<PAGE>
===============================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
MAXWELL SHOE COMPANY INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(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):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
Notes:
<PAGE>
[LOGO OF MAXWELL SHOE COMPANY INC.]
MAXWELL SHOE COMPANY INC.
101 Sprague Street, P.O. Box 37
Readville (Boston), Massachusetts 02137-0037
February 26, 1999
Dear Stockholder:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of Maxwell Shoe Company Inc. on Thursday, April 8, 1999 at 10:00 a.m., at
BankBoston, 100 Federal Street, Boston, Massachusetts 02110. Members of your
Board of Directors and management look forward to greeting those stockholders
who are able to attend.
The accompanying Notice and Proxy Statement describe the matters to be acted
upon at the meeting.
It is important that your shares be represented and voted at the meeting.
Whether or not you plan to attend, please sign, date and mail the enclosed
proxy card at your earliest convenience. If you attend the meeting, you may
withdraw your proxy and vote in person.
Your interest and participation in the affairs of the Company are greatly
appreciated.
Respectfully,
Mark J. Cocozza
Chairman of the Board and
Chief Executive Officer
<PAGE>
MAXWELL SHOE COMPANY INC.
101 Sprague Street, P.O. Box 37
Readville (Boston), Massachusetts 02137-0037
----------------
Notice of Annual Meeting of Stockholders
To be held April 8, 1999
----------------
To the Stockholders of Maxwell Shoe Company Inc.:
Notice is hereby given that the 1999 Annual Meeting of Stockholders of
Maxwell Shoe Company Inc. will be held at the BankBoston, 100 Federal Street,
Boston, Massachusetts on Thursday, April 8, 1999 at 10:00 a.m., for the
following purposes:
1. To elect six directors;
2. To approve an amendment to the Company's Certificate of Incorporation to
eliminate the authorization for the issuance of Class B Common Stock,
and;
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only stockholders of record at the close of business on February 22, 1999
will be entitled to notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof.
By Order of the Board of Directors
James J. Tinagero
Executive Vice President and
Secretary
Readville (Boston), Massachusetts
February 26, 1999
YOUR VOTE IS IMPORTANT. ACCORDINGLY, YOU ARE ASKED TO COMPLETE, SIGN, DATE
AND RETURN THE ACCOMPANYING PROXY CARD IN THE ENVELOPE PROVIDED, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
<PAGE>
MAXWELL SHOE COMPANY INC.
101 Sprague Street, PO Box 37
Readville (Boston), Massachusetts 02137-0037
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
April 8, 1999
----------------
GENERAL INFORMATION
This Proxy Statement and the accompanying Notice of Annual Meeting and Proxy
Card are being mailed on or about February 26, 1999 in connection with the
solicitation of proxies by the Board of Directors of Maxwell Shoe Company Inc.
(the "Company") for use at the 1999 Annual Meeting of Stockholders of the
Company (the "Annual Meeting") to be held at BankBoston, 100 Federal Street,
Boston, Massachusetts on Thursday, April 8, 1999, at 10:00 a.m., and any
adjournment or postponement thereof. At the Annual Meeting, the Company's
stockholders will be asked to elect six directors, to approve an amendment to
the Company's Certificate of Incorporation and to vote on such other matters
as may properly come before the Annual Meeting.
Throughout this Proxy Statement, fiscal 1999, fiscal 1998, fiscal 1997 and
fiscal 1996 shall represent the fiscal years ending October 31, 1999, October
31, 1998, October 31, 1997 and October 31, 1996, respectively.
Persons Making the Solicitation
The Company is making this solicitation and will bear the expenses of
preparing, printing and mailing proxy materials to the Company's stockholders.
In addition, proxies may be solicited personally or by telephone or facsimile
by officers or employees of the Company, none of whom will receive additional
compensation therefore. The Company will also reimburse brokerage houses and
other nominees for their reasonable expenses in forwarding proxy materials to
beneficial owners of the Company's Class A Common Stock.
Voting at the Meeting
Stockholders of record at the close of business on February 22, 1999 of the
Company's Class A Common Stock, par value $.01 per share ("Class A Common
Stock") are entitled to notice of and to vote at the Annual Meeting and any
adjournment or postponement thereof. On that date, 8,795,899 shares of Class A
Common Stock were outstanding and entitled to vote. Each outstanding share of
Class A Common Stock entitles the holder thereof to one vote.
The six nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them shall be
elected as directors. Votes withheld from any director are counted for
purposes of determining of the presence or absence of a quorum for the
transaction of business. The Company believes that abstentions should be
counted for purposes of determining whether a quorum is present at the Annual
Meeting for the transaction of business. In the absence of controlling
precedent to the contrary, the Company intends to count broker non-votes as
present or represented for purposes of determining the absence of a quorum for
the transaction of business.
Stockholders do not have the right to cumulate their votes in the election
of directors.
<PAGE>
Revocability of Proxy
A proxy may be revoked by a stockholder prior to the voting at the Annual
Meeting by written notice to the Secretary of the Company, by submission of
another proxy bearing a later date or by voting in person at the Annual
Meeting. Such notice or later proxy will not affect a vote on any matter taken
prior to the receipt thereof by the Company. The mere presence at the Annual
Meeting of the stockholder who has appointed a proxy will not revoke the prior
appointment. If not revoked, the proxy will be voted at the Annual Meeting in
accordance with the instructions indicated on the Proxy Card by the
stockholders or, if no instructions are indicated, will be voted FOR the slate
of directors described herein, FOR the proposed amendment to the Company's
Certificate of Incorporation and as to any other matter that may be properly
brought before the Annual Meeting, in accordance with the judgment of the
proxyholders.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of February 22, 1999, information
relating to the beneficial ownership of the Company's Class A Common Stock by
each person known to the Company to be the beneficial owner of more than five
percent of the outstanding shares of Class A Common Stock, by each director,
by each of the executive officers named below, and by all directors and
executive officers as a group.
<TABLE>
<CAPTION>
Beneficial Ownership
As of February 22, 1999
*****Class A Common Stock*****
------------------------------
Number of % of
Name Shares(1) Class
---- ---------- ------
<S> <C> <C>
Mark J. Cocozza.................... 695,278(2)(3) 7.08%
James J. Tinagero.................. 204,250(2) 2.08%
Richard J. Bakos................... 26,800 0.27%
John F. Kelly...................... 5,440 0.06%
Maxwell V. Blum.................... 100,000(4) 1.02%
Stephen A. Fine.................... 25,000(5) 0.25%
Jonathan K. Layne.................. 25,000(5) 0.25%
Malcolm L. Sherman................. 25,000(5) 0.25%
FMR Corp.(6)....................... 758,800 7.73%
Mellon Bank Corporation(7)......... 1,211,96 12.3%
All officers and directors as a
group
(eight persons)................... 1,106,768 11.27%
</TABLE>
(1) Each executive officer and director has sole voting and investment power
with respect to the shares listed. The shares owned by each person, or by
the group, and the shares included in the total number of shares
outstanding have been adjusted, and the percentage owned (where the
percentage exceeds 1%) has been computed, in accordance with Rule 13d-
3(d)(1) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The address of each of the executive officers and
directors is 101 Sprague Street, P.O. Box 37, Readville (Boston),
Massachusetts 02137-0037.
(2) Gives effect to the issuance of 106,866, and 4,250 shares of Class A
Common Stock upon exercise of stock options which are exercisable within
60 days of this filing and held by Mr. Cocozza and Mr. Tinagero
respectively.
(3) Gives effect to the issuance of 588,412 shares of Class A Common Stock
upon exercise of a currently exercisable stock option held by Mr. Cocozza.
(4) Includes 100,000 share of Class A Common Stock gifted to a private family
foundation which is controlled by the named person.
(5) Gives effect to the issuance of 25,000 shares of Class A Common Stock upon
exercise of currently exercisable stock options.
2
<PAGE>
(6) This information is based solely on a Schedule 13G dated May 10, 1998
filed with the Securities and Exchange Commission. The address of FMR
Corp. is 82 Devonshire Street, Boston, Massachusetts 02109.
(7) This information is based solely on a Schedule 13G dated February 4, 1999
filed with the Securities and Exchange Commission. The address of Mellon
Bank Corporation is 500 Grant Street, Pittsburgh, Pennsylvania 15258-0001.
PROPOSAL I--ELECTION OF DIRECTORS
A Board of six directors is to be elected at the 1999 Annual Meeting. The
persons named in the Proxy Card as proxies for this meeting will vote in favor
of each of the following nominees as directors of the Company unless otherwise
indicated by the stockholder on the Proxy Card. Directors elected at the 1999
Annual Meeting will hold office until the next annual meeting of stockholders
of the Company, and until their successors are duly elected and qualified,
except in the event of their death, resignation, or removal. Management has no
reason to believe that any of the nominees will be unable or unwilling to
serve if elected. If any nominee should become unavailable prior to the
election, the accompanying Proxy Card will be voted for the election in his or
her stead of such other person as the Board of Directors may recommend.
Nominees
The nominees for election as directors of the Company are Mark J. Cocozza,
James J. Tinagero, Maxwell V. Blum, Stephen A. Fine, Jonathan K. Layne, and
Malcolm L. Sherman, all of whom are presently serving as members of the
Company's Board of Directors. See "Management-Executive Officers and
Directors" for additional information concerning the nominees.
Board of Director's Recommendation.
The Board of Directors unanimously recommends that stockholders vote FOR the
slate of nominees set forth above. Proxies solicited by the Board of Directors
will be so voted unless stockholders specify otherwise on their Proxy Cards.
3
<PAGE>
MANAGEMENT
Executive Officers and Directors
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
Executive Officer
Name Age Position or Director Since
---- --- -------- -----------------
<S> <C> <C> <C>
Mark J. Cocozza 50 Chairman of the Board and Chief Executive Officer 1987
James J. Tinagero 46 Executive Vice President and Secretary 1996
Richard J. Bakos 51 Vice President and Chief Financial Officer 1993
John F. Kelly 46 Vice President of Operations 1998
Maxwell V. Blum 73 Director 1976
Stephen A. Fine(1) 50 Director 1994
Jonathan K. Layne(1) 45 Director 1994
Malcolm L. Sherman(1) 67 Director 1994
</TABLE>
(1) Member of the Audit Committee and of the Compensation and Stock Option
Committee.
Each director holds office until the next annual meeting of stockholders or
until his or her successor has been elected and qualified. Officers are
appointed by and serve at the discretion of the Board of Directors.
Mr. Mark J. Cocozza was elected Chairman of the Board and Chief Executive
Officer in April 1998. Prior to that he served as President and Chief
Operating Officer from October 1993 to April 1998, and served as President of
the Mootsies Tootsies division since joining the Company in 1987. Prior to
joining the Company, Mr. Cocozza served as President of Sperry Top-Sider
division of Stride Rite Corp. Mr. Cocozza has more than twenty years'
experience in the footwear industry.
Mr. James J. Tinagero joined the Company as Executive Vice President in
April 1996 and was elected a Director and Secretary in 1998. Mr. Tinagero has
served as President and Director of International Sales & Marketing
Corporation, a New York based consulting firm for consumer products companies,
from 1993 to 1996, as Executive Vice President of Bonaventure Textiles,
U.S.A., a women's apparel company from 1992 to 1993, as President of Albert
Nipon, a women's designer dress company from 1991 to 1992, and as President of
Anne Klein and Company, a designer sportswear company from 1987 to 1991. From
1980 to 1987, he held various executive positions with Stride Rite
Corporation.
Mr. Richard J. Bakos joined the Company in 1987 as Controller and since
October 1993 has served as Vice President of Finance and Chief Financial
Officer. Before joining the Company, Mr. Bakos was Group Vice President of
Finance and Administration for the Bodwell Fashion Group of the Wingspread
Corporation. He has more than twenty years' experience in the apparel and
footwear industry.
Mr. John F. Kelly joined the Company in 1993 as Controller and since April
1998 has served as Vice President of Operations. Prior to joining the Company,
Mr. Kelly served as director of merchandising and controller for the wholesale
division of Stride Rite Corporation.
Mr. Maxwell V. Blum founded the Company's business in 1949 and served as the
Company's Chairman of the Board and Chief Executive Officer since its
incorporation in 1976 until April 1998. Mr. Blum has more than fifty years'
experience in the footwear industry. Mr. Blum's wife is the first cousin of
Mr. Malcolm L. Sherman.
Mr. Stephen A. Fine, who has served as a member of the Board of Directors of
the Company since May 1994, has been a Director, President and Chief Operating
Officer of the Biltrite Corporation, a manufacturer of a variety of rubber and
plastic products, since 1985, and from 1982 to 1985 Mr. Fine served as
Executive Vice-President of Biltrite. From 1970 to 1982, Mr. Fine held various
executive positions with American Biltrite Inc. Mr. Fine is also a director of
K-Swiss Inc., a manufacturer of athletic footwear.
4
<PAGE>
Mr. Jonathan K. Layne, who has served as a member of the Board of Directors
of the Company since May 1994, has been a partner in the law firm of Gibson,
Dunn, & Crutcher LLP since 1987, where he specializes in corporate and
securities law matters. From 1979 to 1986 he was an associate of the same law
firm. Mr. Layne is also a member of the Board of Directors of Amwest Insurance
Group, Inc., an insurance holding company, The Finish Line, Inc., a retailer
of brand name athletic and leisure footwear, activewear and accessories, and
K-Swiss Inc., a manufacturer of athletic footwear.
Mr. Malcolm L. Sherman, who has served as a member of the Board of Directors
of the Company since May 1994, has served as Chairman of the Board and Chief
Executive Officer of EKCO Group Inc., a manufacturer and distributor of
household goods, since 1996 and as a member of its Board of Directors since
1994. Mr. Sherman is also a member of the Board of Directors of One Price,
Inc., a company engaged in the apparel business, since 1991. Mr. Sherman has
served as Chairman of the Board of Steth Tech Corporation, a developer of
medical devices from 1990 to 1996, as Chairman of the Board of Advisors of
Gordon Brothers, a liquidation and asset based lending firm, from 1993 to
1996, as Chairman of the Board of K. T. Scott Ltd., a company engaged in the
home decor business, from 1990 to 1995, as President and Chief Executive
Officer of Morse Shoe, Inc., a footwear retailer, from 1992 to 1993, as a
member of the Board of Directors of United States Trust Co. from 1980 to 1993,
and as a member of the Board of Directors of Compu Chem Labs Inc., a company
specializing in drugs of abuse and environmental testing, from 1982 to 1993.
In July 1995, K. T. Scott Ltd. filed a petition for bankruptcy under Chapter
11 of federal bankruptcy laws (which case was converted to a Chapter 7
proceeding in November 1995). Mr. Sherman is the first cousin of Mr. Blum's
wife.
Meetings and Committees of the Board of Directors
The Board of Directors held five meetings in fiscal 1998 and all directors
attended at least 75% of the meetings of the Board and Committees of which
they were members.
The Board of Directors has two committees. The Audit Committee is comprised
of Messrs. Fine, Layne and Sherman. The Compensation and Stock Option
Committee is comprised of Messrs. Fine, Layne and Sherman. There is no
committee performing the function of a Nominating Committee.
The Audit Committee held two meetings during fiscal 1998. The
responsibilities of the Audit Committee include recommending to the Board the
selection of the independent auditors and reviewing the Company's internal
accounting controls. The Audit Committee is authorized to conduct such reviews
and examinations as it deems necessary or desirable with respect to the
Company's accounting and internal control practices and policies, and the
relationship between the Company and its independent auditors, including the
availability of Company records, information and personnel.
The Compensation and Stock Option Committee met four times during fiscal
1998. The Compensation and Stock Option Committee focuses on executive
compensation, the administration of the Company stock option and stock
purchase plans and making decisions on the granting of discretionary bonuses.
5
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table shows compensation paid by the
Company for services rendered during fiscal years 1998, 1997, and 1996 by the
persons who served as Chief Executive Officer at any time during the last
fiscal year and the four other most highly compensated executive officers of
the Company who were serving as executive officers at the end of the last
completed fiscal year end and whose salary and bonus exceeded $100,000 in
fiscal 1998 ("Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards
------------------------------------------- ----------------------
Securities
Restricted Underlying
Name and Principal Other Annual Stock Options/
Position Year Salary($) Bonus($)(1)(2)(3) Compensation Award(s)($) SAR's(#)
------------------ ---- --------- ----------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mark J. Cocozza......... 1998 $485,625 $400,031 $4,537,500(5) -- 75,000
Chairman of the Board 1997 $446,250 $427,000 -- -- --
and CEO 1996 $425,000 $182,000 -- -- 60,000
James J. Tinagero....... 1998 $314,500 $247,638 -- -- 25,000
Executive Vice 1997 $271,250 $260,000 -- -- 50,000
President 1996 $126,875(4) $ 64,000(4) -- -- 150,000
Richard J. Bakos........ 1998 $116,213 $ 20,000 -- -- --
Vice President 1997 $110,000 $ 15,000 -- -- 15,000
and CFO 1996 $100,000 $ 15,000 -- -- 10,000
John F. Kelly........... 1998 $101,668 $ 25,000 -- -- --
Vice President-- 1997 $ 90,959 $ 13,000 -- -- 7,500
Operations 1996 $ 75,883 $ 12,000 -- -- 8,500
Maxwell V. Blum......... 1998 $262,500 -- $ 147,181 -- --
Former CEO and Former 1997 $525,000 $497,000 -- -- --
Chairman of the Board 1996 $500,000 $212,000 -- -- 20,000
</TABLE>
(1) The 1998 bonus amounts reflect bonuses earned under the Company's Senior
Management Incentive Plan for fiscal 1998 and paid in fiscal 1999.
(2) The 1997 bonus amounts reflect bonuses earned under the Company's Senior
Management Incentive Plan for fiscal 1997 and paid in fiscal 1998. For Mr.
Cocozza, Mr. Tinagero and Mr. Blum, these bonuses amounted to $392,000,
$225,000 and $462,000, respectively.
(3) The 1997 bonus amounts also reflect bonuses earned under the Company's
Acquisition Bonus Plan for fiscal 1997 and paid in fiscal 1997. For Mr.
Cocozza, Mr. Tinagero and Mr. Blum, these bonuses amounted to $35,000,
$35,000 and $35,000, respectively.
(4) Mr. Tinagero joined the Company on April 8, 1996 and the salary and bonus
amounts shown reflect payments made from such date through October 31,
1996.
(5) Mr. Cocozza and the Company agreed to terminate, effective as of the
completion of the Company's May 1994 initial public offering, a Deferred
Incentive Compensation Agreement entered into in 1988 (the "Compensation
Agreement"). In exchange for his consent to terminate the Compensation
Agreement, Mr. Cocozza was granted a nontransferable option to acquire
888,412 shares of Class A Common Stock at an exercise price of $1.50 per
share. In April 1998, Mr. Cocozza partially exercised this option and sold
300,000 shares of Class A Common Stock at a price per share of $17.50.
6
<PAGE>
Employment Agreements
On April 27, 1998, the Company entered into employment agreements with
Messrs. Cocozza and Tinagero. Mr. Cocozza's employment agreement expires on
April 27, 2003, subject to automatic renewal each year thereafter unless
either the Company or Mr. Cocozza gives the other party six months notice of
its or his intention not to renew the agreement. Mr. Cocozza was compensated
for the period from April 27, 1998 through the end of fiscal 1998 at an
annualized base rate of $525,000. Mr. Cocozza's bonus for the period from
April 27, 1998 through the end of fiscal 1998 was determined pursuant to the
Company's Senior Management Incentive Plan established by the Company's
Compensation and Stock Option Committee. The employment agreement also
provides for customary perquisites and the grant on April 27, 1998 of an
additional 75,000 stock options, each with an exercise price equal to the fair
market value on the date of grant and subject to certain time and stock price
performance vesting provisions. In the event of a termination of Mr. Cocozza's
employment without Cause (as defined in the agreement) following a Change of
Control (as defined in the agreement), Mr. Cocozza will be entitled to receive
a cash payment (in addition to any salary or other amounts then due) based on
a formula generally intended to result in aggregate payments to Mr. Cocozza
equal to three times his average annual compensation (including bonuses and
certain other taxable payments) for the five-year period preceding the Change
of Control. The payment will be reduced by certain amounts that are taken into
account in determining whether Mr. Cocozza would be subject to the excise tax
provisions of Section 4999 of the Internal Revenue Code. Mr. Cocozza has
agreed that if the employment agreement is terminated prior to its scheduled
expiration (or prior to the scheduled expiration of the extended term of the
agreement, if any), he will not compete against the Company in the footwear
industry for a period of 18 months following the termination of the agreement,
subject to certain exceptions.
Mr. Tinagero's employment agreement expires on April 27, 2001, subject to
automatic renewal each year thereafter unless either the Company or Mr.
Tinagero gives the other party six months notice of its or his intention not
to renew the agreement. Pursuant to this agreement, Mr. Tinagero was
compensated for the period from April 27, 1998 through the end of the fiscal
1998 at an annualized base rate of $325,000. Mr. Tinagero's bonuses for the
period from April 27, 1998 through the end of fiscal 1998 was determined
pursuant to the Company's Senior Management Incentive Plan established by the
Company's Compensation and Stock Option Committee. The employment agreement
also provides for customary perquisites and the grant on April 27, 1998 of an
additional 25,000 stock options, each with an exercise price equal to the fair
market value on the date of grant and subject to certain time vesting
provisions. If there is a change of control of the Company and if Mr. Tinagero
is terminated in connection therewith, he will be entitled to a severance
payment equal to his total compensation for the 18-month period immediately
prior to the change of control, in addition to the other payments that the
Company is obligated to make to Mr. Tinagero in the event he is terminated or
deemed to be terminated by the Company without cause (whether or not in
connection with a change of control). Mr. Tinagero has agreed that if the
employment agreement is terminated prior to its scheduled expiration (or prior
to the schedule expiration of the extended term of the agreement, if any) he
will not compete against the company in the footwear industry for a period of
12 months following the termination of the agreement, subject to certain
exceptions.
Consulting Agreement
On April 27, 1998, the Company entered into a consulting agreement with Mr.
Blum. Mr. Blum's consulting agreement is on a year-to-year basis. Pursuant to
this agreement, Mr. Blum provides the Company certain services relating to
strategic planning, customer relations and marketing issues, all as requested
by the Chief Executive Officer of the Company for up to 240 hours per year
(with any additional hours requested by the Chief Executive Officer to be
provided at an additional fee of $2,000 per day). In consideration of Mr. Blum
providing such consulting services to the Company, the Company provides to Mr.
Blum an office, a secretary, reimbursement for business related (including
travel) expenses, an automobile allowance and health insurance benefits
available to senior executives of the Company under the Company's health
plans.
7
<PAGE>
Director Compensation
Directors who are employees of the Company are not compensated for serving
as directors. Directors who are not employees of the Company are each paid
$20,000 per annum and an additional $1,000 per meeting for attending regular
and special meetings and $500 per meeting for committee meetings of the Board
of Directors and are reimbursed for expenses incurred in attending regular,
special and committee meetings. Each non-employee director also receives an
annual grant of options to purchase 5,000 shares of Class A Common Stock. See
"Stock Incentive Plan."
Profit Sharing Plan
The Company established a 401(k) Profit Sharing Plan effective January 1,
1991. After the attainment of age 21 and the completion of six months of
service, an employee becomes a participant in the Plan on the next January 1
or July 1. Contributions made to the Plan by the Company are in the form of
401(k) contributions elected by the participants, and a discretionary profit
sharing contribution in an amount determined each year by the Company. The
Plan document governing the Plan is in the form of a NABEP Prototype Defined
Contribution Retirement Plan and Non-standardized Profit Sharing CODA Adoption
Agreement.
PROPOSAL II--AMENDMENT TO THE COMPANY'S CERTIFICATE
OF INCORPORATION TO ELIMINATE THE AUTHORIZATION FOR
ISSUANCE OF CLASS B COMMON STOCK
The Board of Directors is seeking stockholder approval to amend the
Company's Certificate of Incorporation for the purpose of eliminating the
authorization for the issuance of Class B Common Stock pursuant to a covenant
contained in Section 6(m) of the Underwriting Agreement dated April 21, 1998
by and among the Company, Lehman Brothers, Inc., Bear Stearns & Co., Inc., BT
Alex. Brown Incorporated, Tucker Anthony Incorporated and certain selling
stockholders named therein (the "Underwriting Agreement"). Specifically,
Section 6(m) of the Underwriting Agreement provides in relevant part that the
Company will seek stockholder approval to amend its Certificate of
Incorporation to eliminate the authorization for the issuance of its Class B
Common Stock on or prior to its 1999 Annual Meeting of Stockholders.
On February 8, 1999, the Board of Directors adopted a restatement of the
Company's Certificate of Incorporation, including amendments to Sections 1 and
2 of Article IV of the Company's Certificate of Incorporation, subject to
stockholder approval at the 1999 Annual Meeting, to eliminate the 10,000,000
authorized shares of the Company's Class B Common Stock, par value of $.01 per
share (the "Class B Common Stock"). At the Annual Meeting, the stockholders of
the Company will be asked to consider and vote on such proposed restatement
and amendment to Sections 1 and 2 of Article IV of the Company's Certificate
of Incorporation. Sections 1 and 2 of Article IV of the Company's Certificate
of Incorporation, as so amended, are restated in their entirety as follows:
SECTION 1. Number of Authorized Shares. The total number of shares of all
classes of stock that the Corporation shall have authority to issue is
twenty-one million (21,000,000) shares, consisting of twenty million
(20,000,000) shares of common stock, par value $.01 per share (the "Common
Stock"), and one million (1,000,000) shares of preferred stock, par value
$.01 per share (the "Preferred Stock").
SECTION 2. Common Stock. The Common Stock shall consist solely of two
classes designated "Class A Common Stock" and "Class B Common Stock." The
authorized number of shares of Class A Common Stock shall be twenty million
(20,000,000) and the authorized number of shares of Class B Common Stock
shall be zero (0). The Board of Directors of the Corporation may authorize
the issuance of shares of Class A Common Stock and shares of Class B Common
Stock from time to time subject to the foregoing. The Board of Directors
shall have no power to alter the rights with respect to Class A Common
Stock or Class B Common Stock.
8
<PAGE>
The Board of Directors recommends that the stockholders of the Company adopt
Proposal II. If Proposal II is approved by the stockholders, the proposed
amendment to the Certificate of Incorporation will become effective upon the
filing of a Restated Certificate of Incorporation with the Secretary of the
State of Delaware, which is expected to occur promptly after the Annual
Meeting.
The Board of Directors believes that the elimination of the Class B Common
Stock is in the best interests of the Company and its stockholders. Shares of
Class B Common Stock were originally issued to Mr. Blum, members of his family
and affiliated entities (collectively, the "Blum Family"). All outstanding
shares of Class B Common Stock were converted into shares of Class A Common
Stock and sold by the Blum Family in a public offering consummated on April
27, 1998. Consequently, none of the 10,000,000 shares of Class B Common Stock
authorized by Article IV of the Certificate of Incorporation are currently
outstanding. The Board of Directors believes that there is no reason to
continue to include in the Certificate of Incorporation the authorization for
the Class B Common Stock, and as stated above, the Underwriting Agreement
requires the Company to seek stockholder approval to amend its Certificate of
Incorporation to eliminate the authorization for the issuance of its Class B
Common Stock on or prior to its 1999 Annual Meeting of Stockholders.
Vote Required
Approval of the proposed amendment to the Company's Certificate of
Incorporation will require the affirmative vote of a majority of the votes
cast in person or represented by proxy and voting at the meeting. Abstentions
will be considered shares entitled to vote in the tabulation of votes cast on
the proposed amendment to the Company's Certificate of Incorporation and will
have the same effect as negative votes. Broker non-votes are counted towards a
quorum, but are not counted for any purpose in determining whether this matter
has been approved.
Board of Directors' Recommendation
The Board of Directors has unanimously approved such proposed amendment to
the Company's Certificate of Incorporation and recommends that stockholders
vote FOR such amendment.
Stock Plan
The Stock Plan was approved by the Board of Directors and the stockholders
of the Company on January 30, 1994. Every employee of the Company or any of
its subsidiaries is eligible to be considered for the grant of Awards (as
defined below) under the Stock Plan. The Stock Plan authorizes the Committee
(as defined below) to enter into any type of arrangement with an eligible
employee that, by its terms, involves or might involve the issuance of Class A
Common Stock, or any other security or benefit with a value derived from the
value of the Class A Common Stock. The Stock Plan also provides for the
automatic grant of options to nonemployee directors of the Company. See
"Nonemployee Director Options."
The maximum number of shares of Class A Common Stock that may be issued
pursuant to Incentive Options granted under the Stock Plan is 1,050,000. As of
February 22, 1999, there were 895,200 options granted (75,000 for Nonemployee
Directors), 104,257 options exercised, 108,643 options canceled, 682,300
options outstanding, and 263,443 options available for future grant under the
Stock Plan. Outstanding options are exercisable at prices varying from $1.00
to $17.50 per share.
The purposes of the Stock Plan are to enable the Company and its
subsidiaries to attract, retain and motivate their employees and consultants
by providing for or increasing their proprietary interest in the Company, and
to attract, retain and motivate the Nonemployee Directors of the Company (as
defined below) and further align their interest with those of the Company's
stockholders by providing for or increasing the proprietary interest of such
directors in the Company.
The Stock Plan is administered by the Compensation and Stock Option
Committee of the Board of Directors (the "Committee"). The members of the
Committee are appointed by the Board of Directors and serve on the
9
<PAGE>
Committee until replaced. The Committee determines, within the limitations of
the Stock Plan, which eligible employees of the Company shall be recommended
for Awards under the Stock Plan, the terms and conditions of such grant or
sale and the number of shares to be optioned or sold. In addition, the
Committee has the sole authority to (i) adopt, amend and rescind rules and
regulations for the administration of the Stock Plan, (ii) construe and
interpret the Stock Plan, the rules and regulations regarding the Stock Plan,
and the agreements evidencing Awards under the Stock Plan, (iii) determine the
terms and conditions of the Nonemployee Director Options that are
automatically granted pursuant to the Stock Plan, and (iv) to make all other
determinations deemed necessary or advisable for the administration of the
Stock Plan. Commencing November 1, 1996, option grants have been and will be
recommended by the Committee to the full Board for approval in order for such
option grants to comply with applicable rules of the Securities and Exchange
Commission.
The Stock Plan is not subject to any provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA") and is not required to be qualified
under Section 401(a) of the Internal Revenue Code (the "Code").
Nonemployee Director Options
Each person who becomes a Nonemployee Director after the effective date of
the Stock Plan will automatically be granted, upon becoming a Nonemployee
Director, a Nonemployee Director Option to purchase 5,000 shares of Class A
Common Stock. Each year, on the first business day following the date of the
annual meeting of stockholders of the Company, or any adjournment thereof, at
which directors of the Company are elected, each Nonemployee Director will
automatically be granted an immediately exercisable option (a "Nonemployee
Director Option") to purchase 5,000 shares of Class A Common Stock.
Each Nonemployee Director Option granted under the Stock Plan will be
exercisable in full upon the date of grant of such Nonemployee Director
Option. Each Nonemployee Director Option granted under the Stock Plan will
expire upon the first to occur of the following: (1) the second anniversary of
the date upon which the optionee shall cease to be a Nonemployee Director; or
(2) the tenth anniversary of the Date of Grant of such Nonemployee Director
Option.
Set forth below is information concerning the award of stock options under
the Stock Plan and otherwise to the Named Officers in the fiscal year ended
October 31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Individual Grants Realizable Value at
------------------------------- Assumed
% of Total Annual Rates of
Number of Options Fair Stock Price
Securities Granted to Market Appreciation For
Underlying Employees Exercise Value on Option Term(4)
Options in Fiscal or Base Date of Expiration -------------------
Name Granted(#) Year(3) Price($) Grant($) Date 5%($) 10%($)
---- ---------- ---------- -------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Mark J. Cocozza......... 75,000(1) 57.69% $17.50 $17.50 4/27/08 $825,424 $2,091,787
James J. Tinagero....... 25,000(2) 19.23% $17.50 $17.50 4/27/08 $275,141 $ 697,262
Richard J. Bakos........ -- -- -- -- -- -- --
John F. Kelly........... -- -- -- -- -- -- --
Maxwell V. Blum......... -- -- -- -- -- -- --
</TABLE>
(1) The term of Mr. Cocozza's option is 10 years. With respect to 35,000
option shares, 17% of such options vest on each of the first and second
anniversaries of the date of grant and 33% of such options vest on the
third and fourth anniversaries of the date of grant. Mr. Cocozza's
remaining 40,000 option shares vest only if the Company's Class A Common
Stock reaches certain pre-specified target prices. The exercise price for
such stock option is equal to the fair market value of the underlying
shares on the date of grant.
10
<PAGE>
(2) The term of Mr. Tinagero's stock option is 10 years. Seventeen percent of
such options vest on each of the first and second anniversaries of the
date of grant and 33% of the options vest on the third and fourth
anniversaries of the date of grant. The exercise price for such stock
option is equal to the fair market value of the underlying shares on the
date of grant.
(3) The total number of stock options granted to employees in fiscal 1998 by
the Company was 130,000, each at a per share exercise price from $1.00 to
$17.50.
(4) These amounts represent certain assumed rates of appreciation. Actual
gains, if any, on stock option exercises depend on the future performance
of the Class A Common Stock, as well as the option holders' continued
employment through vesting periods. Therefore, the amounts reflected in
this table will not necessarily be achieved.
Shown below is information with respect to the unexercised options to
purchase Class A Common Stock held by the Named Officers as of October 31,
1998.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options/SARs at Options/SARs at
FY-End(#) FY End($)(1)
Shares
Acquired on
Exercise Value Exercisable/ Exercisable/
Name (#) Realized($) Unexercisable Unexercisable
---- ----------- ----------- --------------- -----------------
<S> <C> <C> <C> <C>
Mark J. Cocozza...... 300,000 $4,800,000 574,278/101,134 5,315,123/254,100
James J. Tinagero.... 0 0 200,000/25,000 1,150,000/0
Richard J. Bakos..... 0 0 23,500/16,500 66,100/88,275
John F. Kelly........ 0 0 6,665/11,835 29,639/70,549
Maxwell V. Blum...... 16,850 $ 161,925 -- --
</TABLE>
(1) Represents the difference between the closing price of the Company's Class
A Common Stock on the NASDAQ National Market System on October 31, 1998
($11.75) and the exercise price of the options.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
The Compensation and Stock Option Committee of the Board of Directors (the
"Committee") determines executive officers' salaries and bonuses and
administers and recommends grant awards under the Stock Plan.
Summary of Compensation Policies for CEO and Executive Officers
The Company's philosophy is to maintain compensation programs which attract,
retain and motivate senior management with economic incentives which are
linked to financial performance and increased stockholder value. The key
elements of the Company's executive compensation program consist of a base
salary, potential for an annual bonus directly linked to overall Company
performance and the grant of stock options and other stock incentive awards
intended to align executive officer and stockholder economic interests.
Generally, in formulating compensation arrangements for executives other than
the Chief Executive Officer, the Committee solicits recommendations from the
Chief Executive Officer, which it considers, modifies and approves.
Salaries
The Committee was formed in May 1994 after the Company's initial public
offering. For fiscal 1998, the Committee established salaries at levels that
reflect the Committee's assessment of prevailing salary levels
11
<PAGE>
among companies in the footwear and related industries and considered each
executive's level of responsibility, talent and skills. The base salary of Mr.
Cocozza and Mr. Tinagero are subject to the terms of employment agreements
between Mr. Cocozza, Mr. Tinagero and the Company, which agreements were
approved by the Board of Directors of the Company to become effective
simultaneously with the consummation of the Company's public offering in April
1998.
Performance Bonuses
The payment of performance bonuses to the Company's executive officers is a
significant element of the Company's executive compensation program.
Performance bonuses are designed to reward executive officers for the
achievement of corporate goals and individual performance in achieving such
goals and to compensate executive officers on the basis of the Company's
financial results. Performance bonuses during fiscal 1998 were based on
specific formulae linked to the financial results of the Company as specified
in the Company's Senior Management Incentive Plan. Under this plan, executive
officers could earn up to 100% of their salary as a bonus upon the Company
attaining predetermined net income and return on asset goals. In fiscal 1998,
the percentage of salary paid as a bonus under such plan was 76.2%.
In addition, an Acquisition Bonus Plan was established during fiscal 1996
pursuant to which eligible executive officers are entitled to receive 1% of
the acquisition price for qualifying transactions in which the Company
acquires the assets or securities of specified companies. During fiscal 1997,
the Company paid five executive officers a total of $140,000 as a result of
the completion of the SLJ Retail LLC joint venture transaction. There was no
bonus paid in fiscal 1998 under such Acquisition Bonus Plan.
Stock Incentive Awards
Stock incentive awards are also an important element of the Company's
executive officer compensation program. Such awards are designed to strengthen
management's long-term perspective on the Company's performance. Compensation
derived from stock options or other stock-based awards are intrinsically
related to long term corporate performance and stockholder value. Stock-based
incentive awards are awarded at the discretion of the Committee based on a
variety of factors, including the executive officer's level of responsibility
and such officer's ability to affect stockholder value, as well as the
officer's demonstrated past and expected future performances. The Committee
also takes into consideration prior stock option awards to the executive
officer and the individual's overall equity position in the Company. The
Committee believes that stock options and stock ownership by the Company's
executive officers, as well as other members of the Company's senior
management, other key employees and nonmanagement directors, are an essential
element in aligning the interests of these individuals with those of the
stockholders and thereby enhancing stockholder value. The grant of 130,000
stock options to a total of five employees was approved by the Committee in
fiscal 1998. Each of the options so granted vests and become exercisable
incrementally over a four year period. The four year vesting schedule
associated with the options assures the long term nature of this incentive
compensation tool.
CEO Compensation
The Committee believes the Chief Executive Officer's compensation should be
heavily influenced by the Company's performance. From November 1, 1997 until
April 27, 1998, the date of consummation of the Company's public offering,
Maxwell V. Blum served as the Chief Executive Officer of the Company.
Thereafter, Mark J. Cocozza became Chairman of the Board and Chief Executive
Officer in addition to his then existing responsibility as President of the
Company. In evaluating the compensation of Mr. Cocozza, the Company's Chief
Executive Officer, and the compensation of Mr. Blum, prior to April 27, 1998,
the Committee considered the financial results of the Company, the
compensation paid to executives in similar positions in the footwear industry,
and Mr. Cocozza's and Mr. Blum's contribution to and length of service with
the Company. The Committee also considered the substantial equity interest in
the Company held by Mr. Cocozza and recognized that this equity interest
serves to substantially align Mr. Cocozza's incentives with those of the
Company's other stockholders. The Committee also considered this same
rationale in determining Mr. Blum's compensation at
12
<PAGE>
the beginning of fiscal 1998 since Mr. Blum and Mr. Blum's family held a
substantial equity interest in the Company prior to April 27, 1998. Based on
these factors, the Committee approved Mr. Cocozza's and Mr. Blum's respective
fiscal 1998 base salaries for the respective periods. As discussed above with
respect to the payment of performance bonuses, the amount of Mr. Cocozza's and
Mr. Blum's bonuses for fiscal 1998 were based on the formula specified in the
Company's Senior Management Incentive Plan.
Beginning in 1994, a federal law generally disallows the corporate tax
deduction for certain compensation paid in excess of $1,000,000 annually to
each of the chief executive officer and the four other most highly paid
executive officers of publicly held companies. One of the exceptions to the
deduction limit is for "performance-based compensation." To qualify as
"performance-based," compensation payments must be made from a plan that is
administered by a committee of outside directors. In addition, the material
terms of the plan must be disclosed to and approved by stockholders, and the
committee must certify that the performance goals were achieved before
payments can be awarded.
The Committee intends to design the Company's compensation programs to
conform with the legislation and adopted final regulations so that total
compensation paid to any employee will not exceed $1,000,000 in any one year,
except for compensation payments in excess of $1,000,000 which qualify as
"performance-based" or are otherwise exempt from the new law. However, the
Company may pay compensation which is not deductible in limited circumstance
when prudent management of the Company so requires.
Summary
The Committee believes that the current compensation arrangements provide
the Chief Executive Officer and the other executive officers with incentive to
perform at superior levels and in a manner which is directly aligned with the
economic interests of the Company's stockholders.
COMPENSATION AND STOCK OPTION
COMMITTEE
Stephen A. Fine
Jonathan K. Layne
Malcolm L. Sherman
February 12, 1999
The above report of the Compensation and Stock Option Committee will not be
deemed to be incorporated by reference into any filing by the Company under
the Securities Act of 1933 or the Exchange Act, except to the extent that the
Company specifically incorporates the same by reference.
Compensation Committee Interlocks and Insider Participation
Messrs. Fine, Layne and Sherman comprise the Compensation and Stock Option
Committee.
Mr. Layne is a partner of the law firm of Gibson, Dunn, & Crutcher LLP,
which has provided legal services to the Company. The Company expects that
such law firm will continue to render legal services to the Company and
certain affiliates in the future.
13
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
Comparison of Fifty-Four Month Cumulative Total Return
Among Maxwell Shoe Company Inc. Class A Common Stock,
NASDAQ Stock Market Index and Peer Group Index(1)
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Exchange Act, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
PERFORMANCE GRAPH APPEARS HERE
COMPARE CUMULATIVE TOTAL RETURN OF COMPANY,
PEER GROUP AND BROAD MARKET
<TABLE>
<CAPTION>
Measurement Period MAXWELL NASDAQ
(Fiscal Year Covered) SHOE CO PEER GROUP MARKET INDEX
- ------------------- ---------- ----------- ------------
<S> <C> <C> <C>
Measurement Pt- 5/12/94 $100 $100 $100
FYE 10/31/94 $ 93.48 $107.67 $105.67
FYE 10/31/95 $ 39.13 $100.73 $125.35
FYE 10/31/96 $ 57.61 $ 80.70 $147.20
FYE 10/31/97 $114.13 $103.87 $192.92
FYE 10/31/98 $102.17 $ 84.92 $218.14
</TABLE>
ASSUMES $100 INVESTED ON MAY 18, 1994
ASSUMES DIVIDENDS REINVESTED
- --------
(1) The Company has changed its peer group index from Media General Industry
Group 552-Footwear to a group of peer issuers selected by the Company in
good faith because the Media General Industry Group 552-Footwear is no
longer a published industry index. Hence, the Company has not included the
Media General Industry Group 552-Footwear graph in the performance graph
above. The peer group index selected by the Company consists of public
companies in the women's and children's fashion footwear industry having
annual net revenues less than $600 million. Stockholder return for each
component issuer in the peer group is weighted to reflect such issuer's
market capitalization at the beginning of each period shown. The peer
group companies consist of Candie's Inc., Deckers Outdoor Corporation,
Kenneth Cole Productions, Inc., Madden Steven, Ltd., Rocky Shoes & Boots,
Inc. and The Stride Rite Corporation.
(2) The first day of trading of the Class A Common Stock on the NASDAQ
National Market System.
14
<PAGE>
CERTAIN TRANSACTIONS
The following is a description of certain transactions during the fiscal
year ended October 31, 1998 in which officers and Directors of the Company and
its affiliates or families had a direct or indirect interest.
Mr. Cocozza and the Company agreed to terminate, effective as of the
completion of the Company's May 1994 initial public offering, a Deferred
Incentive Compensation Agreement entered into in 1988 (the "Compensation
Agreement"). In exchange for his consent to terminate the Compensation
Agreement, Mr. Cocozza was granted a nontransferable option to acquire 888,412
shares of Class A Common Stock at an exercise price of $1.50 per share. The
number of shares subject to the option and the option exercise price were
determined through negotiations between Mr. Cocozza and the Company. The
option is exercisable in whole or in part from time to time during a 15-year
period beginning on January 26, 1995 (the "Exercisability Date"). If following
the Exercisability Date Mr. Cocozza ceases to be employed by the Company for
any reason, his option will cease to be exercisable upon the earlier of (i)
the stated expiration of the option and (ii) the first anniversary of the date
as of which Mr. Cocozza ceased to be employed by the Company. Mr. Cocozza
partially exercised such option for 300,000 shares and sold such shares in the
Company's public offering consummated in April 1998.
Prior to its initial public offering in May 1994, the Company was treated
for federal and state income tax purposes as a S Corporation under Subchapter
S of the Internal Revenue Code and comparable state tax laws. In connection
with the Company's reorganization, reincorporation and initial public
offering, the Company in March and May 1994 made distributions of S
Corporation earnings in the aggregate amount of $20,227,000 of which
$4,025,082 was distributed to Mr. Maxwell V. Blum, with the remainder
distributed to parties related to Mr. Blum (collectively the "Former Principal
Stockholders").
The Company and the Former Principal Stockholders have entered into a tax
indemnification agreement (the "Tax Agreement"). Subject to certain
limitations, the Tax Agreement provides for indemnification to the Former
Principal Stockholders or to the Company in the event of an adjustment by a
taxing authority that shifts federal and certain state income taxes to the
Former Principal Stockholders or to the Company, respectively, between periods
before and after the date of termination of the Company's status as a S
Corporation. The Tax Agreement also provides for certain adjustments to the S
Corporation dividends that were paid in connection with the Company's initial
public offering in certain circumstances if the Company determines that such
amounts differed in the aggregate from the previously undistributed S
Corporation earnings.
The Company entered into arrangements in fiscal 1994 with Mr. Cocozza
pursuant to which the Company, under certain circumstances, will be required
to register his shares of common stock (including shares issuable upon the
exercise of his option) under the Securities Act.
In fiscal 1994, the Company entered into separate but identical indemnity
agreements (the "Indemnity Agreements") with each director and executive
officer of the Company. The Indemnity Agreements provide that the Company will
indemnify the director or officer (the "Indemnitee) against any amounts that
he or she becomes legally obligated to pay in connection with any claim
against him or her based upon any act, omission, neglect or breach of duty
that he or she may commit, omit or suffer while acting in his or her capacity
as a director and/or officer of the Company; provided that such claim: is not
based upon the Indemnitee's gaining any personal profit or advantage to which
he or she is not legally entitled; (ii) is not for an accounting of profits
made from the purchased or sale by the Indemnitee of securities of the Company
within the meaning of Section 16(b) of the Exchange Act or similar provisions
of any state law, and (iii) is not based upon the Indemnitee's knowingly
fraudulent, deliberately dishonest or willful misconduct. The Indemnity
Agreements also provide that all costs and expenses incurred by the Indemnitee
in defending or investigating such claim shall be paid by the Company in
advance of the final disposition thereof unless the Company, independent legal
counsel, the stockholders of the Company or court of competent jurisdiction
determines that: (i) the Indemnitee did not act in good faith and in a manner
that he or she reasonably believed to be in or not opposed to the best
interests of the Company; (ii) in the case of any criminal action or
proceeding, the Indemnitee had reasonable cause to
15
<PAGE>
believe his or her conduct was unlawful; or (iii) the Indemnitee intentionally
breached his or her duty to the Company or its stockholders. Each Indemnitee
has undertaken to repay the Company for any costs or expenses so advanced if
it shall ultimately be determined by a court of competent jurisdiction in a
final, nonappealable adjudication that he or she is not entitled to
indemnification under the Indemnity Agreements.
The Company believes that the terms of all transactions between the Company
and the Former Principal Stockholders, the officers and directors of the
Company and Gibson, Dunn & Crutcher LLP, or any of their affiliates, described
above or under "Compensation Committee Interlocks and Insider Participation"
are no less favorable to the Company than terms that could have been obtained
from unaffiliated third parties.
On April 27, 1998, the Company entered into a consulting agreement with Mr.
Blum. See "Executive Compensation--Consulting Agreement."
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP was the Company's independent auditors for fiscal 1998.
The appointment of auditors is approved annually by the Board of Directors
which is based in part on the recommendation of the Audit Committee. In making
its recommendation, the Audit Committee reviewed both the audit scope and
estimated audit fees for the coming year. Stockholder approval is not sought
in connection with this selection. A representative of Ernst & Young LLP will
be present at the Annual Meeting and will be given an opportunity to make a
statement if he desires to do so and will respond to questions from
stockholders.
16
<PAGE>
PROPOSALS OF STOCKHOLDERS
Proposals which stockholders intend to present at the 2000 Annual Meeting of
Stockholders of the Company must be received by the Secretary of the Company
at its principal offices 101 Sprague Street, Readville (Boston), Massachusetts
02137 no later than October 29, 1999.
MISCELLANEOUS
The Company's Annual Report to Stockholders for the fiscal year ended
October 31, 1998, including the financial statements and related notes
thereto, together with the report of the independent auditors and other
information with respect to the Company, accompanies this Proxy Statement.
The Company is not aware of any other business to be presented at the Annual
Meeting. If matters other than those described should properly arise at the
meeting, the proxies will vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors,
James J. Tinagero
Executive Vice President and
Secretary
Readville (Boston), Massachusetts
February 26, 1999
17
<PAGE>
DETACH HERE
PROXY
MAXWELL SHOE COMPANY INC.
CLASS A COMMON STOCK
ANNUAL MEETING OF STOCKHOLDERS
APRIL 8, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and the accompanying Proxy Statement for the 1999 Annual Meeting
and revoking all prior proxies, constitutes and appoints MAXWELL V. BLUM, MARK
J. COCOZZA and JAMES J. TINAGERO and each of them (and, if two or more of them
act hereunder, by action of a majority of them), attorneys and proxies of the
undersigned to represent the undersigned and to vote all shares of Class A
Common Stock, $.01 par value, of Maxwell Shoe Company Inc. (the "Company") which
the undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders of the Company to be held at 10:00 a.m. (local time) on
Thursday, April 8, 1999 at BankBoston, 100 Federal Street, Boston,
Massachusetts, and at any adjournment or postponement thereof. All proxies shall
be voted as directed, or, if no direction is given, for the nominees named on
the reverse side.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF THE NOMINEES NAMED IN THE
PROXY STATEMENT AND ACCORDING TO THE JUDGMENT OF THE PROXIES WITH RESPECT TO
ITEMS 2 AND 3.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE [SEE REVERSE]
[SIDE]
<PAGE>
[X] Please mark
votes as in
this example.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF MAXWELL SHOE
COMPANY INC.
1. Election of Directors.
Nominees: Mark J. Cocozza, James J. Tinagero, Maxwell V. Blum, Stephen A.
Fine, Jonathan K. Layne and Malcolm L. Sherman
FOR WITHHELD
[_] [_]
[_] ____________________________________________
For all nominees except as noted above
2. Proposal to approve an amendment to the Company's Certificate of
Incorporation to eliminate the authorization for the issuance of Class B
Common Stock.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. In the discretion of the proxyholders with respect to any other matter which
may properly come before the 1999 Annual Meeting and at any adjournment or
postponement thereof. The Board of Directors is presently not aware of any
other matters that will be presented at the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [_]
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please date and sign exactly as your name or names appear hereon. If more than
one registered owner, all should sign. Executors, administrators, trustees,
guardians, attorneys and corporate officers should indicate their fiduciary
capacity or full title when signing.
Signature: Date: Signature: Date:
