EMPLOYMENT AND NONCOMPETITION AGREEMENT

                  This EMPLOYMENT AND NONCOMPETITION AGREEMENT (the "Agreement")
is dated effective as of the 1st day of August, 2001, by and between SHOE
CARNIVAL, INC., an Indiana corporation with its principle offices located at
8233 Baumgart Road, Evansville, Indiana (the "Company"), and TIMOTHY BAKER, an
individual residing at 3243 Brookfield Drive, Newburgh, Indiana (the
"Employee").

                                    RECITALS
                                    --------
                  WHEREAS, the Company is one of the leading retailers of family
shoes in the United States;

                  WHEREAS, the Company desires to retain the services of the
Employee upon the terms and conditions set forth herein; and

                  WHEREAS, the Employee desires to be so employed by the
Company, to be eligible for opportunities of advancement, potential compensation
increases and potential bonus payments for fiscal year 2001 and later, and to be
given access to confidential and proprietary information necessary to perform
his job, but which the Company would not make available to him but for his
signing and agreeing to abide by the terms of this Agreement as a condition of
his continuing employment with the Company; and

                  WHEREAS, the Company and the Employee desire to enter into
this Agreement to set forth the terms and conditions of the employment
relationship between the Company and the Employee; and

                  WHEREAS, in connection with its business, the Company has
expended a substantial amount of time, money, and effort to develop and maintain
its confidential, proprietary and trade secret information, and that this
information, if misused or disclosed, could be very harmful to Company's
business and its competitive position in the marketplace.

                                    AGREEMENT
                                    ---------

                  1. Term of Employment. The Company hereby agrees to employ
Employee and Employee hereby agrees to be employed by the Company, in accordance
with the terms and conditions herein, for a period commencing on the effective
date of this Agreement up to and through December 31, 2003, subject, however, to
earlier termination as expressly provided in this Agreement (such term,
including any extension thereof, shall herein be referred to as the "Term").
This Agreement shall be renewed automatically for successive terms of one (1)
year each unless either party provides written notice of non-renewal to the
other party at least sixty (60) days before the end of the then current Term.
<PAGE>

                  2. Scope of Duties. The Employee shall continue employment in
his current position, Executive Vice President, Operations. During the Term, the
Employee agrees to perform such other services for the Company as may be
directed by the Company. The Employee shall be supportive of the Company's
business and its best interests and shall not, directly or indirectly, take any
action which could reasonably be expected to have an adverse effect upon the
business or best interests of the Company. The Employee covenants that he will
at all times honestly and fairly conduct his duties, and will at all times
maintain the highest of professional standards in representing the interests of
the Company. The Employee will comply with Company policies, decisions, and
instructions, which may be changed by the Company over time. Employee shall
perform all duties incident to his newly promoted position, as well as any other
duties as may from time to time be assigned by the President of the Company or
his designee, and agrees to abide by all By-laws, policies, practices,
procedures or rules of the Company.

                  3.       Compensation of Employee.  For all services rendered
by the Employee under this Agreement, the Company shall compensate the Employee
as follows:

                           3.1   Base Salary. The Base Salary payable to the
         Employee under this Agreement shall be that amount set forth in the
         Company Payroll Action Form, effective August 1, 2001 ("Base Salary"),
         payable in accordance with the Company's usual payroll procedures, and
         subject to all taxes, withholdings and deductions as required by law
         and as the Employee may authorize. The Company will review the Base
         Salary on a periodic basis, approximately annually, during the Term to
         determine, in the discretion of the Company, whether the Base Salary
         should be adjusted, and if so, the amount of such adjustment and the
         time at which such adjustment should take effect.

                           3.2   Incentive Bonus. The Employee is entitled to
         participate in the Company's discretionary incentive bonus program in
         accordance with the terms contained in the then current Incentive Bonus
         Plan for his position, as may be amended or modified by the Company
         from time to time. However, Employee agrees that the failure of the
         Company to award any such bonus and/or other incentive compensation
         shall not give rise to any claim against the Company.

                  4.       Additional Compensation, Benefits, and Obligations.
During the Term, and so long as the Employee serves in the position of Executive
Vice President, Employee is entitled to participate in any and all employee
welfare and health benefit plans (including, but not limited to, life insurance,
health and medical, dental and disability plans, and Exec-U-Care) and other
employee benefit plans, including but not limited to, qualified pension plans,
stock purchase plans, and nonqualified deferred compensation plans, established
by the Company from time to time for the benefit of executives at his level and
position; provided, however, the Employee's participation in such plans is
subject to the eligibility requirements and other terms of such plans. The
Company may change, amend or discontinue any of its employee welfare and health
benefit plans at any time during the Term, and nothing in this Agreement shall
obligate the Company to institute, maintain or refrain from changing, amending
or discontinuing any such plans or programs.


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<PAGE>

                  5.       Termination of Employment. Employee's employment may
be terminated as follows:

                           5.1   For Cause. The Company may terminate Employee's
         employment at any time effective immediately for "Cause." As used in
         this Agreement, the term "Cause" means the occurrence of any one or
         more of the following events: (i) Employee's conviction for a felony or
         other crime involving moral turpitude; (ii) Employee's engaging in
         illegal conduct or gross misconduct which is injurious to the Company;
         (iii) Employee's engaging in any fraudulent or dishonest conduct in his
         dealings with, or on behalf of, the Company; (iv) Employee's failure or
         refusal to follow the lawful and reasonable instructions of the
         Company's Chief Executive Officer, President, or other executive
         officer to whom Employee reports, if such failure or refusal continues
         for a period of ten (10) days after the Company delivers to Employee a
         written notice stating the instructions which Employee has failed or
         refused to follow; (v) Employee's material breach of any of his
         obligations under this Agreement; (vi) Employee's material breach of
         the Company's policies; (vii) Employee's use of alcohol or drugs which
         interferes with the performance of his duties for the Company or which
         compromises the integrity or reputation of the Company; or (viii)
         Employee's engaging in any conduct tending to bring the Company into
         public disgrace or disrepute.

                           5.2   Unilateral - The Company.  The Company may
         terminate Employee's employment at any time without Cause.

                           5.3   Unilateral - Employee. Employee may terminate
         his employment at any time with the Company by providing the Company
         with thirty (30) days' advance written notice of such termination. At
         the sole option of the Company, such termination will be considered
         effective on the date such notice is given.

                           5.4   For Good Reason - Employee. If Employee
         voluntarily terminates his employment during the Term, he shall notify
         Employer in writing if he believes the termination is for Good Reason.
         Employee shall set forth in reasonable detail why Employee believes
         there is Good Reason. For purposes of this Agreement, for "Good Reason"
         means the occurrence, without Employee's written consent, of any one or
         more of the following events: (a) a reduction in Employee's position or
         responsibilities; or (b) a reduction by the Company in Employee's Base
         Salary.

                           5.5   Disability. If Employee suffers a "Disability,"
         the Company shall have the right to terminate Employee's employment by
         delivering to Employee a written notice of the Company's intent to
         terminate for Disability, specifying in such notice a termination date
         not less than ten (10) calendar days after the giving of the notice
         (the "Disability Notice Period"). The Employee's employment shall
         terminate at the close of business on the last day of the Disability
         Notice Period. For purpose of this Agreement, the term "Disability"
         shall mean either (a) when Employee is deemed disabled in accordance
         with the long-term disability insurance policy or plan of the Company
         in effect at the time of the illness or injury causing the Disability,
         or (b) the inability of Employee, because of injury, illness, disease

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<PAGE>

         or bodily or mental infirmity, to perform the essential functions of
         his job (with or without reasonable accommodation) for more than ninety
         (90) days during any period of twelve (12) consecutive months. The
         existence of a Disability shall be determined by the Company.

                                 Death.  If the Employee should die during the
         Term, the Company shall have no further obligation to the Employee, his
         spouse, or his estate except to pay to the Employee's estate the amount
         of compensation earned or accrued by the Employee through the month of
         his death, such compensation to be prorated to the date of death.

                           5.6   Compensation Upon Termination. In the event of
         termination of Employee's employment as set forth herein, and subject
         to the Company's right to offset against any such benefits,
         compensation, or severance amounts owed to Employee, whether the result
         of promissory notes, loans, or other financial arrangements the Company
         may have entered into with or on the Employee's behalf, and which are
         or would become due and payable on or after the Termination Date, to
         include the principal and interest pursuant to such arrangements, the
         Parties agree that the following terms shall be the exclusive severance
         arrangements:

                           5.6.1 In the event of termination of Employee's
                  employment by the Company for "Cause," pursuant to Section 5.1
                  or unilateral termination by the Employee pursuant to Section
                  5.3, the Company's obligation to pay and provide Employee
                  compensation and benefits under this Agreement shall
                  immediately terminate, except: (a) Employee shall be entitled
                  to receive that portion of his Base Salary which shall have
                  been earned through the termination date; and (b) the Company
                  shall pay or provide Employee such other payments and
                  benefits, if any, which had accrued hereunder before the
                  termination date. Other than the foregoing, the Company shall
                  have no further obligations to Employee under this Agreement.

                           5.6.2 In the event the Company terminates Employee's
                  employment Without Cause pursuant to Section 5.2 or Employee
                  terminates for Good Reason within thirty (30) days of the
                  event constituting Good Reason pursuant to Section 5.4, at any
                  time other than the two (2) year period immediately following
                  a "Change in Control," the Company's obligation to pay and
                  provide Employee compensation and benefits under this
                  Agreement shall immediately terminate, except: (a) Employee
                  shall be entitled to receive that portion of his Base Salary
                  which shall have been earned through the termination date; (b)
                  the Company shall pay or provide Employee such other payments
                  and benefits, if any, which had accrued hereunder before the
                  termination date; (c) the Company shall continue to pay to
                  Employee his base monthly salary, which shall be that monthly
                  salary amount as of the date of termination, for a period of
                  twelve (12) months following the date of termination, payable
                  in bi-weekly installments in accordance with the Company's
                  regular pay policy; (d) the Company shall pay Employee a
                  monthly payment in an amount equivalent to the COBRA Premium

                                       4
<PAGE>

                  Rates then in effect, for twelve (12) months immediately
                  following the date of termination, and said payment shall
                  cease immediately upon Employee's re-employment during such
                  period, so long as Employee is covered by the new employer's
                  plan; and (e) with respect to Company stock options granted
                  after the date of this Agreement, Employee would immediately
                  vest in any option that would have vested within twelve (12)
                  months of Employee's termination date had Employee not been
                  terminated, and such option may be exercised pursuant to the
                  provisions of the then current Company Stock Option and
                  Incentive Plan ("Stock Option Plan") as if the option were
                  vested at the date of termination. The Parties agree that, to
                  the extent this language is inconsistent with the Company
                  Stock Option and Incentive Plan, this Agreement shall modify,
                  govern, and control said Plan. Payment of the severance
                  compensation described in subpart (c) and (e) of this Section
                  5.6.2 is subject to the requirements of Sections 5.9 and 5.10.
                  Other than the foregoing, the Company shall have no further
                  obligations to Employee under this Agreement.

                           5.6.3 In the event Employee's employment is
                  terminated as a result of Employee's Death or Disability
                  pursuant to Section 5.5, the Company's obligation to pay and
                  provide the Employee compensation and benefits under this
                  Agreement shall immediately terminate except: (a) Employee
                  shall be entitled to receive that portion of his Base Salary
                  which shall have been earned through the termination date; and
                  (b) the Company shall pay or provide Employee such other
                  payments and benefits, if any, which had accrued hereunder
                  before the termination date. Other than the foregoing, the
                  Company shall have no further obligations to Employee under
                  this Agreement.

                           5.6.4 In the event of a "Qualifying Termination"
                  within two (2) years immediately following a "Change In
                  Control," then, in lieu of all other benefits under this
                  Agreement, the Company's obligation to pay and provide
                  Employee compensation and benefits under this Agreement shall
                  immediately terminate, except: (a) Employee shall be entitled
                  to receive that portion of his Base Salary which shall have
                  been earned through the termination date; (b) the Company
                  shall pay or provide Employee such other payments and
                  benefits, if any, which had accrued hereunder before the
                  termination date; (c) the Company shall pay to Employee in a
                  lump sum not later than thirty (30) days after the termination
                  date an amount equal to two hundred percent (200%) of the sum
                  of (i) his annual Base Salary, and (ii) the highest bonus
                  payment of the preceding two annual bonus awards, which bonus
                  shall not be in an amount less than twenty-five (25%) of
                  Employee's then current annual Base Salary; (d) the Company
                  shall pay Employee a monthly payment in an amount equivalent
                  to the COBRA Premium Rates then in effect, for eighteen (18)
                  months immediately following the date of termination, and said
                  payment shall cease immediately upon Employee's re-employment
                  during such period, so long as Employee is covered by the new
                  employer's health plan; (e) the Company shall provide Employee
                  with out-placement services at a cost not to exceed Two
                  Thousand Five Hundred Dollars ($2,500.00); and (f) Employee
                  shall be allowed to exercise available stock options in
                  accordance with the Stock Option Plan as if he were terminated
                  without cause pursuant to the Stock Option Plan. Payment or
                  provision of the severance compensation or benefits described
                  in subparts (c), (d) and (e) of this Section 5.6.4 is subject
                  to the requirements of Sections 5.9 and 5.10. Other than the
                  foregoing, the Company shall have no further obligations to
                  Employee under this Agreement.

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<PAGE>

                  For purposes of this Agreement, a "Qualifying Termination"
                  shall mean either (i) a unilateral termination of Employee by
                  the Company without Cause pursuant to paragraph 5.2 or (ii) a
                  termination by Employee for Good Reason pursuant to paragraph
                  5.4 within thirty (30) days of the event constituting Good
                  Reason.

                  For purposes of this Agreement, "Change In Control" of the
                  Company shall mean and shall be deemed to have occurred as of
                  the first day any one or more of the following conditions
                  shall have been satisfied:

                           (A) The acquisition by any individual entity or group
                  (within the meaning of Section 13(d)(3) or 14(d)(2) of the
                  Securities Exchange Act of 1934, as amended (the "Exchange
                  Act") (a "Person") of beneficial ownership (within the meaning
                  of Rule 13d-3 promulgated under the Exchange Act as in effect
                  from time to time) of twenty-five percent (25%) or more of
                  either (i) the then outstanding shares of common stock of the
                  Company or (ii) the combined voting power of the then
                  outstanding voting securities of the Company entitled to vote
                  generally in the election of directors; provided, however,
                  that the following acquisitions shall not constitute an
                  acquisition of control: (a) any acquisition directly from the
                  Company (excluding an acquisition by virtue of the exercise of
                  a conversion privilege), (b) any acquisition by the Company,
                  (c) any acquisition by any employee benefit plan (or related
                  trust) sponsored or maintained by the Company or any
                  corporation controlled by the Company, (d) any acquisition by
                  any corporation pursuant to a reorganization, merger or
                  consolidation, if, following such reorganization, merger or
                  consolidation, the conditions described in clauses (i), (ii)
                  and (iii) of subsection (C) of this Section 5.6.4 are
                  satisfied, (e) any acquisition by any Person who on the date
                  of this Agreement is a director or officer of the Company or
                  is the beneficial owner of 10% or more of the outstanding
                  voting securities of the Company ("Affiliated Person") or (f)
                  upon the death of any shareholder who, on the date of this
                  Agreement, is the beneficial owner of 10% or more of the
                  outstanding voting securities of the Company, any acquisition
                  triggered by the death of such shareholder by operation of
                  law, by any testamentary bequest or by the terms of any trust
                  or other contractual arrangement established by such
                  shareholder; or

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<PAGE>

                           (B) Individuals who, as of the date hereof,
                  constitute the Board of Directors of the Company (the
                  "Incumbent Board") cease for any reason to constitute at least
                  a majority of the Board of Directors of the Company (the
                  "Board"); provided, however, that any individual becoming a
                  director subsequent to the date hereof whose election, or
                  nomination for election by the Company's shareholders, was
                  approved by a vote of at least a majority of the directors
                  then comprising the Incumbent Board shall be considered as
                  though such individual were a member of the Incumbent Board,
                  but excluding, for this purpose, any such individual whose
                  initial assumption of office occurs as a result of either an
                  actual or threatened election contest (as such terms are used
                  in Rule 14a-11 of Regulation 14A promulgated under the
                  Exchange Act) or other actual or threatened solicitation of
                  proxies or consents by or on behalf of a Person other than the
                  Board; or

                           (C) Approval by the Shareholders of the Company of a
                  reorganization, merger or consolidation, in each case, unless,
                  following such reorganization, merger or consolidation, (i)
                  more than fifty percent (50%) of, respectively, the then
                  outstanding shares of common stock of the corporation
                  resulting from such reorganization, merger or consolidation
                  and the combined voting power of the then outstanding voting
                  securities of such corporation entitled to vote generally in
                  the election of directors is then beneficially owned, directly
                  or indirectly, by all or substantially all of the individuals
                  and entities who were the beneficial owners, respectively, of
                  the outstanding Company common stock and outstanding Company
                  voting securities immediately prior to such reorganization,
                  merger or consolidation in substantially the same proportions
                  as their ownership, immediately prior to such reorganization,
                  merger or consolidation, of the outstanding Company stock and
                  outstanding Company voting securities, as the case may be,
                  (ii) no Person (excluding the Company, any employee benefit
                  plan or related trust of the Company or such corporation
                  resulting from such reorganization, merger or consolidation
                  and any Person beneficially owning, immediately prior to such
                  reorganization, merger or consolidation, directly or
                  indirectly, twenty-five percent (25%) or more of the
                  outstanding Company common stock or outstanding voting
                  securities, as the case may be) beneficially owns, directly or
                  indirectly, twenty-five percent (25%) or more of,
                  respectively, the then outstanding shares of common stock of
                  the corporation resulting from such reorganization, merger or
                  consolidation or the combined voting power of the then
                  outstanding voting securities of such corporation entitled to
                  vote generally in the election of directors and (iii) at least
                  a majority of the members of the board of directors of the
                  corporation resulting from such reorganization, merger or
                  consolidation were members of the Incumbent Board at the time
                  of the execution of the initial agreement providing for such
                  reorganization, merger or consolidation; or

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<PAGE>

                           (D) Approval by the shareholders of the Company of
                  (i) a complete liquidation or dissolution of the Company or
                  (ii) the sale or other disposition of all or substantially all
                  of the assets of the Company, other than to a corporation with
                  respect to which following such sale or other disposition (a)
                  more than fifty percent (50%) of, respectively, the then
                  outstanding shares of common stock of such corporation and the
                  combined voting power of the then outstanding voting
                  securities of such corporation entitled to vote generally in
                  the election of directors is then beneficially owned, directly
                  or indirectly, by all or substantially all of the individuals
                  and entities who were the beneficial owners, respectively, of
                  the outstanding Company common stock and outstanding Company
                  voting securities immediately prior to such sale or other
                  disposition in substantially the same proportion as their
                  ownership, immediately prior to such sale or other
                  disposition, of the outstanding Company common stock and
                  outstanding Company voting securities, as the case may be, (b)
                  no Person (excluding the Company and any employee benefit plan
                  or related trust of the Company or such corporation, any
                  Affiliated Person and any Person beneficially owning,
                  immediately prior to such sale or other disposition, directly
                  or indirectly, twenty-five percent (25%) or more of the
                  outstanding Company common stock or outstanding Company voting
                  securities, as the case may be) beneficially owns, directly or
                  indirectly, twenty-five percent (25%) or more of,
                  respectively, the then outstanding shares of common stock of
                  such corporation and the combined voting power of the then
                  outstanding voting securities of such corporation entitled to
                  vote generally in the election of directors and (c) at least a
                  majority of the members of the board of directors of such
                  corporation were members of the Incumbent Board at the time of
                  the execution of the initial agreement or action of the Board
                  providing for such sale or other disposition of assets of the
                  Company.

                           5.7   Internal Revenue Code Limits. Should any
         payments by the Company to or for the benefit of Employee under this
         Agreement constitute an "excess parachute payment" within the meaning
         of Section 280G of the Internal Revenue Code of 1986, as amended
         (the "Code"), then the Company shall pay Employee an additional amount
         of money that will equal the sum of (a) all excise or other taxes
         imposed upon Employee by Section 4999 of the Code (excluding any
         penalties or interest) and (b) all additional state and federal taxes,
         interest and/or penalties attributable to the additional payments made
         to Employee pursuant to this Section 5.7. If an excise tax is imposed
         pursuant to the Internal Revenue Code of 1986, Employee agrees to
         immediately notify the Company within ten (10) days of the event, in
         writing, and Employee hereby gives the Company the right to challenge
         said imposition.

                           5.8   Payroll Withholdings. The Company may withhold
         from any compensation or benefits payable under this Agreement all
         federal, state, city, or other taxes or deductions as may be required
         pursuant to any law or governmental regulation or ruling.

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<PAGE>

                           5.9   Compliance With Post-Employment Restrictions.
         If Employee breaches, or threatens to breach any of the covenants or
         provisions set forth in Sections 6 and 7 of this Agreement, then in
         such event the Company shall have the right immediately and permanently
         to discontinue payment and provision of any of the severance
         compensation and benefits payable under this Agreement. The Employee
         and Company acknowledge and agree that such remedy is in addition to,
         and not in lieu of, any and all other legal and/or equitable remedies
         that may be available to the Company in connection with the Employee's
         breach or threatened breach of any of the covenants or provisions of
         this Agreement.

                           5.10  Release Agreement. As a condition of receiving
         the severance benefits described in Sections 5.6.2(c), 5.6.2(e),
         5.6.4(c), 5.6.4(d), or 5.6.4(e), Employee will be required to sign a
         standard release agreement acceptable to the Company in which he
         releases and waives all claims which he may have against the Company or
         any affiliate, employee, shareholder, officer, director, agent or
         representative of the Company (except for his rights under this
         Agreement or any other vested rights Employee may have under any
         insurance, pension, employee stock ownership or stock option plans
         sponsored or made available by the Company). The Company will provide
         such release agreement to Employee at the termination of Employee's
         employment with the Company. As part of the release agreement, Employee
         will be required (a) to agree to cooperate with the Company with
         respect to any business matters about which he has knowledge, including
         any litigation or threatened litigation (b) agree not to cooperate with
         any claimants against the Company unless required by law to do so, (c)
         agree not to make any negative or derogatory comments about the Company
         or its executives and (d) affirm his post-termination obligations under
         this Agreement, including without limitation the obligations set forth
         in Sections 6 and 7.

                  6.       Non-competition.

                           6.1  General. Employee acknowledges that his position
         with the Company is special, unique and intellectual in character and
         his position in the Company places him in a position of confidence and
         trust with employees and customers of the Company. Employee further
         acknowledges, recognizes, and represents receipt of sufficient
         consideration for these restraints in the form of the increased Base
         Salary and other valuable consideration contained herein. The
         restrictions and obligations contained in this Section 6 shall survive
         the term of this Agreement. Notwithstanding the above, if the Company
         terminates, or elects not to renew this Agreement, and subsequently
         terminates Employee's employment without the payment of severance
         payments equivalent to the payments described in Section 5.6.2, the
         Employee will not be subject to the restrictions and obligations of
         this Section 6.

                           6.2  Non-competition. Employee agrees that during his
         employment with the Company and for a period of two (2) years
         immediately after the termination of Employee's employment with the
         Company, whether such employment is pursuant to this Agreement or is
         without an Agreement, thereafter Employee shall not:

                           6.2.1 Either alone or in concert with others, whether
                  as director, officer, consultant, principal, employee, agent
                  or otherwise, engage in or contribute Employee's knowledge and
                  abilities to any business or entity in competition with the
                  Company ("Competing Business");



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<PAGE>

                           6.2.2 Be employed by, work for, consult with, or act
                  in any other capacity for, any person or entity that is
                  engaged in any Competing Business if in such employment, work
                  or capacity Employee likely would, because of the nature of
                  his position with, or work for, the competitor and his
                  knowledge of the Company's Confidential Information,
                  inevitably use and/or disclose any of the Company's
                  Confidential Information in his work for or with such
                  competitor;

                           6.2.3 Solicit, recruit, hire, employ or attempt to
                  hire or employ any person who is then or within the proceeding
                  one (1) year period was, an employee of the Company, or
                  otherwise urge, induce or seek to induce any person to
                  terminate his/her employment with the Company;

                           6.2.4 Solicit, urge, induce or seek to induce any of
                  the Company's independent contractors, subcontractors,
                  vendors, suppliers, customers or consultants to terminate
                  their relationship with, or representation of, the Company or
                  to cancel, withdraw, reduce, limit or in any manner modify any
                  such person's or entity's business with or representation of,
                  the Company for whatever purpose or reason;

                           6.2.5 Take any action intended to harm the Company or
                  its reputation, which the Company reasonably concludes could
                  lead to unwanted or unfavorable publicity to the Company;

                           6.2.6 The restrictive time periods set forth in this
                  Section 6.2 shall not expire during any period in which
                  Employee is in violation of any of the restrictive covenants
                  set forth in this Section 6.2, and all restrictions shall
                  automatically be extended by the period Employee was in
                  violation of any such restrictions;

                           6.2.7 The restrictive covenants contained in this
                  Section 6.2 prohibit Employee from engaging in certain
                  activities directly or indirectly, whether on his own behalf
                  or on behalf of any other person or entity.

                           6.2.8 The covenants and restrictions in this Section
                  6.2 are separate and divisible, and to the extent any
                  covenant, provision or portion of Section 6.2 is determined to
                  be unenforceable or invalid for any reason, such
                  unenforceability or invalidity shall not affect the
                  enforceability or validity of the remainder of the Agreement.
                  Should any particular covenant, restriction, provision or
                  portion of Section 6.2 be held unreasonable or unenforceable
                  for any reason, including, without limitation, the time
                  period, geographical area, and/or scope of activity covered by
                  any restrictive covenant, provision or clause, such covenant,
                  provision or clause shall automatically be deemed reformed
                  such that the contested covenant, provision or portion will
                  have the closest affect permitted by applicable law to the
                  original form and shall be given effect and enforced as so
                  reformed to the extent reasonable and enforceable under
                  applicable law.

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<PAGE>

                           6.3   Definition of "Competing Business":  The term
         "Competing Business" shall include, but not be limited to:

                           6.3.1 Any retail business, or any company affiliated
                  with such a business, whether subsidiary, affiliated or a
                  joint venture, which sells footwear at retail to consumers at
                  price points competitive, or likely to be competitive with the
                  Company (including, without limitation, Payless ShoeSource,
                  Inc.; Brown Shoe Company, Inc.; Discount Shoe Warehouse, a
                  division of Value City Department Stores, Inc.; Rack Room
                  (dba); Kohls Corporation; Shoe Station (dba); Shoe City (dba);
                  Shoe Department (dba); Foot Star, Inc.; Finish Line, Inc.,
                  and/or any subsidiary or affiliate of any of the
                  aforementioned competitors) within 25 miles of any Company
                  store.

                           6.3.2 Ownership of an investment of less than 5% of
                  any class of equity or debt security of a publicly-held
                  Competing Business shall not constitute ownership or
                  participation in violation of the above.

                           6.4   Acknowledgment Regarding Restrictions.
         Employee acknowledges and agrees that he understands the restrictions
         in Section 6; that they are reasonable and enforceable, in view of,
         among other things, the Employee's position within the Company, the
         highly competitive nature of the Company's business, and the
         confidential nature of the information the Employee has been provided.
         Employee further agrees that the Company would not have adequate
         protection if Employee were permitted to work for its competitors in
         violation of the terms of this Agreement since the Company would be
         unable to verify whether its Confidential Information was being
         disclosed and/ or misused, and whether Employee was involved in
         diverting the Company's customers and/or its customer goodwill.

                           6.5   Disclosures Concerning New Employment.
         Employee agrees that he (a) will immediately, within ten (10) days,
         notify the Company in writing of his employment, engagement or other
         affiliation with any other business or entity during the two (2) years
         immediately following the termination of Employee's employment with the
         Company and (b) will provide a copy of Section 6 and 7 of this
         Agreement to any prospective employer before accepting employment or
         other work engagement with any such employer.

                  7.       Confidential or Proprietary Information

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                           7.1   Confidentiality. As used in this Agreement,
         the term "Confidential Information" means any and all of the Company's
         trade secrets, confidential and proprietary information and all other
         information and data of the Company that is not generally known to
         third persons who could derive economic value from its use or
         disclosure, including, without limitation, the Company's profile of
         prospective or current vendors or customers, business methods and
         structure, details of the Company's contracts and business matters,
         employee compensation, personnel information, marketing strategies and
         plans, business plans, pricing information and strategies, costs
         information, and financial data, whether or not reduced to writing or
         other tangible medium of expression, including work product created by
         Employee in rendering services to the Company. During his employment
         with the Company and thereafter, Employee will not use or disclose to
         others any of the Confidential Information except as authorized in
         writing by the Company or in the performance of work assigned Employee
         by the Company. Employee also will abide by the Company's policies
         protecting the Confidential Information. Employee's confidentiality
         obligations shall continue as long as the Confidential Information
         remains confidential, and shall not apply to information which becomes
         generally known to the public through no fault or action of Employee.
         Employee agrees that the Company owns the Confidential Information and
         Employee has no rights, title or interest in any of the Confidential
         Information. At the Company's request or upon termination of Employee's
         employment with the Company for any reason, Employee will immediately
         deliver to the Company all materials (including all copies and
         electronically stored data) containing any Confidential Information in
         Employee's possession, custody or control.

                           7.2   Trade Secrets-Developments. All
         improvements, developments, concepts, and ideas ("Developments")
         relating to the Company's business, or capable of beneficial use by the
         Company, including, but not limited to, marketing, confidential and
         trade secret information, techniques, discoveries, slogans, designs,
         artwork, and writings, which the Employee has made or will make during
         his employment with the Company are the sole and exclusive property of
         the Company without charge to the Company other than the Employee's
         compensation.

                           7.3   Acknowledgement. Employee agrees that the
         restrictions set forth in Sections 7.1 and 7.2 are reasonable and
         necessary to protect the trade secrets, confidential information,
         intellectual property rights and goodwill of the Company. The
         restrictions and obligations contained in this Section 7 shall survive
         the term of this Agreement.

                  8.       Remedies. In the event of a breach or threatened
breach by the Employee of any of the above provisions, the Company shall be
entitled to an injunction restraining Employee from such breach, in addition to
all other remedies which the Company shall be entitled to pursue. The Company
also shall be entitled to recover from Employee all litigation costs and
attorneys' fees incurred by the Company in any action or proceeding relating to
this Agreement in which the Company prevails, including, but not limited to, any
action or proceeding in which the Company seeks enforcement of this Agreement or
seeks relief from Employee's violation of this Agreement. Nothing herein shall
be construed as prohibiting the Company from pursuing any other remedies
available for such breach, threatened breach, or any breach of this Agreement.

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                  9.       Survival of Post-Termination Obligations. Employee
acknowledges and agrees that his post-termination obligations under this
Agreement, including without limitation Employee's non-competition and
confidentiality obligations set forth in Sections 6 and 7 of this Agreement,
shall survive the termination of Employee's employment with the Company,
regardless whether such termination is voluntary or involuntary, or is with or
without cause.

                  10.      Notices.  All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be deemed to
have been delivered on the date personally delivered or the dated mailed,
postage prepaid, by certified mail, return receipt requested, or telegraphed and
confirmed, or faxed and confirmed, if addressed to the respective parties as
follows;

                  To Employee:              Timothy Baker
                                            3243 Brookfield Drive
                                            Newburgh, Indiana 47630

                  To Company:               Chief Executive Officer
                                            Shoe Carnival, Inc.
                                            8233 Baumgart Road
                                            Evansville, Indiana 47725

Either Party hereto may designate a different address by providing written
notice of such new address to the other Party hereto.

                  11.      Waiver. The failure or delay of the Company at any
time or times to require performance of, or to exercise any of its powers,
rights or remedies with respect to, any term or provision of this Agreement or
any other aspect of Employee's conduct or employment shall not affect the
Company's right to later enforce any such term or provision.

                  12.      Assignment. The Company shall have the right to
assign this Agreement. This Agreement shall inure to the benefit of, and may be
enforced by, any and all successors and assigns of the Company, including,
without limitation, by asset assignment, stock sale, merger, consolidation or
other corporate reorganization, and shall be binding on Employee, his executors,
administrators, personal representatives and other successors in interest.
Employee shall not have the right to assign this Agreement nor any of his
rights, powers, duties or obligations hereunder.

                  13.      Binding Effect.  This Agreement shall be binding upon
and inure to the benefit of the Parties hereto, including the Employee's heirs
and personal representatives, and the successor and assigns to the Company.

                  14.      Entire Agreement. This Agreement cancels and
supersedes all prior negotiations, discussions, commitments and understandings
between the Parties relating hereto, whether oral or written. This Agreement
embodies the entire agreement and understanding between such Parties with
respect to the matters covered hereby. Neither party shall be bound by any term
or condition other than as is expressly set forth herein. This Agreement may not
be amended, supplemented or modified except by a written document signed by both
Employee and a duly authorized officer of the Company.

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                  15.      Amendment.  This Agreement may be amended only by an
instrument in writing executed by the Parties hereto.

                  16.      Governing Law: Forum Selection. This Agreement shall
be construed and enforced in accordance with and governed by the laws of the
State of Indiana, without regard to the conflicts of law rules thereof. Any
legal action relating to this Agreement shall be commenced and maintained
exclusively before any appropriate state court of record in Vanderburgh County,
Indiana, or, if necessary because of a federal question mandating jurisdiction
in the federal courts is involved, the United States District Court for the
Southern District of Indiana, Evansville Division, and the parties hereby submit
the jurisdiction of such courts and waive any right to challenge or otherwise
raise questions of personal jurisdiction or venue in any action commenced or
maintained in such courts.

                  17.      Severability.  The Parties intend that the provisions
of this Agreement shall be enforced to the fullest extent permissible under the
applicable law.  Should any provision of this Agreement be unenforceable or
invalid for any reason, such unenforceability or invalidity shall not affect the
enforceability or validity of the remainder of the Agreement.

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

SHOE CARNIVAL, INC.: "Company"              TIMOTHY BAKER: "Employee"


By:    /s/ Mark L. Lemond                   /s/ Timothy T. Baker
      --------------------------------      ------------------------------------
Its:   President and CEO                    Date: August 28, 2001
      --------------------------------      ------------------------------------
Date:  August 28, 2001
      --------------------------------



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