SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
[X] Filed by Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
STEVEN MADDEN, LTD.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined.):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and 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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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 21, 2004
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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 21, 2004, at the Company's
showroom located at 1370 Avenue of the Americas, 12th 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 seven (7) 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 an amendment to the Company's 1999 Stock Plan to
increase 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;
3. To ratify the appointment of Eisner LLP as the Company's
independent auditors for the fiscal year ending December 31,
2004; 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 8, 2004 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 ay purpose germane to the meeting, between the hours of 9:00 a.m. and 4:30
p.m. at our principal executive offices at 52-16 Barnett Avenue, Long Island
City, NY 11104, by contacting the Secretary of the Company.
BY ORDER OF THE BOARD OF DIRECTORS
April 27, 2004 /s/ JAMIESON A. KARSON
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Jamieson A. Karson
Chief Executive Officer
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE DATE AND SIGN THE
ENCLOSED FORM OF PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE TO AMERICAN
STOCK TRANSFER & TRUST COMPANY, 40 WALL STREET, NEW YORK, NEW YORK 10005.
STEVEN MADDEN, LTD.
52-16 Barnett Avenue
Long Island City, NY 11104
PROXY STATEMENT
INTRODUCTION
This Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders and form of proxy are being furnished to the holders of common
stock of Steven Madden, Ltd., a Delaware corporation (the "Company") in
connection with the solicitation of proxies by the Board of Directors of the
Company (the "Board of Directors") for use at the 2004 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, 12th Floor, New York, New York
on Friday, May 21, 2004 at 10:00 a.m, Eastern Daylight Time, and at any
adjournments thereof. These proxy materials are being sent on or about April 28,
2004 to holders of record of common stock, $.0001 par value (the "Common
Stock"), of the Company at the close of business on April 8, 2004 (the "Record
Date"). The Company's Annual Report for the fiscal year ended December 31, 2003,
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 seven (7) 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 an amendment to the Company's 1999 Stock Plan (the "Plan") to increase
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, (iii) to
ratify the appointment of Eisner LLP as the Company's independent auditors for
the fiscal year ending December 31, 2004, 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 common stock, $.0001 par value
(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 13,333,905 shares of
Common Stock (excluding treasury shares) held by approximately 70 holders of
record and 3,400 beneficial owners. Only holders of shares of Common Stock on
the Record Date will be entitled to vote at the Annual Meeting. The holders of
Common Stock are entitled to one vote on all matters presented at the meeting
for each share held of record. The presence in person or by proxy of holders of
record of a majority of the shares outstanding and entitled to vote as of the
Record Date shall be required for a quorum to transact business at the Annual
Meeting. If a quorum should not be present, the Annual Meeting may be adjourned
until a quorum is obtained. Each nominee to be elected as a director named in
Proposal 1 must receive a plurality of the votes cast by the holders of Common
Stock present in person or represented by proxy at the Annual Meeting with
respect to such proposal. Each of the amendments to the Company's 1999 Stock
Plan described in Proposal 2 and the ratification of the appointment of Eisner
LLP as the Company's independent auditors for the fiscal year ending December
31, 2004 described in Proposal 3 must be approved by the affirmative vote of the
holders of a majority of the total votes cast on such proposals in person or by
proxy. Abstentions and broker non-votes are counted as present and entitled to
vote and are, therefore, included for purposes of determining whether a quorum
of shares is present at the meeting. An abstention from a vote with respect to
Proposal 1 will have no effect. An abstention from a vote with respect to
Proposal 2 or 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
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votes cast and, therefore, do not have the effect of votes in opposition in such
tabulations and as such will have the practical effect of reducing the number of
affirmative votes required to achieve a majority vote for a matter by reducing
the total number of shares from which a majority is calculated. Brokers who hold
shares in street name who have not been given specific voting instructions may
not vote on behalf of beneficial owners with respect to Proposal 2. Brokers who
hold shares in street name may vote on behalf of beneficial owners with respect
to Proposals 1, 3 and 4. The approval of all other matters to be considered at
the Annual Meeting requires the affirmative vote of a majority of the eligible
votes cast at the Annual Meeting on such matters.
The expense of preparing, printing and mailing this Proxy Statement,
the exhibits hereto and the proxies solicited hereby will be borne by the
Company. In addition to the use of the mails, proxies may be solicited by
officers and directors and regular employees of the Company, without additional
remuneration, by personal interviews, telephone, telegraph or facsimile
transmission. The Company will also request brokerage firms, nominees,
custodians and fiduciaries to forward proxy materials to the beneficial owners
of shares of Common Stock held of record and will provide reimbursements for the
cost of forwarding the material in accordance with customary charges. The
Company has entered into an agreement with The Proxy Advisory Group of Strategic
Stock Surveillance, LLC to assist the Company in the solicitation of proxies for
the Annual Meeting. Under the agreement, the Company has agreed to pay The Proxy
Advisory Group of Strategic Stock Surveillance, LLC a fee of approximately
$15,000 plus disbursements.
Proxies given by stockholders of record for use at the Annual Meeting
may be revoked at any time prior to the exercise of the powers conferred. In
addition to revocation in any other manner permitted by law, stockholders of
record giving a proxy may revoke the proxy by an instrument in writing, executed
by the stockholder or his attorney authorized in writing or, if the stockholder
is a corporation, under its corporate seal, by an officer or attorney thereof
duly authorized, and deposited either at the corporate headquarters of the
Company at any time up to and including the last business day preceding the day
of the Annual Meeting, or any adjournment thereof, at which the proxy is to be
used, or with the chairman of such Annual Meeting on the day of the Annual
Meeting or adjournment thereof, and upon either of such deposits the proxy is
revoked.
ALL PROXIES RECEIVED WILL BE VOTED IN ACCORDANCE WITH THE CHOICES
SPECIFIED ON SUCH PROXIES. PROXIES WILL BE VOTED IN FAVOR OF A PROPOSAL IF NO
CONTRARY SPECIFICATION IS MADE. ALL VALID PROXIES OBTAINED WILL BE VOTED AT THE
DISCRETION OF THE PERSONS NAMED IN THE PROXY WITH RESPECT TO ANY OTHER BUSINESS
THAT MAY COME BEFORE THE ANNUAL MEETING.
None of the matters to be acted on at the Annual Meeting give rise to
any statutory right of a stockholder to dissent and obtain the appraisal of or
payment for such stockholder's shares.
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PROPOSAL ONE
TO ELECT SEVEN DIRECTORS TO SERVE UNTIL THE NEXT ANNUAL MEETING
OF THE COMPANY'S STOCKHOLDERS OR UNTIL THEIR SUCCESSORS
ARE DULY ELECTED AND QUALIFIED
Under the Amended and Restated By-Laws of the Company (the "By-Laws"),
the Board of Directors of the Company is required to be comprised of a minimum
of one (1) director. Subject to the foregoing limitation, the number of
directors may be fixed from time to time by action of the directors. The
Company's board presently consists of ten (10) directors whose terms expire at
the Annual Meeting.
The Nominating/Corporate Governance Committee of the Board and the
Board have nominated and are recommending the election of each of the seven (7)
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 seven (7)
persons who have been nominated by the Nominating/Corporate Governance Committee
of the Board and the Board to stand for election at the Annual Meeting have been
provided below for your information. Proxies will be voted for the election of
the seven (7) nominees listed below as directors of the Company unless otherwise
specified on the proxy. A plurality of the votes of shares of Common Stock
present in person or represented by proxy at the Annual Meeting will be
necessary to elect the directors listed below. 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.
Biographical Summaries of Nominees for the Board of Directors
Jamieson A. Karson has been the Chief Executive Officer of the Company
and Vice Chairman of the Board of Directors of the Company since July 1, 2001.
Mr. Karson has been a director of the Company since January 2, 2001. Prior to
joining the Company as Chief Executive Officer, Mr. Karson practiced law for
over 17 years. He was a partner in the New York City law firm of Tannenbaum
Helpern Syracuse & Hirshtritt LLP from January 1, 1997 through June 30, 2001,
where he served on the firm's three person Finance Committee. He was a partner
at the law firm of Karson McCormick from February 1992 through December 31,
1996. Prior to that, Mr. Karson was an associate attorney at the law firm of
Shea & Gould.
Jeffrey Birnbaum has been a director of the Company since June 2003.
Mr. Birnbaum has been the Product Development Manager of Dolphin Shoe Company
since August 1982.
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.
Currently, Mr. Cooper serves as a director of Maxcor Financial Group Inc. and
North Atlantic Trading Company, Inc.
John L. Madden has been a director of the Company since the Company's
inception. Since April 1998, Mr. Madden has owned and managed a branch office of
Tradeway Securities Group, Inc. in Florida. From May 1996 through December 1996,
Mr. Madden formed JLM Consultants, Inc. which 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 former Chief Executive Officer.
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.
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Thomas H. Schwartz is a new nominee for director. Mr. Schwartz has been
a managing director of Helmsley-Spear, Inc. since 1984, where he was also a
salesman since 1973. As managing director, among other things, Mr. Schwartz is
responsible for the leasing and sales brokerage of real estate, management of
real estate leasing and supervising managers of properties.
Awadhesh Sinha has been a director of the Company since October 2002.
Mr. Sinha has served as 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, since 2003. 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.
Recommendation of the Board of Directors
The Nominating/Corporate Governance Committee of the Board and the
Board unanimously recommend a vote FOR the election of Messrs. Jamieson A.
Karson, Jeffrey Birnbaum, Marc Cooper, John L. Madden, Peter Migliorini, Thomas
H. Schwartz and Awadhesh Sinha. Unless otherwise instructed or unless authority
to vote is withheld, the enclosed proxy will be voted FOR the election of the
above listed nominees and AGAINST any other nominees.
Director Independence
The Board of directors is currently comprised of ten (10) members.
Messrs. Koppelman, Dharia, Gladstone and Mongeluzo will not stand for reelection
to the Board at the Annual Meeting. The Board has determined that the following
director nominees are "independent" for purposes of The Nasdaq National Market
listing standards: Messrs. Cooper, Migliorini, Schwartz and Sinha. If the seven
(7) nominees set forth above are elected, the Board will be comprised of a
majority of independent directors. The Board has adopted a policy whereby the
independent directors have regularly-scheduled executive sessions at least twice
a year.
Directors' Attendance at Annual Meetings
The Company encourages all of its directors to attend annual meetings
of the Company's stockholders. Six directors attended the Company's 2003 annual
meeting of stockholders.
Communications with Directors
The Company has adopted a procedure by which stockholders may send
communications as defined within Item 7(h) of Schedule 14A under the Exchange
Act to one or more members of the Board of Directors by writing to such
director(s) or to the whole Board of Directors in care of the Corporate
Secretary, Steven Madden, Ltd., 52-16 Barnett Avenue, Long Island City, NY
11104. Any such communications will be promptly distributed by the Corporate
Secretary to such individual director(s) or to all directors if addressed to the
whole Board of Directors.
Director Compensation
Directors who are also employees of the Company are not paid any fees
or other remuneration for service on the Board or any of its Committees. In 2003
each non-employee director (other than Mr. Koppelman) 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
immediately available funds; however, the chairperson of the Audit Committee
received sixty-five thousand dollars ($65,000) in immediately available funds.
In addition, non-employee directors are reimbursed by the Company for all
expenses related to attending meetings.
In May 2001, the Company entered into an agreement with Charles A.
Koppelman pursuant to which Mr. Koppelman agreed to serve as the Company's
Executive Chairman of the Board. On June 30, 2003, this agreement expired in
accordance with its terms; however under the agreement on the date of the Annual
Meeting Mr. Koppelman is entitled to receive an option to purchase 100,000
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shares of the Company's Common Stock at an exercise price equal to the lesser of
(a) the closing market price on the grant date or (b) $13.50. As of July 1,
2003, Mr. Koppelman was compensated for his services as a director in the same
manner as the other outside directors on the Board. See "Agreement with the
Chairman of the Board."
Meetings and Committees of the Board of Directors
The Board of Directors met four (4) times during the fiscal year ended
December 31, 2003. The Board of Directors has the following standing committees:
Audit Committee, Compensation Committee, Nominating/Corporate Governance
Committee, Real Estate Committee and Cash Investment Committee. In addition, the
Company has an Ad Hoc Committee made up of certain board members and executive
officers which meets to discuss general issues regarding the business and
strategic growth of the Company.
Audit Committee
During the year ended December 31, 2003, the Audit Committee of the
Board of Directors consisted of directors Awadhesh Sinha (chairman), Roger
Gladstone and Peter Migliorini. The Audit Committee is comprised of directors
who are "independent" for purposes of The Nasdaq National Market listing
standards and who meet the independence requirements contained in Exchange Act
Rule 10A-3(b)(1). The Board has determined that Awadhesh Sinha meets the SEC
criteria of an "audit committee financial expert." The Audit Committee is
primarily responsible for reviewing the services performed by the Company's
independent public accountants, evaluating the Company's accounting policies and
its system of internal controls, and reviewing significant finance transactions.
During 2003, the Audit Committee met nine (9) times.
The Audit Committee is responsible for reviewing and helping to ensure
the integrity of the Company's financial statements. Among other matters, the
Audit Committee, with management and independent and internal auditors, reviews
the adequacy of the Company's internal accounting controls that could
significantly affect the Company's financial statements. The Audit Committee is
also directly and solely responsible for the appointment, retention,
compensation, oversight and termination of the Company's independent
accountants. In addition, the Audit Committee also functions as the Company's
Qualified Legal Compliance Committee (the "QLCC"). The purpose of the QLCC is to
receive, retain and investigate reports made directly, or otherwise made known,
of evidence of material violations of any United States federal or state law,
including any breach of fiduciary duty by the Company, its officers, directors,
employees or agents, and if the QLCC believes appropriate, to recommend courses
of action to the Company.
The Audit Committee meets with management periodically to consider the
adequacy of the Company's internal controls and the objectivity of its financial
reporting. The Audit Committee discusses these matters with the Company's
independent public accountants and with appropriate Company financial personnel.
Meetings are held with the independent public accountants who have unrestricted
access to the Audit Committee. In addition, the Audit Committee reviews the
Company's financing plans and reports recommendations to the full Board of
Directors for approval and to authorize action. The Board has adopted a written
charter setting out the audit related functions the Audit Committee is to
perform. A copy of the Audit Committee Charter is attached as Annex A to this
Proxy Statement.
Management has primary responsibility for the Company's financial
statements and the overall reporting process, including the Company's system of
internal controls. The independent public accountants audit the annual financial
statements prepared by management, express an opinion as to whether those
financial statements present fairly the financial position, results of
operations and cash flows of the Company in conformity with accounting
principles generally accepted in the United States of America and discuss with
the Audit Committee any issues they believe should be raised with the Audit
Committee.
The following Audit Committee Report does not constitute soliciting
material and shall not be deemed filed or incorporated by reference into any
other Company filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent the Company
specifically incorporates this Audit Committee Report by reference therein.
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Audit Committee Report
The Audit Committee reviewed the Company's audited financial statements
for the fiscal year ended December 31, 2003 and met with both management and
Eisner LLP, the Company's independent public accountants, to discuss such
audited financial statements. Management and the Company's independent public
accountants have represented to the Audit Committee that the financial
statements were prepared in accordance with accounting principles generally
accepted in the United States of America. The Audit Committee has received from
and discussed with Eisner LLP the written disclosure and the letter regarding
the independence of Eisner LLP as required by Independence Standards Board
Standard No. 1. The Audit Committee also discussed with Eisner LLP any matters
required to be discussed by Statement on Auditing Standards No. 61. Based on
these reviews and discussions, the Audit Committee recommended to the Board that
the Company's audited financial statements be included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2003.
AUDIT COMMITTEE
Roger Gladstone
Peter Migliorini
Awadhesh Sinha, Chairman
Nominating/Corporate Governance Committee
In April 2004 the Board of Directors created a Nominating/Corporate
Governance Committee and appointed Peter Migliorini and Awadhesh Sinha as the
initial members of such committee. The Nominating/Corporate Governance Committee
is comprised of directors who are "independent" for purposes of The Nasdaq
National Market listing standards. The Nominating/Corporate Governance Committee
considers and makes recommendations to the Board of Directors with respect to
the size and composition of the Board of Directors and identifies potential
candidates to serve as directors. The Nominating/Corporate Governance Committee
identifies candidates to the Board of Directors by introduction 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 this Proxy Statement.
Stockholders wishing to submit recommendations for the 2005 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 this Proxy Statement, the Company's policy
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.
Since the Company's Nominating/Corporate Governance Committee was
established in April 2004, it did not have any meetings during 2003.
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Compensation Committee
The Compensation Committee of the Board of Directors for the year ended
December 31, 2003 consisted of directors Peter Migliorini (chairman) and Roger
Gladstone. The Compensation Committee is comprised of directors who are
"independent" for purposes of The Nasdaq National Market listing standards. The
Compensation Committee is primarily responsible for approving salaries, bonuses
and other compensation for the Company's Chief Executive Officer and named
executive officers, reviewing management recommendations relating to new
incentive compensation plans and changes to existing incentive compensation
plans, and administering the Company's stock plans, including granting options
and setting the terms thereof pursuant to such plans (all subject to approval by
the Board of Directors). During 2003, the Compensation Committee met four (4)
times.
Real Estate Committee
The Real Estate Committee of the Company for the year ended December
31, 2003 consisted of Jamieson A. Karson, Arvind Dharia and Mark Jankowski. The
Real Estate Committee is primarily responsible for overseeing real estate
transactions for the Company. In light of the Company's aggressive retail store
expansion plan, the Real Estate Committee was formed to consider proposed real
estate transactions for approval.
Cash Investment Committee
In February 2004 the Board of Directors created a Cash Investment
Committee and appointed Jamieson Karson, John Madden and Marc Cooper as the
initial members of such committee. The Cash Investment Committee is primarily
responsible for setting the Company's policy with respect to cash investments.
Since the Company's Cash Investment Committee was established in February 2004,
it did not have any meetings during 2003.
Ad Hoc Committee
During 2002, the Board appointed an Ad Hoc Committee which consists of
Jamieson A. Karson, Charles Koppelman, John Madden, Richard Olicker and Robert
Schmertz. The Ad Hoc Committee meets to discuss general issues regarding the
business and strategic growth of the Company. The Ad Hoc Committee met three (3)
times in 2003.
Code of Business Conduct and Ethics
All of the Company's employees, officers (including senior executive,
financial and accounting officers) and directors are held accountable for
adherence to the Company's Code of Business Conduct and Ethics (the "Code"). The
Code is intended to establish standards necessary to deter wrongdoing and to
promote compliance with applicable governmental laws, rules and regulations and
honest and ethical conduct. The Code covers all areas of professional conduct,
including conflicts of interest, fair dealing, financial reporting and
disclosure, protection of Company assets and confidentiality. Employees have an
obligation to promptly report any known or suspected violation of the Code
without fear of retaliation. Waiver of any provision of the Code for executive
officers and directors may only be granted by the Board of Directors or one of
its committees and any such waiver or modification of the Code relating to such
individuals will be disclosed by the Company. A copy of the Code is attached as
Annex D to this Proxy Statement and may also be obtained by any stockholder upon
request without charge by writing to the Corporate Secretary, Steven Madden,
Ltd., 52-16 Barnett Avenue, Long Island City, NY 11104.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires that the Company's directors and executive officers, and persons who
own more than ten percent (10%) of a registered class of the Company's equity
securities, file with the Securities and Exchange Commission ("SEC") reports of
initial ownership of the Company's common stock and subsequent changes in that
ownership and furnish the Company with copies of all forms they file pursuant to
Section 16(a). To the Company's knowledge, based solely on its review of the
copies of such reports furnished to the Company during the year ended December
31, 2003, all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were complied with,
except that: (i) Charles Koppelman failed to file a Form 4 relating to the
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exercise of stock options that were previously granted to him and failed to
timely file a Form 4 relating to the exercise of stock options that were
previously granted to him, (ii) John Madden failed to timely file a Form 4
relating to the exercise of stock options that were previously granted to him
and (iii) Mark Jankowski failed to timely file a Form 4 relating to the exercise
of stock options that were previously granted to him and the sale of the
underlying shares of the Common Stock of the Company.
Equity Compensation Plan Information
The following table provides information as of December 31, 2003 with
respect to the Company's Common Stock that may be issued under its 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
Equity Stock Option Plans (1) 1,774,000 14.06 277,000
Equity compensation plans not
approved by security holders
Non-Qualified Options (2) 500,000 1.75 0
Other (3) 290,000 N/A 0
Total 2,564,000 11.35 277,000
- --------------------
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 March 1995, the Company issued options to purchase 1,000,000 shares of
its Common Stock to a company wholly owned by Steven Madden, the Company's
former Chief Executive Officer. The options were subsequently transferred
to Steven Madden. The options, which are fully exercisable, have an
exercise price of $1.75 and an exercise period of 10 years. As of the
Record Date, 500,000 of these options remain unexercised. Unearned
compensation was recorded in the amount of $575,000 which represented the
difference between the exercise price and the fair value of the stock on
the date of grant and was classified as a component of stockholders equity.
The unamortized portion was charged to operations in 1997 in connection
with Steven Madden's then-existing amended employment agreement.
3) (a) In 2002 and 2003 the Company entered into agreements with eighteen
employees and independent contractors which agreements provide that, if
such employees and independent contractors continue to be employed with the
Company through specified future dates (ranging from 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 500 shares to 20,000
shares.
(b) In April 2002 the Company entered into an agreement with Robert
Schmertz which provides that, subject to shareholder approval, if Mr.
Schmertz is employed by the Company through June 30, 2005 he will be
entitled to receive 50,000 shares of the Company's Common Stock. See
Employment Agreements with Certain Executive Officers.
-8-
(c) In October 2002 the Company entered into an agreement with Harry Chen
which provides that, subject to shareholder approval, if Mr. Chen is
employed by the Company through June 30, 2005 he will be entitled to
receive 50,000 shares of the Company's Common Stock.
Certain Legal Proceedings
Between June and August 2000, eight putative securities fraud class
action lawsuits have been commenced in the United States District Court for the
Eastern District of New York against the Company, Steven Madden and, in five of
the actions, Rhonda J. Brown (the former President and a former director of the
Company) and Arvind Dharia. These actions are captioned: Wilner v. Steven
Madden, Ltd., et al., 00 CV 3676 (filed June 21, 2000); Connor v. Steven Madden,
et al., 00 CV 3709 (filed June 22, 2000); Blumenthal v. Steven Madden, Ltd., et
al., 00 CV 3709 (filed June 23, 2000); Curry v. Steven Madden, Ltd., et al., 00
CV 3766 (filed June 26, 2000); Dempster v. Steven Madden Ltd., et al., 00 CV
3702 (filed June 30, 2000); Salafia v. Steven Madden, Ltd., et al., 00 CV 4289
(filed July 24, 2000); Fahey v. Steven Madden, Ltd., et al., 00 CV 4712 (filed
August 11, 2000); Process Engineering Services, Inc. v. Steven Madden, Ltd., et
al., 00 CV 5002 (filed August 22, 2000). By Order dated December 8, 2000, the
Court consolidated these eight actions, appointed Process Engineering, Inc.,
Michael Fasci and Mark and Libby Adams as lead plaintiffs and approved their
selection of lead counsel. On February 26, 2001, Plaintiffs served a
Consolidated Amended Complaint. On or about October 31, 2001, plaintiffs filed a
Second Consolidated Amended Class Action Complaint. The pleading names the
Company, Steven Madden, Rhonda J. Brown and Arvind Dharia as defendants. It
principally alleges that the Company and the individual defendants violated
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5
promulgated under the 1934 Act by issuing false and misleading statements, and
failing to disclose material adverse information, generally relating to matters
arising from Mr. Madden's June 2000 indictment. The plaintiffs seek an
unspecified amount of damages, costs and expenses on behalf of themselves and
all other purchasers of the Company's common stock during the period June 21,
1997 through June 20, 2000. On November 30, 2001, all of the defendants served
motions to dismiss the Consolidated Amended Complaint. The motions were fully
briefed on January 14, 2002. Since that time, an agreement has been reached to
resolve all claims in this action, subject to notices to the putative class
members, a hearing and approval by the District Court. The tentative settlement
is within the limits of the Company's insurance coverage.
On or about September 26, 2000, a putative shareholders derivative
action was commenced in the United States District Court for the Eastern
District of New York, captioned Herrera v. Steven Madden and Steven Madden,
Ltd., 00 CV 5803 (JG). The Company is named as a nominal defendant in the
action. The complaint seeks to recover alleged damages on behalf of the Company
from Mr. Madden arising from his June 2000 indictment and to require him to
disgorge certain profits, bonuses and stock option grants he received. On
January 3, 2001, plaintiff filed an Amended Shareholder's Derivative Complaint.
On February 2, 2001, both the Company and Mr. Madden filed motions to dismiss
the Amended Complaint because of plaintiff's failure to make a pre-litigation
demand upon the Company's board of directors. On October 1, 2001, plaintiff
filed a Second Amended Complaint. On November 2, 2001, the Company filed a
motion to dismiss this pleading on grounds that plaintiff had failed to make a
pre-litigation demand upon the Company's board of directors. On February 7,
2002, the Magistrate Judge filed a Report recommending that the Company's motion
to dismiss be denied. The Company filed its objections to the Report on March 4,
2002. On March 22, 2002, the District Judge entered an order adopting the
Magistrate Judge's report and recommendation in full. Since that time, an
agreement has been reached to resolve all claims in this action, subject to such
notice to the Company's shareholders (if any) as may be required by the District
Court, a hearing and approval by the District Court. The Company believes, after
consultation with counsel, that its defense costs and certain attorneys fees in
connection with this action will be subject to coverage by the Company's
insurance.
On or about November 28, 2001, a purported shareholder derivative
complaint was filed in the United States District Court for the Eastern District
of New York, captioned Herrera v. Karson, et al., 00 CV 7868. Named as
defendants therein are the Company (as nominal defendant) and certain of the
Company's present and/or former directors. The complaint alleges that the
individual defendants breached their fiduciary duties to the Company in
connection with a decision by the Board of Directors of the Company to enter
into an employment agreement with Mr. Steven Madden in or about May 2001 that,
among other things, entitles Mr. Madden to receive an annual base salary of
$700,000 during periods that Mr. Madden is not actively engaged in the duties of
Creative and Design Chief (including during the period of his incarceration).
The complaint seeks declaratory and other equitable relief, as well as an
unspecified amount of compensatory damages, costs and expenses. On or about
February 1, 2002, plaintiff filed an Amended Shareholder Derivative Complaint
-9-
(the "Amended Complaint"). The Amended Complaint contains substantially the same
allegations and names the same defendants as the original complaint. Since that
time, an agreement has been reached to resolve all claims in this action,
subject to such notice to the Company's shareholders (if any) as may be required
by the District Court, a hearing and approval by the District Court. The Company
believes, after consultation with counsel, that its defense costs and certain
attorneys fees in connection with this action will be subject to coverage by the
Company's insurance.
The Company and certain of the Company's present and/or former
directors have been named in an action commenced in the United States District
Court for the Eastern District of New York by the Safeco Surplus Lines Insurance
Company captioned, Safeco Surplus Lines Ins. Co. v. Steven Madden Ltd., et al.,
02 CV 1151 (JG). The complaint principally seeks rescission of the excess
insurance policy issued by Safeco to the Company for the February 4, 2000 to
June 13, 2001 period and an order declaring that Safeco does not owe any
indemnity obligation to the Company or any of its officers and directors in
connection with the putative shareholder class action and derivative cases
described in the Form 10Q filed by the Company for the quarter ended March 31,
2002. The parties have agreed to a resolution of Safeco's claims, the
implementation of which is conditioned upon judicial approval of the settlements
of the shareholder class action and derivative claims discussed above.
On September 12, 2001, the State of Florida, Department of Banking and
Finance, Division of Securities and Investor Protection (the "Department")
issued a Final Order adopting the Stipulation and Consent Agreement to Final
Order dated May 15, 2001 ("Stipulation and Consent Agreement") between John
Madden and the Department relating to the Department's investigation of alleged
sales of unregistered securities in 1997. Under the Stipulation and Consent
Agreement, Mr. Madden neither admitted nor denied the allegations against him;
however, Mr. Madden agreed to pay an administrative fine in the amount of $5,000
and agreed to abide by certain limitations related to his employment in the
securities or investment advisory industry for a period of five years, including
Mr. Madden's agreement to not act in any principal, supervisory, or managerial
capacity in the securities industry and to not exercise discretionary authority
in any account of any person.
-10-
Directors, Director Nominees and Executive Officers
Certain information concerning the directors, director nominees and
executive officers of the Company is set forth below:
Name Age Position(s) with the Company
- ---------------------- ----- --------------------------------------
Charles A. Koppelman 63 Chairman of the Board
Jamieson A. Karson 46 Chief Executive Officer and
Vice-Chairman of the Board
Arvind Dharia 54 Chief Financial Officer, Director and
Secretary
Richard Olicker 46 President and Chief Operating Officer
Mark Jankowski 43 Executive Vice-President of Production
for Steven Madden, Ltd.
Gerald Mongeluzo 63 President of Adesso-Madden, Inc., and
Director
Robert Schmertz 40 President of Steve Madden Womens
Wholesale Division and Brand Manager
Joseph Masella 55 President of Candie's Division
Harry Chen 54 Chairman and Lead Designer of Madden
Mens Division
John McCann 42 President of l.e.i. Footwear Division
Andrew Shames 46 President of Madden Mens Division
Larry Paparo 36 President of Candie's Kids and
Stevies, Inc.
Jay Litvack 53 President of Diva Acquisition
Corporation
John L. Madden 56 Director
Peter Migliorini 55 Director
Marc Cooper 42 Director
Awadhesh Sinha 58 Director
Roger Gladstone 50 Director
Jeffrey Birnbaum 43 Director
Thomas H. Schwartz 56 Director Nominee
- --------------------
See "Biographical Summaries of Nominees for the Board of Directors" for
biographical summaries of Messrs. Jamieson A. Karson, Jeffrey Birnbaum, Marc
Cooper, John L. Madden, Peter Migliorini, Thomas H. Schwartz and Awadhesh Sinha.
Charles A. Koppelman will not be standing for re-election as a director
of the Company at the Company's 2004 Annual Meeting. Mr. Koppelman has been a
director of the Company since June 1998 and Chairman of the Board since July 1,
2001. Previously Mr. Koppelman was acting Chairman of the Board from June 2000
to July 2001. Presently, Mr. Koppelman serves as Chairman of CAK Entertainment,
Inc. From 1988 to 1997, Mr. Koppelman served first as Chairman and Chief
Executive Officer of EMI Music Publishing and then as Chairman and Chief
Executive Officer of EMI Records Group, North America.
Arvind Dharia will not be standing for re-election as a director of the
Company at the Company's 2004 Annual Meeting. Mr. Dharia has been the Chief
Financial Office and Secretary of the Company since October 1992 and a director
since December 1993. From December 1988 to September 1992, Mr. Dharia was
Assistant Controller of Millennium III Real Estate Corp.
Richard Olicker has been Chief Operating Officer of the Company since
January 3, 2001. In September 2001 Mr. Olicker was appointed President of the
Company. Prior to joining the Company, Mr. Olicker spent more than 12 years at
AeroGroup International, Inc., which markets Aerosoles and What's What shoes. As
cofounder of Aerosoles, Mr. Olicker served as President of the company's private
label division and was responsible for managing all aspects of sourcing,
production, pricing, sales, service, systems and finance. Mr. Olicker began his
career in footwear in 1982 as the General Counsel and Licensing Director at El
Greco Leather Products and later held an executive position with New Retail
Concepts, Inc., an apparel licensing firm.
Mark Jankowski became the Executive Vice President of Production for
Steven Madden, Ltd. in 2002 after serving as the President of Steve Madden
Retail, Inc. since July 1, 2001. Previously, Mr. Jankowski had been the General
-11-
Merchandise Manager of the Company from December 2000 to June 30, 2001. Prior to
that, Mr. Jankowski had been the President of Steve Madden Retail, Inc. from
February 1999 to December 2000 and the Company's Vice President of Product
Development from 1995 to 1999. From 1980 to 1995, Mr. Jankowski held several
positions at Edison Brothers, including Head of Buying.
Gerald Mongeluzo will not be standing for re-election as a director of
the Company at the Company's 2004 Annual Meeting. Mr. Mongeluzo has been a
director of the Company since July 2001. Mr. Mongeluzo has been President of
Adesso-Madden, Inc., a wholly owned subsidiary of the Company, since September
1995. Previously, Mr. Mongeluzo was the founder and President of Adesso Shoes,
Inc., a buying agent of private label shoes. From 1987 through 1991, Mr.
Mongeluzo was the President of the Prima Barabaro Division of Cells Enterprise,
Inc. Mr. Mongeluzo founded Prima Shoes, Inc., a buying agent of private label
shoes, and served as its President from 1974 to 1987.
Robert Schmertz has been the President of Steve Madden Womens Wholesale
Division and Brand Manager since September 2001, 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.
Joseph Masella has been the President of the Candie's Division since
March 2004. Previously, he was the Executive Chairman of the l.e.i. Footwear
Division and Stevies, Inc. since June 2002. Prior to that, he was President of
Stevies, Inc. since April 2000 and President of l.e.i. Footwear Division since
July 1998. Prior to that, he was Vice President-Sales of the Company's
Adesso-Madden subsidiary since October 1995. From 1992 to 1995, Mr. Masella
served as General Manager-Far East Division of US Shoe Co.
John McCann has been President of l.e.i. Footwear since June 2002.
Previously, he was the line builder of l.e.i. Footwear. Before joining the
Company, Mr. McCann served as the District Merchandise Manager of Baker shoes
from 1995 to 1998.
Harry Chen has been the Chairman of the Madden Mens Division since
March 2004. Previously, he was the President of Union Bay Mens Footwear, Inc.
since January 2003 and the President of Madden Men since November 2002. Before
joining the Company, Mr. Chen served as Chief Executive Officer of XES Appeal,
Inc. from 1997 to 2002.
Jay Litvack has been President of Diva Acquisition Corporation since
May 2002. Before joining the Company, Mr. Litvack served as the President of Me
Too from 1996 to 2002.
Andrew Shames has been the President of Madden Mens since March 2004.
Before joining the Company, Mr. Shames was an executive at Harbor Footwear Group
Ltd. from 1997 to 2004. Mr. Shames began his career at J.P. Marks International,
one of the first importers of men's dress and casual product from Asia, and
occupied the role of Vice President of Sales.
Larry Paparo has been the President of Candie's Kids and Stevies, Inc.
since March 2004. Prior to that, Mr. Paparo served as the Vice President of
Sales for Candie's Division since November 2003. Before joining the Company, Mr.
Paparo held sales and management positions with both Nine West and Kenneth Cole.
Roger Gladstone will not be standing for re-election as a director of
the Company at the Company's 2004 Annual Meeting. Mr. Gladstone has been a
director of the Company since February 2003. Since 1998, Mr. Gladstone has
served as Chairman of Firebrand Financial Group, Inc., a brokerage and
investment banking firm, and has served as a registered representative with
EarlyBirdCapital, Inc., an online investment bank, since 2002. In addition, Mr.
Gladstone has served as Chairman of Premium Asset Recovery Corporation, an
adjustment and collection services company, since 1998. Previously, Mr.
Gladstone has served as President of Shochet Securities, a brokerage firm, from
1999 to 2002.
-12-
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth for each of the last three fiscal years
ended December 31, 2003, December 31, 2002 and December 31, 2001 the
remuneration paid by the Company to its Chief Executive Officer and the four
most highly compensated executive officers (other than the Chief Executive
Officer):
Summary Compensation Table
Annual compensation Long-term compensation
----------------------------------- --------------------------------------------
Restricted
Fiscal Awards Stock Awards All other
Name and principal position year Salary($) Bonus($) options(1) ($) compensation
- --------------------------- ------ ---------- ---------- ----------- ---------- ------------
Jamieson A. Karson, 2003 $ 467,500 $ 108,056(2) -0- N/A $ 287,963(3)
Chief Executive Officer 2002 $ 400,000(4) $ 286,319(5) 45,000(6) N/A $ 32,268(7)
2001 $ 187,500 $ 50,000 100,000 $ 188,000(8) $ 17,791(7)
Richard Olicker, 2003 $ 393,749 $ 183,056 70,000 N/A $ 4,657
President and 2002 $ 350,000 $ 564,319 75,000 $ 374,800(9) N/A
Chief Operating Officer 2001 $ 252,723 N/A 150,000 N/A N/A
Arvind Dharia, 2003 $ 220,000 $ 71,771 40,000 N/A $ 113,443(10)
Chief Financial Officer 2002 $ 200,000 $ 250,000 40,000 $ 338,400(11) $ 113,411(10)
2001 $ 200,000 $ 50,000 40,000 N/A $ 92,857(10)
Gerald Mongeluzo, 2003 $ 326,250 -0- -0- N/A $ 87,776(12)
President, Adesso- 2002 $ 311,538 $ 69,401 33,000 N/A $ 5,155(13)
Madden, Inc. 2001 $ 299,040 $ 93,623 -0- N/A N/A
Robert Schmertz, 2003 $ 393,750 -0- -0- N/A $ 256,000(14)
President, Steve Madden 2002 $ 363,750 $ 150,000 100,000 $ 850,000(15) $ 5,769(16)
Womens Wholesale Division 2001 $ 300,000 $ 115,000 -0- N/A N/A
and Brand Manager
- --------------------
(1) Options to purchase shares of Common Stock.
(2) Mr. Karson was paid cash bonuses totaling $108,056 for 2003.
(3) 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.
(4) Mr. Karson's employment agreement was amended to provide for a base salary
of $425,000 as of July 1, 2002. See "Employment Agreements with Certain
Executives"
(5) In exchange for the increase in base salary described in note (4) above,
Mr. Karson agreed to waive his right to collect the portion of his cash
bonus for 2002 that is allocable to the payment by the Company of the loss
mitigation insurance premium that the Company purchased in the fourth
quarter of fiscal year 2001. The amount waived by Mr. Karson was
approximately $278,000. See "Employment Agreements with Certain Executives"
(6) Although, under his employment agreement Mr. Karson was entitled to receive
an option to purchase 50,000 shares of Common Stock in 2002, on June 24,
2002, Mr. Karson agreed to accept an option to purchase only 45,000 shares
of Common Stock so that an option to purchase 5,000 shares of Common Stock
could be awarded to a key employee.
(7) Expenses paid on behalf of Mr. Karson pursuant to his employment agreement.
(8) On July 10, 2001, Mr. Karson was issued 10,000 shares of restricted Common
Stock, 25% of which became unrestricted at the end of each of the four
quarters following the date of issuance. The closing price of the Company's
Common Stock on July 10, 2001 as reported by The Nasdaq National Market was
$18.80. The value of these restricted shares of Common Stock as of December
31, 2001 was $140,700 (based upon a closing price on December 31, 2001 of
$14.07 per share as reported by The Nasdaq National Market). To the extent
dividends are paid on the Common Stock, such dividends will be paid on
these restricted shares.
-13-
(9) On July 1, 2002, the Company agreed to grant Mr. Olicker 20,000 shares of
Common Stock on January 1, 2005 if Mr. Olicker is employed by the Company
on such date. The closing price of the Company's Common Stock on July 1,
2002 as reported by The Nasdaq National Market was $18.74. The value of
these restricted shares of Common Stock as of December 31, 2002 was
$361,400 (based upon a closing price on December 31, 2002 of $18.07 per
share as reported by The Nasdaq National Market). These shares have not
been issued to Mr. Olicker and Mr. Olicker will not be entitled to any
rights with respect to the ownership of these shares (including voting
rights and dividends) until they are issued to Mr. Olicker.
(10) Life insurance premium and other expenses paid on behalf of Mr. Dharia.
(11) On October 30, 2002, the Company agreed to grant Mr. Dharia 20,000 shares
of Common Stock on December 31, 2005 if Mr. Dharia is employed by the
Company on such date. The closing price of the Company's Common Stock on
October 30, 2002 as reported by The Nasdaq National Market was $16.92. The
value of these restricted shares of Common Stock as of December 31, 2002
was $361,400 (based upon a closing price on December 31, 2002 of $18.07 per
share as reported by The Nasdaq National Market). These shares have not
been issued to Mr. Dharia and Mr. Dharia will not be entitled to any rights
with respect to the ownership of these shares (including voting rights and
dividends) until they are issued to Mr. Dharia.
(12) In 2003, the Company paid expenses in the amount of $5,726 on behalf of Mr.
Mongeluzo pursuant to his employment agreement. In addition, in 2003 the
Company paid Mr. Mongeluzo $82,500 in lieu of granting him the option to
purchase 33,000 shares to purchase Common Stock that he was entitled to
under his employment agreement.
(13) Expenses paid on behalf of Mr. Mongeluzo pursuant to his employment
agreement.
(14) In 2003, 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) On April 2, 2002, the Company agreed to grant Mr. Schmertz 50,000 shares of
Common Stock on June 30, 2005 if Mr. Schmertz is employed by the Company on
such date. The grant of these shares is subject to approval of the
Company's shareholders. The closing price of the Company's Common Stock on
April 2, 2002 as reported by The Nasdaq National Market was $17.00. The
value of these restricted shares of Common Stock as of December 31, 2002
was $903,500 (based upon a closing price on December 31, 2002 of $18.07 per
share as reported by The Nasdaq National Market). These shares have not
been issued to Mr. Schmertz and Mr. Schmertz will not be entitled to any
rights with respect to the ownership of these shares (including voting
rights and dividends) until they are issued to Mr. Schmertz.
(16) Expenses paid on behalf of Mr. Schmertz pursuant to his employment
agreement.
-14-
The following table sets forth certain information with respect to
options granted during the last fiscal year to the persons named in the above
Summary Compensation Table.
Option/SAR Grants In Last Fiscal Year
Number of Percent of Total Potential Realizable
Securities Options/SARS Exercise Value at Assumed Annual
Underlying Granted to or Base Rates of Stock Price
Options/SARS Employees in Price Appreciation for Option
Name Granted (#) Fiscal Year % ($/Sh) Expiration Date Term
- --------------------- ------------- ------------- ---------- ---------------- ------------------------
5% 10%
---------- ----------
Jamieson A. Karson -0- NA NA NA NA NA
Richard Olicker 70,000 17.3 19.00 05/23/13 836,430 2,119,677
Arvind Dharia 40,000 9.9 20.85 09/09/10 339,522 791,230
Gerald Mongeluzo -0- NA NA NA NA NA
Robert Schmertz -0- NA NA NA NA NA
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
Acquired on Realized Underlying Unexercised the Money Options/SARs at
Name Exercise (#) $ Options/SARS at FY-End (#) FY-End ($) (1)
- --------------------- ------------- ------------- ----------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- -------------- ----------- -------------
Jamieson A. Karson -0- NA 145,000 -0- 223,900 -0-
Richard Olicker 25,000 299,000 185,000 35,000 1,288,750 49,000
Arvind Dharia 60,000 625,840 92,000 30,000 557,660 -0-
Gerald Mongeluzo 17,000 146,275 33,000 -0- 46,860 -0-
Robert Schmertz 12,500 86,000 100,000 -0- 142,000 -0-
- --------------------
(1) Based upon a closing price on December 31, 2003 of $20.40 per share as
reported by The Nasdaq National Market.
-15-
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. As of the
Record Date, options to purchase 2,674,500 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. The 1999 Plan
Proposal is expected to provide even greater flexibility to the Company's
compensation methods, after giving due consideration to competitive conditions
and the impact of federal tax laws. See Proposal Number 2--Amendment of the 1999
Stock Plan.
Employment Agreements with Certain Executive Officers
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. This agreement was
amended in February 2004. The term of Mr. Karson's employment under the
agreement (as amended) is five (5) years commencing on July 1, 2001 and ending
on June 30, 2006. 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. In connection with the execution of his Employment
Agreement, Mr. Karson surrendered 5,000 options which had been granted to him
for his service as an outside director. The agreement (as amended) provides that
the Company pay Mr. Karson an annual salary of $467,500 which base salary is
subject to a 10% annual increase on each July 1st of the term if the Company's
net income for the four calendar quarters ending on the most recent June 30th is
greater than the net income for the four calendar quarters ending on the
preceding June 30th. In addition, the agreement provides that for each fiscal
year (beginning with 2002) that occurs during the term of employment, Mr. Karson
receive a cash bonus, in an amount determined by the Board, not less than four
percent (4%) of the increase in the Company's EBITDA (earnings before interest,
tax, depreciation and amortization) over the EBITDA of the prior fiscal year. On
or about July 10, 2001, Mr. Karson received options to purchase 100,000 shares
of the Company's Common Stock at an exercise price equal to the closing market
price on the date prior to the grant date as quoted on The Nasdaq National
Market. These options vested quarterly over the one year period following the
date of grant and are exercisable for a period of five (5) years from the date
of grant. On or about July 10, 2001, the Company issued to Mr. Karson 10,000
shares of restricted common stock, 25% of which became unrestricted at the end
of each of the four quarters following the date of issuance. Subject to approval
by the Company's stockholders of the Amendment of the Company's 1999 Stock 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,
on or about the date of the Company's annual meeting for each year of the term
of the agreement (beginning in 2002), Mr. Karson is entitled to receive, annual
options to purchase shares of the Company's Common Stock equal to the dollar
amount of the annual bonus received by Mr. Karson for the previous fiscal year;
provided, however, that no annual option shall be for greater than 100,000
shares. The annual options shall vest quarterly over the one year period
following the date of grant and shall be exercisable after vesting for a period
of five (5) years from the date of grant at an exercise price equal to the
closing price of the Company's Common Stock on the applicable date of grant, as
quoted on The Nasdaq National Market (or such other market or exchange on which
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the Company's Common Stock is listed or traded). In addition, in the event of
Mr. Karson's total disability or his death, the Company is obligated to continue
to pay Mr. Karson (or Mr. Karson's estate) his base salary for the twelve (12)
month period immediately subsequent to the date of such total disability or
death. In the event Mr. Karson's employment agreement is terminated (or not
extended) for any reason other than For Cause (as defined in the agreement) or
due to his death or his total disability, the Company is obligated to pay Mr.
Karson an amount equal to the product of (i) Mr. Karson's base salary plus the
cash bonus which Mr. Karson was paid for the immediately preceding fiscal year
multiplied by (ii) the greater of (A) the number of years remaining on the term
of the agreement or (B) two. In the event that there is a "change of control"
transaction terminating Mr. Karson's employment, all unvested options to
purchase shares of the Company's Common Stock held by Mr. Karson will vest on
the date of termination and Mr. Karson will be entitled to receive a lump sum
cash payment equal to (a) the amount of compensation that is accrued and unpaid
through the date of termination and (b) three (3) times the total compensation
(base salary and cash bonus) received by Mr. Karson for the preceding 12 month
period ending December 31. Mr. Karson's employment agreement contains other
customary provisions, including provisions regarding confidentiality,
solicitation and competition.
The Company entered into an employment agreement with Richard Olicker,
the Company's President and Chief Operating Officer on January 3, 2001, which
agreement was amended as of July 1, 2002. The term of Mr. Olicker's employment
ends on January 1, 2005. The Company agreed to pay Mr. Olicker an annual base
salary of $375,000, which, subject to certain net income requirements, will be
increased annually by 10%. In addition, Mr. Olicker is entitled to receive a
cash bonus equal to four percent (4%) of the amount by which the aggregate
EBIT-D (earnings before the payment of interest or taxes or a deduction for
depreciation) for the fiscal year ending on the most recent December 31st
exceeds EBIT-D for the fiscal year ending on the preceding December 31st. The
agreement provides that Mr. Olicker receive a one time cash bonus of $125,000 in
the event that the aggregate EBIT-D for any 4 consecutive fiscal quarters during
the term of the agreement equals or exceeds $40,000,000. The agreement also
provides that, on each June 30th during the term of the agreement, Mr. Olicker
receive an option bonus to purchase a number of shares of common stock equal to
thirty percent (30%) of the dollar amount of the annual cash bonus due for the
fiscal year ending on the preceding December 31st. The options comprising the
option bonus shall vest quarterly over a one (1) year period commencing on the
September 30th following the date of grant and be exercisable at a price equal
to the closing bid price of the Company's shares of Common Stock on the date of
grant, as reported by The Nasdaq National Market. Pursuant to the amendment to
Mr. Olicker's agreement, in September 2002, Mr. Olicker received options to
purchase 75,000 shares of the Company's Common Stock and on or about the date of
the Company's annual meeting for each year of the term of the agreement
(beginning in 2003), Mr. Olicker is entitled to receive, annual options to
purchase 75,000 shares of the Company's Common Stock, which options shall vest
quarterly over the one year period following the date of grant and shall have an
exercise price equal to the closing bid price of the Company's Common Stock on
the applicable date of grant, as quoted on The Nasdaq National Market. In the
event that Mr. Olicker's employment is terminated for any reason other than (i)
the Company terminating employment for cause or (ii) Mr. Olicker terminating
employment without good reason, Mr. Olicker shall receive a pro rata option
bonus based on the performance of the Company for the full fiscal year in which
his employment was terminated. In addition, if Mr. Olicker is employed by the
Company on January 1, 2005, he will be entitled to 20,000 unrestricted shares of
the Company's Common Stock. Mr. Olicker also received a signing bonus of one
hundred thousand dollars ($100,000). Mr. Olicker's employment agreement contains
other customary provisions.
In January 1998, the Company entered into an employment agreement with
Arvind Dharia, pursuant to which Mr. Dharia agreed to serve as the Company's
Chief Financial Officer, which agreement was amended as of June 29, 2001 and as
of October 30, 2002. The agreement will expire on December 31, 2005. However,
the term of the agreement is subject to automatic extension for one (1) year
unless either party terminates the agreement with ninety (90) days' prior
notice. The Company agreed to pay Mr. Dharia an annual salary of $169,400 until
September 30, 2001, $200,000 from October 1, 2001 through December 31, 2002,
$220,000 from January 1, 2003 through December 31, 2003, $234,000 from January
1, 2004 through December 31, 2004, and $240,000 from January 1, 2005 through
December 31, 2005. Mr. Dharia received a $50,000 signing bonus upon execution of
the amendment to the agreement on June 29, 2001. The agreement provides that Mr.
Dharia receive options to purchase 40,000 shares of the Company's Common Stock
on June 30 of each year during the term of the agreement (commencing June 30,
2001). The options are to vest quarterly over a period of one (1) year and are
exercisable at an exercise price equal to the lesser of (i) the average closing
bid price of the Company's Common Stock as quoted on The Nasdaq National Market
or such other exchange on which the common stock shall be listed on the date of
grant or (ii) if the date of grant is not June 30th, the average closing bid
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price of the Company's Common Stock as quoted on The Nasdaq National Market or
such other exchange on which the common stock shall be listed on June 30th of
the year in which the grant shall occur. In addition, the agreement provides
that for each fiscal year that occurs during the term of employment (beginning
with the fiscal year ended December 31, 2001), Mr. Dharia receive a cash bonus,
in an amount equal to one and one-half percent (1.5%) of the increase in the
Company's EBITDA (earnings before interest, tax, depreciation and amortization)
over the EBITDA of the prior fiscal year, provided, however that in no event
shall the annual cash bonus exceed Mr. Dharia's base salary for such fiscal
year. Also, Mr. Dharia shall, at the end of a calendar quarter, receive a bonus
of $50,000 if the Company has had sales of $300,000,000 or more for such
calendar quarter and the immediately preceding three (3) calendar quarters,
provided, however, that Mr. Dharia shall not receive this $50,000 bonus more
than once in any given calendar year. In addition, during the term of the
agreement, the Company is obligated to pay life insurance premiums on behalf of
Mr. Dharia of approximately $80,000 per year. Also, if Mr. Dharia is employed by
the Company on January 1, 2005, he will be entitled to 20,000 unrestricted
shares of the Company's Common Stock. In the event of Mr. Dharia's total
disability or death, the Company is obligated to pay Mr. Dharia or his estate an
amount equal to the appropriate salary for the twelve (12) month period
immediately subsequent to the date of his total disability or death. In the
event Mr. Dharia's employment agreement is terminated by the Company for any
reason other than "for cause" or due to his "total disability", the Company is
obligated to pay Mr. Dharia an amount equal to the product of (a) Mr. Dharia's
base salary on the effective date of such termination plus the bonus paid or
payable for the fiscal year ended on the December 31st immediately preceding the
date of termination multiplied by (b) the number of years (and fractions of
years) remaining in the term of the employment agreement. In addition, the
Company will be obligated to continue to pay the life insurance premiums on
behalf of Mr. Dharia provided for above. The payments due Mr. Dharia upon his
termination for any reason other than "for cause" or due to his "total
disability" will be payable in two installments: fifty percent (50%) on January
1 after the date of termination and the remaining fifty percent (50%) one year
after. Further, Mr. Dharia may terminate the agreement in the event of a "change
in control" of the Company without Mr. Dharia's prior written consent, and
within ten (10) days of termination Mr. Dharia is entitled to receive an amount
equal to three (3) times the total compensation (including base salary, cash
bonus, and other employee benefits) received by Mr. Dharia for the preceding
twelve (12) month period ending on the most recent December 31st, provided that
Mr. Dharia's then-current Base Salary shall be used in determining the
foregoing. Mr. Dharia's employment agreement contains other customary
provisions.
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 term of Mr. Schmertz's employment commenced on April 1, 2002 and ends on
June 30, 2005. Mr. Schmertz received a signing bonus of $150,000. The Company
agreed to pay Mr. Schmertz an annual salary of $375,000, which will be increased
to $412,500 on July 1, 2003 and will be further increased to $453,750 on July 1,
2005. Pursuant to the agreement, on May 17, 2002 Mr. Schmertz received 100,000
options to purchase the Company's Common Stock at an exercise price equal to the
closing market price on such date. These options vest quarterly beginning with
the first 25,000 vesting on September 30, 2002 and the last on June 30, 2003. In
addition, on the date of the Company's annual meeting in each of 2003 and 2004,
Mr. Schmertz will be entitled to receive an option to purchase 100,000 shares of
the Company's Common Stock. These options will have an exercise price equal to
the closing market price on the date of the grant and will vest quarterly
beginning with the first 25,000 vesting on the September 30th immediately
following the grant. In the event of a change in control, all unvested options
will vest on the date of the change of control, priced as of the closing market
price on the date of transfer as quoted on The Nasdaq National Market. Subject
to the approval of the Company's shareholders, if Mr. Schmertz is employed by
the Company through June 30, 2005, he will be entitled to receive 50,000 shares
of Common Stock.
In April 2001, Adesso-Madden, Inc. ("Adesso"), a wholly-owned
subsidiary of the Company, entered into an employment agreement with Gerald
Mongeluzo pursuant to which Mr. Mongeluzo agreed to serve as President of
Adesso. The term of Mr. Mongeluzo's employment is three (3) years commencing on
April 1, 2001 and ending on March 31, 2004. Mr. Mongeluzo received a signing
bonus of $35,000. Adesso agreed to pay Mr. Mongeluzo an annual salary of
$300,000 for the first year of the term, $315,000 for the second year of the
term and $330,000 for the third year of the term. The agreement provides that by
April 15th of 2002, 2003 and 2004, Mr. Mongeluzo shall receive a cash bonus
equal to four percent (4%) of the amount by which net profit for the fiscal year
ending on the most recent December 31st exceeds net profit for the fiscal year
ending on the preceding December 31st. In addition, the agreement provides that
on each of June 30, 2001, 2002, and 2003, Mr. Mongeluzo shall receive an option
to purchase 34,000, 33,000 and 33,000 shares of the Company's Common Stock,
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respectively. These options shall vest quarterly over the one year period
following the date of grant and shall be exercisable after vesting for a period
of seven (7) years from the date of grant at an exercise price equal to the
closing price of the Company's Common Stock on the applicable date of grant, as
quoted on The Nasdaq National Market (or other principal exchange on which
shares of the Company's Common Stock are traded). In the event that Mr.
Mongeluzo terminates his employment for `good reason' or Mr. Mongeluzo's
employment is terminated by the Company for any reason other than "for cause" or
due to his disability, the Company is obligated to pay Mr. Mongeluzo an amount
equal to Mr. Mongeluzo's base salary for the greater of (i) twelve (12) months
or (b) the remaining term of his agreement (as if it had not been terminated).
Further, Mr. Mongeluzo may terminate the agreement in the event of a "change in
control" of the Company, and upon such termination Mr. Mongeluzo is entitled to
receive an amount equal to the greater of (a) Mr. Mongeluzo's base salary for
the remaining term of his agreement (as if it had not been terminated) or (b)
Mr. Mongeluzo's base salary as then in effect for a period of twelve (12)
months. Mr. Mongeluzo's employment agreement contains other customary
provisions.
Agreement with the Chairman of the Board
In May 2001, the Company entered into an agreement with Charles A.
Koppelman pursuant to which Mr. Koppelman agreed to serve as the Company's
Executive Chairman of the Board. The term of the agreement is two (2) years
commencing on July 1, 2001 and ending on June 30, 2003. The Company agreed to
pay Mr. Koppelman an annual base salary of $125,000. The Company also agreed to
provide Mr. Koppelman with an annual $125,000 non-accountable expense allowance.
Pursuant to the agreement, on or about July 10, 2001 Mr. Koppelman received
options to purchase 100,000 shares of the Company's Common Stock at an exercise
price equal to the closing market price on the date prior to the grant date, as
quoted on The Nasdaq National Market. These options vested quarterly over the
one year period following the date of grant and are exercisable for a period of
five (5) years from the date of grant. On or about July 10, 2001, the Company
issued to Mr. Koppelman 10,000 shares of restricted common stock, 25% of which
became unrestricted at the end of each of the four quarters following the date
of issuance. As of May 31, 2001, Mr. Koppelman received fully-vested options to
purchase 75,000 shares of the Company's Common Stock, which are exercisable for
a period of five (5) years from the date of grant at an exercise price of $7.00.
These options were granted pursuant to an outstanding letter agreement between
the Company and Mr. Koppelman (the "Option Letter"). Mr. Koppelman surrendered
the remaining 225,000 options to be granted to him pursuant to the Option Letter
in connection with the execution of his agreement. Pursuant to the terms of the
agreement, Mr. Koppelman is also entitled to receive annual options to purchase
100,000 shares of the Company's Common Stock on the date of the Company's annual
meeting held in each of 2002, 2003, and 2004. Twenty five percent (25%) of each
annual option will vest at the end of each of the four full calendar quarters
after the applicable grant date. The annual options shall be exercisable after
vesting for a period of five (5) years from the date of grant at an exercise
price equal to the lesser of (a) the closing market price on the applicable
grant date, as quoted on The Nasdaq National Market (or such other market or
exchange on which the Company's Common Stock is listed or traded) or (b) $13.50.
In the event that Mr. Koppelman ceases to be either an employee or director of
the Company, any annual option not yet granted shall be forfeited as of the date
of termination; provided however, that if the agreement shall have been
terminated (or not extended) by the Company other than For Cause (as defined in
the agreement) or by Mr. Koppelman with Good Reason (as defined in the
agreement) any annual options which were granted prior to such termination shall
be deemed granted as of the date prior to the date of such termination. The
agreement also provides that in the event there is a "change of control" of the
Company, (i) all unvested options granted to Mr. Koppelman prior to such "change
of control" shall immediately vest (ii) if Mr. Koppelman is an employee or
director of the Company at the time of such "change of control", any annual
options which have not been granted prior to such change of control shall
immediately be granted and vest, and (iii) the exercise price of all unexercised
options shall be reduced to $7.00. Mr. Koppelman's agreement contains other
customary provisions, including provisions regarding confidentiality,
solicitation and competition. In October 2002, the Compensation Committee of the
Board of Directors determined that it was in the best interests of the Company
that Mr. Koppelman's current agreement not be extended beyond its June 30, 2003
expiration date. As of July 1, 2003, Mr. Koppelman was compensated for his
services as a director in the same manner as the other outside directors on the
Board.
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Agreement with Steven Madden
In May 2001, the Company entered into an agreement with Steven Madden,
the Company's founder, pursuant to which Mr. Madden agreed to serve as the
Company's Creative and Design Chief. The agreement amends and restates the prior
agreement dated July 29, 1997 (and amended February 28, 2000). The term of Mr.
Madden's employment under the agreement is ten (10) years commencing on July 1,
2001 and ending on June 30, 2011. The Company has agreed to pay Mr. Madden an
annual base salary of $700,000, which the Board may increase, but not decrease,
at any time. Mr. Madden is entitled to receive base salary payments during
periods that he is not actively engaged in the duties of Creative and Design
Chief. For each fiscal year during the term of the agreement, Mr. Madden is
entitled to receive a cash bonus in an amount determined by the Board, but not
less than 2% of the Company's EBITDA (earnings before interest, tax,
depreciation and amortization) for such year; provided however, that the Company
is not required to pay such cash bonus for any fiscal year during which Mr.
Madden is not actively engaged in the duties of Creative and Design Chief for at
least six months. Subject to availability of shares under the Company's 1999
Stock Plan or any other plan designated by the Board of Directors and approved
by the Company's stockholders, on or about the date of the Company's annual
meeting for each year of the term (beginning in 2002), Mr. Madden is eligible to
receive, during the term of the agreement, annual options to purchase shares of
the Company's common stock in an amount equal to not less than 150% of the
largest aggregate amount of options granted to any other continuing full time
employee of the Company over the 12 month period up to and including the
applicable grant date; provided that all annual options shall be subject to
final approval of the Board. The annual options will vest quarterly over the 1
year period following the date of grant and will be exercisable after vesting
for a period of 5 years from the grant date at an exercise price equal to the
closing price of the Company's Common Stock on the grant date as quoted on The
Nasdaq National Market (or such other market or exchange on which the Company's
Common Stock is listed or traded). The Company is not required to grant an
annual option if Mr. Madden is not actively engaged in the duties of Creative
and Design Chief for at least six months out of the twelve months immediately
preceding the grant date for such annual option. The Company also agreed to
provide Mr. Madden with an annual $200,000 non-accountable expense allowance
which amount is payable in equal monthly installments; however, the Company is
not required to pay the non-accountable expense allowance for any month during
which Mr. Madden is not actively engaged in the duties of Creative and Design
Chief.
In addition, in the event of Mr. Madden's total disability or death,
the Company is obligated to continue to pay Mr. Madden (or Mr. Madden's estate)
Mr. Madden's base salary for the twelve (12) month period immediately subsequent
to the date of such total disability or death. In the event Mr. Madden's
agreement is terminated for any reason other than "for cause" or due to his
death or his total disability, the Company is obligated to pay Mr. Madden the
balance of his base salary that would have been paid over the full term of the
agreement if the agreement had not been terminated, fifty percent (50%) upon
termination and the remaining fifty percent (50%) in equal annual installments
until June 30, 2011. In the event there is a "change of control" transaction
terminating Mr. Madden's employment, all unvested options to purchase shares of
the Company's 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 (a) the amount of compensation that is accrued and unpaid through the
date of termination and (b) three (3) times the total compensation (base salary,
cash bonus and non-accountable expense allowance) received by Mr. Madden for the
preceding 12 month period ending December 31.
To the extent not previously assigned or consented to, except as
provided below, (i) Mr. Madden sold, assigned and transferred to the Company the
exclusive right and interest to his name and (ii) Mr. Madden consented to the
use of his name as trademarks, service marks, corporate names and/or internet
domain name addresses of the Company (the "Marks"). Mr. Madden also agreed to
never challenge the Company's ownership of his name or the validity of the
Company's ownership of the Marks or of any registration or application for
registration thereof. Mr. Madden may however use his name for all non-commercial
purposes and for use in connection with any business that is not in the design,
manufacture, sale, marketing or distribution of (i) branded or designer
footwear, apparel, accessories and other products in the categories of products
sold by, or under license from, the Company or any of its affiliates, (ii)
jewelry and other giftware, (iii) cosmetics, fragrances and other health and
beauty care items, (iv) housewares, furniture, home furnishings and related
products and (v) other products related to fashion, cosmetics or lifestyle (any
of such activities being a "competitive business"). Further, Mr. Madden agreed
to not directly or indirectly (i) engage in any competitive business in any
relationship or capacity, (ii) solicit any customers of the Company, or (iii)
solicit or employ any employee or agent to the Company, until the later of (a)
June 30, 2011 or (b) the date which is twelve (12) months after the date on
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which Mr. Madden is no longer employed by the Company, or until twelve months
after the date of termination should Mr. Madden be terminated in connection with
a change of control. Mr. Madden's agreement contains other customary provisions.
In May 2001, Mr. Madden entered into a plea agreement with the U.S.
Attorney's Office, pursuant to which he pled guilty to four securities fraud and
money laundering charges that had been previously filed against him. In 2002,
Mr. Madden was sentenced to forty-one (41) months' imprisonment in connection
with the charges. Mr. Madden began serving his sentence in September of 2002.
While serving his sentence, Mr. Madden is not actively engaged in the duties of
Creative and Design Chief and is therefore only entitled to receive base salary
payments under the agreement.
On April 26, 2004, the SEC sent the Company a letter requesting
information and documents relating to, among other things, Mr. Madden's
employment by the Company and the officer and director bar against Mr. Madden.
The Company intends to fully comply with the SEC's request.
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 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.
Pursuant to this agreement, the Company paid fees to Peter J. Solomon & Company
in the amount of $75,000 during 2001 and $150,000 during 2002. During 2003, the
Company paid $32,866 to Peter J. Solomon & Company for research and other
expenses. This agreement was amended in March 2004. Under the amended agreement,
the Company will pay fees to Peter J. Solomon & Company in the amount of
$200,000 during 2004.
The Company and Jeffrey Birnbaum, one of the Company's directors, have
entered into an agreement whereby Mr. Birnbaum provides design consultation
services to the Company. Pursuant to this agreement, Mr. Birnbaum received a fee
of $200,000 from the Company in 2003.
The Company paid John Madden, one of the Company's directors, $15,000
in 2003 for investment consulting advice provided by Mr. Madden to the Company
in 2002. In addition, in January 2004 the Company entered into an agreement with
JLM Consultants, a company wholly-owned by Mr. Madden, whereby JLM Consultants
will provide consulting services with respect to the development of
international sales of the Company. Pursuant to this agreement, JLM Consultants
will receive a monthly fee of $16,000.
The Company had an agreement with Charles Koppelman, its Chairman,
which expired on June 30, 2003. See "Agreement with the Chairman of the Board."
The Company has an agreement with Steven Madden, a beneficial holder of
more than 10% of the Company's outstanding shares of common stock. See
"Agreement with Steven Madden."
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 2003, the Compensation Committee was comprised of directors
Peter Migliorini (chairman) and Roger Gladstone. Each member of the Compensation
Committee was a non-employee director of the Company during 2003.
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.
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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 interest 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). 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.
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 2003, Mr. Karson's compensation consisted of $467,500 in base salary
payments and a total of $108,056 in bonus payments, which total bonus amount was
fully paid by April 21, 2004. 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.
Mr. Karson is also entitled to receive options to purchase an additional 58,056
shares of Common Stock for his service as Chief Executive Officer in 2003. In
February 2004, the Compensation Committee approved an amendment to Mr. Karson's
employment agreement which extended the term of the agreement to June 30, 2006.
The Compensation Committee believes that Mr. Karson's compensation should be
heavily weighted towards enhancing stockholder value, and accordingly, Mr.
Karson's employment agreement provides that a significant portion of his future
compensation will be based upon the Company's overall performance. See
"Employment Agreements with Certain Executive Officers."
The Company has negotiated employment agreements with respect to base
salary, annual incentive awards and stock option awards for each of the
Company's named executive officers based upon the Company's performance and the
individual performance of such named executives.
The Internal Revenue Code of 1986 prohibits the Company from taking a
tax deduction in any year for compensation paid the persons who would be named
executive officers in that year in excess of $1 million unless such compensation
is "performance-based compensation." The Company did not pay in 2003 any officer
compensation which will be subject to the $1 million deduction limitation. The
Compensation Committee will take into consideration the $1 million deduction
limitation when structuring future compensation packages for the Company's
executive officers and, if appropriate and in the best interests of the Company,
will conform such packages to permit the Company to take a deduction for the
full amount of all compensation.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee makes all compensation decisions. During
2003, the following directors served on the Compensation Committee: Peter
Migliorini (chairman) and Roger Gladstone. During the fiscal year 2003, no
interlocking relationship existed between the Company's Board of Directors or
Compensation Committee and the board of directors or compensation committee of
any other company.
COMPENSATION COMMITTEE
Peter Migliorini (chairman)
Roger Gladstone
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STOCK PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
cumulative total stockholder return on the Common Stock during the period
beginning on December 31, 1998 and ending on December 31, 2003 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, 1998 in the
Company's Common Stock and in the foregoing indices and assumes the reinvestment
of dividends.
[GRAPHIC CHART OMITTED]
12/31/98 12/31/99 12/29/00 12/31/01 12/31/02 12/31/03
-------- -------- -------- -------- -------- --------
Steven Madden, Ltd. 100.00 224.24 89.65 165.53 212.59 240.00
Russell 2000 Index 100.00 119.62 114.59 115.77 90.79 131.98
S&P 500 Footwear Index 100.00 117.64 140.92 141.39 116.06 175.63
-23-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of the Record Date with
respect to the beneficial ownership of the outstanding shares of the Company's
Common Stock by (i) each person known by the Company to beneficially own five
percent or more of the outstanding shares; (ii) the directors and the persons
named in the Summary Compensation Table; and (iii) the Company's officers and
directors as a group. A person is deemed to be a beneficial owner of any
securities of which that person has the right to acquire beneficial ownership
within sixty (60) days. See "Compensation of Directors and Executive Officers."
Name and Address of Amount and Nature of Percentage (%)
Beneficial Owner(1) Beneficial Ownership(2) of Class(2)
- ---------------------------------------------- ---------------------- ------------
Charles A. Koppelman 211,250(3) 1.56
Jamieson A. Karson 155,000(4) 1.15
Arvind Dharia 102,000(5) *
Gerald Mongeluzo 33,000(6) *
Richard Olicker 220,000(7) 1.62
Robert Schmertz 100,000(8) *
Marc Cooper 30,000(9) *
John Madden 30,000(10) *
Peter Migliorini 30,000(11) *
Jeffrey Birnbaum -0- *
Awadhesh Sinha 10,000(12) *
Roger Gladstone 10,000(13) *
Steven Madden (14) 1,854,000(15) 13.00
BOCAP Corp. 1,854,000(16) 13.00
T. Rowe Price Associates, Inc. (17) 1,115,600 8.37
T. Rowe Price Small-Cap Value Fund, Inc. (18) 950,000 7.13
Columbia Wanger Asset Management, L.P. (19) 1,746,800(20) 13.11
WAM Acquisition GP, Inc. (19) 1,746,800(20) 13.11
Columbia Acorn Trust (19) 1,025,600(20) 7.70
Wells Fargo & Company (21) 964,700 7.24
Wells Capital Management Incorporated (22) 964,700 7.24
Wellington Management Company, LLP (23) 635,200 4.76
Royce & Associates, LLC (24) 1,584,700 6.55
Directors and Officers as a Group (12 persons) 931,250(25) 6.55
- --------------------
* 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 13(d)-3 of the Securities Exchange Act, and based upon 13,333,905
shares of Common Stock outstanding (excluding treasury shares) as of the
Record Date.
(3) Includes 211,250 shares of Common Stock issuable upon the exercise of
options held by Mr. Koppelman.
(4) Includes (i) 145,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Karson and (ii) 10,000 shares of Common Stock held by
Mr. Karson's wife.
(5) Includes 102,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Dharia.
(6) Includes 33,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Mongeluzo.
(7) Includes 220,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Olicker.
(8) Includes 100,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Schmertz.
(9) Includes 30,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Cooper.
(10) Includes 30,000 shares of Common Stock issuable upon the exercise of
options held by Mr. J. Madden.
-24-
(11) Includes 30,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Migliorini.
(12) Includes 10,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Sinha.
(13) Includes 10,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Gladstone.
(14) Mr. Madden resigned as Chief Executive Officer of the Company effective as
of July 1, 2001.
(15) Includes (i) 809,000 shares of Common Stock held by BOCAP, a corporation
wholly-owned by Mr. S. Madden, (ii) 940,000 shares of Common Stock issuable
upon the exercise of options held by Mr. Madden.
(16) Includes (i) 940,000 shares of Common Stock issuable upon the exercise of
options held by Mr. Madden and (ii) 105,000 shares of Common Stock held by
Mr. Madden.
(17) Based upon a Schedule 13G/A filed with the SEC on February 6, 2004. The
address for such stockholder is 100 E. Pratt Street, Baltimore, MD 21202.
(18) Based upon a Schedule 13G filed with the SEC on February 6, 2004. The
address for such stockholder is 100 E. Pratt Street, Baltimore, MD 21202.
(19) Based upon a Schedule 13G/A filed with the SEC on February 6, 2004. The
address for such stockholder is 227 West Monroe Street, Suite 3000,
Chicago, IL 60606.
(20) As disclosed in the Schedule 13G/A filed with the SEC on February 6, 2004,
the 1,746,800 shares beneficially owned by Columbia Wanger Asset
Management, L.P. include the 1,746,800 shares beneficially owned by its
general partner, WAM Acquisition GP, Inc. and the 1,025,600 shares owned by
its discretionary client, Columbia Acorn Trust.
(21) Based upon a Schedule 13G/A filed with the SEC on February 13, 2004. The
address for such stockholder is 420 Montgomery Street, San Francisco, CA
94104. As disclosed in the Schedule 13G/A, Wells Capital Management
Incorporated is a subsidiary of such stockholder.
(22) Based upon a Schedule 13G/A filed with the SEC on February 13, 2004. The
address for such stockholder is 525 Market Street, 10th Floor, San
Francisco, CA 94105. As disclosed in the Schedule 13G/A, such stockholder
is a subsidiary of Wells Fargo & Company.
(23) Based upon a Schedule 13/A filed with the SEC on February 12, 2004. The
address for such stockholder is 75 State Street, Boston, MA 02109.
(24) Based upon a Schedule 13G/A filed with SEC on March 8, 2004. The address
for such stockholder is 1414 Avenue of the Americas, New York, NY 10019.
(25) Includes 921,250 shares issuable upon the exercise of options.
-25-
PROPOSAL TWO
AMENDMENT OF THE 1999 STOCK PLAN
At the 1999 Annual Meeting of Stockholders, the Company's stockholders
approved the adoption of the Company's 1999 Stock Plan (the "1999 Plan"). The
Board of Directors has amended the 1999 Plan, subject to stockholder approval,
to authorize 300,000 additional shares for future awards (the "1999 Plan
Proposal"). The affirmative vote of the holders of a majority of the total votes
cast on the 1999 Plan Proposal is needed to approve the 1999 Plan Proposal.
Because of the limited number of remaining shares that may be granted
under the 1999 Plan, the Board of Directors believes it is appropriate and
necessary at this time to authorize additional shares for future awards.
Authorization of these additional shares will allow grants to employees,
consultants and directors in furtherance of the Company's goal of continuing to
achieve significant gains in stockholder value and operating results.
As of March 31, 2004, options to purchase 2,174,000 shares of the
Company's common stock were outstanding. These options had a weighted average
exercise price of $11.74 and a weighted average remaining contractual life of
5.93 years.
The Company intends to continue awarding options 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 and its affiliates. The following is a summary of the principal features
of the 1999 Plan. The summary is qualified in its entirety by reference to the
complete text of the 1999 Plan, as proposed to be amended. The proposed
amendment to the 1999 Plan is set forth as Annex E to this Proxy Statement.
Description of the 1999 Plan
The maximum number of shares of Common Stock with respect to which
awards may be presently granted pursuant to the 1999 Plan is 2,920,000 shares.
The 1999 Plan Proposal would authorize the use of up to an additional 300,000
shares of the Company's common stock for a total of 3,220,000 shares being
available for issuance under the 1999 Plan. Shares issuable under the 1999 Plan
may be either treasury shares or authorized but unissued shares. The number of
shares available for issuance will be subject to adjustment to prevent dilution
in the event of stock splits, stock dividends or other changes in the
capitalization of the Company.
Subject to compliance with Rule 16b-3 of the Securities Exchange Act of
1934 (the "Exchange Act"), the Plan shall be administered by the Board of
Directors of the Company (the "Board") or, in the event the Board shall appoint
and/or authorize a committee, such as the Compensation Committee, of two or more
members of the Board to administer the Plan, by such committee (the "Plan
Administrator"). Except for the terms and conditions explicitly set forth in the
Plan, the Plan Administrator shall have the authority, in its discretion, to
determine all matters relating to the options to be granted under the Plan,
including, without limitation, selection of whether an option will be an
incentive stock option or a nonqualified stock option, selection of the
individuals to be granted options, the number of shares to be subject to each
option, the exercise price per share, the timing of grants and all other terms
and conditions of the options. In May 2003 the stockholders of the Company
approved an amendment to the Plan which provided that (i) 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 (ii) prohibited the Board from amending the terms of any option
granted pursuant to the Plan to reduce the option price.
Options granted under the 1999 Plan may be "incentive stock options"
("Incentive Options") within the meaning of Section 422 of the Internal Revenue
Code (the "Code") or stock options which are not incentive stock options
("Non-Incentive Options" and, collectively with Incentive Options, hereinafter
referred to as "Options"). Each Option may be exercised in whole or in part;
provided, that only whole shares may be issued pursuant to the exercise of any
Option. Subject to any other terms and conditions herein, the Plan Administrator
may provide that an Option may not be exercised in whole or in part for a stated
period or periods of time during which such Option is outstanding; provided,
-26-
that the Plan Administrator may rescind, modify, or waive any such limitation
(including by the acceleration of the vesting schedule upon a change in control
of the Company) at any time and from time to time after the grant date thereof.
During an optionee's lifetime, any incentive stock options granted under the
Plan are personal to such optionee and are exercisable solely by such optionee.
The Plan Administrator can determine at the time the Option is granted
in the case of Incentive Options, or at any time before exercise in the case of
Non-Incentive Options, that additional forms of payment will be permitted. To
the extent permitted by the Plan Administrator and applicable laws and
regulations (including, without limitation, federal tax and securities laws and
regulations and state corporate law), an Option may be exercised by:
(a) delivery of shares of Common Stock of the Company held by an
optionee having a fair market value equal to the exercise price, such fair
market value to be determined in good faith by the Plan Administrator;
(b) delivery of a properly executed notice of exercise, together
with irrevocable instructions to a broker, all in accordance with the
regulations of the Federal Reserve Board, to promptly deliver to the Company the
amount of sale or loan proceeds to pay the exercise price and any federal,
state, or local withholding tax obligations that may arise in connection with
the exercise; or
(c) delivery of a properly executed notice of exercise, together
with instructions to the Company to withhold from the shares of Common Stock
that would otherwise be issued upon exercise that number of shares of Common
Stock having a fair market value equal to the Option exercise price.
Upon a Change in Control of the Company, any award carrying a right to
exercise that was not previously exercisable shall become fully exercisable, the
restrictions, deferral limitations and forfeiture conditions applicable to any
other award granted shall lapse and any performance conditions imposed with
respect to awards shall be deemed to be fully achieved.
Options granted under the 1999 Plan may not be transferred, pledged,
mortgaged, hypothecated or otherwise encumbered other than by will or under the
laws of descent and distribution, except that the Plan Administrator may permit
transfers of awards for estate planning purposes if, and to the extent, such
transfers do not cause a participant who is then subject to Section 16 of the
Exchange Act to lose the benefit of the exemption under Rule 16b-3 for such
transactions.
For federal income tax purposes, the grant to an optionee of a
Non-Incentive Option will not constitute a taxable event to the optionee or to
the Company. Upon exercise of a Non-Incentive Option, in general, the optionee
will recognize compensation income taxable as ordinary income, measured by the
excess of the fair market value of the Common Stock purchased on the exercise
date over the amount paid by the optionee for such Common Stock, and will be
subject to tax withholding. The Company may claim a deduction for the amount of
such compensation. The optionee will have a tax basis in the Common Stock
purchased equal to the amount paid plus the amount of ordinary income recognized
upon exercise of the Non-Incentive Option. Upon the subsequent sale of the
Common Stock received upon exercise of the Non-Incentive Option, an optionee
will recognize capital gain or loss equal to the difference between the amount
realized on such sale and his or her tax basis in the Common Stock, which may be
long-term capital gain or loss if the optionee holds the Common Stock for more
than one year from the exercise date.
For federal income tax purposes, neither the grant nor the exercise of
an Incentive Option will constitute a taxable event to the optionee or to the
Company, assuming the Incentive Option qualifies as an "incentive stock option"
under Code ss.422. If an optionee does not dispose of the Common Stock acquired
upon exercise of an Incentive Option during the statutory holding period, any
gain or loss upon subsequent sale of the Common Stock will be long-term capital
gain or loss, assuming the shares represent a capital asset in the optionee's
hands. The statutory holding period is the later of two years from the date the
Incentive Option is granted or one year from the date the Common Stock is
transferred to the optionee pursuant to the exercise of the Incentive Option. If
the statutory holding period requirements are satisfied, the Company may not
claim any federal income tax deduction upon either the exercise of the Incentive
Option or the subsequent sale of the Common Stock received upon exercise
thereof. If the statutory holding period requirement is not satisfied, the
optionee will recognize compensation income taxable as ordinary income on the
date the Common Stock is sold, in general, in an amount equal to the lesser of
-27-
(i) the fair market value of the Common Stock on that date less the amount paid
by the optionee for such Common Stock, or (ii) the amount realized on the
disposition of the Common Stock less the amount paid by the optionee for such
Common Stock; the Company may then claim a deduction for the amount of such
compensation income.
The federal income tax consequences summarized hereinabove are based
upon current law and are subject to change.
The Board may amend, alter, suspend, discontinue or terminate the 1999
Plan at any time, except that any such action shall be subject to stockholder
approval at the annual meeting next following such Board action if such
stockholder approval is required by federal or state law or regulation or the
rules of any exchange or automated quotation system on which the Common Stock
may then be listed or quoted, or if the Board of Directors otherwise determines
to submit such action for stockholder approval. In addition, no amendment,
alteration, suspension, discontinuation or termination to the 1999 Plan may
materially impair the rights of any participant with respect to any Option
granted before amendment without such participant's consent. Unless terminated
earlier by action of the Board of Directors, the 1999 Plan shall terminate ten
(10) years after adoption by the stockholders.
Recommendation of the Board of Directors
The Board of Directors unanimously recommends a vote FOR approval of
the 1999 Plan Amendment Proposal. Unless marked to the contrary, proxies
received from Stockholders will be voted in favor of the 1999 Plan Proposal.
-28-
PROPOSAL THREE
RATIFICATION OF THE APPOINTMENT OF EISNER LLP AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2004
The Audit Committee has appointed Eisner LLP as the Company's
independent auditors to conduct the audit of the Company's books and records for
the fiscal year ending December 31, 2004. Eisner LLP also served as the
Company's independent auditors for the previous fiscal year. 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.
The affirmative vote of a majority of the shares of Common Stock
represented at the meeting and entitled to vote is required for the ratification
of the appointment of Eisner LLP as the Company's independent auditors. The
Audit Committee is directly responsible for the appointment and retention of the
Company's independent auditors. Although ratification by stockholders is not
required by our organizational documents or other applicable law, the Audit
Committee has determined that requesting ratification by stockholders of its
appointment of Eisner LLP as the Company's independent auditors is a matter of
good corporate practice. If stockholders do not ratify the selection, the Audit
Committee will reconsider whether or not to retain Eisner LLP, but may still
retain them. Even if the selection is ratified, the Audit Committee, in its
discretion, may change the appointment at any time during the year if it
determines that such a change would be in the best interest of the Company and
its stockholders.
Recommendation of the Board of Directors
The Board of Directors unanimously recommends a vote FOR the
ratification of the appointment of Eisner LLP as the Company's independent
auditors for the fiscal year ending December 31, 2004. Unless marked to the
contrary, proxies received from stockholders will be voted in favor of the
appointment of Eisner LLP as the Company's independent auditors for the fiscal
year ending December 31, 2004.
FEES PAID TO INDEPENDENT AUDITORS
Audit Fees
The aggregate fees billed by Eisner LLP for professional services
rendered for the audit of the Company's annual financial statements for the
fiscal year ended December 31, 2003, for the reviews of the financial statements
included in the Company's Quarterly Reports on Form 10-Q for that fiscal year,
other statutory and regulatory filings and consents related to registration
statements filed with the SEC for the 2003 fiscal year were $196,000. The
comparative amount for the fiscal year ended December 31, 2002 was $152,000.
Audit-Related Fees
In addition to Audit Fees, Eisner LLP has billed the Company $85,000,
in the aggregate, for Audit Related Fees related to assurance and related
services for the fiscal year ended December 31, 2003. These services include,
among others, the audit of the Company's employee benefit plans and other
accounting related consultations. The comparative amount for the fiscal year
ended December 31, 2002 was $60,000.
Tax Fees
During the fiscal year ended December 31, 2003, Eisner LLP billed the
Company $98,000, in the aggregate, for services rendered to the Company for tax
compliance, tax advice and tax planning. Eisner LLP billed $154,000 for similar
services in the 2001 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 year ended December 31, 2003 and 2002.
-29-
AUDIT COMMITTEE'S PRE-APPROVAL POLICIES AND PROCEDURES
Consistent with SEC policies regarding auditor independence, the Audit
Committee has responsibility for appointing, setting compensation and overseeing
the work of the independent auditor. In recognition of this responsibility, the
Audit Committee has established a policy to review and pre-approve all audit and
permissible non-audit services provided by the independent auditor. These
services may include audit services, audit-related services, tax services and
other services.
Prior to engagement of the independent auditor for next year's audit,
the Audit Committee will pre-approve all auditing services and all permitted
non-audit services (including the fees and terms thereof), except those excluded
from requiring pre-approval based upon the de minimus exception set forth in
Section 10A(i)(1)(b) of the Exchange Act.
The Audit Committee's pre-approval policies and procedures are as
follows: (a) prior to each fiscal year, the Audit Committee pre-approves a
schedule of estimated fees for proposed non-prohibited audit and non-audit
services and (b) actual amounts paid are monitored by financial management of
the Company and reported to the Audit Committee.
All work performed by Eisner LLP as described above under the captions
Audit Fees, Audit Related Fees, Tax Fees and All Other Fees has been approved or
pre-approved by the Audit Committee pursuant to the provisions of the Audit
Committee charter attached as Annex A. The Audit Committee has considered and
concluded that the provision of non-audit services is compatible with
maintaining the principal accountant's independence.
-30-
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 2005 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 2005 Annual Meeting must do so
no later than December 24, 2004.
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
2005 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 2004 Annual Meeting. Accordingly, any written notice given by or on
behalf of a stockholder pursuant to the foregoing clause (iii) in connection
with the 2004 Annual Meeting must be received no later than January 21, 2005 and
no earlier than December 22, 2004.
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 27, 2004 By: /s/ JAMIESON A. KARSON
-------------------------------------
Jamieson A. Karson
Chief Executive Officer
-31-
ANNEX A
STEVEN MADDEN, LTD.
AMENDED & RESTATED AUDIT COMMITTEE CHARTER
Purpose
The Audit Committee (the "Committee") is a committee of the Board of
Directors (the "Board") of Steven Madden, Ltd. (the "Corporation"). The purpose
of the Committee is to assist the Board in the Board's oversight of (1) the
integrity of the financial statements of the Corporation, (2) the Corporation's
compliance with legal and regulatory requirements, (3) the qualifications,
performance and independence of the Corporation's independent auditor(s) (the
"Auditor(s)"), and (4) the performance of the Corporation's internal audit
function.
In addition, the Committee shall prepare the report required by the
rules of the Securities and Exchange Commission (the "SEC") to be included in
the Corporation's annual proxy statement.
Membership
The Committee shall consist of at least three directors who shall be
appointed by the Board on the recommendation of the Nominating/Corporate
Governance Committee of the Board. Each member of the Committee, in the judgment
of the Board, shall be an "independent director" of the Corporation as that term
is defined by the Sarbanes-Oxley Act of 2002 (the "Act"), Section 10A(m)(3) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the rules
of the The Nasdaq National Market ("Nasdaq") and any other law, rule or
regulation applicable to the Corporation. No Committee member shall have
participated in the preparation of the financial statements of the Corporation
or any of its subsidiaries at any time during the past three years.
Each member of the Committee shall have the ability to read and
understand the Corporation's financial statements, including its balance sheet,
income statement and cash flow statement. In addition, at least one member of
the Committee shall have past employment experience in finance or accounting,
requisite professional certification in accounting or any other comparable
experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities. Also, at least one member of the Committee shall qualify as a
"financial expert" as that term is defined in the Act and the final rules
promulgated thereunder and as determined by the Board. A Committee member may be
removed with or without cause by action taken by a majority of the whole Board.
Responsibilities
The Committee's responsibilities include:
A) Financial Statement/Reporting Related:
--------------------------------------
1. Resolving disagreements, if any, between management and the Auditor(s)
regarding financial reporting.
2. Reviewing with management and the Auditor(s):
a. Significant financial reporting issues and judgments made in
connection with the preparation of the Corporation's financial
statements; and
b. The adequacy of internal controls that could significantly
affect the Corporation's financial statements.
3. Discussing the Corporation's annual audited financial statements and
quarterly financial statements, including the Corporation's disclosures
under "Management's Discussion and Analysis of Financial Condition and
Results of Operations," with management and the Auditor(s).
A-1
4. Reviewing major issues regarding accounting principles and financial
statement presentations, including:
(a) any significant or major changes in the Corporation's
selection or application of accounting principles and
practices;
(b) any major issues as to the adequacy of the Corporation's
internal controls; and
(c) any special audit steps adopted in light of material control
deficiencies.
5. Reviewing analyses prepared by management and/or the Auditor(s) setting
forth significant financial reporting issues and judgments made in
connection with the preparation of the financial statements, including
analyses of the effects of alternative generally accepted accounting
principles ("GAAP") methods on the Corporation's financial statements,
and reviewing the effect of regulatory and accounting initiatives, as
well as off-balance sheet structures, on the financial statements of
the Corporation.
6. Ensuring review by the Auditor(s) of the Corporation's interim
financial information prior to the filing of the Corporation's
Quarterly Report on Form 10-Q.
7. Discussing generally (i.e., the types of information to be discussed
and the type of presentation to be made) the Corporation's earnings
press releases, as well as financial information and earnings guidance
provided to analysts and rating agencies, particularly any use of
"proforma" or "adjusted" non-GAAP information.
8. Discussing the Corporation's policies regarding risk assessment and
risk management, including the Corporation's major financial risk
exposures and the steps management has taken to monitor and control
such exposures.
9. Reviewing regularly with the Auditor(s) any audit problems or
difficulties encountered in the course of the audit work (and
management's responses thereto), including:
(a) any restrictions on the scope of the Auditor(s)' activities or
on access to requested information;
(b) any significant disagreements with management;
(c) any accounting adjustments that were noted or proposed by the
Auditor(s) but were "passed" on;
(d) any communications between the audit team and the Auditor(s)'
national office regarding auditing or accounting issues
presented by the engagement; and
(e) any "management" or "internal control" letter issued, or
proposed to be issued, by the Auditor(s) to the Corporation,
and management's response.
10. Requesting that the Auditor(s) performing the Corporation's audit
timely report to the Committee the following:
(a) all critical accounting policies and practices to be used;
(b) all alternative treatments of financial information within
GAAP that have been discussed with the Corporation's
management, potential ramifications of their use, and the
treatment preferred by the Auditor(s);
(c) other material written communications between the Auditor(s)
and the Corporation's management, such as any management
letter or schedule of unadjusted differences; and
(d) significant disagreements with management, if any.
A-2
11. Requesting that the officers certifying the Corporation's periodic
reports filed under Sections 13(a) and 15(d) of the Exchange Act
disclose the following to the Auditor(s) and the Committee on a
quarterly basis:
(a) all significant deficiencies and material weaknesses in the
design or operation of internal controls;
(b) any fraud that involves management or other employees who have
a significant role in the Corporation's internal controls;
(c) any significant changes in internal controls or in other
factors that could significantly affect internal controls; and
(d) any corrective actions taken with regard to such deficiencies
and weaknesses.
12. Discussing with the Auditor(s) the matters required to be discussed by
Statement on Auditing Standards No. 61 relating to the conduct of the
audit. Such review should include: any changes required in the planned
scope of the audit and any matters communicated by the Auditor(s) to
management which the Auditor(s) view as material weaknesses and
reportable conditions of material inadequacies as those terms are
generally understood by the accounting profession or regulators.
13. Reviewing legal matters that may have a material impact on the
financial statements, the Corporation's compliance policies and any
material reports or inquiries received from regulators or governmental
agencies with the Corporation's management and outside counsel.
14. Meeting, as necessary, with management to review the Corporation's
major financial risk exposures and the steps management has taken to
monitor and control such exposures.
B) Oversight of External Auditor(s):
--------------------------------
1. Being directly and solely responsible for the appointment, retention
and termination, compensation and oversight of the Auditor(s) engaged
to prepare or issue an audit report on the Corporation's financial
statements or perform other audit, review or attest services for the
Corporation, and if applicable, subject to shareholder ratification.
2. Having ultimate authority to approve all audit engagement fees and
terms of the Auditor(s), who shall report directly to the Committee.
3. Reviewing and pre-approving all audit, review, attest and non-audit
services not prohibited by Section 201 of the Act (as codified in
Section 10A(g) of the Exchange Act) and the final rules promulgated
thereunder to be provided by the Auditor(s) (except those services that
satisfy the de minimus exception set forth in Section 10A(i) of the
Exchange Act).
4. Reviewing the Auditor(s)' responsibilities, budget and staffing.
5. At least annually, evaluating the qualifications, performance and
independence of the Auditor(s), including the lead partner of the
audit, after gathering information from management and those
responsible for performing the internal audit function and present the
results of such evaluation to the Board.
6. At least annually, obtaining and reviewing a report by the Auditor(s)
describing:
(a) the Auditor(s)' internal quality-control procedures;
(b) any material issues raised by the most recent internal
quality-control review, or peer review, of the Auditor(s), or
by any inquiry or investigation by governmental or
professional authorities within the preceding five years,
regarding one or more audits carried out by the Auditor(s) and
any steps taken to deal with such issues; and
A-3
(c) all relationships between the Auditor(s) and the Corporation,
in order to evaluate the Auditor(s)' independence.
7. Confirming that the Corporation's chief executive officer, controller,
chief financial officer, chief accounting officer, or any person
serving in an equivalent position for the Corporation, were not
previously employed by the Auditor(s) and did not participate, as an
employee of the Auditor(s), in the Corporation's audit during the
one-year period preceding the date of the initiation of the audit and,
if necessary, take appropriate action regarding the Auditor(s),
including removal and replacement.
8. Periodically reviewing the Auditor(s) to assure that all partners who
perform audit services for the Corporation have not performed audit
services for the Corporation in any of the years prohibited by
applicable laws and regulations and, if necessary, take appropriate
action regarding the Auditor(s), including removal and replacement.
9. Considering whether, in order to assure continuing independence of the
Auditor(s), it is appropriate for the Corporation to adopt a policy of
rotating the Auditor(s) on a regular basis.
C) Internal Audit:
---------------
1. Reviewing the responsibilities, budget and staffing of the
Corporation's internal audit function with the Auditor(s) prior to the
audit.
2. Reviewing the appointment and replacement of the senior internal
auditing executive.
3. Reviewing significant reports to management prepared by the staff of
the Corporation that performs the internal audit function and
management's responses thereto, if any.
D) Reporting and Other:
--------------------
1. Preparing the report required by the rules of the SEC to be included in
the Corporation's annual proxy statement and any other required
reports.
2. Reviewing and reassessing the adequacy of this Charter as necessary,
but not less than annually, and recommending any proposed changes to
the Board for approval.
3. Ensuring inclusion of this Charter in the Corporation's annual proxy
statement at least once every three years or as required by SEC rules.
4. Establishing procedures for the receipt, retention and confidential
treatment of complaints received by the Corporation regarding
accounting, internal accounting controls or auditing matters and the
confidential, anonymous submission by employees of the Corporation of
concerns regarding questionable accounting or auditing matters.
5. Establishing clear hiring policies for employees and former employees
of the Auditor(s).
6. Reviewing any issues that arise with respect to the quality or
integrity of the Corporation's financial statements, the Corporation's
compliance with legal and regulatory requirements, the performance and
independence of the Auditor(s) and the performance of the internal
audit function with the full Board.
7. Timely reporting any non-audit service(s) being performed by the
Auditor(s) to the Corporation's controller (or such employee of the
Corporation that performs a similar function) so that such information
may be disclosed in the Corporation's annual and proxy statements.
8. Discussing with management the compliance of the Corporation's
subsidiaries and controlled affiliated entities with applicable
significant legal requirements and advising the Board of such
compliance.
9. Meeting separately, periodically with management, those responsible for
the internal audit function and the Auditor(s).
10. Reporting regularly to the Board.
A-4
Qualified Legal Compliance Committee
The Committee shall also serve as the Qualified Legal Compliance
Committee ("QLCC"), as such term is defined by the Securities and Exchange
Commission in 17 CFR 205, and perform the duties set forth on Attachment 1 to
this Charter.
Committee Structure and Operations
A majority of the Committee shall constitute a quorum. The Board shall
designate a member of the Committee as its chairman. The Committee may act by a
majority vote of the members present at a duly constituted meeting of the
Committee. In the absence or disqualification of a member of the Committee, the
members present, whether or not they constitute a quorum, may unanimously
appoint another independent member of the Board to act at the meeting in the
place of an absent or disqualified member. In the event of a "tie" vote on any
issue voted upon by the Committee, the Committee chairman's vote shall decide
the issue.
The Committee shall meet in person or telephonically at least four
times a year at a time and place determined by the Committee chairman, with
additional meetings called when deemed necessary or desirable by the Committee
or its chairman. The Committee shall make regular reports to the Board.
The Committee shall have the authority to retain and pay legal,
accounting or other advisors as it deems necessary, at the Corporation's
expense, to fulfill its duties. The Corporation shall provide for appropriate
funding, as determined by the Committee, for payment of compensation to the
Auditor(s) for the purpose of rendering or issuing an audit report or performing
other audit, review or attest services and to any advisors employed by the
Committee and for ordinary administrative expenses of the Committee that are
necessary or appropriate in carrying out its duties.
The Committee shall have the authority to delegate to one or more
members of the Committee the authority to pre-approve audit and permitted
non-audit services. Such members must report grants of pre-approval to the full
Committee at its next scheduled meeting. In addition, the Committee may ask
members of management or others whose advice and counsel are relevant to the
issues then being considered by the Committee to attend a Committee meeting and
to provide such pertinent information as may be requested by the Committee.
Annual Performance Evaluation
Each year, the Audit Committee shall conduct a self-evaluation. In this
regard, the Committee shall compare its performance with the provisions of this
Charter, set forth its objectives for the following year, and recommend to the
Board changes to the Charter, when deemed appropriate or necessary by the
Committee.
General
The Committee shall have and may exercise all powers, authority and
responsibilities as the Board shall determine and as may be properly granted to
the Committee under the laws of the State of Delaware and the Corporation's
Certificate of Incorporation and By-laws. While the Committee has the
responsibilities and powers set forth in this Charter, it is not the duty of the
Committee to plan or conduct audits or to determine that the Corporation's
financial statements are presented fairly in accordance with GAAP. This is the
responsibility of management as to the Corporation's financial statements and
the Auditor(s) as to the plan, extent and execution of the audit. Furthermore,
it is not the duty of the Committee to assure compliance with laws and
regulations.
Approved and adopted by the Audit Committee on April 13, 2004
Approved and adopted by the Board of Directors on April 13, 2004
A-5
Attachment 1
Qualified Legal Compliance Committee ("QLCC")
DUTIES AND RESPONSIBILITIES
The QLCC has the authority and responsibility to:
1) Adopt written procedures for the confidential receipt, retention and
treatment of any report of evidence of a material violation of any
applicable United States federal or state securities law, a material
breach of fiduciary duty arising under United States federal or state
law or a similar material violation of any United States federal or
state law ("Material Violation");
2) Inform the Corporation's chief legal officer and chief executive
officer (or the equivalents thereof) of any report of evidence of a
Material Violation, except if the QLCC believes that to do so would be
futile;
3) Determine whether an investigation is necessary regarding any report of
evidence of a Material Violation by the Corporation, its officers,
directors, employees or agents and, if it determines an investigation
is necessary or appropriate, to:
a. notify the full Board of Directors;
b. initiate an investigation, which may be conducted either by
the chief legal officer (or equivalent) or by outside
attorneys; and
c. retain such additional expert personnel as the QLCC deems
necessary;
4) If such investigation was necessary, then at the conclusion, to:
a. recommend, by a majority vote, that the Corporation implement
an appropriate response to evidence of a Material Violation;
and
b. Inform the chief legal officer, the chief executive officer
(or the equivalents thereof) and the Board of Directors of the
results of any such investigation and the appropriate remedial
measures to be adopted; and
5) By majority vote, to take all other appropriate action, including
notifying the authority to notify the Securities and Exchange
Commission in the event that the Corporation fails in any material
respect to implement an appropriate response that the QLCC has
recommended.
ANNEX B
STEVEN MADDEN, LTD.
NOMINATING/CORPORATE GOVERNANCE COMMITTEE CHARTER
Status
- ------
There shall be a committee of the Board of Directors of Steven Madden,
Ltd. (the "Corporation") to be known as the Nominating/Corporate Governance
Committee (the "Committee"). The Committee shall be governed by this Charter.
Membership
- ----------
The Committee shall consist of at least two members of the Board of
Directors (the "Board"). Each member shall be independent in accordance with the
requirements of the National Association of Security Dealers ("NASD"), subject
to any NASD exceptions.
Members of the Committee shall be appointed by the Board of Directors
and may be removed by the Board in its discretion. The Committee shall have the
authority to delegate any of its responsibilities to subcommittees as the
Committee may deem appropriate, provided any such subcommittee is composed
entirely of independent directors as defined under the listing standards of the
NASD.
Meetings
- --------
The Committee shall meet as often as its members deem necessary to
perform the Committee's responsibilities. The Committee may meet in person or
telephonically and at such times and places as the Committee shall determine.
The Committee shall make regular reports to the Board regarding corporate
governance matters and the activities of the Committee.
Purpose and Responsibilities
- ----------------------------
The Committee is responsible for considering and making recommendations
to the Board of Directors concerning the appropriate size, functions and needs
of the Board of Directors. These responsibilities include:
o Establish the criteria and qualifications for membership on
the Board and ensure the disclosure of such criteria and
qualifications in the Corporation's proxy statement.
o Identify and recruit individuals qualified to become Board
members.
o Conduct the appropriate and necessary inquiries into the
backgrounds and qualifications of possible Board candidates.
o Evaluate the suitability of potential nominees, taking into
consideration the criteria and qualifications established by
the Committee in the Board of Director Candidate Guidelines.
o Recommend the director nominees for approval by the Board.
o Review the direct and indirect relationships of members of the
Board with the Company or its management and assist the Board
with its determination of the independence of its members.
o Establish a policy regarding the consideration of any director
candidates nominated by stockholders, including the procedures
that stockholders will need to follow to submit their
recommendations and whether nominees recommended by
stockholders will be evaluated differently. This policy must
be disclosed in the Corporation's proxy statement.
B-1
o Review the candidates recommended by the stockholders.
o Review this Charter at least annually, and make any changes
deemed appropriate, subject to review and approval of the
Board.
o Prepare a report each year concerning its compliance with this
charter for inclusion in the Corporation's proxy statement.
The Committee's additional functions are:
o to consider questions of possible conflicts of interest of
Board members and of the Company's senior executives;
o to monitor and recommend the functions of the various
committees of the Board;
o to oversee the evaluation of the Board and its committees and
the Company's senior executives;
o to recommend members of the various committees of the Board;
o to advise on changes in Board compensation;
o to make recommendations on the structure of Board meetings;
o to recommend matters for consideration by the Board;
o to consider matters of corporate governance and to develop and
recommend to the Board a set of Corporate Governance
Principles applicable to the Company, and review and assess
the adequacy of such guidelines annually and recommend to the
Board any changes deemed appropriate;
o to review and recommend to the Board retirement and other
tenure policies for directors;
o to review the functions of the Company's senior executives and
to make recommendations on changes;
o to review annually with the Chairman and the Chief Executive
Officer of the Company the job performance of elected
corporate officers and other senior executives;
o to review the outside activities of the Board and the
Company's senior executives and such persons' membership on
outside boards of directors;
o to review periodically with the Chairman and the Chief
Executive Officer of the Company the succession plans relating
to positions held by elected corporate officers and other
senior executives, and to make recommendations to the Board
with respect to the selection of individuals to occupy these
positions; and
o to perform any other activities consistent with this Charter,
the Company's by-laws and governing law as the Committee or
the Board deems appropriate.
Nominations by Stockholders
- ---------------------------
Stockholders may recommend director candidates to the Committee by
following the procedures set forth in the Company's bylaws. In addition, such
stockholders must (a) meet and evidence the minimum eligibility requirements
specified in Rule 14a-8 under the Exchange Act and (b) submit within the same
timeframe for submitting a shareholder proposal required by Rule 14a-8 under the
Exchange Act (i) evidence in accordance with Rule 14a-8 of compliance with the
shareholder eligibility requirements; (ii) the written consent of the
candidate(s) for nomination as a director; (iii) a resume or other written
statement of the qualifications of the candidate(s) for nomination as a director
and (iv) all information regarding the candidate(s) and the security holder that
B-2
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. The Committee will
consider nominating director candidates recommended by stockholders who meet the
criteria established in the Board of Director Candidate Guidelines.
Performance Evaluation
- ----------------------
The Committee shall conduct an annual performance evaluation of itself.
Committee Resources
- -------------------
The Committee shall have the authority to obtain advice and assistance
from internal or external legal, accounting, financial or other advisors. The
Committee shall have sole authority to retain and terminate any search firm to
be used to identify director candidates, including sole authority to approve
such search firm's fees and other terms of retention. The Company shall provide
for appropriate funding, as determined by the Committee, for payment of
compensation to any consulting firm or other advisors employed by the Committee.
Committee Charter Review
- ------------------------
The Committee shall review at least annually the adequacy of this
Charter and recommend any changes to the Board for approval.
B-3
ANNEX C
STEVEN MADDEN, LTD.
BOARD OF DIRECTOR CANDIDATE GUIDELINES
The Nominating/Corporate Governance Committee of Steven Madden, Ltd.
("Corporation") identifies, evaluates and recommends candidates to become
members of the Board of Directors ("Board") with the goal of creating a balance
of knowledge, experience and diversity. Nominations to the Board may also be
submitted to the Nominating/Corporate Governance Committee by the Corporation's
stockholders in accordance with Corporation's bylaws. Candidates are reviewed in
the context of current composition of the Board, the operating requirements of
the Corporation and the long-term interests of the Corporation's stockholders.
In conducting this assessment, the Committee will consider and evaluate
director-candidates based upon the following factors:
o Whether the candidate is independent pursuant to the
requirements of the National Association of Security Dealers
("NASD").
o Candidates should be at least 21 years of age.
o Candidates should be accomplished in their respective fields
and have reputations, both personal and professional, that are
consistent with the image and reputation of the Corporation.
o Candidates should generally be, or have been, chief executive
officers, chief operating officers or chief financial officers
or have other high-level managerial experience in a relatively
complex organization.
o Candidates should have the ability to read and understand
basic financial statements. The Nominating/Governance
Committee will also determine if any of the candidates satisfy
the criteria for being an "audit committee financial expert,"
as defined by the Securities and Exchange Commission.
o Candidates should have relevant experience and expertise and
be able to provide insights and practical wisdom based on that
experience and expertise.
o Candidates should have knowledge of the Corporation and issues
affecting the Corporation.
o Candidates should be committed to enhancing stockholder value.
o Candidates should understand, or have the capacity to
understand, fully the legal responsibilities of a director and
the governance processes of a public company.
o Candidates should be of high moral and ethical character and
should be willing to apply sound, objective and independent
business judgment, and to assume broad, fiduciary
responsibility.
o Candidates should have, and be willing to commit, the required
hours necessary to discharge the duties of Board membership.
o Candidates should not have any prohibitive interlocking
relationships or conflicts of interest.
o Candidates should be able to develop a good working
relationship with other Board members and contribute to the
Board's working relationship with the senior management of the
Corporation.
C-1
ANNEX D
STEVEN MADDEN, LTD.
CODE OF BUSINESS CONDUCT AND ETHICS
Introduction
- ------------
All employees, officers and directors of Steven Madden, Ltd. (the
"Company") are responsible for conducting themselves in compliance with this
Code of Business Conduct and Ethics (the "Code"), other policies of the Company
and applicable laws, rules and regulations. The Company adopted the Code in
order to assist the Company and its employees, officers and directors with the
Company's goals of conducting its business and affairs in accordance with
applicable laws, rules and regulations and maintaining the highest standards of
ethical conduct, fair dealing and honesty.
The Company also expects that any consultants or other service
providers it retains will adhere to the Code. In addition, for purposes of
Section 406 of the Sarbanes-Oxley Act of 2002 and the rules of the Securities
and Exchange Commission (the "Commission") promulgated thereunder, Sections I
through IV of the Code shall constitute the Company's code of ethics for "Senior
Financial Officers" (as defined in Section I below).
I. Compliance and Reporting
------------------------
Employees, officers and directors should strive to identify
and raise potential issues before they lead to problems for the Company and
should ask about the application of the Code whenever there is a question as to
whether a violation of the Code has occurred or will occur. Any employee or
officer who becomes aware of any existing or potential violation of the Code
should promptly notify the Chief Operating Officer (COO). Should the Chief
Executive Officer (CEO), the Chief Financial Officer (CFO) and the Principal
Accounting Officer (collectively, the "Senior Financial Officers") or any
director become aware of an existing or potential violation of the Code, he or
she should promptly notify the Company's COO. Notifications or reports required
under this Code should be made to the Company's CEO instead of the Company's COO
if the issue or activity requiring such notification or report involves the
Company's COO. The Company shall take such disciplinary, corrective or
preventative action as it deems appropriate to address any existing or potential
violation of this Code brought to its attention.
Confidentiality regarding those who make compliance reports
and those potentially involved is maintained to the extent possible during a
compliance investigation. The Company does not tolerate retribution, retaliation
or adverse personnel action of any kind against any person for lawfully
reporting a situation of potential noncompliance with the Code, or providing to
the Company or any law enforcement or other governmental agency any information
or assistance relating to the commission or possible commission of any federal
or state offense.
The Senior Financial Officers have a responsibility to create
an environment within the Company in which compliance with the Code is treated
as a serious obligation and in which violations of the Code are not tolerated.
The Senior Financial Officers will establish and, if necessary, modify the
procedures by which violations of the Code are to be reported.
After reading the Code, every employee and officer of the
Company must submit a signed acknowledgement indicating that he or she has read,
understands and, to the best of his or her knowledge, is in compliance with the
Code. Senior Financial Officers must submit a written certification regarding
their responsibilities under the Code in lieu of the acknowledgement.
II. Conflicts of Interest
---------------------
All business decisions must be made in the Company's best
interest. A "conflict of interest" arises when an individual's judgment is or
may be influenced considerations of improper personal gain or benefit to the
individual or another person. Even if no actual conflict of interest occurs,
situations that create the appearance of a conflict may harm the Company's
D-1
public relations or cause other problems damaging to the Company, and, as such,
also should be avoided. Conflicts of interest are prohibited as a matter of
Company policy, unless they have been approved in advance by the Company.
For example, an employee, officer or director must never use
or attempt to use his or her position at the Company to obtain any improper
personal benefit for himself or herself, for his or her family members or for
any other person, including loans or guarantees of obligations, from any other
person or entity. In this regard, service to the Company should never be
subordinated to personal gain and advantage. To the extent possible, conflicts
of interest always should be avoided. Any employee, officer or director who is
aware of a material transaction or relationship that could reasonably be
expected to give rise to a conflict of interest should promptly discuss the
matter with the Company's COO.
In addition, as a result of their close relationships to the
Company and its business, the Senior Financial Officers have a special
responsibility to:
o refrain, without the approval of the Board of Directors, from
transacting business with the Company through any entity in
which the officer or a member of his or her immediate family
owns all or a controlling interest;
o refrain, without the approval of the Board of Directors, from
participating in other employment or serving as a director for
other organizations if such activity reasonably could be
expected to interfere with the officer's ability to act in the
best interests of the Company or reasonably could be expected
to require the officer to use proprietary, confidential or
non-public information of the Company;
o refuse gifts, favors or hospitality that would influence or
appear to influence the recipient to act other than in the
best interests of the Company; and
o report to the Audit Committee or to the Board of Directors any
existing or potential director positions they hold, including
positions on non-profit or charitable organization boards of
directors.
III. Public Disclosure
-----------------
It is the Company's policy that the information in its public
communications and disclosures, including its filings with the SEC, be full,
fair, accurate, timely and understandable. All employees, officers and directors
who are involved in the Company's disclosure process, including the Senior
Financial Officers, are responsible for acting in furtherance of this policy.
Specifically, these individuals are required to maintain familiarity with the
disclosure requirements applicable to the Company and are prohibited from
knowingly misrepresenting, omitting or causing others to misrepresent or omit,
material facts regarding the Company to others, whether within or outside the
Company, including the Company's independent accountants. In addition, any
employee, officer or director who has a supervisory role in the Company's
disclosure process has an obligation to diligently discharge his or her
responsibilities.
The Senior Financial Officers, in particular, must act in good
faith and with due care and diligence in connection with the preparation of the
Company's public disclosures. The Senior Financial Officers must ensure that the
financial statements and reports submitted to the SEC are full, fair, accurate,
timely and understandable. The Senior Financial Officers must also promptly
report any irregularities or deficiencies in the Company's internal controls for
financial reporting to the Audit Committee or the Board of Directors.
IV. Compliance with Laws, Rules and Regulations
-------------------------------------------
As noted, it is the Company's policy to comply with all
applicable laws, rules and regulations. It is the personal responsibility of
each employee, officer and director to adhere to the standards and restrictions
imposed by those laws, rules and regulations.
It is both illegal and against Company policy for any
employee, officer or director who is aware of material, nonpublic information
relating to the Company, any of the Company's customers or clients or any other
D-2
private or governmental issuer or securities to purchase or sell any securities
of those issuers, or recommend that another person purchase, sell or hold the
securities of those issuers.
In general, information is "material" if it could affect a
person's decision to purchase, sell or hold a company's securities. Material
information includes, for example, a company's anticipated earnings, plans to
acquire or sell significant assets and changes in senior executives. Employees,
officers and directors should try to limit transactions to times when it can
reasonably be assumed that all material information about a company has been
disclosed. Officers and directors of the Company, in particular, should consult
with the Company's COO regarding the safest times to trade in the Company's
securities.
In addition, employees, officers and directors may not
disclose material, nonpublic information about the Company or another company to
any person (i) inside the Company, unless they need to know the information for
legitimate business purposes, or (ii) outside of the Company, unless prior
approval is obtained from management in consultation with the Company's COO.
Bear in mind that this information belongs to the Company and no person may
misappropriate it for anyone's benefit. Providing a "tip" based on material,
nonpublic information is unethical and illegal, and is prohibited, even if you
do not profit from it. Certain persons who regularly have access to material,
nonpublic information or who hold certain positions within the Company must
obtain clearance from the Company's COO prior to trading in the Company's
securities. All affected individuals will be personally notified about this
clearance requirement.
More detailed rules governing the trading of Company
securities by employees, officers and directors are set forth in the Company's
Insider Trading Policy. You may obtain a copy of this policy by contacting the
Company's COO.
Other laws, rules, regulations and Company policies to which
employees, officers and directors are subject relate to business practices. For
example, employees, officers and directors may not misrepresent facts,
contractual terms or Company policies to a stockholder, service provider or
regulator. Even if done inadvertently, you must correct the misrepresentation as
soon as possible after consulting with the Company's COO. In addition,
employees, officers and directors must adhere to appropriate procedures
governing the retention and destruction of the Company's records, consistent
with applicable laws, regulations, Company policies and business needs. No
person should destroy, alter or falsify any document that may be relevant to a
threatened or pending lawsuit or governmental investigation. You should consult
with, and follow the instructions of, the Company's COO in these situations.
Employees, officers and directors must also comply with the
U.S. Foreign Corrupt Practices Act, which prohibits American businesses, and in
many cases their foreign subsidiaries, from offering, paying or authorizing
payment to foreign government officials, political parties or their officials,
or political candidates.
The Senior Financial Officers, in particular, have a
responsibility to ensure compliance with the applicable rules and regulations of
federal, state and local governments and of appropriate public and private
regulatory agencies or organizations. In addition to adhering to established
Company policies and procedures, these individuals must take steps to ensure
that other employees and officers follow such policies and procedures.
Any employee, officer or director who is uncertain about the
legal rules and regulations to which he or she or the Company is subject should
consult with the Company's COO.
V. Employment Practices
--------------------
In making employment and personnel decisions, the Company
employment decisions must be based only on an employee's or applicant's
qualifications, demonstrated skills and achievements without regard to race,
color, sex, religion, national origin, age, disability, veteran status,
citizenship, sexual orientation, gender identity or marital status.
All employees are entitled to be treated with respect and
dignity. Management must not tolerate harassment of, or by, any employee in
situations involving another employee, stockholder, service provider or business
associate. Employees, officers and directors must not engage in conduct that
could be construed as sexual harassment, which may include, for example,
D-3
unwelcome sexual advances, offensive touching, sexually suggestive statements,
offensive jokes, requests for sexual favors or other verbal or physical conduct
of a sexual nature.
Any person who believes he or she has been harassed in the
course of performing his or her employment with the Company should notify the
Company's COO. Company policy prohibits retaliation against any individual who
complains of, or reports an instance of, harassment or participates in an
investigation of a harassment complaint.
More detailed information governing the Company's employment
practices is set forth in the Company's Employee Handbook. You may obtain a copy
of this handbook by contacting the Company's Director of Human Resources.
VI. Corporate Opportunities
-----------------------
Employees, officers and directors owe a duty to the Company to
advance the Company's legitimate business interests when the opportunity to do
so arises. In this regard, employees, officers and directors are prohibited from
(i) taking for themselves personally (or directing to a third party) business
opportunities that are discovered through the use of Company property,
information or position (unless the Company has already been offered the
opportunity and rejected it); (ii) using Company property, information or
position for improper personal gain; and (iii) competing with the Company.
It may be difficult to decipher whether or not a particular
personal benefit is proper, as sometimes both personal and Company benefits may
be derived from certain activities. The best course of action in these
circumstances is to consult with the Company's COO.
VII. Confidentiality
---------------
In carrying out the Company's business, employees, officers
and directors may learn confidential or proprietary information about the
Company or third parties. Employees, officers and directors must maintain the
confidentiality of all information entrusted to them, except when disclosure is
authorized or legally mandated. Confidential or proprietary information
includes, for example, any nonpublic information concerning the Company,
including its business, properties, financial performance, results or prospects,
and any nonpublic information provided by a third party with the expectation or
contractual agreement that the information will be kept confidential and used
solely for the business purpose for which it was conveyed. Employees, officers
and directors are required to secure from unauthorized access and public view
documents under their control that contain confidential or proprietary
information. When such information is discarded, appropriate steps must be taken
to ensure proper and complete destruction.
In addition, employees, officers and directors are prohibited
from taking confidential or proprietary information with them upon termination
of employment with the Company or from using or disclosing such information for
any purpose elsewhere, including with a different employer or company. Any
confidential or proprietary information must be promptly returned to the Company
upon termination of employment or affiliation with the Company.
VIII. Fair Dealing
------------
Company policy is to conduct business fairly through honest
business competition and the Company does not seek competitive advantages
through unethical or illegal business practices. Each employee, officer and
director should endeavor to deal fairly with the Company's stockholders, service
providers, competitors and employees. No employee, officer or director should
take unfair advantage of anyone through manipulation, concealment, abuse of
privileged information, misrepresentation or omission of material facts or any
other practice involving unfair dealing.
D-4
IX. Protection and Proper Use of Company Assets
-------------------------------------------
All employees, officers and directors should protect the
Company's assets and ensure their efficient use. It is important to bear in mind
that theft, carelessness and waste have a direct impact on the Company's
profitability. Thus, all assets of the Company should be used only for
legitimate business purposes.
X. Waivers of the Code
-------------------
The Company may elect to waive certain provisions of the Code
on a case-by-case basis. Any employee, officer or director who would like to
request a waiver of one or more of the Code's provisions must discuss the matter
with the Company's COO. Waivers for executive officers and directors of the
Company only may be granted by the Board of Directors or a committee of the
Board.
D-5
Acknowledgment of Employees
---------------------------
I have read and understand the Code of Business Conduct and Ethics (the
"Code") of Steven Madden, Ltd. (the "Company"). To the best of my knowledge, I
am in compliance with the Code. I understand that if I violate the Code, or if I
fail to report a violation of this Code by any officer or employee of the
Company, I may be subject to disciplinary action up to and including dismissal
from my employment with the Company. I understand that it is my obligation to
implement this Code and to use my best efforts to ensure that employees of the
Company comply with its provisions. I know of no reason why I would not be able
to abide by this Code.
By: _____________________________________
Name:
Title:
Date:____________________________________
D-6
Certification of Senior Financial Officers
------------------------------------------
I have read the Code of Business Conduct and Ethics (the "Code") of
Steven Madden, Ltd. (the "Company") and have been provided an opportunity to ask
questions and to consult counsel. I understand that if I violate the Code, or if
I fail to report a violation of this Code by any other officer or employee of
the Company, I may be subject to disciplinary action up to and including
dismissal from my employment with the Company. I understand that it is my
obligation to implement this Code and to use my best efforts to ensure that
other officers and employees of the Company comply with its provisions. I know
of no reason why I would not be able to abide by this Code.
By: _____________________________________
Name:
Title:
Date:____________________________________
D-7
ANNEX E
STEVEN MADDEN, LTD.
1999 STOCK PLAN
This Steven Madden, Ltd. 1999 Stock Plan (the "1999 Plan") is hereby
amended as follows:
1. The second sentence of Section 3 of the 1999 Plan shall be
deleted and replaced with the following:
"Subject to adjustment as provided in Section 7 hereof,
the aggregate amount of Common Stock to be delivered upon the
exercise of all options granted under the Plan shall not exceed in
the aggregate 3,220,000 shares as such Common Stock was
constituted on the effective date of the Plan."
2. Except as expressly amended hereby, the provisions of the Plan
are and shall remain in full force and effect.
3. This Amendment shall be effective immediately upon approval by
the Company's Board of Directors and stockholders of the Company.
Adopted by the Board of Directors
as of the __ day of April, 2004
Approved by the Stockholders
this __ day of May, 2004
E-1
STEVEN MADDEN, LTD. PROXY
STEVEN MADDEN, LTD.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLEASE CLEARLY INDICATE A RESPONSE BY CHECKING ONE OF THE BOXES ([FOR] [WITHHOLD
AUTHORITY] [AGAINST] OR [ABSTAIN]) NEXT TO EACH OF THE THREE (3) 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,
12th Floor, New York, New York at 10:00 a.m., local time, on May 21, 2004, 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 8,
2004, in accordance with the directions indicated herein.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEMS NO. 1, 2 AND 3.
1) ELECTION OF DIRECTORS
---------------------
VOTE
[ ] 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.)
[ ] ABSTAIN
Jamieson A. Karson, Jeffrey Birnbaum, Marc Cooper, John L. Madden, Peter
Migliorini, Thomas H. Schwartz and Awadhesh Sinha
2) AMENDMENT OF THE 1999 STOCK PLAN
--------------------------------
[ ] FOR the Amendment of the 1999 Stock Plan
[ ] AGAINST
[ ] ABSTAIN
3) RATIFICATION OF THE APPOINTMENT OF EISNER LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2004
-----------------------------------------------------------------
[ ] FOR the ratification of the selection of Eisner LLP
[ ] AGAINST
[ ] ABSTAIN
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE; UNLESS OTHERWISE
INDICATED, THIS PROXY WILL BE VOTED (1) FOR THE ELECTION OF THE SEVEN (7)
NOMINEES NAMED IN ITEM 1, (2) FOR THE AMENDMENT OF THE 1999 STOCK PLAN IN ITEM
2, (3) FOR THE RATIFICATION OF THE APPOINTMENT OF EISNER LLP AS THE COMPANY'S
INDEPENDENT AUDITORS FOR FISCAL YEAR 2004 IN ITEM 3 AND (4) IN THE DISCRETION OF
THE PROXIES ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
In their discretion, the proxies are authorized to vote upon such other
business as may properly be presented at the meeting or any adjournments or
postponements thereof.
Please mark, sign, date and return this Proxy promptly using the
accompanying postage pre-paid envelope. THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF STEVEN MADDEN, LTD.
Dated: _____________________
_________________________________________
Signature
_________________________________________
Signature if jointly owned:
_________________________________________
Print name:
Please sign exactly as the name appears on your stock certificate. When
shares of capital stock are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee, guardian, or corporate
officer, please include full title as such. If the shares of capital stock are
owned by a corporation, sign in the full corporate name by an authorized
officer. If the shares of capital stock are owned by a partnership, sign in the
name of the partnership by an authorized officer.
PLEASE MARK, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
IN THE ENCLOSED ENVELOPE
