SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 9, 1997 (May 15, 1997)
Shoe Carnival, Inc.
(Exact name of Registrant as specified in its charter)
Indiana 0-21360 35-1736614
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
8233 Baumgart Road, Evansville, Indiana 47711
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (812) 867-6471
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Item 5. Other Events
Shoe Carnival, Inc. announced on May 15, 1997 that its founder and Vice
Chairman, David H. Russell, retired from the Company effective May 1, 1997. Mr.
Russell will continue to serve on the Board of Directors. In conjunction with
his retirement the Company made a lump-sum payment of $420,000 to Mr. Russell
and has forgiven a loan and other receivables totaling $209,140. Mr. Russell
will serve as a consultant to the Company's management for a term of three years
and will receive compensation of $50,000 per year. Other terms of the consulting
agreement include a non-compete clause for the 60 month period following Mr.
Russell's retirement and restrictions on the sale or transfer of shares of the
Company's common stock acquired pursuant to a stock option granted on April 24,
1997 for 142,000 shares of Shoe Carnival, Inc. Attached as an exhibit to this
report is a copy of the agreement, which agreement is incorporated herein by
reference.
Item 7(c). Exhibits
Exhibit No. Description of Exhibit
10-M Consulting Agreement dated May 28, 1997, between
Registrant and David H. Russell
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Shoe Carnival, Inc.
(Registrant)
Date: June 9, 1997 By: /s/ W. Kerry Jackson
W. Kerry Jackson
Vice President
Chief Financial Officer
and Treasurer
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INDEX TO EXHIBITS
Exhibit No. Exhibit
10-M * Consulting Agreement dated May 28, 1997, between
Registrant and David H. Russell.
* The indicated exhibit is a management contract, compensatory plan or
arrangement required to be filed by Item 601 of Regulation S-K.
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AGREEMENT
This Agreement is entered into by David H. Russell ("Russell") and Shoe
Carnival, Inc. ("Shoe Carnival").
R E C I T A L S:
A. Russell is the founder and former chief executive officer of Shoe
Carnival, and is currently employed by Shoe Carnival as its Vice Chairman. The
geographic scope of Russell's employment with Shoe Carnival has been coextensive
with the scope of Shoe Carnival's operations.
B. During his employment with Shoe Carnival, Russell has become well
acquainted with the affairs of Shoe Carnival, its officers and employees, its
services and business practices, the needs and requirements of its customers and
prospective customers, its trade secrets, and other proprietary and confidential
information, and Russell has developed business relationships and good will in
the retail footwear industry.
C. Russell and Shoe Carnival have mutually decided that Russell's
employment with Shoe Carnival will terminate effective May 1, 1997. Shoe
Carnival desires to have the continuing benefit of Russell's experience and
expertise relating to certain aspects of Shoe Carnival's business, and to that
end, desires to retain Russell as a business consultant following the
termination of his employment, and Russell is willing to serve as such, all
pursuant to the terms and conditions of this Agreement. The geographic scope of
Russell's duties as a consultant for Shoe Carnival will be coextensive with the
geographic scope of Shoe Carnival's operations.
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D. Shoe Carnival desires to induce Russell to agree, and Russell is willing
to agree, that, except as specifically provided in this Agreement, he will not
engage in competition with, nor serve as a consultant for or employee of a
business enterprise that is in competition with, the business of Shoe Carnival
during the term of his consulting relationship with Shoe Carnival and for a
period of 24 months thereafter, all as more specifically provided in this
Agreement.
E. Russell's employment relationship with Shoe Carnival has been covered
by, among other things, the Age Discrimination Employment Act of 1967 (the
"ADEA"). To obtain certain special severance benefits, Russell is willing to
waive any rights or claims against Shoe Carnival that may have arisen or may
arise under the ADEA on or before the date he signs this Agreement and any other
claims he may have against Shoe Carnival.
F. The parties desire that Russell keep the terms and conditions of this
Agreement strictly confidential.
NOW, THEREFORE, in consideration of the premises and in consideration of
the covenants and agreements recited and made in this Agreement, the parties
hereby agree as follows:
A G R E E M E N T:
1. Termination of Employment. Russell's employment with Shoe Carnival will
terminate effective May 1, 1997. Russell and Shoe Carnival agree that from the
time Russell signs this Agreement, he will have no other job duties or
responsibilities with Shoe Carnival outside of the consulting function described
in Paragraph 3. The preceding sentence is
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not intended to prohibit Russell from continuing to serve as a member of the
Board of Directors of Shoe Carnival.
(a) Automobile Lease. Shoe Carnival currently leases an automobile for
Russell's use and has procured and pays the premiums for insurance on that
automobile. Russell and Shoe Carnival agree that, on or before the date Russell
executes this Agreement, the lease for that vehicle will be canceled, and the
vehicle will be returned to the lessor. Shoe Carnival agrees that it will pay
the lease cancellation charges, but Russell agrees that if the lease
cancellation charges exceed $15,000, the lump sum payment payable to Russell
under Subparagraph 3(a) of the Agreement shall be reduced by the amount by which
the lease cancellation charges exceed $15,000.
(b) Club Memberships. Shoe Carnival currently maintains and pays the cost
of club memberships for Russell at Oak Meadow and the Petroleum Club. Shoe
Carnival and Russell agree that, effective May 1, 1997, the Oak Meadow
membership shall revert to Shoe Carnival. Shoe Carnival and Russell further
agree that, prior to May 1, 1997, Russell shall make arrangements, acceptable to
Shoe Carnival, to assume responsibility for and pay all costs associated with
the Petroleum Club membership. Russell hereby agrees to indemnify and hold
harmless Shoe Carnival for any and all costs associated with the Petroleum Club
membership incurred on or after May 1, 1997.
2. Severance Benefits. Shoe Carnival will provide the following severance
benefits to Russell.
(a) Lump Sum Payment. Subject to Subparagraph 1(a)of this Agreement, Shoe
Carnival will provide severance pay to Russell in the form of a lump sum payment
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in the amount of $430,000, less applicable tax withholding, to be paid on the
later of (1) May 1, 1997, or (2) the expiration of the revocation period
described in Subparagraph 5(c).
(b) Forgiveness of Indebtedness. Shoe Carnival agrees that, effective upon
Russell's execution of this Agreement, it will forgive its account receivable
from Russell in the amount of $38,046. Shoe Carnival further agrees that, upon
Russell's execution of this Agreement, Shoe Carnival will forgive the principal
amount of $158,220 and all interest (which totals $12,874 through May 1, 1997)
on that certain promissory note from Russell to Shoe Carnival dated November 1,
1992.
(c) COBRA Continuation Coverage. Russell will be given health insurance
continuation coverage rights under the federal law known as COBRA. In the event
Russell elects COBRA continuation coverage, for himself or any eligible
dependent of Russell, Russell will be responsible for paying the cost of that
continuation coverage.
(d) Treatment of Termination under Stock Option Plan. Shoe Carnival and
Russell hereby agree that, in light of Russell's age and years of service to
Shoe Carnival, Russell's termination of employment shall be deemed to be
retirement for purposes of Shoe Carnival's 1993 Stock Option and Incentive Plan.
3. Consulting Arrangement. Shoe Carnival hereby agrees to retain Russell as
a business consultant, and Russell hereby agrees to serve as such, for a period
of 36 months commencing May 1, 1997 (the "Consulting Term"), upon and subject to
the terms and conditions of this Agreement.
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(a) Nature and Extent of Consulting Services. The consulting services to be
provided by Russell shall consist of consultation with, and advice to, the
officers and managerial employees of Shoe Carnival, as requested by Shoe
Carnival, on subjects related to Shoe Carnival's business affairs. The
consulting services of Russell under this Agreement shall be performed at
reasonable times when and as needed, as determined by Shoe Carnival. The parties
understand and agree that all of the services to be provided by Russell under
this Paragraph 3 shall be performed by him as an independent consultant and not
as an employee of Shoe Carnival. Russell shall not have any authority to act as
an agent or representative of Shoe Carnival, except to the extent expressly
authorized in writing by Shoe Carnival.
(b) Consulting Fees. Conditional upon Russell's performance of his
obligations under this Paragraph 3 and his continued compliance with his
obligations under Paragraphs 4 and 7, Shoe Carnival agrees to pay consulting
fees to Russell at the annual rates specified below:
12 month period ending April 30 Annual Rate
----------------------------------- -------------
1998 $50,000
1999 $50,000
2000 $50,000
Such consulting fees shall be paid in annual installments, on the last day of
each twelve month period shown above, unless Russell and Shoe Carnival agree
otherwise in writing. In the event that Russell breaches any of his obligations
under this Paragraph 3 or Paragraphs 4 or 7 of this Agreement, all payments to
Russell under this subparagraph 3(b) shall cease.
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(c) Stock Restrictions. Shortly before his execution of this Agreement,
Russell was granted stock options (the "Options") to acquire 142,000 shares of
Shoe Carnival, Inc. common stock at fair market value on the date of grant,
pursuant to the terms of Shoe Carnival's 1993 Stock Option and Incentive Plan.
Russell and Shoe Carnival hereby agree that any shares of stock acquired by
Russell through the exercise of the Options ("Shares") will be subject to the
restrictions described in the following subparagraph (i) (the "Restrictions")
for the period described in the following subparagraph (ii) (the "Restriction
Period"):
(i) During the Restriction Period, Russell is prohibited from selling,
assigning, transferring, or otherwise disposing of the Shares, except as
provided in the following sentence. In the event that Russell breaches any
of his obligations under this Paragraph 3 or Paragraph 4 or 7 of this
Agreement during the Restriction Period, Russell shall be required to sell
to Shoe Carnival, at the exercise price, any Shares that are then subject
to the Restrictions.
(ii) The Restriction Period shall be until April 30, 1998, with
respect to Shares attributable to one-third of the Options; until April 30,
1999, with respect to the Shares attributable to one-third of the Options;
and until April 30, 2000, with respect to the Shares attributable to
one-third of the Options.
Russell and Shoe Carnival further agree that in the event that Russell breaches
any of his obligations under this Paragraph 3 or Paragraph 4 or 7 of this
Agreement, any Options not yet exercised shall be forfeited by Russell
immediately upon the breach.
(d) Health Insurance Coverage. Subject to the condition of Russell's
continuing compliance with all of his obligations under this Paragraph 3 and
Paragraphs 4 and 7 of this Agreement, upon the expiration of Russell's COBRA
continuation right under The Shoe Carnival, Inc. Group Health Insurance Plan,
(1) Shoe Carnival will assist
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Russell in procuring health insurance coverage for Russell (but not for any
dependents of Russell) from the Indiana Comprehensive Health Insurance
Association ("ICHIA"), a health insurance association similar to ICHIA in the
state where Russell then resides, or a another health insurance issuer mutually
agreeable to Russell and Shoe Carnival; (2) Shoe Carnival will provide all
documentation within its control that is required to establish to the issuer of
that health insurance coverage that Russell is an "eligible individual," within
the meaning of the federal regulations at 45 CFR Part 148; and (3) Shoe Carnival
will pay or reimburse Russell for the premiums for that health insurance
coverage, to the extent that those premiums do not exceed $7,000 per year, until
Russell becomes eligible for Medicare. All payments to or on behalf of Russell
pursuant to this Paragraph 3(d) shall cease, however, in the event that Russell
breaches any of his obligations under this Paragraph 3 or Paragraphs 4 or 7 of
this Agreement. Russell further agrees that all payments to or on behalf of
Russell pursuant to this Paragraph 3(d) shall cease in the event that Russell
becomes eligible for group health insurance coverage by reason of other
employment obtained by Russell. Russell hereby agrees to notify Shoe Carnival
promptly of his eligibility for such group health insurance coverage.
4. Restrictive Covenant. Russell acknowledges that the consulting services
he is to render pursuant to this Agreement are of a special and unusual
character with a unique value to Shoe Carnival, the loss of which cannot
adequately be compensated by damages in an action at law. In view of the unique
value to Shoe Carnival of the services that Russell is to provide pursuant to
this Agreement, because of the confidential information to be obtained by or
disclosed to Russell, and as a material inducement to Shoe Carnival to enter
into a consulting
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arrangement with Russell and to pay Russell the compensation provided for in
Paragraph 3, Russell covenants and agrees as follows:
(a) Noncompetition During Consulting Term. Russell agrees that during the
Consulting Term, he will not, directly or indirectly, whether as an owner,
stockholder (except as the holder of 5% or less of the stock of a publicly-held
corporation), director, officer, partner, employee, consultant, or otherwise,
compete or assist a third party in competing with Shoe Carnival in the retail
footwear industry within any city or town (1) in which Shoe Carnival operates a
retail location or has definitive plans to operate a retail location, and (2)
with respect to which Russell renders or has rendered services to Shoe Carnival
at any time during his employment with Shoe Carnival or the Consulting Term.
Notwithstanding the foregoing, the parties agree that Russell shall be permitted
to (1) establish and operate his own, independent retail footwear store in
Destin, Florida, and (2) operate retail kiosk shoe outlets of Fever, Inc. at the
following locations: Tyson's Corner in McLean, VA; Pentagon City in Arlington,
VA; Roosevelt Field in Long Island, NY; Garden State Plaza in Paramus, NJ; King
of Prussia Mall in King of Prussia, PA; South Shore Plaza in Boston, MA;
Oakbrook Mall in Chicago, IL; Mall of America in Bloomington, MN; Dadeland Mall
in Miami, FL; Boca Raton Towne Centre in Boca Raton, FL; Broward Mall in
Plantation, FL; Galleria in Dallas, TX; Galleria in Houston, TX; Fashion Mall in
Las Vegas, NV; University Town Center in San Diego, CA; Fashion Valley in San
Diego, CA; Sherman Oaks Galleria in Los Angeles, CA; Beverly Town Center in
Beverly Hills, CA; Topanga Mall in Topanga, CA; and such other locations as are,
from time to time, approved by Shoe Carnival in writing.
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(b) Noncompetition After Consulting Term. For a period of 24 months from
the end of the Consulting Term, Russell agrees that he shall not, directly or
indirectly, whether as an owner, stockholder (except as the holder of 5% or less
of the stock of a publicly-held corporation), director, officer, partner,
employee, consultant, or otherwise, compete with or assist a third party in
competing with Shoe Carnival in the retail footwear industry within any city or
town in the United States (1) in which Shoe Carnival is operating a retail
location at the end of the Consulting Term or has definitive plans to operate a
retail location within 12 months following the end of the Consulting Term, and
(2) with respect to which Russell renders or has rendered services to Shoe
Carnival at any time during his employment with Shoe carnival or the Consulting
Term. Notwithstanding the foregoing, the parties agree that Russell shall be
permitted to (1) establish and operate his own, independent retail footwear
store in Destin, Florida, and (2) operate retail kiosk shoe outlets of Fever,
Inc. at the following locations: Tyson's Corner in McLean, VA; Pentagon City in
Arlington, VA; Roosevelt Field in Long Island, NY; Garden State Plaza in
Paramus, NJ; King of Prussia Mall in King of Prussia, PA; South Shore Plaza in
Boston, MA; Oakbrook Mall in Chicago, IL; Mall of America in Bloomington, MN;
Dadeland Mall in Miami, FL; Boca Raton Towne Centre in Boca Raton, FL; Broward
Mall in Plantation, FL; Galleria in Dallas, TX; Galleria in Houston, TX; Fashion
Mall in Las Vegas, NV; University Town Center in San Diego, CA; Fashion Valley
in San Diego, CA; Sherman Oaks Galleria in Los Angeles, CA; Beverly Town Center
in Beverly Hills, CA; Topanga Mall in Topanga, CA; and such other locations as
are, from time to time, approved by Shoe Carnival in writing .
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(c) Extension of Restrictions. If a court of competent jurisdiction finds
that Russell has violated any of the restrictions set forth in this Paragraph 4,
then the parties agree that all such restrictions set forth in this Paragraph 4
automatically shall be extended by the number of days that a court determines
Russell to have been in violation of such restrictions.
(d) Confidential Information. As used in this Agreement, the term
"Confidential Information" means any and all of Shoe Carnival's trade secrets,
confidential proprietary information, and all information and data that is not
generally known to third persons not associated with Shoe Carnival and/or that
provides Shoe Carnival with competitive advantages. The parties agree that
Confidential Information shall not cease to be Confidential Information for
purposes of this Agreement simply because another individual with a duty to
maintain the confidentiality of the Confidential Information discloses it in
violation of that duty. Russell hereby agrees that he will not at any time after
termination of his employment with Shoe Carnival use or disclose to any others
any of the Confidential Information, except as authorized in writing by Shoe
Carnival. Russell agrees that Shoe Carnival owns all of the Confidential
Information and Russell has no rights, title, or interest in any of the
Confidential Information. Russell agrees that upon the termination of his
employment with Shoe Carnival on May 1, 1997, he shall surrender promptly to
Shoe Carnival any and all trade secrets, internal memoranda, and other documents
in his possession disclosing any Confidential Information.
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(e) Remedies and Enforcement. Russell acknowledges that any violation of
this Paragraph 4 by him will cause irreparable damage to Shoe Carnival, that
such damage will be incapable of precise measurement, and that, as a result,
Shoe Carnival will not have an adequate remedy at law to redress the harm that
such violation will cause. Therefore, in addition to any other rights or
remedies Shoe Carnival may have as a result of the violation of this Paragraph 4
by Russell, Russell agrees that Shoe Carnival shall be entitled to injunctive
relief, including but not limited to temporary restraining order and preliminary
and permanent injunction, to restrain any violation of this Paragraph 4 by
Russell. Russell hereby agrees and consents that such injunctive relief may be
entered in any state or federal court of record in Vanderburgh County, Indiana,
or in the state and county in which such violation may occur, or in any other
court having jurisdiction, at the election of Shoe Carnival, without security.
Russell agrees and hereby does submit to personal jurisdiction before each and
every such court for that purpose. In addition to any other relief to which it
shall be entitled, Shoe Carnival shall be entitled to recover from Russell the
costs and reasonable attorneys' fees incurred by Shoe Carnival in seeking
enforcement of this Paragraph 4 or relief from any violation by Russell of this
Paragraph 4.
5. Russell's Waiver/Release of ADEA Rights and Claims.
(a) Waiver and Release. By signing this Agreement, Russell waives any
rights or claims against Shoe Carnival and each and all of its affiliates,
directors, officers, agents, employees, representatives, and attorneys and their
successors, heirs, administrators, and assigns, and all persons acting by,
through, under, or in concert with
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any of them (collectively referred to as "Releasees") that have arisen or may
arise under the ADEA on or before the date that Russell signs this Agreement.
Russell and Shoe Carnival specifically agree that because Russell knows and
agrees that his employment with Shoe Carnival will end on May 1, 1997, any and
all claims concerning that event, including but not limited to any claims under
the ADEA, presently are in existence and are hereby being waived.
(b) Consideration Period. Russell acknowledges that Shoe Carnival has
advised him, and he understands, that he has 21 days to consider and accept this
Agreement by signing and returning this Agreement to Shoe Carnival.
(c) Revocation Period. Russell acknowledges that Shoe Carnival has advised
him, and he understands, that for a period of seven days following Russell's
signing of this Agreement, Russell may revoke this Agreement. This Agreement
shall not be effective or enforceable against Russell if he revokes it by
written notice to Shoe Carnival not later than seven days after he signs it.
Russell acknowledges that Shoe Carnival has advised him, and he understands,
that this Agreement will not become binding and enforceable until the seven day
revocation period referred to in this subparagraph (c) has expired.
(d) Consultation With Attorney. Russell acknowledges that Shoe Carnival has
advised him to consult with an attorney prior to signing this Agreement.
(e) Claims Not Released. By executing this Agreement, Russell does not
waive or release any rights or claims under the ADEA that may arise after the
date Russell executes this Agreement.
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(f) Nonadmission. Russell acknowledges that this Agreement and the actions
taken pursuant to this Agreement do not constitute an acknowledgment or an
admission on the part of Shoe Carnival of any liability to Russell under the
ADEA.
6. Russell's Waiver/Release Of All Other Claims. By signing this Agreement,
Russell waives any rights or claims against any and all of the Releasees that
have arisen or may arise on or before the date Russell signs this Agreement.
Russell, for himself and his heirs, executors, administrators, and assigns, also
releases and discharges each and all of the Releasees from any and all charges,
complaints, claims, demands, liabilities, obligations, actions, or causes of
action of any kind or nature, whether known or unknown, suspected or
unsuspected, that he has asserted or could have asserted in any form, whether
administrative or judicial, arising out of, connected with, or incidental to any
act, omission, or event occurring in whole or in part on or prior to the date he
signs this Agreement, including, but not limited to, any and all claims arising
from his employment with Shoe Carnival or the termination of that employment
relationship. The parties intend that the claims released pursuant to this
Agreement be construed as broadly as possible. Russell understands and expressly
agrees that the claims released pursuant to this Agreement include any claim or
claims he may have for costs or attorneys' fees in connection with any action
arising from or attributable to the matters covered by this Agreement or this
Agreement itself.
7. Russell's Covenant Not to Sue. Russell agrees and covenants not to sue,
file any complaint or charge, or bring any administrative or other kind of legal
action whatsoever against the Releasees or any of them based on any claims or
facts in existence as of the date Russell signs this Agreement, whether known or
unknown, suspected or unsuspected, including
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but not limited to any claims involving his employment with Shoe Carnival or the
termination of that employment relationship, and Russell expressly agrees that
if he does so, he will be in breach of this Agreement and will pay, in addition
to any of the other remedies to which Shoe Carnival may be entitled, any and all
expenses, including legal fees, that Shoe Carnival incurs in defense of any such
action.
8. Confidentiality. Russell agrees to keep completely confidential and,
unless required by law or any lawful authority to do so, not to disclose any of
the terms and conditions of this Agreement to any person except his attorney,
accountant, or tax preparer.
9. Nonadmission. By entering into this Agreement, Shoe Carnival does not
admit any liability to Russell on any basis, and Shoe Carnival specifically
denies that it has violated any law, duty, or contract, or engaged in any
wrongful conduct.
10. Benefit and Nonassignability. The rights and obligations of Shoe
Carnival under this Agreement will inure to the benefit of Shoe Carnival and its
successors and assigns. The rights of Russell hereunder shall not be assignable
by Russell but in the event of his death shall inure to the benefit of the
executor or other personal representative of his estate.
11. Negotiated Agreement; Construction. This Agreement is the result of
negotiations among the parties, and no party shall be deemed to be the drafter
of this Agreement. The language of all parts of this Agreement shall in all
cases be construed as a whole, according to its fair meaning, and not strictly
for or against any party.
12. Governing Law. The terms and conditions of this Agreement and the
parties' rights and obligations hereunder shall be construed under and be
governed by the internal laws of the State of Indiana, without regard to
principles of choice of law.
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13. Captions. The captions in this Agreement are for convenience and for
identification purposes only, are not integral parts of this Agreement, and are
not to be considered in the interpretation of any part of this Agreement.
14. Severability. The parties agree that if any provision of this Agreement
or any construction or application of any provision of this Agreement is held to
be unenforceable or invalid for any reason, then the validity of all of the
remaining provisions shall not be affected, and the rights and obligations of
each of the parties shall be construed and enforced as if the Agreement did not
contain such invalid provision or, as the case may be, invalid construction or
application of such provision; provided, however, that the economic and legal
substance of this Agreement is not affected in any manner materially adverse to
any party.
15. Consultation with Counsel; Voluntary Agreement. Russell acknowledges
that he has had ample opportunity to consult with an attorney and to make
suggestions or changes to the terms and language of this Agreement. Russell
further acknowledges that he has read this Agreement, knows and understands its
terms and contents, and is voluntarily entering into it.
16. Entire Agreement. This Agreement sets forth the entire agreement
between the parties and fully supersedes any and all prior agreements or
understandings, written or oral, between the parties pertaining to the subject
matter of this Agreement. No amendment or modification of any provision of this
Agreement pertaining to Russell shall be effective unless and until agreed to in
writing by both Russell and Shoe Carnival. To be effective, a waiver of any
right under this Agreement must be in writing and signed by the waiving parties.
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IN WITNESS WHEREOF, this Agreement is executed as of the date
stated below.
Date: 05/28/97 /S/ David H. Russell
David H. Russell
SHOE CARNIVAL, INC.
Date: 05/29/97 By:/s/ Mark L. Lemond
Title: President & CEO
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