President Winnecke: Would you please stand and join in the Pledge of Allegiance?

(Pledge of Allegiance was given)

President Winnecke: The purpose of this special meeting is to consider a preliminary resolution on a tax phase-in request from the Shoe Carnival, and we’ll begin with several folks representing the company. We’ll begin by introducing Evan Beck, who is the developer on the project.

Evan Beck: Thank you, Councilman Winnecke. It is a special day. And I want to begin with introductions of who we have here today. First we have Mr. Kerry Jackson, Executive Vice President/CFO of Shoe Carnival; Marco DeLucio, counsel for both Big Shoe Properties and Shoe Carnival, Incorporated; CEO Mark Lemond; and then Nazan Wolfe, Assistant Vice President of Woodward Development and Construction. Again, I am Evan Beck, President of Woodward Development and Construction and also the managing member of the applicant, Big Shoe Properties, LLC., which is a real estate holding company, to work on this project. Today is a wonderful opportunity we have in front of us. You know, it makes me harken back to last summer when I was here in front of you working very hard with you on revising the tax phase-in guidelines. Thankfully, everyone in the room did an excellent job on revising the guidelines because today is why we’re here on the opportunity of retaining and expanding a company that’s both headquartered in Vanderburgh County and currently doing its national distribution from this county as well. We have filed applications for two specific projects. Number one is the opportunity to build a new distribution center for Shoe Carnival. Again, that would handle the national distribution of its inventory to its multiple store locations across the country. What we have here is a simplistic proposed site plan on the site that we have filed. This is just along the Interstate 164 corridor here on the bottom of the site plan, this is Highway 57. I think most of you will recognize this location, right across the street is the Vanderburgh Industrial Park, location of Graham Packaging and Tenneco, and other businesses in that park. Its hard to depict the magnitude of this project on the site plan, but just to give you the feel, this is about ten acres under roof. It’s a 410,000 square foot distribution center. This represents a doubling in size of Shoe Carnival’s current distribution space in Vanderburgh County. The second part of the application that we have filed today is the opportunity to locate the national headquarters in Vanderburgh County as well, also along the Interstate 164 corridor on Evansville’s east side. This would be a project that would be somewhere in the range of 50 to 60,000 square feet that would offer the movement of the current administrative staff of Shoe Carnival and also the growth of that staff as both the distribution center and the headquarters will be built and designed to handle today’s business cycle but also the growth for the next ten to fifteen years, which is very significant. Now I will let Mr. Lemond get into more detail about the company’s history and its future. Mark?

Mark Lemond: Thanks, Evan, now that you’ve stolen my thunder. Many of you well know that Shoe Carnival is a local retailer of footwear, founded here in Evansville in 1978. In 1993, the company went public and is now traded on the NASDAQ stock market. Under the current executive management watch, we’ve grown since 1996 from about 93 stores located in a very tight circle in the Midwest to over 260 stores today throughout the Midwest, south, southeast, and starting into the west right now. We’ve grown in terms of sales from 234,000,000 in 1996 to over 655,000,000 this past fiscal year. And the number of employees at our corporate office and distribution center, which is one building right now, has grown from around 200 at that time to over 330 today. The total company has grown in terms of employment from around 1,880 employees to over 4,000 today. In our Evansville area, just the Evansville area alone, payroll has grown over that same time frame, and this is payroll and benefits and bonuses, has grown from about 6.9 million to 15.5 million last year, so significant growth. We’re at the point where we can’t grow any more with our existing facilities which are located on the north side of Evansville. And to give you a description of that, we have a 200,000 square foot warehouse with an appurtenant office building of about 40 to 45,000 square feet. In order to continue our growth which we anticipate accelerating in 2007 and beyond, we need larger square footage in terms of both administrative capability and distribution center capability. So the project that we are currently anticipating is actually going to take our current building and bifurcate it into two separate projects, even though we look at it as one total project of expansion. Its going to entail, as Evan said, about 400 to 410,000 square feet of distribution capacity and 50 to 60,000 capacity in terms of a corporate headquarters. And we are going to retain, hopefully, Vanderburgh County has the opportunity right now to retain the corporate headquarters of Shoe Carnival where its at today within the Vanderburgh County confines. What that entails then in the future over the next five years is an increase in employment, an anticipated increase in employment at our distribution center of approximately 60 to 65 people with an annual employment, base employment of about 1.2 million dollars. That doesn’t include benefits and bonuses, which we anticipate to be somewhere in excess of 25 percent of that base number. It also entails, with the administrative headquarters located here, an employment increase of about 59 persons over that five year period, and that payroll would entail about 3.2 million dollars in annualized payroll. Again, that’s base payroll with the benefit package that we anticipate will continue to improve, that would increase in excess of 25% of that base number in terms of bonuses and benefits as well. So it’s a very big project. We’re looking at the Vanderburgh County sites for the opportunity to put that there. We’re primarily people from Evansville. We want to retain that Evansville base. We’re looking to local developers like Woodward Development to maintain that Evansville connection, if you will, the Vanderburgh County connection, and we would like your support as well. Can I answer any questions?

President Winnecke: Who would like to start?

Councilmember Raben: Mr. President, I’ll start by making a motion. I’ll move that we approve the preliminary resolution by this Council declaring economic revitalization area for a tax phase-in for acquisition of equipment located at 15001 Highway 57 North known as Shoe Carnival, Inc. and Big Shoe Properties, LLC., and along with that I’ll also include with this motion, the northwest corner of Cross Pointe Boulevard and Columbia Street known as Big Shoe Properties, LLC. for corporate headquarters.

Councilmember Sutton: Second.

President Winnecke: Motion and a second. And just to clarify, you move that we approve a phase-in on the equipment and both pieces of property and in your second? Any other discussion? Mr. Goebel?

Councilmember Goebel: This is not really part of the motion but, Mark, the existing property you have, I think for the people watching, is that going to lie vacant now or do you have plans or does somebody have plans for your distribution warehouse?

Mark Lemond: We’re negotiating for the sale of that distribution center and office building as we speak. But the contracts have not been completed yet, so it would be a little bit premature to say that we have that building sold, but we anticipate selling it very quickly.

Councilmember Goebel: Thank you.

Councilmember Sutton: One of the things that we have, Mark, one of the things that we often ask is, we talk about, ask questions about the benefits package that will be provided to employees and the base wage rate you’ve covered. Some of that information, as Councilmen, we do have some of that information before us, but just if you could, provide a little bit of information regarding that because one of the things that we always want to be sure of and that is, as we’re looking at tax phase-in opportunities, that truly is a partnership that benefits the community on the whole. And then while you’re there, you guys are obviously good corporate citizens, you’ve been here for a while, you could talk about some of your involvements as well, your contributions to the Evansville-Vanderburgh County community.

Mark Lemond: Let me start with the benefit package for our employees, and we’re proud of those benefits, I might add. By way of example, just a few of the benefits that we provide, medical benefits is a very competitive medical package, when we look at national averages and national averages within the retail industry, we are at the low side in terms of cost not to us, but the cost for employees in participating in that benefit package. And we’re at the high side in terms of percentage that the company pays relative to what the employee pays and we’re proud of that. That includes prescription benefits, dental benefits, an eye wear benefit, we also provide for benefits for part-time employees. That doesn’t affect the distribution and administrative headquarters as much as it does all the people in our stores throughout the mid-west, south and southeast. We have a basic life insurance plan, we have accidental death and dismemberment provisions in most policies, we provide a 401(k) plan for employees and do provide a match from company funds on part of that 401(k) plan. We provide health club membership opportunities for our employees for a number of different health clubs within the tri-state and probably one of the most important to our employees and one of the largest used, or the most frequently used benefit is an employee discount program for merchandise in our stores. Employees very much appreciate that program. With regard to our involvement in the Evansville community, first of all, let me say that not only do we look at the Evansville community as being benefitted by either our charitable giving or our employee involvement in various communities. We look at the total company footprint, if you will, around the country. So again, by way of example, one thing that we’ve tried to do, particularly this past year with all the natural disasters that we’ve had is spend our charitable, our philanthropic funds for those natural disasters whether it be Hurricane Katrina, I believe we donated about 10,000 pairs of shoes at a cost to us of about 150 to $175,000 towards that end in addition to local efforts that we made in various communities along that Gulf coast. The tornado in Evansville, for example, we very quickly donated 10,000 to the Red Cross in addition to the other involvements that we’ve had with the Red Cross in various projects, both on a local level and on a national level. One really – I’m proud of one benefit that we gave our employees – we set aside a fund of about $25,000 for our employees to utilize or to utilize this $25,000 fund in increments of 200 to $500 to help fund team or children’s activities. For example, chess clubs, baseball teams, basketball teams, cheerleading squads, whatever our employee’s children are involved in, we set aside a fund of $25,000 to help support those kinds of involvement. And we’re really proud about that activity. So we get involved in the community in a number of ways in addition to just our employees’ involvement in the community through funding our employees’ involvement in the community.

Councilmember Sutton: You know, one of the things that when we had a chance to speak earlier, I had expressed – I wouldn’t say concern, but just interest in the fact that you guys are going to be adding several new positions. And the challenge that many employers have here locally here with entry level or just below the entry level type of positions and trying to fill those and what challenges you guys might face and how you might intend to address that. Could you speak to that?

Mark Lemond: Well, as the Evansville community has an opportunity to grow, and I’m not just talking about Vanderburgh County, but all the appurtenant counties as well, that’s going to become more and more of a challenge for the businesses that locate here. With what’s going on today in the legislature with the Major Moves legislation and the I-69 piece of that, I think that and the kind of projects that we’re talking about is going to, again, lead to a huge opportunity for this region to develop economically, much more so than we’ve ever seen in the past. I think it’s a tremendous opportunity. Along with that comes the burden, if you will, of supplying labor to meet the challenges of those businesses. As we talked, nearly 100% of our employees are Evansville-based employees – I should say Evansville area based employees, whether they live in Warrick County or Vanderburgh County or elsewhere in the Evansville area, we would very much like to see the labor pool in Evansville and the surrounding communities evolve with that opportunity so that we can take advantage of that. That’s our anticipation. One of the reasons that we elected to stay if we can possibly stay in this area is what we think is going to be that created opportunity for the employment base here. We want to be one of the people that are taking advantage of that expanded opportunity. Just as an aside, and I don’t want to take a lot of time, but when we decided to increase the size of our distribution capabilities, we engineered a study by a nationally known organization – actually, an internationally known organization, and we asked them the question, if we expand and we expand significantly throughout the United States, do we need more than one distribution center and, if so, where should they be or do we need one distribution center and if so, where should it be? And after a myriad pieces of input, they came back and said you need to build one distribution center and it needs to be within 30 miles either side of I64 of where you’re at today. So what that told me and a lot of people in the Evansville area I think don’t look at it this way, but Evansville has a tremendous opportunity in the way of transportation, the transportation industry, to take advantage of some of the things that are going on today. And we are trying to take advantage of that in a very preliminary way. So I see that as a huge opportunity for the Evansville area to, again, supplement that labor need.

Councilmember Sutton: And you guys have been before us years ago and I asked the question then, if you guys were an affirmative action employer, and you guys replied affirmatively on that, and I would expect that things haven’t changed in that regard. Is anyone from DMD here?

President Winnecke: Rob is here.

Councilmember Sutton: Rob, have you scored their applications on this?

President Winnecke: Its in the packet.

Councilmember Sutton: Okay, could you share that with us. We’ve got the information here but, I mean, can you...

Rob Schaefer: All three projects, and I call them three because the distribution center includes the real estate and the personal property, and the headquarters is real estate, all three scored ten years.

Councilmember Sutton: Thank you.

President Winnecke: Mr. Tornatta?

Councilmember Tornatta: Yeah, we set up the phase-in process and we set it up for companies like yours. We wanted to see new job creation – we have that. We want to see employee retention – we have that in a big way. We want to see community involvement – we’ve seen that in years past and up until today we see a lot of community involvement. And that kind of goes with being a good corporate citizen. And those are things that I think we looked at when setting up that phase-in document to make sure that these companies were coming forward. Benefits package, when I asked you for the benefits package, stealing the line from Phil Hoy when he was here, he was always concerned about the benefits, it was there and in great shape. The opportunity to take a potential business that could move on and bring those headquarters to Vanderburgh County and keep them in Vanderburgh County, which we talked, it could have been in Florida. There could have been a lot of opportunities for you guys to move to other locations because you’re not associated necessarily with the warehousing unit. We were able to retain that. I think that we appreciate Shoe Carnival coming out and taking a chance on Vanderburgh County. I think a lot of the Council people in return want to make sure that it is a good partnership with the county and with your business. And I think we think that this is going to be an awesome opportunity to build up growth in this economic area and I have seen it much like they were saying, that this is going to be a tremendous place to do business. We’re going to have a lot of big fish like yourself, but we’re glad that we have you and we’re glad we’re able to retain your services, and I hope by the time this is over in the next couple of sessions, we’re able to get through this, that we can still put your name on the rolls and allow the phase-in characteristics to take advantage and make sure we have a great company on board.

Mark Lemond: Thank you very much, you’re very kind.

President Winnecke: Anyone else? Mr. Goebel?

Councilmember Goebel: Yes, a final comment from me. As I mentioned, we met last week. It’s a certain amount of hometown pride when any of us travel around the country and we see the Shoe Carnival logo and recognize that the headquarters are here and its part of Evansville history, and its being spread out and you have taken steps to remain here. I think it’s, the old cliche is, win/win. Its definitely going to be a winning proposition for Vanderburgh County and Evansville, and I’m sure its going to be a winning situation for Shoe Carnival also, so I think its exactly as Mr. Tornatta said, this is the purpose of tax phase-in to grow an environmentally friendly company, that’s going to be a great corporate partner for years to come. And I think it was mentioned, ten to fifteen years are your plans. You’re obviously building to stay, so that’s great news for us. Thank you.

Mark Lemond: Thank you, sir.

President Winnecke: Any other comments? I would just wrap up, again, to mirror some of the other thoughts. One, to thank you for your commitment to our community. I know that these discussions have been going on for a long time and you know, Kerry and I first met probably 18 months to 24 months ago, just to talk about the preliminary phase of this. So I do appreciate your tenacity and your support of our community. I think one of the things I’ve learned during these discussions is what a hidden treasure that Shoe Carnival is for our community. We all think of the store on the east side, but we don’t necessarily think about the 2 or 300 other folks who are at the distribution center and the headquarters. And I think that speaks a lot to your commitment to our community. And I, again, like the other Councilmembers, applaud you.

Mark Lemond: Thank you, sir.

President Winnecke: Currently, we have a resolution or a motion before us to grant a tax phase-in on each of the two properties listed before you, as well as the equipment at the property at 15001 Highway 41 North for a period of ten years, and I would remind you this is the preliminary resolution. Assuming it passes, the confirming resolution would occur next Wednesday. At this time, I would call for a roll call vote.

Jeff Ahlers : (Inaudible)

President Winnecke: Right, this is a – good point. This is a vote on all three of the resolutions before us. Roll call vote.

Teri Lukeman: Councilmember Tornatta?

Councilmember Tornatta: Yes.

Teri Lukeman: Councilmember Sutton?

Councilmember Sutton: Yes.

Teri Lukeman: Councilmember Abell?

Councilmember Abell: Yes.

Teri Lukeman: Councilmember Goebel?

Councilmember Goebel: Yes.

Teri Lukeman: Councilmember Raben?

Councilmember Raben: Yes.

Teri Lukeman: Councilmember Wortman?

Councilmember Wortman: Yes.

Teri Lukeman: President Winnecke?

President Winnecke: Yes.

(Motion unanimously approved 7-0)

President Winnecke: Thank you very much, we’ll have the confirming resolution next Wednesday, 8:30.

Mark Lemond: Thank you very much.

President Winnecke: Thank you for your time. Having no other business before us, we stand adjourned.

(Meeting adjourned at 8:58 a.m.)

VANDERBURGH COUNTY COUNCIL

                                                                                                                                             President Lloyd Winnecke                 Vice President Marsha Abell

       Councilmember Jim Raben           Councilmember Mike Goebel

                                                                                                                                         Councilmember Curt Wortman       Councilmember Royce Sutton

Councilmember Troy Tornatta

Recorded and transcribed by Teri Lukeman.