Document:

EXHIBIT 10.2

                               EARN-OUT AGREEMENT

                                  by and among

                              STEVEN MADDEN, LTD.,

                     DANIEL M. FRIEDMAN & ASSOCIATES, INC.,

                             DMF INTERNATIONAL, LTD.

                                       and

                               DANIEL M. FRIEDMAN

                          Dated as of February 7, 2006
<PAGE>
                               EARN-OUT AGREEMENT

                  This EARN-OUT AGREEMENT (this "Agreement"), dated as of
February 7, 2006 and effective as of the Closing Date (as defined below), if one
occurs, is by and among Steven Madden, Ltd., a Delaware corporation
("Purchaser"), Daniel M. Friedman, ("Friedman" or "Seller"), Daniel M. Friedman
& Associates, Inc. and DMF International, Ltd. (each a "Company," and together
the "Companies").

                                    RECITALS

                  WHEREAS, concurrently herewith, Seller and Purchaser are
entering into that certain Stock Purchase Agreement, dated as of the date hereof
(as amended from time to time in accordance with its terms, the "Stock Purchase
Agreement"), pursuant to which Purchaser shall purchase all of the issued and
outstanding shares of each of the Companies from Seller; and

                  WHEREAS, pursuant to Section 2.2(a) of the Stock Purchase
Agreement, Seller shall be entitled to receive certain earn-out purchase price
payments, subject to the terms and conditions of this Agreement, in respect of
each of fiscal years 2008, 2009 and 2010.

                  NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:

             1.    Definitions. As used in this Agreement, the following terms
shall have the meanings indicated:

                  "2008 Contingent Purchase Price Payment" shall have the
meaning set forth in Section 2(a) hereof.

                  "2009 Contingent Purchase Price Payment" shall have the
meaning set forth in Section 2(b) hereof.

                  "2010 Contingent Purchase Price Payment" shall have the
meaning set forth in Section 2(c) hereof.

                  "AAA" shall mean the American Arbitration Association.

                  "Act" shall mean the United States Securities Act of 1933, as
amended.

                  "Affiliate" with respect to any Person shall mean any other
Person which, directly or indirectly, is in control of, is controlled by or is
under common control with such specified Person. For the purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise. In
the case of any Person who is an individual, such Person's Affiliates shall
include such Person's spouse, siblings, parents, children, grandchildren, and
trusts for the benefit of any of the foregoing. For the avoidance of doubt,
Purchaser and its Affiliates shall be deemed to be Affiliates of each of the
Companies after the Closing Date.
<PAGE>

                  "Agreement" shall have the meaning set forth in the preamble.

                  "Applicable Contingent Purchase Price Payment Date" shall have
the meaning set forth in Section 4(a) hereof.

                  "Board of Directors" shall have the meaning set forth in
Section 6(a) hereof.

                  "Business Day" means any day that is not a Saturday or Sunday
or a legal holiday on which banks are authorized or required by law to be closed
in New York, New York.

                  "Closing Date" shall have the meaning set forth in the Stock
Purchase Agreement.

                  "Company" or "Companies" shall have the meaning set forth in
the preamble.

                  "Contingent Purchase Price Payment" shall mean each of the
2008 Contingent Purchase Price Payment, the 2009 Contingent Purchase Price
Payment and the 2010 Contingent Purchase Price Payment.

                  "Contingent Purchase Price Statement" shall have the meaning
set forth in Section 3(a) hereof.

                  "Dispute" shall have the meaning set forth in Section 16
hereof.

                  "Dispute Notice" shall have the meaning set forth in Section
3(b) hereof.

                  "Disputing Party" shall have the meaning set forth in Section
16 hereof.

                  "Earn-Out Year" shall mean each of fiscal year 2008, fiscal
year 2009 and fiscal year 2010, which shall end on December 31, 2008, 2009 and
2010, respectively.

                  "Earn-Out Multiple" shall mean 4.64.

                  "EBITDA" shall mean the Companies' (a) net sales, less,
without duplication, the sum of (i) cost of sales (including, without
limitation, any amounts which, absent the transactions contemplated by the Stock
Purchase Agreement, would have been payable by Daniel M. Friedman & Associates,
Inc. to the Purchaser pursuant to the terms of the License Agreement (as
hereinafter defined) as if, with respect to such amounts, such License Agreement
is coterminous with this Agreement), (ii) selling and distribution expenses,
(iii) design and production expenses and (iv) general administrative expenses
(for the avoidance of doubt, including in each of the foregoing clauses the net
amount payable under the Services Agreement), plus (b) to the extent included in
expenses in clause (a) of this definition, the sum of (i) interest expense, (ii)
fees and expenses (including prepayment penalties) in connection with
financings, (iii) income tax expense (including payments in respect of any tax
sharing or other similar agreement) other than international VAT or other
similar tax, (iv) depreciation and amortization expense, (v) expenses resulting
from FAS 142 or FAS 144, (vi) amortized expenses related to the closing of the
transactions contemplated by the Stock Purchase Agreement and the 338(h)(10)
Election (as defined in the Stock Purchase Agreement), (vii) any allocation of
corporate overhead from Affiliates of either Company or allocation of profit,
loss or expenses from Affiliates of either Company, other than those allocations
<PAGE>

specified in the Services Agreement, (viii) any Losses (as defined in the Stock
Purchase Agreement) of either of the Companies which give rise to an indemnity
obligation pursuant to the indemnification provisions of the Stock Purchase
Agreement, to the extent, and only to the extent, that such indemnity
obligations have been honored, and (ix) any amounts recovered or recoverable by
either Company from insurance, to the extent, and only to the extent, the Loss
attributable to such insurance arose in the same period, plus (c) the amount set
forth on Schedule A attached hereto for the applicable fiscal year; provided
that for purposes of the foregoing, all products of Purchaser sold by the
Companies to retail stores of Purchaser shall be sold at cost. Each figure in
clause (a) and clause (b) of this definition shall be determined on a
consolidated basis in accordance with GAAP consistently applied from the Closing
Date.

                  "Employment Agreement" shall mean the employment agreement,
dated as of the date hereof, between Daniel M. Friedman & Associates, Inc. and
Friedman, executed and delivered simultaneously with the execution and delivery
of this Agreement.

                  "Final Contingent Purchase Price Statement" shall have the
meaning set forth in Section 3(c) hereof.

                  "Final Financial Statements" shall have the meaning set forth
in Section 3(c) hereof.

                  "Financial Statements" means for any fiscal year, unaudited
consolidated financial statements for the Companies for such fiscal year, which
shall be prepared in accordance with GAAP.

                  "Friedman" means Daniel M. Friedman.

                  "GAAP" shall mean United States generally accepted accounting
principles, as in effect on the date of this Agreement, consistently applied.

                  "Independent Accounting Firm" shall have the meaning set forth
in Section 3(b) hereof.

                  "Intercompany Transaction" shall have the meaning set forth in
Section 7 hereof.

                  "License Agreement" shall mean that certain License Agreement,
dated as of July 14, 2005, between Purchaser and Daniel M. Friedman &
Associates, Inc.

                  "Notice of Set-Off Dispute" shall have the meaning set forth
in Section 5(b) hereof.

                  "Ordinary Course Operations of the Companies" shall mean the
ordinary course operations of the Companies consistent with past practice,
taking into account the provisions of Section 6 of this Agreement.

                  "Person" shall mean an individual, partnership, venture,
unincorporated association, organization, syndicate, corporation, limited
liability company, or other entity, trust, trustee, executor, administrator or
<PAGE>

other legal or personal representative or any government or any agency or
political subdivision thereof.

                  "Prime Rate" shall mean the rate of interest that The JPMorgan
Chase Bank (or its successor and assign) announces from time to time as its
prime lending rate as then in effect, or if no such rate is announced by The
JPMorgan Chase Bank (or its successor or assign), the prime lending rate
announced by a New York City money center bank selected by Purchaser and
reasonably acceptable to the Seller.

                  "Purchaser" shall have the meaning set forth in the preamble.

                  "Quarterly Statement" shall have the meaning set forth in
Section 6(g) hereof.

                  "Quarterly Statement Due Date" shall have the meaning set
forth in Section 6(g) hereof.

                  "Revised Contingent Purchase Price Statement" shall have the
meaning set forth in Section 3(b) hereof.

                  "Revised Financial Statements" shall have the meaning set
forth in Section 3(b) hereof.

                  "Rules" shall have the meaning set forth in Section 16 hereof.

                  "SEC" shall mean the United States Securities and Exchange
Commission.

                  "Seller" shall have the meaning set forth in the preamble.

                  "Services Agreement" shall mean that certain services
agreement, dated as of the date hereof, among Purchaser, Seller and the
Companies pursuant to which the Companies shall pay Purchaser certain
agreed-upon fees in respect of certain services provided for the Companies by
Purchaser.

                  "Set-Off Notice" shall have the meaning set forth in Section
5(b) hereof.

                  "Set-Off Review Period" shall have the meaning set forth in
Section 5(b) hereof.

                  "Stock Purchase Agreement" shall have the meaning set forth in
the recitals.

                2. Contingent Purchase Price Calculation.
                   -------------------------------------

                  (a) 2008 Contingent Purchase Price Payment. The aggregate
amount of the contingent purchase price payment payable to Seller with respect
to fiscal year 2008 (the "2008 Contingent Purchase Price Payment") shall equal
10% of the product of (i) the EBITDA for fiscal year 2008 and (ii) the Earn-Out
Multiple.

                  (b) 2009 Contingent Purchase Price Payment. The aggregate
amount of the contingent purchase price payment payable to Seller with respect
to fiscal year
<PAGE>

2009 (the "2009 Contingent Purchase Price Payment") shall equal 10% of the
product of (i) the EBITDA for fiscal year 2009 and (ii) the Earn-Out Multiple.

                  (c) 2010 Contingent Purchase Price Payment. The aggregate
amount of the contingent purchase price payment payable to Seller with respect
to fiscal year 2010 (the "2010 Contingent Purchase Price Payment") shall equal
20% of the product of (i) the EBITDA for fiscal year 2010 and (ii) the Earn-Out
Multiple.

                  (d) For the avoidance of doubt, the parties acknowledge that
no Contingent Purchase Price Payment shall ever be less than zero.

                3. Contingent Purchase Price Statement; Dispute.
                   --------------------------------------------

                  (a) As promptly as practicable, but in any event within ninety
(90) days after the end of each Earn-Out Year, Purchaser shall prepare and
deliver to Seller (and the Companies shall provide Purchaser with all assistance
as may be reasonably requested by Purchaser in connection with such preparation)
(i) Financial Statements for such fiscal year, (ii) a statement of the
Contingent Purchase Price Payment for such fiscal year, which shall explain in
reasonable detail the calculations of EBITDA for such fiscal year (a "Contingent
Purchase Price Statement") and (iii) reasonable supporting documentation
sufficiently detailed to enable Seller to verify the amounts set forth in such
Financial Statements and Contingent Purchase Price Statement.

                  (b) Seller may dispute such Financial Statements and/or
Contingent Purchase Price Payment Statement for such fiscal year by sending a
written notice (a "Dispute Notice") to Purchaser within thirty (30) days of
Purchaser's delivery of all of the items specified in Section 3(a) to the
Seller. The Dispute Notice shall identify each disputed item on the Financial
Statements or Contingent Purchase Price Statement, specify the amount of such
dispute and set forth in reasonable detail the basis for such dispute. In the
event of any such disputes, Purchaser and Seller shall attempt, in good faith,
to reconcile their differences (including providing information that is
reasonably requested to the other party), and any resolution by them as to any
disputed items shall be final, binding and conclusive on the parties and shall
be evidenced by a writing signed by Purchaser and Seller, including, as
appropriate, revised Financial Statements ("Revised Financial Statements")
and/or a revised Contingent Purchase Price Statement (a "Revised Contingent
Purchase Price Statement") reflecting such resolution. If Purchaser and Seller
are unable to reach such resolution within twenty (20) days after the Seller's
delivery of the Dispute Notice to Purchaser, then Purchaser and Seller shall
promptly submit any remaining disputed items for final binding resolution to any
independent accounting firm mutually acceptable to Purchaser and Seller (which
accounting firm has not, within the prior twenty-four (24) months, provided
services to Purchaser, Seller or either Company or any Affiliate of any of
them). If Purchaser and Seller are unable to agree upon an independent
accounting firm within ten (10) days, an independent accounting firm selected by
Purchaser (which accounting firm has not, within the prior twenty-four (24)
months, provided services to Purchaser or either Company or any Affiliate of any
of them) and an independent accounting firm selected by Seller (which accounting
firm has not, within the prior twenty-four (24) months, provided services to
Seller or either Company or any Affiliate of any of them) shall select an
independent accounting firm that has not, within the prior twenty-four (24)
months, provided services to Purchaser, Seller or either Company or any
Affiliate of any of them. Such independent accounting firm mutually agreed upon
<PAGE>

by Purchaser and Seller or selected by the procedure referenced in the
immediately preceding sentence, as the case may be, is hereinafter referred to
as the "Independent Accounting Firm." If any remaining disputed items are
submitted to an Independent Accounting Firm for resolution, (A) each party will
furnish to the Independent Accounting Firm such workpapers and other documents
and information relating to the remaining disputed items as the Independent
Accounting Firm may request and are available to such party, and each party will
be afforded the opportunity to present to the Independent Accounting Firm any
material relating to the disputed items and to discuss the resolution of the
disputed items with the Independent Accounting Firm; (B) each party will use its
good faith commercially reasonable efforts to cooperate with the resolution
process so that the disputed items can be resolved within forty-five (45) days
of submission of the disputed items to the Independent Accounting Firm; (C) the
determination by the Independent Accounting Firm, as set forth in a written
notice to Purchaser and Seller (which written notice shall include, as
appropriate, Revised Financial Statements and/or a Revised Contingent Purchase
Price Statement), shall be final, binding and conclusive on the parties; and (D)
the fees and disbursements of the Independent Accounting Firm shall be allocated
between Purchaser and Seller in the same proportion that the aggregate dollar
amount of the disputed items submitted to the Independent Accounting Firm that
are unsuccessfully disputed by Seller (as finally determined by the Independent
Accounting Firm) bears to the total amount of all disputed items submitted to
the Independent Accounting Firm. By way of illustration, if Seller disputes
$500,000 of items, and the Independent Accounting Firm determines that Seller's
position is correct as to $400,000 of the disputed items, then Purchaser would
bear 80 percent and Seller would bear 20 percent of such fees and disbursements.

                  (c) The Financial Statements for such fiscal year and the
Contingent Purchase Price Statement or, if either have been adopted pursuant to
Section 3(b), the Revised Financial Statements and/or the Revised Contingent
Purchase Price Statement, shall be deemed to be final, binding and conclusive on
Purchaser and Seller ("Final Financial Statements" and "Final Contingent
Purchase Price Statement") upon the earliest of (A) the failure of Seller to
deliver to Purchaser the Dispute Notice within thirty (30) days of Purchaser's
delivery to Seller of all of the items specified in Section 3(a) for such fiscal
year; (B) the resolution by Purchaser and Seller of all disputes, as evidenced
by, as appropriate, Revised Financial Statements and/or a Revised Contingent
Purchase Price Statement; and (C) the resolution by the Independent Accounting
Firm of all disputes, as evidenced by, as appropriate, Revised Financial
Statements and/or a Revised Contingent Purchase Price Statement. Any Contingent
Purchase Price Payment based on Final Financial Statements and a Final
Contingent Purchase Price Statement shall be made in accordance with Section 4
hereof.

                 4. Contingent Purchase Price Payments.
                    ----------------------------------

                  (a) Each Contingent Purchase Price Payment shall be paid and
payable by Purchaser or the Companies to Seller with respect to each Earn-Out
Year and shall be paid on a date or dates selected by Purchaser that results in
the payment of such Contingent Purchase Price Payment to Seller in full on or
before the tenth Business Day after the later of (x) the date on which the Final
Financial Statements and Final Contingent Purchase Price Statement are deemed
final, binding and conclusive for such Earn-Out Year pursuant to Section 3(c)
and (y) the conclusion of the negotiation period with respect to any set-off
pursuant to Section 5 (such date, the "Applicable Contingent Purchase Price
Payment Date"). Notwithstanding the foregoing, in the event that Seller timely
<PAGE>

delivers a Dispute Notice to Purchaser pursuant to Section 3(b), the Applicable
Contingent Purchase Price Payment Date with respect to the portion of the
Contingent Purchase Price Payment that would otherwise be payable to Seller if
Seller had not delivered such Dispute Notice shall be on or before the tenth
Business Day after the later of (1) the delivery date of such Dispute Notice and
(2) the conclusion of the negotiation period with respect to any set-off
pursuant to Section 5. In the event that any amounts due under this Section 4
shall not be paid to Seller on or before the Applicable Contingent Purchase
Price Payment Date, such amounts shall bear interest, calculated from the
Applicable Contingent Purchase Price Payment Date until the date such amounts
are paid to Seller, at a rate per annum equal to the Prime Rate, calculated and
payable monthly, compounded monthly. Each Contingent Purchase Price Payment
shall be paid in cash and shall be made by wire transfer of immediately
available funds to an account or accounts designated at least two (2) Business
Days prior to the applicable payment date by Seller in writing. The Contingent
Purchase Price Payments are not subject to or contingent on Seller's employment
status with the Companies or Purchaser.

                 5. Set-Off Rights.
                    --------------

                  (a) Notwithstanding any provision of this Agreement to the
contrary, the parties hereby acknowledge and agree that, in addition to any
other right hereunder, Purchaser shall have the right, but not the obligation,
from time to time to set off against any Contingent Purchase Price Payment
required to be paid by Purchaser to Seller pursuant to this Agreement any
amounts owed at such time by Seller to either Company or to Purchaser (or any of
its Affiliates) hereunder or pursuant to the Stock Purchase Agreement.

                  (b) If Purchaser elects to exercise its set-off rights
hereunder against any amounts otherwise required to be paid by Purchaser to
Seller pursuant to this Agreement, it shall give Seller written notice of such
election (the "Set-Off Notice"), which Set-Off Notice shall include the amount
to be set off and a reasonable description of the circumstances giving rise to
Purchaser's entitlement to such set-off. Seller shall have ten (10) days after
receipt of such Set-Off Notice to review such Set-Off Notice (the "Set-Off
Review Period"), and in the event that Seller has any objections or challenges
to the exercise of the set-off right of Purchaser, Seller shall submit a single
written notice of set-off dispute ("Notice of Set-Off Dispute") to Purchaser
during such Set-Off Review Period, specifying in reasonable detail the nature of
any asserted objections or challenges. In the event of any such dispute, Seller
and Purchaser shall negotiate in good faith to resolve such dispute for thirty
(30) days after receipt by Purchaser of the Notice of Set-Off Dispute. If Seller
and Purchaser are unable to resolve such dispute within such 30-day period, the
amount payable by Purchaser to Seller shall automatically be reduced by the
amount set forth in the Set-Off Notice. In the event that there is a final
determination that Seller did not owe either Company or Purchaser (or any of its
Affiliates) the amount that has been set off, Purchaser shall promptly repay to
Seller all such amounts that are so determined to have been incorrectly set off,
plus interest, calculated from the date of set-off until the date such amount is
paid to Seller, at a rate per annum equal to the Prime Rate, calculated and
payable monthly, compounded monthly. For purposes of this Section 5, a
determination shall be final if any and all appeals therefrom shall have been
resolved or if thirty (30) days shall have passed from the rendering of such
determination (or of any determination of appeal therefrom) and no party shall
have commenced any appeal therefrom.
<PAGE>

                  (c) In the case of any such set-off by Purchaser pursuant to
this Section 5, Seller's obligation to make such payment (or any portion
thereof) shall be deemed satisfied and discharged to the extent of such set-off.
The exercise of such right of set-off by Purchaser in good faith, whether or not
finally determined to be justified, will not constitute a breach under this
Agreement or the Stock Purchase Agreement.

                 6. Corporate Governance During Earn-Out Period. Seller and
Purchaser agree that until the earlier of the termination of this Agreement or
the end of fiscal year 2010, the Companies shall be managed in accordance with
the following provisions:

                  (a) The Board of Directors of each Company (the "Board of
Directors") shall consist of the same three (3) persons, and Purchaser will vote
the Companies' common stock owned by it in favor of the election of two (2)
designees of Purchaser and one (1) designee of Friedman, provided that during
his term of employment with Daniel M. Friedman & Associates, Inc., the designee
of Friedman shall be himself.

                  (b) Friedman shall, subject to Purchaser's then existing
policies, practices and procedures consistently applied to Purchaser and to all
domestic subsidiaries of Purchaser, have authority to control, in reasonable
consultation with Purchaser, the Ordinary Course Operations of the Companies,
including, without limitation, the following: (i) accepting new customers and
terminating existing customers, (ii) hiring or promoting design, merchandising,
sales, marketing and advertising employees of the Companies, (iii) firing
design, merchandising, sales, marketing and advertising employees of the
Companies below the Vice President level, (iv) selling, marketing or otherwise
distributing products to historical and prospective customers of the Companies,
and (v) terminating existing suppliers or engaging new suppliers that, in each
case, are not also suppliers of Purchaser. Notwithstanding the foregoing,
Friedman shall not, without the prior written consent of the Board of Directors,
enter into any contract that would impose any obligation or negative covenant
(e.g., a most favored nations provision or a restriction on the ability to
conduct business) on Purchaser or any of its subsidiaries (other than either of
the Companies).

                  (c) Notwithstanding the provisions of Section 6(b), the Board
of Directors or its designee shall have authority to control, in reasonable
consultation with Friedman, the following matters: (i) hiring or promoting
finance and other back office employees of the Companies, (ii) firing finance
and other back office employees of the Companies, (iii) firing design,
merchandising, sales, marketing and advertising employees of the Companies at
the Vice President or higher level, (iv) the declaring, authorizing or paying by
the Companies of any dividend or distribution, (v) determining the compensation
and benefits of employees, (vi) expanding the channels of sales or distribution
of the Companies' products from that existing on the Closing Date, (vii) the
termination of existing license agreements and the entering into of new license
agreements by the Companies, and (viii) the products covered by the Companies'
new license agreements and any amendments or renewals of existing license
agreements; provided that Purchaser shall not, and shall cause its Affiliates
not to, take any action that is primarily intended to adversely impact the
Ordinary Course Operations of the Companies. Furthermore, neither Purchaser nor
the Companies may (A) take any action that is expressly controlled by Friedman
pursuant to Section 6(b) hereunder or (B) take any action or enter into any
transaction that is primarily intended to adversely affect any of the Contingent
Purchase Price Payments payable under this Agreement.
<PAGE>

                  (d) Notwithstanding the provisions of Sections 6(b) and 6(c),
the following actions shall not be taken without the mutual consent of Friedman,
on the one hand, and Purchaser or the Board of Directors, on the other hand: (i)
terminating existing suppliers or engaging new suppliers that, in either case,
are also suppliers of Purchaser, (ii) entering into any transaction with any
Affiliate of either Company or any officer or director of either Company or its
Affiliates (including family members), other than compensation arrangements in
the Ordinary Course Operations of the Companies or as provided in the Services
Agreement, (iii) voluntarily liquidating or dissolving either Company, (iv)
filing of a petition under bankruptcy or other insolvency laws, or admitting in
writing that either Company is bankrupt, insolvent or generally unable to pay
its debts as they become due, (v) issuing any capital stock or other securities
of either Company or granting any option or other right to acquire any capital
stock or other securities of either Company, (vi) engaging in any line of
business other than the business in which the Companies are engaged as of the
Closing Date, (vii) Purchaser's suffering or permitting any third person, firm
or corporation (including Purchaser) other than Daniel M. Friedman & Associates,
Inc. to be a licensee of Purchaser, or otherwise giving permission to any other
entity to use any trademarks of Purchaser or any of its Affiliates, with respect
to any category of "Products" covered by the License Agreement, notwithstanding
the termination of such License Agreement pursuant to the Stock Purchase
Agreement, provided, however, that the rights reserved by Purchaser pursuant to
Section 1.3 of such License Agreement will survive the termination of such
License Agreement, or (viii) selling stock or assets of either Company to a
third party that is not a one-hundred percent (100%)-owned subsidiary of
Purchaser or Purchaser itself (other than sales of inventory in the ordinary
course of business consistent with the Companies' past practices) or engaging in
a merger transaction (other than mergers solely for the purpose of
reincorporating the Companies in the state of Delaware). For the avoidance of
doubt, it is acknowledged and agreed among the parties hereto that the
restrictions set forth in clause (vi) above shall not apply to a sale of all or
substantially all of the stock or assets of Purchaser or any Affiliate of
Purchaser (other than the Companies) or the engagement by Purchaser or any
Affiliate of Purchaser (other than the Companies) in any merger transaction.

                  (e) Notwithstanding the provisions of Sections 6(b), 6(c) and
6(d), the Board of Directors or its designee shall have authority to control the
following matters: (i) capital expenditures, (ii) the incurrence of
indebtedness, (iii) selecting legal counsel and auditors for the Companies, and
(iv) mergers solely for the purpose of reincorporating the Companies in the
state of Delaware; provided that neither Purchaser nor the Companies may take
any action or enter into any transaction that is primarily intended to adversely
affect any of the Contingent Purchase Price Payments payable under this
Agreement. Notwithstanding any other provision of this Agreement to the
contrary, the Board of Directors of each of the Companies shall have the
authority, in their sole discretion, to veto, modify or change any action taken
or to be taken by the Companies with respect to any matter; provided, however,
that, to the extent any such veto, modification or change (i) relates to a
<PAGE>

matter that would have been subject to Friedman's control under Section 6(b)
hereunder or Friedman's consent under Section 6(d) hereunder, and (ii) is
reasonably objected to by Friedman as evidenced in a writing setting forth such
objections in reasonable detail, then any significant adverse effect on the
Companies' EBITDA (taking into account the effect on EBITDA of the action or
proposed action to which the veto, modification or change related) directly
resulting from such veto, modification or change shall be disregarded for
purposes of calculating EBITDA pursuant to this Agreement. For purpose of
clarity, the preceding sentence shall be construed to override any other
contrary provision of this Agreement.

                  (f) Friedman and designees of Purchaser shall consult
regularly (but in any event at least quarterly) with each other regarding the
strategic direction of the Companies, the sales and merchandising functions of
the Companies (including the hiring and firing of sales and merchandising
employees), and to mutually agree on EBITDA and revenue goals. In addition,
Purchaser shall have prompt access to all properties, records, financial
information or other data concerning the Companies that Purchaser may request,
and the Companies shall prepare and provide to Purchaser all financial
statements, reports and analyses required by Purchaser within a reasonable
period after any request therefor.

                  (g) No later than fifteen (15) days after the end of each
quarterly period (beginning with the quarter beginning April 1, 2006) (each, a
"Quarterly Statement Due Date") the Companies shall submit a statement (a
"Quarterly Statement") to Purchaser setting forth the Companies' actual EBITDA
for such quarterly period, and the Companies' projected revenue and EBITDA for
the prospective four fiscal quarter period following such completed fiscal
quarter. In addition, the Companies shall provide reasonable supporting
documentation sufficiently detailed to enable Purchaser (i) to verify the actual
amounts set forth in the Companies' Quarterly Statement and (ii) to verify that
the assumptions underlying the projected amounts set forth in the Companies'
Quarterly Statement are reasonable.

                  (h) In the event that the employment of Seller is terminated
by the Companies for "Cause" or by Seller without "Good Reason" (as such terms
are defined in the Employment Agreement) or due to his death or disability, (i)
he may be removed from the Board of Directors and (ii) the management of the
Companies shall be at the sole discretion of Purchaser or its designees and the
Companies shall thereafter be operated by Purchaser. In the event that the
employment of Seller is terminated by the Companies without "Cause" or by Seller
with "Good Reason" and the Companies employ another executive or executives to
replace Seller, then any excess of the compensation, benefits and expenses of
the executive(s) employed to replace Seller over the amounts that would have
been payable to Seller pursuant to the Employment Agreement had Seller remained
employed with the Companies shall be disregarded for purposes of the calculation
<PAGE>

of EBITDA pursuant to this Agreement, regardless of the actual amount of such
compensation, benefits and expenses. In the event that the employment of any of
Steven Lloyd, Kenneth Horowitz or Renee Cohen (each, a "Specified Employee") is
terminated by the Companies without "Cause" (as such term is defined in such
Specified Employee's employment agreement with the Companies) and the Companies
employ another executive or executives to replace such Specified Employee, any
excess of the sum of (1) any compensation or other payments made to such
Specified Employee after his or her termination pursuant to the terms of such
Specified Employee's employment agreement with the Companies plus (2) the
compensation, benefits and expenses of the executive(s) employed to replace such
Specified Employee, over the amounts that would have been payable to such
Specified Employee pursuant to such Specified Employee's employment agreement
with the Companies had such Specified Employee remained employed with the
Companies, shall be disregarded for purposes of the calculation of EBITDA
pursuant to this Agreement, regardless of the actual amount of such
compensation, benefits and expenses.

        7.    Intercompany Transactions and Other Activities During Earn-Out
Period. For purposes of determining any Contingent Purchase Price Payment
payable under this Agreement, Seller and Purchaser agree that until the earlier
of the termination of this Agreement or the end of fiscal year 2010, all
transactions between the Companies, on the one hand, and Purchaser or any of its
Affiliates (excluding the Companies and their subsidiaries), on the other hand
(each an "Intercompany Transaction"), shall be at cost or shall be adjusted to
be upon fair and reasonable terms no less favorable to either party than would
be obtained in a comparable arm's-length transaction with an unaffiliated third
Person. The parties acknowledge and agree that the Services Agreement is or will
be on arm's-length terms.

        8.    Term. This Agreement shall be effective on the Closing Date, if
one occurs, and shall continue until the payment of all Contingent Purchase
Price Payments pursuant to Section 4.

        9.    Assignment; Binding Nature. Neither this Agreement nor any of
the rights, interests or obligations hereunder may be assigned by Seller.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of, and be enforceable by the parties hereto and their respective
heirs, personal representatives, legatees, successors and permitted assigns.

       10.    Amendment. This Agreement may be modified or amended only by
an instrument in writing, duly executed by Purchaser, on the one hand, and
Seller, on the other hand.

       11.    Notices. All notices, demands and communications of any kind
which any party hereto may be required or desires to serve upon another party
under the terms of this Agreement shall be in writing and shall be given by: (a)
personal service upon such other party; (b) mailing a copy thereof by certified
or registered mail, postage prepaid, with return receipt requested; (c) sending
a copy thereof by Federal Express or equivalent courier service; or (d) sending
a copy thereof by facsimile, in each case addressed as required for notices
pursuant to Section 13.3 of the Stock Purchase Agreement. In case of service by
Federal Express or equivalent courier service or by facsimile or by personal
service, such service shall be deemed complete upon delivery or transmission, as
applicable. In the case of service by mail, such service shall be deemed
complete on the fifth Business Day after mailing. The addresses and facsimile
numbers to which, and persons to whose attention, notices and demands shall be
delivered or sent may be changed from time to time by notice served as
hereinabove provided by any party upon any other party.

       12.    Governing Law; Jurisdiction. This Agreement and all the
transactions contemplated hereby, and all disputes between the parties under or
related to the Agreement or the facts and circumstances leading to its
execution, whether in contract, tort or otherwise, shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York
including, without limitation, Section 5-1401 of the New York General
Obligations Law and New York Civil Practice Laws and Rules 327.
<PAGE>

       13.    Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any arbitrator to be invalid or unenforceable to any extent, the
remainder of this Agreement, or the application of such provision to such person
or circumstances other than those to which it is so determined to be invalid or
unenforceable, shall not be affected thereby, and each provision hereof shall be
enforced to the fullest extent permitted by law. If the final determination of
an arbitrator declares that any item or provision hereof is invalid or
unenforceable, the parties hereto agree that the arbitrator making the
determination of invalidity or unenforceability shall have the power, and is
hereby directed, to reduce the scope, duration or area of the term or provision,
to delete specific words or phrases and to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified.

       14.    Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.

       15.    Counterparts; Facsimile. For the convenience of the parties, any
number of counterparts hereof may be executed, each such executed counterpart
shall be deemed an original, and all such counterparts together shall constitute
one and the same instrument. Facsimile transmission of any signed original
counterpart and/or retransmission of any signed facsimile transmission shall be
deemed the same as the delivery of an original.

       16.    Arbitration. Except as otherwise set forth in Section 3(b) hereof,
if any dispute or difference of any kind whatsoever shall arise between the
parties to this Agreement (each a "Disputing Party") in connection with or
arising out of this Agreement, or the breach, termination or validity thereof (a
"Dispute"), then, on the demand of any Disputing Party, the Dispute shall be
finally and exclusively resolved by arbitration in accordance with the
Commercial Arbitration Rules of the AAA (the "Rules") then in effect, except as
modified herein. The arbitration shall be held, and the award shall be issued
in, the City of New York. There shall be one neutral arbitrator appointed by
agreement of the Disputing Parties within thirty (30) days of receipt by
respondent of the demand for arbitration. If such arbitrator is not appointed
within the time limit provided herein, on the request of any Disputing Party, an
arbitrator shall be appointed by the AAA by using a list striking and ranking
procedure in accordance with the Rules. Any arbitrator appointed by the AAA
shall be a retired judge or a practicing attorney with no less than fifteen
years of experience and an experienced arbitrator. By agreeing to arbitration,
the Disputing Parties do not intend to deprive any court of its jurisdiction to
issue a pre arbitral injunction, pre arbitral attachment, or other order in aid
of arbitration proceedings and the enforcement of any award. Without prejudice
to such provisional remedies as may be available under the jurisdiction of a
court, the arbitrator shall have full authority to grant provisional remedies
and to direct the Disputing Parties to request that any court modify or vacate
any temporary or preliminary relief issued by such court, and to award damages
for the failure of any Disputing Party to respect the arbitrator's orders to
that effect. Any arbitration proceedings, decisions or awards rendered hereunder
and the validity, effect and interpretation of this arbitration agreement shall
be governed by the Federal Arbitration Act, 9 U.S.C. et seq. In arriving at a
decision, the arbitrator shall be bound by the terms and conditions of this
Agreement and shall apply the governing law of this Agreement as designated in
<PAGE>

Section 12. The arbitrator is not empowered to award damages in excess of
compensatory damages, and each Disputing Party hereby irrevocably waives any
right to recover punitive, exemplary or similar damages with respect to any
Dispute. The award shall provide that the fees and expenses of the arbitration
(including the fees of the AAA, the fees and expenses of the arbitrator and
attorneys' fees) shall be allocated based on the proportion that the aggregate
amount of disputed items submitted to arbitration that are unsuccessfully
disputed by each Disputed Party (as finally determined by the arbitrator) bears
to the total amount of all disputed items submitted to arbitration. The award,
which shall be in writing and shall, on the written request of any Disputing
Party, state the findings of fact and conclusions of law upon which it is based,
shall be final and binding on the Disputing Parties and shall be the sole and
the exclusive remedy between the Disputing Parties regarding any claims,
counterclaims, issues or accountings presented to the arbitral tribunal.
Judgment upon any award may be entered in any court of competent jurisdiction
located in the State of New York, and the parties hereby consent to the
exclusive jurisdiction of the courts located in the State of New York.

       17.    Entire Agreement. This Agreement, the Stock Purchase
Agreement, the Services Agreement and the Employment Agreement, including all
schedules and exhibits hereto and thereto, contain the entire understanding of
the parties hereto with respect to the subject matter hereof.

                  [Remainder of page intentionally left blank]
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

                                  COMPANIES:
                                  ---------

                                 DANIEL M. FRIEDMAN & ASSOCIATES, INC.

                                 By: /s/ DANIEL M. FRIEDMAN
                                     -------------------------------------------
                                     Name:  Daniel M. Friedman
                                     Title: President

                                 DMF INTERNATIONAL, LTD.

                                 By: /s/ DANIEL M. FRIEDMAN
                                     -------------------------------------------
                                     Name:  Daniel M. Friedman
                                     Title: President

                                 PURCHASER:
                                 ---------

                                 STEVEN MADDEN, LTD.

                                 By: /s/ JAMIESON A. KARSON
                                     -------------------------------------------
                                    Name:  Jamieson A. Karson
                                    Title: Chairman and Chief Executive Officer

                                 SELLER:

                                 /s/ DANIEL M. FRIEDMAN
                                 ----------------------------------------------
                                 Daniel M. Friedman
<PAGE>

                                   SCHEDULE A
                                   ----------

                         2008              $446,000

                         2009              $492,000

                         2010              $521,000EXHIBIT 10.1
                                  ------------

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made effective as of _December 20, 2001, by and
between FIRSTBANK NORTHWEST (the "Bank"), FIRSTBANK NW CORP. (the "Company"), a
Washington corporation; and CLYDE E. CONKLIN (the "Executive").

         WHEREAS, the Bank wishes to assure itself of the services of Executive
for the period provided in this Agreement; and

         WHEREAS, Executive is willing to serve in the employ of the Bank on a
full-time basis for said period.

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:

1.       POSITION AND RESPONSIBILITIES.

         During the period of his employment hereunder, Executive agrees to
serve as Chief Financial Officer of the Bank. During said period, Executive also
agrees to serve, if elected, as an officer and director of the Company or any
subsidiary or affiliate of the Company or the Bank.

2.       TERMS AND DUTIES.

         (a)      The term of this Agreement shall be deemed to have commenced
as of the date first above written and shall continue for a period of thirty-six
(36) full calendar months thereafter. Commencing on the first anniversary date,
and continuing at each anniversary date thereafter, the Board of Directors of
the Bank (the "Board") may extend the Agreement for an additional year. Prior to
the extension of the Agreement as provided herein, the Board of Directors of the
Bank will conduct a formal performance evaluation of Executive for purposes of
determining whether to extend the Agreement, and the results thereof shall be
included in the minutes of the Board's meeting.

         (b)      During the period of his employment hereunder, except for
periods of absence occasioned by illness, reasonable vacation periods, and
reasonable leaves of absence, Executive shall devote substantially all his
business time, attention, skill, and efforts to the faithful performance of his
duties hereunder including activities and services related to the organization,
operation and management of the Bank; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
Executive may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with the Bank,
or materially affect the performance of Executive's duties pursuant to this
Agreement.

3.       COMPENSATION AND REIMBURSEMENT.

         (a)      The compensation specified under this Agreement shall
constitute the salary and benefits paid for the duties described in Sections 1
and 2. The Bank shall pay Executive as compensation a salary of not less than
$102,000 per year. Such salary shall be payable in accordance with the customary
payroll practices of the Bank. During the period of this Agreement, Executive's
salary shall be reviewed at least annually; the first such review will be made
<PAGE>

no later than one year from the date of this Agreement. Such review shall be
conducted by a Committee designated by the Board. Executive's salary plus any
increases provided by the Committee, including any incentive compensation, shall
constitute Executive's base salary ("Base Salary"). In addition to the Base
Salary provided in this Section 3(a), the Bank shall provide Executive at no
cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.

         (b)      The Bank will provide Executive with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
Executive was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the Bank will not, without
Executive's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect Executive's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), Executive will be entitled to participate in or receive benefits
under any employee benefit plans including, but not limited to, retirement
plans, supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement made available by the Bank in the future to its senior executives
and key management employees, subject to, and on a basis consistent with, the
terms, conditions and overall administration of such plans and arrangements.
Executive will be entitled to incentive compensation and bonuses as provided in
any plan, or pursuant to any arrangement of the Bank, in which Executive is
eligible to participate. Nothing paid to Executive under any such plan or
arrangement will be deemed to be in lieu of other compensation to which
Executive is entitled under this Agreement, except as provided under Section
5(e).

         (c)      In addition to the Base Salary provided for by paragraph (a)
of this Section 3, the Bank shall pay or reimburse Executive for all reasonable
travel and other obligations under this Agreement and may provide such
additional compensation in such form and such amounts as the Board may from time
to time determine.

         (d)      If Executive serves as a member of the Board or the Board of
Directors of the Company (the "Company Board"), the Company or the Bank, as
applicable, shall pay Executive, as additional compensation, an amount equal to
eighty (80) percent of the fees or retainers received by a nonemployee member of
the Board or the Company Board.

4.       PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

         (a)      Upon the occurrence of an Event of Termination (as herein
defined) during Executive's term of employment under this Agreement, the
provisions of this Section shall apply. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following: (i) the
termination by the Bank of Executive's full-time employment hereunder for any
reason other than a Change in Control, as defined in Section 5(a) hereof; death;
or retirement, as defined in Section 7 hereof; (ii) Executive's resignation from
the Bank's employ, upon (A) unless consented to by Executive, a material change
in Executive's function, duties, or responsibilities, which change would cause
Executive's position to become one of lesser responsibility, importance, or
scope from the position and attributes thereof described in Sections 1 and 2,
above (any such material change shall be deemed a continuing breach of this
Agreement), (B) a relocation of Executive's principal place of employment by
more than 35 miles from its location at the effective date of this Agreement, or
a material reduction in the benefits and perquisites to Executive from those
being provided as of the effective date of this Agreement, (C) the liquidation
or dissolution of the Bank, or (D) any breach of this Agreement by the Bank.
Upon the occurrence of any event described in clauses (A), (B), (C) or (D),
above, Executive shall have the right to elect to terminate his employment under
<PAGE>

this Agreement by resignation upon not less than sixty (60) days prior written
notice given within a reasonable period of time not to exceed, except in case of
a continuing breach, four (4) calendar months after the event giving rise to
said right to elect.

         (b)      Upon the occurrence of an Event of Termination, the Bank shall
pay Executive, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay, a lump sum
amount equal to the present value (at a rate reasonably determined by the Board
of all Base Salary and life, medical, dental and disability coverage that would
have been paid to Executive had the contract remained in effect through the
remainder of its then existing term; provided, however, that if the Bank is not
in compliance with its minimum capital requirements or if such payments would
cause the Bank's capital to be reduced below its minimum capital requirements,
such payment shall be deferred until such time as the Bank is in capital
compliance.

5.       CHANGE IN CONTROL.

         (a)      No benefit shall be paid under this Section 5 unless there
shall have occurred a Change in Control of the Company or the Bank. For purposes
of this Agreement, a "Change in Control" of the Company or the Bank shall be
deemed to occur if and when (a) an offeror other than the Company purchases
shares of the common stock of the Company or the Bank pursuant to a tender or
exchange offer for 25% or more of such shares, (b) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) is
or becomes the beneficial owner, directly or indirectly, of securities of the
Company or the Bank representing 25% or more of the combined voting power of the
Company's or the Bank's then outstanding securities, (c) the membership of the
board of directors of the Company or the Bank changes as the result of a
contested election, such that individuals who were directors at the beginning of
any twenty-four (24) month period (whether commencing before or after the date
of adoption of this Agreement) do not constitute a majority of the Board at the
end of such period, or (d) shareholders of the Company or the Bank approve a
merger, consolidation, sale or disposition of all or substantially all of the
Company's or the Bank's assets, or a plan of partial or complete liquidation.

         (b)      If any of the events described in Section 5(a) hereof
constituting a Change in Control have occurred or the Board of the Bank or the
Company has reasonably determined that a Change in Control has occurred,
Executive shall be entitled to the benefits provided in paragraphs (c), (d) and
(e) of this Section 5 upon his subsequent involuntary termination following the
effective date of a Change in Control (or voluntary termination following the
effective date of a Change in Control following any demotion, loss of title,
office or significant authority, reduction in his annual compensation or
benefits (other than a reduction affecting the Bank's personnel generally), or
relocation of his principal place of employment by more than thirty-five (35)
miles from its location immediately prior to the Change in Control), unless such
termination is because of his death, retirement as provided in Section 7,
termination for Cause, or termination for Disability.

         (c)      Upon the occurrence of a Change in Control followed by
Executive's termination of employment, the Bank shall pay Executive, or in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, as severance pay or liquidated damages, or both, a sum equal
to 2.99 times Executive's "base amount," within the meaning of ss.280G(b)(3) of
the Internal Revenue Code of 1986 ("Code"), as amended. Such payment shall be
made in a lump sum paid within ten (10) days of Executive's Date of Termination.
<PAGE>

         (d)      Upon the occurrence of a Change in Control followed by
Executive's termination of employment, the Bank will cause to be continued life,
medical, dental and disability coverage substantially identical to the coverage
maintained by the Bank for Executive prior to his severance. In addition,
Executive shall be entitled to receive the value of employer contributions that
would have been made on Executive's behalf over the remaining term of the
agreement to any tax-qualified retirement plan sponsored by the Bank as of the
Date of Termination. Such coverage and payments shall cease upon the expiration
of thirty-six (36) months.

         (e)      Upon the occurrence of a Change in Control, Executive shall be
entitled to receive benefits due him under, or contributed by the Company or the
Bank on his behalf, pursuant to any retirement, incentive, profit sharing,
bonus, performance, disability or other employee benefit plan maintained by the
Bank or the Company on Executive's behalf to the extent that such benefits are
not otherwise paid to Executive upon a Change in Control.

         (f)      Notwithstanding the preceding paragraphs of this Section 5, in
the event that the aggregate payments or benefits to be made or afforded to
Executive under this Section, together with any other payments or benefits
received or to be received by Executive in connection with a Change in Control,
would be deemed to include an "excess parachute payment" under ss.280G of the
Code, then, at the election of Executive, (i) such payments or benefits shall be
payable or provided to Executive over the minimum period necessary to reduce the
present value of such payments or benefits to an amount which is one dollar
($1.00) less than three (3) times Executive's "base amount" under ss.280G(b)(3)
of the Code or (ii) the payments or benefits to be provided under this Section 5
shall be reduced to the extent necessary to avoid treatment as an excess
parachute payment with the allocation of the reduction among such payments and
benefits to be determined by Executive.

6.       TERMINATION FOR DISABILITY.

         (a)      If Executive shall become disabled as defined in the Bank's
then current disability plan (or, if no such plan is then in effect, totally
disabled within with respect to the performance of the material duties of his
regular occupation, as determined by a physician designated by the Board), the
Bank may terminate Executive's employment for "Disability."

         (b)      Upon Executive's termination of employment for Disability, the
Bank will pay Executive, as disability pay, a bi-weekly payment equal to
three-quarters (3/4) of Executive's bi-weekly compensation, determined as of the
effective date of such termination. For purposes of the preceding sentence of
this paragraph, "weekly compensation" shall mean the sum of Executive's Base
Salary and bonuses paid or accrued on Executive's behalf during the twelve-month
period ending on the last day of the month preceding Executive's termination of
employment for Disability divided by fifty-two (52). These disability payments
shall commence on the effective date of Executive's termination and will end on
the earlier of (i) the date Executive returns to the full-time employment of the
Bank in the same capacity as he was employed prior to his termination for
Disability and pursuant to an employment agreement between Executive and the
Bank; (ii) Executive's full-time employment by another employer; (iii) Executive
attaining the age of sixty-five (65); or (iv) Executive's death; (v) the
expiration of the term of this Agreement. The disability pay shall be reduced by
the amount, if any, paid to Executive under any plan of the Bank providing
disability benefits to Executive.

         (c)      The Bank will cause to be continued life, medical, dental and
disability coverage substantially identical to the coverage maintained by the
Bank for Executive prior to his termination for Disability. This coverage and
payments shall cease upon the earlier of (i) the date Executive returns to the
full-time employment of the Bank, in the same capacity as he was employed prior
<PAGE>

to his termination for Disability and pursuant to an employment agreement
between Executive and the Bank; (ii) Executive's full-time employment by another
employer; (iii) Executive's attaining the age of sixty-five (65); (iv)
Executive's death; or (v) the expiration of the term of this Agreement.

         (d)      Notwithstanding the foregoing, there will be no reduction in
the compensation otherwise payable to Executive during any period during which
Executive is incapable of performing his duties hereunder by reason of temporary
disability.

7.       TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE.

         Termination of Executive based on "Retirement" shall mean retirement at
or after attaining age sixty-five (65) or in accordance with any retirement
arrangement established with Executive's consent with respect to him. Upon
termination of Executive upon Retirement, Executive shall be entitled to all
benefits under any retirement plan of the Bank or the Company and other plans to
which Executive is a party. Upon the death of Executive during the term of this
Agreement, the Bank shall pay to Executive's estate the compensation due to
Executive through the last day of the calendar month in which his death
occurred.

8.       TERMINATION FOR CAUSE.

         For purposes of this Agreement, "Termination for Cause" shall include
termination because of Executive's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.
For purposes of this Section, no act, or the failure to act, on Executive's part
shall be "willful" unless done, or omitted to be done, not in good faith and
without reasonable belief that the action or omission was in the best interest
of the Bank or its affiliates. Notwithstanding the foregoing, Executive shall
not be deemed to have been terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three-fourths (3/4) of the members of the
Board at a meeting of the Board called and held for that purpose (after
reasonable notice to Executive and an opportunity for him, together with
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board, Executive was guilty of conduct justifying termination for Cause
and specifying the reasons thereof. Executive shall not have the right to
receive compensation or other benefits for any period after termination for
Cause. Any stock options granted to Executive under any stock option plan or any
unvested awards granted under any other stock benefit plan of the Bank, the
Company, or any subsidiary or affiliate thereof, shall become null and void
effective upon Executive's receipt of Notice of Termination for Cause pursuant
to Section 10 hereof, and shall not be exercisable by Executive at any time
subsequent to such Termination for Cause.

9.       REQUIRED PROVISIONS.

         (a)      The Bank may terminate Executive's employment at any time, but
any termination by the Bank, other than Termination for Cause, shall not
prejudice Executive's right to compensation or other benefits under this
Agreement. Executive shall not have the right to receive compensation or other
benefits for any period after Termination for Cause as defined in Section 8
herein.
<PAGE>

         (b)      If Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act ("FDIA") (12
U.S.C. 1818(e)(3) and (g)(1)), the Bank's obligations under the Agreement shall
be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Bank may, in its
discretion, (i) pay Executive all or part of the compensation withheld while its
contract obligations were suspended and (ii) reinstate (in whole or in part) any
of its obligations that were suspended.

         (c)      If Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the Bank under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.

         (d)      If the Bank is in default (as defined in Section 3(x)(1) of
the FDIA), all obligations under this Agreement shall terminate as of the date
of default, but this paragraph shall not affect any vested rights of the
parties.

         (e)      All obligations under this Agreement shall be terminated
(except to the extent determined that continuation of the Agreement is necessary
for the continued operation of the Bank): (i) at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the Bank under the authority contained in Section 13(c) of the FDIA;
or (ii) by the FDIC at the time it approves a supervisory merger to resolve
problems related to operation of the Bank. Any rights of the parties that have
already vested, however, shall not be affected by such action.

         (f)      Any payments made to Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
ss.1828(k) and any regulations promulgated thereunder. Any payments to Executive
contemplated by this Agreement shall not be immediately payable to the extent
such payments are barred or prohibited by an action or order issued by the
Director of Banks of the Washington Department of Financial Institutions or the
FDIC.

10.      NOTICE.

         (a)      Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

         (b)      "Date of Termination" shall mean (A) if Executive's employment
is terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason, the date specified in the Notice
of Termination (which, in the case of a Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).

         (c)      If, within thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, except upon the occurrence of
a Change in Control and voluntary termination by Executive in which case the
<PAGE>

Date of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal there from having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Bank will continue to pay
Executive his full compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, Base Salary) and continue him
as a participant in all compensation, benefit and insurance plans in which he
was participating when the notice of dispute was given, until the dispute is
finally resolved in accordance with this Agreement. Amounts paid under this
Section are in addition to all other amounts due under this Agreement and shall
not be offset against or reduce any other amounts due under this Agreement.

11.      NON-COMPETITION.

         (a)      Upon any termination of Executive's employment hereunder
pursuant to an Event of Termination as provided in Section 4 hereof, Executive
agrees not to compete with the Bank and/or the Company for a period equal to the
greater of one (1) year or the remainder of the existing term of the Agreement
following such termination in any city, town or county in which the Bank and/or
the Company has an office or has filed an application for regulatory approval to
establish an office, determined as of the effective date of such termination.
Executive agrees that during such period and within said cities, towns and
counties, Executive shall not work for or advise, consult or otherwise serve
with, directly or indirectly, any entity whose business materially competes with
the depository, lending or other business activities of the Bank and/or the
Company. The parties hereto, recognizing that irreparable injury will result to
the Bank and/or the Company, its business and property in the event of
Executive's breach of this Subsection 11(a) agree that in the event of any such
breach by Executive, the Bank and/or the Company will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by Executive, Executive's partners, agents, servants,
employers, employees and all persons acting for or with Executive. Executive
represents and admits that in the event of the termination of his employment
pursuant to Section 8 hereof, Executive's experience and capabilities are such
that Executive can obtain employment in a business engaged in other lines and/or
of a different nature than the Bank and/or the Company, and that the enforcement
of a remedy by way of injunction will not prevent Executive from earning a
livelihood. Nothing herein will be construed as prohibiting the Bank and/or the
Company from pursuing any other remedies available to the Bank and/or the
Company for such breach or threatened breach, including the recovery of damages
from Executive.

         (b)      Executive recognizes and acknowledges that the knowledge of
the business activities and plans for business activities of the Bank and
affiliates thereof, as it may exist from time to time, is a valuable, special
and unique asset of the business of the Bank. Executive will not, during or
after the term of his employment, disclose any knowledge of the past, present,
planned or considered business activities of the Bank or affiliates thereof to
any person, firm, corporation, or other entity for any reason or purpose
whatsoever. Notwithstanding the foregoing, Executive may disclose any knowledge
of banking, financial and/or economic principles, concepts or ideas which are
not solely and exclusively derived from the business plans and activities of the
Bank. In the event of a breach or threatened breach by Executive of the
provisions of this Section, the Bank will be entitled to an injunction
restraining Executive from disclosing, in whole or in part, the knowledge of the
past, present, planned or considered business activities of the Bank or
affiliates thereof, or from rendering any services to any person, firm,
<PAGE>

corporation, other entity to whom such knowledge, in whole or in part, has been
disclosed or is threatened to be disclosed. Nothing herein will be construed as
prohibiting the Bank from pursuing any other remedies available to the Bank for
such breach or threatened breach, including the recovery of damages from
Executive.

12.      SOURCE OF PAYMENTS.

         All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the Bank. The Company, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
Executive and, if such payments are not timely paid or provided by the Bank,
such amounts and benefits shall be paid or provided by the Company.

13.      EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

         This Agreement contains the entire understanding between the parties
hereto and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to Executive of
a kind elsewhere provided. No provision of this Agreement shall be interpreted
to mean that Executive is subject to receiving fewer benefits than those
available to him without reference to this Agreement.

14.      NO ATTACHMENT.

         (a)      Except as required by law, no right to receive payments under
this Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.

         (b)      This Agreement shall be binding upon, and inure to the benefit
of, Executive, the Bank, the Company and their respective successors and
assigns.

15.      MODIFICATION AND WAIVER.

         (a)      This Agreement may not be modified or amended except by an
instrument in writing signed by the parties hereto.

         (b)      No term or condition of this Agreement shall be deemed to have
been waived, nor shall there by any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future as to any act other
than that specifically waived.

16.      SEVERABILITY.

         If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.
<PAGE>

17.      HEADINGS FOR REFERENCE ONLY.

         The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

18.      GOVERNING LAW.

         This Agreement shall be governed by the laws of the State of Idaho,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or state
law or regulation, the provisions of such law or regulation shall prevail.

19.      ARBITRATION.

         Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the employee within one
hundred (100) miles from the location of the Bank, in accordance with the rules
of the American Arbitration Association then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction; provided, however,
that Executive shall be entitled to seek specific performance of his right to be
paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.

20.      PAYMENT OF LEGAL FEES.

         All reasonable legal fees paid or incurred by Executive pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the Bank, if successful pursuant to a legal judgment,
arbitration or settlement.

21.      INDEMNIFICATION.

         The Bank shall provide Executive (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
Executive (and his heirs, executors and administrators) to the fullest extent
permitted under the Company's Certificate of Incorporation and Bylaws.

22.      SUCCESSOR TO THE BANK OR THE COMPANY.

         The Bank and the Company shall require any successor or assignee,
whether direct or indirect, by purchase, merger, consolidation or otherwise, to
all or substantially all the business or assets of the Bank or the Company,
expressly and unconditionally to assume and agree to perform the Bank's or the
Company's obligations under this Agreement, in the same manner and to the same
extent that the Bank or the Company would be required to perform if no such
succession or assignment had taken place.

23.      ADDITIONAL AGREEMENTS

         Upon the termination of Executive's employment with the Bank and the
Company (or any successor entity) during the term of this Agreement, Executive
shall submit in writing his resignation as a member of the Bank Board, the
Company Board or the board of directors of any affiliate of the Bank or the
Company if he is then serving in such capacity, with such resignation to be
effective as of the date of his termination of employment.

<PAGE>

         IN WITNESS WHEREOF, the Bank and the Company hereto have caused this
Agreement to be executed and their seal to be affixed hereunto by a duly
authorized officer or director, and Executive has signed this Agreement, all on
the 20th day of December, 2001.

ATTEST:                             FIRSTBANK NORTHWEST

/s/ DEBY L. LUTES                   BY: /s/ STEVE R. COX
------------------------------          -----------------------------------

ATTEST:                             FIRSTBANK NW CORP.

/s/ DEBY L. LUTES                   BY: /s/ STEVE R. COX
------------------------------          -----------------------------------

WITNESS:

/s/ DEBY L. LUTES                   /s/ CLYDE E. CONKLIN
-------------------------------     ---------------------------------------

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