SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. ___)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-12
SHOE CARNIVAL, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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computed pursuant to Exchange Act Rule 0-11 (Set forth the
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SHOE CARNIVAL, INC.
NOTICE OF ANNUAL MEETING OF COMMON SHAREHOLDERS
TO BE HELD ON JUNE 12, 2003
The annual meeting of common shareholders of Shoe Carnival, Inc. will be
held at the Evansville Marriott, 7101 North U.S. Route 41, Evansville, Indiana,
on Thursday, June 12, 2003, at 10:00 a.m., C.D.T., for the following purposes:
(1) To elect one Director to serve until the 2006 annual
meeting of shareholders and until his successor is elected and has
qualified, as set forth in the accompanying Proxy Statement;
(2) To ratify the appointment of Deloitte & Touche LLP, as
auditors for the Company for fiscal year 2003;
(3) To transact such other business as may properly come before
the meeting.
All common shareholders of record at the close of business on April 4, 2003
will be eligible to vote.
It is important that your stock be represented at this meeting. Whether or
not you expect to be present, please fill in, date, sign and return the enclosed
proxy form in the accompanying addressed, postage-prepaid envelope. If you
attend the meeting, your proxy will be canceled at your request.
David A. Kapp, Secretary
SHOE CARNIVAL, INC.
8233 Baumgart Road
Evansville, Indiana 47725
PROXY STATEMENT
Annual Meeting of Common Shareholders
June 12, 2003
This statement is being furnished to common shareholders on or about May 7,
2003, in connection with a solicitation by the Board of Directors of Shoe
Carnival, Inc. (the "Company") of proxies to be voted at the annual meeting of
common shareholders to be held at 10:00 a.m., C.D.T., Thursday, June 12, 2003,
at the Evansville Marriott, 7101 North U.S. Route 41, Evansville, Indiana, for
the purposes set forth in the accompanying Notice.
At the close of business on April 4, 2003, the record date for the meeting,
there were 12,633,820 shares of Common Stock of the Company outstanding and
entitled to vote at the meeting. On all matters, including the election of the
Director, each common shareholder will have one vote for each share held.
If the enclosed form of proxy is executed and returned, it may nevertheless
be revoked at any time insofar as it has not been exercised. The proxy may be
revoked by giving written notice of revocation to the Company, executing a
subsequently dated proxy that is delivered to the Company, or attending the
annual meeting and voting in person. Unless revoked, a proxy will be voted at
the meeting in accordance with the instructions of the shareholder in the proxy,
or, if no instructions are given, for the election as a Director of the nominee
listed under Proposal 1 and for Proposal 2. Election of the Director will be
determined by the vote of the holders of a plurality of the shares voting on
such election. Approval of Proposal 2 will be subject to the vote of the holders
of a greater number of shares favoring approval than those opposing it. A proxy
may indicate that all or a portion of the shares represented by such proxy are
not being voted with respect to a specific proposal. This could occur, for
example, when a broker is not permitted to vote shares held in street name on
certain proposals in the absence of instructions from the beneficial owner.
Shares that are not voted with respect to a specific proposal will be considered
as not present and entitled to vote on such proposal, even though such shares
will be considered present for purposes of determining a quorum and voting on
other proposals. Abstentions on a specific proposal will be considered as
present, but not as voting in favor of such proposal. Neither broker non-votes
nor abstentions will have any effect on the vote required to approve any of the
proposals.
The Board of Directors knows of no matters, other than those reported
below, which are to be brought before the meeting. However, if other matters
properly come before the meeting, it is the intention of the persons named in
the enclosed form of proxy to vote such proxy in accordance with their judgment
on such matters.
The cost of this solicitation of proxies will be borne by the Company.
Proxies may also be solicited personally or by telephone by Company employees
acting without additional compensation.
ELECTION OF DIRECTOR
Nominee
The Company currently has five Directors divided into three classes. Two
classes contain two Directors each, with the remaining class containing one
Director. The term of one class expires each year. Each Director holds office
for a three-year term expiring at the annual meeting of shareholders held in the
year that is three years after his election and thereafter until his successor
is elected and qualified.
The shareholders will be asked to elect one Director. William E. Bindley
has been nominated by the Board of Directors for election as Director for a term
to expire at the 2006 annual meeting of shareholders and until his successor is
elected and qualified. Mr. Bindley has served as a Director since 1993. It is
the intention of the persons named in the accompanying form of proxy, absent
contrary instructions therein, to vote such proxy for the election to the Board
of Directors of Mr. Bindley.
Unless otherwise indicated in a footnote to the following table, the
principal occupation of each Director has been the same for the last five years,
and each Director possesses sole voting and investment power with respect to the
shares of Common Stock indicated as beneficially owned by him.
Shares
Beneficially
Present Owned on
Principal Director April 2, Percent of
Name Age Occupation Since 2003(1) Class
------------------------ --- ----------------------------------- -------- --------------- -----------
NOMINEE FOR DIRECTOR
(Nominee for three-year term to expire at the annual meeting of shareholders in 2006)
William E. Bindley 62 Chairman of the Board and 1993 5,000 (2) *
Chief Executive Officer of
Bindley Capital Partners, LLC(3)
DIRECTORS CONTINUING IN OFFICE
(Term expiring at the annual meeting of shareholders in 2004)
Mark L. Lemond 48 President and Chief Executive 1988 549,335 (4) 4.3%
Officer of the Company
James A. Aschleman 58 Partner of Baker & Daniels 2001 1,200 (5) *
(law firm)
(Term expiring at the annual meeting of shareholders in 2005)
J. Wayne Weaver 68 Chairman of the Board of the 1988 4,833,230 (6) 38.3%
Company, Chairman and Chief
Executive Officer of Jacksonville
Jaguars, LTD (professional football
franchise), and Chairman and Chief
Executive Officer of LC Footwear, LLC
(footwear distributor) (7)
Gerald W. Schoor 68 Merchant Banker 1993 7,000 (8) *
(self-employed) (9)
The Board of Directors recommends a vote FOR the nominee listed above.
2
----------------
* Less than 1%
(1) Does not include shares subject to options that are not presently
exercisable (i.e., within 60 days after April 2, 2003).
(2) Includes 4,000 shares issuable upon the exercise of presently exercisable
options granted under the Company's Outside Directors Stock Option Plan.
(3) Mr. Bindley also serves on the Board of Directors of Priority Healthcare
Corporation, a distributor and provider to the alternate site healthcare
market. From 1968 until February 2001, Mr. Bindley's principal occupation
was chairman of the board and chief executive officer of Bindley Western
Industries, Inc., a pharmaceutical wholesale distribution company.
(4) Includes 11,500 shares directly owned by Mr. Lemond's spouse and 266,874
shares issuable upon the exercise of presently exercisable options granted
under the Company's 1993 Stock Option and Incentive Plan ("1993 Stock
Option Plan") and the Company's 2000 Stock Option and Incentive Plan
("2000 Stock Option Plan").
(5) Represents 200 shares owned by Mr. Aschleman's spouse and 1,000 shares
issuable upon the exercise of presently exercisable options granted under
the Company's Outside Directors Stock Option Plan.
(6) Includes 1,750,000 shares directly owned by Mr. Weaver's spouse,
333,230 shares owned jointly with Mr. Weaver's spouse and 1,000,000
shares held in a trust of which Mr. Weaver is a trustee.
(7) Mr. Weaver also serves on the Board of Directors of Stein Mart, Inc., a
chain of off-price retail stores. From 1978 until February 2, 1993, Mr.
Weaver's principal occupation was as president and chief executive officer
of Nine West Group, Inc. ("Nine West"), a designer, developer and marketer
of women's footwear.
(8) Represents 3,000 shares held as co-trustee for the benefit of Mr. Schoor's
spouse and 4,000 shares issuable upon the exercise of presently
exercisable options granted under the Company's Outside Directors Stock
Option Plan.
(9) Prior to January 1997, Mr. Schoor was employed as president of
Corporate Finance Associates, St. Louis (financial intermediary) and as
executive vice president of National Industrial Services, Inc.
(industrial asset management company).
Meetings and Committees
During fiscal 2002, the board of directors held five meetings. Each
Director during fiscal 2002 attended at least 75% of the total board meetings
and the meetings of the respective committees on which he served. The board of
directors has an Audit Committee, a Compensation Committee, and a Nominating and
Corporate Governance Committee. Each of the Committees operates pursuant to a
written charter which can be viewed on the Company's website at
www.shoecarnival.com.
The Audit Committee is comprised of the Company's non-employee Directors:
Messrs. Schoor (Chair), Bindley and Aschleman. It met seven times during fiscal
2002. The Audit Committee is solely responsible for the selection and hiring of
independent public accountants to audit the Company's books and records and
preapproves audit and permitted non-audit services undertaken by the auditor.
This Committee is also responsible for review of (i) the Company's financial
reports and other financial information, (ii) systems of internal controls
regarding finance, accounting, legal compliance and ethics, and (iii) auditing,
accounting and financial reporting processes. The Audit Committee also approves
all related-party transactions, including the Company's relationships with LC
Footwear, LLC and PL Footwear, Inc. The Committee meets with management and the
independent auditors as necessary.
3
The Compensation Committee consists of the Company's non-employee
Directors: Messrs. Bindley (Chair), Schoor and Aschleman. The Compensation
Committee held three meetings during fiscal 2002. The Compensation Committee is
responsible for reviewing, determining and establishing the salaries, bonuses
and other compensation of the executive officers and Directors of the Company.
The Compensation Committee also administers the Company's 1993 Stock Option
Plan, 2000 Stock Option Plan and Employee Stock Purchase Plan.
The Nominating and Corporate Governance Committee consists of the Company's
non-employee Directors: Messrs. Aschleman (Chair), Bindley and Schoor. This
Committee met once during fiscal 2002. The Committee exercises a leadership role
in shaping the corporate governance of the Company and recommends to the Board
corporate governance principles on a number of topics, including (i) board
organization, membership and function, (ii) committee structure and membership,
and (iii) oversight of evaluation of the Board. As the nominating body of the
Board, the Committee also interviews, evaluates, nominates and recommends
individuals for membership on the Board and on the various committees of the
Board. The Committee also will consider shareholder nominations for Directors.
For a description of the requirements regarding shareholder nominations and
other proposals, see "Shareholder Proposals for 2004 Annual Meeting" and the
Company's By-Laws, a copy of which may be obtained from the Secretary of the
Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and Directors, and persons who own more than 10% of Common
Stock, to file initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission. Such persons are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes that during fiscal 2002 all filing requirements applicable to its
executive officers, Directors and greater than 10% shareholders were timely
satisfied.
4
Summary Compensation Table
The following table sets forth a summary of the compensation paid by the
Company for services rendered in all capacities to the Company during each of
the three most recent fiscal years, to the Company's Chief Executive Officer,
and to each of the Company's four other most highly compensated executive
officers, based on salary and bonuses earned during fiscal 2002 (the "Named
Executive Officers").
Summary Compensation Table
Long-Term
Compensation
------------
Annual Compensation (1) Awards
---------------------------- -----------
Securities
Fiscal Underlying All Other
Name and Principal Position Year Salary Bonus(2) Options (3) Compensation (4)
--------------------------- ----- ------ -------- ----------- ---------------
Mark L. Lemond, 2002 $ 548,077 $ 101,000 75,000 $ 27,504 (5)
President and Chief 2001 496,250 132,500 0 22,760 (6)
Executive Officer 2000 462,596 0 50,000 4,912 (7)
J. Wayne Weaver, 2002 $ 300,000 $ 0 0 $ 0
Chairman of the Board 2001 300,000 0 0 0
2000 300,000 0 0 0
Timothy T. Baker, 2002 $ 358,212 $ 52,700 20,000 $ 14,507 (5)
Executive Vice President-- 2001 289,731 63,600 0 8,883 (6)
Store Operations 2000 217,692 0 35,000 3,213 (7)
Clifton E. Sifford, 2002 $ 358,212 $ 52,700 20,000 $ 16,373 (5)
Executive Vice President-- 2001 289,731 63,600 0 14,542 (6)
General Merchandise Manager 2000 217,692 0 35,000 4,908 (7)
W. Kerry Jackson, 2002 $ 189,616 $ 24,400 15,000 $ 13,942 (5)
Senior Vice President 2001 177,923 33,400 0 14,707 (6)
-Chief Financial Officer 2000 158,885 0 15,000 8,827 (7)
and Treasurer
---------------
(1) The column for Other Annual Compensation is not included (as permitted
under applicable regulations) because the perquisites and other personal
benefits awarded, earned or paid to the Named Executive Officers did not
exceed the lesser of $50,000 or 10% of the total of annual salary and bonus
for each Named Executive Officer for any of the years listed.
(2) Represents bonuses earned during the fiscal year indicated, which bonuses
at times have been paid in the subsequent fiscal year.
(3) All of the amounts reflect option shares. The Company has never granted
SARs.
(4) Except as otherwise indicated, all amounts are compensation related to life
and disability insurance premiums.
(5) Of the amounts shown, $26,153 for Mr. Lemond, $13,156 for Mr. Baker,
$15,021 for Mr. Sifford and $12,661 for Mr. Jackson represent the
Company's matching contributions under the Company's 401(k) Plan and
Deferred Compensation Plan.
(6) Of the amounts shown, $21,650 for Mr. Lemond, $7,774 for Mr. Baker,
$13,432 for Mr. Sifford and $13,693 for Mr. Jackson represent the Company's
matching contributions under the Company's 401(k) Plan and Deferred
Compensation Plan.
(7) Of the amounts shown, $3,986 for Mr. Lemond, $2,287 for Mr. Baker, $3,767
for Mr. Sifford and $8,141 for Mr. Jackson represent the Company's matching
contributions under the Company's 401(k)Plan and Deferred Compensation
Plan.
Employment and Noncompetition Agreements
On January 15, 1993, the Company entered into a noncompetition agreement
with J. Wayne Weaver. As long as Mr. Weaver is an executive officer or Director
of the Company he may not engage directly or indirectly through any other
company or entity in the retail shoe business without the prior approval of the
Company's Audit Committee. The Audit Committee has approved Mr. Weaver's
association with LC Footwear, LLC and PL Footwear, Inc. Effective February 1,
1993, Mr. Weaver became an employee of the Company at an annual salary of
$300,000. Although Mr. Weaver will continue to be involved in other
5
business activities and will not devote full time to the Company, he will
devote such time to the Company as he deems necessary or appropriate to
perform his duties as Chairman of the Board.
On August 1, 2001, the Company entered into Employment and Noncompetition
Agreements with Mr. Baker and Mr. Sifford. The term of the agreements is through
December 31, 2003. The agreements will automatically be extended for successive
one-year periods unless either party gives notification prior to the end of the
then term of the agreement that the term of the agreement shall no longer be
extended. The agreements provide for an annual base salary equivalent to the
salary in effect as of August 1, 2001, subject to increase by the Compensation
Committee of the Company's Board of Directors. Messrs. Baker and Sifford are
entitled to participate in such bonus plans as the Company may establish from
time to time. Under each of the agreements, employment of the executive may be
terminated by the Company upon death or disability of the executive or by the
Company for "Cause" (as defined in the agreement) or without Cause. The
executive may terminate employment voluntarily or for "Good Reason" (defined as
a reduction in salary or position). If an executive is terminated for death,
disability, Cause or voluntarily terminates, the executive will receive only
amounts that are earned and unpaid as of the date of termination. If an
executive is terminated by the Company without Cause or terminates for Good
Reason, absent a "Change in Control," the executive will continue to receive his
bi-weekly salary for a period of twelve months and be reimbursed for health care
premiums for the lesser of twelve months or until the executive is reemployed
and is eligible for health care coverage. Additionally, any non-vested stock
options granted after the date of the agreement that would have vested within
twelve months of termination will become immediately exercisable. If the
executive is terminated by the Company without Cause or terminates for Good
Reason within two years of a "Change in Control" (as defined in the agreement),
the executive is entitled to a lump sum payment within 30 days of termination
equivalent to 200% of his base salary plus the highest bonus paid within the
past two years, which bonus amount will not be less than 25% of his base salary;
reimbursement for health care premiums for the lesser of eighteen months or
until the executive is reemployed and is eligible for health care coverage;
outplacement services; and any non-vested stock options that would have vested
within twelve months of termination will become immediately exercisable. If any
payment under the agreement would be subject to the excise tax under Section
4999 of the Internal Revenue Code, the executive would be entitled to receive
additional compensation from the Company to cover the excise taxes, interest and
penalties (if applicable) and other taxes arising from the additional
compensation. The benefits to the executive under the agreement are subject to
certain conditions, including the agreement by the executive not to compete with
the Company for a period of two years following the termination of the
executive's employment.
On July 1, 2002, the Company entered into an Employment and Noncompetition
Agreement with Mr. Lemond. The term of the agreement is through June 30, 2006.
The term of the agreement will automatically be extended one year on July 1st of
each year unless either party gives notification not more than 90 and not less
than 30 days prior to a July 1st, in which case the agreement will terminate
four years after such July 1st. The agreement provides for an annual base salary
equivalent to his salary for fiscal 2002, subject to increase by the
Compensation Committee of the Company's Board of Directors. Mr. Lemond is
entitled to participate in such bonus plans as the Company may establish from
time to time. In addition, the Company will keep in effect a spilt-dollar life
insurance policy on the life of Mr. Lemond and his spouse in the face amount of
$1,000,000. Under the agreement, employment will terminate upon Mr. Lemond's
death, may be terminated by the Company upon Mr. Lemond's disability or by the
Company for "Cause" (as defined in the agreement) or without Cause. Mr. Lemond
may terminate employment voluntarily, for "Good Reason" (defined as a reduction
in salary or position, involuntary relocation, breach of the agreement by the
Company, or notification that the Company will not extend the agreement term),
or retirement. If Mr. Lemond is terminated for death, disability, Cause or
voluntarily terminates or retires, he will receive (i) earned but unpaid base
6
pay plus (ii) as long as the reason is not for Cause or a voluntary termination,
a prorated bonus, and (iii) if for disability, a bonus equal to the split-dollar
policy premiums required to be reimbursed to the Company plus applicable taxes.
If Mr. Lemond is terminated by the Company without Cause or terminates for Good
Reason, he will receive (i) earned but unpaid base pay, (ii) a prorated bonus,
(iii) a lump-sum payment equivalent to two times the "Salary Continuation
Benefit" (defined as the sum of salary plus the larger of the bonuses paid to
Mr. Lemond for the two years preceding the termination date or 25% of the salary
then in effect), (iv) a monthly wage continuation for 24 months equal to
one-twelfth of his Salary Continuation Benefit, (v) a bonus equal to the
split-dollar policy premiums required to be reimbursed to the Company plus
applicable taxes, and (vi) medical and dental benefits for the lesser of the
remainder of the contract term or until Mr. Lemond is reemployed and is eligible
for health care coverage. Additionally, all unvested options will immediately
vest. If any payment under the agreement would be subject to the excise tax
under Section 4999 of the Internal Revenue Code, Mr. Lemond would be entitled to
receive additional compensation from the Company to cover the excise taxes,
interest and penalties (if applicable) and other taxes arising from the
additional compensation. The benefits to Mr. Lemond under the agreement are
subject to certain conditions, including the agreement by Mr. Lemond not to
compete with the Company for a period of two years following the termination of
his employment.
The Company does not currently have employment or noncompetition agreements
with any other executive officers.
Split Dollar Life Insurance
In March 1999, the Company established a split-dollar life insurance
arrangement on the lives of Mr. Lemond and his spouse. The life insurance policy
provides coverage in the amount of $1.0 million, payable on the death of the
last to survive. The annual premiums on the policy are $21,300. Under the
arrangement, at the later of the death of Mr. Lemond or his spouse, the Company
will be reimbursed for all premiums paid by it, and the balance of the proceeds
of the policy would be paid to the estate of Mr. Lemond or his spouse.
Prior to the enactment of the Sarbanes-Oxley Act on July 30, 2002, the
Company paid all of the premiums on the policy. There is currently uncertainty
as to whether the payment of premiums on a split-dollar life insurance policy by
a company would constitute a personal loan prohibited under the Sarbanes-Oxley
Act. Due to this uncertainty, Mr. Lemond paid the latest premium on his
split-dollar life insurance policy, and the Company paid to Mr. Lemond a bonus
in an amount sufficient to cover the premium paid by Mr. Lemond and the tax
liability on the bonus. The Company will reevaluate this split-dollar
arrangement when there is more definitive guidance on the effect of the
Sarbanes-Oxley Act on split-dollar life insurance policies.
Compensation of Directors
During 2002, the Company paid non-officer Directors an annual retainer of
$15,000 per year and a fee of $1,000 for each meeting of the Board with
accompanying committee meetings attended. Attendees of Committee meetings in
which the full Board does not meet are paid a fee of $1,000 per meeting or $750
if attendance is by conference call. All Directors receive reimbursement of
reasonable out-of-pocket expenses incurred in connection with meetings of the
Board. No Director who is an officer or employee of the Company receives
compensation for services rendered as a Director.
On March 4, 1999, the Board of Directors approved the Outside Directors
Stock Option Plan. The plan reserves for issuance 25,000 shares of the Company's
Common Stock (subject to adjustment for stock splits, stock dividends and
certain other changes to the Common Stock). The plan calls for each non-employee
Director to be granted on April 1 of each year an option to purchase 1,000
shares of the Company's common stock at the market value on the date of the
grant. The options will vest six months from the date of grant and expire ten
years from the date of grant.
7
Stock Options
The Company's Board of Directors and shareholders approved the 1993 Stock
Option Plan, effective January 15, 1993, and amended it at the 1997 annual
meeting of shareholders. The 1993 Stock Option Plan reserves 1,500,000 shares of
the Company's Common Stock for stock option grants (subject to adjustment for
subsequent stock splits, stock dividends and certain other changes in the Common
Stock).
The Company's Board of Directors and shareholders approved the 2000 Stock
Option Plan, effective June 8, 2000. The 2000 Stock Option Plan reserves
1,000,000 shares of the Company's Common Stock for stock option grants (subject
to adjustment for subsequent stock splits, stock dividends and certain other
changes in the Common Stock).
The Compensation Committee of the Board of Directors administers and grants
incentive awards under the 1993 Stock Option Plan and the 2000 Stock Option
Plan. The 1993 Stock Option Plan and the 2000 Stock Option Plan provide for the
grant to officers and other key employees of the Company of incentive awards in
the form of stock options or restricted stock. Stock options granted under the
plans may be either options intended to qualify for federal income tax purposes
as "incentive stock options" or options not qualifying for favorable tax
treatment ("nonqualified stock options").
The following table sets forth information with respect to options granted
by the Company under the 1993 and 2000 Stock Option Plans to the Named Executive
Officers during the fiscal year ended February 1, 2003.
Option Grants in Last Fiscal Year
Individual Grants (1)
-----------------------------------
Potential Realizable Value
Number of % of Total at Assumed Annual Rates
Securities Options of Stock Price
Underlying Granted to Exercise or Appreciation for Option Term (2)
Options Employees in Base Price Expiration -------------------------------
Name Granted (#)(3) Fiscal Year ($/Sh) Date 5%($) 10%($)
--------------- ------------- ------------ ----------- ---------- ----- ------
Mark L. Lemond 75,000 24.1% $17.12 04/03/12 $807,501 $2,046,365
J. Wayne Weaver --- --- --- --- --- ---
Timothy T. Baker 20,000 6.4% $17.12 04/03/12 $215,334 $545,697
Clifton E. Sifford 20,000 6.4% $17.12 04/03/12 $215,334 $545,697
W. Kerry Jackson 15,000 4.8% $17.12 04/03/12 $161,500 $409,273
---------------
(1) During fiscal 2002, options to purchase an aggregate of 311,000 shares were
granted to 117 employees at exercise prices equal to or above the market
price on the respective grant dates. Such options have a term of ten years,
subject to earlier expiration at or following termination of employment in
certain circumstances.
(2) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation, if
any, of the Company's stock price. The Company did not use an alternative
formula for a grant date valuation, as the Company is not aware of any
formula which will determine with reasonable accuracy a present value based
on future unknown or volatile factors.
(3)These options become exercisable in thirds on the first through third
anniversaries of the grant date.
8
The following table sets forth information with respect to the exercise of
options held by the Named Executive Officers during fiscal year 2002 and
unexercised stock options held by such individuals at the end of the fiscal year
ended February 1, 2003.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Number of Securities
Underlying Value of Unexercised
Unexercised Options at In-the-Money
Fiscal Options at Fiscal Year-End
Year-End (#) ($)(1)
---------------------------- ----------------------------
Shares Acquired Value
Name on Exercise(#) Realized($)(2) Exercisable Unexercisable Exercisable Unexercisable
------------------ --------------- -------------- ----------- ------------- ----------- -------------
Mark L. Lemond 0 0 235,207 91,667 $1,267,369 $116,285
J. Wayne Weaver 0 0 0 0 0 0
Timothy T. Baker 3,800 $ 40,470 47,867 31,668 $ 191,061 $ 86,984
Clifton E. Sifford 18,655 $ 92,004 48,627 31,668 $ 309,253 $ 86,984
W. Kerry Jackson 14,850 $ 124,603 24,999 20,001 $ 102,064 $ 36,286
---------------
(1) The closing price for the Company's Common Stock as reported by The Nasdaq
Stock Market on January 31, 2003 was $13.03. The value is calculated on the
basis of the difference between the Common Stock option exercise price and
$13.03, multiplied by the number of "in-the-money" shares of Common Stock
underlying the options.
(2) The value realized is calculated based on the difference between the
closing market price of the Common Stock on the date of exercise and the
option exercise price, multiplied by the number of shares to which the
exercise relates.
The following table sets forth information regarding outstanding grants and
shares available for grant under the Company's existing equity compensation
plans, including our 1993 Stock Option Plan, 2000 Stock Option Plan, Outside
Directors Stock Option Plan and the Shoe Carnival, Inc. Employee Stock Purchase
Plan. All information is as of February 1, 2003.
Equity Compensation Plan Information
Number of Securities
Number of Securities Remaining Available
To be Issued Upon Weighted Average for Future Issuance
Exercise of Outstanding Exercise Price of (Excluding Securities
Options, Warrants and Outstanding Options, Reflected in the
Plan Category Rights Warrants and Rights First Column)
----------------------------------- ----------------------- -------------------- ---------------------
Equity compensation plans
approved by security holders (1) 1,081,133 $ 10.27 648,803 (2)
Equity compensation plans not
approved by security holders (3) 9,000 $ 12.28 16,000
Total 1,090,133 $ 10.29 664,803
---------------
(1) Includes the 1993 Stock Option Plan, 2000 Stock Option Plan and the
Employee Stock Purchase Plan.
(2) Includes 453,169 shares available for future issuance as stock options or
restricted stock under the 2000 Stock Option Plan and 195,634 shares
available for future issuance under the Shoe Carnival, Inc. Employee Stock
Purchase Plan. No additional grants will be made from the 1993 Stock Option
Plan.
(3) Includes the Outside Directors Stock Option Plan which has been approved by
the Company's Board of Directors but was not required to be approved by its
shareholders. For a description of the material terms of the plan see
"Compensation of Directors".
9
Compensation Report of the Compensation Committee
Executive Compensation Policy. In evaluating the performance of the
Company, the Compensation Committee focuses primarily on attained increases in
store growth, sales, operating income, net earnings and earnings per share as
compared to the Company's internal financial plan for the year approved by the
Board of Directors. In making compensation decisions, the Compensation Committee
also reviews executive compensation practices within the retail and footwear
industries with consideration given to, among other factors, differences in
sales, growth rates and total market capitalization.
The Company designs compensation programs to attract, retain and motivate
the finest talent possible for all levels of the organization. In addition, the
programs are designed to treat all employees fairly, to be cost-effective and to
assure that all compensation will continue to be tax deductible. To that end,
all programs, including those for executive officers, have the following
characteristics.
- Compensation is based on the level of job responsibility, the
individual's level of performance and Company performance. Members of management
have a greater portion of their pay based on Company performance than do
non-management employees.
- Compensation also takes into consideration the value of the job in the
marketplace. To retain its highly skilled work force, the Company strives to
remain competitive with the pay of employers of a similar stature who compete
with the Company for talent.
- The Company's 1993 and 2000 Stock Option Plans are intended to provide a
long-term incentive for executives and other key employees to maximize growth
and profitability to create shareholder value.
The basic components of executive compensation, including that of the Chief
Executive Officer, consist of salary, bonus, stock options and participation in
the Company's 401(k) Savings Plan, Deferred Compensation Plan, Employee Stock
Purchase Plan and Executive Medical Plan. The Company does not currently provide
for any defined benefit pension plan.
Cash Compensation. The Compensation Committee reviews and approves salaries
for the Chief Executive Officer and other executive officers on an annual basis
or at other times as necessary to accommodate the hiring of new employees,
promotions or other considerations. Recommended base salaries are reviewed and
set based on a number of factors, including job responsibilities, individual
industry experience, individual performance, Company performance, industry data
for comparable positions and recommendations by senior executive officers. No
predetermined weight is given to any of the above factors.
Salary increases for the Company's executive officers have averaged
approximately 12.1% annually for the past three years. Certain executive
officers have received greater salary increases corresponding to expanded
responsibilities as a result of the continued growth of the Company.
A portion of the cash compensation of executive officers and most other
salaried employees consists of bonus payments. Under the Company's Executive
Incentive Compensation Plan, most salaried employees, including all executive
officers, are eligible to receive a cash bonus equal to a specified percentage
of the participant's base salary if certain financial objectives are met. The
financial objectives for executive officers relate to the attainment of sales,
operating income, net earnings, earnings per share, return on equity, return on
invested capital and stock price appreciation goals established in advance by
the Company's management and approved by its Board of Directors. Based on the
Company's 2002 financial performance, bonuses under the plan were awarded to all
Named Executive Officers.
10
Stock Options. The Company considers equity compensation, in the form of
stock options, to be an important element in the overall compensation of its
executive officers and other key employees. The grant of stock options continues
the Company's practice of increasing management's equity ownership in order to
ensure that the interests of management remain closely aligned with those of the
Company's shareholders. Stock options also create an incentive for the Company's
key employees to remain with the Company for the long term because the options
are typically not immediately exercisable and, if not exercised, are forfeited
immediately if the employee is terminated for cause or voluntarily terminates
his employment (other than by reason of death, disability or retirement) or
within three months if employment is terminated for any other reason except
death, disability or retirement.
Options are granted pursuant to the Company's 1993 and 2000 Stock Option
Plans at the discretion of the Company's Compensation Committee. The
Compensation Committee relies in large part on the recommendation of the
Chairman in determining the number of option shares to be granted to executive
officers, based upon the Chairman's assessment of individual performance and the
Company's performance. With the exception of new employees, options are
typically granted on an annual basis. Selected operational and administrative
managers and all executive officers were granted options in 2002 with an
exercise price equal to the market price on the grant date. See "Stock Options -
Option Grants in Last Fiscal Year".
Chief Executive Officer Compensation. The Chief Executive Officer's total
compensation is based upon the same factors as the compensation of other
executive officers, including his individual performance and the Company's
short-term and long-term performance, as measured principally by increases in
store growth, sales, operating income, net earnings, earnings per share, return
on equity, return on invested capital and stock price appreciation. In addition,
the Compensation Committee reviews the level of chief executives' compensation
within the retail and footwear industries with consideration given to, among
other factors, differences in sales, growth rates and total market
capitalization.
In April 2002, the Compensation Committee increased Mr. Lemond's salary 10%
from $500,000 to $550,000 and granted him an option to purchase 75,000 shares of
the Company's Common Stock. Based on the 2002 financial results, Mr. Lemond
received a bonus of $101,000 under the quantitative Executive Incentive
Compensation Plan. The bonus represents 37% of the maximum that could be earned
under the plan by Mr. Lemond.
Compensation Committee
James A. Aschleman (beginning December 12, 2002)
William E. Bindley (full year)
Gerald W. Schoor (full year)
Report of the Audit Committee
Management of the Company is responsible for the financial reporting
process, including the system of internal accounting and financial controls, and
for the preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States. The Company's
independent accountants, Deloitte & Touche LLP, are responsible for performing
the audit of the Company's consolidated financial statements and expressing an
opinion on those statements. The Audit Committee is responsible for oversight of
all aspects of the Company's financial reporting, internal controls and audit
processes. A copy of the current Audit Committee Charter adopted by the Board of
Directors is included in this proxy statement as Appendix A. The Audit Committee
is composed of three "independent directors" as that term is defined by the
listing standards of the National Association of Securities Dealers, Inc.
11
In fulfillment of its responsibilities, the Audit Committee on a regular
basis discusses with both management and Deloitte & Touche LLP the adequacy and
effectiveness of the Company's internal accounting and financial controls. The
Audit Committee has reviewed and discussed the audited financial statements with
the Company's management and Deloitte & Touche LLP. In addition, the Audit
Committee has discussed with Deloitte & Touche LLP all matters required to be
discussed with audit committees by Statement on Auditing Standards No. 61,
"Communication with Audit Committees". Deloitte & Touche LLP also provided the
Audit Committee the written disclosures and the letter required by the
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees". The Audit Committee has discussed with Deloitte & Touche LLP
any relationships or services that might impact their objectivity and
independence.
Based on the Audit Committee's review and discussions referenced in this
report, the Audit Committee recommended to the Board that the Company's audited
financial statements be included in the Company's Annual Report on Form 10-K for
the year ended February 1, 2003 for filing with the Securities and Exchange
Commission.
Audit Committee
Gerald W. Schoor
William E. Bindley
James A. Aschleman
12
INDEPENDENT ACCOUNTANTS
The ratification of the appointment of Deloitte & Touche LLP as auditors
for the Company for fiscal year 2003 is recommended by the Audit Committee and
will be submitted to the meeting in order to permit the shareholders to express
their approval or disapproval. In the event of a negative vote, a selection of
other auditors will be made by the Audit Committee. A representative of Deloitte
& Touche LLP is expected to be present at the meeting, will be given an
opportunity to make a statement if he desires and will respond to appropriate
questions. Notwithstanding approval by the shareholders, the Audit Committee
reserves the right to replace the auditors at any time.
The Board of Directors and the Audit Committee recommend a vote FOR the
ratification of Deloitte & Touche LLP as auditors for 2003.
The Company incurred fees with Deloitte & Touche LLP for the following services
for fiscal years 2002 and 2001:
Audit Fees
Fees relating to the audit of the Company's annual financial statements
and the reviews of the financial statements filed on Form 10-Q were
$132,100 and $106,500 in fiscal years 2002 and 2001, respectively.
Audit Related Fees
Fees relating to audit services of employee benefit plans were $9,600
and $12,400 in fiscal years 2002 and 2001, respectively.
Tax and All Other Fees
No services other than audit services were preformed by Deloitte &
Touche LLP for the Company in fiscal years 2002 and 2001.
13
Performance Graph
The performance graph set forth below compares the cumulative total
shareholder return on the Company's Common Stock with the Nasdaq Stock Market
Index and the Nasdaq Index for Retail Trade Stocks for the period from January
30, 1998 through January 31, 2003.
Comparison of Cumulative Total Return Among The Company,
Nasdaq Stock Market Index and Nasdaq Index for Retail Trade Stocks
--------------------------------------------------------------------------------
January 30, January 29, January 28, February 2, February 1, January 31,
1998 1999 2000 2001 2002 2003
------------------------------------------------------------------------------------------------------------------------
The Nasdaq Stock Market (U.S.) 100 156 241 164 119 83
------------------------------------------------------------------------------------------------------------------------
Nasdaq Retail Trade Stocks 100 122 98 75 90 73
------------------------------------------------------------------------------------------------------------------------
Shoe Carnival, Inc. 100 113 95 104 167 156
------------------------------------------------------------------------------------------------------------------------
[PERFORMANCE GRAPH APPEARS HERE]
Compensation Committee Interlocks and Insider Participation
During fiscal 2002, the Compensation Committee consisted of Messrs. Bindley
and Schoor, and Mr. Aschleman joined the Committee on December 12, 2002. None of
the Compensation Committee members were involved in a relationship requiring
disclosure as an interlocking executive officer/director or under Item 404 of
Regulation S-K or as a former officer or employee of the Company.
14
Certain Transactions
Mr. Weaver, along with Bradley W. Weaver, his son and the owner of 4.9% of
the outstanding shares of the Company's Common Stock, are the principal
shareholders of LC Footwear, LLC and PL Footwear, Inc. Mr. J. Wayne Weaver is
also Chairman of the Board and Chief Executive Officer of LC Footwear, LLC and
PL Footwear, Inc.
The Company purchases women's footwear from LC Footwear, LLC in the
ordinary course of business. During 2002, the Company purchased approximately
$372,000 of merchandise from LC Footwear, LLC. Management of the Company
believes that purchases from LC Footwear, LLC are on terms that are not less
favorable to the Company than could be obtained from unrelated third parties for
comparable merchandise.
PL Footwear, Inc., along with others, serve as import agents for the
Company. Import agents represent the Company on a commission basis in dealings
with shoe factories primarily in mainland China where most of the Company's
private label shoes are manufactured. As agents for the Company, PL Footwear,
Inc. and others visit shoe manufacturers, collect shoe samples, submit these
samples to the Company and advise the Company of market conditions and
availability of merchandise. They also help select leather, assist in detailing
and quality control and coordinate the production and delivery schedule of a
portion of the Company's private label merchandise. The Company pays PL
Footwear, Inc. 10% of the gross purchase price of shoes bought through that
company. Commissions paid to PL Footwear, Inc. were approximately $1.2 million
in 2002. Management of the Company believes that the arrangements with PL
Footwear, Inc. are on terms that are not less favorable to the Company than
could be obtained from unrelated parties.
Mr. Aschleman is a partner of the law firm of Baker & Daniels, which has in
the past, and continues to, provide legal services to the Company.
15
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of April 2, 2003, certain information
with respect to beneficial ownership of the Company's Common Stock by each
person (or group of affiliated persons) who is known by management to own
beneficially more than 5% of the Common Stock, by each Named Executive Officer
who is not a Director, and by all Directors and current executive officers as a
group. Except as otherwise noted, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
Number of Shares Percent of
Name Beneficially Owned Class
--------------------------------------------------------------- ------------------ ----------
J. Wayne Weaver and Delores B. Weaver(1)...................... 4,833,230 (2) 38.3%
Timothy T. Baker.............................................. 65,944 (3) *
Clifton E. Sifford............................................ 59,253 (4) *
W. Kerry Jackson.............................................. 37,966 (5) *
All current executive officers and Directors as a group
(9 persons)................................................... 5,586,694 (6) 42.7%
Dimensional Fund Advisors, Inc.
1299 Ocean Ave., 11th Floor
Santa Monica, CA 90401**.....................................
916,200 (7) 7.3%
Barclays Global Investors, NA
Barclays Global Fund Advisors
45 Fremont Street
San Francisco, CA 94105**..................................... 648,946 (8) 5.1%
----------
* Less than 1%
** Information is based solely on reports filed by such shareholder under
Section 13(d) or Section 13(g) of the Securities Exchange Act of 1934.
(1) J. Wayne Weaver and Delores B. Weaver are husband and wife. Their address
is 8233 Baumgart Road, Evansville, Indiana 47725.
(2) Mr. and Mrs. Weaver each individually own 1,750,000 shares and jointly
own 333,230 shares. 1,000,000 shares are held in a trust of which Mr. and
Mrs. Weaver are both trustees.
(3) Includes 57,867 shares issuable upon the exercise of options.
(4) Includes 58,627 shares issuable upon the exercise of options.
(5) Includes 31,666 shares issuable upon the exercise of options.
(6) Includes 443,200 shares issuable upon the exercise of options.
(7) The shareholder is a registered investment advisor and has sole voting and
dispositive power with respect to the shares. All of the indicated shares
are owned by advisory clients of the shareholder, and the shareholder
disclaims beneficial ownership of such shares.
(8) The shareholders are banks.
16
SHAREHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
The date by which shareholder proposals must be received by the Company for
inclusion in proxy materials relating to the 2004 Annual Meeting of Common
Shareholders is January 7, 2004.
In order to be considered at the 2004 Annual Meeting, shareholder proposals
must comply with the advance notice and eligibility requirements contained in
the Company's By-Laws. The Company's By-Laws provide that shareholders are
required to give advance notice to the Company of any nomination by a
shareholder of candidates for election as Directors and of any business to be
brought by a shareholder before an annual shareholders' meeting. Specifically,
the By-Laws provide that for a shareholder to nominate a person for election to
the Company's Board of Directors, the shareholder must be entitled to vote for
the election of Directors at the meeting and must give timely written notice of
the nomination to the Secretary of the Company. The By-Laws also provide that
for business to be properly brought before an annual meeting by a shareholder,
the shareholder must have the legal right and authority to make the proposal for
consideration at the meeting and the shareholder must give timely written notice
thereof to the Secretary of the Company. In order to be timely, a shareholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Company not less than 30 days nor more than 60 days prior to the
meeting. In the event that less than 40 days' notice or prior public disclosure
of the date of the meeting is given or made to shareholders, notice by the
shareholder must be received not later than the close of business on the tenth
day following the day on which notice of the date of the meeting was mailed or
public disclosure was made. The notice must contain specified information about
each nominee or the proposed business and the shareholder making the nomination
or proposal.
The specific requirements of these advance notice and eligibility
provisions are set forth in Article II and Article III of the Company's By-Laws,
a copy of which is available upon request. Such request and any shareholder
proposals should be sent to the Secretary of the Company at the principal
executive offices of the Company.
INCORPORATION BY REFERENCE
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that may incorporate future filings (including
this proxy statement, in whole or in part), the Compensation Report of the
Compensation Committee, the Performance Graph and the Report of the Audit
Committee shall not be incorporated by reference in any such filings.
ANNUAL REPORTS
The Annual Report to Shareholders for the 2002 fiscal year accompanies this
Proxy Statement. The Annual Report is not used as part of this solicitation
material and no action will be taken with respect to it at the Annual Meeting.
In addition, a copy of the Company's Annual Report on Form 10-K for the 2002
fiscal year as filed with the Securities and Exchange Commission, including
financial statements but excluding exhibits, may be obtained without charge upon
written request to David A. Kapp, Secretary, Shoe Carnival, Inc., 8233 Baumgart
Road, Evansville, Indiana 47725.
17
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF
SHOE CARNIVAL, INC.
Purpose
The Audit Committee of the Board of Directors of Shoe Carnival, Inc. (the
"Company") is appointed by the Board to assist the Board in monitoring (1) the
integrity of the Company's financial statements, (2) the independent auditor's
qualifications and independence, (3) the performance of the Company's internal
audit function and independent auditor, and (4) the Company's compliance with
legal and regulatory requirements.
The Audit Committee is also responsible for producing the annual report
required by the rules of the Securities and Exchange Commission (the "SEC") to
be included in the Company's proxy statement.
Committee Membership
The Audit Committee shall consist of at least three directors. The members
of the Audit Committee shall meet the independence and experience requirements
of the Nasdaq Stock Market, Section 10A of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and SEC rules and regulations.
The members and the Chair of the Audit Committee shall be appointed by the
Board on the recommendation of the Nominating and Corporate Governance
Committee. Audit Committee members may be replaced by the Board.
Committee Authority and Responsibilities
The Audit Committee shall have the sole authority to retain and terminate
the independent auditor (subject, if applicable, to shareholder ratification),
and to approve all audit engagement fees and terms and all significant non-audit
engagements with the independent auditor. The Audit Committee may consult with
management but shall not delegate these responsibilities to management.
The Audit Committee shall preapprove all auditing services and non-audit
services (subject to a de minimus exception) provided to the Company by the
independent auditor and shall be directly responsible for the appointment,
compensation and oversight of the work of the independent auditor, including
resolution of disagreements between management and the auditor regarding
financial reporting, as required by Section 10A of the Exchange Act. The Audit
Committee may delegate its responsibility to preapprove auditing and non-audit
services to one or more of its members, whose decisions must be presented to the
full Audit Committee at each of its scheduled meetings.
The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly. The Audit Committee may form and delegate authority
to subcommittees when appropriate.
The Audit Committee shall have the authority, to the extent it deems
necessary or appropriate and without seeking Board approval, to retain special
legal, accounting or other consultants to advise the Committee. The Audit
Committee may request any officer or employee of the Company or the Company's
outside counsel or independent auditor to attend a meeting of the Committee or
to meet with any members of, or consultants to, the Committee. The Audit
Committee shall meet with management, personnel responsible for the internal
audit function and the independent auditor in separate executive sessions at
least quarterly. The Audit Committee may also, to the extent it deems necessary
or appropriate, meet with the Company's investment bankers or financial analysts
who follow the Company.
The Audit Committee shall establish and maintain procedures for the
receipt, retention and treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters and the
confidential, anonymous submission by Company employees of concerns regarding
questionable accounting or auditing matters.
Appendix A
The Audit Committee shall review and approve all related-party
transactions.
The Audit Committee shall make regular reports to the Board which shall
include a review of any issues that arise with respect to the quality or
integrity of the Company's financial statements. The Audit Committee shall
review and reassess the adequacy of this Charter annually and recommend any
proposed changes to the Board for approval. The Audit Committee shall annually
review the Audit Committee's own performance.
The Audit Committee shall also perform the following functions:
Financial Statement and Disclosure Matters
1. Review and discuss with management and the independent auditor the
annual audited financial statements, including disclosures made in management's
discussion and analysis, and recommend to the Board whether the audited
financial statements should be included in the Company's Form 10-K.
2. Review and discuss with management and the independent auditor the
Company's quarterly financial statements, including disclosures made in
management's discussion and analysis, prior to the filing of its Form 10-Q,
including the results of the independent auditor's reviews of the quarterly
financial statements.
3. Discuss with management and the independent auditor major issues
regarding accounting principles and financial statement presentations, including
any significant changes in the Company's selection or application of accounting
principles, any major issues as to the adequacy of the Company's internal
controls and any special audit steps adopted in light of material control
deficiencies, as well as significant financial reporting issues and judgments
made in connection with the preparation of the Company's financial statements,
including the development, selection and disclosure of critical accounting
estimates, and analyses of the effect of alternative assumptions, estimates or
GAAP methods on the Company's financial statements.
4. Discuss with management the Company's earnings press releases, including
the use of "pro forma" or "adjusted" non-GAAP information, as well as financial
information and earnings guidance provided to analysts and rating agencies.
5. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives as well as off-balance sheet structures on
the Company's financial statements.
6. Discuss with management the Company's major financial risk exposures and
the steps management has taken to monitor and control such exposures, including
the Company's risk assessment and risk management policies.
7. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct of
the audit. In particular, discuss:
a. The adoption of, or changes to, the Company's significant auditing
and accounting principles and practices as suggested by the independent
auditor, any internal auditors or management.
b. The management letter provided by the independent auditor and the
Company's response to that letter.
c. Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
requested information, and any significant disagreements with management,
including any accounting adjustments that were noted or proposed by the
auditor but were "passed" (as being immaterial or otherwise).
A-2
Oversight of the Company's Relationship with the Independent Auditor
8. Review the experience and qualifications of the senior members of the
independent auditor team.
9. Obtain and review a report from the independent auditor at least
annually regarding (a) the auditor's internal quality-control procedures,
(b) any material issues raised by the most recent internal quality-control
review, or peer review, of the firm, or by any inquiry or investigation by
governmental or professional authorities within the preceding five years
respecting one or more independent audits carried out by the firm, (c) any
steps taken to deal with any such issues, and (d) all relationships between
the independent auditor and the Company.
10. Evaluate the qualifications, performance and independence of the
independent auditor, including considering whether the auditor's quality
controls are adequate and the provision of non-audit services is compatible with
maintaining the auditor's independence, and taking into account the opinions of
management and the personnel responsible for the internal audit function. The
Audit Committee shall present its conclusions to the Board and, if so determined
by the Audit Committee, recommend that the Board take additional action to
satisfy itself of the qualifications, performance and independence of the
auditor.
11. Assure the regular rotation of the lead audit partner of the independent
auditor as required by Section 10A of the Exchange Act.
12. Consider whether, in order to assure continuing auditor
independence, it is appropriate to adopt a policy of rotating the independent
auditing firm on a regular basis.
13. Set policies for the Company's hiring of employees or former employees
of the independent auditor who were engaged on the Company's account.
14. Discuss with the national office of the independent auditor issues
on which it was consulted by the Company's audit team and matters of audit
quality and consistency.
15. Meet with the independent auditor prior to the audit to discuss the
planning and staffing of the audit.
16. Obtain and review the report required under Section 10A of the Exchange
Act from the independent auditor.
Oversight of the Company's Internal Audit Function
17. Discuss with the independent auditor the responsibilities, budget
and staffing of the internal audit function and any recommended changes in the
planned scope of the internal audit.
18. Review with the Board the performance of the Company's internal audit
function.
Compliance Oversight Responsibilities
19. Obtain from the independent auditor assurance that the provisions
of Section l0A of the Exchange Act respecting the detection and reporting of
illegal acts have not been implicated.
20. Obtain reports from management and the independent auditor that the
Company is in conformity with applicable legal requirements and the Company's
Code of Business Conduct and Ethics. Review reports and disclosures of insider
A-3
and affiliated party transactions. Advise the Board with respect to the
Company's policies and procedures regarding compliance with applicable laws and
regulations and with the Company's Code of Business Conduct and Ethics.
21. Discuss with management and the independent auditor any
correspondence with regulators or governmental agencies and any employee
complaints or published reports which raise material issues regarding the
Company's financial statements or accounting policies.
22. Discuss with the Company's General Counsel legal matters that may
have a material impact on the financial statements or the Company's compliance
policies.
Limitation of Audit Committee's Role
While the Audit Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements and disclosures
are complete and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations. These are the
responsibilities of management and the independent auditor.
A-4
Proxy - Shoe Carnival, Inc.
Proxy Solicited on Behalf of The Board of Directors
For The Annual Meeting of Shareholders -- June 12, 2003
The undersigned appoints Mark L. Lemond and J. Wayne Weaver, and each of them,
as proxies, with full power of substitution and revocation, to vote, as
designated on the reverse side hereof, all the Common Stock of Shoe Carnival,
Inc. which the undersigned has power to vote, with all powers which the
undersigned would possess if personally present, at the annual meeting of
shareholders thereof to be held at the Evansville Marriott, 7101 North U.S.
Route 41, Evansville, Indiana on June 12, 2003, or at any adjournment thereof.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. Unless otherwise marked, this proxy will be voted
FOR the election as Director of the nominee listed under Proposal 1 and FOR
Proposal 2.
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed on reverse side.)
Shoe Carnival, Inc.
Annual Meeting Proxy Card
A Election of Director
1. The Board of Directors recommends a vote FOR the listed nominee.
For Withold
01 - William E. Bindley [ ] [ ]
B Issue
The Board of Directors recommends a vote FOR the following proposal.
2. Proposal to ratify the appointment of Deloitte & Touche LLP,
as auditors for the Company for 2003.
For Against Abstain
[ ] [ ] [ ]
3. In their discretion, to transact such other business
that may properly come before the meeting.
C Authorized Signatures - Sign Here - This section must be completed for your
instructions to be executed.
NOTE: When signing as attorney, executor, administrator, trustee or guardian,
please give full title. If more than one trustee, all should sign. All joint
owners must sign.
Signature 1 - Please keep signature within the box
Signature 2 - Please keep signature within the box
Date (mm/dd/yyyy)
/ /