<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM 10-K
------------------------
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
TO
COMMISSION FILE NUMBER 1-6402-1
------------------------
SERVICE CORPORATION INTERNATIONAL
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TEXAS 74-1488375
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
1929 ALLEN PARKWAY 77019
HOUSTON, TEXAS (Zip code)
(Address of principal executive offices)
</TABLE>
Registrant's telephone number, including area code: 713/522-5141
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<C> <C>
Common Stock ($1 par value) New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
$3.125 Term Convertible Shares, New York Stock Exchange
Series A, of SCI Finance LLC,
a subsidiary of the registrant
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No______
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the common stock held by non-affiliates of
the registrant (assuming that the registrant's only affiliates are its officers
and directors) is $7,482,259,803 based upon a closing market price of $32.125 on
March 21, 1997 of a share of common stock as reported on the New York Stock
Exchange -- Composite Transactions Tape.
The number of shares outstanding of the registrant's common stock as of
March 21, 1997 was 238,757,934 (excluding treasury shares).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement in connection with its 1997
Annual Meeting of Shareholders (Part III)
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<PAGE> 2
PART I
ITEM 1. BUSINESS.
Service Corporation International was incorporated in Texas on July 5,
1962. The term "Company" or "SCI" includes the registrant and its subsidiaries,
unless the context indicates otherwise.
The Company is the largest provider of death care services in the world. At
December 31, 1996, the Company operated 2,882 funeral service locations, 345
cemeteries and 150 crematoria located in North America, Europe and the Pacific
Rim. In addition, the Company provides capital financing to independent funeral
home and cemetery operators.
The Company has continued to expand through the acquisition of funeral
service locations, cemeteries and crematoria, both domestically and
internationally. In 1996, the Company acquired 210 funeral service locations, 35
cemeteries and 9 crematoria. The Company has acquired most of its present
operations through acquisitions. For information regarding acquisitions, see
Note 3 to the consolidated financial statements in Item 8 of this Form 10-K.
For financial information about the Company's industry segments, including
the identifiable assets of the Company by industry segments, see Note 14 to the
consolidated financial statements in Item 8 of this Form 10-K.
FUNERAL AND CEMETERY OPERATIONS
The Funeral and Cemetery Operations consist of the Company's funeral
service locations, cemeteries and related businesses. The operations are
organized into five North American divisions covering the United States and
Canada, a European division which includes the Company's French and United
Kingdom operations, and a Pacific Rim division. Each division is under the
direction of divisional executive management with substantial industry
experience. Local funeral service location and cemetery managers, under the
direction of the divisional management, receive support and resources from SCI's
headquarters in Houston, Texas and have substantial autonomy with respect to the
manner in which services are conducted.
The majority of the Company's funeral service locations and cemeteries are
managed in groups called clusters. Clusters are established primarily in
metropolitan areas to take advantage of operational efficiencies, including the
sharing of service personnel, vehicles, preparation services, clerical staff and
certain building facility costs.
Funeral Service Locations. The funeral service locations provide all
professional services relating to funerals, including the use of funeral
facilities and motor vehicles. Funeral service locations sell caskets, coffins,
burial vaults, cremation receptacles, flowers and burial garments, and certain
funeral service locations also operate crematoria. The Company owns 140 funeral
service location/cemetery combinations and operates 53 flower shops engaged
principally in the design and sale of funeral floral arrangements. These flower
shops provide floral arrangements to some of the Company's funeral homes and
cemeteries.
In addition to selling its services and products to client families at the
time of need, the Company also sells prearranged funeral services in most of its
service markets, including foreign markets. Funeral prearrangement is a means
through which a customer contractually agrees to the terms of a funeral to be
performed in the future. The funds collected from prearranged funeral contracts
are generally held in trust, are used to purchase life insurance or annuity
contracts from third party insurers or, with respect to French contracts, are
held in the Company's French insurance subsidiary. This French insurance
subsidiary sells prearranged funeral insurance contracts primarily in connection
with the Company's French funeral service operations. Funds paid on prearranged
funerals may not be withdrawn until the funeral is performed or until
cancellation by the customer. At December 31, 1996, the Company's unfulfilled
prearranged funeral contracts, including accumulated trust fund earnings and
increased benefits on insurance products, amounted to $2,726 million of which
$239 million is estimated, based on actuarial assumptions, to be fulfilled in
1997. The unfulfilled prearranged funeral contracts at December 31, 1995 were
$2,362 million. For additional informa-
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tion concerning prearranged funeral activities, see Note 4 to the consolidated
financial statements in Item 8 of this Form 10-K.
The Company has multiple funeral service locations and cemeteries in a
number of metropolitan areas. Within individual metropolitan areas, the funeral
service locations and cemeteries operate under various names because most
operations were acquired as existing businesses and generally continue to be
operated under the same name as before acquisition.
The death rate tends to be somewhat higher in the winter months and the
Company's funeral service locations generally experience a higher volume of
business during those months.
Since 1984, the Company has operated under the Federal Trade Commission's
("FTC") comprehensive trade regulation rule for the funeral industry. The rule
contains minimum guidelines for funeral industry practices, requires extensive
price and other affirmative disclosures and imposes mandatory itemization of
funeral goods and services. From time to time in connection with acquisitions,
the Company has entered into consent orders with the FTC that have required the
Company to dispose of certain operations to proceed with acquisitions or have
limited the Company's ability to make acquisitions in specified areas. The trade
regulation rule and the various consent orders have not had a materially adverse
effect on the Company's operations.
Cemeteries. The Company's cemeteries sell cemetery interment rights
(including mausoleum spaces and lawn crypts) and certain merchandise including
stone and bronze memorials and burial vaults. The Company's cemeteries also
perform interment services and provide management and maintenance of cemetery
grounds. Certain cemeteries also operate crematoria.
Cemetery sales are often made on a preneed basis pursuant to installment
contracts providing for monthly payments. A portion of the proceeds from
cemetery sales is generally required by law to be paid into perpetual care trust
funds. Earnings of perpetual care trust funds are used to defray the maintenance
cost of cemeteries. In addition, all or a portion of the proceeds from the sale
of preneed cemetery merchandise may be required by law to be paid into trust
until the merchandise is purchased on behalf of the customer. For additional
information regarding cemetery trust funds, see Notes 2 and 5 to the
consolidated financial statements in Item 8 of this Form 10-K.
Death Care Industry. The funeral industry is characterized by a large
number of locally owned, independent operations. The Company believes that based
on the total number of funeral services performed in 1996, the Company,
including companies acquired by it, performed approximately 10%, 29%, 14% and
24% of the funeral services in North America, France, the United Kingdom and
Australia, respectively.
To compete successfully, the Company's funeral service locations must
maintain competitive prices, attractive, well-maintained and conveniently
located facilities, a good reputation and high professional standards. In
addition, heritage and tradition can provide an established funeral home with
the opportunity for repeat business from client families. Furthermore, an
established firm can generate future volume and revenues by marketing
prearranged funeral services.
The cemetery industry is also characterized by a large number of locally
owned independent operations. The Company's cemetery properties compete with
other cemeteries in the same general area. To compete successfully, the
Company's cemeteries must maintain competitive prices, attractive and
well-maintained properties, a good reputation, an effective sales force and high
professional standards.
FINANCIAL SERVICES OPERATION
Since 1988, the Company's wholly owned subsidiary, Provident Services, Inc.
("Provident"), has provided secured financing to independent funeral home and
cemetery operators. The majority of Provident's loans are made to clients
seeking to finance funeral home or cemetery acquisitions. Additionally,
Provident provides construction loans for funeral home or cemetery improvement
and expansion. Loan packages take traditional forms of secured financing
comparable to arrangements offered by leading commercial banks. Provident's
loans are generally made at interest rates which float with the prime lending
rate.
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Provident had $146 million in loans outstanding at December 31, 1996 and
unfunded loan commitments amounting to $55 million. Such loans outstanding
decreased from $214 million in loans outstanding at December 31, 1995. Provident
obtains its funds primarily from the Company's variable interest rate bank
borrowings.
Provident is in competition with banks and other lending institutions, many
of which have substantially greater resources than Provident. However, Provident
believes that its knowledge of the death care industry provides it with the
ability to make more accurate assessments of funeral home and cemetery loans,
thereby providing Provident a competitive advantage in making such loans.
EMPLOYEES
At December 31, 1996, the Company employed 22,607 (13,987 in the United
States) persons on a full time basis and 10,776 (7,422 in the United States)
persons on a part time basis. Of the full time employees, 22,009 were in the
Funeral and Cemetery Operations, eight were in Financial Services and 590 were
in corporate services. All of the Company's eligible United States employees who
so elect are covered by the Company's group health and life insurance plans, and
all eligible United States employees are participants in retirement plans of the
Company or various subsidiaries. Although labor disputes are experienced from
time to time, in general relations with employees are considered satisfactory.
REGULATION
The Company's various operations are subject to regulations, supervision
and licensing under various federal, state, local and Australian, Canadian,
French, United Kingdom and other foreign statutes, ordinances and regulations.
The Company believes that it is in substantial compliance with the significant
provisions of such statutes, ordinances and regulations. See discussion of FTC
funeral industry trade regulation and consent orders in "Funeral Service
Locations" above.
In May 1995, the Monopolies and Mergers Commission (the "Commission") of
the United Kingdom issued a report with respect to SCI's 1994 acquisition of
Plantsbrook Group plc that recommended that SCI divest of certain operations in
ten localities to achieve a competitive balance satisfactory to the Commission.
In 1997, this matter was settled and SCI is divesting 12 funeral service
locations in ten localities. The Company believes the settlement will not have a
materially adverse effect on the Company's operations in the United Kingdom.
The French funeral services industry is currently undergoing significant
regulatory change. Historically, the French funeral services industry has been
controlled, as provided by national legislation, either (i) directly by
municipalities through municipality-operated funeral establishments ("Municipal
Monopoly"), or (ii) indirectly by the remaining municipalities that have
contracted for funeral service activities with third party providers, such as
SCI's French operations ("Exclusive Municipal Authority"). Legislation has been
passed that will generally end municipal control of the French funeral service
business and will allow the public to choose their funeral service provider.
Under such legislation, the Exclusive Municipal Authority was abolished in
January 1996, and the Municipal Monopolies will be eliminated by January 1998.
Cemeteries in France, however, are and will continue to be controlled by
municipalities and religious organizations, with third parties, such as SCI,
providing cemetery merchandise such as markers and monuments.
ITEM 2. PROPERTIES.
The Company's executive headquarters are located at 1929 Allen Parkway,
Houston, Texas 77019, in a 12-story office building. A wholly owned subsidiary
of the Company owns an undivided one-half interest in the building and its
parking garage. The property consists of approximately 1.3 acres, 250,000 square
feet of office space in the building and 160,000 square feet of parking space in
the garage. The Company leases all of the office space in the building pursuant
to a lease that expires June 30, 2005 providing for monthly rent of $43,000
through July 2000 and $59,000 thereafter. The Company pays all operating
expenses. One half of the rent is paid to the wholly owned subsidiary and the
other half is paid to the owners of the remaining undivided
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<PAGE> 5
one-half interest. The Company owns and utilizes a three-story building at 1919
Allen Parkway, Houston, Texas 77019 containing 43,000 square feet of office
space.
At December 31, 1996, the Company owned the real estate and buildings of
2,307 of its funeral service and cemetery locations and leased facilities in
connection with 1,070 of such operations. In addition, the Company leased four
aircraft pursuant to cancelable leases. At December 31, 1996, the Company
operated 10,987 vehicles, of which 7,505 were owned and 3,482 were leased. For
additional information regarding leases, see Note 10 to the consolidated
financial statements in Item 8 of this Form 10-K.
The Company's 345 cemeteries contain an aggregate of approximately 25,751
acres, of which approximately 55% are developed.
The specialized nature of the Company's businesses requires that its
facilities be well maintained and kept in good condition. Management believes
that these standards are met.
ITEM 3. LEGAL PROCEEDINGS.
Although the Company is involved in legal proceedings, the Company does not
believe that any of the proceedings is material pursuant to the standards set
forth in Item 103 of Regulation S-K promulgated under the Securities Exchange
Act of 1934.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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EXECUTIVE OFFICERS OF THE COMPANY
Pursuant to General Instruction G to Form 10-K, the information regarding
executive officers of the Company called for by Item 401 of Regulation S-K is
hereby included in Part I of this report.
The following table sets forth as of March 21, 1997 the name and age of
each executive officer of the Company, the office held, and the date first
elected an officer.
<TABLE>
<CAPTION>
YEAR
FIRST
BECAME
OFFICER NAME AGE POSITION OFFICER(1)
------------ --- -------- ----------
<S> <C> <C> <C>
R. L. Waltrip................................ (66) Chairman of the Board and Chief 1962
Executive Officer
L. William Heiligbrodt....................... (55) President and Chief Operating Officer 1988
W. Blair Waltrip............................. (42) Executive Vice President Operations 1980
John W. Morrow, Jr. ......................... (61) Executive Vice President 1989
Corporate Development
Jerald L. Pullins............................ (55) Executive Vice President 1992
European Operations
George R. Champagne.......................... (43) Senior Vice President 1989
Chief Financial Officer
Glenn G. McMillen............................ (54) Senior Vice President Operations 1993
Richard T. Sells............................. (57) Senior Vice President Prearranged 1987
Sales
James M. Shelger............................. (47) Senior Vice President General Counsel 1987
and Secretary
Jack L. Stoner............................... (51) Senior Vice President Administration 1992
T. Craig Benson.............................. (35) Vice President International 1990
Operations
Gregory L. Cauthen........................... (39) Vice President Treasurer 1995
W. Mark Hamilton............................. (32) Vice President Finance 1996
European Operations
Lowell A. Kirkpatrick, Jr. .................. (38) Vice President Corporate Development 1994
Todd A. Matherne............................. (42) Vice President Investor Relations 1996
Vincent L. Visosky........................... (49) Vice President Operational Controller 1989
Henry M. Nelly, III.......................... (52) President -- Provident Services, Inc., 1989
a subsidiary of the Company
</TABLE>
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(1) Indicates the year a person was first elected as an officer although there
were subsequent periods when certain persons ceased being officers of the
Company.
Unless otherwise indicated below, the persons listed above have been
executive officers or employees for more than five years.
Mr. Matherne joined the Company in April 1995 as Managing Director Investor
Relations and was promoted in May 1996 to Vice President Investor Relations.
Prior thereto, Mr. Matherne was Vice President and General Manager of Baker
Hughes Treatment Services, an environmental services business.
Each officer of the Company is elected by the Board of Directors and holds
his office until his successor is elected and qualified or until his earlier
death, resignation or removal in the manner prescribed in the Bylaws of the
Company. Each officer of a subsidiary of the Company is elected by the
subsidiary's board of directors and holds his office until his successor is
elected and qualified or until his earlier death, resignation or removal in the
manner prescribed in the bylaws of the subsidiary. There is no family
relationship between any of the
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persons in the preceding table except that W. Blair Waltrip is a son of R. L.
Waltrip, that T. Craig Benson is a son-in-law of R. L. Waltrip and that T. Craig
Benson and W. Blair Waltrip are brothers-in-law.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock has been traded on the New York Stock Exchange
since May 14, 1974. On December 31, 1996, there were 7,730 holders of record of
the Company's common stock.
The Company has declared 95 consecutive quarterly dividends on its common
stock since it began paying dividends in 1974. The dividend rate is currently
$.075 per share per quarter, or an indicated annual rate of $.30 per share. For
the three years ended December 31, 1996, dividends per share were $.24, $.22 and
$.21, respectively.
The table below shows the Company's quarterly high and low common stock
prices:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1996 1995 1994
---------------- ---------------- ----------------
HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
First................................ $24.75 $19.44 $14.56 $13.13 $14.00 $12.38
Second............................... 30.13 24.13 15.81 13.44 12.94 11.25
Third................................ 29.44 27.63 19.75 15.19 13.32 12.44
Fourth............................... 30.75 26.50 22.00 18.81 13.88 12.07
</TABLE>
SRV is the New York Stock Exchange ticker symbol for the common stock of
the Company. Options in the Company's common stock are traded on the
Philadelphia Stock Exchange under the symbol SRV.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,*
--------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues......................... $2,294,194 $1,652,126 $1,117,175 $ 899,178 $ 772,477
Income before income taxes....... 413,881 294,211 219,021 173,492 139,336
Income before cumulative effect
of change in accounting
principles..................... 265,298 183,588 131,045 103,092 86,536
Net income....................... 265,298 183,588 131,045 101,061 86,536
Earnings per share:
Primary........................ 1.10 .90 .75 .61 .56
Fully diluted.................. 1.07 .85 .72 .58 .53
Dividends per share.............. .24 .22 .21 .20 .20
Total assets..................... 8,869,770 7,672,387 5,161,888 3,683,304 2,611,123
Long-term debt................... 2,048,737 1,712,464 1,330,177 1,062,222 980,029
Convertible preferred securities
of SCI Finance LLC............. 172,500 172,500 172,500 -- --
Stockholders' equity............. 2,235,317 1,975,345 1,196,622 884,513 683,097
Shares outstanding............... 236,193 234,542 189,714 169,718 153,810
Ratio of earnings to fixed
charges**...................... 3.24 2.84 3.13 3.19 3.03
</TABLE>
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* All common stock and per share data has been restated for a two-for-one
common stock split on August 30, 1996. The year ended December 31, 1993
reflects a change in accounting principles adopted January 1, 1993. The year
ended December 31, 1992 reflect results as historically reported.
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** For purposes of computing the ratio of earnings to fixed charges, earnings
consist of income from continuing operations before income taxes, less
undistributed income of equity investees which are less than 50% owned, plus
the minority interest of majority-owned subsidiaries with fixed charges and
plus fixed charges (excluding capitalized interest). Fixed charges consist of
interest expense, whether capitalized or expensed, amortization of debt
costs, dividends on preferred securities of SCI Finance LLC and one-third of
rental expense which the Company considers representative of the interest
factor in the rentals.
SCI International Limited
SCI International Limited ("International") is a wholly owned subsidiary of
the Company. International, through wholly owned subsidiaries, began operations
in mid-1993 and owns substantially all of the Company's foreign operations.
Set forth below is certain summary financial information for International.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues............................................... $ 883,203 $ 439,750 $ 99,033
---------- ---------- ----------
Gross profit........................................... $ 143,924 $ 88,551 $ 30,068
---------- ---------- ----------
Net income............................................. $ 55,748 $ 21,163 $ 4,353
---------- ---------- ----------
Current assets......................................... $ 223,930 $ 207,411 $ 215,104
Non-current assets..................................... 2,520,118 2,218,977 885,417
---------- ---------- ----------
Total assets........................................... $2,744,048 $2,426,388 $1,100,521
---------- ---------- ----------
Current liabilities.................................... $ 303,304 $ 257,682 $ 258,723
Non-current liabilities................................ $2,198,718 1,584,979 805,939
---------- ---------- ----------
Total liabilities...................................... $2,502,022 $1,842,661 $1,064,662
---------- ---------- ----------
Stockholder's equity................................... $ 242,026 $ 583,727 $ 35,859
---------- ---------- ----------
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
(DOLLARS IN THOUSANDS, EXCEPT AVERAGE SALES PRICES AND PER SHARE DATA)
The Company's primary objective is to maximize shareholder value. To
accomplish this goal, the Company's strategy has been to provide consistent
growth in earnings per share. The growth strategy initiates with the Company
producing significant cash flow from its existing cluster operations, then grows
by using that cash to expand clusters through add-on acquisitions, new
construction, and improvements to existing locations. The Company also expands
its network through strategic acquisition of larger, multi-location death care
companies, typically funding these transactions by accessing the debt and equity
markets when appropriate. All businesses are continuously improved by further
leveraging operating and overhead costs; enhancing buying power; expanding
preneed sales; and improving products, services and systems.
The majority of the Company's funeral service locations and cemeteries are
managed in groups called clusters. Clusters are established in and around
metropolitan areas to take advantage of operational efficiencies, particularly
the sharing of operating expenses such as service personnel, vehicles,
preparation services, clerical staff and certain building facility costs.
Personnel costs, the largest operating expense for the Company, is the cost
component most beneficially affected by clustering. The sharing of employees, as
well as the other costs mentioned, allow the Company to more efficiently utilize
its operating facilities during the traditional fluctuation in the number of
funeral services and cemetery interments performed in a given period. The
Company's acquisitions are primarily located within existing cluster areas or
create new cluster area opportunities. The Company has successfully implemented
the cluster strategy in its North American, United Kingdom and Australian
operations and is proceeding with implementation in its French operations which
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<PAGE> 9
were acquired in August 1995. The Company has approximately 311 clusters in
North America, the United Kingdom and Australia, which range in size from two
operations to 63 operations. There may be more than one cluster in a given
metropolitan area, depending upon the level and degree of shared costs.
RESULTS OF OPERATIONS:
Year ended 1996 compared to 1995
Segment information for the Company's three lines of business was as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, PERCENTAGE
-------------------------------------------------- INCREASE INCREASE
1996 1995 (DECREASE) (DECREASE)
----------------------- ----------------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Funeral....................... $ 1,663,387 $ 1,166,247 $497,140 42.6%
Cemetery...................... 612,421 463,754 148,667 32.1
Financial services............ 18,386 22,125 (3,739) (16.9)
----------- ----------- -------- -----
2,294,194 1,652,126 642,068 38.9
Costs and expenses:
Funeral....................... (1,282,546) (871,096) 411,450 47.2
Cemetery...................... (397,700) (303,312) 94,388 31.1
Financial services............ (9,496) (12,497) (3,001) (24.0)
----------- ----------- -------- -----
(1,689,742) (1,186,905) 502,837 42.4
Gross profit margin and
percentage:
Funeral....................... 380,841 22.9% 295,151 25.3% 85,690 29.0
Cemetery...................... 214,721 35.1% 160,442 34.6% 54,279 33.8
Financial services............ 8,890 48.4% 9,628 43.5% (738) (7.7)
----------- ----------- -------- -----
$ 604,452 26.3% $ 465,221 28.2% $139,231 29.9%
=========== =========== ========
</TABLE>
FUNERAL
Funeral revenues were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------ PERCENTAGE
1996 1995 INCREASE INCREASE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Existing clusters:
United States............................... $ 807,829 $ 730,053 $ 77,776 10.7%
Other European.............................. 141,969 130,849 11,120 8.5
Other foreign*.............................. 99,951 87,044 12,907 14.8
---------- ---------- -------- ----
1,049,749 947,946 101,803 10.7
New clusters:**
United States............................... 25,203 10,999 14,204
Other European.............................. 27,691 6,980 20,711
Other foreign*.............................. 15,450 4,278 11,172
France...................................... 537,079 190,091 346,988
---------- ---------- --------
605,423 212,348 393,075
---------- ---------- -------- ----
Total clusters...................... 1,655,172 1,160,294 494,878 42.7
Non-cluster and disposed operations........... 8,215 5,953 2,262
---------- ---------- -------- ----
Total funeral revenues.............. $1,663,387 $1,166,247 $497,140 42.6%
========== ========== ======== ====
</TABLE>
- ---------------
* Other foreign primarily includes Australian and Canadian operations.
** Represents new geographic cluster areas entered into since the beginning of
1995 for the period that those businesses were owned by the Company.
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<PAGE> 10
The $101,803 increase in revenues at existing clusters was primarily the
result of a 7.7% increase in North American funeral services performed at
existing cluster locations (226,822 compared to 210,611) and a 3.0% higher
average sales price ($3,745 compared to $3,635). Included in this increase were
$79,290 in increased revenues from locations acquired since the beginning of
1995. The remaining existing cluster revenue increase of $22,513 was contributed
by operations acquired before 1995. The 1995 results for France represent
approximately four months of Company ownership. The increase in Other European
new cluster revenue is primarily due to non-French European operations added
through the August 1995 OGF/PFG acquisition (See note three to the consolidated
financial statements).
The death rate in the Company's primary markets has remained relatively
constant for several years and is expected to remain at this rate for at least
the near future; however, due to the increasing proportion of people over age 65
in the Company's primary markets, demand for funeral services could increase in
the decades to come. It is anticipated that the Company's near term revenue
growth will continue to be primarily generated from acquired operations (added
to existing clusters and the creation of new clusters) as well as from
potentially higher average sales prices from improved merchandising of funeral
services and products and periodic price increases. The Company is the world's
largest in the funeral service industry and currently performs approximately
10%, 29%, 14% and 24% of the funeral services in North America, France, the
United Kingdom and Australia, respectively. The Company believes that there are
approximately 8,000 potential acquisition candidates in North America that meet
its current metropolitan acquisition criteria and numerous other candidates
outside of North America. The Company plans to continue to aggressively seek to
acquire these potential candidates.
During the year ended December 31, 1996, the Company sold (net of
cancellations) approximately $523,000 of prearranged funeral services compared
to approximately $367,000 for the same period in 1995. The obligations are
funded through both trust funded and insurance backed contracts. These
prearranged funeral services are deferred and will be reflected in funeral
revenues in the periods that the funeral services are performed. The current
emphasis on sales of prearranged funerals is expected to continue.
Funeral costs and expenses were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------ PERCENTAGE
1996 1995 INCREASE INCREASE
----------- --------- -------- ----------
<S> <C> <C> <C> <C>
Existing clusters:
United States............................... $ 520,864 $482,497 $ 38,367 8.0%
Other European.............................. 104,176 101,327 2,849 2.8
Other foreign*.............................. 65,549 57,650 7,899 13.7
---------- -------- -------- ----
690,589 641,474 49,115 7.7
New clusters:**
United States............................... 18,431 8,148 10,283
Other European.............................. 24,978 6,986 17,992
Other foreign............................... 10,855 3,396 7,459
France...................................... 466,136 165,778 300,358
---------- -------- --------
520,400 184,308 336,092
---------- -------- -------- ----
Total clusters...................... 1,210,989 825,782 385,207 46.6
Non-cluster and disposed operations........... 9,237 7,582 1,655
Administrative overhead....................... 62,320 37,732 24,588 65.2
---------- -------- -------- ----
Total funeral costs and expenses.... $1,282,546 $871,096 $411,450 47.2%
========== ======== ======== ====
</TABLE>
The total gross profit for existing clusters increased to $359,160 in 1996
from $306,472 in 1995, and the related gross profit percentage for existing
clusters increased to 34.2% from 32.3% last year. Acquisitions since the
beginning of 1995, included in existing clusters, accounted for $23,980 of the
existing gross profit increase. Typically, acquisitions will temporarily exhibit
slightly lower gross profit margins than those experienced by the Company's
existing locations at least until such time as these locations are assimilated
into the Company's
9
<PAGE> 11
cluster management strategy. The gross profit margin for those funeral
operations in existing clusters that were acquired before 1995 increased to
35.0% in 1996 from 32.7% last year due to the increased revenues discussed above
without a corresponding percentage increase in personnel and other operating
costs.
Contributing to the overall funeral gross profit margin decline (22.9%
compared to 25.3% last year) was the Company's French operations. French
operations had an increased gross profit margin of 13.2% in 1996, compared to
12.8% in 1995, however 1996 reflects a full years results compared to the four
months of ownership in 1995. The French margin is consistent with the Company's
expectations for these operations which have historically produced lower gross
margins than the Company's operations in North America and Australia.
Administrative overhead costs expressed as a percentage of revenues increased in
1996 to 3.7%, compared to 3.2% last year. This administrative overhead cost
increase was primarily attributable to the addition of the French operations as
well as the Company's realignment of its North American operating structure.
This realignment is expected to enhance the clusters' ability to manage
increased levels of business.
CEMETERY
Cemetery revenues were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------ PERCENTAGE
1996 1995 INCREASE INCREASE
---------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Existing clusters:
United States................................ $506,330 $395,821 $110,509 27.9%
Other European............................... 13,978 11,307 2,671 23.6
Other foreign*............................... 46,485 39,979 6,506 16.3
-------- -------- -------- ----
566,793 447,107 119,686 26.8
-------- -------- -------- ----
New clusters:**
United States................................ 41,221 12,972 28,249
Other European............................... 1,307 796 511
-------- -------- --------
42,528 13,768 28,760
-------- -------- -------- ----
Total clusters....................... 609,321 460,875 148,446 32.2
Non-cluster and disposed operations............ 3,100 2,879 221
-------- -------- -------- ----
Total cemetery revenues.............. $612,421 $463,754 $148,667 32.1%
======== ======== ======== ====
</TABLE>
Revenues for existing clusters increased due to an increased volume of
sales and higher average sales prices for property and merchandise. Included in
the existing cluster increase were $82,470 in increased revenues from cemeteries
acquired since the beginning of 1995. This increase was primarily due to the
impact of reporting a full years' results from the Gibraltar acquisition in
October 1995 (see note three to the consolidated financial statements). A
majority of the Gibraltar properties were additions to existing clusters. The
remaining existing cluster revenue increase of $37,216 was contributed by
operations acquired before 1995. The Company plans to continue to emphasize the
selling of preneed cemetery property and merchandise by maintaining an active
and well-trained sales force. Additionally, future growth through acquisitions
is considered likely.
10
<PAGE> 12
Cemetery costs and expenses were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------ PERCENTAGE
1996 1995 INCREASE INCREASE
---------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Existing clusters:
United States................................ $304,732 $246,790 $ 57,942 23.5%
Other European............................... 8,404 5,799 2,605 44.9
Other foreign*............................... 25,322 20,227 5,095 25.2
-------- -------- -------- ----
338,458 272,816 65,642 24.1
New clusters:**
United States................................ 24,547 8,581 15,966
Other European............................... 1,181 570 611
-------- -------- --------
25,728 9,151 16,577
-------- -------- -------- ----
Total clusters....................... 364,186 281,967 82,219 29.2
Non-cluster and disposed operations............ 4,129 3,509 620
Administrative overhead........................ 29,385 17,836 11,549 64.8
-------- -------- -------- ----
Total cemetery costs and expenses.... $397,700 $303,312 $ 94,388 31.1%
======== ======== ======== ====
</TABLE>
Costs at existing clusters increased $65,642 due primarily to an increase
of $48,846 from cemeteries acquired since the beginning of 1995, while costs
from existing cluster cemeteries acquired before 1995 increased $16,796. The
overall cemetery gross profit margin increased to 35.1% in 1996 from 34.6% last
year. This increase reflects strong growth in sales of preneed cemetery property
and merchandise as well as continued cost control in all major expense
categories. Administrative overhead costs have increased to 4.8% of revenues
this year compared to 3.8% last year. This administrative overhead cost increase
was primarily attributable to increased costs from additional infrastructure
added in the Company's United Kingdom operations as well as the Company's
realignment of its North American operating structure which should enhance the
clusters' ability to manage increased levels of business. Acquisitions typically
have lower gross profit margins, at least until such time that they are
assimilated into the Company's cluster management strategy and preneed selling
programs are fully implemented.
FINANCIAL SERVICES
The Company's wholly-owned finance subsidiary, Provident Services, Inc.
("Provident") increased its gross margin percentage to 48.4% from 43.5%. This
was primarily attributable to early termination fees associated with the payoff
of outstanding loans in August 1996, by two of Provident's largest customers.
These payoffs reduced the average outstanding loan portfolio during the current
year to approximately $191,000 with an average interest rate spread of 3.6%
compared to approximately $206,000 and 3.7%, respectively, last year.
OTHER INCOME AND EXPENSES
Expressed as a percentage of revenues, general and administrative expenses
were 2.8% in 1996 compared to 3.2% last year. These expenses increased by
approximately $9,600 or 17.9% during the year primarily due to the recognition
of $6,000 in costs relating to the Loewen transaction (see below) as well as
increases in personnel costs. On October 3, 1996, the Company filed a
registration statement with the Securities and Exchange Commission ("SEC") with
regard to a proposed acquisition of the outstanding shares of Loewen Group Inc.
("Loewen"), a publicly traded death care company, through an exchange offer. On
January 7, 1997, the Company announced that it had withdrawn its proposed
exchange offer for Loewen.
Interest expense, which excludes the amount incurred through financial
service operations, increased $20,409 or 17.3% during the current year primarily
from incremental borrowings incurred to fund the Company's acquisition program.
The 1996 increase is the result of an increase of approximately $296,875 in the
Company's average debt (excluding debt related to Provident) outstanding during
the year ended
11
<PAGE> 13
December 31, 1996, compared to the prior year. The increased interest associated
with the higher debt level was offset by a slightly lower average interest rate
for the year.
The provision for income taxes reflected a 35.9% effective tax rate for
1996 as compared to a 37.6% effective tax rate in the prior year. The decrease
in the effective tax rate is due primarily to lower taxes from international
operations.
RESULTS OF OPERATIONS:
Year ended 1995 compared to 1994
Segment information for the Company's three lines of business was as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------- PERCENTAGE
1995 1994 INCREASE INCREASE
-------------------- -------------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Funeral......................... $ 1,166,247 $ 754,408 $411,839 54.6%
Cemetery........................ 463,754 343,521 120,233 35.0
Financial services.............. 22,125 19,246 2,879 15.0
----------- ----------- -------- ----
1,652,126 1,117,175 534,951 47.9
Costs and expenses:
Funeral......................... (871,096) (531,803) 339,293 63.8
Cemetery........................ (303,312) (233,295) 70,017 30.0
Financial services.............. (12,497) (10,882) 1,615 14.8
----------- ----------- -------- ----
(1,186,905) (775,980) 410,925 53.0
Gross profit margin and
percentage:
Funeral......................... 295,151 25.3% 222,605 29.5% 72,546 32.6
Cemetery........................ 160,442 34.6% 110,226 32.1% 50,216 45.6
Financial services.............. 9,628 43.5% 8,364 43.5% 1,264 15.1
----------- ----------- -------- ----
$ 465,221 28.2% $ 341,195 30.5% $124,026 36.4%
=========== =========== ========
</TABLE>
FUNERAL
Funeral revenues were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------ INCREASE PERCENTAGE
1995 1994 (DECREASE) INCREASE
----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Existing clusters:
United States............................... $ 720,608 $633,569 $ 87,039 13.7%
Other foreign*.............................. 83,441 68,166 15,275 22.4
---------- -------- -------- ----
804,049 701,735 102,314 14.6
New clusters:**
United States............................... 20,975 4,450 16,525
Other foreign*.............................. 6,146 1,631 4,515
United Kingdom.............................. 131,523 39,277 92,246
---------- -------- --------
158,644 45,358 113,286
---------- -------- -------- ----
Total clusters...................... 962,693 747,093 215,600 28.9
France and other European..................... 198,018 -- 198,018
Non-cluster and disposed operations........... 5,536 7,315 (1,779)
---------- -------- -------- ----
Total funeral revenues.............. $1,166,247 $754,408 $411,839 54.6%
========== ======== ======== ====
</TABLE>
- ---------------
* Other foreign primarily includes Australian and Canadian operations.
** Represents new geographic cluster areas entered into since the beginning of
1994 for the period that those businesses were owned by the Company.
12
<PAGE> 14
The $102,314 increase in revenues at existing clusters was primarily the
result of a 9.7% increase in North American funeral services performed (207,834
compared to 189,481) and a 3.9% higher average sales price ($3,638 compared to
$3,501). Included in this increase were $77,434 in increased revenues from
locations acquired since the beginning of 1994. The remaining revenue increase
of $24,880 was contributed by operations acquired before 1994.
The France and other European operations represent approximately four
months of Company ownership, while the 1994 United Kingdom operations represent
approximately four months of Company ownership.
During the year ended December 31, 1995, the Company sold (net of
cancellations) approximately $367,000 of prearranged funeral services compared
to approximately $245,000 for the same period in 1994. The Company also acquired
approximately $508,000 of deferred revenues associated with prearranged funerals
in the 1995 French acquisition.
Funeral costs and expenses were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------ INCREASE PERCENTAGE
1995 1994 (DECREASE) INCREASE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Existing clusters:
United States................................ $473,991 $413,663 $ 60,328 14.6%
Other foreign*............................... 54,227 44,725 9,502 21.2
-------- -------- -------- ----
528,218 458,388 69,830 15.2
New clusters:**
United States................................ 16,292 3,679 12,613
Other foreign*............................... 4,762 1,286 3,476
United Kingdom............................... 101,992 29,909 72,083
-------- -------- --------
123,046 34,874 88,172
-------- -------- -------- ----
Total clusters....................... 651,264 493,262 158,002 32.0
France and other European...................... 173,437 -- 173,437
Non-cluster and disposed operations............ 8,663 9,733 (1,070)
Administrative overhead........................ 37,732 28,808 8,924 31.0
-------- -------- -------- ----
Total funeral costs and expenses..... $871,096 $531,803 $339,293 63.8%
======== ======== ======== ====
</TABLE>
The total gross profit for existing clusters increased to $275,831 in 1995
from $243,347 in 1994, while the related gross profit margin percentage for
existing clusters declined slightly to 34.3% from 34.7% in 1994. Acquisitions
since the beginning of 1994, included in existing clusters, accounted for
$19,905 of the existing gross profit increase and were the primary reason for
the existing cluster gross profit margin decline. Typically, acquisitions will
temporarily exhibit slightly lower gross profit margins than those experienced
by the Company's existing locations at least until such time as these locations
are assimilated into the Company's cluster management strategy. This was
especially noticeable given the large number of acquired operations incorporated
into existing clusters in 1995 and 1994. The gross profit margin for those
funeral operations in existing clusters that were acquired before 1994 increased
to 36.0% in 1995 from 35.5% in 1994 due to the increased revenues discussed
above without a corresponding percentage increase in personnel and other
operating costs.
Contributing to the overall funeral gross profit margin decline (25.3%
compared to 29.5% in 1994) were the Company's United Kingdom and French
operations. The Company's United Kingdom operations had a gross profit margin of
22.5% for the year ended December 31, 1995, compared to 23.9% in 1994 (four
months of ownership). France and other European operations had a gross profit
margin of 12.4% in 1995 (four months of ownership). These margins are consistent
with the Company's expectations for its European funeral operations which have
historically produced lower gross margins than the Company's operations in North
America and Australia. Administrative overhead costs expressed as a percentage
of revenues declined in 1995 to 3.2%, compared to 3.8% in 1994.
13
<PAGE> 15
CEMETERY
Cemetery revenues were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------ PERCENTAGE
1995 1994 INCREASE INCREASE
---------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Existing clusters:
United States................................ $392,949 $310,211 $ 82,738 26.7%
Other foreign*............................... 39,979 27,876 12,103 43.4
-------- -------- -------- ----
432,928 338,087 94,841 28.1
New clusters:**
United States................................ 14,148 -- 14,148
United Kingdom............................... 12,232 3,316 8,916
-------- -------- --------
26,380 3,316 23,064
-------- -------- -------- ----
Total clusters....................... 459,308 341,403 117,905 34.5
Non-cluster and disposed operations............ 4,446 2,118 2,328
-------- -------- -------- ----
Total cemetery revenues.............. $463,754 $343,521 $120,233 35.0%
======== ======== ======== ====
</TABLE>
Revenues for existing clusters increased due to an increased volume of
sales and higher average sales prices for property and merchandise. Included in
the existing cluster increase were $38,157 in increased revenues from cemeteries
acquired since the beginning of 1994.
Cemetery costs and expenses were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------ PERCENTAGE
1995 1994 INCREASE INCREASE
---------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Existing clusters:
United States.................................. $244,550 $197,189 $47,361 24.0%
Other foreign*................................. 20,227 14,107 6,120 43.4
-------- -------- ------- ----
264,777 211,296 53,481 25.3
New clusters:**
United States.................................. 10,438 -- 10,438
United Kingdom................................. 6,517 2,425 4,092
-------- -------- -------
16,955 2,425 14,530
-------- -------- ------- ----
Total clusters......................... 281,732 213,721 68,011 31.8
Non-cluster and disposed operations.............. 3,744 2,045 1,699
Administrative overhead.......................... 17,836 17,529 307 1.8
-------- -------- ------- ----
Total cemetery costs and expenses...... $303,312 $233,295 $70,017 30.0%
======== ======== ======= ====
</TABLE>
Costs at existing clusters increased $53,481 due primarily to an increase
of $26,404 from cemeteries acquired since the beginning of 1994, while costs
from existing cluster cemeteries acquired before 1994 increased $27,077. The
overall cemetery gross profit margin increased to 34.6% in 1995 from 32.1% in
1994. This increase reflects strong growth in sales of preneed cemetery property
and merchandise as well as continued cost control in all major expense
categories. Administrative overhead costs decreased to 3.8% of revenues in 1995
compared to 5.1% in 1994.
14
<PAGE> 16
FINANCIAL SERVICES
Provident reported an improved interest rate spread offset by higher
administrative expenses. The average outstanding loan portfolio during 1995 was
approximately $206,000 with an average interest rate spread of 3.7% compared to
approximately $235,000 and 3.4%, respectively, in 1994.
OTHER INCOME AND EXPENSES
Expressed as a percentage of revenues, general and administrative expenses
were 3.2% in 1995 compared to 4.6% in 1994. These expenses increased by $1,900
or 3.7% during the year primarily from corporate transportation and travel costs
partially offset by decreased professional fees and other corporate expenses.
Interest expense, which excludes the amount incurred through financial
service operations, increased $38,025 or 47.5% during 1995 primarily from
incremental borrowings incurred to fund the Company's international acquisition
program. Of the increase, approximately $27,000 is the result of financings for
the United Kingdom acquisition and represents a full year of interest compared
to only four months in 1994. Approximately $10,000 of the remaining increase is
due to debt related to the French acquisition in late August 1995.
The provision for income taxes reflected a 37.6% effective tax rate for
1995 as compared to a 40.2% effective tax rate in 1994. The decrease in the
effective tax rate is due primarily to lower taxes from international
operations.
FINANCIAL CONDITION AND LIQUIDITY AT DECEMBER 31, 1996:
GENERAL
Historically, the Company has funded its working capital needs and capital
expenditures primarily through cash provided by operating activities and
borrowings under bank revolving credit agreements and commercial paper. Funding
required for the Company's acquisition program has been generated through public
and private offerings of debt and the issuance of equity securities supplemented
by the Company's revolving credit agreements and additional securities
registered with the SEC. The Company believes cash from operations, additional
funds available under its revolving credit agreements, proceeds from offerings
of securities and the other registered securities will be sufficient to continue
its current acquisition program and operating policies.
At December 31, 1996, the Company had net working capital of $106,497 and a
current ratio of 1.18:1, compared to working capital of $47,850 and a current
ratio of 1.08:1 at December 31, 1995.
1996 PUBLIC OFFERINGS
In May 1996, the Company issued $300,000 of notes which were sold through
an underwritten public offering. These notes were issued in two tranches of
$150,000 each with maturities in June 2001 and 2006 and interest rates of 6.75%
and 7.20%, respectively. The proceeds of this offering were primarily used to
repay existing debt outstanding under the Company's revolving credit agreements.
REVOLVING CREDIT AGREEMENTS
The Company has various revolving credit facilities and lines of credit
which provide for aggregate borrowings of up to $850,000. At December 31, 1996,
$544,852 of these facilities and lines was available.
INTEREST RATE AND CURRENCY MANAGEMENT
The Company uses derivatives primarily in the form of interest rate swaps
and cross-currency interest rate swaps in combination with local currency
borrowings in order to manage its mix of fixed and floating rate debt and to
substantially hedge the Company's net investment in foreign assets. Accordingly,
movements in currency rates that impact the swaps are generally offset by a
corresponding movement in the value of the underlying assets being hedged and
movements in interest rates that impact the fair value of the interest rate
15
<PAGE> 17
swaps are generally offset by a corresponding movement in the value of the
underlying debt being hedged. Similarly, currency movements that impact foreign
interest expense due under the cross-currency interest rate swaps are generally
offset by a corresponding movement in the earnings of the foreign operation.
In general, interest rates are managed such that 30% to 50% of the total
debt (excluding debt which offsets the Provident loan receivable portfolio) is
floating rate and thus is sensitive to interest rate fluctuations. After giving
effect to the interest rate swaps discussed more fully in note eight to the
Company's consolidated financial statements, the Company's total debt has been
converted into approximately $1,174,000 of fixed interest rate debt at a
weighted average rate of 8.00% and approximately $1,052,000 of floating interest
rate debt at a weighted average rate of 5.28%. At December 31, 1996, a one
percent increase in the various floating rate indices referenced in the debt and
swaps would cause a $10,520 net increase in interest expense. However, the
Company's overall sensitivity to floating interest rate fluctuations on amounts
owed would be partially mitigated by a corresponding higher interest rate on the
receivables issued by Provident (approximately $146,000 in receivables at
December 31, 1996). Further interest rate risk is diversified in that
approximately 42% of the Company's floating rate exposure is based in four
markets other than the United States. In the first quarter of 1997, the Company
initiated the repurchase of three issues of its outstanding notes and intends to
refinance such repurchased notes in a manner that should reduce future interest
expense (see note eighteen to the consolidated financial statements).
In general, the Company hedges up to 100% of its net investment in foreign
assets when such investment is considered significant and when it is reasonably
cost efficient to do so. The death care industries in countries where the
Company has foreign operations are generally stable and have had predictable
cash flows. In addition, those countries have not had highly inflationary
economies. Approximately one-third of the Company's net assets and one-quarter
of its operating income are denominated in foreign currencies. Due to the
cross-currency hedges described above, only about 10% of the Company's net
assets and operating earnings are subject to translation risk. At December 31,
1996 the increase in the "Foreign currency translation adjustment" of $20.6
million, is primarily the result of the U.S. dollar appreciation against the
British pound.
SOURCES AND USES OF CASH
Cash Flows from Operating Activities: Net cash provided by operating
activities was $209,857 for the year ended December 31, 1996, compared to
$171,498 for the same period in 1995, an increase of $38,359. This increase was
primarily due to improved operating results in 1996. Significant uses of
operating cash include an increase in net receivables resulting from increased
sales of funeral services and cemetery products and merchandise.
Cash Flows from Investing Activities: Net cash used in investing activities
was $480,126 for the year ended December 31, 1996, compared to $925,135 for the
same period in 1995, a decrease of $445,009. This decrease was primarily due to
a $414,307 decrease in cash used in acquisitions. The difference primarily
relates to the significant French acquisition during 1995. Additionally the
Company received approximately $126,000 in early principal payments on loans
issued by Provident from two of its largest customers during 1996. These were
partially offset by increased capital expenditures including new construction of
facilities and major improvements to existing properties which continue to
require significant amounts of cash. Cash used for capital expenditures was
$193,152 during the year ended December 31, 1996. Additionally, cash used
relating to prearranged funeral activities increased due to the timing of cash
payments to and withdrawals from trusts as well as increased cash outlays on
marketing efforts.
Cash Flows from Financing Activities: Net cash provided by financing
activities was $256,916 for the year ended December 31, 1996, compared to
$592,780 for the same period in 1995, a decrease of $335,864. The decrease in
1996 compared to 1995 is mainly due to the significant French acquisition in
1995 for which the Company raised equity (approximately $313,000) as well as
debt.
The Company believes that debt service has no adverse effect on its
operations or financing activities at the current levels of debt outstanding. As
of December 31, 1996, the Company's debt to capitalization ratio was 47.3%
compared to 46.1% at December 31, 1995. The interest rate coverage ratio for the
year ended
16
<PAGE> 18
December 31, 1996 was 3.62:1, compared to 3.11:1 for the same period in 1995.
This interest rate coverage level has been relatively consistent, despite higher
levels of debt outstanding, for several years. The Company believes that the
acquisition of funeral and cemetery operations funded with debt or Company
common stock is a prudent business strategy given the stable cash flow generated
and the low failure rate exhibited by these types of businesses. The Company
believes these acquired firms are capable of servicing the additional debt and
providing a sufficient return on the Company's investment.
The Company expects adequate sources of funds to be available to finance
its future operations and acquisitions through internally generated funds,
borrowings under credit facilities and the issuance of securities. At December
31, 1996, the Company had approximately $544,852 of available borrowings under
its revolving credit facilities. In addition, as of December 31, 1996, the
Company had the ability to issue $1,000,000 in securities registered with the
SEC under a shelf registration as well as 19,338,000 shares of common stock and
a total of $222,378 of guaranteed promissory notes and convertible debentures
registered with the SEC under a separate shelf registration to be used
exclusively for future acquisitions.
PREARRANGED FUNERAL SERVICES
The Company has a marketing program to sell prearranged funeral contracts
and the funds collected are generally held in trust or are used to purchase a
life insurance or annuity contract. The principal amount of these prearranged
funeral contracts will be received in cash by a Company funeral service location
at the time the funeral is performed. Earnings on trust funds and increasing
benefits under insurance funded contracts also increase the amount of cash to be
received upon performance of the funeral and are intended to cover future
increases in the cost of providing a price guaranteed funeral service as well as
any selling costs. The Company has recently completed a review of the
prearranged trust investment process which included an asset/liability study.
This has resulted in a new investment program which entails the consolidation of
multiple trustees, the use of institutional managers with differing investing
styles and consolidated performance monitoring and tracking. This new program
targets a real return in excess of the amount necessary to cover future
increases in the cost of providing a price guaranteed funeral service as well as
any selling costs. This is accomplished by allocating the portfolio mix to the
appropriate investments that more accurately match the anticipated maturity of
the policies. This has resulted in a new asset allocation policy of
approximately 65% equity and 35% fixed income which the Company intends to
implement in the first half of 1997.
Marketing costs incurred with the sale of prearranged funeral contracts are
a current use of cash which is partially offset with cash retained, pursuant to
state laws, from amounts trusted and certain commissions earned by the Company
for sales of insurance products issued by third party insurers. The Company
sells prearranged funerals in most of its service markets including its foreign
markets. Auxia, the Company's French life insurance subsidiary, primarily sells
insurance products used to fund prearranged funerals to be performed at the
Company's French funeral service locations. Prearranged funeral service sales
afford the Company the opportunity to both protect current market share and mix
as well as expand market share in certain markets. The Company believes this
adds stability to the funeral service industry and will stimulate future revenue
growth. Prearranged funeral services fulfilled as a percent of the total North
American funerals performed annually approximates 22% and is expected to grow,
thereby making the total number of funerals performed more predictable.
CREMATIONS
In recent years there has been steady, gradual growth in the number of
cremations that have been chosen as an alternative to traditional methods of
disposal of human remains. In 1996, nearly 33% of all families served by the
Company's North American funeral service locations selected the cremation
alternative, substantially more than the 20% national average according to
industry studies. The Company has a significant number of operating locations in
Florida and the west coast of North America where the cremation alternative
continues to gain acceptance. Based on industry studies, the Company believes
that cremations account for approximately 60-70% of all dispositions of human
remains in Australia and the United Kingdom. It is estimated that cremations
account for approximately 12% of all dispositions of human remains in France.
Though a cremation typically results in less sales dollars than a traditional
funeral service, the Company
17
<PAGE> 19
believes that funeral operations which are predominantly cremation businesses
typically have higher gross profit margin percentages than those exhibited at
traditional funeral operations. Cremation memorialization has long been a
tradition in the Australian and United Kingdom markets. The Company has expanded
its product alternatives in these markets which has resulted in higher average
sales. The Company has also established markets in select areas within North
America and believes that memorialization of cremated remains represents a
source of revenue growth.
OTHER MATTERS
The Company will adopt Statement of Financial Accounting Standards No. 125
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" ("FAS 125"), which was amended by FAS 127, in January 1997. The
Company will adopt FAS 128 "Earnings Per Share" and FAS 129 "Disclosures of
Information About Capital Structure" for the year ended December 31, 1997. The
Company does not anticipate that the adoption of these standards will have a
material impact on the consolidated financial statements. See note sixteen to
the consolidated financial statements.
18
<PAGE> 20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS AND RELATED SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... 20
Consolidated Statement of Income for the three years ended
December 31, 1996......................................... 21
Consolidated Balance Sheet as of December 31, 1996 and
1995...................................................... 22
Consolidated Statement of Cash Flows for the three years
ended December 31, 1996................................... 23
Consolidated Statement of Stockholders' Equity for the three
years ended December 31, 1996............................. 24
Notes to Consolidated Financial Statements.................. 25
Financial Statement Schedule:
II -- Valuation and Qualifying Accounts..................... 49
</TABLE>
All other schedules have been omitted because the required information is
not applicable or is not present in amounts sufficient to require submission or
because the information required is included in the consolidated financial
statements or the related notes thereto.
19
<PAGE> 21
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of
Directors of Service Corporation International
We have audited the accompanying consolidated balance sheet of Service
Corporation International as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. We have also audited
the financial statement schedule for the three years ended December 31, 1996,
listed in the index at item 8 of this Form 10-K. These financial statements and
the financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Service
Corporation International as of December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND L.L.P.
Houston, Texas
March 21, 1997
20
<PAGE> 22
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Revenues........................................... $ 2,294,194 $ 1,652,126 $ 1,117,175
Costs and expenses................................. (1,689,742) (1,186,905) (775,980)
----------- ----------- -----------
Gross profit....................................... 604,452 465,221 341,195
General and administrative expenses................ (63,215) (53,600) (51,700)
----------- ----------- -----------
Income from operations............................. 541,237 411,621 289,495
Interest expense................................... (138,557) (118,148) (80,123)
Dividends on preferred securities of SCI Finance
LLC.............................................. (10,781) (10,781) (539)
Other income....................................... 21,982 11,519 10,188
----------- ----------- -----------
(127,356) (117,410) (70,474)
----------- ----------- -----------
Income before income taxes......................... 413,881 294,211 219,021
Provision for income taxes......................... (148,583) (110,623) (87,976)
----------- ----------- -----------
Net income......................................... $ 265,298 $ 183,588 $ 131,045
=========== =========== ===========
Earnings per share:
Primary.......................................... $ 1.10 $ .90 $ .75
=========== =========== ===========
Fully diluted.................................... $ 1.07 $ .85 $ .72
=========== =========== ===========
Weighted average number of shares and
equivalents...................................... 241,178 204,148 173,852
=========== =========== ===========
</TABLE>
(All common stock and per share data has been restated for a
two-for-one common stock split on August 30, 1996)
(See notes to consolidated financial statements)
21
<PAGE> 23
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
---------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 44,131 $ 57,484
Receivables, net of allowances............................ 494,576 448,941
Inventories............................................... 139,019 120,805
Other..................................................... 36,314 32,371
---------- ----------
Total current assets.............................. 714,040 659,601
---------- ----------
Investments -- insurance subsidiary......................... 601,565 557,335
Prearranged funeral contracts............................... 2,159,348 1,811,597
Long-term receivables....................................... 809,287 762,891
Cemetery property, at cost.................................. 1,380,213 1,162,556
Property, plant and equipment, at cost (net)................ 1,457,075 1,273,722
Deferred charges and other assets........................... 371,608 292,470
Names and reputations (net)................................. 1,376,634 1,152,215
---------- ----------
$8,869,770 $7,672,387
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 440,797 $ 420,940
Current maturities of long-term debt...................... 113,876 122,237
Income taxes.............................................. 52,870 68,574
---------- ----------
Total current liabilities......................... 607,543 611,751
---------- ----------
Long-term debt.............................................. 2,048,737 1,712,464
Deferred income taxes....................................... 527,460 437,840
Other liabilities........................................... 552,443 400,434
Deferred prearranged funeral contract revenues.............. 2,725,770 2,362,053
Commitments and contingencies............................... -- --
Company obligated, mandatorily redeemable, convertible
preferred securities of SCI Finance LLC, whose principal
asset is a 6.25%, $216,315 note from the Company.......... 172,500 172,500
Stockholders' equity:
Common stock, $1 per share par value, 500,000,000 shares
authorized, 236,193,427 and 234,542,172, respectively,
issued and outstanding................................. 236,193 234,542
Capital in excess of par value............................ 1,237,783 1,214,708
Retained earnings......................................... 728,108 518,562
Foreign currency translation adjustment................... 22,315 1,747
Unrealized gain on securities available for sale, net of
tax.................................................... 10,918 5,786
---------- ----------
Total stockholders' equity.................................. 2,235,317 1,975,345
---------- ----------
$8,869,770 $7,672,387
========== ==========
</TABLE>
(All common stock data has been restated for a
two-for-one common stock split on August 30, 1996)
(See notes to consolidated financial statements)
22
<PAGE> 24
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................ $ 265,298 $ 183,588 $ 131,045
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 129,819 92,541 68,993
Provision for deferred income taxes............ 56,902 45,164 27,490
Gains from dispositions (net).................. (9,930) (1,024) (2,143)
Change in assets and liabilities net of effects
from acquisitions:
(Increase) in receivables.................... (167,338) (115,888) (103,935)
(Increase) in other assets................... (36,781) (36,496) (35,983)
Increase (decrease) in other liabilities..... (26,365) 7,473 27,606
Other........................................ (1,748) (3,860) (159)
----------- ----------- -----------
Net cash provided by operating activities........... 209,857 171,498 112,914
----------- ----------- -----------
Cash flows from investing activities:
Capital expenditures.............................. (193,152) (125,231) (81,090)
Changes in prearranged funeral balances........... (86,291) (80,794) 49,530
Proceeds from sales of property and equipment..... 30,121 12,655 13,294
Acquisitions, net of cash acquired................ (279,320) (693,627) (711,357)
Loans issued by finance subsidiary................ (86,858) (38,184) (48,320)
Principal payments received on loans by finance
subsidiary..................................... 156,064 24,312 76,288
Change in investments and other................... (20,690) (24,266) (5,042)
----------- ----------- -----------
Net cash used in investing activities............... (480,126) (925,135) (706,697)
----------- ----------- -----------
Cash flows from financing activities:
Increase (decrease) in borrowings under revolving
credit agreements.............................. 96,441 (453,959) 295,570
Long-term debt issued............................. 300,000 862,848 200,000
Payment of debt................................... (109,458) (135,960) (31,896)
Convertible preferred shares of SCI Finance LLC
issued......................................... -- -- 172,500
Common stock issued............................... -- 331,063 189,726
Dividends paid.................................... (55,262) (43,676) (36,013)
Bank overdrafts and other......................... 25,195 32,464 1,415
----------- ----------- -----------
Net cash provided by financing activities........... 256,916 592,780 791,302
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents....................................... (13,353) (160,857) 197,519
Cash and cash equivalents at beginning of period.... 57,484 218,341 20,822
----------- ----------- -----------
Cash and cash equivalents at end of period.......... $ 44,131 $ 57,484 $ 218,341
=========== =========== ===========
</TABLE>
(See notes to consolidated financial statements)
23
<PAGE> 25
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL IN FOREIGN UNREALIZED
COMMON EXCESS OF RETAINED CURRENCY GAIN ON
STOCK PAR VALUE EARNINGS TRANSLATION SECURITIES
------------------ --------------- ------------ ------------ -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993......... $ 169,718 $ 433,043 $ 284,879 $ (3,127) $ --
Add (deduct):
Net income......................... 131,045
Retirement of common stock......... (64) (741)
Common stock issued:
Common stock offering........... 15,400 174,326
Stock option exercises and stock
grants........................ 452 3,449
Acquisitions.................... 4,066 5,425 2,729
Debenture conversion............ 142 1,151
Dividends on common stock ($.21 per
share).......................... (37,144)
Foreign currency translation....... 4,525
Gain on sale of subsidiary stock
and other....................... 7,348
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1994......... 189,714 624,001 381,509 1,398 --
Add (deduct):
Net income......................... 183,588
Common stock issued:
Common stock offerings.......... 18,350 312,713
Stock option exercises and stock
grants........................ 696 5,792
Acquisitions.................... 7,310 101,967
Debenture conversions........... 18,472 170,235
Dividends on common stock ($.22 per
share).......................... (46,535)
Foreign currency translation....... 349
Unrealized gain on securities...... 5,786
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1995......... 234,542 1,214,708 518,562 1,747 5,786
Add (deduct):
Net income......................... 265,298
Common Stock issued:
Stock option exercises and stock
grants........................ 723 6,940
Acquisitions.................... 811 15,012 796
Debenture conversions........... 117 1,123
Dividends on common stock ($.24 per
share).......................... (56,548)
Foreign currency translation....... 20,568
Unrealized gain on securities...... 5,132
---------- ---------- ---------- ---------- ----------
Balance at December 31, 1996......... $ 236,193 $1,237,783 $ 728,108 $ 22,315 $ 10,918
========== ========== ========== ========== ==========
</TABLE>
(All common stock and per share data has been restated for a
two-for-one common stock split on August 30, 1996)
(See notes to consolidated financial statements)
24
<PAGE> 26
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE ONE
NATURE OF OPERATIONS
The Company is the largest provider of death care services in the world. At
December 31, 1996, the Company operated 2,882 funeral service locations, 345
cemeteries and 150 crematoria located in North America, Europe and the Pacific
Rim.
The funeral service locations and cemetery operations consist of the
Company's funeral homes, cemeteries, crematoria and related businesses. Company
personnel at the funeral service locations provide all professional services
relating to funerals, including the use of funeral facilities and motor
vehicles. Funeral related merchandise is sold at funeral service locations and
certain funeral service locations contain crematoria. The Company sells
prearranged funeral services whereby a customer contractually agrees to the
terms of a funeral to be performed in the future. The Company's cemeteries
provide cemetery interment rights (including mausoleum spaces and lawn crypts)
and certain merchandise including stone and bronze memorials and burial vaults.
These items are sold on an at need or preneed basis. Company personnel at
cemeteries perform interment services and provide management and maintenance of
cemetery grounds. Certain cemeteries also operate crematoria.
The Company's financial services operations consist of a finance
subsidiary, Provident Services, Inc. ("Provident"). Provident provides capital
financing to independent funeral home and cemetery operators.
NOTE TWO
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts of Service Corporation International and all majority-owned
subsidiaries (the "Company"). Intercompany balances and transactions have been
eliminated in consolidation. Certain reclassifications have been made to prior
years to conform to current period presentation.
Cash Equivalents: The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
Inventories and Cemetery Property: Funeral merchandise and cemetery
property and merchandise, are stated at the lower of average cost or market.
Depreciation and Amortization: Depreciation of property, plant and
equipment is provided using the straight line method over the estimated useful
lives of the various classes of assets. Property and plant are depreciated over
a period ranging from seven to 50 years, while equipment is depreciated over a
period from three to 20 years. For the three years ended December 31, 1996,
depreciation expense was $74,854, $52,828 and $35,546, respectively. Maintenance
and repairs are charged to expense whereas renewals and major replacements are
capitalized. Prepaid management, consultative and non-competition agreements,
primarily with former owners and key employees of businesses acquired are
amortized on a straight-line basis over the lives of the respective contracts.
Funeral Operations: Funeral revenue is recognized when the funeral service
is performed. The Company's trade receivables consist primarily of funeral
services already performed. An allowance for doubtful accounts has been provided
based on historical experience.
The Company sells price guaranteed prearranged funeral contracts through
various programs providing for future funeral services at prices prevailing when
the agreement is signed. Revenues associated with sales of prearranged funeral
contracts (which include accumulated trust earnings and increasing insurance
benefits) are deferred and later recognized when the funeral service is
performed. The Company considers price
25
<PAGE> 27
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
guaranteed prearranged funeral contracts to be investments made to retain and
expand future market share. Accordingly, cash flows related to price guaranteed
prearranged funeral contracts that have not been performed have been
reclassified from cash flows from operating activities to cash flows from
investing activities. For comparative purposes, reclassification was made to the
1995 and 1994 consolidated statement of cash flows.
Cemetery Operations: All cemetery interment right sales, together with
associated merchandise, are recorded to income at the time contracts are signed.
Costs related to the sales of interment rights include property and other costs
related to cemetery development activities which are charged to operations using
the specific identification method. Allowances for customer cancellations are
provided at the date of sale based upon historical experience. Costs related to
merchandise are based on actual costs incurred or estimates of future costs
necessary to purchase the merchandise, including provisions for inflation when
required. Pursuant to state law, all or a portion of the proceeds from the sale
of cemetery merchandise may also be required to be paid into trust funds until
such merchandise is purchased by the Company for the customer. Merchandise funds
trusted at December 31, 1996 and 1995 were $390,534 and $330,470 (see note
five). The Company recognizes realized trust income on these merchandise trusts
in current cemetery revenues as trust earnings accrue to defray inflation costs
recognized related to the unpurchased cemetery merchandise. Additionally, a
portion of the proceeds from the sale of cemetery property is required by state
law to be paid into perpetual care trust funds. Earnings from these trusts are
recognized in current cemetery revenues and are intended to defray cemetery
maintenance costs. Perpetual care funds trusted at December 31, 1996 and 1995
were $318,868 and $242,449, respectively, which approximates fair value. The
principal of such perpetual care trust funds generally cannot be withdrawn by
the Company and therefore is not included in the consolidated balance sheet. For
the three years ended December 31, 1996, the earnings recognized from all
cemetery trusts were $51,601, $33,795 and $24,456, respectively.
Names and Reputations: The excess of purchase price over the fair value of
identifiable net assets acquired in transactions accounted for as a purchase are
included in "Names and reputations" and generally amortized on a straight line
basis over 40 years which, in the opinion of management, is not necessarily the
maximum period benefited. Fair values determined at the date of acquisition are
determined by management or independent appraisals. Many of the Company's
acquired funeral service locations have been providing high quality service to
client families for many years. Such loyalty often forms the basic valuation of
the funeral business. Additionally, the death care industry has historically
exhibited stable cash flows as well as a low failure rate. The Company monitors
the recoverability of names and reputations based on projections of future
undiscounted cash flows of the acquired businesses. The amortization charged
against income was $33,836, $25,226 and $15,495 for the three years ended
December 31, 1996, respectively. Accumulated amortization of names and
reputations as of December 31, 1996 and 1995 was $101,426 and $77,855,
respectively.
Evaluation of Long-Lived Assets: Effective January 1, 1996, the Company
adopted Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Assets to be Disposed Of" (FAS 121). FAS
121 requires the Company to monitor the recoverability of its long-lived assets
on an ongoing basis as events or circumstances indicate that carrying values may
not be recoverable. Adoption of FAS 121 did not have a material effect on the
Company's financial position or results of operations. In accordance with FAS
121, assets are primarily grouped at the cluster level.
Derivatives: Amounts to be paid or received under interest rate swaps,
including the interest rate provisions of the cross-currency swaps, are recorded
on the accrual basis over the life of the swap agreements as an adjustment to
interest expense. The related net amounts payable to, or receivable from, the
counterparties are included in accrued liabilities or current receivables,
respectively. Gains and losses resulting from currency movements on the
cross-currency swaps that hedge the Company's net foreign investments are
reflected in stockholders' equity, with the related net amounts due to, or from,
the counterparties included in other liabilities, or other assets, respectively.
Net deferred gains and losses on early termination of interest rate
26
<PAGE> 28
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
swaps are being amortized into interest expense over the remaining lives of the
original agreements ($1,808 net unamortized loss at December 31, 1996).
Use of Estimates in the Preparation of Financial Statements: The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE THREE
ACQUISITIONS
In August 1995, the Company acquired two French companies, Omnium de
Gestion et de Financement S.A. and Pompes Funebres Generales S.A. ("OGF/PFG"),
which when combined operated 1,099 funeral service locations, 28 crematoria and
Auxia which primarily sells insurance policies in connection with OGF/PFG's
prearranged funeral business throughout France and several other countries. The
total purchase price for OGF/PFG was approximately $577,000. Permanent financing
was provided by issuances of notes and Company common stock in October 1995 (see
note twelve). OGF/PFG was accounted for as a purchase and the results of
operations have been consolidated with the Company's since August 1995.
In October 1995, the Company purchased Gibraltar Mausoleum Corporation
which operated 23 funeral service locations and 54 cemeteries in the United
States. The purchase price of approximately $267,000 was financed through the
issuance of securities under the Company's acquisition shelf registration and
borrowings under the Company's revolving credit facilities.
In addition to the acquisitions disclosed above, the Company acquired
certain other funeral and cemetery operations both domestically and
internationally during the years ended December 31, 1996 and 1995. The operating
results of all of these acquisitions have been included since their respective
dates of acquisitions.
The following table is a summary of the above acquisitions made during the
two years ended December 31, 1996:
<TABLE>
<CAPTION>
1996 1995
-------- ----------
<S> <C> <C>
Number acquired:
Funeral service locations................................. 210 1,263
Cemeteries................................................ 35 99
Crematoria................................................ 9 30
Purchase price.............................................. $362,651 $1,145,777
</TABLE>
The purchase price in both years consisted primarily of combinations of
cash, Company common stock, issued and assumed debt and the retirement of loans
receivable issued by Provident.
In addition, on September 5, 1995, the Company acquired the shares of
Service Corporation International (Canada) Limited ("SCIC") not already owned by
the Company which made SCIC (formerly an approximate 70% owned subsidiary) a
wholly owned subsidiary of the Company. The purchase price of approximately
$62,578 was financed through the issuance of a 6.95% amortizing note in December
1995.
27
<PAGE> 29
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effect of the above acquisitions on the consolidated balance sheet at
December 31, was as follows:
<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
Current assets.............................................. $ 30,542 $ 171,431
Investments-insurance subsidiary............................ -- 541,784
Prearranged funeral contracts............................... 61,994 132,158
Long-term receivables....................................... (10,559) 155,013
Cemetery property........................................... 210,507 423,852
Property, plant and equipment............................... 93,482 379,616
Deferred charges and other assets........................... (1,244) 42,949
Names and reputations....................................... 164,414 363,506
Current liabilities......................................... (62,817) (320,158)
Long-term debt.............................................. (32,532) (89,724)
Deferred income taxes and other liabilities................. (85,635) (341,070)
Deferred prearranged funeral contract revenues.............. (72,213) (656,453)
Stockholders' equity........................................ (16,619) (109,277)
-------- ---------
Cash used for acquisitions........................ $279,320 $ 693,627
======== =========
</TABLE>
The following unaudited pro forma information assumes that the acquisition
by the Company of all operations acquired during the years ended December 31,
1996 and 1995 took place on January 1, 1995 (1,473 funeral service locations,
134 cemeteries and 39 crematoria acquired in 208 separate transactions). This
information also assumes that the October 1995 public offerings of notes and
Company common stock (disclosed in note twelve) were issued at the beginning of
1995. The net proceeds of the October 1995 public offerings were first applied
toward the purchase price of OGF/PFG, with the excess net proceeds used to repay
amounts outstanding under the Company's existing revolving credit facilities.
This unaudited pro forma information may not be indicative of results that would
have actually resulted if these transactions had occurred on the dates indicated
or which may be obtained in the future.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995
---------- ----------
(UNAUDITED)
<S> <C> <C>
Revenues.................................................... $2,358,704 $2,263,992
========== ==========
Net income.................................................. $ 265,341 $ 204,713
========== ==========
Primary earnings per share.................................. $ 1.10 $ .90
========== ==========
Fully diluted earnings per share............................ $ 1.07 $ .85
========== ==========
</TABLE>
NOTE FOUR
PREARRANGED FUNERAL ACCOUNTING
The Company sells price guaranteed prearranged funeral contracts through
various programs providing for future funeral services at prices prevailing when
the agreement is signed. Payments under these contracts are generally placed in
trust (pursuant to state law) or are used to pay premiums on life insurance
policies issued by third party insurers in North America, the United Kingdom and
Australia or the Company's French prearranged funeral service life insurance
subsidiary ("Auxia") which was acquired in the 1995 French acquisition (see note
three). Unperformed price guaranteed prearranged funeral contracts are included
in the consolidated balance sheet as "prearranged funeral contracts" or, in the
case of contracts funded by Auxia, "investments-insurance subsidiary." A
corresponding credit is recorded to "deferred prearranged funeral
28
<PAGE> 30
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
contract revenues." Allowances for customer cancellations are provided at the
date of sale based on historical experience.
Amounts paid by the customer pursuant to the prearranged funeral contracts
are recognized in funeral revenue at the time the funeral is performed. Trust
earnings and increasing insurance benefits are accrued and deferred until the
service is performed at which time these funds are also recognized in funeral
revenues and are intended to cover future increases in the cost of providing a
price guaranteed funeral service. Included in deferred prearranged funeral
contract revenues are net obtaining costs, including sales commissions and
certain other direct marketing costs, applicable to prearranged funeral
contracts which are deferred and will be expensed over a period representing the
actuarially determined average life of the prearranged contract.
PREARRANGED FUNERAL CONTRACTS
At December 31, 1996, $962,389 due from trust funded contracts (which
includes $235,433 of amounts that have not yet been collected from customers)
and $1,196,959 due from third party insurance funded contracts will be available
to the Company at the time the funeral services are performed. These amounts are
shown net of estimated customer cancellations. The allowance for cancellation is
based on historical experience and is equivalent to approximately 8% of the
total balance. Accumulated realized earnings from trust funds and increasing
insurance benefits have been included to the extent that they have accrued
through December 31, 1996. The cumulative total has been reduced by allowable
cash withdrawals for realized trust earnings and amounts retained by the Company
pursuant to various state laws.
The cost and market value associated with the assets held in the trust
funds underlying the Company's prearranged funeral contracts are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------- --------------------
COST MARKET COST MARKET
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Debt securities:
Government................................... $245,736 $259,910 $ 94,645 $106,927
Corporate.................................... 121,887 122,322 259,907 265,864
Equity securities.............................. 164,630 208,082 173,500 191,773
Money market/other............................. 274,949 275,581 190,448 190,813
-------- -------- -------- --------
$807,202 $865,895 $718,500 $755,377
======== ======== ======== ========
</TABLE>
Investments -- Insurance subsidiary
As part of the Company's funding of prearranged funeral contracts, Auxia
invests in securities which are considered as "available-for-sale" in accordance
with the classification of investments defined in Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." These securities are reported at fair value, with unrealized
gains and losses excluded from earnings and reported net of income taxes in
stockholders' equity.
29
<PAGE> 31
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The cost, market value and unrealized gains or losses related to Auxia's
and certain other European debt and equity securities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
--------------------------------- ---------------------------------
UNREALIZED
UNREALIZED GAINS
COST MARKET GAINS COST MARKET (LOSSES)
-------- -------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Debt securities:
Foreign government.... $220,256 $236,443 $16,187 $171,480 $179,840 $ 8,360
Corporate............. 210,235 210,428 193 123,156 123,564 408
Equity securities....... 96,157 96,735 578 69,734 67,695 (2,039)
Mutual funds:
Money market/other.... 27,749 27,942 193 113,743 115,947 2,204
Debt.................. 61,471 61,471 -- 41,800 42,003 203
-------- -------- ------- -------- -------- -------
$615,868 $633,019 $17,151 $519,913 $529,049 $ 9,136
======== ======== ======= ======== ======== =======
</TABLE>
At December 31, 1996, gross unrealized gains were $22,932 and gross
unrealized losses were $5,781.
The contractual maturities of Auxia's debt securities (at fair value) as of
December 31, 1996, were as follows:
<TABLE>
<S> <C>
Within one year............................................. $ 69,564
After one year through five years........................... 240,875
After five years through ten years.......................... 107,334
After ten years............................................. 29,098
--------
$446,871
========
</TABLE>
The following table summarizes the activity in prearranged funeral
contracts and investments -- insurance subsidiary during the years ended
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Beginning balance.......................................... $2,368,932 $1,418,104
Net sales................................................ 513,882 358,103
Acquisitions............................................. 61,994 673,942
Realized earnings and increasing insurance benefits...... 111,950 60,502
Maturities............................................... (249,705) (148,241)
Increase in cancellation reserve......................... (36,694) (38,132)
Distributed earnings and other........................... (9,446) 44,654
---------- ----------
Ending balance............................................. $2,760,913 $2,368,932
========== ==========
</TABLE>
Deferred Prearranged Funeral Contract Revenues
"Deferred prearranged funeral contract revenues" on the consolidated
balance sheet includes the contract amount of all price guaranteed prearranged
funeral service contracts as well as the accrued trust earnings and increasing
insurance benefits. Also included in deferred prearranged funeral contract
revenues are net obtaining costs applicable to prearranged funeral contracts.
The aggregate net costs deferred as of December 31, 1996 and 1995 were $151,008
and $96,595, respectively. The Company will continue to defer additional
accruals of trust earnings and insurance benefits as they are earned until the
performance of the funeral service. Upon performance of the funeral service, the
Company will recognize the fixed contract price as well as total accumulated
trust earnings and increasing insurance benefits as funeral revenues.
30
<PAGE> 32
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarized the activity in deferred prearranged funeral
contract revenues during the years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Beginning balance.......................................... $2,362,053 $1,519,582
Net sales................................................ 523,229 366,835
Acquisitions............................................. 72,213 656,453
Realized earnings and increasing insurance benefits...... 111,950 60,502
Maturities............................................... (252,603) (150,382)
Increase in cancellation reserve......................... (36,694) (38,132)
Net deferred obtaining costs............................. (61,421) (43,663)
Other.................................................... 7,043 (9,142)
---------- ----------
Ending balance............................................. $2,725,770 $2,362,053
========== ==========
</TABLE>
The recognition of future funeral revenues is estimated to occur in the
following years based on actuarial assumptions as follows:
<TABLE>
<S> <C>
1997........................................................ $ 239,145
1998........................................................ 208,534
1999........................................................ 192,264
2000........................................................ 178,823
2001........................................................ 166,037
2002 through 2006........................................... 680,850
2007 and thereafter......................................... 1,060,117
----------
$2,725,770
==========
</TABLE>
NOTE FIVE
CEMETERY MERCHANDISE TRUST FUNDS
The cost and market value associated with the assets held in the cemetery
merchandise trust funds (included in current and long-term receivables, at cost)
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
-------------------- --------------------
COST MARKET COST MARKET
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Debt securities:
Government................................... $ 72,394 $ 72,101 $ 24,910 $ 25,244
Corporate.................................... 35,060 34,560 136,730 139,343
Equity securities.............................. 71,239 75,297 85,117 91,428
Money market/other............................. 211,841 211,896 83,713 83,800
-------- -------- -------- --------
$390,534 $393,854 $330,470 $339,815
======== ======== ======== ========
</TABLE>
31
<PAGE> 33
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE SIX
INCOME TAXES
The provision for income taxes includes United States income taxes,
determined on a consolidated return basis, foreign and state and local income
taxes.
Income before income taxes:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
United States...................................... $309,431 $257,318 $198,961
Foreign............................................ 104,450 36,893 20,060
-------- -------- --------
$413,881 $294,211 $219,021
======== ======== ========
Income tax expense (benefit) consisted of the
following:
Current:
United States.................................... $ 65,709 $ 43,396 $ 43,290
Foreign.......................................... 14,158 12,949 9,443
State and local.................................. 11,814 9,114 7,753
-------- -------- --------
91,681 65,459 60,486
-------- -------- --------
Deferred:
United States.................................... 45,330 39,767 25,282
Foreign.......................................... 3,238 (1,498) (219)
State and local.................................. 8,334 6,895 2,427
-------- -------- --------
56,902 45,164 27,490
-------- -------- --------
Total provision.................................... $148,583 $110,623 $ 87,976
======== ======== ========
</TABLE>
The Company made income tax payments of approximately $99,377, $65,859 and
$69,555, in 1996, 1995, and 1994, respectively.
The differences between the U.S. federal statutory tax rate and the
Company's effective rate were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Computed tax provision at the applicable U.S.
federal statutory income tax rate................. $144,858 $102,974 $76,658
State and local taxes, net of federal income tax
benefits.......................................... 13,097 10,406 6,617
Dividends received deduction and tax exempt
interest.......................................... (2,108) (1,939) (1,425)
Amortization of names and reputations............... 4,765 4,554 3,807
Foreign jurisdiction tax rate difference............ (11,849) (5,309) 2,144
Other............................................... (180) (63) 175
-------- -------- -------
Provision for income taxes........................ $148,583 $110,623 $87,976
======== ======== =======
Total effective tax rate............................ 35.9% 37.6% 40.2%
======== ======== =======
</TABLE>
32
<PAGE> 34
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences and carry-forwards that give rise
to significant portions of deferred tax assets and liabilities consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Receivables, principally due to sales of cemetery interment
rights and related products............................... $152,069 $128,755
Inventories and cemetery property, principally due to
purchase accounting adjustments........................... 383,687 317,937
Property, plant and equipment, principally due to
depreciation and to purchase accounting adjustments....... 110,907 110,755
Other....................................................... -- 5,519
-------- --------
Deferred tax liabilities.................................. 646,663 562,966
-------- --------
Deferred revenue on prearranged funeral contracts,
principally due to earnings from trust funds.............. (34,092) (49,889)
Accrued liabilities......................................... (38,337) (20,273)
Carry-forwards and foreign tax credits...................... (7,484) (10,888)
Other....................................................... (4,367) --
-------- --------
Deferred tax assets....................................... (84,280) (81,050)
-------- --------
Valuation allowance....................................... 6,128 8,729
-------- --------
Net deferred income taxes................................. $568,511 $490,645
======== ========
</TABLE>
During the three years ended December 31, 1996, tax expense resulting from
allocating certain tax benefits directly to capital in excess of par totaled
$2,410, $1,165 and $1,223, respectively.
Current refundable income taxes and foreign current deferred tax assets are
included in other current assets, with current taxes payable and current
deferred taxes being reflected as "Income taxes" on the consolidated balance
sheet.
United States income taxes have not been provided on $153,598 of
undistributed earnings of foreign subsidiaries since it is the Company's
intention to reinvest such earnings indefinitely.
As of December 31, 1996 the Company has United States foreign tax credit
carry-forwards of $556 which will expire in the years 1999 through 2001.
Various subsidiaries have state operating loss carry-forwards of $45,442
with expiration dates through 2011.
The Company believes that some uncertainty exists with respect to future
realization of these tax credits and loss carry-forwards, therefore a valuation
allowance has been established for the carry-forwards not expected to be
realized. The decrease in the valuation allowance is primarily attributable to
loss carry-forwards and foreign tax credits that were realized in the current
year.
33
<PAGE> 35
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE SEVEN
DEBT
Debt at December 31, was as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Bank revolving credit agreements and commercial paper...... $ 325,875 $ 226,611
6.375% notes due in 2000................................... 150,000 150,000
6.75% notes due in 2001.................................... 150,000 --
8.72% amortizing notes due in 2002......................... 165,761 178,866
8.375% notes due in 2004................................... 200,000 200,000
7.2% notes due in 2006..................................... 150,000 --
6.875% notes due in 2007................................... 150,000 150,000
6.95% amortizing notes due in 2010......................... 61,576 63,837
7.875% debentures due in 2013.............................. 150,000 150,000
7.0% notes due in 2015 (putable in 2000)................... 300,000 300,000
Medium term notes, maturities through 2019, fixed average
interest rate of 9.6%.................................... 186,040 186,040
Convertible debentures, interest rates range from
5% -- 5.5%, due through 2006, conversion price ranges
from $11.25 -- $36.72.................................... 44,140 27,090
Mortgage and other notes payable with maturities through
2013, average interest rate of 7.64%..................... 151,836 221,840
Deferred loan costs........................................ (22,615) (19,583)
---------- ----------
Total debt................................................. 2,162,613 1,834,701
Less current maturities.................................... (113,876) (122,237)
---------- ----------
Total long-term debt............................. $2,048,737 $1,712,464
========== ==========
</TABLE>
The Company's primary revolving credit agreement provides for borrowings up
to $800,000. The 364-day portion allows for borrowings up to $450,000, and is
used primarily to support commercial paper. The agreement expires June 27, 1997,
but has provisions to be extended for 364-day terms. At the end of any term, the
outstanding balance may be converted into a two year term loan at the Company's
option. Interest rates are based on various indices as determined by the
Company. In addition, a facility fee ranging from .06% to .15% is paid quarterly
on the total commitment amount. At December 31, 1996, there was $202,571 of
commercial paper outstanding backed by this agreement at a weighted average
interest rate of 5.57%. These commercial paper borrowings and revolving notes
generally have maturities ranging from one to 90 days. In addition, the Company
has a multi-currency revolving credit agreement which allows for borrowings of
up to $350,000, including up to $75,000 each in United Kingdom Pound Sterling,
Canadian Dollar and Australian Dollar. This agreement expires June 30, 2000, but
has provisions to extend the termination date each year for 364-day periods.
Interest rates are based on various indices as determined by the Company. In
addition, a facility fee ranging from .085% to .15% is paid quarterly on the
total commitment amount. At December 31, 1996, there was $85,234 outstanding
under this agreement at a weighted average interest rate of 5.43%. These credit
agreements disclosed above contain financial compliance provisions that contain
certain restrictions on levels of net worth, debt, equity, liens, letters of
credit and guarantees.
The Company's outstanding commercial paper and other borrowings under its
various credit facilities at December 31, 1996 are classified as long-term debt.
The Company uses these revolving credit agreements primarily to finance the
Company's ongoing acquisition programs. From time to time, the Company raises
debt and/or equity in the public markets to reduce its revolving credit facility
balances. The timing of these public debt or equity offerings is dependent on
numerous factors including market conditions, long and short term interest
rates, the Company's capitalization ratios and the outstanding balances under
the revolving credit facilities. Therefore, the Company has classified these
borrowings as long-term debt. Additionally, the
34
<PAGE> 36
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company has excluded these borrowings from the five-year maturity of long-term
debt disclosure due to the uncertainty of the eventual term of the related debt.
It is the Company's intent to refinance such borrowings through the use of its
credit agreements or other long-term notes issued under the Company's $1,000,000
shelf registration.
The Company's French revolving credit agreement allows for borrowings, in
French francs, up to $50,000 and expires in August 1997. Interest rates are
based on various indices as determined by the Company. In addition, a facility
fee of .075% is paid quarterly on the total commitment amount. At December 31,
1996, $17,343 was outstanding under this agreement at a weighted average
interest rate of 3.55%.
The Company also has a bank line of credit for $100,000 (no borrowings
outstanding at December 31, 1996) at rates similar to the primary revolving
credit agreements. This line may be withdrawn at any time at the option of the
bank. Additionally, the Company has approximately $88,933 in lines of credit
with several international banks and at December 31, 1996, $21,454 was
outstanding under these international lines of credit.
In May 1996, the Company issued $300,000 of notes which were sold through
an underwritten public offering. These notes were issued in two tranches of
$150,000 each with maturities in June 2001 and 2006 and interest rates of 6.75%
and 7.2%, respectively. The proceeds of this offering were primarily used to
repay existing debt outstanding under the Company's revolving credit agreements.
During the first quarter of 1997, the Company initiated the repurchase of
three issues of its outstanding notes and intends to refinance such repurchased
notes in a manner that should reduce future interest expense. (See note eighteen
to the consolidated financial statements).
Approximately $80,000 of the Company's facilities and cemetery properties
are pledged as collateral for the mortgage notes at December 31, 1996.
Additionally, at December 31, 1996, the Company had $41,738 in letters of
credit outstanding primarily to guarantee funding of certain insurance claims.
The aggregate principal payments on debt for the five years subsequent to
December 31, 1996, excluding amounts due to banks under revolving credit loan
agreements are: 1997-$113,876; 1998-$55,217; 1999-$53,243; 2000-$191,843 and
2001-$204,747.
Cash interest payments for the three years ended December 31, 1996 totaled
$150,961, $111,609 and $77,334, respectively.
Approximately $1,386,000 of total debt has essentially been converted to
foreign currencies as a result of cross-currency swaps. Similarly, the stated
coupons described above have substantially been modified through the use of
interest rate and cross-currency interest rate swaps used in the management of
interest rates within defined targets for fixed and floating interest rate
exposure. See note eight below.
During the three months ended December 31, 1996, pursuant to a shelf
registration filed with the SEC to be used exclusively for future acquisitions,
the Company guaranteed the following promissory notes issued through
subsidiaries in connection with various acquisitions of operations:
<TABLE>
<CAPTION>
SUBSIDIARY AMOUNT
---------- --------
<S> <C>
SCI Funeral Services of New York, Inc. ..................... $ 60
Hubbard Funeral Home, Inc. ................................. 1,500
SCI Arizona Funeral Services, Inc. ......................... 4,061
SCI Texas Funeral Services, Inc. ........................... 1,150
SCI Iowa Funeral Services, Inc. ............................ 825
Affiliated Family Funeral Services, Inc. ................... 1,846
</TABLE>
35
<PAGE> 37
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE EIGHT
DERIVATIVES
The Company enters into derivatives primarily in the form of interest rate
swaps and cross-currency interest rate swaps in order to manage its mix of fixed
and floating rate debt and to substantially hedge the Company's net investments
in foreign assets. The Company has procedures in place to monitor and control
the use of derivatives and enters into transactions only with a limited group of
creditworthy financial institutions. The Company does not engage in derivative
transactions for speculative or trading purposes, nor is it a party to leveraged
derivatives.
In general, cross-currency swaps are entered into concurrently with
significant foreign acquisitions and convert US dollar debt into the respective
foreign currency of the acquisitions. Such cross-currency swaps are used in
combination with local currency borrowings to substantially hedge the Company's
net investment in foreign operations. The cross-currency swaps generally include
interest rate provisions to enable the Company to additionally hedge a portion
of the earnings of its foreign operations. Accordingly, movements in currency
rates that impact the swap are generally offset by a corresponding movement in
the value of the underlying assets being hedged. Similarly, currency movements
that impact foreign expense due under the cross-currency interest rate swaps are
generally offset by a corresponding movement in the earnings of the foreign
operation.
<TABLE>
<CAPTION>
CARRYING WEIGHTED AVERAGE
AMOUNT INTEREST RATE
NOTIONAL ASSET -----------------
DECEMBER 31, 1996 AMOUNT (LIABILITY) MATURITY RECEIVE PAY
----------------- ---------- ----------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
Interest Rate Swaps:
US dollar fixed to US dollar floating........ $ 575,000 $ -- 1999-2006 6.37% 5.56%
Canadian dollar floating to Canadian dollar
fixed..................................... 40,134 -- 1999 2.94 7.57
French franc floating to German mark
floating.................................. 94,808 -- 2006 3.50 3.47
Cross-Currency Interest Rate Swaps:
US dollar fixed to French franc fixed........ 500,000 24,123 2000-2007 6.20 5.94
US dollar fixed to French franc floating..... 100,000 (599) 2006 7.20 3.74
US dollar fixed to British pound fixed....... 405,109 (40,394) 2002-2004 8.47 7.98
US dollar fixed to British pound floating.... 33,152 (3,477) 2002 8.72 6.56
US dollar floating to British pound
floating.................................. 76,375 (4,113) 1997 5.50 6.30
US dollar floating to Australian dollar
fixed..................................... 67,568 (10,881) 1999-2000 5.63 7.02
US dollar floating to Australian dollar
floating.................................. 29,436 (5,531) 2000 5.63 5.93
US dollar fixed to Canadian dollar fixed..... 75,000 133 1999 6.66 6.64
US dollar fixed to Canadian dollar
floating.................................. 100,000 1,089 2010 6.95 3.54
---------- --------
$2,096,582 $(39,650)
========== ========
</TABLE>
<TABLE>
<CAPTION>
CARRYING WEIGHTED AVERAGE
AMOUNT INTEREST RATE
NOTIONAL ASSET -----------------
DECEMBER 31, 1995 AMOUNT (LIABILITY) MATURITY RECEIVE PAY
----------------- ---------- ----------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
Interest Rate Swaps:
US dollar fixed to US dollar floating....... $ 75,000 $ -- 1999 5.36% 5.88%
Canadian dollar floating to Canadian dollar
fixed.................................... 40,310 -- 1999 5.98 7.57
Cross-Currency Interest Rate Swaps:
US dollar fixed to French franc fixed....... 300,000 (2,221) 2000-2007 6.75 6.96
US dollar fixed to British pound fixed...... 252,170 753 2002-2004 8.63 9.22
US dollar fixed to British pound floating... 208,728 916 2002-2004 8.35 6.85
US dollar floating to Australian dollar
fixed.................................... 67,568 (5,827) 1999-2000 5.56 7.03
US dollar floating to Australian dollar
floating................................. 29,436 (3,278) 2000 5.56 7.35
US dollar fixed to Canadian dollar
floating................................. 100,000 655 2010 6.95 6.58
---------- --------
$1,073,212 $ (9,002)
========== ========
</TABLE>
36
<PAGE> 38
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
During 1996, the Company entered into $200,000 of French Franc and $75,000
of Canadian dollar cross-currency interest rate swaps to further hedge its net
investment in related foreign assets on an after-tax basis. In May 1996, a
$100,000 French Franc cross-currency swap was executed to maintain the Company's
existing hedge of net assets in French operations upon repayment of balances
outstanding under the French bridge facility. In March 1996, the Company
converted $94,808 of floating French rates to floating German rates and in
December 1996, the Company entered into US dollar fixed to floating interest
rate swaps on $500,000 notional in connection with its ongoing management of
interest rates.
Interest rate swap settlements are generally semiannual and match the
coupons of the underlying debt or related intercompany loan payments on the
foreign operations being hedged. In the cross-currency swaps, the notional
amounts are exchangeable in accordance with the terms of the swaps: at maturity
for nonamortizing swaps or according to defined amortization tables. Maturities
of derivative financial instruments held on December 31, 1996, are as follows:
1997 -- $76,375; 1998 -- $0; 1999 -- $213,548; 2000 -- $323,590; 2001 --
$150,000; and thereafter -- $1,333,069.
NOTE NINE
CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments has been determined by the Company using available market
information and appropriate valuation methodologies. The carrying amounts of
cash and cash equivalents, trade receivables and accounts payable approximate
fair values due to the short-term maturities of these instruments. The carrying
value of Provident's receivables approximates fair value as the majority of the
loan portfolio carries market rates of interest. It is not practicable to
estimate the fair value of receivables due on cemetery contracts or prearranged
funeral contracts (other than cemetery merchandise trust funds and prearranged
funeral trust funds, see notes four and five) without incurring excessive costs
because of the large number of individual contracts with varying terms. The
investments of the Company's insurance subsidiary are reported at fair value in
the consolidated balance sheet.
<TABLE>
<CAPTION>
1996 1995
------------------------ ------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest rate and cross currency swap
agreements.............................. $ 39,650 $ 50,102 $ 9,002 $ (34,905)
Long-term debt (including current
maturities)............................. 2,162,613 2,220,377 1,834,701 1,980,599
6.25% convertible preferred securities of
SCI Finance LLC......................... 172,500 323,438 172,500 252,243
</TABLE>
The Company has entered into various derivative financial instruments with
major financial institutions to hedge fluctuation exposures in interest and
foreign exchange rates (swap agreements). The net fair value of the Company's
various swap agreements at December 31, 1996 is a payable of $50,102. Fair
values were obtained from counterparties to the agreements and represent their
estimate of the amount the Company would pay to terminate the swap agreements
based upon the existing terms and current market conditions. At December 31,
1995, the net fair value was a receivable owed to the Company of $34,905. The
fair value of the Company's swap agreements may vary substantially with changes
in interest and currency rates. The Company's credit exposure is limited to the
sum of the fair value of positions that have become favorable to the Company and
any accrued interest receivable due from counterparties. Potential credit
exposure is dependent upon the maximum adverse impact of interest and currency
movement. Such potential credit exposure is minimized by selection of
counterparties from a limited group of high quality institutions and inclusion
of certain contract provisions. Management believes that any credit exposure
with respect to its favorable positions at December 31, 1996 is remote (see note
eight).
37
<PAGE> 39
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The fair value of the fixed rate long-term borrowings was estimated by
discounting the future cash flows, including interest payments, using rates
currently available for debt of similar terms and maturity, based on the
Company's credit standing and other market factors. The carrying value of
convertible securities has been estimated based on the respective shares of SCI
stock into which such securities may be converted. The carrying value of the
Company's revolving credit agreements approximate fair value because the rates
on such agreements are variable, based on current market conditions.
Provident is a party to financial instruments with potential credit risk.
The financial instruments result from loans made in the normal course of
business to meet the financing needs of borrowers who are principally
independent funeral home and cemetery operators. These financial instruments
also include loan commitments of $55,017 at December 31, 1996 ($28,319 at
December 31, 1995) to extend credit. Provident's total loans outstanding at
December 31, 1996 were approximately $146,000. Provident evaluates each
borrower's credit-worthiness and the amount loaned and collateral obtained, if
any, is determined by this evaluation.
The Company grants credit in the normal course of business and the credit
risk with respect to these trade, cemetery and prearranged funeral receivables
due from customers is generally considered minimal because of the wide
dispersion of the customers served. Procedures are in effect to monitor the
credit-worthiness of customers and bad debts have not been significant in
relation to the volume of revenues.
Customer payments on prearranged funeral contracts that are placed in state
regulated trusts or used to pay premiums on life insurance contracts generally
do not subject the Company to collection risk. Insurance funded contracts are
subject to supervision by state insurance departments and are protected in the
majority of states by insurance guaranty acts.
NOTE TEN
COMMITMENTS
The annual payments for operating leases (primarily for funeral home
facilities and transportation equipment) are as follows:
<TABLE>
<S> <C>
1997....................................................... $67,717
1998....................................................... 55,840
1999....................................................... 41,561
2000....................................................... 25,042
2001....................................................... 15,485
Thereafter................................................. 80,776
</TABLE>
The majority of these operating leases contain one of the following
options: (a) purchase the property at the fair value at date of exercise, (b)
purchase the property for a value determined at the inception of the lease or
(c) renew for the fair rental value at the end of the primary term of the lease.
Some of the equipment leases contain residual value exposures. For the three
years ended December 31, 1996, rental expense was $64,073, $47,848 and $36,244,
respectively.
The Company has entered into management, consultative and noncompetition
agreements (generally for five to 10 years) with certain officers of the Company
and former owners and key employees of businesses acquired. During the three
years ended December 31, 1996, $55,688, $55,419 and $48,053, respectively, were
charged to expense. At December 31, 1996, the maximum estimated future expense
under all agreements with a remaining term in excess of one year is $249,654,
including $14,985 with certain officers of the Company.
The Company has entered into a minimum purchase agreement with a major
casket manufacturer for its North American operations. The agreement contains
provisions to increase the minimum annual purchases for normal price increases
and for the maintenance of product quality. The agreement expires in 1998 and
38
<PAGE> 40
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
contains a remaining purchase commitment of $108,834. During the three years
ended December 31, 1996, the Company purchased caskets for $54,431, $48,828 and
$47,098, respectively, under this agreement.
Included in the Company's acquisition of OGF/PFG was an eight year
(beginning in January 1996) casket purchase agreement with a French casket
manufacturer. The total value of merchandise to be purchased under the contract
is $26,513. During the year ended December 31, 1996, the Company purchased
caskets for $5,432 under this agreement.
NOTE ELEVEN
CONVERTIBLE PREFERRED SECURITIES OF SCI FINANCE LLC
In December 1994 SCI Finance LLC, a subsidiary of the Company, issued,
through an underwritten public offering, 3,450,000 shares of cumulative 6.25%
convertible preferred shares. These shares are non-voting, carry a liquidation
value of $50 per share plus accumulated and unpaid dividends and are convertible
into Company common stock at a conversion price of $15.05 per share at any time
unless previously redeemed. Liquidation may occur after December 5, 1999 unless
earlier redemption (beginning in June 1997) is permitted based on Company common
stock price performance (20 trading days above $18.81 per share within a period
of 30 consecutive trading days immediately prior to notice of redemption). The
proceeds from this offering were used in 1995 to repay bank debt incurred in
connection with the United Kingdom acquisitions.
NOTE TWELVE
STOCKHOLDERS' EQUITY
The Company is authorized to issue 1,000,000 shares of preferred stock, $1
per share par value. No shares were issued as of December 31, 1996. At December
31, 1996, 500,000,000 common shares of $1 par value were authorized, 236,193,427
shares were issued and outstanding (234,542,172 at December 31, 1995), net of
9,813 shares held, at cost, in treasury (40,226 at December 31, 1995).
On June 13, 1996, the Company's Board of Directors approved a two-for-one
split of its common stock to be effected as a stock dividend. On August 8, 1996,
the Company's shareholders approved an amendment to the Company's Articles of
Incorporation to increase the number of authorized shares of common stock from
200,000,000 to 500,000,000 shares. The stock dividend was paid on August 30,
1996, to shareholders of record as of August 16, 1996. The par value of the new
shares issued totaled $117,838, which was transferred from capital in excess of
par value to the common stock account. All share and per share data for prior
periods presented have been restated to reflect this stock dividend.
In October 1995, the Company issued 16,790,000 shares of common stock at a
net price of $18.65 per share through an underwritten public offering. The net
proceeds of approximately $313,000 from the offering were used primarily to
finance the Company's worldwide acquisition program including OGF/PFG. In
addition, on October 11, 1995, the Company completed the purchase of Gibraltar
and issued 6,573,518 shares of Company common stock as part of the purchase
price.
During the fourth quarter of 1995, the Company redeemed the remaining
outstanding 6.5% convertible subordinated debentures due in 2001. This
redemption resulted in the issuance of 16,634,522 shares of Company common
stock.
In December 1994 and January 1995 the Company sold, through an underwritten
public offering, 16,960,000 common shares at a net $12.35 per share. The net
proceeds of approximately $209,000 were used to repay existing bank debt.
The fully diluted earnings per share calculation assumes full conversion
into common stock of the Company's various convertible securities.
39
<PAGE> 41
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has benefit plans whereby shares of the Company's common stock
may be issued pursuant to the exercise of stock options granted to officers and
key employees. The plans allow for options to be granted as either non-qualified
or incentive stock options. The options are granted with an exercise price equal
to the then current market price of the Company's common stock. The options are
generally exercisable at a rate of 33 1/3% each year unless, at the discretion
of the Company's Compensation Committee of the Board of Directors, alternative
vesting methods are allowed. At December 31, 1996, 9,965,000 options had been
granted to officers and key employees of the Company which contain alternative
vesting methods. Under the alternative vesting methods, partial or full
accelerated vesting will occur when the price of Company common stock reaches
pre-determined prices and for certain of these options an additional earnings
per share growth increase is required. If the pre-determined stock prices and
earnings per share growth are not met in the required time period, the options
will fully vest in periods ranging from eight to thirteen years from date of
grant. At December 31, 1996 and 1995, 14,802,500 and 3,428,656 shares,
respectively, were reserved for future option grants under all stock option
plans.
The following sets forth certain stock option information:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
---------- ----------------
<S> <C> <C>
Outstanding at December 31, 1993............................ 2,212,910 $ 7.73
Granted................................................... 8,571,500 12.89
Exercised................................................. (342,404) 7.21
Canceled.................................................. (67,954) 8.41
---------- -------
Outstanding at December 31, 1994............................ 10,374,052 12.01
---------- -------
Granted................................................... 2,854,000 16.35
Exercised................................................. (668,552) 7.53
Canceled.................................................. (977,668) 12.81
---------- -------
Outstanding at December 31, 1995............................ 11,581,832 13.27
---------- -------
Granted................................................... 2,239,200 22.63
Exercised................................................. (724,425) 8.82
Canceled.................................................. (47,338) 20.45
---------- -------
Outstanding at December 31, 1996............................ 13,049,269 $15.09
========== =======
Exercisable at December 31, 1996............................ 1,055,435 $11.01
========== =======
</TABLE>
At December 31, 1995 and 1994, 1,206,762 and 1,467,696 options were
exercisable, respectively. For the two years ended December 31, 1996, 2,239,200
and 2,854,000 options were awarded to average fair values of $9.18 and $7.24,
respectively.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------- ------------------------------
NUMBER WEIGHTED-AVERAGE NUMBER
RANGE OF OUTSTANDING REMAINING WEIGHTED-AVERAGE EXERCISABLE WEIGHTED-AVERAGE
EXERCISE PRICES AT 12/31/96 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/96 EXERCISE PRICE
- --------------- ----------- ---------------- ---------------- ----------- ----------------
<C> <C> <C> <C> <C> <C>
$ 5.04 -- 7.25 142,810 1.0 $ 6.50 142,810 $ 6.50
8.33 -- 9.41 405,854 2.6 8.96 405,854 8.96
12.88 -- 18.38 10,274,905 9.8 13.83 496,771 13.80
20.09 -- 29.59 2,225,700 6.8 22.59 10,000 20.09
- --------------- ---------- --- ------- --------- -------
$ 5.04 -- 29.59 13,049,269 9.0 $15.09 1,055,435 $11.01
=============== ========== === ======= ========= =======
</TABLE>
40
<PAGE> 42
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In May 1996, shareholders approved the 1996 Incentive Plan. This plan
reserves 12,000,000 shares of common stock for future awards of stock options,
restricted stock and other stock based awards to officers and key employees of
the Company and replaced all shares of common stock available for future grant
under previously existing stock option and restricted stock plans. In November
1996, the Company approved the 1996 Nonqualified Incentive Plan. This plan
reserves 4,000,000 shares of common stock for future awards of nonqualified
stock options to employees who are not officers of the Company. Under the
Company's 1995 Stock Plan for Non-Employee Directors, non-employee directors
automatically receive yearly awards of restricted stock through the year 2000.
Each award is for 3,000 shares of common stock and vests after one year of
service.
For the two years ended December 31, 1996, 49,600 and 128,600 shares of
restricted stock were awarded at average fair values of $25.76 and $14.60,
respectively.
The Board of Directors has adopted a preferred share purchase rights plan
and has declared a dividend of one preferred share purchase right for each share
of common stock outstanding. The rights become exercisable in the event of
certain attempts to acquire 20% or more of the common stock of the Company and
entitle the rights holders to purchase certain securities of the Company or the
acquiring company. The rights, which are redeemable by the Company for $.01 per
right, expire in July 1998 unless extended.
The Company has adopted the disclosure-only provisions of FAS 123,
"Accounting for Stock-Based Compensation," but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its plans. If
the Company had elected to recognize compensation cost for its option plans
based on the fair value at the grant dates for awards under those plans,
consistent with the method prescribed by FAS 123, net income and earnings per
share would have been changed to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Net income:
As reported............................................... $265,298 $183,588
Pro forma................................................. 252,929 181,285
Primary earnings per share:
As reported............................................... $ 1.10 $ .90
Pro forma................................................. 1.05 .89
Fully diluted earnings per share:
As reported............................................... $ 1.07 $ .85
Pro forma................................................. 1.02 .84
</TABLE>
The fair value of the Company's stock options used to compute pro forma net
income and earnings per share disclosures is the estimated present value at
grant date using the Black-Scholes option-pricing model with the following
weighted average assumptions for 1996 and 1995, respectively: dividend yield of
1.0% and 1.0%; expected volatility of 25.3% and 25.3%; a risk free interest rate
of 6.8% and 5.8%; and an expected holding period of 9 and 7 years.
FAS 123 only applies to options granted in 1995 and 1996. Accordingly, as
most of the options vest over three years, the full impact of the pro forma
disclosure will not be reflected until 1997.
41
<PAGE> 43
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE THIRTEEN
RETIREMENT PLANS
The Company has a noncontributory defined benefit pension plan covering
substantially all United States employees, a supplemental retirement plan for
certain current and former key employees (SERP), a supplemental retirement plan
for officers and certain key employees (Senior SERP), and a retirement plan for
non-employee directors (Directors' Plan).
For the pension plan, retirement benefits are generally based on years of
service and compensation. The Company annually contributes to the pension plan
an actuarially determined amount consistent with the funding requirements of the
Employee Retirement Income Security Act of 1974. Assets of the pension plan
consist primarily of bank money market funds, fixed income investments,
marketable equity securities and mortgage notes. The marketable equity
securities include shares of Company common stock with a value of $9,250 at
December 31, 1996. Most foreign employees are covered by various foreign
government mandated or defined contribution plans which are adequately funded
and are not considered material to the financial condition or results of
operations of the Company. The plans' liabilities and their related costs are
computed in accordance with the laws of the individual countries and appropriate
actuarial practices.
Retirement benefits under the SERP are based on years of service and
average monthly compensation, reduced by benefits under the pension plan and
Social Security. The Senior SERP provides retirement benefits based on years of
service and position. The Directors' Plan will provide an annual benefit to
directors following their retirement, based on a vesting schedule. The Company
purchased various life insurance policies on the participants in the SERP,
Senior SERP and Directors' Plan with the intent to use the proceeds or any cash
value buildup from such policies to assist in funding, at least to the extent of
such assets, the plans' funding requirements.
The net cost for the four defined plans described above were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Service cost--benefits earned during the period............. $ 8,550 $ 6,996 $ 6,179
Interest cost on projected benefit obligation............... 9,400 9,114 7,686
Return on plan assets....................................... (13,341) (15,752) (5,252)
Net amortization and deferral of gain....................... 9,747 12,189 2,056
------- ------- -------
$14,356 $12,547 $10,669
======= ======= =======
</TABLE>
The plans' funded status at December 31, was as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------- ---------------------
FUNDED NON-FUNDED FUNDED NON-FUNDED
PLAN PLANS PLAN PLANS
-------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Vested benefit obligation...................... $ 76,701 $ 40,130 $75,586 $ 38,205
-------- -------- ------- --------
Accumulated benefit obligation................. $ 80,228 $ 40,245 $80,897 $ 38,308
======== ======== ======= ========
Projected benefit obligation................... $ 88,080 $ 40,280 $89,363 $ 38,341
Plans' assets at fair value.................... 103,603 -- 91,058 --
-------- -------- ------- --------
Plans' assets in excess (deficit) of projected
benefit obligation........................... 15,523 (40,280) 1,695 (38,341)
Unrecognized net loss from past experience and
effects of changes in assumptions............ 1,634 7,484 14,005 8,121
Prior service cost not yet recognized in net
periodic pension cost........................ (2,035) 10,749 (2,395) 12,345
-------- -------- ------- --------
Accrued pension cost........................... 15,122 (22,047) 13,305 (17,875)
Adjustment for additional minimum liability.... -- (18,198) -- (20,433)
-------- -------- ------- --------
Retirement plan asset (liability).............. $ 15,122 $(40,245) $13,305 $(38,308)
======== ======== ======= ========
</TABLE>
42
<PAGE> 44
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following assumed rates were used in the determination of the plans'
funded status:
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
FUNDED NON-FUNDED FUNDED NON-FUNDED
PLAN PLANS PLAN PLANS
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Discount rate used to determine
obligations................................ 7.5% 7.5% 7.25% 7.25%
Assumed rate of compensation increase........ 5.5 5.5 5.5 5.5
Assumed rate of return on plan assets........ 8.5 -- 8.0 --
</TABLE>
NOTE FOURTEEN
MAJOR SEGMENTS OF BUSINESS
The Company conducts funeral and cemetery operations principally in North
America, Europe and the Pacific Rim and offers financial services in the United
States.
<TABLE>
<CAPTION>
FINANCIAL
FUNERAL CEMETERY SERVICES CORPORATE CONSOLIDATED
---------- ---------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
1996....................... $1,663,387 $ 612,421 $ 18,386 $ -- $2,294,194
1995....................... 1,166,247 463,754 22,125 -- 1,652,126
1994....................... 754,408 343,521 19,246 -- 1,117,175
Income from operations:
1996....................... $ 380,841 $ 214,721 $ 8,890 $(63,215) $ 541,237
1995....................... 295,151 160,442 9,628 (53,600) 411,621
1994....................... 222,605 110,226 8,364 (51,700) 289,495
Identifiable assets:
1996....................... $5,905,246 $2,638,775 $148,193 $177,556 $8,869,770
1995....................... 5,110,145 2,157,906 218,963 185,373 7,672,387
1994....................... 3,115,053 1,417,081 213,257 416,497 5,161,888
Depreciation and
amortization:
1996....................... $ 103,696 $ 18,601 $ 9 $ 7,513 $ 129,819
1995....................... 72,477 11,772 33 8,259 92,541
1994....................... 46,944 9,969 120 11,960 68,993
Capital expenditures:(1)
1996....................... $ 234,673 $ 268,039 $ -- $ 11,582 $ 514,294
1995....................... 442,227 480,372 10 6,090 928,699
1994....................... 212,660 384,402 -- 2,950 600,012
Number of operating locations
at year end:
1996....................... 2,882 495 -- -- 3,377
1995....................... 2,836 360 -- -- 3,196
1994....................... 1,534 259 -- -- 1,793
</TABLE>
- ---------------
(1) Includes $321,142, $803,468 and $518,922 for the three years ended December
31, 1996, respectively, for purchases of property, plant, and equipment and
cemetery property of acquired businesses.
43
<PAGE> 45
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Geographic segment information was as follows:
<TABLE>
<CAPTION>
UNITED OTHER OTHER
STATES FRANCE* EUROPEAN** FOREIGN*** CONSOLIDATED
---------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
1996....................... $1,409,409 $ 537,079 $184,943 $162,763 $2,294,194
1995....................... 1,178,407 190,091 151,225 132,403 1,652,126
1994....................... 975,971 -- 42,613 98,591 1,117,175
Income from operations:
1996....................... $400,622 $ 52,204 $ 37,376 $ 51,035 $ 541,237
1995....................... 314,698 18,743 34,214 43,966 411,621
1994....................... 245,230 -- 10,266 33,999 289,495
Identifiable assets:
1996....................... $6,135,950 $1,252,738 $923,692 $557,390 $8,869,770
1995....................... 5,256,876 1,169,484 777,247 468,780 7,672,387
1994....................... 4,168,636 -- 683,612 309,640 5,161,888
Number of operating locations
at year end:
1996....................... 1,441 1,056 631 249 3,377
1995....................... 1,274 1,067 618 237 3,196
1994....................... 1,043 -- 549 201 1,793
</TABLE>
- ---------------
* French operations from August 1995.
** Includes United Kingdom operations from September 1994, and other European
operations from August 1995.
*** Includes Canadian and Australian operations.
44
<PAGE> 46
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE FIFTEEN
SUPPLEMENTARY INFORMATION
The detail of certain balance sheet accounts at December 31, was as
follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Cash and cash equivalents:
Cash...................................................... $ 41,344 $ 46,999
Commercial paper and temporary investments................ 2,787 10,485
-------- --------
$ 44,131 $ 57,484
======== ========
Receivables and allowances:
Current:
Trade accounts......................................... $273,696 $242,268
Cemetery contracts..................................... 236,578 196,091
Loans and other........................................ 69,174 82,151
-------- --------
579,448 520,510
Less:
Allowance for contract cancellations and doubtful
accounts.............................................. 45,155 34,147
Unearned finance charges and valuation discounts....... 39,717 37,422
-------- --------
84,872 71,569
-------- --------
$494,576 $448,941
======== ========
Long-term:
Cemetery contracts..................................... $311,847 $258,253
Loans and other notes.................................. 206,897 257,415
Trusted cemetery merchandise sales..................... 371,400 314,400
-------- --------
890,144 830,068
Less:
Allowance for contract cancellations and doubtful
accounts.............................................. 29,951 23,298
Unearned finance charges and valuation discounts....... 50,906 43,879
-------- --------
80,857 67,177
-------- --------
$809,287 $762,891
======== ========
</TABLE>
Interest rates on cemetery contracts and loans and other notes receivable
range from 1.5% to 18.0% at December 31, 1996. Included in loans and other notes
receivable are $18,228 in notes with officers and employees of the Company, the
majority of which are collateralized by real estate, and $19,523 in notes with
other related parties.
45
<PAGE> 47
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Cemetery property:
Undeveloped land......................................... $1,003,961 $ 839,797
Developed land, lawn crypts and mausoleums............... 376,252 322,759
---------- ----------
$1,380,213 $1,162,556
========== ==========
Property, plant and equipment:
Land..................................................... $ 355,017 $ 314,185
Buildings and improvements............................... 1,017,334 884,178
Operating equipment...................................... 358,577 279,560
Leasehold improvements................................... 45,606 42,844
---------- ----------
1,776,534 1,520,767
Less: accumulated depreciation........................... (319,459) (247,045)
---------- ----------
$1,457,075 $1,273,722
========== ==========
Accounts payable and accrued liabilities:
Trade payables........................................... $ 68,912 $ 98,984
Dividends................................................ 14,189 12,902
Payroll.................................................. 78,233 93,375
Unpaid acquisition cost.................................. -- 19,493
Interest................................................. 28,984 24,633
Insurance................................................ 33,263 44,848
Bank overdraft........................................... 48,312 27,749
Other.................................................... 168,904 98,956
---------- ----------
$ 440,797 $ 420,940
========== ==========
</TABLE>
NON-CASH TRANSACTIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1995 1994
------- -------- -------
<S> <C> <C> <C>
Common stock issued under restricted stock plans............ $ 1,278 $ 1,868 $ 1,724
Minimum liability under retirement plans.................... (2,235) 4,213 (382)
Debenture conversions to common stock....................... 1,240 188,707 1,293
Property distributed from prearranged funeral trust......... -- -- 9,920
Common stock issued in acquisitions......................... 15,823 109,277 9,491
Debt issued in acquisitions................................. 26,467 114,609 36,567
</TABLE>
NOTE SIXTEEN
PROSPECTIVE ACCOUNTING CHANGES
The Company will adopt Statement of Financial Accounting Standards No. 125
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities" ("FAS 125"), which was amended by FAS 127, in January 1997. FAS
125 provides standards for transfers and servicing of financial assets and
extinguishments of liabilities that are based on a financial components approach
that focuses on control. The Company does not anticipate that FAS 125 will have
a material impact on the Company's consolidated financial statements. The
Company will adopt FAS 128 "Earnings Per Share" and FAS 129 "Disclosures of
Information About Capital Structure" for the year ended December 31, 1997. FAS
128
46
<PAGE> 48
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
simplifies the computation of earnings per share by replacing primary and fully
diluted presentations with the new basic and diluted disclosures. FAS 129
contains new capital structure disclosure requirements.
NOTE SEVENTEEN
RELATED PARTY TRANSACTIONS
As of February 12, 1997, subsidiaries of J. P. Morgan & Co. Incorporated
("Morgan") beneficially own approximately 1.7% of the Company's common stock.
Morgan and the Company have entered into various foreign currency and/or
interest rate swap agreements during the three years ended December 31, 1996.
During 1996 and 1995, Morgan participated as lead underwriter on public
offerings in 1995 and acted as an advisor in a private offering of debt. Morgan
also acted as an advisor in the 1995 acquisition of OGF/PFG. During 1994, Morgan
participated as lead underwriter in public offerings. Additionally in the 1994
acquisition of a United Kingdom company. Morgan acted as an advisor as well as
provided a loan used by the Company (repaid in 1995) in the acquisitions of two
United Kingdom companies. For the three years ended December 31, 1996, Morgan
received $3,000, $14,062 and $10,747, respectively in fees from the Company.
NOTE EIGHTEEN
SUBSEQUENT EVENTS
In January 1997, the Company sold its interest in Equity Corporation
International (approximately 7,994,000 shares) and received sale proceeds of
approximately $148,000 producing a gain of approximately $68,000 ($42,000
after-tax), which will be included in the financial results for the quarter
ended March 31, 1997.
Additionally, in the first quarter of 1997, the Company initiated the
repurchase of the 8.375% notes due 2004, the 7.875% debentures due 2013 and the
Company's medium term notes. This will result in an after-tax loss which will be
recorded as an extraordinary item in the financial results for the quarter ended
March 31, 1997. It is the Company's intention to refinance these notes to reduce
future interest expense.
47
<PAGE> 49
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE NINETEEN
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH YEAR
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
1996................................ $575,453 $564,749 $544,500 $609,492 $2,294,194
1995................................ 348,113 353,649 403,491 546,873 1,652,126
Gross profit:
1996................................ 160,168 144,063 131,378 168,843 604,452
1995................................ 116,675 105,982 105,724 136,840 465,221
Net income:
1996................................ 71,897 62,250 57,395 73,756 265,298
1995................................ 47,380 40,640 39,136 56,432 183,588
Primary earnings per share:
1996................................ .30 .26 .24 .30 1.10
1995................................ .24 .21 .20 .25 .90
Fully diluted earnings per share:
1996................................ .29 .25 .23 .30 1.07
1995................................ .23 .20 .18 .24 .85
</TABLE>
48
<PAGE> 50
SERVICE CORPORATION INTERNATIONAL
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(2) DEDUCTIONS(1) OF PERIOD
----------- ---------- ---------- ----------- ------------- ---------
(THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current --
Allowance for contract cancellations
and doubtful accounts:
Year ended December 31, 1996....... $34,147 $14,187 $ 6,638 $(9,817) $45,155
Year ended December 31, 1995....... 20,156 8,853 10,904 (5,766) 34,147
Year ended December 31, 1994....... 14,786 7,658 4,155 (6,443) 20,156
Due After One Year --
Allowance for contract cancellations
and doubtful accounts:
Year ended December 31, 1996....... $23,298 $ 3,072 $ 3,581 $ -- $29,951
Year ended December 31, 1995....... 16,086 2,999 4,689 (476) 23,298
Year ended December 31, 1994....... 14,054 1,969 1,830 (1,767) 16,086
</TABLE>
- ---------------
(1) Uncollected receivables written off, net of recoveries.
(2) Primarily acquisitions and dispositions of operations.
49
<PAGE> 51
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information called for by PART III (Items 10, 11, 12 and 13) has been
omitted as the Company intends to file with the Commission not later than 120
days after the close of its fiscal year a definitive Proxy Statement pursuant to
Regulation 14A. Such information is set forth in such Proxy Statement (i) with
respect to Item 10 under the captions "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance", (ii) with respect to Items 11 and 13
under the captions "Certain Information with Respect to Officers and Directors",
"Compensation Committee Interlocks and Insider Participation" and "Certain
Transactions" and (iii) with respect to Item 12 under the caption "Voting
Securities and Principal Holders." The information as specified in the preceding
sentence is incorporated herein by reference. Notwithstanding anything set forth
in this Form 10-K, the information under the caption "Compensation Committee
Report on Executive Compensation" and under the captions "Overview of Executive
Compensation" and "Performance Graphs" in such Proxy Statement are not
incorporated by reference into this Form 10-K.
The information regarding the Company's executive officers called for by
Item 401 of Regulation S-K has been included in PART I of this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1)-(2) Financial Statements and Schedule:
The financial statements and schedules are listed in the accompanying
Index to Financial Statements and Related Schedule on page 19 of this
report.
(3) Exhibits:
The exhibits listed on the accompanying Exhibit Index on pages 52-54
are filed as part of this report.
(b) Reports on Form 8-K:
During the quarter ended December 31, 1996, the Company filed a Form
8-K dated October 9, 1996 reporting under "Item 5. Other Events" a press
release announcing a proposed exchange offer by the Company to acquire the
outstanding shares of The Loewen Group, Inc.
(c) Included in (a) above.
(d) Included in (a) above.
50
<PAGE> 52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant, Service Corporation International, has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
SERVICE CORPORATION INTERNATIONAL
Dated: March 28, 1997 By: JAMES M. SHELGER
----------------------------------
(James M. Shelger,
Senior Vice President, General
Counsel and Secretary)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
R. L. WALTRIP* Chairman of the Board and Chief
(R. L. Waltrip) Executive Officer
GEORGE R. CHAMPAGNE* Senior Vice President Chief Financial
(George R. Champagne) Officer (Principal Financial
Officer)
WESLEY T. McRAE Corporate Controller of SCI
- ----------------------------------------------------- Management Corporation, a
(Wesley T. McRae) subsidiary of the Registrant
(Principal Accounting Officer)
ANTHONY L. COELHO* Directors
(Anthony L. Coelho)
DOUGLAS M. CONWAY*
(Douglas M. Conway)
JACK FINKELSTEIN*
(Jack Finkelstein)
A. J. FOYT, JR.*
(A. J. Foyt, Jr.)
JAMES J. GAVIN, JR.*
(James J. Gavin, Jr.)
JAMES H. GREER*
(James H. Greer)
L. WILLIAM HEILIGBRODT*
(L. William Heiligbrodt)
B. D. HUNTER*
(B. D. Hunter)
JOHN W. MECOM, JR.*
(John W. Mecom, Jr.)
CLIFTON H. MORRIS, JR.*
(Clifton H. Morris, Jr.)
E. H. THORNTON, JR.*
(E. H. Thornton, Jr.)
W. BLAIR WALTRIP*
(W. Blair Waltrip)
EDWARD E. WILLIAMS*
(Edward E. Williams)
*By JAMES M. SHELGER
-------------------------------------------------
(James M. Shelger, as Attorney-In-Fact
for each of the Persons indicated)
</TABLE>
March 28, 1997
51
<PAGE> 53
EXHIBIT INDEX
PURSUANT TO ITEM 601 OF REG. S-K
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
3.1 -- Restated Articles of Incorporation (Incorporated by
reference to Exhibit 3.1 to Registration Statement No.
333-10867 on Form S-4).
3.2 -- Articles of Amendment to Restated Articles of
Incorporation. (Incorporated by reference to Exhibit 3.1
to Form 10-Q for the fiscal quarter ended September 30,
1997).
3.3 -- Statement of Resolution Establishing Series of Shares of
Series C Junior Participating Preferred Stock, dated
August 5, 1988. (Incorporated by reference to Exhibit 3.1
to Form 10-Q for the fiscal quarter ended July 31, 1988).
3.4 -- Bylaws, as amended. (Incorporated by reference to Exhibit
3.7 to Form 10-K for the fiscal year ended December 31,
1991).
4.1 -- Rights Agreement dated as of July 18, 1988 between the
Company and Texas Commerce Bank National Association.
(Incorporated by reference to Exhibit 1 to Form 8-K dated
July 18, 1988).
4.2 -- Amendment, dated as of May 10, 1990, to the Rights
Agreement, dated as of July 18, 1988, between the Company
and Texas Commerce Bank National Association.
(Incorporated by reference to Exhibit 1 to Form 8-K dated
May 10, 1990).
4.3 -- Agreement Appointing a Successor Rights Agent under
Rights Agreement, dated as of June 1, 1990, by the
Company and Ameritrust Company National Association.
(Incorporated by reference to Exhibit 4.1 to Form 10-Q
for the fiscal quarter ended June 30, 1990).
4.4 -- Undertaking to furnish instruments related to long-term
debt.
10.1 -- Retirement Plan For Non-Employee Directors. (Incorporated
by reference to Exhibit 10.1 to Form 10-K for the fiscal
year ended December 31, 1991).
10.2 -- Agreement dated May 14, 1992 between the Company, R. L.
Waltrip and related parties relating to life insurance.
(Incorporated by reference to Exhibit 10.4 to Form 10-K
for the fiscal year ended December 31, 1992).
10.3 -- Employment Agreement, dated November 11, 1991, as amended
and restated as of August 12, 1992, further amended and
restated as of May 12, 1993, and further amended and
restated as of January 1, 1997, between SCI Executive
Services, Inc. and R. L. Waltrip.
10.4 -- Non-Competition Agreement and Amendment to Employment
Agreement, dated November 11, 1991, among the Company, R.
L. Waltrip and Claire Waltrip. (Incorporated by reference
to Exhibit 10.9 to Form 10-K for the fiscal year ended
December 31, 1992).
10.5 -- Employment Agreement, dated November 11, 1991, as amended
and restated as of August 12, 1992, further amended and
restated as of May 12, 1993, and further amended and
restated as of January 1, 1997, between SCI Executive
Services, Inc. and L. William Heiligbrodt.
10.6 -- Employment Agreement, dated November 11, 1991, as amended
and restated as of August 12, 1992, further amended and
restated as of May 12, 1993, and further amended and
restated as of January 1, 1997, between SCI Executive
Services, Inc. and W. Blair Waltrip.
</TABLE>
52
<PAGE> 54
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.7 -- Employment Agreement, dated November 11, 1991, as amended
and restated as of August 12, 1992, further amended and
restated as of May 12, 1993, and further amended and
restated as of January 1, 1997, between SCI Executive
Services, Inc. and John W. Morrow, Jr.
10.8 -- Employment Agreement, dated November 11, 1991, as amended
and restated as of August 12, 1992, further amended and
restated as of May 12, 1993, further amended and restated
as of January 1, 1995, and further amended and restated
as of January 1, 1997, between SCI Executive Services,
Inc. and Jerald L. Pullins.
10.9 -- Form of Employment Agreement pertaining to officers
(other than the officers identified in the preceding
exhibits).
10.10 -- Form of 1986 Stock Option Plan. (Incorporated by
reference to Exhibit 10.21 to Form 10-K for the fiscal
year ended December 31, 1991).
10.11 -- Amendment to 1986 Stock Option Plan.
10.12 -- Amended 1987 Stock Plan. (Incorporated by reference to
Appendix A to Proxy Statement dated April 1, 1991).
10.13 -- First Amendment to Amended 1987 Stock Plan. (Incorporated
by reference to Exhibit 10.23 to Form 10-K for the fiscal
year ended December 31, 1993).
10.14 -- 1993 Long-Term Incentive Stock Option Plan. (Incorporated
by reference to Exhibit 4.12 to Registration Statement
No. 333-00179 on Form S-8).
10.15 -- Amendment to 1993 Long-Term Incentive Stock Option Plan.
10.16 -- Service Corporation International ECI Stock Option Plan.
(Incorporated by reference to Exhibit 10.1 to Form 10-Q
for the fiscal quarter ended September 30, 1994).
10.17 -- 1995 Incentive Equity Plan. (Incorporated by reference to
Annex B to Proxy Statement dated April 17, 1995).
10.18 -- Amendment to 1995 Incentive Equity Plan.
10.19 -- 1995 Stock Plan for Non-Employee Directors. (Incorporated
by reference to Annex A to Proxy Statement dated April
17, 1995).
10.20 -- Summary of 1995 Long Term Cash Performance Plan.
(Incorporated by reference to Exhibit 10.22 to Form 10-K
for the fiscal year ended December 31, 1994).
10.21 -- 1996 Incentive Plan. (Incorporated by reference to Annex
A to Proxy Statement dated April 15, 1996).
10.22 -- Amendment to 1996 Incentive Plan.
10.23 -- Split Dollar Life Insurance Plan. (Incorporated by
reference to Exhibit 10.36 to Form 10-K for the fiscal
year ended December 31, 1995).
10.24 -- Agreement for Reorganization, dated August 15, 1989 among
Morrow Partners, Inc., J.W. Morrow Investment Company,
John W. Morrow, Jr., Billy Dee Davis and the Company;
Agreement-Not-To-Compete, dated August 15, 1989, between
John W. Morrow, Jr., Morrow Partners, Inc. and the
Company, and; Lease dated August 15, 1989, by John W.
Morrow, Jr. and Crawford-A. Crim Funeral Home, Inc.
(Incorporated by reference to Exhibit 10.27 to Form 10-K
for the fiscal year ended December 31, 1989).
10.25 -- Casket Supply and Requirements Agreement, dated October
31, 1990, between York Acquisition Corp. and SCI Funeral
Services, Inc., and; First Amendment to Casket Supply and
Requirements Agreement, dated December 30, 1992.
(Incorporated by reference to Exhibit 10.27 to Form 10-K
for the fiscal year ended December 31, 1992).
</TABLE>
53
<PAGE> 55
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.26 -- Supplemental Executive Retirement Plan for Senior
Officers (as Amended and Restated Effective as of
December 31, 1993). (Incorporated by reference to Exhibit
10.21 to Form 10-K for the fiscal year ended December 31,
1993).
10.27 -- First Amendment to Supplemental Executive Retirement Plan
for Senior Officers. (Incorporated by reference to
Exhibit 10.26 to Form 10-K for the fiscal year ended
December 31, 1994).
10.28 -- ISDA Master Agreement dated February 4, 1993; Amendment
to the Master Agreement dated August 12, 1993;
Confirmation dated August 13, 1993; Confirmation dated
November 1, 1993 and Notice of Exercise; all of which are
between Morgan Guaranty Trust Company of New York
("Morgan") and the Company. (Incorporated by reference to
Exhibit 10.22 to Form 10-K for the fiscal year ended
December 31, 1993).
10.29 -- Letter, dated December 2, 1994 amending the ISDA Master
Agreement (filed in Exhibit 10.31 above) and a note
agreement and guaranty, between the Company and Morgan;
Letter dated December 13, 1994 regarding the ISDA Master
Agreement (filed in Exhibit 10.31 above). (Incorporated
by reference to Exhibit 10.29 to Form 10-K for the fiscal
year ended December 31, 1994).
10.30 -- Confirmation dated May 18, 1995; Confirmation dated
January 18, 1995; Confirmation dated January 18, 1995;
Confirmation dated January 18, 1995; all of which are
between Morgan and the Company. (Incorporated by
reference to Exhibit 10.30 to Form 10-K for the fiscal
year ended December 31, 1994).
10.31 -- Confirmation dated September 14, 1995; and Confirmation
dated January 12, 1996, between Morgan and the Company;
Confirmation dated January 18, 1996 between J P Morgan
Canada and Service Corporation International (Canada)
Limited. (Incorporated by reference to Exhibit 10.35 to
Form 10-K for the fiscal year ended December 31, 1995).
10.32 -- Confirmation dated March 15, 1996; Confirmation dated May
23, 1996; Confirmation dated May 30, 1996; all of which
are between Morgan and the Company.
11.1 -- Computation of Earnings Per Share.
12.1 -- Ratio of Earnings to Fixed Charges.
21.1 -- Subsidiaries of the Company.
23.1 -- Consent of Independent Accountants (Coopers & Lybrand
L.L.P.).
24.1 -- Powers of Attorney.
27.1 -- Financial Data Schedule.
</TABLE>
In the above list, the management contracts or compensatory plans or
arrangements are set forth in Exhibits 10.1 through 10.23, 10.26 and 10.27.
54
<PAGE> 1
EXHIBIT 4.4
AGREEMENT TO FURNISH INSTRUMENTS
WITH RESPECT TO LONG-TERM DEBT
Pursuant to Item 601(b)(4) of Regulation S-K, there is not
filed with this report certain instruments with respect to Long-term debt under
which the total amount of securities authorized thereunder does not exceed 10
per cent of the total assets of Registrant and its subsidiaries on a
consolidated basis. Registrant agrees to furnish a copy of any such instrument
to the Commission upon request.
SERVICE CORPORATION INTERNATIONAL
By: /s/ James M. Shelger
------------------------------
James M. Shelger
Senior Vice President
Date: March 28, 1997
<PAGE> 1
EXHIBIT 10.3
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into
as of this 11th day of November, 1991, amended and restated as of August 12,
1992, further amended and restated as of May 12, 1993 and further amended and
restated as of January 1, 1997 by and between SCI EXECUTIVE SERVICES, INC., a
Delaware corporation (the "Company") wholly owned by and successor by
assignment to all of the rights, duties and obligations under this Agreement of
SERVICE CORPORATION INTERNATIONAL, a Texas corporation (the "Parent"), and R.
L. Waltrip (the"Employee");
WHEREAS, in order to achieve certain administrative
efficiencies in providing professional management services to its affiliated
companies, the Parent has transferred the Employee to the employ of the Company
effective January 1, 1997;
WHEREAS, the Company, the Parent and the Employee desire to
join in the execution of this amended and restated Agreement to (i) provide for
the transfer of the employment of the Employee and (ii) set out more fully the
rights, duties and obligations of the parties hereto;
WHEREAS, Employee is employed by the Company in a management
capacity, has extraordinary access to the Company's confidential business
information, and has significant duties and responsibilities in connection with
the conduct of the Company's business which places Employee in a special and
uncommon classification of employees;
WHEREAS, attendant to Employee's employment by the Company,
the Company and Employee wish for there to be a complete understanding and
agreement between the Company and Employee with respect to the fiduciary duties
owed by Employee to the Company; Employee's obligation to avoid conflicts of
interest, disclose pertinent information to the Company, and refrain from using
or disclosing the Company's information; the term of employment and conditions
for or upon termination thereof; the compensation and benefits owed to
Employee; and the post-employment obligations Employee owes to the Company; and
WHEREAS, but for Employee's agreement to the covenants and
conditions of this Agreement, particularly the conflict of interest provisions,
the provisions with respect to confidentiality of information and the ownership
of intellectual property, and the post-employment obligations of Employee, the
Company would not have entered into this Agreement;
NOW, THEREFORE, in consideration of Employee's employment by
the Company and the mutual promises and covenants contained herein, the receipt
and sufficiency of such consideration being hereby acknowledged, the Company
and Employee agree as follows:
<PAGE> 2
1. Employment and Term. The Company agrees to employ
the Employee and the Employee agrees to remain in the employ of the Company, in
accordance with the terms and provisions of this Agreement, for the period
beginning on the date of this Agreement (i.e. November 11, 1991) and ending as
of the close of business on the fifth (5th) anniversary of the date hereof
(such period together with all extensions thereof, including any Change of
Control Period (as defined in Section 16(b) below), are referred to hereinafter
as the "Employment Period"); provided, however, that commencing on the date one
year after the date hereof, and on each annual anniversary of such date (such
date and each annual anniversary thereof shall be hereinafter referred to as a
"Renewal Date") the Employment Period shall be automatically extended so as to
terminate five (5) years from such Renewal Date, unless at least 60 days prior
to the Renewal Date either the Company or the Employee gives the other written
notice that the Employment Period shall not be so extended.
2. Duties and Powers of Employee. (a) Position;
Location. During the Employment Period, the Employee shall perform such duties
and have such powers as designated by the Board of Directors of the Company
(the "Board") or any duly authorized committee thereof in connection with the
execution of this Agreement. The Employee's services shall be performed at the
location where the Employee is currently employed or any office which is the
headquarters of the Company and is less than 50 miles from such location.
During the Change of Control Period, the Employee's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned with or by the
Company or the Parent at any time during the 90-day period immediately
preceding the Change of Control Date (as defined in Section 16(a) below).
(b) Duties. During the Employment Period, and excluding
any periods of vacation and sick leave to which the Employee is entitled, the
Employee agrees to devote his attention and time during normal business hours
to the business and affairs of the Company and to use the Employee's best
efforts to perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for the
Employee to (i) serve on corporate, civic or charitable boards or committees,
(ii) deliver lectures, fulfill speaking engagements or teach at educational
institutions and (iii) manage personal investments, so long as such activities
do not significantly interfere with the performance of the Employee's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Employee prior to the date of this
Agreement or subsequent thereto consistent with this Section 2(b), the
continued conduct of such activities (or the conduct of activities similar in
nature and scope thereto) shall not thereafter be deemed to interfere with the
performance of the Employee's responsibilities to the Company.
(c) Employee agrees and acknowledges that he owes, and
will comply with, a fiduciary duty of loyalty, fidelity or allegiance to act at
all times in the best interests of the Company and to take no action or fail to
take action if such action or failure to act would injure the Company's
business, its interests or its reputation.
2
<PAGE> 3
3. Compensation. The Employee shall receive the
following compensation for his services:
(a) Salary. During the Employment Period, he shall be
paid an annual base salary ("Annual Base Salary") at the rate of not less than
$798,000.00 per year, in substantially equal bi-weekly installments, and
subject to any and all required withholdings and deductions for Social
Security, income taxes and the like. The Board may from time to time direct
such upward adjustments to Annual Base Salary as the Board deems to be
appropriate or desirable; provided, however, that during the Change of Control
Period, the Annual Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be substantially
consistent with increases in base salary generally awarded in the ordinary
course of business to other employees of comparable rank with the Company and
its affiliated companies (as defined in Section 16(d) below). Annual Base
Salary shall not be reduced after any increase thereof pursuant to this Section
3(a). Any increase in Annual Base Salary shall not serve to limit or reduce any
other obligation of the Company under this Agreement.
(b) Incentive Cash Compensation. During the Employment
Period, he shall be eligible annually for a cash bonus at the discretion of the
Board (such aggregate awards for each year are hereinafter referred to as the
"Annual Bonus") and at the discretion of the Board to receive awards from any
plan of the Company or any of its affiliated companies providing for the
payment of bonuses in cash to employees of the Company or its affiliated
companies having rank comparable to that of the Employee (such plans being
referred to herein collectively as the "Cash Bonus Plans") in accordance with
the terms thereof; provided, however, that, during the Change of Control
Period, the Employee shall be awarded, for each fiscal year ending during the
Change of Control Period, an Annual Bonus at least equal to the Highest Recent
Bonus (as defined in Section 16(e) below). Each Annual Bonus shall be paid no
later than the end of the third month of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, unless the Employee shall
elect to defer the receipt of such Annual Bonus.
(c) Incentive and Savings and Retirement Plans. During
the Employment Period, the Employee shall be entitled to participate in all
incentive and savings (in addition to the Cash Bonus Plans) and retirement
plans, practices, policies and programs applicable generally to other employees
of comparable rank with the Company and its affiliated companies.
(d) Welfare Benefit Plans. During the Employment
Period, the Employee and/or the Employee's family, as the case may be, shall be
eligible for participation in all welfare benefit plans, practices, policies
and programs provided by the Company and its affiliated companies (including,
without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other
employees of comparable rank with the Company and its affiliated companies.
(e) Expenses. During the Employment Period and for so
long as the Employee is employed by the Company, he shall be entitled to
receive prompt reimbursement
3
<PAGE> 4
for all reasonable expenses incurred by the Employee in accordance with the
policies, practices and procedures of the Company and its affiliated companies
from time to time in effect.
(f) Fringe Benefits. During the Employment Period, the
Employee shall be entitled to fringe benefits in accordance with the plans,
practices, programs and policies of the Company and its affiliated companies
from time to time in effect, commensurate with his position and on a basis at
least comparable to those received by other employees of comparable rank with
the Company and its affiliated companies.
(g) Office and Support Staff. During the Employment
Period, the Employee shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal secretarial
and other assistance, commensurate with his position and on a basis at least
comparable to those received by other employees of comparable rank with the
Company and its affiliated companies.
(h) Vacation and Other Absences. During the Employment
Period, the Employee shall be entitled to paid vacation and such other paid
absences whether for holidays, illness, personal time or any similar purposes,
in accordance with the plans, policies, programs and practices of the Company
and its affiliated companies in effect from time to time, commensurate with his
position and on a basis at least comparable to those received by other
employees of comparable rank with the Company and its affiliated companies.
(i) During the Change of Control Period, the Employee's
benefits listed under Sections 3(c), 3(d), 3(e), 3(f), 3(g) and 3(h) above
shall be at least commensurate in all material respects with the most valuable
and favorable of those received by the Employee at any time during the 90-day
period immediately preceding the Change of Control Date.
4. Termination of Employment. (a) Death or Disability.
The Employment Period shall terminate automatically upon the Employee's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Employee has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Employee
written notice in accordance with Section 17(b) of its intention to terminate
the Employment Period. In such event, the Employment Period shall terminate
effective on the 30th day after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
inability of the Employee to perform the Employee's duties with the Company on
a full-time basis as a result of incapacity due to mental or physical illness
which continues for more than one year after the commencement of such
incapacity, such incapacity to be determined by a physician selected by the
Company or its insurers and acceptable to the Employee or the Employee's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Employment
Period for Cause. For purposes of this Agreement, "Cause" shall mean (i) a
material breach by the Employee of
4
<PAGE> 5
Section 9 which is willful on the Employee's part or which is committed in bad
faith or without reasonable belief that such breach is in the best interests of
the Company and its affiliated companies, or (ii) a material breach by the
Employee of the Employee's obligations under Section 2 (other than a breach of
the Employee's obligations under Section 2 arising from the failure of the
Employee to work as a result of incapacity due to physical or mental illness)
or any material breach by the Employee of Section 10, 11 or 12 of this
Agreement which in either case is willful on the Employee's part, which is
committed in bad faith or without reasonable belief that such breach is in the
best interests of the Company and its affiliated companies and which is not
remedied in a reasonable period of time after receipt of written notice from
the Company specifying such breach, or (iii) the conviction of the Employee of
a felony involving malice which conviction has been affirmed on appeal or as to
which the period in which an appeal can be taken has lapsed.
(c) Good Reason; Window Period. The Employee's
employment may be terminated (i) by the Employee for Good Reason (as defined
below) or (ii) during the Window Period (as defined below) by the Employee
without any reason. For purposes of this Agreement, the "Window Period" shall
mean the 30-day period immediately following the first anniversary of the
Change of Control Date. For purposes of this Agreement, "Good Reason" shall
mean
(i) the assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities prior to the date of such assignment or any other
action by the Company or the Parent which results in a diminution in
such position, authority, duties or responsibilities, excluding for
this purpose an isolated and insubstantial action not taken in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 3, other than an isolated and insubstantial
failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the
Employee;
(iii) the Company's requiring the Employee to be based at
any office or location other than that described in Section 2(a);
(iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company or the Parent to comply
with and satisfy Section 15(c), provided that the successor referred
to in Section 15(c) has received at least ten days prior written
notice from the Company or the Employee of the requirements of Section
15(c).
For purposes of this Section 4(c), during the Change of Control Period, any
good faith determination of "Good Reason" made by the Employee shall be
conclusive.
5
<PAGE> 6
(d) Notice of Termination. Any termination by the
Company for Cause or by the Employee without any reason during the Window
Period or for Good Reason shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 17(b). For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employment Period under the
provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination
date (which date shall be not more than 15 days after the giving of such
notice). The failure by the Employee or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Employee or the Company
hereunder or preclude the Employee or the Company from asserting such fact or
circumstance in enforcing the Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Employee's employment is terminated by the Company for Cause, or by
the Employee during the Window Period or for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein, as the case
may be, (ii) if the Employee's employment is terminated by the Company other
than for Cause or Disability, or by the Employee other than for Good Reason or
during the Window Period, the Date of Termination shall be the date on which
the Company or the Employee, as the case may be, notifies the other of such
termination and (iii) if the Employee's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Employee or the Disability Effective Date, as the case may be.
5. Obligations of the Company Upon Termination. (a)
Certain Terminations Prior to Change of Control Date. If, during the Employment
Period prior to any Change of Control Date, the employment of the Employee with
the Company shall be terminated (i) by the Company other than for Cause, death
or Disability or (ii) by the Employee for Good Reason, then, in lieu of the
obligations of the Company under Section 3, (i) the Company shall pay to the
Employee in a lump sum in cash within 30 days after the Date of Termination all
Unpaid Agreement Amounts (as defined in Section 5(b)(i)(A) below) and (ii)
notwithstanding any other provision hereunder, for the longer of (A) the
remainder of the Employment Period or (B) to the extent compensation and/or
benefits are provided under any plan, program, practice or policy, such longer
period, if any, as such plan, program, practice or policy may provide, the
Company shall continue to provide to the Employee the compensation and benefits
provided in Sections 3(a), 3(c) and 3(d).
(b) Certain Terminations After Change of Control Date.
If, during the Change of Control Period, the employment of the Employee with
the Company shall be terminated (i) by the Company other than for Cause, death
or Disability or (ii) by the Employee either for Good Reason or without any
reason during the Window Period, then, in lieu of the obligations of the
Company under Section 3 and notwithstanding any other provision hereunder:
6
<PAGE> 7
(i) the Company shall pay to the Employee in a lump sum
in cash within 30 days after the Date of Termination the aggregate of the
following amounts:
(A) the sum of (1) all unpaid amounts due to the
Employee under Section 3 through the Date of
Termination, including without limitation, the
Employee's Annual Base Salary and any accrued
vacation pay, (2) the product of (x) the Highest
Recent Bonus and (y) a fraction, the numerator of
which is the number of days in the current fiscal
year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation
previously deferred by the Employee (together with
any accrued interest or earnings thereon) to the
extent not theretofore paid (the sum of the amounts
described in clauses (1), (2) and (3) shall be
hereinafter referred to as the "Accrued Obligations"
and the sum of the amounts described in clauses (1)
and (3) shall be hereinafter referred to as the
"Unpaid Agreement Amounts"); and
(B) the amount (such amount shall be hereinafter
referred to as the "Severance Amount") equal to
the sum of
(1) Five (5) multiplied by the
Employee's Annual Base Salary, plus
(2) Five (5) multiplied by the
Employee's Highest Recent Bonus;
(ii) for the longer of (A) the remainder of the Employment
Period or (B) to the extent benefits are provided under any plan,
program, practice or policy, such longer period as such plan, program,
practice or policy may provide, the Company shall continue benefits to
the Employee and/or the Employee's family at least equal to those
which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 3(d) if the
Employee's employment had not been terminated, in accordance with the
most favorable plans, practices, programs or policies of the Company
and its affiliated companies as in effect and applicable generally to
other employees of comparable rank and their families during the
90-day period immediately preceding the Change of Control Date or, if
more favorable to the Employee, as in effect generally at any time
thereafter with respect to other employees of comparable rank with the
Company and its affiliated companies and their families; provided,
however, that if the Employee becomes reemployed with another employer
and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits
described herein shall be required only to the extent not provided
under such other plan during such applicable period of eligibility.
For purposes of determining eligibility of the Employee for retiree
benefits pursuant to such plans, practices, programs and policies, the
Employee shall be considered to have remained employed until the end
of the Employment Period and to have retired on the last day of such
period; and
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(iii) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Employee and/or the
Employee's family for the remainder of the Employment Period any other
amounts or benefits required to be paid or provided or which the
Employee and/or the Employee's family is eligible to receive pursuant
to this Agreement and under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies as
in effect and applicable generally to other employees of comparable
rank with the Company and its affiliated companies and their families
during the 90- day period immediately preceding the Change of Control
Date or, if more favorable to the Employee, as in effect generally
thereafter with respect to other employees of comparable rank with the
Company and its affiliated companies and their families.
Such amounts received under this Section 5(b) shall be in lieu of any other
amount of severance relating to salary or bonus continuation to be received by
the Employee upon termination of employment of the Employee under any severance
plan, policy or arrangement of the Company.
(c) Termination as a Result of Death. If the Employee's
employment is terminated by reason of the Employee's death during the
Employment Period, in lieu of the obligations of the Company under Section 3,
the Company shall pay or provide to the Employee's estate (i) all Accrued
Obligations (which shall be paid in a lump sum in cash within 30 days after the
Date of Termination) and the timely payment or provision of the Welfare Benefit
Continuation (as defined below) and the Other Benefits (as defined below) and
(ii) any cash amount to be received by the Employee or the Employee's family as
a death benefit pursuant to the terms of any plan, policy or arrangement of the
Company and its affiliated companies. "Welfare Benefit Continuation" shall
mean the continuation of benefits to the Employee and/or the Employee's family
for the longer of (i) five (5) years from the Date of Termination or (ii) the
period provided by the plans, programs, policies or practices described in
Section 3(d) in which the Employee participates as of the Date of Termination,
such benefits to be at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described
in Section 3(d) if the Employee's employment had not been terminated, in
accordance with the most favorable plans, practices, programs or policies of
the Company and its affiliated companies as in effect and applicable generally
to other employees of comparable rank and their families on the Date of
Termination or, if the Date of Termination occurs after the Change of Control
Date, during the 90-day period immediately preceding the Change of Control Date
or, if more favorable to the Employee, as in effect generally at any time
thereafter with respect to other employees of comparable rank with the Company
and its affiliated companies and their families. "Other Benefits" shall mean
the timely payment or provision to the Employee and/or the Employee's family of
any other amounts or benefits required to be paid or provided or which the
Employee and/or the Employee's family is eligible to receive pursuant to this
Agreement and under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies as in effect and
applicable generally to other employees of comparable rank and their families
on the Date of Termination or, if the Date of Termination occurs after the
Change of Control Date, during the 90-day period immediately preceding the
Change of Control Date or,
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<PAGE> 9
if more favorable to the Employee, as in effect generally thereafter with
respect to other employees of comparable rank with the Company and its
affiliated companies and their families.
(d) Termination as a Result of Disability. If the
Employee's employment is terminated by reason of the Employee's Disability
during the Employment Period, in lieu of the obligations of the Company under
Section 3, the Company shall pay or provide to the Employee (i) all Accrued
Obligations which shall be paid in a lump sum in cash within 30 days after the
Date of Termination and the timely payment or provision of the Welfare Benefit
Continuation and the Other Benefits, provided, however, that if the Employee
becomes reemployed with another employer and is eligible to receive medical or
other welfare benefits under another employer provided plan, the Welfare
Benefit Continuation shall be required only to the extent not provided under
such other plan during such applicable period of eligibility, and (ii) any cash
amount to be received by the Employee as a disability benefit pursuant to the
terms of any plan, policy or arrangement of the Company and its affiliated
companies.
(e) Cause; Other than for Good Reason. If the Employee's
employment shall be terminated during the Employment Period by the Company for
Cause or by the Employee other than during the Window Period and other than for
Good Reason, in lieu of the obligations of the Company under Section 3, the
Company shall pay to the Employee in a lump sum in cash within 30 days after
the Date of Termination all Unpaid Agreement Amounts.
6. Non-exclusivity of Rights. Except as provided in
Sections 5(a), 5(b)(i)(B), 5(b)(ii), 5(c) and 5(d), nothing in this Agreement
shall prevent or limit the Employee's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Employee may qualify, nor shall anything
herein limit or otherwise affect such rights as the Employee may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Employee is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
7. Full Settlement; Resolution of Disputes. (a) The
Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Employee or others. In no event shall
the Employee be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Employee under any of the
provisions of this Agreement and, except as provided in Sections 5(b)(ii) and
5(d), such amounts shall not be reduced whether or not the Employee obtains
other employment. The Company agrees to pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company, the Employee or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result
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<PAGE> 10
of any contest by the Employee about the amount of any payment pursuant to this
Agreement), plus in each case interest on any payment required to be made under
this Agreement but not timely paid at the rate provided for in Section
280G(d)(4) of the Internal Revenue Code of 1986, as amended (the "Code").
(b) If there shall be any dispute between the Company and
the Employee (i) in the event of any termination of the Employee's employment
by the Company, whether such termination was for Cause, or (ii) in the event of
any termination of employment by the Employee, whether Good Reason existed,
then, unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that
the determination by the Employee of the existence of Good Reason was not made
in good faith, the Company shall pay all amounts, and provide all benefits, to
the Employee and/or the Employee's family or other beneficiaries, as the case
may be, that the Company would be required to pay or provide pursuant to
Section 5(a) or 5(b) as though such termination were by the Company without
Cause or by the Employee with Good Reason. The Employee hereby undertakes to
repay to the Company all such amounts to which the Employee is ultimately
adjudged by such court not to be entitled.
8. Certain Additional Payments by the Company. (a)
Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 8) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Employee with
respect to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Employee shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Employee of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by the Company's outside independent auditor (the "Accounting Firm"), which
shall provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving (or has served within
the three years preceding the Change of Control Date) as accountant or auditor
for the individual, entity or group effecting the Change of Control, or is
unwilling or unable to perform its obligations pursuant to this Section 8, the
Employee shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm
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<PAGE> 11
hereunder). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8,
shall be paid by the Company to the Employee within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Employee, it shall furnish the Employee with a
written opinion that failure to report the Excise Tax on the Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall
be binding upon the Company and the Employee. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 8(c) and the Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee.
(c) The Employee shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Employee is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Employee shall not pay such claim prior to the expiration of the
30-day period following the date on which the Employee gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Employee in
writing prior to the expiration of such period that it desires to contest such
claim, the Company, subject to the provisions of this Section 8(c), shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Employee to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner. In this
connection, the Employee agrees, subject to the provisions of this Section
8(c), to (i) prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine, (ii) give the Company any
information reasonably requested by the Company relating to such claim, (iii)
take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company, (iv) cooperate with the Company in good
faith in order effectively to contest such claim and (v) permit the Company to
participate in any proceedings relating to such claim. The foregoing is
subject, however, to the following: (A) the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties) incurred
in connection with such contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed in connection therewith
and the payment of costs and expenses in such connection, (B) if the Company
directs the Employee to pay such claim and sue for a refund, the Company shall
advance the amount of such payment
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to the Employee, on an interest-free basis, and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance, (C) any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Employee with respect to which such contested
amount is claimed to be due shall be limited solely to such contested amount
and (D) the Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Employee
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 8(c), the Employee becomes entitled
to receive any refund with respect to such claim, the Employee shall (subject
to the Company's complying with the requirements of Section 8(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Employee shall not be entitled to any refund
with respect to such claim and the Company does not notify the Employee in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Employee shall hold in
a fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Employee during the Employee's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Employee or representatives of the Employee in violation of
this Agreement). After termination of the Employee's employment with the
Company or any of its affiliated companies, the Employee shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis
for deferring or withholding any amounts otherwise payable to the Employee
under this Agreement. Subject to the previous sentence, nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from the Employee.
10. Employee's Obligation to Avoid Conflicts of Interest.
(a) In keeping with Employee's fiduciary duties to the Company, Employee agrees
that he shall not knowingly become involved in circumstances constituting a
conflict of interest with such duties, or upon discovery thereof, allow such a
conflict to continue. Moreover, Employee agrees that he shall disclose to the
Secretary of the Company any facts which might involve a conflict of interest
that has not been approved by the Company. The Board hereby acknowledges and
agrees that the
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activities of Employee listed on Schedule A hereto do not, and the continuation
of such activities will not, constitute a conflict of interest for purposes of
this Section 10.
(b) In this connection, it is agreed that any direct
interest in, connection with, or benefit from any outside activities,
particularly commercial activities, which might in any way adversely affect the
Company or any of its affiliated companies, involves a possible conflict of
interest. Circumstances in which a conflict of interest on the part of Employee
would or might arise, and which should be reported immediately to the Company,
include, but are not limited to, the following:
(i) Ownership of a material interest in any lender,
supplier, contractor, customer or other entity with
which the Company or any of its affiliated companies
does business;
(ii) Acting in any capacity, including director, officer,
partner, consultant, employee, distributor, agent or
the like, for lenders, suppliers, contractors,
subcontractors, customers or other entities with
which the Company or any of its affiliated companies
does business;
(iii) Acceptance, directly or indirectly, of payments,
services or loans from a lender, supplier,
contractor, subcontractor, customer or other entity
with which the Company or any of its affiliated
companies does business, including but not limited
to, gifts, trips, entertainment, or other favors of
more than a nominal value, but excluding loans from
publicly held insurance companies and commercial or
savings banks at normal rates of interest;
(iv) Misuse of information or facilities to which Employee
has access in a manner which will be detrimental to
the Company's or any of its affiliated companies'
interest, such as utilization for Employee's own
benefit of know-how or information developed through
the Company's or any of its affiliated companies'
business activities;
(v) Disclosure or other misuse of information of any kind
obtained through Employee's connection with the
Company or any of its affiliated companies; or
(vi) Acquiring or trading in, directly or indirectly,
other properties or interests connected with the
design or marketing of products or services designed
or marketed by the Company or any of its affiliated
companies.
(c) In the event that the Company determines, in the
exercise of its reasonable judgment, that a conflict of interest exists between
the Employee and the Company or any of its affiliated companies, the Company
shall notify the Employee in writing in accordance with Section 17(b) hereof,
providing reasonably detailed information identifying the source of the
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conflict of interest. Within the 60-day period following receipt of such
notice, the Employee shall take action satisfactory to the Company to eliminate
the conflict of interest. Failure of the Employee to take such action within
such 60-day period shall constitute "Cause" under Section 4(b) hereof.
11. Disclosure of Information, Ideas, Concepts,
Improvements, Discoveries and Inventions. As part of Employee's fiduciary
duties to the Company, Employee agrees that during the Employment Period, and
for a period of six (6) months after the Date of Termination, Employee shall
promptly disclose in writing to the Company all information, ideas, concepts,
improvements, discoveries and inventions, whether patentable or not, and
whether or not reduced to practice, which are conceived, developed, made or
acquired by Employee, either individually or jointly with others, and which
relate to the business, products or services of the Company or any of its
affiliated companies, irrespective of whether Employee utilized the Company's
or any of its affiliated companies' time or facilities and irrespective of
whether such information, idea, concept, improvement, discovery or invention
was conceived, developed, discovered or acquired by Employee on the job, at
home, or elsewhere. This obligation extends to all types of information, ideas
and concepts, including information, ideas and concepts relating to new types
of services, corporate opportunities, acquisition prospects, the identity of
key representatives within acquisition prospect organizations, prospective
names or service marks for the Company's or any of its affiliated companies'
business activities, and the like.
12. Ownership of Information, Ideas, Concepts,
Improvements, Discoveries and Inventions and all Original Works of Authorship.
(a) All information, ideas, concepts, improvements, discoveries and inventions,
whether patentable or not, which are conceived, made, developed or acquired by
Employee or which are disclosed or made known to Employee, individually or in
conjunction with others, during Employee's employment by the Company or any of
its affiliated companies and which relate to the Company's or any of its
affiliated companies' business, products or services (including all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evaluations, opinions, interpretations,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customer's organizations or within the
organization of acquisition prospects, or marketing and merchandising
techniques, prospective names and marks) are and shall be the sole and
exclusive property of the Company. Moreover, all drawings, memoranda, notes,
records, files, correspondence, manuals, models, specifications, computer
programs, maps and all other writings or materials of any type embodying any of
such information, ideas, concepts, improvements, discoveries and inventions are
and shall be the sole and exclusive property of the Company.
(b) In particular, Employee hereby specifically sells,
assigns and transfers to the Company all of his worldwide right, title and
interest in and to all such information, ideas, concepts, improvements,
discoveries or inventions, and any United States or foreign applications for
patents, inventor's certificates or other industrial rights that may be filed
thereon, including divisions, continuations, continuations-in-part, reissues
and/or extensions thereof, and applications for registration of such names and
marks. Both during the period of Employee's employment by the Company or any of
its affiliated companies and thereafter, Employee shall
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assist the Company and its nominee at all times in the protection of such
information, ideas, concepts, improvements, discoveries or inventions, both in
the United States and all foreign countries, including but not limited to, the
execution of all lawful oaths and all assignment documents requested by the
Company or its nominee in connection with the preparation, prosecution,
issuance or enforcement of any applications for United States or foreign
letters patent, including divisions, continuations, continuations-in-part,
reissues, and/or extensions thereof, and any application for the registration
of such names and marks.
(c) Moreover, if during Employee's employment by the
Company or any of its affiliated companies, Employee creates any original work
of authorship fixed in any tangible medium of expression which is the subject
matter of copyright (such as videotapes, written presentations on acquisitions,
computer programs, drawings, maps, architectural renditions, models, manuals,
brochures or the like) relating to the Company's or any of its affiliated
companies' business, products, or services, whether such work is created solely
by Employee or jointly with others, the Company shall be deemed the author of
such work if the work is prepared by Employee in the scope of his or her
employment; or, if the work is not prepared by Employee within the scope of his
or her employment but is specially ordered by the Company as a contribution to
a collective work, as a part of a motion picture or other audiovisual work, as
a translation, as a supplementary work, as a compilation or as an instrumental
text, then the work shall be considered to be work made for hire and the
Company shall be the author of the work. In the event such work is neither
prepared by the Employee within the scope of his or her employment or is not a
work specially ordered and deemed to be a work made for hire, then Employee
hereby agrees to assign, and by these presents does assign, to the Company all
of Employee's worldwide right, title and interest in and to such work and all
rights of copyright therein. Both during the period of Employee's employment by
the Company or any of its affiliated companies and thereafter, Employee agrees
to assist the Company and its nominee, at any time, in the protection of the
Company's worldwide right, title and interest in and to the work and all rights
of copyright therein, including but not limited to, the execution of all formal
assignment documents requested by the Company or its nominee and the execution
of all lawful oaths and applications for registration of copyright in the
United States and foreign countries.
13. Employee's Post-Employment Non-Competition
Obligations: In Certain Situations such Obligations Apply only if the Company
Opts to Continue Employee's Salary Payment. (a) During the Employment Period
and, subject to the conditions of Sections 13(b) and 13(c), for a period of
five (5) years thereafter (the "Non-Competition Period") provided, however,
that the Non-Competition Period shall not exceed five (5) years from the Date
of Termination, Employee shall not, acting alone or in conjunction with others,
directly or indirectly, in any of the business territories in which the Company
or any of its affiliated companies is presently or at the time of termination
of employment conducting business, engage in any business in competition with
the business conducted by the Company or any of its affiliated companies at the
time of the termination of the employment relationship, whether for his own
account or by soliciting, canvassing or accepting any business or transaction
for or from any other company or business in competition with such business of
the Company or any of its affiliated companies.
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(b) If Employee has been terminated for Cause (Section
4(b)) or if Employee terminates his employment for any reason other than for
Good Reason or other than during the Window Period (Section 4(c)), Employee
shall be bound by the obligations of Section 13(a) and the Company shall have
no obligation to make the Non-Competition Payments (as defined in Section 13(c)
below). However, if the employment relationship is terminated by any other
circumstance or for any other reason, Employee's post-employment
non-competition obligations required by Section 13(a) shall be subject to the
Company's obligation to make the Non-Competition Payments specified in Section
13(c).
(c) Notwithstanding the provisions of Section 4 of this
Agreement, whenever the employment relationship is terminated due to the
expiration of its term because the Company or Employee timely gave written
notice of termination (Section 1), or due to Employee's Disability (Section
4(a)), or by the Company without Cause (Section 4(b)), unless the Company
exercises its option as hereinafter provided, Employee shall be entitled to
continue to receive payments (the "Non-Competition Payments") equal to his then
current Annual Base Salary (as of the Date of Termination) during the
Non-Competition Period. During the Non-Competition Period, the Employee shall
not, however, be deemed to be an employee of the Company or be entitled to
continue to receive any other employee benefits other than as set forth in
Section 5 or Section 8. Moreover, the Non-Competition Payments shall be reduced
to the extent Employee has already received lump-sum payments in lieu of salary
and bonus pursuant to Section 5. The Company shall have the option, exercisable
at any time within one (1) month after Employee's Date of Termination, to
cancel Employee's post-employment non-competition obligations under Section
13(a) and the Company's corresponding obligation to make the Non-Competition
Payments. Such option shall be exercised by the Company mailing a written
notice thereof to Employee in accordance with Section 17(b); if the Company
does not send such notice within the prescribed one-month time, the Company
shall remain obligated to make the Non-Competition Payments and Employee shall
remain obligated to comply with the provisions of Section 13(a). The purpose of
this paragraph is to make the non-competition obligations of Employee more
reasonable from the Employee's point of view. The amounts to be paid by the
Company are not intended to be liquidated damages or an estimate of the actual
damages that would be sustained by the Company if Employee breaches his
post-employment non-competition obligations. If Employee breaches his
post-employment non-competition obligations, the Company shall be entitled to
cease making the Non-Competition Payments and shall be entitled to all of its
remedies at law or in equity for damages and injunctive relief.
14. Obligations to Refrain From Competing Unfairly. In
addition to the other obligations agreed to by Employee in this Agreement,
Employee agrees that during the Employment Period and for five (5) years
following the Date of Termination, he shall not at any time, directly or
indirectly for the benefit of any other party than the Company or any of its
affiliated companies, (a) induce, entice, or solicit any employee of the
Company or any of its affiliated companies to leave his employment, or (b)
contact, communicate or solicit any customer of the Company or any of its
affiliated companies derived from any customer list, customer lead, mail,
printed matter or other information secured from the Company or any of its
affiliated companies or their present or past employees, or (c) in any other
manner use any
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customer lists or customer leads, mail, telephone numbers, printed material or
material of the Company or any of its affiliated companies relating thereto.
15. Successors. (a) This Agreement is personal to the
Employee and without the prior written consent of the Company shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or the Company
to assume expressly and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. The Parent will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Parent or the Parent to
assume expressly and agree to perform the Parent's obligations hereunder in the
same manner and to the same extent that the Parent would be required to perform
them if no such succession had taken place. As used in this Agreement,
"Parent" shall mean the Parent as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform the
Parent's obligations hereunder by operation of law, or otherwise.
16. Certain Definitions. The following defined terms used
in this Agreement shall have the meanings indicated:
(a) The "Change of Control Date" shall mean the first
date on which a Change of Control occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Employee's
employment with the Company is terminated or the Employee ceases to have the
position with the Company or the Parent which the Employee had prior to the
date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Employee that such termination or cessation (i) was at the
request of a third party who has taken steps reasonably calculated to effect
the Change of Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then, for all purposes of this
Agreement, the "Change of Control Date" shall mean the date immediately prior
to the date of such termination or cessation.
(b) The "Change of Control Period" shall mean the period
commencing on the Change of Control Date and ending on the last day of the
Employment Period.
(c) "Change of Control" shall mean:
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<PAGE> 18
(i) 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) of 20% or more of either (A) the then
outstanding shares of Common Stock of the Parent (the "Outstanding
Parent Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Parent entitled to vote generally
in the election of directors (the "Outstanding Parent Voting
Securities"); provided, however, that the following acquisitions shall
not constitute a Change of Control: (A) any acquisition directly from
the Parent (excluding an acquisition by virtue of the exercise of a
conversion privilege), (B) any acquisition by the Parent, (C) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Parent or any corporation controlled by the
Parent or (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 (A), (B) and (C) of subsection (iii) of this definition of
"Change of Control" are satisfied; or
(ii) Individuals who, as of the effective date hereof,
constitute the Board of Directors of the Parent (the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board of Directors of the Parent; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Parent's shareholders, was
approved by (A) a vote of at least a majority of the directors then
comprising the Incumbent Board of the Parent, or (B) a vote of at
least a majority of the directors then comprising the Executive
Committee of the Board of Directors of the Parent at a time when such
committee was comprised of at least five members and all members of
such committee were either members of the Incumbent Board or
considered as being members of the Incumbent Board pursuant to clause
(A) of this subsection (ii), 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
of Directors of the Parent; or
(iii) Approval by the shareholders of the Parent of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (A) more than
60% 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 Parent Common Stock and Outstanding Parent Voting
Securities immediately prior to such organization, merger or
consolidation in substantially the same proportions as their
ownership, immediately prior
18
<PAGE> 19
to such reorganization, merger or consolidation, of the Outstanding
Parent Common Stock and Outstanding Parent Voting Securities, as the
case may be, (B) no Person (excluding the Parent, any employee benefit
plan or related trust of the Parent 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, 20% or more of the
Outstanding Parent Common Stock or Outstanding Parent Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% 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 (C) 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
(iv) Approval by the shareholders of the Parent of (A) a
complete liquidation or dissolution of the Parent or (B) the sale or
other disposition of all or substantially all of the assets of the
Parent, other than to a corporation, with respect to which following
such sale or other disposition, (A) more than 60% 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 Parent Common
Stock and Outstanding Parent 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 Parent Common Stock and Outstanding Parent Voting
Securities, as the case may be, (B) no Person (excluding the Parent
and any employee benefit plan or related trust of the Parent or such
corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 20% or more of
the Outstanding Parent Common Stock or Outstanding Parent Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% 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 of Directors of the
Parent providing for such sale or other disposition of assets of the
Parent.
(d) The term "affiliated company" shall mean any company
controlled by, controlling or under common control with the Company.
(e) The term "Highest Recent Bonus" shall mean the
highest Annual Bonus (annualized for any fiscal year consisting of less than
twelve full months) paid or payable,
19
<PAGE> 20
including by reason of any deferral, to the Employee by the Company and its
affiliated companies in respect of the three most recent full fiscal years
ending on or prior to, (i) if prior to a Change of Control, the Date of
Termination, or (ii) if after a Change of Control, the Change of Control Date.
17. Miscellaneous. (a) This Agreement replaces and merges
all previous agreements and discussions relating to the same or similar subject
matters between Employee and the Company and shall be governed by and construed
in accordance with the laws of the State of Texas, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a duly authorized
committee thereof, shall have authority on behalf of the Company to agree to
amend, modify, repeal, waive, extend or discharge any provision of this
Agreement or anything in reference thereto.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
R. L. Waltrip
1929 Allen Parkway
Houston, TX 77019
If to the Company:
SCI Executive Services, Inc.
1929 Allen Parkway
Houston, Texas 77019
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
20
<PAGE> 21
(e) The Employee's or the Company's failure to insist
upon strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Employee or the Company may
have hereunder, including, without limitation, the right of the Employee to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) No breach, whether actual or alleged, of this
Agreement by the Employee shall constitute grounds for the Company to withhold
or offset any payment or benefit due to the Employee under any other agreement,
contract, plan, program, policy or practice of the Company.
IN WITNESS WHEREOF, the Employee and, pursuant to due
authorization from the Board of Directors of the Company, the Company have
caused this Agreement to be executed this 1st day of January, 1997, effective
as of the day and year first above written.
R. L. WALTRIP
/s/ R. L. WALTRIP
---------------------------------
"EMPLOYEE"
SCI EXECUTIVE SERVICES, INC.
By: /s/ CURTIS G. BRIGGS
------------------------------
Curtis G. Briggs
Vice President
"COMPANY"
21
<PAGE> 22
Pursuant to due authorization from its Board of Directors, the Parent,
by its execution hereof, absolutely and unconditionally guarantees to Employee
the full and timely payment and performance of each obligation of the Company
to Employee under this Agreement, WAIVES any and all rights that it may
otherwise have to require Employee to proceed against the Company for
nonpayment or nonperformance, WAIVES any and all defenses that would otherwise
be a defense to this guarantee, and agrees to remain liable to Employee for all
payment and performance obligations of the Company under this Agreement,
whether arising before, on or after the date of this Agreement, until this
Agreement shall terminate pursuant to its terms.
SERVICE CORPORATION INTERNATIONAL
By: /s/ JAMES M. SHELGER
------------------------------
James M. Shelger
Senior Vice President
General Counsel & Secretary
"PARENT"
22
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into
as of this 11th day of November, 1991, amended and restated as of August 12,
1992, further amended and restated May 12, 1993, and further amended and
restated as of January 1, 1997 by and between SCI EXECUTIVE SERVICES, INC., a
Delaware corporation (the "Company") wholly owned by and successor by
assignment to all of the rights, duties and obligations under this Agreement of
SERVICE CORPORATION INTERNATIONAL, a Texas corporation (the "Parent"), and L.
William Heiligbrodt (the"Employee");
WHEREAS, in order to achieve certain administrative
efficiencies in providing professional management services to its affiliated
companies, the Parent has transferred the Employee to the employ of the Company
effective January 1, 1997;
WHEREAS, the Company, the Parent and the Employee desire to
join in the execution of this amended and restated Agreement to (i) provide for
the transfer of the employment of the Employee and (ii) set out more fully the
rights, duties and obligations of the parties hereto;
WHEREAS, Employee is employed by the Company in a management
capacity, has extraordinary access to the Company's confidential business
information, and has significant duties and responsibilities in connection with
the conduct of the Company's business which places Employee in a special and
uncommon classification of employees;
WHEREAS, attendant to Employee's employment by the Company,
the Company and Employee wish for there to be a complete understanding and
agreement between the Company and Employee with respect to the fiduciary duties
owed by Employee to the Company; Employee's obligation to avoid conflicts of
interest, disclose pertinent information to the Company, and refrain from using
or disclosing the Company's information; the term of employment and conditions
for or upon termination thereof; the compensation and benefits owed to
Employee; and the post-employment obligations Employee owes to the Company; and
WHEREAS, but for Employee's agreement to the covenants and
conditions of this Agreement, particularly the conflict of interest provisions,
the provisions with respect to confidentiality of information and the ownership
of intellectual property, and the post-employment obligations of Employee, the
Company would not have entered into this Agreement;
NOW, THEREFORE, in consideration of Employee's employment by
the Company and the mutual promises and covenants contained herein, the receipt
and sufficiency of such consideration being hereby acknowledged, the Company
and Employee agree as follows:
<PAGE> 2
1. Employment and Term. The Company agrees to employ
the Employee and the Employee agrees to remain in the employ of the Company, in
accordance with the terms and provisions of this Agreement, for the period
beginning on the date of this Agreement (i.e. November 11, 1991) and ending as
of the close of business on the fourth (4th) anniversary of the date hereof
(such period together with all extensions thereof, including any Change of
Control Period (as defined in Section 16(b) below), are referred to hereinafter
as the "Employment Period"); provided, however, that commencing on the date one
year after the date hereof, and on each annual anniversary of such date (such
date and each annual anniversary thereof shall be hereinafter referred to as a
"Renewal Date") the Employment Period shall be automatically extended so as to
terminate four (4) years from such Renewal Date, unless at least 60 days prior
to the Renewal Date either the Company or the Employee gives the other written
notice that the Employment Period shall not be so extended.
2. Duties and Powers of Employee. (a) Position;
Location. During the Employment Period, the Employee shall perform such duties
and have such powers as designated by the Board of Directors of the Company
(the "Board") or any duly authorized committee thereof in connection with the
execution of this Agreement. The Employee's services shall be performed at the
location where the Employee is currently employed or any office which is the
headquarters of the Company and is less than 50 miles from such location.
During the Change of Control Period, the Employee's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned with or by the
Company or the Parent at any time during the 90-day period immediately
preceding the Change of Control Date (as defined in Section 16(a) below).
(b) Duties. During the Employment Period, and excluding
any periods of vacation and sick leave to which the Employee is entitled, the
Employee agrees to devote his attention and time during normal business hours
to the business and affairs of the Company and to use the Employee's best
efforts to perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for the
Employee to (i) serve on corporate, civic or charitable boards or committees,
(ii) deliver lectures, fulfill speaking engagements or teach at educational
institutions and (iii) manage personal investments, so long as such activities
do not significantly interfere with the performance of the Employee's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Employee prior to the date of this
Agreement or subsequent thereto consistent with this Section 2(b), the
continued conduct of such activities (or the conduct of activities similar in
nature and scope thereto) shall not thereafter be deemed to interfere with the
performance of the Employee's responsibilities to the Company.
(c) Employee agrees and acknowledges that he owes, and
will comply with, a fiduciary duty of loyalty, fidelity or allegiance to act at
all times in the best interests of the Company and to take no action or fail to
take action if such action or failure to act would injure the Company's
business, its interests or its reputation.
2
<PAGE> 3
3. Compensation. The Employee shall receive the
following compensation for his services:
(a) Salary. During the Employment Period, he shall be
paid an annual base salary ("Annual Base Salary") at the rate of not less than
$516,000.00 per year, in substantially equal bi-weekly installments, and
subject to any and all required withholdings and deductions for Social
Security, income taxes and the like. The Board may from time to time direct
such upward adjustments to Annual Base Salary as the Board deems to be
appropriate or desirable; provided, however, that during the Change of Control
Period, the Annual Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be substantially
consistent with increases in base salary generally awarded in the ordinary
course of business to other employees of comparable rank with the Company and
its affiliated companies (as defined in Section 16(d) below). Annual Base
Salary shall not be reduced after any increase thereof pursuant to this Section
3(a). Any increase in Annual Base Salary shall not serve to limit or reduce any
other obligation of the Company under this Agreement.
(b) Incentive Cash Compensation. During the Employment
Period, he shall be eligible annually for a cash bonus at the discretion of the
Board (such aggregate awards for each year are hereinafter referred to as the
"Annual Bonus") and at the discretion of the Board to receive awards from any
plan of the Company or any of its affiliated companies providing for the
payment of bonuses in cash to employees of the Company or its affiliated
companies having rank comparable to that of the Employee (such plans being
referred to herein collectively as the "Cash Bonus Plans") in accordance with
the terms thereof; provided, however, that, during the Change of Control
Period, the Employee shall be awarded, for each fiscal year ending during the
Change of Control Period, an Annual Bonus at least equal to the Highest Recent
Bonus (as defined in Section 16(e) below). Each Annual Bonus shall be paid no
later than the end of the third month of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, unless the Employee shall
elect to defer the receipt of such Annual Bonus.
(c) Incentive and Savings and Retirement Plans. During
the Employment Period, the Employee shall be entitled to participate in all
incentive and savings (in addition to the Cash Bonus Plans) and retirement
plans, practices, policies and programs applicable generally to other employees
of comparable rank with the Company and its affiliated companies.
(d) Welfare Benefit Plans. During the Employment
Period, the Employee and/or the Employee's family, as the case may be, shall be
eligible for participation in all welfare benefit plans, practices, policies
and programs provided by the Company and its affiliated companies (including,
without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other
employees of comparable rank with the Company and its affiliated companies.
(e) Expenses. During the Employment Period and for so
long as the Employee is employed by the Company, he shall be entitled to
receive prompt reimbursement
3
<PAGE> 4
for all reasonable expenses incurred by the Employee in accordance with the
policies, practices and procedures of the Company and its affiliated companies
from time to time in effect.
(f) Fringe Benefits. During the Employment Period, the
Employee shall be entitled to fringe benefits in accordance with the plans,
practices, programs and policies of the Company and its affiliated companies
from time to time in effect, commensurate with his position and on a basis at
least comparable to those received by other employees of comparable rank with
the Company and its affiliated companies.
(g) Office and Support Staff. During the Employment
Period, the Employee shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal secretarial
and other assistance, commensurate with his position and on a basis at least
comparable to those received by other employees of comparable rank with the
Company and its affiliated companies.
(h) Vacation and Other Absences. During the Employment
Period, the Employee shall be entitled to paid vacation and such other paid
absences whether for holidays, illness, personal time or any similar purposes,
in accordance with the plans, policies, programs and practices of the Company
and its affiliated companies in effect from time to time, commensurate with his
position and on a basis at least comparable to those received by other
employees of comparable rank with the Company and its affiliated companies.
(i) During the Change of Control Period, the Employee's
benefits listed under Sections 3(c), 3(d), 3(e), 3(f), 3(g) and 3(h) above
shall be at least commensurate in all material respects with the most valuable
and favorable of those received by the Employee at any time during the 90-day
period immediately preceding the Change of Control Date.
4. Termination of Employment. (a) Death or Disability.
The Employment Period shall terminate automatically upon the Employee's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Employee has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Employee
written notice in accordance with Section 17(b) of its intention to terminate
the Employment Period. In such event, the Employment Period shall terminate
effective on the 30th day after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
inability of the Employee to perform the Employee's duties with the Company on
a full-time basis as a result of incapacity due to mental or physical illness
which continues for more than one year after the commencement of such
incapacity, such incapacity to be determined by a physician selected by the
Company or its insurers and acceptable to the Employee or the Employee's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Employment
Period for Cause. For purposes of this Agreement, "Cause" shall mean (i) a
material breach by the Employee of
4
<PAGE> 5
Section 9 which is willful on the Employee's part or which is committed in bad
faith or without reasonable belief that such breach is in the best interests of
the Company and its affiliated companies, or (ii) a material breach by the
Employee of the Employee's obligations under Section 2 (other than a breach of
the Employee's obligations under Section 2 arising from the failure of the
Employee to work as a result of incapacity due to physical or mental illness)
or any material breach by the Employee of Section 10, 11 or 12 of this
Agreement which in either case is willful on the Employee's part, which is
committed in bad faith or without reasonable belief that such breach is in the
best interests of the Company and its affiliated companies and which is not
remedied in a reasonable period of time after receipt of written notice from
the Company specifying such breach, or (iii) the conviction of the Employee of
a felony involving malice which conviction has been affirmed on appeal or as to
which the period in which an appeal can be taken has lapsed.
(c) Good Reason; Window Period. The Employee's
employment may be terminated (i) by the Employee for Good Reason (as defined
below) or (ii) during the Window Period (as defined below) by the Employee
without any reason. For purposes of this Agreement, the "Window Period" shall
mean the 30-day period immediately following the first anniversary of the
Change of Control Date. For purposes of this Agreement, "Good Reason" shall
mean
(i) the assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities prior to the date of such assignment or any other
action by the Company or the Parent which results in a diminution in
such position, authority, duties or responsibilities, excluding for
this purpose an isolated and insubstantial action not taken in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 3, other than an isolated and insubstantial
failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the
Employee;
(iii) the Company's requiring the Employee to be based at
any office or location other than that described in Section 2(a);
(iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company or the Parent to comply
with and satisfy Section 15(c), provided that the successor referred
to in Section 15(c) has received at least ten days prior written
notice from the Company or the Employee of the requirements of Section
15(c).
For purposes of this Section 4(c), during the Change of Control Period, any
good faith determination of "Good Reason" made by the Employee shall be
conclusive.
5
<PAGE> 6
(d) Notice of Termination. Any termination by the
Company for Cause or by the Employee without any reason during the Window
Period or for Good Reason shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 17(b). For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employment Period under the
provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination
date (which date shall be not more than 15 days after the giving of such
notice). The failure by the Employee or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Employee or the Company
hereunder or preclude the Employee or the Company from asserting such fact or
circumstance in enforcing the Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Employee's employment is terminated by the Company for Cause, or by
the Employee during the Window Period or for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein, as the case
may be, (ii) if the Employee's employment is terminated by the Company other
than for Cause or Disability, or by the Employee other than for Good Reason or
during the Window Period, the Date of Termination shall be the date on which
the Company or the Employee, as the case may be, notifies the other of such
termination and (iii) if the Employee's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Employee or the Disability Effective Date, as the case may be.
5. Obligations of the Company Upon Termination. (a)
Certain Terminations Prior to Change of Control Date. If, during the Employment
Period prior to any Change of Control Date, the employment of the Employee with
the Company shall be terminated (i) by the Company other than for Cause, death
or Disability or (ii) by the Employee for Good Reason, then, in lieu of the
obligations of the Company under Section 3, (i) the Company shall pay to the
Employee in a lump sum in cash within 30 days after the Date of Termination all
Unpaid Agreement Amounts (as defined in Section 5(b)(i)(A) below) and (ii)
notwithstanding any other provision hereunder, for the longer of (A) the
remainder of the Employment Period or (B) to the extent compensation and/or
benefits are provided under any plan, program, practice or policy, such longer
period, if any, as such plan, program, practice or policy may provide, the
Company shall continue to provide to the Employee the compensation and benefits
provided in Sections 3(a), 3(c) and 3(d).
(b) Certain Terminations After Change of Control Date.
If, during the Change of Control Period, the employment of the Employee with
the Company shall be terminated (i) by the Company other than for Cause, death
or Disability or (ii) by the Employee either for Good Reason or without any
reason during the Window Period, then, in lieu of the obligations of the
Company under Section 3 and notwithstanding any other provision hereunder:
6
<PAGE> 7
(i) the Company shall pay to the Employee in a lump sum
in cash within 30 days after the Date of Termination the aggregate of
the following amounts:
(A) the sum of (1) all unpaid amounts due to the
Employee under Section 3 through the Date of
Termination, including without limitation, the
Employee's Annual Base Salary and any accrued
vacation pay, (2) the product of (x) the Highest
Recent Bonus and (y) a fraction, the numerator of
which is the number of days in the current fiscal
year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation
previously deferred by the Employee (together with
any accrued interest or earnings thereon) to the
extent not theretofore paid (the sum of the amounts
described in clauses (1), (2) and (3) shall be
hereinafter referred to as the "Accrued Obligations"
and the sum of the amounts described in clauses (1)
and (3) shall be hereinafter referred to as the
"Unpaid Agreement Amounts"); and
(B) the amount (such amount shall be hereinafter
referred to as the "Severance Amount") equal to
the sum of
(1) Four (4) multiplied by the
Employee's Annual Base Salary, plus
(2) Four (4) multiplied by the
Employee's Highest Recent Bonus;
(ii) for the longer of (A) the remainder of the Employment
Period or (B) to the extent benefits are provided under any plan,
program, practice or policy, such longer period as such plan, program,
practice or policy may provide, the Company shall continue benefits to
the Employee and/or the Employee's family at least equal to those
which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 3(d) if the
Employee's employment had not been terminated, in accordance with the
most favorable plans, practices, programs or policies of the Company
and its affiliated companies as in effect and applicable generally to
other employees of comparable rank and their families during the
90-day period immediately preceding the Change of Control Date or, if
more favorable to the Employee, as in effect generally at any time
thereafter with respect to other employees of comparable rank with the
Company and its affiliated companies and their families; provided,
however, that if the Employee becomes reemployed with another employer
and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits
described herein shall be required only to the extent not provided
under such other plan during such applicable period of eligibility.
For purposes of determining eligibility of the Employee for retiree
benefits pursuant to such plans, practices, programs and policies, the
Employee shall be considered to have remained employed until the end
of the Employment Period and to have retired on the last day of such
period; and
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(iii) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Employee and/or the
Employee's family for the remainder of the Employment Period any other
amounts or benefits required to be paid or provided or which the
Employee and/or the Employee's family is eligible to receive pursuant
to this Agreement and under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies as
in effect and applicable generally to other employees of comparable
rank with the Company and its affiliated companies and their families
during the 90- day period immediately preceding the Change of Control
Date or, if more favorable to the Employee, as in effect generally
thereafter with respect to other employees of comparable rank with the
Company and its affiliated companies and their families.
Such amounts received under this Section 5(b) shall be in lieu of any other
amount of severance relating to salary or bonus continuation to be received by
the Employee upon termination of employment of the Employee under any severance
plan, policy or arrangement of the Company.
(c) Termination as a Result of Death. If the Employee's
employment is terminated by reason of the Employee's death during the
Employment Period, in lieu of the obligations of the Company under Section 3,
the Company shall pay or provide to the Employee's estate (i) all Accrued
Obligations (which shall be paid in a lump sum in cash within 30 days after the
Date of Termination) and the timely payment or provision of the Welfare Benefit
Continuation (as defined below) and the Other Benefits (as defined below) and
(ii) any cash amount to be received by the Employee or the Employee's family as
a death benefit pursuant to the terms of any plan, policy or arrangement of the
Company and its affiliated companies. "Welfare Benefit Continuation" shall
mean the continuation of benefits to the Employee and/or the Employee's family
for the longer of (i) four (4) years from the Date of Termination or (ii) the
period provided by the plans, programs, policies or practices described in
Section 3(d) in which the Employee participates as of the Date of Termination,
such benefits to be at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described
in Section 3(d) if the Employee's employment had not been terminated, in
accordance with the most favorable plans, practices, programs or policies of
the Company and its affiliated companies as in effect and applicable generally
to other employees of comparable rank and their families on the Date of
Termination or, if the Date of Termination occurs after the Change of Control
Date, during the 90-day period immediately preceding the Change of Control Date
or, if more favorable to the Employee, as in effect generally at any time
thereafter with respect to other employees of comparable rank with the Company
and its affiliated companies and their families. "Other Benefits" shall mean
the timely payment or provision to the Employee and/or the Employee's family of
any other amounts or benefits required to be paid or provided or which the
Employee and/or the Employee's family is eligible to receive pursuant to this
Agreement and under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies as in effect and
applicable generally to other employees of comparable rank and their families
on the Date of Termination or, if the Date of Termination occurs after the
Change of Control Date, during the 90-day period immediately preceding the
Change of Control Date or,
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if more favorable to the Employee, as in effect generally thereafter with
respect to other employees of comparable rank with the Company and its
affiliated companies and their families.
(d) Termination as a Result of Disability. If the
Employee's employment is terminated by reason of the Employee's Disability
during the Employment Period, in lieu of the obligations of the Company under
Section 3, the Company shall pay or provide to the Employee (i) all Accrued
Obligations which shall be paid in a lump sum in cash within 30 days after the
Date of Termination and the timely payment or provision of the Welfare Benefit
Continuation and the Other Benefits, provided, however, that if the Employee
becomes reemployed with another employer and is eligible to receive medical or
other welfare benefits under another employer provided plan, the Welfare
Benefit Continuation shall be required only to the extent not provided under
such other plan during such applicable period of eligibility, and (ii) any cash
amount to be received by the Employee as a disability benefit pursuant to the
terms of any plan, policy or arrangement of the Company and its affiliated
companies.
(e) Cause; Other than for Good Reason. If the Employee's
employment shall be terminated during the Employment Period by the Company for
Cause or by the Employee other than during the Window Period and other than for
Good Reason, in lieu of the obligations of the Company under Section 3, the
Company shall pay to the Employee in a lump sum in cash within 30 days after
the Date of Termination all Unpaid Agreement Amounts.
6. Non-exclusivity of Rights. Except as provided in
Sections 5(a), 5(b)(i)(B), 5(b)(ii), 5(c) and 5(d), nothing in this Agreement
shall prevent or limit the Employee's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Employee may qualify, nor shall anything
herein limit or otherwise affect such rights as the Employee may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Employee is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
7. Full Settlement; Resolution of Disputes. (a) The
Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Employee or others. In no event shall
the Employee be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Employee under any of the
provisions of this Agreement and, except as provided in Sections 5(b)(ii) and
5(d), such amounts shall not be reduced whether or not the Employee obtains
other employment. The Company agrees to pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company, the Employee or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result
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<PAGE> 10
of any contest by the Employee about the amount of any payment pursuant to this
Agreement), plus in each case interest on any payment required to be made under
this Agreement but not timely paid at the rate provided for in Section
280G(d)(4) of the Internal Revenue Code of 1986, as amended (the "Code").
(b) If there shall be any dispute between the Company and
the Employee (i) in the event of any termination of the Employee's employment
by the Company, whether such termination was for Cause, or (ii) in the event of
any termination of employment by the Employee, whether Good Reason existed,
then, unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that
the determination by the Employee of the existence of Good Reason was not made
in good faith, the Company shall pay all amounts, and provide all benefits, to
the Employee and/or the Employee's family or other beneficiaries, as the case
may be, that the Company would be required to pay or provide pursuant to
Section 5(a) or 5(b) as though such termination were by the Company without
Cause or by the Employee with Good Reason. The Employee hereby undertakes to
repay to the Company all such amounts to which the Employee is ultimately
adjudged by such court not to be entitled.
8. Certain Additional Payments by the Company. (a)
Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 8) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Employee with
respect to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Employee shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Employee of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by the Company's outside independent auditor (the "Accounting Firm"), which
shall provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving (or has served within
the three years preceding the Change of Control Date) as accountant or auditor
for the individual, entity or group effecting the Change of Control, or is
unwilling or unable to perform its obligations pursuant to this Section 8, the
Employee shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm
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hereunder). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8,
shall be paid by the Company to the Employee within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Employee, it shall furnish the Employee with a
written opinion that failure to report the Excise Tax on the Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall
be binding upon the Company and the Employee. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 8(c) and the Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee.
(c) The Employee shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Employee is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Employee shall not pay such claim prior to the expiration of the
30-day period following the date on which the Employee gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Employee in
writing prior to the expiration of such period that it desires to contest such
claim, the Company, subject to the provisions of this Section 8(c), shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Employee to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner. In this
connection, the Employee agrees, subject to the provisions of this Section
8(c), to (i) prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine, (ii) give the Company any
information reasonably requested by the Company relating to such claim, (iii)
take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company, (iv) cooperate with the Company in good
faith in order effectively to contest such claim and (v) permit the Company to
participate in any proceedings relating to such claim. The foregoing is
subject, however, to the following: (A) the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties) incurred
in connection with such contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed in connection therewith
and the payment of costs and expenses in such connection, (B) if the Company
directs the Employee to pay such claim and sue for a refund, the Company shall
advance the amount of such payment
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to the Employee, on an interest-free basis, and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance, (C) any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Employee with respect to which such contested
amount is claimed to be due shall be limited solely to such contested amount
and (D) the Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Employee
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 8(c), the Employee becomes entitled
to receive any refund with respect to such claim, the Employee shall (subject
to the Company's complying with the requirements of Section 8(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Employee shall not be entitled to any refund
with respect to such claim and the Company does not notify the Employee in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Employee shall hold in
a fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Employee during the Employee's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Employee or representatives of the Employee in violation of
this Agreement). After termination of the Employee's employment with the
Company or any of its affiliated companies, the Employee shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis
for deferring or withholding any amounts otherwise payable to the Employee
under this Agreement. Subject to the previous sentence, nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from the Employee.
10. Employee's Obligation to Avoid Conflicts of Interest.
(a) In keeping with Employee's fiduciary duties to the Company, Employee agrees
that he shall not knowingly become involved in circumstances constituting a
conflict of interest with such duties, or upon discovery thereof, allow such a
conflict to continue. Moreover, Employee agrees that he shall disclose to the
Secretary of the Company any facts which might involve a conflict of interest
that has not been approved by the Company. The Board hereby acknowledges and
agrees that the
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activities of Employee listed on Schedule A hereto do not, and the continuation
of such activities will not, constitute a conflict of interest for purposes of
this Section 10.
(b) In this connection, it is agreed that any direct
interest in, connection with, or benefit from any outside activities,
particularly commercial activities, which might in any way adversely affect the
Company or any of its affiliated companies, involves a possible conflict of
interest. Circumstances in which a conflict of interest on the part of Employee
would or might arise, and which should be reported immediately to the Company,
include, but are not limited to, the following:
(i) Ownership of a material interest in any lender,
supplier, contractor, customer or other entity with
which the Company or any of its affiliated companies
does business;
(ii) Acting in any capacity, including director, officer,
partner, consultant, employee, distributor, agent or
the like, for lenders, suppliers, contractors,
subcontractors, customers or other entities with
which the Company or any of its affiliated companies
does business;
(iii) Acceptance, directly or indirectly, of payments,
services or loans from a lender, supplier,
contractor, subcontractor, customer or other entity
with which the Company or any of its affiliated
companies does business, including but not limited
to, gifts, trips, entertainment, or other favors of
more than a nominal value, but excluding loans from
publicly held insurance companies and commercial or
savings banks at normal rates of interest;
(iv) Misuse of information or facilities to which Employee
has access in a manner which will be detrimental to
the Company's or any of its affiliated companies'
interest, such as utilization for Employee's own
benefit of know-how or information developed through
the Company's or any of its affiliated companies'
business activities;
(v) Disclosure or other misuse of information of any kind
obtained through Employee's connection with the
Company or any of its affiliated companies; or
(vi) Acquiring or trading in, directly or indirectly,
other properties or interests connected with the
design or marketing of products or services designed
or marketed by the Company or any of its affiliated
companies.
(c) In the event that the Company determines, in the
exercise of its reasonable judgment, that a conflict of interest exists between
the Employee and the Company or any of its affiliated companies, the Company
shall notify the Employee in writing in accordance with Section 17(b) hereof,
providing reasonably detailed information identifying the source of the
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conflict of interest. Within the 60-day period following receipt of such
notice, the Employee shall take action satisfactory to the Company to eliminate
the conflict of interest. Failure of the Employee to take such action within
such 60-day period shall constitute "Cause" under Section 4(b) hereof.
11. Disclosure of Information, Ideas, Concepts,
Improvements, Discoveries and Inventions. As part of Employee's fiduciary
duties to the Company, Employee agrees that during the Employment Period, and
for a period of six (6) months after the Date of Termination, Employee shall
promptly disclose in writing to the Company all information, ideas, concepts,
improvements, discoveries and inventions, whether patentable or not, and
whether or not reduced to practice, which are conceived, developed, made or
acquired by Employee, either individually or jointly with others, and which
relate to the business, products or services of the Company or any of its
affiliated companies, irrespective of whether Employee utilized the Company's
or any of its affiliated companies' time or facilities and irrespective of
whether such information, idea, concept, improvement, discovery or invention
was conceived, developed, discovered or acquired by Employee on the job, at
home, or elsewhere. This obligation extends to all types of information, ideas
and concepts, including information, ideas and concepts relating to new types
of services, corporate opportunities, acquisition prospects, the identity of
key representatives within acquisition prospect organizations, prospective
names or service marks for the Company's or any of its affiliated companies'
business activities, and the like.
12. Ownership of Information, Ideas, Concepts,
Improvements, Discoveries and Inventions and all Original Works of Authorship.
(a) All information, ideas, concepts, improvements, discoveries and inventions,
whether patentable or not, which are conceived, made, developed or acquired by
Employee or which are disclosed or made known to Employee, individually or in
conjunction with others, during Employee's employment by the Company or any of
its affiliated companies and which relate to the Company's or any of its
affiliated companies' business, products or services (including all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evaluations, opinions, interpretations,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customer's organizations or within the
organization of acquisition prospects, or marketing and merchandising
techniques, prospective names and marks) are and shall be the sole and
exclusive property of the Company. Moreover, all drawings, memoranda, notes,
records, files, correspondence, manuals, models, specifications, computer
programs, maps and all other writings or materials of any type embodying any of
such information, ideas, concepts, improvements, discoveries and inventions are
and shall be the sole and exclusive property of the Company.
(b) In particular, Employee hereby specifically sells,
assigns and transfers to the Company all of his worldwide right, title and
interest in and to all such information, ideas, concepts, improvements,
discoveries or inventions, and any United States or foreign applications for
patents, inventor's certificates or other industrial rights that may be filed
thereon, including divisions, continuations, continuations-in-part, reissues
and/or extensions thereof, and applications for registration of such names and
marks. Both during the period of Employee's employment by the Company or any of
its affiliated companies and thereafter, Employee shall
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assist the Company and its nominee at all times in the protection of such
information, ideas, concepts, improvements, discoveries or inventions, both in
the United States and all foreign countries, including but not limited to, the
execution of all lawful oaths and all assignment documents requested by the
Company or its nominee in connection with the preparation, prosecution,
issuance or enforcement of any applications for United States or foreign
letters patent, including divisions, continuations, continuations-in-part,
reissues, and/or extensions thereof, and any application for the registration
of such names and marks.
(c) Moreover, if during Employee's employment by the
Company or any of its affiliated companies, Employee creates any original work
of authorship fixed in any tangible medium of expression which is the subject
matter of copyright (such as videotapes, written presentations on acquisitions,
computer programs, drawings, maps, architectural renditions, models, manuals,
brochures or the like) relating to the Company's or any of its affiliated
companies' business, products, or services, whether such work is created solely
by Employee or jointly with others, the Company shall be deemed the author of
such work if the work is prepared by Employee in the scope of his or her
employment; or, if the work is not prepared by Employee within the scope of his
or her employment but is specially ordered by the Company as a contribution to
a collective work, as a part of a motion picture or other audiovisual work, as
a translation, as a supplementary work, as a compilation or as an instrumental
text, then the work shall be considered to be work made for hire and the
Company shall be the author of the work. In the event such work is neither
prepared by the Employee within the scope of his or her employment or is not a
work specially ordered and deemed to be a work made for hire, then Employee
hereby agrees to assign, and by these presents does assign, to the Company all
of Employee's worldwide right, title and interest in and to such work and all
rights of copyright therein. Both during the period of Employee's employment by
the Company or any of its affiliated companies and thereafter, Employee agrees
to assist the Company and its nominee, at any time, in the protection of the
Company's worldwide right, title and interest in and to the work and all rights
of copyright therein, including but not limited to, the execution of all formal
assignment documents requested by the Company or its nominee and the execution
of all lawful oaths and applications for registration of copyright in the
United States and foreign countries.
13. Employee's Post-Employment Non-Competition
Obligations: In Certain Situations such Obligations Apply only if the Company
Opts to Continue Employee's Salary Payment. (a) During the Employment Period
and, subject to the conditions of Sections 13(b) and 13(c), for a period of
four (4) years thereafter (the "Non-Competition Period") provided, however,
that the Non-Competition Period shall not exceed four (4) years from the Date
of Termination, Employee shall not, acting alone or in conjunction with others,
directly or indirectly, in any of the business territories in which the Company
or any of its affiliated companies is presently or at the time of termination
of employment conducting business, engage in any business in competition with
the business conducted by the Company or any of its affiliated companies at the
time of the termination of the employment relationship, whether for his own
account or by soliciting, canvassing or accepting any business or transaction
for or from any other company or business in competition with such business of
the Company or any of its affiliated companies.
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(b) If Employee has been terminated for Cause (Section
4(b)) or if Employee terminates his employment for any reason other than for
Good Reason or other than during the Window Period (Section 4(c)), Employee
shall be bound by the obligations of Section 13(a) and the Company shall have
no obligation to make the Non-Competition Payments (as defined in Section 13(c)
below). However, if the employment relationship is terminated by any other
circumstance or for any other reason, Employee's post-employment
non-competition obligations required by Section 13(a) shall be subject to the
Company's obligation to make the Non-Competition Payments specified in Section
13(c).
(c) Notwithstanding the provisions of Section 4 of this
Agreement, whenever the employment relationship is terminated due to the
expiration of its term because the Company or Employee timely gave written
notice of termination (Section 1), or due to Employee's Disability (Section
4(a)), or by the Company without Cause (Section 4(b)), unless the Company
exercises its option as hereinafter provided, Employee shall be entitled to
continue to receive payments (the "Non-Competition Payments") equal to his then
current Annual Base Salary (as of the Date of Termination) during the
Non-Competition Period. During the Non-Competition Period, the Employee shall
not, however, be deemed to be an employee of the Company or be entitled to
continue to receive any other employee benefits other than as set forth in
Section 5 or Section 8. Moreover, the Non-Competition Payments shall be reduced
to the extent Employee has already received lump-sum payments in lieu of salary
and bonus pursuant to Section 5. The Company shall have the option, exercisable
at any time within one (1) month after Employee's Date of Termination, to
cancel Employee's post-employment non-competition obligations under Section
13(a) and the Company's corresponding obligation to make the Non-Competition
Payments. Such option shall be exercised by the Company mailing a written
notice thereof to Employee in accordance with Section 17(b); if the Company
does not send such notice within the prescribed one-month time, the Company
shall remain obligated to make the Non-Competition Payments and Employee shall
remain obligated to comply with the provisions of Section 13(a). The purpose of
this paragraph is to make the non-competition obligations of Employee more
reasonable from the Employee's point of view. The amounts to be paid by the
Company are not intended to be liquidated damages or an estimate of the actual
damages that would be sustained by the Company if Employee breaches his
post-employment non-competition obligations. If Employee breaches his
post-employment non-competition obligations, the Company shall be entitled to
cease making the Non-Competition Payments and shall be entitled to all of its
remedies at law or in equity for damages and injunctive relief.
14. Obligations to Refrain From Competing Unfairly. In
addition to the other obligations agreed to by Employee in this Agreement,
Employee agrees that during the Employment Period and for four (4) years
following the Date of Termination, he shall not at any time, directly or
indirectly for the benefit of any other party than the Company or any of its
affiliated companies, (a) induce, entice, or solicit any employee of the
Company or any of its affiliated companies to leave his employment, or (b)
contact, communicate or solicit any customer of the Company or any of its
affiliated companies derived from any customer list, customer lead, mail,
printed matter or other information secured from the Company or any of its
affiliated companies or their present or past employees, or (c) in any other
manner use any
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customer lists or customer leads, mail, telephone numbers, printed material or
material of the Company or any of its affiliated companies relating thereto.
15. Successors. (a) This Agreement is personal to the
Employee and without the prior written consent of the Company shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or the Company
to assume expressly and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. The Parent will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Parent or the Parent to
assume expressly and agree to perform the Parent's obligations hereunder in the
same manner and to the same extent that the Parent would be required to perform
them if no such succession had taken place. As used in this Agreement,
"Parent" shall mean the Parent as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform the
Parent's obligations hereunder by operation of law, or otherwise.
16. Certain Definitions. The following defined terms used
in this Agreement shall have the meanings indicated:
(a) The "Change of Control Date" shall mean the first
date on which a Change of Control occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Employee's
employment with the Company is terminated or the Employee ceases to have the
position with the Company or the Parent which the Employee had prior to the
date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Employee that such termination or cessation (i) was at the
request of a third party who has taken steps reasonably calculated to effect
the Change of Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then, for all purposes of this
Agreement, the "Change of Control Date" shall mean the date immediately prior
to the date of such termination or cessation.
(b) The "Change of Control Period" shall mean the period
commencing on the Change of Control Date and ending on the last day of the
Employment Period.
(c) "Change of Control" shall mean:
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<PAGE> 18
(i) 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) of 20% or more of either (A) the then
outstanding shares of Common Stock of the Parent (the "Outstanding
Parent Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Parent entitled to vote generally
in the election of directors (the "Outstanding Parent Voting
Securities"); provided, however, that the following acquisitions shall
not constitute a Change of Control: (A) any acquisition directly from
the Parent (excluding an acquisition by virtue of the exercise of a
conversion privilege), (B) any acquisition by the Parent, (C) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Parent or any corporation controlled by the
Parent or (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 (A), (B) and (C) of subsection (iii) of this definition of
"Change of Control" are satisfied; or
(ii) Individuals who, as of the effective date hereof,
constitute the Board of Directors of the Parent (the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board of Directors of the Parent; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Parent's shareholders, was
approved by (A) a vote of at least a majority of the directors then
comprising the Incumbent Board of the Parent, or (B) a vote of at
least a majority of the directors then comprising the Executive
Committee of the Board of Directors of the Parent at a time when such
committee was comprised of at least five members and all members of
such committee were either members of the Incumbent Board or
considered as being members of the Incumbent Board pursuant to clause
(A) of this subsection (ii), 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
of Directors of the Parent; or
(iii) Approval by the shareholders of the Parent of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (A) more than
60% 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 Parent Common Stock and Outstanding Parent Voting
Securities immediately prior to such organization, merger or
consolidation in substantially the same proportions as their
ownership, immediately prior
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<PAGE> 19
to such reorganization, merger or consolidation, of the Outstanding
Parent Common Stock and Outstanding Parent Voting Securities, as the
case may be, (B) no Person (excluding the Parent, any employee benefit
plan or related trust of the Parent 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, 20% or more of the
Outstanding Parent Common Stock or Outstanding Parent Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% 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 (C) 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
(iv) Approval by the shareholders of the Parent of (A) a
complete liquidation or dissolution of the Parent or (B) the sale or
other disposition of all or substantially all of the assets of the
Parent, other than to a corporation, with respect to which following
such sale or other disposition, (A) more than 60% 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 Parent Common
Stock and Outstanding Parent 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 Parent Common Stock and Outstanding Parent Voting
Securities, as the case may be, (B) no Person (excluding the Parent
and any employee benefit plan or related trust of the Parent or such
corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 20% or more of
the Outstanding Parent Common Stock or Outstanding Parent Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% 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 of Directors of the
Parent providing for such sale or other disposition of assets of the
Parent.
(d) The term "affiliated company" shall mean any company
controlled by, controlling or under common control with the Company.
(e) The term "Highest Recent Bonus" shall mean the
highest Annual Bonus (annualized for any fiscal year consisting of less than
twelve full months) paid or payable,
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<PAGE> 20
including by reason of any deferral, to the Employee by the Company and its
affiliated companies in respect of the three most recent full fiscal years
ending on or prior to, (i) if prior to a Change of Control, the Date of
Termination, or (ii) if after a Change of Control, the Change of Control Date.
17. Miscellaneous. (a) This Agreement replaces and merges
all previous agreements and discussions relating to the same or similar subject
matters between Employee and the Company and shall be governed by and construed
in accordance with the laws of the State of Texas, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a duly authorized
committee thereof, shall have authority on behalf of the Company to agree to
amend, modify, repeal, waive, extend or discharge any provision of this
Agreement or anything in reference thereto.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
L. William Heiligbrodt
11015 Landon Lane
Houston, TX 77024
If to the Company:
SCI Executive Services, Inc.
1929 Allen Parkway
Houston, Texas 77019
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
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<PAGE> 21
(e) The Employee's or the Company's failure to insist
upon strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Employee or the Company may
have hereunder, including, without limitation, the right of the Employee to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) No breach, whether actual or alleged, of this
Agreement by the Employee shall constitute grounds for the Company to withhold
or offset any payment or benefit due to the Employee under any other agreement,
contract, plan, program, policy or practice of the Company.
IN WITNESS WHEREOF, the Employee and, pursuant to due
authorization from the Board of Directors of the Company, the Company have
caused this Agreement to be executed this 1st day of January, 1997, effective
as of the day and year first above written.
L. WILLIAM HEILIGBRODT
/s/ L. WILLIAM HEILIGBRODT
----------------------------------------
"EMPLOYEE"
SCI EXECUTIVE SERVICES, INC.
By: /s/ CURTIS G. BRIGGS
-------------------------------------
Curtis G. Briggs
Vice President
"COMPANY"
21
<PAGE> 22
Pursuant to due authorization from its Board of Directors, the Parent,
by its execution hereof, absolutely and unconditionally guarantees to Employee
the full and timely payment and performance of each obligation of the Company
to Employee under this Agreement, WAIVES any and all rights that it may
otherwise have to require Employee to proceed against the Company for
nonpayment or nonperformance, WAIVES any and all defenses that would otherwise
be a defense to this guarantee, and agrees to remain liable to Employee for all
payment and performance obligations of the Company under this Agreement,
whether arising before, on or after the date of this Agreement, until this
Agreement shall terminate pursuant to its terms.
SERVICE CORPORATION INTERNATIONAL
By: /s/ JAMES M. SHELGER
-------------------------------------
James M. Shelger
Senior Vice President
General Counsel & Secretary
"PARENT"
22
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into
as of this 11th day of November, 1991, amended and restated as of August 12,
1992, further amended and restated May 12, 1993, and further amended and
restated as of January 1, 1997 by and between SCI EXECUTIVE SERVICES, INC., a
Delaware corporation (the "Company") wholly owned by and successor by
assignment to all of the rights, duties and obligations under this Agreement of
SERVICE CORPORATION INTERNATIONAL, a Texas corporation (the "Parent"), and W.
Blair Waltrip (the"Employee");
WHEREAS, in order to achieve certain administrative
efficiencies in providing professional management services to its affiliated
companies, the Parent has transferred the Employee to the employ of the Company
effective January 1, 1997;
WHEREAS, the Company, the Parent and the Employee desire to
join in the execution of this amended and restated Agreement to (i) provide for
the transfer of the employment of the Employee and (ii) set out more fully the
rights, duties and obligations of the parties hereto;
WHEREAS, Employee is employed by the Company in a management
capacity, has extraordinary access to the Company's confidential business
information, and has significant duties and responsibilities in connection with
the conduct of the Company's business which places Employee in a special and
uncommon classification of employees;
WHEREAS, attendant to Employee's employment by the Company,
the Company and Employee wish for there to be a complete understanding and
agreement between the Company and Employee with respect to the fiduciary duties
owed by Employee to the Company; Employee's obligation to avoid conflicts of
interest, disclose pertinent information to the Company, and refrain from using
or disclosing the Company's information; the term of employment and conditions
for or upon termination thereof; the compensation and benefits owed to
Employee; and the post-employment obligations Employee owes to the Company; and
WHEREAS, but for Employee's agreement to the covenants and
conditions of this Agreement, particularly the conflict of interest provisions,
the provisions with respect to confidentiality of information and the ownership
of intellectual property, and the post-employment obligations of Employee, the
Company would not have entered into this Agreement;
NOW, THEREFORE, in consideration of Employee's employment by
the Company and the mutual promises and covenants contained herein, the receipt
and sufficiency of such consideration being hereby acknowledged, the Company
and Employee agree as follows:
<PAGE> 2
1. Employment and Term. The Company agrees to employ
the Employee and the Employee agrees to remain in the employ of the Company, in
accordance with the terms and provisions of this Agreement, for the period
beginning on the date of this Agreement (i.e. November 11, 1991) and ending as
of the close of business on the third (3rd) anniversary of the date hereof
(such period together with all extensions thereof, including any Change of
Control Period (as defined in Section 16(b) below), are referred to hereinafter
as the "Employment Period"); provided, however, that commencing on the date one
year after the date hereof, and on each annual anniversary of such date (such
date and each annual anniversary thereof shall be hereinafter referred to as a
"Renewal Date") the Employment Period shall be automatically extended so as to
terminate three (3) years from such Renewal Date, unless at least 60 days prior
to the Renewal Date either the Company or the Employee gives the other written
notice that the Employment Period shall not be so extended.
2. Duties and Powers of Employee. (a) Position;
Location. During the Employment Period, the Employee shall perform such duties
and have such powers as designated by the Board of Directors of the Company
(the "Board") or any duly authorized committee thereof in connection with the
execution of this Agreement. The Employee's services shall be performed at the
location where the Employee is currently employed or any office which is the
headquarters of the Company and is less than 50 miles from such location.
During the Change of Control Period, the Employee's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned with or by the
Company or the Parent at any time during the 90-day period immediately
preceding the Change of Control Date (as defined in Section 16(a) below).
(b) Duties. During the Employment Period, and excluding
any periods of vacation and sick leave to which the Employee is entitled, the
Employee agrees to devote his attention and time during normal business hours
to the business and affairs of the Company and to use the Employee's best
efforts to perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for the
Employee to (i) serve on corporate, civic or charitable boards or committees,
(ii) deliver lectures, fulfill speaking engagements or teach at educational
institutions and (iii) manage personal investments, so long as such activities
do not significantly interfere with the performance of the Employee's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Employee prior to the date of this
Agreement or subsequent thereto consistent with this Section 2(b), the
continued conduct of such activities (or the conduct of activities similar in
nature and scope thereto) shall not thereafter be deemed to interfere with the
performance of the Employee's responsibilities to the Company.
(c) Employee agrees and acknowledges that he owes, and
will comply with, a fiduciary duty of loyalty, fidelity or allegiance to act at
all times in the best interests of the Company and to take no action or fail to
take action if such action or failure to act would injure the Company's
business, its interests or its reputation.
2
<PAGE> 3
3. Compensation. The Employee shall receive the
following compensation for his services:
(a) Salary. During the Employment Period, he shall be
paid an annual base salary ("Annual Base Salary") at the rate of not less than
$385,000.00 per year, in substantially equal bi-weekly installments, and
subject to any and all required withholdings and deductions for Social
Security, income taxes and the like. The Board may from time to time direct
such upward adjustments to Annual Base Salary as the Board deems to be
appropriate or desirable; provided, however, that during the Change of Control
Period, the Annual Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be substantially
consistent with increases in base salary generally awarded in the ordinary
course of business to other employees of comparable rank with the Company and
its affiliated companies (as defined in Section 16(d) below). Annual Base
Salary shall not be reduced after any increase thereof pursuant to this Section
3(a). Any increase in Annual Base Salary shall not serve to limit or reduce any
other obligation of the Company under this Agreement.
(b) Incentive Cash Compensation. During the Employment
Period, he shall be eligible annually for a cash bonus at the discretion of the
Board (such aggregate awards for each year are hereinafter referred to as the
"Annual Bonus") and at the discretion of the Board to receive awards from any
plan of the Company or any of its affiliated companies providing for the
payment of bonuses in cash to employees of the Company or its affiliated
companies having rank comparable to that of the Employee (such plans being
referred to herein collectively as the "Cash Bonus Plans") in accordance with
the terms thereof; provided, however, that, during the Change of Control
Period, the Employee shall be awarded, for each fiscal year ending during the
Change of Control Period, an Annual Bonus at least equal to the Highest Recent
Bonus (as defined in Section 16(e) below). Each Annual Bonus shall be paid no
later than the end of the third month of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, unless the Employee shall
elect to defer the receipt of such Annual Bonus.
(c) Incentive and Savings and Retirement Plans. During
the Employment Period, the Employee shall be entitled to participate in all
incentive and savings (in addition to the Cash Bonus Plans) and retirement
plans, practices, policies and programs applicable generally to other employees
of comparable rank with the Company and its affiliated companies.
(d) Welfare Benefit Plans. During the Employment
Period, the Employee and/or the Employee's family, as the case may be, shall be
eligible for participation in all welfare benefit plans, practices, policies
and programs provided by the Company and its affiliated companies (including,
without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other
employees of comparable rank with the Company and its affiliated companies.
(e) Expenses. During the Employment Period and for so
long as the Employee is employed by the Company, he shall be entitled to
receive prompt reimbursement
3
<PAGE> 4
for all reasonable expenses incurred by the Employee in accordance with the
policies, practices and procedures of the Company and its affiliated companies
from time to time in effect.
(f) Fringe Benefits. During the Employment Period, the
Employee shall be entitled to fringe benefits in accordance with the plans,
practices, programs and policies of the Company and its affiliated companies
from time to time in effect, commensurate with his position and on a basis at
least comparable to those received by other employees of comparable rank with
the Company and its affiliated companies.
(g) Office and Support Staff. During the Employment
Period, the Employee shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal secretarial
and other assistance, commensurate with his position and on a basis at least
comparable to those received by other employees of comparable rank with the
Company and its affiliated companies.
(h) Vacation and Other Absences. During the Employment
Period, the Employee shall be entitled to paid vacation and such other paid
absences whether for holidays, illness, personal time or any similar purposes,
in accordance with the plans, policies, programs and practices of the Company
and its affiliated companies in effect from time to time, commensurate with his
position and on a basis at least comparable to those received by other
employees of comparable rank with the Company and its affiliated companies.
(i) During the Change of Control Period, the Employee's
benefits listed under Sections 3(c), 3(d), 3(e), 3(f), 3(g) and 3(h) above
shall be at least commensurate in all material respects with the most valuable
and favorable of those received by the Employee at any time during the 90-day
period immediately preceding the Change of Control Date.
4. Termination of Employment. (a) Death or Disability.
The Employment Period shall terminate automatically upon the Employee's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Employee has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Employee
written notice in accordance with Section 17(b) of its intention to terminate
the Employment Period. In such event, the Employment Period shall terminate
effective on the 30th day after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
inability of the Employee to perform the Employee's duties with the Company on
a full-time basis as a result of incapacity due to mental or physical illness
which continues for more than one year after the commencement of such
incapacity, such incapacity to be determined by a physician selected by the
Company or its insurers and acceptable to the Employee or the Employee's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Employment
Period for Cause. For purposes of this Agreement, "Cause" shall mean (i) a
material breach by the Employee of
4
<PAGE> 5
Section 9 which is willful on the Employee's part or which is committed in bad
faith or without reasonable belief that such breach is in the best interests of
the Company and its affiliated companies, or (ii) a material breach by the
Employee of the Employee's obligations under Section 2 (other than a breach of
the Employee's obligations under Section 2 arising from the failure of the
Employee to work as a result of incapacity due to physical or mental illness)
or any material breach by the Employee of Section 10, 11 or 12 of this
Agreement which in either case is willful on the Employee's part, which is
committed in bad faith or without reasonable belief that such breach is in the
best interests of the Company and its affiliated companies and which is not
remedied in a reasonable period of time after receipt of written notice from
the Company specifying such breach, or (iii) the conviction of the Employee of
a felony involving malice which conviction has been affirmed on appeal or as to
which the period in which an appeal can be taken has lapsed.
(c) Good Reason; Window Period. The Employee's
employment may be terminated (i) by the Employee for Good Reason (as defined
below) or (ii) during the Window Period (as defined below) by the Employee
without any reason. For purposes of this Agreement, the "Window Period" shall
mean the 30-day period immediately following the first anniversary of the
Change of Control Date. For purposes of this Agreement, "Good Reason" shall
mean
(i) the assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities prior to the date of such assignment or any other
action by the Company or the Parent which results in a diminution in
such position, authority, duties or responsibilities, excluding for
this purpose an isolated and insubstantial action not taken in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 3, other than an isolated and insubstantial
failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the
Employee;
(iii) the Company's requiring the Employee to be based at
any office or location other than that described in Section 2(a);
(iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company or the Parent to comply
with and satisfy Section 15(c), provided that the successor referred
to in Section 15(c) has received at least ten days prior written
notice from the Company or the Employee of the requirements of Section
15(c).
For purposes of this Section 4(c), during the Change of Control Period, any
good faith determination of "Good Reason" made by the Employee shall be
conclusive.
5
<PAGE> 6
(d) Notice of Termination. Any termination by the
Company for Cause or by the Employee without any reason during the Window
Period or for Good Reason shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 17(b). For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employment Period under the
provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination
date (which date shall be not more than 15 days after the giving of such
notice). The failure by the Employee or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Employee or the Company
hereunder or preclude the Employee or the Company from asserting such fact or
circumstance in enforcing the Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Employee's employment is terminated by the Company for Cause, or by
the Employee during the Window Period or for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein, as the case
may be, (ii) if the Employee's employment is terminated by the Company other
than for Cause or Disability, or by the Employee other than for Good Reason or
during the Window Period, the Date of Termination shall be the date on which
the Company or the Employee, as the case may be, notifies the other of such
termination and (iii) if the Employee's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Employee or the Disability Effective Date, as the case may be.
5. Obligations of the Company Upon Termination. (a)
Certain Terminations Prior to Change of Control Date. If, during the Employment
Period prior to any Change of Control Date, the employment of the Employee with
the Company shall be terminated (i) by the Company other than for Cause, death
or Disability or (ii) by the Employee for Good Reason, then, in lieu of the
obligations of the Company under Section 3, (i) the Company shall pay to the
Employee in a lump sum in cash within 30 days after the Date of Termination all
Unpaid Agreement Amounts (as defined in Section 5(b)(i)(A) below) and (ii)
notwithstanding any other provision hereunder, for the longer of (A) the
remainder of the Employment Period or (B) to the extent compensation and/or
benefits are provided under any plan, program, practice or policy, such longer
period, if any, as such plan, program, practice or policy may provide, the
Company shall continue to provide to the Employee the compensation and benefits
provided in Sections 3(a), 3(c) and 3(d).
(b) Certain Terminations After Change of Control Date.
If, during the Change of Control Period, the employment of the Employee with
the Company shall be terminated (i) by the Company other than for Cause, death
or Disability or (ii) by the Employee either for Good Reason or without any
reason during the Window Period, then, in lieu of the obligations of the
Company under Section 3 and notwithstanding any other provision hereunder:
6
<PAGE> 7
(i) the Company shall pay to the Employee in a lump sum
in cash within 30 days after the Date of Termination the aggregate of the
following amounts:
(A) the sum of (1) all unpaid amounts due to the
Employee under Section 3 through the Date of Termination, including
without limitation, the Employee's Annual Base Salary and any accrued
vacation pay, (2) the product of (x) the Highest Recent Bonus and (y)
a fraction, the numerator of which is the number of days in the
current fiscal year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation previously
deferred by the Employee (together with any accrued interest or
earnings thereon) to the extent not theretofore paid (the 8 sum of the
amounts described in clauses (1), (2) and (3) shall be here in after
referred to as the "Accrued Obligations" and the sum of the amounts
described in clauses (1) and (3) shall be hereinafter referred to as
the "Unpaid Agreement Amounts"); an d
(B) the amount (such amount shall be hereinafter
referred to as the "Severance Amount") equal to the sum of
(1) Three (3) multiplied by the
Employee's Annual Base Salary, plus
(2) Three (3) multiplied by the
Employee's Highest Recent Bonus;
(ii) for the longer of (A) the remainder of the Employment
Period or (B) to the extent benefits are provided under any plan,
program, practice or policy, such longer period as such plan,
program, practice or policy may provide, the Company shall continue
benefits to the Employee and/or the Employee's family at least equal
to those which would have been provided to them in accordance with the
plans, programs, practices and policies described in Section 3(d) if
the Employee's employment had not been terminated, in accordance with
the most favorable plans, practices, programs or policies of the
Company and its affiliated companies as in effect and applicable
generally to other employees of comparable rank and their families
during the 90-day period immediately preceding the Change of Control
Date or, if more favorable to the Employee, as in effect generally at
any time thereafter with respect to other employees of comparable rank
with the Company and its affiliated companies and their families;
provided, however, that if the Employee becomes reemployed with
another employer and is eligible to receive medical or other welfare
benefits under another employer provided plan, the medical and other
welfare benefits described herein shall be required only to the extent
not provided under such other plan during such applicable period of
eligibility. For purposes of determining eligibility of the Employee
for retiree benefits pursuant to such plans, practices, programs and
policies, the Employee shall be considered to have remained employed
until the end of the Employment Period and to have retired on the last
day of such period; and
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(iii) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Employee and/or the
Employee's family for the remainder of the Employment Period
any other amounts or benefits required to be paid or provided or which
the Employee and/or the Employee's family is eligible to receive
pursuant to this Agreement and under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated
companies as in effect and applicable generally to other employees of
comparable rank with the Company and its affiliated companies and
their families during the 90- day period immediately preceding the
Change of Control Date or, if more favorable to the Employee, as in
effect generally thereafter with respect to other employees of
comparable rank with the Company and its affiliated companies and
their families.
Such amounts received under this Section 5(b) shall be in lieu of any other
amount of severance relating to salary or bonus continuation to be received by
the Employee upon termination of employment of the Employee under any severance
plan, policy or arrangement of the Company.
(c) Termination as a Result of Death. If the Employee's
employment is terminated by reason of the Employee's death during the
Employment Period, in lieu of the obligations of the Company under Section 3,
the Company shall pay or provide to the Employee's estate (i) all Accrued
Obligations (which shall be paid in a lump sum in cash within 30 days after the
Date of Termination) and the timely payment or provision of the Welfare Benefit
Continuation (as defined below) and the Other Benefits (as defined below) and
(ii) any cash amount to be received by the Employee or the Employee's family as
a death benefit pursuant to the terms of any plan, policy or arrangement of the
Company and its affiliated companies. "Welfare Benefit Continuation" shall
mean the continuation of benefits to the Employee and/or the Employee's family
for the longer of (i) three (3) years from the Date of Termination or (ii) the
period provided by the plans, programs, policies or practices described in
Section 3(d) in which the Employee participates as of the Date of Termination,
such benefits to be at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described
in Section 3(d) if the Employee's employment had not been terminated, in
accordance with the most favorable plans, practices, programs or policies of
the Company and its affiliated companies as in effect and applicable generally
to other employees of comparable rank and their families on the Date of
Termination or, if the Date of Termination occurs after the Change of Control
Date, during the 90-day period immediately preceding the Change of Control Date
or, if more favorable to the Employee, as in effect generally at any time
thereafter with respect to other employees of comparable rank with the Company
and its affiliated companies and their families. "Other Benefits" shall mean
the timely payment or provision to the Employee and/or the Employee's family of
any other amounts or benefits required to be paid or provided or which the
Employee and/or the Employee's family is eligible to receive pursuant to this
Agreement and under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies as in effect and
applicable generally to other employees of comparable rank and their families
on the Date of Termination or, if the Date of Termination occurs after the
Change of Control Date, during the 90-day period immediately preceding the
Change of Control Date or,
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if more favorable to the Employee, as in effect generally thereafter with
respect to other employees of comparable rank with the Company and its
affiliated companies and their families.
(d) Termination as a Result of Disability. If the
Employee's employment is terminated by reason of the Employee's Disability
during the Employment Period, in lieu of the obligations of the Company under
Section 3, the Company shall pay or provide to the Employee (i) all Accrued
Obligations which shall be paid in a lump sum in cash within 30 days after the
Date of Termination and the timely payment or provision of the Welfare Benefit
Continuation and the Other Benefits, provided, however, that if the Employee
becomes reemployed with another employer and is eligible to receive medical or
other welfare benefits under another employer provided plan, the Welfare
Benefit Continuation shall be required only to the extent not provided under
such other plan during such applicable period of eligibility, and (ii) any cash
amount to be received by the Employee as a disability benefit pursuant to the
terms of any plan, policy or arrangement of the Company and its affiliated
companies.
(e) Cause; Other than for Good Reason. If the Employee's
employment shall be terminated during the Employment Period by the Company for
Cause or by the Employee other than during the Window Period and other than for
Good Reason, in lieu of the obligations of the Company under Section 3, the
Company shall pay to the Employee in a lump sum in cash within 30 days after
the Date of Termination all Unpaid Agreement Amounts.
6. Non-exclusivity of Rights. Except as provided in
Sections 5(a), 5(b)(i)(B), 5(b)(ii), 5(c) and 5(d), nothing in this Agreement
shall prevent or limit the Employee's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Employee may qualify, nor shall anything
herein limit or otherwise affect such rights as the Employee may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Employee is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
7. Full Settlement; Resolution of Disputes. (a) The
Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Employee or others. In no event shall
the Employee be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Employee under any of the
provisions of this Agreement and, except as provided in Sections 5(b)(ii) and
5(d), such amounts shall not be reduced whether or not the Employee obtains
other employment. The Company agrees to pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company, the Employee or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result
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<PAGE> 10
of any contest by the Employee about the amount of any payment pursuant to this
Agreement), plus in each case interest on any payment required to be made under
this Agreement but not timely paid at the rate provided for in Section
280G(d)(4) of the Internal Revenue Code of 1986, as amended (the "Code").
(b) If there shall be any dispute between the Company and
the Employee (i) in the event of any termination of the Employee's employment
by the Company, whether such termination was for Cause, or (ii) in the event of
any termination of employment by the Employee, whether Good Reason existed,
then, unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that
the determination by the Employee of the existence of Good Reason was not made
in good faith, the Company shall pay all amounts, and provide all benefits, to
the Employee and/or the Employee's family or other beneficiaries, as the case
may be, that the Company would be required to pay or provide pursuant to
Section 5(a) or 5(b) as though such termination were by the Company without
Cause or by the Employee with Good Reason. The Employee hereby undertakes to
repay to the Company all such amounts to which the Employee is ultimately
adjudged by such court not to be entitled.
8. Certain Additional Payments by the Company. (a)
Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 8) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Employee with
respect to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Employee shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Employee of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by the Company's outside independent auditor (the "Accounting Firm"), which
shall provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving (or has served within
the three years preceding the Change of Control Date) as accountant or auditor
for the individual, entity or group effecting the Change of Control, or is
unwilling or unable to perform its obligations pursuant to this Section 8, the
Employee shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm
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hereunder). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8,
shall be paid by the Company to the Employee within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Employee, it shall furnish the Employee with a
written opinion that failure to report the Excise Tax on the Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall
be binding upon the Company and the Employee. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 8(c) and the Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee.
(c) The Employee shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Employee is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Employee shall not pay such claim prior to the expiration of the
30-day period following the date on which the Employee gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Employee in
writing prior to the expiration of such period that it desires to contest such
claim, the Company, subject to the provisions of this Section 8(c), shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Employee to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner. In this
connection, the Employee agrees, subject to the provisions of this Section
8(c), to (i) prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine, (ii) give the Company any
information reasonably requested by the Company relating to such claim, (iii)
take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company, (iv) cooperate with the Company in good
faith in order effectively to contest such claim and (v) permit the Company to
participate in any proceedings relating to such claim. The foregoing is
subject, however, to the following: (A) the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties) incurred
in connection with such contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed in connection therewith
and the payment of costs and expenses in such connection, (B) if the Company
directs the Employee to pay such claim and sue for a refund, the Company shall
advance the amount of such payment
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to the Employee, on an interest-free basis, and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance, (C) any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Employee with respect to which such contested
amount is claimed to be due shall be limited solely to such contested amount
and (D) the Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Employee
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 8(c), the Employee becomes entitled
to receive any refund with respect to such claim, the Employee shall (subject
to the Company's complying with the requirements of Section 8(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Employee shall not be entitled to any refund
with respect to such claim and the Company does not notify the Employee in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Employee shall hold in
a fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Employee during the Employee's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Employee or representatives of the Employee in violation of
this Agreement). After termination of the Employee's employment with the
Company or any of its affiliated companies, the Employee shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis
for deferring or withholding any amounts otherwise payable to the Employee
under this Agreement. Subject to the previous sentence, nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from the Employee.
10. Employee's Obligation to Avoid Conflicts of Interest.
(a) In keeping with Employee's fiduciary duties to the Company, Employee agrees
that he shall not knowingly become involved in circumstances constituting a
conflict of interest with such duties, or upon discovery thereof, allow such a
conflict to continue. Moreover, Employee agrees that he shall disclose to the
Secretary of the Company any facts which might involve a conflict of interest
that has not been approved by the Company. The Board hereby acknowledges and
agrees that the
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activities of Employee listed on Schedule A hereto do not, and the continuation
of such activities will not, constitute a conflict of interest for purposes of
this Section 10.
(b) In this connection, it is agreed that any direct
interest in, connection with, or benefit from any outside activities,
particularly commercial activities, which might in any way adversely affect the
Company or any of its affiliated companies, involves a possible conflict of
interest. Circumstances in which a conflict of interest on the part of Employee
would or might arise, and which should be reported immediately to the Company,
include, but are not limited to, the following:
(i) Ownership of a material interest in any lender,
supplier, contractor, customer or other entity with
which the Company or any of its affiliated companies
does business;
(ii) Acting in any capacity, including director, officer,
partner, consultant, employee, distributor, agent or
the like, for lenders, suppliers, contractors,
subcontractors, customers or other entities with
which the Company or any of its affiliated companies
does business;
(iii) Acceptance, directly or indirectly, of payments,
services or loans from a lender, supplier,
contractor, subcontractor, customer or other entity
with which the Company or any of its affiliated
companies does business, including but not limited
to, gifts, trips, entertainment, or other favors of
more than a nominal value, but excluding loans from
publicly held insurance companies and commercial or
savings banks at normal rates of interest;
(iv) Misuse of information or facilities to which Employee
has access in a manner which will be detrimental to
the Company's or any of its affiliated companies'
interest, such as utilization for Employee's own
benefit of know-how or information developed through
the Company's or any of its affiliated companies'
business activities;
(v) Disclosure or other misuse of information of any kind
obtained through Employee's connection with the
Company or any of its affiliated companies; or
(vi) Acquiring or trading in, directly or indirectly,
other properties or interests connected with the
design or marketing of products or services designed
or marketed by the Company or any of its affiliated
companies.
(c) In the event that the Company determines, in the
exercise of its reasonable judgment, that a conflict of interest exists between
the Employee and the Company or any of its affiliated companies, the Company
shall notify the Employee in writing in accordance with Section 17(b) hereof,
providing reasonably detailed information identifying the source of the
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conflict of interest. Within the 60-day period following receipt of such
notice, the Employee shall take action satisfactory to the Company to eliminate
the conflict of interest. Failure of the Employee to take such action within
such 60-day period shall constitute "Cause" under Section 4(b) hereof.
11. Disclosure of Information, Ideas, Concepts,
Improvements, Discoveries and Inventions. As part of Employee's fiduciary
duties to the Company, Employee agrees that during the Employment Period, and
for a period of six (6) months after the Date of Termination, Employee shall
promptly disclose in writing to the Company all information, ideas, concepts,
improvements, discoveries and inventions, whether patentable or not, and
whether or not reduced to practice, which are conceived, developed, made or
acquired by Employee, either individually or jointly with others, and which
relate to the business, products or services of the Company or any of its
affiliated companies, irrespective of whether Employee utilized the Company's
or any of its affiliated companies' time or facilities and irrespective of
whether such information, idea, concept, improvement, discovery or invention
was conceived, developed, discovered or acquired by Employee on the job, at
home, or elsewhere. This obligation extends to all types of information, ideas
and concepts, including information, ideas and concepts relating to new types
of services, corporate opportunities, acquisition prospects, the identity of
key representatives within acquisition prospect organizations, prospective
names or service marks for the Company's or any of its affiliated companies'
business activities, and the like.
12. Ownership of Information, Ideas, Concepts,
Improvements, Discoveries and Inventions and all Original Works of Authorship.
(a) All information, ideas, concepts, improvements, discoveries and inventions,
whether patentable or not, which are conceived, made, developed or acquired by
Employee or which are disclosed or made known to Employee, individually or in
conjunction with others, during Employee's employment by the Company or any of
its affiliated companies and which relate to the Company's or any of its
affiliated companies' business, products or services (including all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evaluations, opinions, interpretations,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customer's organizations or within the
organization of acquisition prospects, or marketing and merchandising
techniques, prospective names and marks) are and shall be the sole and
exclusive property of the Company. Moreover, all drawings, memoranda, notes,
records, files, correspondence, manuals, models, specifications, computer
programs, maps and all other writings or materials of any type embodying any of
such information, ideas, concepts, improvements, discoveries and inventions are
and shall be the sole and exclusive property of the Company.
(b) In particular, Employee hereby specifically sells,
assigns and transfers to the Company all of his worldwide right, title and
interest in and to all such information, ideas, concepts, improvements,
discoveries or inventions, and any United States or foreign applications for
patents, inventor's certificates or other industrial rights that may be filed
thereon, including divisions, continuations, continuations-in-part, reissues
and/or extensions thereof, and applications for registration of such names and
marks. Both during the period of Employee's employment by the Company or any of
its affiliated companies and thereafter, Employee shall
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assist the Company and its nominee at all times in the protection of such
information, ideas, concepts, improvements, discoveries or inventions, both in
the United States and all foreign countries, including but not limited to, the
execution of all lawful oaths and all assignment documents requested by the
Company or its nominee in connection with the preparation, prosecution,
issuance or enforcement of any applications for United States or foreign
letters patent, including divisions, continuations, continuations-in-part,
reissues, and/or extensions thereof, and any application for the registration
of such names and marks.
(c) Moreover, if during Employee's employment by the
Company or any of its affiliated companies, Employee creates any original work
of authorship fixed in any tangible medium of expression which is the subject
matter of copyright (such as videotapes, written presentations on acquisitions,
computer programs, drawings, maps, architectural renditions, models, manuals,
brochures or the like) relating to the Company's or any of its affiliated
companies' business, products, or services, whether such work is created solely
by Employee or jointly with others, the Company shall be deemed the author of
such work if the work is prepared by Employee in the scope of his or her
employment; or, if the work is not prepared by Employee within the scope of his
or her employment but is specially ordered by the Company as a contribution to
a collective work, as a part of a motion picture or other audiovisual work, as
a translation, as a supplementary work, as a compilation or as an instrumental
text, then the work shall be considered to be work made for hire and the
Company shall be the author of the work. In the event such work is neither
prepared by the Employee within the scope of his or her employment or is not a
work specially ordered and deemed to be a work made for hire, then Employee
hereby agrees to assign, and by these presents does assign, to the Company all
of Employee's worldwide right, title and interest in and to such work and all
rights of copyright therein. Both during the period of Employee's employment by
the Company or any of its affiliated companies and thereafter, Employee agrees
to assist the Company and its nominee, at any time, in the protection of the
Company's worldwide right, title and interest in and to the work and all rights
of copyright therein, including but not limited to, the execution of all formal
assignment documents requested by the Company or its nominee and the execution
of all lawful oaths and applications for registration of copyright in the
United States and foreign countries.
13. Employee's Post-Employment Non-Competition
Obligations: In Certain Situations such Obligations Apply only if the Company
Opts to Continue Employee's Salary Payment. (a) During the Employment Period
and, subject to the conditions of Sections 13(b) and 13(c), for a period of
three (3) years thereafter (the "Non-Competition Period") provided, however,
that the Non-Competition Period shall not exceed three (3) years from the Date
of Termination, Employee shall not, acting alone or in conjunction with others,
directly or indirectly, in any of the business territories in which the Company
or any of its affiliated companies is presently or at the time of termination
of employment conducting business, engage in any business in competition with
the business conducted by the Company or any of its affiliated companies at the
time of the termination of the employment relationship, whether for his own
account or by soliciting, canvassing or accepting any business or transaction
for or from any other company or business in competition with such business of
the Company or any of its affiliated companies.
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(b) If Employee has been terminated for Cause (Section
4(b)) or if Employee terminates his employment for any reason other than for
Good Reason or other than during the Window Period (Section 4(c)), Employee
shall be bound by the obligations of Section 13(a) and the Company shall have
no obligation to make the Non-Competition Payments (as defined in Section 13(c)
below). However, if the employment relationship is terminated by any other
circumstance or for any other reason, Employee's post-employment
non-competition obligations required by Section 13(a) shall be subject to the
Company's obligation to make the Non-Competition Payments specified in Section
13(c).
(c) Notwithstanding the provisions of Section 4 of this
Agreement, whenever the employment relationship is terminated due to the
expiration of its term because the Company or Employee timely gave written
notice of termination (Section 1), or due to Employee's Disability (Section
4(a)), or by the Company without Cause (Section 4(b)), unless the Company
exercises its option as hereinafter provided, Employee shall be entitled to
continue to receive payments (the "Non-Competition Payments") equal to his then
current Annual Base Salary (as of the Date of Termination) during the
Non-Competition Period. During the Non-Competition Period, the Employee shall
not, however, be deemed to be an employee of the Company or be entitled to
continue to receive any other employee benefits other than as set forth in
Section 5 or Section 8. Moreover, the Non-Competition Payments shall be reduced
to the extent Employee has already received lump-sum payments in lieu of salary
and bonus pursuant to Section 5. The Company shall have the option, exercisable
at any time within one (1) month after Employee's Date of Termination, to
cancel Employee's post-employment non-competition obligations under Section
13(a) and the Company's corresponding obligation to make the Non-Competition
Payments. Such option shall be exercised by the Company mailing a written
notice thereof to Employee in accordance with Section 17(b); if the Company
does not send such notice within the prescribed one-month time, the Company
shall remain obligated to make the Non-Competition Payments and Employee shall
remain obligated to comply with the provisions of Section 13(a). The purpose of
this paragraph is to make the non-competition obligations of Employee more
reasonable from the Employee's point of view. The amounts to be paid by the
Company are not intended to be liquidated damages or an estimate of the actual
damages that would be sustained by the Company if Employee breaches his
post-employment non-competition obligations. If Employee breaches his
post-employment non-competition obligations, the Company shall be entitled to
cease making the Non-Competition Payments and shall be entitled to all of its
remedies at law or in equity for damages and injunctive relief.
14. Obligations to Refrain From Competing Unfairly. In
addition to the other obligations agreed to by Employee in this Agreement,
Employee agrees that during the Employment Period and for three (3) years
following the Date of Termination, he shall not at any time, directly or
indirectly for the benefit of any other party than the Company or any of its
affiliated companies, (a) induce, entice, or solicit any employee of the
Company or any of its affiliated companies to leave his employment, or (b)
contact, communicate or solicit any customer of the Company or any of its
affiliated companies derived from any customer list, customer lead, mail,
printed matter or other information secured from the Company or any of its
affiliated companies or their present or past employees, or (c) in any other
manner use any
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customer lists or customer leads, mail, telephone numbers, printed material or
material of the Company or any of its affiliated companies relating thereto.
15. Successors. (a) This Agreement is personal to the
Employee and without the prior written consent of the Company shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or the Company
to assume expressly and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. The Parent will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Parent or the Parent to
assume expressly and agree to perform the Parent's obligations hereunder in the
same manner and to the same extent that the Parent would be required to perform
them if no such succession had taken place. As used in this Agreement,
"Parent" shall mean the Parent as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform the
Parent's obligations hereunder by operation of law, or otherwise.
16. Certain Definitions. The following defined terms used
in this Agreement shall have the meanings indicated:
(a) The "Change of Control Date" shall mean the first
date on which a Change of Control occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Employee's
employment with the Company is terminated or the Employee ceases to have the
position with the Company or the Parent which the Employee had prior to the
date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Employee that such termination or cessation (i) was at the
request of a third party who has taken steps reasonably calculated to effect
the Change of Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then, for all purposes of this
Agreement, the "Change of Control Date" shall mean the date immediately prior
to the date of such termination or cessation.
(b) The "Change of Control Period" shall mean the period
commencing on the Change of Control Date and ending on the last day of the
Employment Period.
(c) "Change of Control" shall mean:
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<PAGE> 18
(i) 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) of 20% or more of either (A) the then
outstanding shares of Common Stock of the Parent (the "Outstanding
Parent Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Parent entitled to vote generally
in the election of directors (the "Outstanding Parent Voting
Securities"); provided, however, that the following acquisitions shall
not constitute a Change of Control: (A) any acquisition directly from
the Parent (excluding an acquisition by virtue of the exercise of a
conversion privilege), (B) any acquisition by the Parent, (C) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Parent or any corporation controlled by the
Parent or (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 (A), (B) and (C) of subsection (iii) of this definition of
"Change of Control" are satisfied; or
(ii) Individuals who, as of the effective date hereof,
constitute the Board of Directors of the Parent (the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board of Directors of the Parent; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Parent's shareholders, was
approved by (A) a vote of at least a majority of the directors then
comprising the Incumbent Board of the Parent, or (B) a vote of at
least a majority of the directors then comprising the Executive
Committee of the Board of Directors of the Parent at a time when such
committee was comprised of at least five members and all members of
such committee were either members of the Incumbent Board or
considered as being members of the Incumbent Board pursuant to clause
(A) of this subsection (ii), 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
of Directors of the Parent; or
(iii) Approval by the shareholders of the Parent of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (A) more than
60% 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 Parent Common Stock and Outstanding Parent Voting
Securities immediately prior to such organization, merger or
consolidation in substantially the same proportions as their
ownership, immediately prior
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<PAGE> 19
to such reorganization, merger or consolidation, of the Outstanding
Parent Common Stock and Outstanding Parent Voting Securities, as the
case may be, (B) no Person (excluding the Parent, any employee benefit
plan or related trust of the Parent 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, 20% or more of the
Outstanding Parent Common Stock or Outstanding Parent Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% 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 (C) 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
(iv) Approval by the shareholders of the Parent of (A) a
complete liquidation or dissolution of the Parent or (B) the sale or
other disposition of all or substantially all of the assets of the
Parent, other than to a corporation, with respect to which following
such sale or other disposition, (A) more than 60% 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 Parent Common
Stock and Outstanding Parent 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 Parent Common Stock and Outstanding Parent Voting
Securities, as the case may be, (B) no Person (excluding the Parent
and any employee benefit plan or related trust of the Parent or such
corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 20% or more of
the Outstanding Parent Common Stock or Outstanding Parent Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% 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 of Directors of the
Parent providing for such sale or other disposition of assets of the
Parent.
(d) The term "affiliated company" shall mean any company
controlled by, controlling or under common control with the Company.
(e) The term "Highest Recent Bonus" shall mean the
highest Annual Bonus (annualized for any fiscal year consisting of less than
twelve full months) paid or payable,
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<PAGE> 20
including by reason of any deferral, to the Employee by the Company and its
affiliated companies in respect of the three most recent full fiscal years
ending on or prior to, (i) if prior to a Change of Control, the Date of
Termination, or (ii) if after a Change of Control, the Change of Control Date.
17. Miscellaneous. (a) This Agreement replaces and merges
all previous agreements and discussions relating to the same or similar subject
matters between Employee and the Company and shall be governed by and construed
in accordance with the laws of the State of Texas, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a duly authorized
committee thereof, shall have authority on behalf of the Company to agree to
amend, modify, repeal, waive, extend or discharge any provision of this
Agreement or anything in reference thereto.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
W. Blair Waltrip
1929 Allen Parkway
Houston, TX 77019
If to the Company:
SCI Executive Services, Inc.
1929 Allen Parkway
Houston, Texas 77019
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
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<PAGE> 21
(e) The Employee's or the Company's failure to insist
upon strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Employee or the Company may
have hereunder, including, without limitation, the right of the Employee to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) No breach, whether actual or alleged, of this
Agreement by the Employee shall constitute grounds for the Company to withhold
or offset any payment or benefit due to the Employee under any other agreement,
contract, plan, program, policy or practice of the Company.
IN WITNESS WHEREOF, the Employee and, pursuant to due
authorization from the Board of Directors of the Company, the Company have
caused this Agreement to be executed this 1st day of January, 1997, effective
as of the day and year first above written.
W. BLAIR WALTRIP
/s/ W. BLAIR WALTRIP
--------------------------------------
"EMPLOYEE"
SCI EXECUTIVE SERVICES, INC.
By: /s/ CURTIS G. BRIGGS
------------------------------------
Curtis G. Briggs
Vice President
"COMPANY"
21
<PAGE> 22
Pursuant to due authorization from its Board of Directors, the Parent,
by its execution hereof, absolutely and unconditionally guarantees to Employee
the full and timely payment and performance of each obligation of the Company
to Employee under this Agreement, WAIVES any and all rights that it may
otherwise have to require Employee to proceed against the Company for
nonpayment or nonperformance, WAIVES any and all defenses that would otherwise
be a defense to this guarantee, and agrees to remain liable to Employee for all
payment and performance obligations of the Company under this Agreement,
whether arising before, on or after the date of this Agreement, until this
Agreement shall terminate pursuant to its terms.
SERVICE CORPORATION INTERNATIONAL
By: /s/ JAMES M. SHELGER
----------------------------------
James M. Shelger
Senior Vice President
General Counsel & Secretary
"PARENT"
22
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into
as of this 11th day of November, 1991, amended and restated as of August 12,
1992, further amended and restated May 12, 1993, and further amended and
restated as of January 1, 1997 by and between SCI EXECUTIVE SERVICES, INC., a
Delaware corporation (the "Company") wholly owned by and successor by
assignment to all of the rights, duties and obligations under this Agreement of
SERVICE CORPORATION INTERNATIONAL, a Texas corporation (the "Parent"), and John
W. Morrow, Jr. (the"Employee");
WHEREAS, in order to achieve certain administrative
efficiencies in providing professional management services to its affiliated
companies, the Parent has transferred the Employee to the employ of the Company
effective January 1, 1997;
WHEREAS, the Company, the Parent and the Employee desire to
join in the execution of this amended and restated Agreement to (i) provide for
the transfer of the employment of the Employee and (ii) set out more fully the
rights, duties and obligations of the parties hereto;
WHEREAS, Employee is employed by the Company in a management
capacity, has extraordinary access to the Company's confidential business
information, and has significant duties and responsibilities in connection with
the conduct of the Company's business which places Employee in a special and
uncommon classification of employees;
WHEREAS, attendant to Employee's employment by the Company,
the Company and Employee wish for there to be a complete understanding and
agreement between the Company and Employee with respect to the fiduciary duties
owed by Employee to the Company; Employee's obligation to avoid conflicts of
interest, disclose pertinent information to the Company, and refrain from using
or disclosing the Company's information; the term of employment and conditions
for or upon termination thereof; the compensation and benefits owed to
Employee; and the post-employment obligations Employee owes to the Company; and
WHEREAS, but for Employee's agreement to the covenants and
conditions of this Agreement, particularly the conflict of interest provisions,
the provisions with respect to confidentiality of information and the ownership
of intellectual property, and the post-employment obligations of Employee, the
Company would not have entered into this Agreement;
NOW, THEREFORE, in consideration of Employee's employment by
the Company and the mutual promises and covenants contained herein, the receipt
and sufficiency of such consideration being hereby acknowledged, the Company
and Employee agree as follows:
<PAGE> 2
1. Employment and Term. The Company agrees to employ
the Employee and the Employee agrees to remain in the employ of the Company, in
accordance with the terms and provisions of this Agreement, for the period
beginning on the date of this Agreement (i.e. November 11, 1991) and ending as
of the close of business on the third (3rd) anniversary of the date hereof
(such period together with all extensions thereof, including any Change of
Control Period (as defined in Section 16(b) below), are referred to hereinafter
as the "Employment Period"); provided, however, that commencing on the date one
year after the date hereof, and on each annual anniversary of such date (such
date and each annual anniversary thereof shall be hereinafter referred to as a
"Renewal Date") the Employment Period shall be automatically extended so as to
terminate three (3) years from such Renewal Date, unless at least 60 days prior
to the Renewal Date either the Company or the Employee gives the other written
notice that the Employment Period shall not be so extended.
2. Duties and Powers of Employee. (a) Position;
Location. During the Employment Period, the Employee shall perform such duties
and have such powers as designated by the Board of Directors of the Company
(the "Board") or any duly authorized committee thereof in connection with the
execution of this Agreement. The Employee's services shall be performed at the
location where the Employee is currently employed or any office which is the
headquarters of the Company and is less than 50 miles from such location.
During the Change of Control Period, the Employee's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned with or by the
Company or the Parent at any time during the 90-day period immediately
preceding the Change of Control Date (as defined in Section 16(a) below).
(b) Duties. During the Employment Period, and excluding
any periods of vacation and sick leave to which the Employee is entitled, the
Employee agrees to devote his attention and time during normal business hours
to the business and affairs of the Company and to use the Employee's best
efforts to perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for the
Employee to (i) serve on corporate, civic or charitable boards or committees,
(ii) deliver lectures, fulfill speaking engagements or teach at educational
institutions and (iii) manage personal investments, so long as such activities
do not significantly interfere with the performance of the Employee's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Employee prior to the date of this
Agreement or subsequent thereto consistent with this Section 2(b), the
continued conduct of such activities (or the conduct of activities similar in
nature and scope thereto) shall not thereafter be deemed to interfere with the
performance of the Employee's responsibilities to the Company.
(c) Employee agrees and acknowledges that he owes, and
will comply with, a fiduciary duty of loyalty, fidelity or allegiance to act at
all times in the best interests of the Company and to take no action or fail to
take action if such action or failure to act would injure the Company's
business, its interests or its reputation.
2
<PAGE> 3
3. Compensation. The Employee shall receive the
following compensation for his services:
(a) Salary. During the Employment Period, he shall be
paid an annual base salary ("Annual Base Salary") at the rate of not less than
$330,000.00 per year, in substantially equal bi-weekly installments, and
subject to any and all required withholdings and deductions for Social
Security, income taxes and the like. The Board may from time to time direct
such upward adjustments to Annual Base Salary as the Board deems to be
appropriate or desirable; provided, however, that during the Change of Control
Period, the Annual Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be substantially
consistent with increases in base salary generally awarded in the ordinary
course of business to other employees of comparable rank with the Company and
its affiliated companies (as defined in Section 16(d) below). Annual Base
Salary shall not be reduced after any increase thereof pursuant to this Section
3(a). Any increase in Annual Base Salary shall not serve to limit or reduce any
other obligation of the Company under this Agreement.
(b) Incentive Cash Compensation. During the Employment
Period, he shall be eligible annually for a cash bonus at the discretion of the
Board (such aggregate awards for each year are hereinafter referred to as the
"Annual Bonus") and at the discretion of the Board to receive awards from any
plan of the Company or any of its affiliated companies providing for the
payment of bonuses in cash to employees of the Company or its affiliated
companies having rank comparable to that of the Employee (such plans being
referred to herein collectively as the "Cash Bonus Plans") in accordance with
the terms thereof; provided, however, that, during the Change of Control
Period, the Employee shall be awarded, for each fiscal year ending during the
Change of Control Period, an Annual Bonus at least equal to the Highest Recent
Bonus (as defined in Section 16(e) below). Each Annual Bonus shall be paid no
later than the end of the third month of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, unless the Employee shall
elect to defer the receipt of such Annual Bonus.
(c) Incentive and Savings and Retirement Plans. During
the Employment Period, the Employee shall be entitled to participate in all
incentive and savings (in addition to the Cash Bonus Plans) and retirement
plans, practices, policies and programs applicable generally to other employees
of comparable rank with the Company and its affiliated companies.
(d) Welfare Benefit Plans. During the Employment
Period, the Employee and/or the Employee's family, as the case may be, shall be
eligible for participation in all welfare benefit plans, practices, policies
and programs provided by the Company and its affiliated companies (including,
without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other
employees of comparable rank with the Company and its affiliated companies.
(e) Expenses. During the Employment Period and for so
long as the Employee is employed by the Company, he shall be entitled to
receive prompt reimbursement
3
<PAGE> 4
for all reasonable expenses incurred by the Employee in accordance with the
policies, practices and procedures of the Company and its affiliated companies
from time to time in effect.
(f) Fringe Benefits. During the Employment Period, the
Employee shall be entitled to fringe benefits in accordance with the plans,
practices, programs and policies of the Company and its affiliated companies
from time to time in effect, commensurate with his position and on a basis at
least comparable to those received by other employees of comparable rank with
the Company and its affiliated companies.
(g) Office and Support Staff. During the Employment
Period, the Employee shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal secretarial
and other assistance, commensurate with his position and on a basis at least
comparable to those received by other employees of comparable rank with the
Company and its affiliated companies.
(h) Vacation and Other Absences. During the Employment
Period, the Employee shall be entitled to paid vacation and such other paid
absences whether for holidays, illness, personal time or any similar purposes,
in accordance with the plans, policies, programs and practices of the Company
and its affiliated companies in effect from time to time, commensurate with his
position and on a basis at least comparable to those received by other
employees of comparable rank with the Company and its affiliated companies.
(i) During the Change of Control Period, the Employee's
benefits listed under Sections 3(c), 3(d), 3(e), 3(f), 3(g) and 3(h) above
shall be at least commensurate in all material respects with the most valuable
and favorable of those received by the Employee at any time during the 90-day
period immediately preceding the Change of Control Date.
4. Termination of Employment. (a) Death or Disability.
The Employment Period shall terminate automatically upon the Employee's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Employee has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Employee
written notice in accordance with Section 17(b) of its intention to terminate
the Employment Period. In such event, the Employment Period shall terminate
effective on the 30th day after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
inability of the Employee to perform the Employee's duties with the Company on
a full-time basis as a result of incapacity due to mental or physical illness
which continues for more than one year after the commencement of such
incapacity, such incapacity to be determined by a physician selected by the
Company or its insurers and acceptable to the Employee or the Employee's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Employment
Period for Cause. For purposes of this Agreement, "Cause" shall mean (i) a
material breach by the Employee of
4
<PAGE> 5
Section 9 which is willful on the Employee's part or which is committed in bad
faith or without reasonable belief that such breach is in the best interests of
the Company and its affiliated companies, or (ii) a material breach by the
Employee of the Employee's obligations under Section 2 (other than a breach of
the Employee's obligations under Section 2 arising from the failure of the
Employee to work as a result of incapacity due to physical or mental illness)
or any material breach by the Employee of Section 10, 11 or 12 of this
Agreement which in either case is willful on the Employee's part, which is
committed in bad faith or without reasonable belief that such breach is in the
best interests of the Company and its affiliated companies and which is not
remedied in a reasonable period of time after receipt of written notice from
the Company specifying such breach, or (iii) the conviction of the Employee of
a felony involving malice which conviction has been affirmed on appeal or as to
which the period in which an appeal can be taken has lapsed.
(c) Good Reason; Window Period. The Employee's
employment may be terminated (i) by the Employee for Good Reason (as defined
below) or (ii) during the Window Period (as defined below) by the Employee
without any reason. For purposes of this Agreement, the "Window Period" shall
mean the 30-day period immediately following the first anniversary of the
Change of Control Date. For purposes of this Agreement, "Good Reason" shall
mean
(i) the assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities prior to the date of such assignment or any other
action by the Company or the Parent which results in a diminution in
such position, authority, duties or responsibilities, excluding for
this purpose an isolated and insubstantial action not taken in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 3, other than an isolated and insubstantial
failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the
Employee;
(iii) the Company's requiring the Employee to be based at
any office or location other than that described in Section 2(a);
(iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company or the Parent to comply
with and satisfy Section 15(c), provided that the successor referred
to in Section 15(c) has received at least ten days prior written
notice from the Company or the Employee of the requirements of Section
15(c).
For purposes of this Section 4(c), during the Change of Control Period, any
good faith determination of "Good Reason" made by the Employee shall be
conclusive.
5
<PAGE> 6
(d) Notice of Termination. Any termination by the
Company for Cause or by the Employee without any reason during the Window
Period or for Good Reason shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 17(b). For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employment Period under the
provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination
date (which date shall be not more than 15 days after the giving of such
notice). The failure by the Employee or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Employee or the Company
hereunder or preclude the Employee or the Company from asserting such fact or
circumstance in enforcing the Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Employee's employment is terminated by the Company for Cause, or by
the Employee during the Window Period or for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein, as the case
may be, (ii) if the Employee's employment is terminated by the Company other
than for Cause or Disability, or by the Employee other than for Good Reason or
during the Window Period, the Date of Termination shall be the date on which
the Company or the Employee, as the case may be, notifies the other of such
termination and (iii) if the Employee's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Employee or the Disability Effective Date, as the case may be.
5. Obligations of the Company Upon Termination. (a)
Certain Terminations Prior to Change of Control Date. If, during the Employment
Period prior to any Change of Control Date, the employment of the Employee with
the Company shall be terminated (i) by the Company other than for Cause, death
or Disability or (ii) by the Employee for Good Reason, then, in lieu of the
obligations of the Company under Section 3, (i) the Company shall pay to the
Employee in a lump sum in cash within 30 days after the Date of Termination all
Unpaid Agreement Amounts (as defined in Section 5(b)(i)(A) below) and (ii)
notwithstanding any other provision hereunder, for the longer of (A) the
remainder of the Employment Period or (B) to the extent compensation and/or
benefits are provided under any plan, program, practice or policy, such longer
period, if any, as such plan, program, practice or policy may provide, the
Company shall continue to provide to the Employee the compensation and benefits
provided in Sections 3(a), 3(c) and 3(d).
(b) Certain Terminations After Change of Control Date.
If, during the Change of Control Period, the employment of the Employee with
the Company shall be terminated (i) by the Company other than for Cause, death
or Disability or (ii) by the Employee either for Good Reason or without any
reason during the Window Period, then, in lieu of the obligations of the
Company under Section 3 and notwithstanding any other provision hereunder:
6
<PAGE> 7
(i) the Company shall pay to the Employee in a lump sum
in cash within 30 days after the Date of Termination the aggregate of the
following amounts:
(A) the sum of (1) all unpaid amounts due to the
Employee under Section 3 through the Date of
Termination, including without limitation, the
Employee's Annual Base Salary and any accrued
vacation pay, (2) the product of (x) the Highest
Recent Bonus and (y) a fraction, the numerator of
which is the number of days in the current fiscal
year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation
previously deferred by the Employee (together with
any accrued interest or earnings thereon) to the
extent not theretofore paid (the sum of the amounts
described in clauses (1), (2) and (3) shall be
hereinafter referred to as the "Accrued Obligations"
and the sum of the amounts described in clauses (1)
and (3) shall be hereinafter referred to as the
"Unpaid Agreement Amounts"); and
(B) the amount (such amount shall be hereinafter
referred to as the "Severance Amount") equal to
the sum of
(1) Three (3) multiplied by the
Employee's Annual Base Salary, plus
(2) Three (3) multiplied by the
Employee's Highest Recent Bonus;
(ii) for the longer of (A) the remainder of the Employment
Period or (B) to the extent benefits are provided under any plan,
program, practice or policy, such longer period as such plan, program,
practice or policy may provide, the Company shall continue benefits to
the Employee and/or the Employee's family at least equal to those
which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 3(d) if the
Employee's employment had not been terminated, in accordance with the
most favorable plans, practices, programs or policies of the Company
and its affiliated companies as in effect and applicable generally to
other employees of comparable rank and their families during the
90-day period immediately preceding the Change of Control Date or, if
more favorable to the Employee, as in effect generally at any time
thereafter with respect to other employees of comparable rank with the
Company and its affiliated companies and their families; provided,
however, that if the Employee becomes reemployed with another employer
and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits
described herein shall be required only to the extent not provided
under such other plan during such applicable period of eligibility.
For purposes of determining eligibility of the Employee for retiree
benefits pursuant to such plans, practices, programs and policies, the
Employee shall be considered to have remained employed until the end
of the Employment Period and to have retired on the last day of such
period; and
7
<PAGE> 8
(iii) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Employee and/or the
Employee's family for the remainder of the Employment Period any other
amounts or benefits required to be paid or provided or which the
Employee and/or the Employee's family is eligible to receive pursuant
to this Agreement and under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies as
in effect and applicable generally to other employees of comparable
rank with the Company and its affiliated companies and their families
during the 90- day period immediately preceding the Change of Control
Date or, if more favorable to the Employee, as in effect generally
thereafter with respect to other employees of comparable rank with the
Company and its affiliated companies and their families.
Such amounts received under this Section 5(b) shall be in lieu of any other
amount of severance relating to salary or bonus continuation to be received by
the Employee upon termination of employment of the Employee under any severance
plan, policy or arrangement of the Company.
(c) Termination as a Result of Death. If the Employee's
employment is terminated by reason of the Employee's death during the
Employment Period, in lieu of the obligations of the Company under Section 3,
the Company shall pay or provide to the Employee's estate (i) all Accrued
Obligations (which shall be paid in a lump sum in cash within 30 days after the
Date of Termination) and the timely payment or provision of the Welfare Benefit
Continuation (as defined below) and the Other Benefits (as defined below) and
(ii) any cash amount to be received by the Employee or the Employee's family as
a death benefit pursuant to the terms of any plan, policy or arrangement of the
Company and its affiliated companies. "Welfare Benefit Continuation" shall
mean the continuation of benefits to the Employee and/or the Employee's family
for the longer of (i) three (3) years from the Date of Termination or (ii) the
period provided by the plans, programs, policies or practices described in
Section 3(d) in which the Employee participates as of the Date of Termination,
such benefits to be at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described
in Section 3(d) if the Employee's employment had not been terminated, in
accordance with the most favorable plans, practices, programs or policies of
the Company and its affiliated companies as in effect and applicable generally
to other employees of comparable rank and their families on the Date of
Termination or, if the Date of Termination occurs after the Change of Control
Date, during the 90-day period immediately preceding the Change of Control Date
or, if more favorable to the Employee, as in effect generally at any time
thereafter with respect to other employees of comparable rank with the Company
and its affiliated companies and their families. "Other Benefits" shall mean
the timely payment or provision to the Employee and/or the Employee's family of
any other amounts or benefits required to be paid or provided or which the
Employee and/or the Employee's family is eligible to receive pursuant to this
Agreement and under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies as in effect and
applicable generally to other employees of comparable rank and their families
on the Date of Termination or, if the Date of Termination occurs after the
Change of Control Date, during the 90-day period immediately preceding the
Change of Control Date or,
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if more favorable to the Employee, as in effect generally thereafter with
respect to other employees of comparable rank with the Company and its
affiliated companies and their families.
(d) Termination as a Result of Disability. If the
Employee's employment is terminated by reason of the Employee's Disability
during the Employment Period, in lieu of the obligations of the Company under
Section 3, the Company shall pay or provide to the Employee (i) all Accrued
Obligations which shall be paid in a lump sum in cash within 30 days after the
Date of Termination and the timely payment or provision of the Welfare Benefit
Continuation and the Other Benefits, provided, however, that if the Employee
becomes reemployed with another employer and is eligible to receive medical or
other welfare benefits under another employer provided plan, the Welfare
Benefit Continuation shall be required only to the extent not provided under
such other plan during such applicable period of eligibility, and (ii) any cash
amount to be received by the Employee as a disability benefit pursuant to the
terms of any plan, policy or arrangement of the Company and its affiliated
companies.
(e) Cause; Other than for Good Reason. If the Employee's
employment shall be terminated during the Employment Period by the Company for
Cause or by the Employee other than during the Window Period and other than for
Good Reason, in lieu of the obligations of the Company under Section 3, the
Company shall pay to the Employee in a lump sum in cash within 30 days after
the Date of Termination all Unpaid Agreement Amounts.
6. Non-exclusivity of Rights. Except as provided in
Sections 5(a), 5(b)(i)(B), 5(b)(ii), 5(c) and 5(d), nothing in this Agreement
shall prevent or limit the Employee's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Employee may qualify, nor shall anything
herein limit or otherwise affect such rights as the Employee may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Employee is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
7. Full Settlement; Resolution of Disputes. (a) The
Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Employee or others. In no event shall
the Employee be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Employee under any of the
provisions of this Agreement and, except as provided in Sections 5(b)(ii) and
5(d), such amounts shall not be reduced whether or not the Employee obtains
other employment. The Company agrees to pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company, the Employee or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result
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<PAGE> 10
of any contest by the Employee about the amount of any payment pursuant to this
Agreement), plus in each case interest on any payment required to be made under
this Agreement but not timely paid at the rate provided for in Section
280G(d)(4) of the Internal Revenue Code of 1986, as amended (the "Code").
(b) If there shall be any dispute between the Company and
the Employee (i) in the event of any termination of the Employee's employment
by the Company, whether such termination was for Cause, or (ii) in the event of
any termination of employment by the Employee, whether Good Reason existed,
then, unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that
the determination by the Employee of the existence of Good Reason was not made
in good faith, the Company shall pay all amounts, and provide all benefits, to
the Employee and/or the Employee's family or other beneficiaries, as the case
may be, that the Company would be required to pay or provide pursuant to
Section 5(a) or 5(b) as though such termination were by the Company without
Cause or by the Employee with Good Reason. The Employee hereby undertakes to
repay to the Company all such amounts to which the Employee is ultimately
adjudged by such court not to be entitled.
8. Certain Additional Payments by the Company. (a)
Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 8) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Employee with
respect to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Employee shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Employee of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by the Company's outside independent auditor (the "Accounting Firm"), which
shall provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving (or has served within
the three years preceding the Change of Control Date) as accountant or auditor
for the individual, entity or group effecting the Change of Control, or is
unwilling or unable to perform its obligations pursuant to this Section 8, the
Employee shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm
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hereunder). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8,
shall be paid by the Company to the Employee within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Employee, it shall furnish the Employee with a
written opinion that failure to report the Excise Tax on the Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall
be binding upon the Company and the Employee. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 8(c) and the Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee.
(c) The Employee shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Employee is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Employee shall not pay such claim prior to the expiration of the
30-day period following the date on which the Employee gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Employee in
writing prior to the expiration of such period that it desires to contest such
claim, the Company, subject to the provisions of this Section 8(c), shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Employee to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner. In this
connection, the Employee agrees, subject to the provisions of this Section
8(c), to (i) prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine, (ii) give the Company any
information reasonably requested by the Company relating to such claim, (iii)
take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company, (iv) cooperate with the Company in good
faith in order effectively to contest such claim and (v) permit the Company to
participate in any proceedings relating to such claim. The foregoing is
subject, however, to the following: (A) the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties) incurred
in connection with such contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed in connection therewith
and the payment of costs and expenses in such connection, (B) if the Company
directs the Employee to pay such claim and sue for a refund, the Company shall
advance the amount of such payment
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to the Employee, on an interest-free basis, and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance, (C) any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Employee with respect to which such contested
amount is claimed to be due shall be limited solely to such contested amount
and (D) the Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Employee
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 8(c), the Employee becomes entitled
to receive any refund with respect to such claim, the Employee shall (subject
to the Company's complying with the requirements of Section 8(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Employee shall not be entitled to any refund
with respect to such claim and the Company does not notify the Employee in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Employee shall hold in
a fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Employee during the Employee's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Employee or representatives of the Employee in violation of
this Agreement). After termination of the Employee's employment with the
Company or any of its affiliated companies, the Employee shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis
for deferring or withholding any amounts otherwise payable to the Employee
under this Agreement. Subject to the previous sentence, nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from the Employee.
10. Employee's Obligation to Avoid Conflicts of Interest.
(a) In keeping with Employee's fiduciary duties to the Company, Employee agrees
that he shall not knowingly become involved in circumstances constituting a
conflict of interest with such duties, or upon discovery thereof, allow such a
conflict to continue. Moreover, Employee agrees that he shall disclose to the
Secretary of the Company any facts which might involve a conflict of interest
that has not been approved by the Company. The Board hereby acknowledges and
agrees that the
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activities of Employee listed on Schedule A hereto do not, and the continuation
of such activities will not, constitute a conflict of interest for purposes of
this Section 10.
(b) In this connection, it is agreed that any direct
interest in, connection with, or benefit from any outside activities,
particularly commercial activities, which might in any way adversely affect the
Company or any of its affiliated companies, involves a possible conflict of
interest. Circumstances in which a conflict of interest on the part of Employee
would or might arise, and which should be reported immediately to the Company,
include, but are not limited to, the following:
(i) Ownership of a material interest in any lender,
supplier, contractor, customer or other entity with
which the Company or any of its affiliated companies
does business;
(ii) Acting in any capacity, including director, officer,
partner, consultant, employee, distributor, agent or
the like, for lenders, suppliers, contractors,
subcontractors, customers or other entities with
which the Company or any of its affiliated companies
does business;
(iii) Acceptance, directly or indirectly, of payments,
services or loans from a lender, supplier,
contractor, subcontractor, customer or other entity
with which the Company or any of its affiliated
companies does business, including but not limited
to, gifts, trips, entertainment, or other favors of
more than a nominal value, but excluding loans from
publicly held insurance companies and commercial or
savings banks at normal rates of interest;
(iv) Misuse of information or facilities to which Employee
has access in a manner which will be detrimental to
the Company's or any of its affiliated companies'
interest, such as utilization for Employee's own
benefit of know-how or information developed through
the Company's or any of its affiliated companies'
business activities;
(v) Disclosure or other misuse of information of any kind
obtained through Employee's connection with the
Company or any of its affiliated companies; or
(vi) Acquiring or trading in, directly or indirectly,
other properties or interests connected with the
design or marketing of products or services designed
or marketed by the Company or any of its affiliated
companies.
(c) In the event that the Company determines, in the
exercise of its reasonable judgment, that a conflict of interest exists between
the Employee and the Company or any of its affiliated companies, the Company
shall notify the Employee in writing in accordance with Section 17(b) hereof,
providing reasonably detailed information identifying the source of the
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conflict of interest. Within the 60-day period following receipt of such
notice, the Employee shall take action satisfactory to the Company to eliminate
the conflict of interest. Failure of the Employee to take such action within
such 60-day period shall constitute "Cause" under Section 4(b) hereof.
11. Disclosure of Information, Ideas, Concepts,
Improvements, Discoveries and Inventions. As part of Employee's fiduciary
duties to the Company, Employee agrees that during the Employment Period, and
for a period of six (6) months after the Date of Termination, Employee shall
promptly disclose in writing to the Company all information, ideas, concepts,
improvements, discoveries and inventions, whether patentable or not, and
whether or not reduced to practice, which are conceived, developed, made or
acquired by Employee, either individually or jointly with others, and which
relate to the business, products or services of the Company or any of its
affiliated companies, irrespective of whether Employee utilized the Company's
or any of its affiliated companies' time or facilities and irrespective of
whether such information, idea, concept, improvement, discovery or invention
was conceived, developed, discovered or acquired by Employee on the job, at
home, or elsewhere. This obligation extends to all types of information, ideas
and concepts, including information, ideas and concepts relating to new types
of services, corporate opportunities, acquisition prospects, the identity of
key representatives within acquisition prospect organizations, prospective
names or service marks for the Company's or any of its affiliated companies'
business activities, and the like.
12. Ownership of Information, Ideas, Concepts,
Improvements, Discoveries and Inventions and all Original Works of Authorship.
(a) All information, ideas, concepts, improvements, discoveries and inventions,
whether patentable or not, which are conceived, made, developed or acquired by
Employee or which are disclosed or made known to Employee, individually or in
conjunction with others, during Employee's employment by the Company or any of
its affiliated companies and which relate to the Company's or any of its
affiliated companies' business, products or services (including all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evaluations, opinions, interpretations,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customer's organizations or within the
organization of acquisition prospects, or marketing and merchandising
techniques, prospective names and marks) are and shall be the sole and
exclusive property of the Company. Moreover, all drawings, memoranda, notes,
records, files, correspondence, manuals, models, specifications, computer
programs, maps and all other writings or materials of any type embodying any of
such information, ideas, concepts, improvements, discoveries and inventions are
and shall be the sole and exclusive property of the Company.
(b) In particular, Employee hereby specifically sells,
assigns and transfers to the Company all of his worldwide right, title and
interest in and to all such information, ideas, concepts, improvements,
discoveries or inventions, and any United States or foreign applications for
patents, inventor's certificates or other industrial rights that may be filed
thereon, including divisions, continuations, continuations-in-part, reissues
and/or extensions thereof, and applications for registration of such names and
marks. Both during the period of Employee's employment by the Company or any of
its affiliated companies and thereafter, Employee shall
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assist the Company and its nominee at all times in the protection of such
information, ideas, concepts, improvements, discoveries or inventions, both in
the United States and all foreign countries, including but not limited to, the
execution of all lawful oaths and all assignment documents requested by the
Company or its nominee in connection with the preparation, prosecution,
issuance or enforcement of any applications for United States or foreign
letters patent, including divisions, continuations, continuations-in-part,
reissues, and/or extensions thereof, and any application for the registration
of such names and marks.
(c) Moreover, if during Employee's employment by the
Company or any of its affiliated companies, Employee creates any original work
of authorship fixed in any tangible medium of expression which is the subject
matter of copyright (such as videotapes, written presentations on acquisitions,
computer programs, drawings, maps, architectural renditions, models, manuals,
brochures or the like) relating to the Company's or any of its affiliated
companies' business, products, or services, whether such work is created solely
by Employee or jointly with others, the Company shall be deemed the author of
such work if the work is prepared by Employee in the scope of his or her
employment; or, if the work is not prepared by Employee within the scope of his
or her employment but is specially ordered by the Company as a contribution to
a collective work, as a part of a motion picture or other audiovisual work, as
a translation, as a supplementary work, as a compilation or as an instrumental
text, then the work shall be considered to be work made for hire and the
Company shall be the author of the work. In the event such work is neither
prepared by the Employee within the scope of his or her employment or is not a
work specially ordered and deemed to be a work made for hire, then Employee
hereby agrees to assign, and by these presents does assign, to the Company all
of Employee's worldwide right, title and interest in and to such work and all
rights of copyright therein. Both during the period of Employee's employment by
the Company or any of its affiliated companies and thereafter, Employee agrees
to assist the Company and its nominee, at any time, in the protection of the
Company's worldwide right, title and interest in and to the work and all rights
of copyright therein, including but not limited to, the execution of all formal
assignment documents requested by the Company or its nominee and the execution
of all lawful oaths and applications for registration of copyright in the
United States and foreign countries.
13. Employee's Post-Employment Non-Competition
Obligations: In Certain Situations such Obligations Apply only if the Company
Opts to Continue Employee's Salary Payment. (a) During the Employment Period
and, subject to the conditions of Sections 13(b) and 13(c), for a period of
three (3) years thereafter (the "Non-Competition Period") provided, however,
that the Non-Competition Period shall not exceed three (3) years from the Date
of Termination, Employee shall not, acting alone or in conjunction with others,
directly or indirectly, in any of the business territories in which the Company
or any of its affiliated companies is presently or at the time of termination
of employment conducting business, engage in any business in competition with
the business conducted by the Company or any of its affiliated companies at the
time of the termination of the employment relationship, whether for his own
account or by soliciting, canvassing or accepting any business or transaction
for or from any other company or business in competition with such business of
the Company or any of its affiliated companies.
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(b) If Employee has been terminated for Cause (Section
4(b)) or if Employee terminates his employment for any reason other than for
Good Reason or other than during the Window Period (Section 4(c)), Employee
shall be bound by the obligations of Section 13(a) and the Company shall have
no obligation to make the Non-Competition Payments (as defined in Section 13(c)
below). However, if the employment relationship is terminated by any other
circumstance or for any other reason, Employee's post-employment
non-competition obligations required by Section 13(a) shall be subject to the
Company's obligation to make the Non-Competition Payments specified in Section
13(c).
(c) Notwithstanding the provisions of Section 4 of this
Agreement, whenever the employment relationship is terminated due to the
expiration of its term because the Company or Employee timely gave written
notice of termination (Section 1), or due to Employee's Disability (Section
4(a)), or by the Company without Cause (Section 4(b)), unless the Company
exercises its option as hereinafter provided, Employee shall be entitled to
continue to receive payments (the "Non-Competition Payments") equal to his then
current Annual Base Salary (as of the Date of Termination) during the
Non-Competition Period. During the Non-Competition Period, the Employee shall
not, however, be deemed to be an employee of the Company or be entitled to
continue to receive any other employee benefits other than as set forth in
Section 5 or Section 8. Moreover, the Non-Competition Payments shall be reduced
to the extent Employee has already received lump-sum payments in lieu of salary
and bonus pursuant to Section 5. The Company shall have the option, exercisable
at any time within one (1) month after Employee's Date of Termination, to
cancel Employee's post-employment non-competition obligations under Section
13(a) and the Company's corresponding obligation to make the Non-Competition
Payments. Such option shall be exercised by the Company mailing a written
notice thereof to Employee in accordance with Section 17(b); if the Company
does not send such notice within the prescribed one-month time, the Company
shall remain obligated to make the Non-Competition Payments and Employee shall
remain obligated to comply with the provisions of Section 13(a). The purpose of
this paragraph is to make the non-competition obligations of Employee more
reasonable from the Employee's point of view. The amounts to be paid by the
Company are not intended to be liquidated damages or an estimate of the actual
damages that would be sustained by the Company if Employee breaches his
post-employment non-competition obligations. If Employee breaches his
post-employment non-competition obligations, the Company shall be entitled to
cease making the Non-Competition Payments and shall be entitled to all of its
remedies at law or in equity for damages and injunctive relief.
14. Obligations to Refrain From Competing Unfairly. In
addition to the other obligations agreed to by Employee in this Agreement,
Employee agrees that during the Employment Period and for three (3) years
following the Date of Termination, he shall not at any time, directly or
indirectly for the benefit of any other party than the Company or any of its
affiliated companies, (a) induce, entice, or solicit any employee of the
Company or any of its affiliated companies to leave his employment, or (b)
contact, communicate or solicit any customer of the Company or any of its
affiliated companies derived from any customer list, customer lead, mail,
printed matter or other information secured from the Company or any of its
affiliated companies or their present or past employees, or (c) in any other
manner use any
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customer lists or customer leads, mail, telephone numbers, printed material or
material of the Company or any of its affiliated companies relating thereto.
15. Successors. (a) This Agreement is personal to the
Employee and without the prior written consent of the Company shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or the Company
to assume expressly and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. The Parent will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Parent or the Parent to
assume expressly and agree to perform the Parent's obligations hereunder in the
same manner and to the same extent that the Parent would be required to perform
them if no such succession had taken place. As used in this Agreement,
"Parent" shall mean the Parent as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform the
Parent's obligations hereunder by operation of law, or otherwise.
16. Certain Definitions. The following defined terms used
in this Agreement shall have the meanings indicated:
(a) The "Change of Control Date" shall mean the first
date on which a Change of Control occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Employee's
employment with the Company is terminated or the Employee ceases to have the
position with the Company or the Parent which the Employee had prior to the
date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Employee that such termination or cessation (i) was at the
request of a third party who has taken steps reasonably calculated to effect
the Change of Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then, for all purposes of this
Agreement, the "Change of Control Date" shall mean the date immediately prior
to the date of such termination or cessation.
(b) The "Change of Control Period" shall mean the period
commencing on the Change of Control Date and ending on the last day of the
Employment Period.
(c) "Change of Control" shall mean:
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(i) 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) of 20% or more of either (A) the then
outstanding shares of Common Stock of the Parent (the "Outstanding
Parent Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Parent entitled to vote generally
in the election of directors (the "Outstanding Parent Voting
Securities"); provided, however, that the following acquisitions shall
not constitute a Change of Control: (A) any acquisition directly from
the Parent (excluding an acquisition by virtue of the exercise of a
conversion privilege), (B) any acquisition by the Parent, (C) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Parent or any corporation controlled by the
Parent or (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 (A), (B) and (C) of subsection (iii) of this definition of
"Change of Control" are satisfied; or
(ii) Individuals who, as of the effective date hereof,
constitute the Board of Directors of the Parent (the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board of Directors of the Parent; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Parent's shareholders, was
approved by (A) a vote of at least a majority of the directors then
comprising the Incumbent Board of the Parent, or (B) a vote of at
least a majority of the directors then comprising the Executive
Committee of the Board of Directors of the Parent at a time when such
committee was comprised of at least five members and all members of
such committee were either members of the Incumbent Board or
considered as being members of the Incumbent Board pursuant to clause
(A) of this subsection (ii), 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
of Directors of the Parent; or
(iii) Approval by the shareholders of the Parent of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (A) more than
60% 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 Parent Common Stock and Outstanding Parent Voting
Securities immediately prior to such organization, merger or
consolidation in substantially the same proportions as their
ownership, immediately prior
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<PAGE> 19
to such reorganization, merger or consolidation, of the Outstanding
Parent Common Stock and Outstanding Parent Voting Securities, as the
case may be, (B) no Person (excluding the Parent, any employee benefit
plan or related trust of the Parent 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, 20% or more of the
Outstanding Parent Common Stock or Outstanding Parent Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% 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 (C) 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
(iv) Approval by the shareholders of the Parent of (A) a
complete liquidation or dissolution of the Parent or (B) the sale or
other disposition of all or substantially all of the assets of the
Parent, other than to a corporation, with respect to which following
such sale or other disposition, (A) more than 60% 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 Parent Common
Stock and Outstanding Parent 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 Parent Common Stock and Outstanding Parent Voting
Securities, as the case may be, (B) no Person (excluding the Parent
and any employee benefit plan or related trust of the Parent or such
corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 20% or more of
the Outstanding Parent Common Stock or Outstanding Parent Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% 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 of Directors of the
Parent providing for such sale or other disposition of assets of the
Parent.
(d) The term "affiliated company" shall mean any company
controlled by, controlling or under common control with the Company.
(e) The term "Highest Recent Bonus" shall mean the
highest Annual Bonus (annualized for any fiscal year consisting of less than
twelve full months) paid or payable,
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<PAGE> 20
including by reason of any deferral, to the Employee by the Company and its
affiliated companies in respect of the three most recent full fiscal years
ending on or prior to, (i) if prior to a Change of Control, the Date of
Termination, or (ii) if after a Change of Control, the Change of Control Date.
17. Miscellaneous. (a) This Agreement replaces and merges
all previous agreements and discussions relating to the same or similar subject
matters between Employee and the Company and shall be governed by and construed
in accordance with the laws of the State of Texas, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a duly authorized
committee thereof, shall have authority on behalf of the Company to agree to
amend, modify, repeal, waive, extend or discharge any provision of this
Agreement or anything in reference thereto.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
John W. Morrow, Jr.
8615 Stable Crest Blvd.
Houston, TX 77024
If to the Company:
SCI Executive Services, Inc.
1929 Allen Parkway
Houston, Texas 77019
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
20
<PAGE> 21
(e) The Employee's or the Company's failure to insist
upon strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Employee or the Company may
have hereunder, including, without limitation, the right of the Employee to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) No breach, whether actual or alleged, of this
Agreement by the Employee shall constitute grounds for the Company to withhold
or offset any payment or benefit due to the Employee under any other agreement,
contract, plan, program, policy or practice of the Company.
IN WITNESS WHEREOF, the Employee and, pursuant to due
authorization from the Board of Directors of the Company, the Company have
caused this Agreement to be executed this 1st day of January, 1997, effective
as of the day and year first above written.
JOHN W. MORROW, JR.
/s/ JOHN W. MORROW, JR.
-------------------------------------
"EMPLOYEE"
SCI EXECUTIVE SERVICES, INC.
By: /s/ CURTIS G. BRIGGS
----------------------------------
Curtis G. Briggs
Vice President
"COMPANY"
21
<PAGE> 22
Pursuant to due authorization from its Board of Directors, the Parent,
by its execution hereof, absolutely and unconditionally guarantees to Employee
the full and timely payment and performance of each obligation of the Company
to Employee under this Agreement, WAIVES any and all rights that it may
otherwise have to require Employee to proceed against the Company for
nonpayment or nonperformance, WAIVES any and all defenses that would otherwise
be a defense to this guarantee, and agrees to remain liable to Employee for all
payment and performance obligations of the Company under this Agreement,
whether arising before, on or after the date of this Agreement, until this
Agreement shall terminate pursuant to its terms.
SERVICE CORPORATION INTERNATIONAL
By: /s/ JAMES M. SHELGER
--------------------------------
James M. Shelger
Senior Vice President
General Counsel & Secretary
"PARENT"
22
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into
as of this 11th day of November, 1991, amended and restated as of August 12,
1992, further amended and restated May 12, 1993, further amended and restated
as of January 1, 1995 and further amended and restated as of January 1, 1997 by
and between SCI MANAGEMENT CORPORATION, a Delaware corporation (the "Company")
wholly owned by and successor by assignment to all of the rights, duties and
obligations under this Agreement of SERVICE CORPORATION INTERNATIONAL, a Texas
corporation (the "Parent"), and Jerald L. Pullins (the"Employee");
WHEREAS, in order to achieve certain administrative
efficiencies in providing professional management services to its affiliated
companies, the Parent has transferred the Employee to the employ of the Company
effective January 1, 1997;
WHEREAS, the Company, the Parent and the Employee desire to
join in the execution of this amended and restated Agreement to (i) provide for
the transfer of the employment of the Employee and (ii) set out more fully the
rights, duties and obligations of the parties hereto;
WHEREAS, Employee is employed by the Company in a management
capacity, has extraordinary access to the Company's confidential business
information, and has significant duties and responsibilities in connection with
the conduct of the Company's business which places Employee in a special and
uncommon classification of employees;
WHEREAS, attendant to Employee's employment by the Company,
the Company and Employee wish for there to be a complete understanding and
agreement between the Company and Employee with respect to the fiduciary duties
owed by Employee to the Company; Employee's obligation to avoid conflicts of
interest, disclose pertinent information to the Company, and refrain from using
or disclosing the Company's information; the term of employment and conditions
for or upon termination thereof; the compensation and benefits owed to
Employee; and the post-employment obligations Employee owes to the Company; and
WHEREAS, but for Employee's agreement to the covenants and
conditions of this Agreement, particularly the conflict of interest provisions,
the provisions with respect to confidentiality of information and the ownership
of intellectual property, and the post-employment obligations of Employee, the
Company would not have entered into this Agreement;
NOW, THEREFORE, in consideration of Employee's employment by
the Company and the mutual promises and covenants contained herein, the receipt
and sufficiency of such consideration being hereby acknowledged, the Company
and Employee agree as follows:
<PAGE> 2
1. Employment and Term. The Company agrees to employ
the Employee and the Employee agrees to remain in the employ of the Company, in
accordance with the terms and provisions of this Agreement, for the period
beginning on the date of this Agreement (i.e. December 1, 1991) and ending as
of the close of business on the third (3rd) anniversary of the date hereof
(such period together with all extensions thereof, including any Change of
Control Period (as defined in Section 16(b) below), are referred to hereinafter
as the "Employment Period"); provided, however, that commencing on the date one
year after the date hereof, and on each annual anniversary of such date (such
date and each annual anniversary thereof shall be hereinafter referred to as a
"Renewal Date") the Employment Period shall be automatically extended so as to
terminate three (3) years from such Renewal Date, unless at least 60 days prior
to the Renewal Date either the Company or the Employee gives the other written
notice that the Employment Period shall not be so extended.
2. Duties and Powers of Employee. (a) Position;
Location. During the Employment Period, the Employee shall perform such duties
and have such powers as designated by the Board of Directors of the Company
(the "Board") or any duly authorized committee thereof in connection with the
execution of this Agreement. The Employee's services shall be performed at the
location where the Employee is currently employed or any office which is the
headquarters of the Company and is less than 50 miles from such location.
During the Change of Control Period, the Employee's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned with or by the
Company or the Parent at any time during the 90-day period immediately
preceding the Change of Control Date (as defined in Section 16(a) below).
(b) Duties. During the Employment Period, and excluding
any periods of vacation and sick leave to which the Employee is entitled, the
Employee agrees to devote his attention and time during normal business hours
to the business and affairs of the Company and to use the Employee's best
efforts to perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for the
Employee to (i) serve on corporate, civic or charitable boards or committees,
(ii) deliver lectures, fulfill speaking engagements or teach at educational
institutions and (iii) manage personal investments, so long as such activities
do not significantly interfere with the performance of the Employee's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Employee prior to the date of this
Agreement or subsequent thereto consistent with this Section 2(b), the
continued conduct of such activities (or the conduct of activities similar in
nature and scope thereto) shall not thereafter be deemed to interfere with the
performance of the Employee's responsibilities to the Company.
(c) Employee agrees and acknowledges that he owes, and
will comply with, a fiduciary duty of loyalty, fidelity or allegiance to act at
all times in the best interests of the Company and to take no action or fail to
take action if such action or failure to act would injure the Company's
business, its interests or its reputation.
2
<PAGE> 3
3. Compensation. The Employee shall receive the
following compensation for his services:
(a) Salary. During the Employment Period, he shall be
paid an annual base salary ("Annual Base Salary") at the rate of not less than
$340,000.00 per year, in substantially equal bi-weekly installments, and
subject to any and all required withholdings and deductions for Social
Security, income taxes and the like. The Board may from time to time direct
such upward adjustments to Annual Base Salary as the Board deems to be
appropriate or desirable; provided, however, that during the Change of Control
Period, the Annual Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be substantially
consistent with increases in base salary generally awarded in the ordinary
course of business to other employees of comparable rank with the Company and
its affiliated companies (as defined in Section 16(d) below). Annual Base
Salary shall not be reduced after any increase thereof pursuant to this Section
3(a). Any increase in Annual Base Salary shall not serve to limit or reduce any
other obligation of the Company under this Agreement.
(b) Incentive Cash Compensation. During the Employment
Period, he shall be eligible annually for a cash bonus at the discretion of the
Board (such aggregate awards for each year are hereinafter referred to as the
"Annual Bonus") and at the discretion of the Board to receive awards from any
plan of the Company or any of its affiliated companies providing for the
payment of bonuses in cash to employees of the Company or its affiliated
companies having rank comparable to that of the Employee (such plans being
referred to herein collectively as the "Cash Bonus Plans") in accordance with
the terms thereof; provided, however, that, during the Change of Control
Period, the Employee shall be awarded, for each fiscal year ending during the
Change of Control Period, an Annual Bonus at least equal to the Highest Recent
Bonus (as defined in Section 16(e) below). Each Annual Bonus shall be paid no
later than the end of the third month of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, unless the Employee shall
elect to defer the receipt of such Annual Bonus.
(c) Incentive and Savings and Retirement Plans. During
the Employment Period, the Employee shall be entitled to participate in all
incentive and savings (in addition to the Cash Bonus Plans) and retirement
plans, practices, policies and programs applicable generally to other employees
of comparable rank with the Company and its affiliated companies.
(d) Welfare Benefit Plans. During the Employment
Period, the Employee and/or the Employee's family, as the case may be, shall be
eligible for participation in all welfare benefit plans, practices, policies
and programs provided by the Company and its affiliated companies (including,
without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other
employees of comparable rank with the Company and its affiliated companies.
(e) Expenses. During the Employment Period and for so
long as the Employee is employed by the Company, he shall be entitled to
receive prompt reimbursement
3
<PAGE> 4
for all reasonable expenses incurred by the Employee in accordance with the
policies, practices and procedures of the Company and its affiliated companies
from time to time in effect.
(f) Fringe Benefits. During the Employment Period, the
Employee shall be entitled to fringe benefits in accordance with the plans,
practices, programs and policies of the Company and its affiliated companies
from time to time in effect, commensurate with his position and on a basis at
least comparable to those received by other employees of comparable rank with
the Company and its affiliated companies.
(g) Office and Support Staff. During the Employment
Period, the Employee shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal secretarial
and other assistance, commensurate with his position and on a basis at least
comparable to those received by other employees of comparable rank with the
Company and its affiliated companies.
(h) Vacation and Other Absences. During the Employment
Period, the Employee shall be entitled to paid vacation and such other paid
absences whether for holidays, illness, personal time or any similar purposes,
in accordance with the plans, policies, programs and practices of the Company
and its affiliated companies in effect from time to time, commensurate with his
position and on a basis at least comparable to those received by other
employees of comparable rank with the Company and its affiliated companies.
(i) During the Change of Control Period, the Employee's
benefits listed under Sections 3(c), 3(d), 3(e), 3(f), 3(g) and 3(h) above
shall be at least commensurate in all material respects with the most valuable
and favorable of those received by the Employee at any time during the 90-day
period immediately preceding the Change of Control Date.
4. Termination of Employment. (a) Death or Disability.
The Employment Period shall terminate automatically upon the Employee's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Employee has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Employee
written notice in accordance with Section 17(b) of its intention to terminate
the Employment Period. In such event, the Employment Period shall terminate
effective on the 30th day after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
inability of the Employee to perform the Employee's duties with the Company on
a full-time basis as a result of incapacity due to mental or physical illness
which continues for more than one year after the commencement of such
incapacity, such incapacity to be determined by a physician selected by the
Company or its insurers and acceptable to the Employee or the Employee's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Employment
Period for Cause. For purposes of this Agreement, "Cause" shall mean (i) a
material breach by the Employee of
4
<PAGE> 5
Section 9 which is willful on the Employee's part or which is committed in bad
faith or without reasonable belief that such breach is in the best interests of
the Company and its affiliated companies, or (ii) a material breach by the
Employee of the Employee's obligations under Section 2 (other than a breach of
the Employee's obligations under Section 2 arising from the failure of the
Employee to work as a result of incapacity due to physical or mental illness)
or any material breach by the Employee of Section 10, 11 or 12 of this
Agreement which in either case is willful on the Employee's part, which is
committed in bad faith or without reasonable belief that such breach is in the
best interests of the Company and its affiliated companies and which is not
remedied in a reasonable period of time after receipt of written notice from
the Company specifying such breach, or (iii) the conviction of the Employee of
a felony involving malice which conviction has been affirmed on appeal or as to
which the period in which an appeal can be taken has lapsed.
(c) Good Reason; Window Period. The Employee's
employment may be terminated (i) by the Employee for Good Reason (as defined
below) or (ii) during the Window Period (as defined below) by the Employee
without any reason. For purposes of this Agreement, the "Window Period" shall
mean the 30-day period immediately following the first anniversary of the
Change of Control Date. For purposes of this Agreement, "Good Reason" shall
mean
(i) the assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities prior to the date of such assignment or any other
action by the Company or the Parent which results in a diminution in
such position, authority, duties or responsibilities, excluding for
this purpose an isolated and insubstantial action not taken in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 3, other than an isolated and insubstantial
failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the
Employee;
(iii) the Company's requiring the Employee to be based at
any office or location other than that described in Section 2(a);
(iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company or the Parent to comply
with and satisfy Section 15(c), provided that the successor referred
to in Section 15(c) has received at least ten days prior written
notice from the Company or the Employee of the requirements of Section
15(c).
For purposes of this Section 4(c), during the Change of Control Period, any
good faith determination of "Good Reason" made by the Employee shall be
conclusive.
5
<PAGE> 6
(d) Notice of Termination. Any termination by the
Company for Cause or by the Employee without any reason during the Window
Period or for Good Reason shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 17(b). For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employment Period under the
provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination
date (which date shall be not more than 15 days after the giving of such
notice). The failure by the Employee or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Employee or the Company
hereunder or preclude the Employee or the Company from asserting such fact or
circumstance in enforcing the Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Employee's employment is terminated by the Company for Cause, or by
the Employee during the Window Period or for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein, as the case
may be, (ii) if the Employee's employment is terminated by the Company other
than for Cause or Disability, or by the Employee other than for Good Reason or
during the Window Period, the Date of Termination shall be the date on which
the Company or the Employee, as the case may be, notifies the other of such
termination and (iii) if the Employee's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Employee or the Disability Effective Date, as the case may be.
5. Obligations of the Company Upon Termination. (a)
Certain Terminations Prior to Change of Control Date. If, during the Employment
Period prior to any Change of Control Date, the employment of the Employee with
the Company shall be terminated (i) by the Company other than for Cause, death
or Disability or (ii) by the Employee for Good Reason, then, in lieu of the
obligations of the Company under Section 3, (i) the Company shall pay to the
Employee in a lump sum in cash within 30 days after the Date of Termination all
Unpaid Agreement Amounts (as defined in Section 5(b)(i)(A) below) and (ii)
notwithstanding any other provision hereunder, for the longer of (A) the
remainder of the Employment Period or (B) to the extent compensation and/or
benefits are provided under any plan, program, practice or policy, such longer
period, if any, as such plan, program, practice or policy may provide, the
Company shall continue to provide to the Employee the compensation and benefits
provided in Sections 3(a), 3(c) and 3(d).
(b) Certain Terminations After Change of Control Date.
If, during the Change of Control Period, the employment of the Employee with
the Company shall be terminated (i) by the Company other than for Cause, death
or Disability or (ii) by the Employee either for Good Reason or without any
reason during the Window Period, then, in lieu of the obligations of the
Company under Section 3 and notwithstanding any other provision hereunder:
6
<PAGE> 7
(i) the Company shall pay to the Employee in a lump sum
in cash within 30 days after the Date of Termination the aggregate of the
following amounts:
(A) the sum of (1) all unpaid amounts due to the
Employee under Section 3 through the Date of
Termination, including without limitation, the
Employee's Annual Base Salary and any accrued
vacation pay, (2) the product of (x) the Highest
Recent Bonus and (y) a fraction, the numerator of
which is the number of days in the current fiscal
year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation
previously deferred by the Employee (together with
any accrued interest or earnings thereon) to the
extent not theretofore paid (the sum of the amounts
described in clauses (1), (2) and (3) shall be
hereinafter referred to as the "Accrued Obligations"
and the sum of the amounts described in clauses (1)
and (3) shall be hereinafter referred to as the
"Unpaid Agreement Amounts"); and
(B) the amount (such amount shall be hereinafter
referred to as the "Severance Amount") equal to
the sum of
(1) Three (3) multiplied by the
Employee's Annual Base Salary, plus
(2) Three (3) multiplied by the
Employee's Highest Recent Bonus;
(ii) for the longer of (A) the remainder of the Employment
Period or (B) to the extent benefits are provided under any plan,
program, practice or policy, such longer period as such plan, program,
practice or policy may provide, the Company shall continue benefits to
the Employee and/or the Employee's family at least equal to those
which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 3(d) if the
Employee's employment had not been terminated, in accordance with the
most favorable plans, practices, programs or policies of the Company
and its affiliated companies as in effect and applicable generally to
other employees of comparable rank and their families during the
90-day period immediately preceding the Change of Control Date or, if
more favorable to the Employee, as in effect generally at any time
thereafter with respect to other employees of comparable rank with the
Company and its affiliated companies and their families; provided,
however, that if the Employee becomes reemployed with another employer
and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits
described herein shall be required only to the extent not provided
under such other plan during such applicable period of eligibility.
For purposes of determining eligibility of the Employee for retiree
benefits pursuant to such plans, practices, programs and policies, the
Employee shall be considered to have remained employed until the end
of the Employment Period and to have retired on the last day of such
period; and
7
<PAGE> 8
(iii) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Employee and/or the
Employee's family for the remainder of the Employment Period any other
amounts or benefits required to be paid or provided or which the
Employee and/or the Employee's family is eligible to receive pursuant
to this Agreement and under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies as
in effect and applicable generally to other employees of comparable
rank with the Company and its affiliated companies and their families
during the 90- day period immediately preceding the Change of Control
Date or, if more favorable to the Employee, as in effect generally
thereafter with respect to other employees of comparable rank with the
Company and its affiliated companies and their families.
Such amounts received under this Section 5(b) shall be in lieu of any other
amount of severance relating to salary or bonus continuation to be received by
the Employee upon termination of employment of the Employee under any severance
plan, policy or arrangement of the Company.
(c) Termination as a Result of Death. If the Employee's
employment is terminated by reason of the Employee's death during the
Employment Period, in lieu of the obligations of the Company under Section 3,
the Company shall pay or provide to the Employee's estate (i) all Accrued
Obligations (which shall be paid in a lump sum in cash within 30 days after the
Date of Termination) and the timely payment or provision of the Welfare Benefit
Continuation (as defined below) and the Other Benefits (as defined below) and
(ii) any cash amount to be received by the Employee or the Employee's family as
a death benefit pursuant to the terms of any plan, policy or arrangement of the
Company and its affiliated companies. "Welfare Benefit Continuation" shall
mean the continuation of benefits to the Employee and/or the Employee's family
for the longer of (i) three (3) years from the Date of Termination or (ii) the
period provided by the plans, programs, policies or practices described in
Section 3(d) in which the Employee participates as of the Date of Termination,
such benefits to be at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described
in Section 3(d) if the Employee's employment had not been terminated, in
accordance with the most favorable plans, practices, programs or policies of
the Company and its affiliated companies as in effect and applicable generally
to other employees of comparable rank and their families on the Date of
Termination or, if the Date of Termination occurs after the Change of Control
Date, during the 90-day period immediately preceding the Change of Control Date
or, if more favorable to the Employee, as in effect generally at any time
thereafter with respect to other employees of comparable rank with the Company
and its affiliated companies and their families. "Other Benefits" shall mean
the timely payment or provision to the Employee and/or the Employee's family of
any other amounts or benefits required to be paid or provided or which the
Employee and/or the Employee's family is eligible to receive pursuant to this
Agreement and under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies as in effect and
applicable generally to other employees of comparable rank and their families
on the Date of Termination or, if the Date of Termination occurs after the
Change of Control Date, during the 90-day period immediately preceding the
Change of Control Date or,
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if more favorable to the Employee, as in effect generally thereafter with
respect to other employees of comparable rank with the Company and its
affiliated companies and their families.
(d) Termination as a Result of Disability. If the
Employee's employment is terminated by reason of the Employee's Disability
during the Employment Period, in lieu of the obligations of the Company under
Section 3, the Company shall pay or provide to the Employee (i) all Accrued
Obligations which shall be paid in a lump sum in cash within 30 days after the
Date of Termination and the timely payment or provision of the Welfare Benefit
Continuation and the Other Benefits, provided, however, that if the Employee
becomes reemployed with another employer and is eligible to receive medical or
other welfare benefits under another employer provided plan, the Welfare
Benefit Continuation shall be required only to the extent not provided under
such other plan during such applicable period of eligibility, and (ii) any cash
amount to be received by the Employee as a disability benefit pursuant to the
terms of any plan, policy or arrangement of the Company and its affiliated
companies.
(e) Cause; Other than for Good Reason. If the Employee's
employment shall be terminated during the Employment Period by the Company for
Cause or by the Employee other than during the Window Period and other than for
Good Reason, in lieu of the obligations of the Company under Section 3, the
Company shall pay to the Employee in a lump sum in cash within 30 days after
the Date of Termination all Unpaid Agreement Amounts.
6. Non-exclusivity of Rights. Except as provided in
Sections 5(a), 5(b)(i)(B), 5(b)(ii), 5(c) and 5(d), nothing in this Agreement
shall prevent or limit the Employee's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Employee may qualify, nor shall anything
herein limit or otherwise affect such rights as the Employee may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Employee is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
7. Full Settlement; Resolution of Disputes. (a) The
Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Employee or others. In no event shall
the Employee be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Employee under any of the
provisions of this Agreement and, except as provided in Sections 5(b)(ii) and
5(d), such amounts shall not be reduced whether or not the Employee obtains
other employment. The Company agrees to pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company, the Employee or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result
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<PAGE> 10
of any contest by the Employee about the amount of any payment pursuant to this
Agreement), plus in each case interest on any payment required to be made under
this Agreement but not timely paid at the rate provided for in Section
280G(d)(4) of the Internal Revenue Code of 1986, as amended (the "Code").
(b) If there shall be any dispute between the Company and
the Employee (i) in the event of any termination of the Employee's employment
by the Company, whether such termination was for Cause, or (ii) in the event of
any termination of employment by the Employee, whether Good Reason existed,
then, unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that
the determination by the Employee of the existence of Good Reason was not made
in good faith, the Company shall pay all amounts, and provide all benefits, to
the Employee and/or the Employee's family or other beneficiaries, as the case
may be, that the Company would be required to pay or provide pursuant to
Section 5(a) or 5(b) as though such termination were by the Company without
Cause or by the Employee with Good Reason. The Employee hereby undertakes to
repay to the Company all such amounts to which the Employee is ultimately
adjudged by such court not to be entitled.
8. Certain Additional Payments by the Company. (a)
Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 8) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Employee with
respect to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Employee shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Employee of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by the Company's outside independent auditor (the "Accounting Firm"), which
shall provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving (or has served within
the three years preceding the Change of Control Date) as accountant or auditor
for the individual, entity or group effecting the Change of Control, or is
unwilling or unable to perform its obligations pursuant to this Section 8, the
Employee shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm
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hereunder). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8,
shall be paid by the Company to the Employee within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Employee, it shall furnish the Employee with a
written opinion that failure to report the Excise Tax on the Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall
be binding upon the Company and the Employee. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 8(c) and the Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee.
(c) The Employee shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Employee is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Employee shall not pay such claim prior to the expiration of the
30-day period following the date on which the Employee gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Employee in
writing prior to the expiration of such period that it desires to contest such
claim, the Company, subject to the provisions of this Section 8(c), shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Employee to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner. In this
connection, the Employee agrees, subject to the provisions of this Section
8(c), to (i) prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine, (ii) give the Company any
information reasonably requested by the Company relating to such claim, (iii)
take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company, (iv) cooperate with the Company in good
faith in order effectively to contest such claim and (v) permit the Company to
participate in any proceedings relating to such claim. The foregoing is
subject, however, to the following: (A) the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties) incurred
in connection with such contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed in connection therewith
and the payment of costs and expenses in such connection, (B) if the Company
directs the Employee to pay such claim and sue for a refund, the Company shall
advance the amount of such payment
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to the Employee, on an interest-free basis, and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance, (C) any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Employee with respect to which such contested
amount is claimed to be due shall be limited solely to such contested amount
and (D) the Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Employee
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 8(c), the Employee becomes entitled
to receive any refund with respect to such claim, the Employee shall (subject
to the Company's complying with the requirements of Section 8(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Employee shall not be entitled to any refund
with respect to such claim and the Company does not notify the Employee in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Employee shall hold in
a fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Employee during the Employee's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Employee or representatives of the Employee in violation of
this Agreement). After termination of the Employee's employment with the
Company or any of its affiliated companies, the Employee shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis
for deferring or withholding any amounts otherwise payable to the Employee
under this Agreement. Subject to the previous sentence, nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from the Employee.
10. Employee's Obligation to Avoid Conflicts of Interest.
(a) In keeping with Employee's fiduciary duties to the Company, Employee agrees
that he shall not knowingly become involved in circumstances constituting a
conflict of interest with such duties, or upon discovery thereof, allow such a
conflict to continue. Moreover, Employee agrees that he shall disclose to the
Secretary of the Company any facts which might involve a conflict of interest
that has not been approved by the Company. The Board hereby acknowledges and
agrees that the
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activities of Employee listed on Schedule A hereto do not, and the continuation
of such activities will not, constitute a conflict of interest for purposes of
this Section 10.
(b) In this connection, it is agreed that any direct
interest in, connection with, or benefit from any outside activities,
particularly commercial activities, which might in any way adversely affect the
Company or any of its affiliated companies, involves a possible conflict of
interest. Circumstances in which a conflict of interest on the part of Employee
would or might arise, and which should be reported immediately to the Company,
include, but are not limited to, the following:
(i) Ownership of a material interest in any lender,
supplier, contractor, customer or other entity with
which the Company or any of its affiliated companies
does business;
(ii) Acting in any capacity, including director, officer,
partner, consultant, employee, distributor, agent or
the like, for lenders, suppliers, contractors,
subcontractors, customers or other entities with
which the Company or any of its affiliated companies
does business;
(iii) Acceptance, directly or indirectly, of payments,
services or loans from a lender, supplier,
contractor, subcontractor, customer or other entity
with which the Company or any of its affiliated
companies does business, including but not limited
to, gifts, trips, entertainment, or other favors of
more than a nominal value, but excluding loans from
publicly held insurance companies and commercial or
savings banks at normal rates of interest;
(iv) Misuse of information or facilities to which Employee
has access in a manner which will be detrimental to
the Company's or any of its affiliated companies'
interest, such as utilization for Employee's own
benefit of know-how or information developed through
the Company's or any of its affiliated companies'
business activities;
(v) Disclosure or other misuse of information of any kind
obtained through Employee's connection with the
Company or any of its affiliated companies; or
(vi) Acquiring or trading in, directly or indirectly,
other properties or interests connected with the
design or marketing of products or services designed
or marketed by the Company or any of its affiliated
companies.
(c) In the event that the Company determines, in the
exercise of its reasonable judgment, that a conflict of interest exists between
the Employee and the Company or any of its affiliated companies, the Company
shall notify the Employee in writing in accordance with Section 17(b) hereof,
providing reasonably detailed information identifying the source of the
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conflict of interest. Within the 60-day period following receipt of such
notice, the Employee shall take action satisfactory to the Company to eliminate
the conflict of interest. Failure of the Employee to take such action within
such 60-day period shall constitute "Cause" under Section 4(b) hereof.
11. Disclosure of Information, Ideas, Concepts,
Improvements, Discoveries and Inventions. As part of Employee's fiduciary
duties to the Company, Employee agrees that during the Employment Period, and
for a period of six (6) months after the Date of Termination, Employee shall
promptly disclose in writing to the Company all information, ideas, concepts,
improvements, discoveries and inventions, whether patentable or not, and
whether or not reduced to practice, which are conceived, developed, made or
acquired by Employee, either individually or jointly with others, and which
relate to the business, products or services of the Company or any of its
affiliated companies, irrespective of whether Employee utilized the Company's
or any of its affiliated companies' time or facilities and irrespective of
whether such information, idea, concept, improvement, discovery or invention
was conceived, developed, discovered or acquired by Employee on the job, at
home, or elsewhere. This obligation extends to all types of information, ideas
and concepts, including information, ideas and concepts relating to new types
of services, corporate opportunities, acquisition prospects, the identity of
key representatives within acquisition prospect organizations, prospective
names or service marks for the Company's or any of its affiliated companies'
business activities, and the like.
12. Ownership of Information, Ideas, Concepts,
Improvements, Discoveries and Inventions and all Original Works of Authorship.
(a) All information, ideas, concepts, improvements, discoveries and inventions,
whether patentable or not, which are conceived, made, developed or acquired by
Employee or which are disclosed or made known to Employee, individually or in
conjunction with others, during Employee's employment by the Company or any of
its affiliated companies and which relate to the Company's or any of its
affiliated companies' business, products or services (including all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evaluations, opinions, interpretations,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customer's organizations or within the
organization of acquisition prospects, or marketing and merchandising
techniques, prospective names and marks) are and shall be the sole and
exclusive property of the Company. Moreover, all drawings, memoranda, notes,
records, files, correspondence, manuals, models, specifications, computer
programs, maps and all other writings or materials of any type embodying any of
such information, ideas, concepts, improvements, discoveries and inventions are
and shall be the sole and exclusive property of the Company.
(b) In particular, Employee hereby specifically sells,
assigns and transfers to the Company all of his worldwide right, title and
interest in and to all such information, ideas, concepts, improvements,
discoveries or inventions, and any United States or foreign applications for
patents, inventor's certificates or other industrial rights that may be filed
thereon, including divisions, continuations, continuations-in-part, reissues
and/or extensions thereof, and applications for registration of such names and
marks. Both during the period of Employee's employment by the Company or any of
its affiliated companies and thereafter, Employee shall
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assist the Company and its nominee at all times in the protection of such
information, ideas, concepts, improvements, discoveries or inventions, both in
the United States and all foreign countries, including but not limited to, the
execution of all lawful oaths and all assignment documents requested by the
Company or its nominee in connection with the preparation, prosecution,
issuance or enforcement of any applications for United States or foreign
letters patent, including divisions, continuations, continuations-in-part,
reissues, and/or extensions thereof, and any application for the registration
of such names and marks.
(c) Moreover, if during Employee's employment by the
Company or any of its affiliated companies, Employee creates any original work
of authorship fixed in any tangible medium of expression which is the subject
matter of copyright (such as videotapes, written presentations on acquisitions,
computer programs, drawings, maps, architectural renditions, models, manuals,
brochures or the like) relating to the Company's or any of its affiliated
companies' business, products, or services, whether such work is created solely
by Employee or jointly with others, the Company shall be deemed the author of
such work if the work is prepared by Employee in the scope of his or her
employment; or, if the work is not prepared by Employee within the scope of his
or her employment but is specially ordered by the Company as a contribution to
a collective work, as a part of a motion picture or other audiovisual work, as
a translation, as a supplementary work, as a compilation or as an instrumental
text, then the work shall be considered to be work made for hire and the
Company shall be the author of the work. In the event such work is neither
prepared by the Employee within the scope of his or her employment or is not a
work specially ordered and deemed to be a work made for hire, then Employee
hereby agrees to assign, and by these presents does assign, to the Company all
of Employee's worldwide right, title and interest in and to such work and all
rights of copyright therein. Both during the period of Employee's employment by
the Company or any of its affiliated companies and thereafter, Employee agrees
to assist the Company and its nominee, at any time, in the protection of the
Company's worldwide right, title and interest in and to the work and all rights
of copyright therein, including but not limited to, the execution of all formal
assignment documents requested by the Company or its nominee and the execution
of all lawful oaths and applications for registration of copyright in the
United States and foreign countries.
13. Employee's Post-Employment Non-Competition
Obligations: In Certain Situations such Obligations Apply only if the Company
Opts to Continue Employee's Salary Payment. (a) During the Employment Period
and, subject to the conditions of Sections 13(b) and 13(c), for a period of
three (3) years thereafter (the "Non-Competition Period") provided, however,
that the Non-Competition Period shall not exceed three (3) years from the Date
of Termination, Employee shall not, acting alone or in conjunction with others,
directly or indirectly, in any of the business territories in which the Company
or any of its affiliated companies is presently or at the time of termination
of employment conducting business, engage in any business in competition with
the business conducted by the Company or any of its affiliated companies at the
time of the termination of the employment relationship, whether for his own
account or by soliciting, canvassing or accepting any business or transaction
for or from any other company or business in competition with such business of
the Company or any of its affiliated companies.
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(b) If Employee has been terminated for Cause (Section
4(b)) or if Employee terminates his employment for any reason other than for
Good Reason or other than during the Window Period (Section 4(c)), Employee
shall be bound by the obligations of Section 13(a) and the Company shall have
no obligation to make the Non-Competition Payments (as defined in Section 13(c)
below). However, if the employment relationship is terminated by any other
circumstance or for any other reason, Employee's post-employment
non-competition obligations required by Section 13(a) shall be subject to the
Company's obligation to make the Non-Competition Payments specified in Section
13(c).
(c) Notwithstanding the provisions of Section 4 of this
Agreement, whenever the employment relationship is terminated due to the
expiration of its term because the Company or Employee timely gave written
notice of termination (Section 1), or due to Employee's Disability (Section
4(a)), or by the Company without Cause (Section 4(b)), unless the Company
exercises its option as hereinafter provided, Employee shall be entitled to
continue to receive payments (the "Non-Competition Payments") equal to his then
current Annual Base Salary (as of the Date of Termination) during the
Non-Competition Period. During the Non-Competition Period, the Employee shall
not, however, be deemed to be an employee of the Company or be entitled to
continue to receive any other employee benefits other than as set forth in
Section 5 or Section 8. Moreover, the Non-Competition Payments shall be reduced
to the extent Employee has already received lump-sum payments in lieu of salary
and bonus pursuant to Section 5. The Company shall have the option, exercisable
at any time within one (1) month after Employee's Date of Termination, to
cancel Employee's post-employment non-competition obligations under Section
13(a) and the Company's corresponding obligation to make the Non-Competition
Payments. Such option shall be exercised by the Company mailing a written
notice thereof to Employee in accordance with Section 17(b); if the Company
does not send such notice within the prescribed one-month time, the Company
shall remain obligated to make the Non-Competition Payments and Employee shall
remain obligated to comply with the provisions of Section 13(a). The purpose of
this paragraph is to make the non-competition obligations of Employee more
reasonable from the Employee's point of view. The amounts to be paid by the
Company are not intended to be liquidated damages or an estimate of the actual
damages that would be sustained by the Company if Employee breaches his
post-employment non-competition obligations. If Employee breaches his
post-employment non-competition obligations, the Company shall be entitled to
cease making the Non-Competition Payments and shall be entitled to all of its
remedies at law or in equity for damages and injunctive relief.
14. Obligations to Refrain From Competing Unfairly. In
addition to the other obligations agreed to by Employee in this Agreement,
Employee agrees that during the Employment Period and for three (3) years
following the Date of Termination, he shall not at any time, directly or
indirectly for the benefit of any other party than the Company or any of its
affiliated companies, (a) induce, entice, or solicit any employee of the
Company or any of its affiliated companies to leave his employment, or (b)
contact, communicate or solicit any customer of the Company or any of its
affiliated companies derived from any customer list, customer lead, mail,
printed matter or other information secured from the Company or any of its
affiliated companies or their present or past employees, or (c) in any other
manner use any
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customer lists or customer leads, mail, telephone numbers, printed material or
material of the Company or any of its affiliated companies relating thereto.
15. Successors. (a) This Agreement is personal to the
Employee and without the prior written consent of the Company shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or the Company
to assume expressly and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. The Parent will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Parent or the Parent to
assume expressly and agree to perform the Parent's obligations hereunder in the
same manner and to the same extent that the Parent would be required to perform
them if no such succession had taken place. As used in this Agreement,
"Parent" shall mean the Parent as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform the
Parent's obligations hereunder by operation of law, or otherwise.
16. Certain Definitions. The following defined terms used
in this Agreement shall have the meanings indicated:
(a) The "Change of Control Date" shall mean the first
date on which a Change of Control occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Employee's
employment with the Company is terminated or the Employee ceases to have the
position with the Company or the Parent which the Employee had prior to the
date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Employee that such termination or cessation (i) was at the
request of a third party who has taken steps reasonably calculated to effect
the Change of Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then, for all purposes of this
Agreement, the "Change of Control Date" shall mean the date immediately prior
to the date of such termination or cessation.
(b) The "Change of Control Period" shall mean the period
commencing on the Change of Control Date and ending on the last day of the
Employment Period.
(c) "Change of Control" shall mean:
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(i) 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) of 20% or more of either (A) the then
outstanding shares of Common Stock of the Parent (the "Outstanding
Parent Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Parent entitled to vote generally
in the election of directors (the "Outstanding Parent Voting
Securities"); provided, however, that the following acquisitions shall
not constitute a Change of Control: (A) any acquisition directly from
the Parent (excluding an acquisition by virtue of the exercise of a
conversion privilege), (B) any acquisition by the Parent, (C) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Parent or any corporation controlled by the
Parent or (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 (A), (B) and (C) of subsection (iii) of this definition of
"Change of Control" are satisfied; or
(ii) Individuals who, as of the effective date hereof,
constitute the Board of Directors of the Parent (the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board of Directors of the Parent; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Parent's shareholders, was
approved by (A) a vote of at least a majority of the directors then
comprising the Incumbent Board of the Parent, or (B) a vote of at
least a majority of the directors then comprising the Executive
Committee of the Board of Directors of the Parent at a time when such
committee was comprised of at least five members and all members of
such committee were either members of the Incumbent Board or
considered as being members of the Incumbent Board pursuant to clause
(A) of this subsection (ii), 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
of Directors of the Parent; or
(iii) Approval by the shareholders of the Parent of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (A) more than
60% 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 Parent Common Stock and Outstanding Parent Voting
Securities immediately prior to such organization, merger or
consolidation in substantially the same proportions as their
ownership, immediately prior
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<PAGE> 19
to such reorganization, merger or consolidation, of the Outstanding
Parent Common Stock and Outstanding Parent Voting Securities, as the
case may be, (B) no Person (excluding the Parent, any employee benefit
plan or related trust of the Parent 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, 20% or more of the
Outstanding Parent Common Stock or Outstanding Parent Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% 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 (C) 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
(iv) Approval by the shareholders of the Parent of (A) a
complete liquidation or dissolution of the Parent or (B) the sale or
other disposition of all or substantially all of the assets of the
Parent, other than to a corporation, with respect to which following
such sale or other disposition, (A) more than 60% 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 Parent Common
Stock and Outstanding Parent 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 Parent Common Stock and Outstanding Parent Voting
Securities, as the case may be, (B) no Person (excluding the Parent
and any employee benefit plan or related trust of the Parent or such
corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 20% or more of
the Outstanding Parent Common Stock or Outstanding Parent Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% 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 of Directors of the
Parent providing for such sale or other disposition of assets of the
Parent.
(d) The term "affiliated company" shall mean any company
controlled by, controlling or under common control with the Company.
(e) The term "Highest Recent Bonus" shall mean the
highest Annual Bonus (annualized for any fiscal year consisting of less than
twelve full months) paid or payable,
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<PAGE> 20
including by reason of any deferral, to the Employee by the Company and its
affiliated companies in respect of the three most recent full fiscal years
ending on or prior to, (i) if prior to a Change of Control, the Date of
Termination, or (ii) if after a Change of Control, the Change of Control Date.
17. Miscellaneous. (a) This Agreement replaces and merges
all previous agreements and discussions relating to the same or similar subject
matters between Employee and the Company and shall be governed by and construed
in accordance with the laws of the State of Texas, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a duly authorized
committee thereof, shall have authority on behalf of the Company to agree to
amend, modify, repeal, waive, extend or discharge any provision of this
Agreement or anything in reference thereto.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
Jerald L. Pullins
99 Brookwood Lane
New Canaan, CT 06840
If to the Company:
SCI Executive Services, Inc.
1929 Allen Parkway
Houston, Texas 77019
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
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<PAGE> 21
(e) The Employee's or the Company's failure to insist
upon strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Employee or the Company may
have hereunder, including, without limitation, the right of the Employee to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) No breach, whether actual or alleged, of this
Agreement by the Employee shall constitute grounds for the Company to withhold
or offset any payment or benefit due to the Employee under any other agreement,
contract, plan, program, policy or practice of the Company.
IN WITNESS WHEREOF, the Employee and, pursuant to due
authorization from the Board of Directors of the Company, the Company have
caused this Agreement to be executed this 1st day of January, 1997, effective
as of the day and year first above written.
JERALD L. PULLINS
/s/ JERALD L. PULLINS
-----------------------------
"EMPLOYEE"
SCI EXECUTIVE SERVICES, INC.
By: /s/ CURTIS G. BRIGGS
-------------------------
Curtis G. Briggs
Vice President
"COMPANY"
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<PAGE> 22
Pursuant to due authorization from its Board of Directors, the Parent,
by its execution hereof, absolutely and unconditionally guarantees to Employee
the full and timely payment and performance of each obligation of the Company
to Employee under this Agreement, WAIVES any and all rights that it may
otherwise have to require Employee to proceed against the Company for
nonpayment or nonperformance, WAIVES any and all defenses that would otherwise
be a defense to this guarantee, and agrees to remain liable to Employee for all
payment and performance obligations of the Company under this Agreement,
whether arising before, on or after the date of this Agreement, until this
Agreement shall terminate pursuant to its terms.
SERVICE CORPORATION INTERNATIONAL
By: /s/ JAMES M. SHELGER
------------------------------
James M. Shelger
Senior Vice President
General Counsel & Secretary
"PARENT"
22
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into
as of this 11th day of November, 1991, amended and restated as of August 12,
1992, and further amended and restated as of January 1, 1997 by and between SCI
EXECUTIVE SERVICES, INC., a Delaware corporation (the "Company") wholly owned
by and successor by assignment to all of the rights, duties and obligations
under this Agreement of SERVICE CORPORATION INTERNATIONAL, a Texas corporation
(the "Parent"), and _____________________________ (the"Employee");
WHEREAS, in order to achieve certain administrative
efficiencies in providing professional management services to its affiliated
companies, the Parent has transferred the Employee to the employ of the Company
effective January 1, 1997;
WHEREAS, the Company, the Parent and the Employee desire to
join in the execution of this amended and restated Agreement to (i) provide for
the transfer of the employment of the Employee and (ii) set out more fully the
rights, duties and obligations of the parties hereto;
WHEREAS, Employee is employed by the Company in a management
capacity, has extraordinary access to the Company's confidential business
information, and has significant duties and responsibilities in connection with
the conduct of the Company's business which places Employee in a special and
uncommon classification of employees;
WHEREAS, attendant to Employee's employment by the Company,
the Company and Employee wish for there to be a complete understanding and
agreement between the Company and Employee with respect to the fiduciary duties
owed by Employee to the Company; Employee's obligation to avoid conflicts of
interest, disclose pertinent information to the Company, and refrain from using
or disclosing the Company's information; the term of employment and conditions
for or upon termination thereof; the compensation and benefits owed to
Employee; and the post-employment obligations Employee owes to the Company; and
WHEREAS, but for Employee's agreement to the covenants and
conditions of this Agreement, particularly the conflict of interest provisions,
the provisions with respect to confidentiality of information and the ownership
of intellectual property, and the post-employment obligations of Employee, the
Company would not have entered into this Agreement;
NOW, THEREFORE, in consideration of Employee's employment by
the Company and the mutual promises and covenants contained herein, the receipt
and sufficiency of such consideration being hereby acknowledged, the Company
and Employee agree as follows:
<PAGE> 2
1. Employment and Term. The Company agrees to employ
the Employee and the Employee agrees to remain in the employ of the Company, in
accordance with the terms and provisions of this Agreement, for the period
beginning on the date of this Agreement (i.e. November 11, 1991) and ending as
of the close of business on the __________ (___) anniversary of the date hereof
(such period together with all extensions thereof, including any Change of
Control Period (as defined in Section 16(b) below), are referred to hereinafter
as the "Employment Period"); provided, however, that commencing on the date one
year after the date hereof, and on each annual anniversary of such date (such
date and each annual anniversary thereof shall be hereinafter referred to as a
"Renewal Date") the Employment Period shall be automatically extended so as to
terminate ________ (___) years from such Renewal Date, unless at least 60 days
prior to the Renewal Date either the Company or the Employee gives the other
written notice that the Employment Period shall not be so extended.
2. Duties and Powers of Employee. (a) Position;
Location. During the Employment Period, the Employee shall perform such duties
and have such powers as designated by the Board of Directors of the Company
(the "Board") or any duly authorized committee thereof in connection with the
execution of this Agreement. The Employee's services shall be performed at the
location where the Employee is currently employed or any office which is the
headquarters of the Company and is less than 50 miles from such location.
During the Change of Control Period, the Employee's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material respects with
the most significant of those held, exercised and assigned with or by the
Company or the Parent at any time during the 90-day period immediately
preceding the Change of Control Date (as defined in Section 16(a) below).
(b) Duties. During the Employment Period, and excluding
any periods of vacation and sick leave to which the Employee is entitled, the
Employee agrees to devote his attention and time during normal business hours
to the business and affairs of the Company and to use the Employee's best
efforts to perform faithfully and efficiently such responsibilities. During the
Employment Period it shall not be a violation of this Agreement for the
Employee to (i) serve on corporate, civic or charitable boards or committees,
(ii) deliver lectures, fulfill speaking engagements or teach at educational
institutions and (iii) manage personal investments, so long as such activities
do not significantly interfere with the performance of the Employee's
responsibilities as an employee of the Company in accordance with this
Agreement. It is expressly understood and agreed that to the extent that any
such activities have been conducted by the Employee prior to the date of this
Agreement or subsequent thereto consistent with this Section 2(b), the
continued conduct of such activities (or the conduct of activities similar in
nature and scope thereto) shall not thereafter be deemed to interfere with the
performance of the Employee's responsibilities to the Company.
(c) Employee agrees and acknowledges that he owes, and
will comply with, a fiduciary duty of loyalty, fidelity or allegiance to act at
all times in the best interests of the Company and to take no action or fail to
take action if such action or failure to act would injure the Company's
business, its interests or its reputation.
2
<PAGE> 3
3. Compensation. The Employee shall receive the
following compensation for his services:
(a) Salary. During the Employment Period, he shall be
paid an annual base salary ("Annual Base Salary") at the rate of not less than
$ _________________ per year, in substantially equal bi-weekly installments,
and subject to any and all required withholdings and deductions for Social
Security, income taxes and the like. The Board may from time to time direct
such upward adjustments to Annual Base Salary as the Board deems to be
appropriate or desirable; provided, however, that during the Change of Control
Period, the Annual Base Salary shall be reviewed at least annually and shall be
increased at any time and from time to time as shall be substantially
consistent with increases in base salary generally awarded in the ordinary
course of business to other employees of comparable rank with the Company and
its affiliated companies (as defined in Section 16(d) below). Annual Base
Salary shall not be reduced after any increase thereof pursuant to this Section
3(a). Any increase in Annual Base Salary shall not serve to limit or reduce any
other obligation of the Company under this Agreement.
(b) Incentive Cash Compensation. During the Employment
Period, he shall be eligible annually for a cash bonus at the discretion of the
Board (such aggregate awards for each year are hereinafter referred to as the
"Annual Bonus") and at the discretion of the Board to receive awards from any
plan of the Company or any of its affiliated companies providing for the
payment of bonuses in cash to employees of the Company or its affiliated
companies having rank comparable to that of the Employee (such plans being
referred to herein collectively as the "Cash Bonus Plans") in accordance with
the terms thereof; provided, however, that, during the Change of Control
Period, the Employee shall be awarded, for each fiscal year ending during the
Change of Control Period, an Annual Bonus at least equal to the Highest Recent
Bonus (as defined in Section 16(e) below). Each Annual Bonus shall be paid no
later than the end of the third month of the fiscal year next following the
fiscal year for which the Annual Bonus is awarded, unless the Employee shall
elect to defer the receipt of such Annual Bonus.
(c) Incentive and Savings and Retirement Plans. During
the Employment Period, the Employee shall be entitled to participate in all
incentive and savings (in addition to the Cash Bonus Plans) and retirement
plans, practices, policies and programs applicable generally to other employees
of comparable rank with the Company and its affiliated companies.
(d) Welfare Benefit Plans. During the Employment
Period, the Employee and/or the Employee's family, as the case may be, shall be
eligible for participation in all welfare benefit plans, practices, policies
and programs provided by the Company and its affiliated companies (including,
without limitation, medical, prescription, dental, disability, salary
continuance, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other
employees of comparable rank with the Company and its affiliated companies.
(e) Expenses. During the Employment Period and for so
long as the Employee is employed by the Company, he shall be entitled to
receive prompt reimbursement
3
<PAGE> 4
for all reasonable expenses incurred by the Employee in accordance with the
policies, practices and procedures of the Company and its affiliated companies
from time to time in effect.
(f) Fringe Benefits. During the Employment Period, the
Employee shall be entitled to fringe benefits in accordance with the plans,
practices, programs and policies of the Company and its affiliated companies
from time to time in effect, commensurate with his position and on a basis at
least comparable to those received by other employees of comparable rank with
the Company and its affiliated companies.
(g) Office and Support Staff. During the Employment
Period, the Employee shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal secretarial
and other assistance, commensurate with his position and on a basis at least
comparable to those received by other employees of comparable rank with the
Company and its affiliated companies.
(h) Vacation and Other Absences. During the Employment
Period, the Employee shall be entitled to paid vacation and such other paid
absences whether for holidays, illness, personal time or any similar purposes,
in accordance with the plans, policies, programs and practices of the Company
and its affiliated companies in effect from time to time, commensurate with his
position and on a basis at least comparable to those received by other
employees of comparable rank with the Company and its affiliated companies.
(i) During the Change of Control Period, the Employee's
benefits listed under Sections 3(c), 3(d), 3(e), 3(f), 3(g) and 3(h) above
shall be at least commensurate in all material respects with the most valuable
and favorable of those received by the Employee at any time during the 90-day
period immediately preceding the Change of Control Date.
4. Termination of Employment. (a) Death or Disability.
The Employment Period shall terminate automatically upon the Employee's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Employee has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Employee
written notice in accordance with Section 17(b) of its intention to terminate
the Employment Period. In such event, the Employment Period shall terminate
effective on the 30th day after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
inability of the Employee to perform the Employee's duties with the Company on
a full-time basis as a result of incapacity due to mental or physical illness
which continues for more than one year after the commencement of such
incapacity, such incapacity to be determined by a physician selected by the
Company or its insurers and acceptable to the Employee or the Employee's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Employment
Period for Cause. For purposes of this Agreement, "Cause" shall mean (i) a
material breach by the Employee of
4
<PAGE> 5
Section 9 which is willful on the Employee's part or which is committed in bad
faith or without reasonable belief that such breach is in the best interests of
the Company and its affiliated companies, or (ii) a material breach by the
Employee of the Employee's obligations under Section 2 (other than a breach of
the Employee's obligations under Section 2 arising from the failure of the
Employee to work as a result of incapacity due to physical or mental illness)
or any material breach by the Employee of Section 10, 11 or 12 of this
Agreement which in either case is willful on the Employee's part, which is
committed in bad faith or without reasonable belief that such breach is in the
best interests of the Company and its affiliated companies and which is not
remedied in a reasonable period of time after receipt of written notice from
the Company specifying such breach, or (iii) the conviction of the Employee of
a felony involving malice which conviction has been affirmed on appeal or as to
which the period in which an appeal can be taken has lapsed.
(c) Good Reason; Window Period. The Employee's
employment may be terminated (i) by the Employee for Good Reason (as defined
below) or (ii) during the Window Period (as defined below) by the Employee
without any reason. For purposes of this Agreement, the "Window Period" shall
mean the 30-day period immediately following the first anniversary of the
Change of Control Date. For purposes of this Agreement, "Good Reason" shall
mean
(i) the assignment to the Employee of any duties
inconsistent in any respect with the Employee's position (including
status, offices, titles and reporting requirements), authority, duties
or responsibilities prior to the date of such assignment or any other
action by the Company or the Parent which results in a diminution in
such position, authority, duties or responsibilities, excluding for
this purpose an isolated and insubstantial action not taken in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 3, other than an isolated and insubstantial
failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the
Employee;
(iii) the Company's requiring the Employee to be based at
any office or location other than that described in Section 2(a);
(iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company or the Parent to comply
with and satisfy Section 15(c), provided that the successor referred
to in Section 15(c) has received at least ten days prior written
notice from the Company or the Employee of the requirements of Section
15(c).
For purposes of this Section 4(c), during the Change of Control Period, any
good faith determination of "Good Reason" made by the Employee shall be
conclusive.
5
<PAGE> 6
(d) Notice of Termination. Any termination by the
Company for Cause or by the Employee without any reason during the Window
Period or for Good Reason shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 17(b). For purposes of this
Agreement, a "Notice of Termination" means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employment Period under the
provision so indicated and (iii) if the Date of Termination (as defined below)
is other than the date of receipt of such notice, specifies the termination
date (which date shall be not more than 15 days after the giving of such
notice). The failure by the Employee or the Company to set forth in the Notice
of Termination any fact or circumstance which contributes to a showing of Good
Reason or Cause shall not waive any right of the Employee or the Company
hereunder or preclude the Employee or the Company from asserting such fact or
circumstance in enforcing the Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Employee's employment is terminated by the Company for Cause, or by
the Employee during the Window Period or for Good Reason, the date of receipt
of the Notice of Termination or any later date specified therein, as the case
may be, (ii) if the Employee's employment is terminated by the Company other
than for Cause or Disability, or by the Employee other than for Good Reason or
during the Window Period, the Date of Termination shall be the date on which
the Company or the Employee, as the case may be, notifies the other of such
termination and (iii) if the Employee's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Employee or the Disability Effective Date, as the case may be.
5. Obligations of the Company Upon Termination. (a)
Certain Terminations Prior to Change of Control Date. If, during the Employment
Period prior to any Change of Control Date, the employment of the Employee with
the Company shall be terminated (i) by the Company other than for Cause, death
or Disability or (ii) by the Employee for Good Reason, then, in lieu of the
obligations of the Company under Section 3, (i) the Company shall pay to the
Employee in a lump sum in cash within 30 days after the Date of Termination all
Unpaid Agreement Amounts (as defined in Section 5(b)(i)(A) below) and (ii)
notwithstanding any other provision hereunder, for the longer of (A) the
remainder of the Employment Period or (B) to the extent compensation and/or
benefits are provided under any plan, program, practice or policy, such longer
period, if any, as such plan, program, practice or policy may provide, the
Company shall continue to provide to the Employee the compensation and benefits
provided in Sections 3(a), 3(c) and 3(d).
(b) Certain Terminations After Change of Control Date.
If, during the Change of Control Period, the employment of the Employee with
the Company shall be terminated (i) by the Company other than for Cause, death
or Disability or (ii) by the Employee either for Good Reason or without any
reason during the Window Period, then, in lieu of the obligations of the
Company under Section 3 and notwithstanding any other provision hereunder:
6
<PAGE> 7
(i) the Company shall pay to the Employee in a lump sum
in cash within 30 days after the Date of Termination the aggregate of the
following amounts:
(A) the sum of (1) all unpaid amounts due to the
Employee under Section 3 through the Date of
Termination, including without limitation, the
Employee's Annual Base Salary and any accrued
vacation pay, (2) the product of (x) the Highest
Recent Bonus and (y) a fraction, the numerator of
which is the number of days in the current fiscal
year through the Date of Termination, and the
denominator of which is 365 and (3) any compensation
previously deferred by the Employee (together with
any accrued interest or earnings thereon) to the
extent not theretofore paid (the sum of the amounts
described in clauses (1), (2) and (3) shall be
hereinafter referred to as the "Accrued Obligations"
and the sum of the amounts described in clauses (1)
and (3) shall be hereinafter referred to as the
"Unpaid Agreement Amounts"); and
(B) the amount (such amount shall be hereinafter
referred to as the "Severance Amount") equal to
the sum of
(1) ______________ (___) multiplied by
the Employee's Annual Base Salary,
plus
(2) ______________ (___) multiplied by
the Employee's Highest Recent Bonus;
(ii) for the longer of (A) the remainder of the Employment
Period or (B) to the extent benefits are provided under any plan,
program, practice or policy, such longer period as such plan, program,
practice or policy may provide, the Company shall continue benefits to
the Employee and/or the Employee's family at least equal to those
which would have been provided to them in accordance with the plans,
programs, practices and policies described in Section 3(d) if the
Employee's employment had not been terminated, in accordance with the
most favorable plans, practices, programs or policies of the Company
and its affiliated companies as in effect and applicable generally to
other employees of comparable rank and their families during the
90-day period immediately preceding the Change of Control Date or, if
more favorable to the Employee, as in effect generally at any time
thereafter with respect to other employees of comparable rank with the
Company and its affiliated companies and their families; provided,
however, that if the Employee becomes reemployed with another employer
and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits
described herein shall be required only to the extent not provided
under such other plan during such applicable period of eligibility.
For purposes of determining eligibility of the Employee for retiree
benefits pursuant to such plans, practices, programs and policies, the
Employee shall be considered to have remained employed until the end
of the Employment Period and to have retired on the last day of such
period; and
7
<PAGE> 8
(iii) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Employee and/or the
Employee's family for the remainder of the Employment Period any other
amounts or benefits required to be paid or provided or which the
Employee and/or the Employee's family is eligible to receive pursuant
to this Agreement and under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies as
in effect and applicable generally to other employees of comparable
rank with the Company and its affiliated companies and their families
during the 90- day period immediately preceding the Change of Control
Date or, if more favorable to the Employee, as in effect generally
thereafter with respect to other employees of comparable rank with the
Company and its affiliated companies and their families.
Such amounts received under this Section 5(b) shall be in lieu of any other
amount of severance relating to salary or bonus continuation to be received by
the Employee upon termination of employment of the Employee under any severance
plan, policy or arrangement of the Company.
(c) Termination as a Result of Death. If the Employee's
employment is terminated by reason of the Employee's death during the
Employment Period, in lieu of the obligations of the Company under Section 3,
the Company shall pay or provide to the Employee's estate (i) all Accrued
Obligations (which shall be paid in a lump sum in cash within 30 days after the
Date of Termination) and the timely payment or provision of the Welfare Benefit
Continuation (as defined below) and the Other Benefits (as defined below) and
(ii) any cash amount to be received by the Employee or the Employee's family as
a death benefit pursuant to the terms of any plan, policy or arrangement of the
Company and its affiliated companies. "Welfare Benefit Continuation" shall
mean the continuation of benefits to the Employee and/or the Employee's family
for the longer of (i) ______ (___) years from the Date of Termination or (ii)
the period provided by the plans, programs, policies or practices described in
Section 3(d) in which the Employee participates as of the Date of Termination,
such benefits to be at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described
in Section 3(d) if the Employee's employment had not been terminated, in
accordance with the most favorable plans, practices, programs or policies of
the Company and its affiliated companies as in effect and applicable generally
to other employees of comparable rank and their families on the Date of
Termination or, if the Date of Termination occurs after the Change of Control
Date, during the 90-day period immediately preceding the Change of Control Date
or, if more favorable to the Employee, as in effect generally at any time
thereafter with respect to other employees of comparable rank with the Company
and its affiliated companies and their families. "Other Benefits" shall mean
the timely payment or provision to the Employee and/or the Employee's family of
any other amounts or benefits required to be paid or provided or which the
Employee and/or the Employee's family is eligible to receive pursuant to this
Agreement and under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies as in effect and
applicable generally to other employees of comparable rank and their families
on the Date of Termination or, if the Date of Termination occurs after the
Change of Control Date, during the 90-day period immediately preceding the
Change of Control Date or,
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if more favorable to the Employee, as in effect generally thereafter with
respect to other employees of comparable rank with the Company and its
affiliated companies and their families.
(d) Termination as a Result of Disability. If the
Employee's employment is terminated by reason of the Employee's Disability
during the Employment Period, in lieu of the obligations of the Company under
Section 3, the Company shall pay or provide to the Employee (i) all Accrued
Obligations which shall be paid in a lump sum in cash within 30 days after the
Date of Termination and the timely payment or provision of the Welfare Benefit
Continuation and the Other Benefits, provided, however, that if the Employee
becomes reemployed with another employer and is eligible to receive medical or
other welfare benefits under another employer provided plan, the Welfare
Benefit Continuation shall be required only to the extent not provided under
such other plan during such applicable period of eligibility, and (ii) any cash
amount to be received by the Employee as a disability benefit pursuant to the
terms of any plan, policy or arrangement of the Company and its affiliated
companies.
(e) Cause; Other than for Good Reason. If the Employee's
employment shall be terminated during the Employment Period by the Company for
Cause or by the Employee other than during the Window Period and other than for
Good Reason, in lieu of the obligations of the Company under Section 3, the
Company shall pay to the Employee in a lump sum in cash within 30 days after
the Date of Termination all Unpaid Agreement Amounts.
6. Non-exclusivity of Rights. Except as provided in
Sections 5(a), 5(b)(i)(B), 5(b)(ii), 5(c) and 5(d), nothing in this Agreement
shall prevent or limit the Employee's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Employee may qualify, nor shall anything
herein limit or otherwise affect such rights as the Employee may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Employee is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
7. Full Settlement; Resolution of Disputes. (a) The
Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action
which the Company may have against the Employee or others. In no event shall
the Employee be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Employee under any of the
provisions of this Agreement and, except as provided in Sections 5(b)(ii) and
5(d), such amounts shall not be reduced whether or not the Employee obtains
other employment. The Company agrees to pay promptly as incurred, to the full
extent permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company, the Employee or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result
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of any contest by the Employee about the amount of any payment pursuant to this
Agreement), plus in each case interest on any payment required to be made under
this Agreement but not timely paid at the rate provided for in Section
280G(d)(4) of the Internal Revenue Code of 1986, as amended (the "Code").
(b) If there shall be any dispute between the Company and
the Employee (i) in the event of any termination of the Employee's employment
by the Company, whether such termination was for Cause, or (ii) in the event of
any termination of employment by the Employee, whether Good Reason existed,
then, unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that
the determination by the Employee of the existence of Good Reason was not made
in good faith, the Company shall pay all amounts, and provide all benefits, to
the Employee and/or the Employee's family or other beneficiaries, as the case
may be, that the Company would be required to pay or provide pursuant to
Section 5(a) or 5(b) as though such termination were by the Company without
Cause or by the Employee with Good Reason. The Employee hereby undertakes to
repay to the Company all such amounts to which the Employee is ultimately
adjudged by such court not to be entitled.
8. Certain Additional Payments by the Company. (a)
Anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of the Employee (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this
Section 8) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by the Employee with
respect to such excise tax (such excise tax, together with any such interest
and penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Employee shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Employee of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by the Company's outside independent auditor (the "Accounting Firm"), which
shall provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the Employee
that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving (or has served within
the three years preceding the Change of Control Date) as accountant or auditor
for the individual, entity or group effecting the Change of Control, or is
unwilling or unable to perform its obligations pursuant to this Section 8, the
Employee shall appoint another nationally recognized accounting firm to make
the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm
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hereunder). All fees and expenses of the Accounting Firm shall be borne solely
by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8,
shall be paid by the Company to the Employee within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Employee, it shall furnish the Employee with a
written opinion that failure to report the Excise Tax on the Employee's
applicable federal income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the Accounting Firm shall
be binding upon the Company and the Employee. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 8(c) and the Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee.
(c) The Employee shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten business days after the
Employee is informed in writing of such claim and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Employee shall not pay such claim prior to the expiration of the
30-day period following the date on which the Employee gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Employee in
writing prior to the expiration of such period that it desires to contest such
claim, the Company, subject to the provisions of this Section 8(c), shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Employee to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner. In this
connection, the Employee agrees, subject to the provisions of this Section
8(c), to (i) prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine, (ii) give the Company any
information reasonably requested by the Company relating to such claim, (iii)
take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company, (iv) cooperate with the Company in good
faith in order effectively to contest such claim and (v) permit the Company to
participate in any proceedings relating to such claim. The foregoing is
subject, however, to the following: (A) the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties) incurred
in connection with such contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed in connection therewith
and the payment of costs and expenses in such connection, (B) if the Company
directs the Employee to pay such claim and sue for a refund, the Company shall
advance the amount of such payment
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to the Employee, on an interest-free basis, and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such
advance, (C) any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Employee with respect to which such contested
amount is claimed to be due shall be limited solely to such contested amount
and (D) the Company's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Employee
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 8(c), the Employee becomes entitled
to receive any refund with respect to such claim, the Employee shall (subject
to the Company's complying with the requirements of Section 8(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Employee shall not be entitled to any refund
with respect to such claim and the Company does not notify the Employee in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Employee shall hold in
a fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Employee during the Employee's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Employee or representatives of the Employee in violation of
this Agreement). After termination of the Employee's employment with the
Company or any of its affiliated companies, the Employee shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data
to anyone other than the Company and those designated by it. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis
for deferring or withholding any amounts otherwise payable to the Employee
under this Agreement. Subject to the previous sentence, nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from the Employee.
10. Employee's Obligation to Avoid Conflicts of Interest.
(a) In keeping with Employee's fiduciary duties to the Company, Employee agrees
that he shall not knowingly become involved in circumstances constituting a
conflict of interest with such duties, or upon discovery thereof, allow such a
conflict to continue. Moreover, Employee agrees that he shall disclose to the
Secretary of the Company any facts which might involve a conflict of interest
that has not been approved by the Company. The Board hereby acknowledges and
agrees that the
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activities of Employee listed on Schedule A hereto do not, and the continuation
of such activities will not, constitute a conflict of interest for purposes of
this Section 10.
(b) In this connection, it is agreed that any direct
interest in, connection with, or benefit from any outside activities,
particularly commercial activities, which might in any way adversely affect the
Company or any of its affiliated companies, involves a possible conflict of
interest. Circumstances in which a conflict of interest on the part of Employee
would or might arise, and which should be reported immediately to the Company,
include, but are not limited to, the following:
(i) Ownership of a material interest in any lender,
supplier, contractor, customer or other entity with
which the Company or any of its affiliated companies
does business;
(ii) Acting in any capacity, including director, officer,
partner, consultant, employee, distributor, agent or
the like, for lenders, suppliers, contractors,
subcontractors, customers or other entities with
which the Company or any of its affiliated companies
does business;
(iii) Acceptance, directly or indirectly, of payments,
services or loans from a lender, supplier,
contractor, subcontractor, customer or other entity
with which the Company or any of its affiliated
companies does business, including but not limited
to, gifts, trips, entertainment, or other favors of
more than a nominal value, but excluding loans from
publicly held insurance companies and commercial or
savings banks at normal rates of interest;
(iv) Misuse of information or facilities to which Employee
has access in a manner which will be detrimental to
the Company's or any of its affiliated companies'
interest, such as utilization for Employee's own
benefit of know-how or information developed through
the Company's or any of its affiliated companies'
business activities;
(v) Disclosure or other misuse of information of any kind
obtained through Employee's connection with the
Company or any of its affiliated companies; or
(vi) Acquiring or trading in, directly or indirectly,
other properties or interests connected with the
design or marketing of products or services designed
or marketed by the Company or any of its affiliated
companies.
(c) In the event that the Company determines, in the
exercise of its reasonable judgment, that a conflict of interest exists between
the Employee and the Company or any of its affiliated companies, the Company
shall notify the Employee in writing in accordance with Section 17(b) hereof,
providing reasonably detailed information identifying the source of the
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conflict of interest. Within the 60-day period following receipt of such
notice, the Employee shall take action satisfactory to the Company to eliminate
the conflict of interest. Failure of the Employee to take such action within
such 60-day period shall constitute "Cause" under Section 4(b) hereof.
11. Disclosure of Information, Ideas, Concepts,
Improvements, Discoveries and Inventions. As part of Employee's fiduciary
duties to the Company, Employee agrees that during the Employment Period, and
for a period of six (6) months after the Date of Termination, Employee shall
promptly disclose in writing to the Company all information, ideas, concepts,
improvements, discoveries and inventions, whether patentable or not, and
whether or not reduced to practice, which are conceived, developed, made or
acquired by Employee, either individually or jointly with others, and which
relate to the business, products or services of the Company or any of its
affiliated companies, irrespective of whether Employee utilized the Company's
or any of its affiliated companies' time or facilities and irrespective of
whether such information, idea, concept, improvement, discovery or invention
was conceived, developed, discovered or acquired by Employee on the job, at
home, or elsewhere. This obligation extends to all types of information, ideas
and concepts, including information, ideas and concepts relating to new types
of services, corporate opportunities, acquisition prospects, the identity of
key representatives within acquisition prospect organizations, prospective
names or service marks for the Company's or any of its affiliated companies'
business activities, and the like.
12. Ownership of Information, Ideas, Concepts,
Improvements, Discoveries and Inventions and all Original Works of Authorship.
(a) All information, ideas, concepts, improvements, discoveries and inventions,
whether patentable or not, which are conceived, made, developed or acquired by
Employee or which are disclosed or made known to Employee, individually or in
conjunction with others, during Employee's employment by the Company or any of
its affiliated companies and which relate to the Company's or any of its
affiliated companies' business, products or services (including all such
information relating to corporate opportunities, research, financial and sales
data, pricing and trading terms, evaluations, opinions, interpretations,
acquisition prospects, the identity of customers or their requirements, the
identity of key contacts within the customer's organizations or within the
organization of acquisition prospects, or marketing and merchandising
techniques, prospective names and marks) are and shall be the sole and
exclusive property of the Company. Moreover, all drawings, memoranda, notes,
records, files, correspondence, manuals, models, specifications, computer
programs, maps and all other writings or materials of any type embodying any of
such information, ideas, concepts, improvements, discoveries and inventions are
and shall be the sole and exclusive property of the Company.
(b) In particular, Employee hereby specifically sells,
assigns and transfers to the Company all of his worldwide right, title and
interest in and to all such information, ideas, concepts, improvements,
discoveries or inventions, and any United States or foreign applications for
patents, inventor's certificates or other industrial rights that may be filed
thereon, including divisions, continuations, continuations-in-part, reissues
and/or extensions thereof, and applications for registration of such names and
marks. Both during the period of Employee's employment by the Company or any of
its affiliated companies and thereafter, Employee shall
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assist the Company and its nominee at all times in the protection of such
information, ideas, concepts, improvements, discoveries or inventions, both in
the United States and all foreign countries, including but not limited to, the
execution of all lawful oaths and all assignment documents requested by the
Company or its nominee in connection with the preparation, prosecution,
issuance or enforcement of any applications for United States or foreign
letters patent, including divisions, continuations, continuations-in-part,
reissues, and/or extensions thereof, and any application for the registration
of such names and marks.
(c) Moreover, if during Employee's employment by the
Company or any of its affiliated companies, Employee creates any original work
of authorship fixed in any tangible medium of expression which is the subject
matter of copyright (such as videotapes, written presentations on acquisitions,
computer programs, drawings, maps, architectural renditions, models, manuals,
brochures or the like) relating to the Company's or any of its affiliated
companies' business, products, or services, whether such work is created solely
by Employee or jointly with others, the Company shall be deemed the author of
such work if the work is prepared by Employee in the scope of his or her
employment; or, if the work is not prepared by Employee within the scope of his
or her employment but is specially ordered by the Company as a contribution to
a collective work, as a part of a motion picture or other audiovisual work, as
a translation, as a supplementary work, as a compilation or as an instrumental
text, then the work shall be considered to be work made for hire and the
Company shall be the author of the work. In the event such work is neither
prepared by the Employee within the scope of his or her employment or is not a
work specially ordered and deemed to be a work made for hire, then Employee
hereby agrees to assign, and by these presents does assign, to the Company all
of Employee's worldwide right, title and interest in and to such work and all
rights of copyright therein. Both during the period of Employee's employment by
the Company or any of its affiliated companies and thereafter, Employee agrees
to assist the Company and its nominee, at any time, in the protection of the
Company's worldwide right, title and interest in and to the work and all rights
of copyright therein, including but not limited to, the execution of all formal
assignment documents requested by the Company or its nominee and the execution
of all lawful oaths and applications for registration of copyright in the
United States and foreign countries.
13. Employee's Post-Employment Non-Competition
Obligations: In Certain Situations such Obligations Apply only if the Company
Opts to Continue Employee's Salary Payment. (a) During the Employment Period
and, subject to the conditions of Sections 13(b) and 13(c), for a period of
_____ (___) years thereafter (the "Non-Competition Period") provided, however,
that the Non-Competition Period shall not exceed _______ (___) years from the
Date of Termination, Employee shall not, acting alone or in conjunction with
others, directly or indirectly, in any of the business territories in which the
Company or any of its affiliated companies is presently or at the time of
termination of employment conducting business, engage in any business in
competition with the business conducted by the Company or any of its affiliated
companies at the time of the termination of the employment relationship,
whether for his own account or by soliciting, canvassing or accepting any
business or transaction for or from any other company or business in
competition with such business of the Company or any of its affiliated
companies.
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(b) If Employee has been terminated for Cause (Section
4(b)) or if Employee terminates his employment for any reason other than for
Good Reason or other than during the Window Period (Section 4(c)), Employee
shall be bound by the obligations of Section 13(a) and the Company shall have
no obligation to make the Non-Competition Payments (as defined in Section 13(c)
below). However, if the employment relationship is terminated by any other
circumstance or for any other reason, Employee's post-employment
non-competition obligations required by Section 13(a) shall be subject to the
Company's obligation to make the Non-Competition Payments specified in Section
13(c).
(c) Notwithstanding the provisions of Section 4 of this
Agreement, whenever the employment relationship is terminated due to the
expiration of its term because the Company or Employee timely gave written
notice of termination (Section 1), or due to Employee's Disability (Section
4(a)), or by the Company without Cause (Section 4(b)), unless the Company
exercises its option as hereinafter provided, Employee shall be entitled to
continue to receive payments (the "Non-Competition Payments") equal to his then
current Annual Base Salary (as of the Date of Termination) during the
Non-Competition Period. During the Non-Competition Period, the Employee shall
not, however, be deemed to be an employee of the Company or be entitled to
continue to receive any other employee benefits other than as set forth in
Section 5 or Section 8. Moreover, the Non-Competition Payments shall be reduced
to the extent Employee has already received lump-sum payments in lieu of salary
and bonus pursuant to Section 5. The Company shall have the option, exercisable
at any time within one (1) month after Employee's Date of Termination, to
cancel Employee's post-employment non-competition obligations under Section
13(a) and the Company's corresponding obligation to make the Non-Competition
Payments. Such option shall be exercised by the Company mailing a written
notice thereof to Employee in accordance with Section 17(b); if the Company
does not send such notice within the prescribed one-month time, the Company
shall remain obligated to make the Non-Competition Payments and Employee shall
remain obligated to comply with the provisions of Section 13(a). The purpose of
this paragraph is to make the non-competition obligations of Employee more
reasonable from the Employee's point of view. The amounts to be paid by the
Company are not intended to be liquidated damages or an estimate of the actual
damages that would be sustained by the Company if Employee breaches his
post-employment non-competition obligations. If Employee breaches his
post-employment non-competition obligations, the Company shall be entitled to
cease making the Non-Competition Payments and shall be entitled to all of its
remedies at law or in equity for damages and injunctive relief.
14. Obligations to Refrain From Competing Unfairly. In
addition to the other obligations agreed to by Employee in this Agreement,
Employee agrees that during the Employment Period and for ________ (____) years
following the Date of Termination, he shall not at any time, directly or
indirectly for the benefit of any other party than the Company or any of its
affiliated companies, (a) induce, entice, or solicit any employee of the
Company or any of its affiliated companies to leave his employment, or (b)
contact, communicate or solicit any customer of the Company or any of its
affiliated companies derived from any customer list, customer lead, mail,
printed matter or other information secured from the Company or any of its
affiliated companies or their present or past employees, or (c) in any other
manner use any
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customer lists or customer leads, mail, telephone numbers, printed material or
material of the Company or any of its affiliated companies relating thereto.
15. Successors. (a) This Agreement is personal to the
Employee and without the prior written consent of the Company shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable
by the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company or the Company
to assume expressly and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. The Parent will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Parent or the Parent to
assume expressly and agree to perform the Parent's obligations hereunder in the
same manner and to the same extent that the Parent would be required to perform
them if no such succession had taken place. As used in this Agreement,
"Parent" shall mean the Parent as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform the
Parent's obligations hereunder by operation of law, or otherwise.
16. Certain Definitions. The following defined terms used
in this Agreement shall have the meanings indicated:
(a) The "Change of Control Date" shall mean the first
date on which a Change of Control occurs. Anything in this Agreement to the
contrary notwithstanding, if a Change of Control occurs and if the Employee's
employment with the Company is terminated or the Employee ceases to have the
position with the Company or the Parent which the Employee had prior to the
date on which the Change of Control occurs, and if it is reasonably
demonstrated by the Employee that such termination or cessation (i) was at the
request of a third party who has taken steps reasonably calculated to effect
the Change of Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then, for all purposes of this
Agreement, the "Change of Control Date" shall mean the date immediately prior
to the date of such termination or cessation.
(b) The "Change of Control Period" shall mean the period
commencing on the Change of Control Date and ending on the last day of the
Employment Period.
(c) "Change of Control" shall mean:
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(i) 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) of 20% or more of either (A) the then
outstanding shares of Common Stock of the Parent (the "Outstanding
Parent Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Parent entitled to vote generally
in the election of directors (the "Outstanding Parent Voting
Securities"); provided, however, that the following acquisitions shall
not constitute a Change of Control: (A) any acquisition directly from
the Parent (excluding an acquisition by virtue of the exercise of a
conversion privilege), (B) any acquisition by the Parent, (C) any
acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Parent or any corporation controlled by the
Parent or (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 (A), (B) and (C) of subsection (iii) of this definition of
"Change of Control" are satisfied; or
(ii) Individuals who, as of the effective date hereof,
constitute the Board of Directors of the Parent (the "Incumbent
Board") cease for any reason to constitute at least a majority of the
Board of Directors of the Parent; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Parent's shareholders, was
approved by (A) a vote of at least a majority of the directors then
comprising the Incumbent Board of the Parent, or (B) a vote of at
least a majority of the directors then comprising the Executive
Committee of the Board of Directors of the Parent at a time when such
committee was comprised of at least five members and all members of
such committee were either members of the Incumbent Board or
considered as being members of the Incumbent Board pursuant to clause
(A) of this subsection (ii), 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
of Directors of the Parent; or
(iii) Approval by the shareholders of the Parent of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (A) more than
60% 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 Parent Common Stock and Outstanding Parent Voting
Securities immediately prior to such organization, merger or
consolidation in substantially the same proportions as their
ownership, immediately prior
18
<PAGE> 19
to such reorganization, merger or consolidation, of the Outstanding
Parent Common Stock and Outstanding Parent Voting Securities, as the
case may be, (B) no Person (excluding the Parent, any employee benefit
plan or related trust of the Parent 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, 20% or more of the
Outstanding Parent Common Stock or Outstanding Parent Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% 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 (C) 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
(iv) Approval by the shareholders of the Parent of (A) a
complete liquidation or dissolution of the Parent or (B) the sale or
other disposition of all or substantially all of the assets of the
Parent, other than to a corporation, with respect to which following
such sale or other disposition, (A) more than 60% 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 Parent Common
Stock and Outstanding Parent 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 Parent Common Stock and Outstanding Parent Voting
Securities, as the case may be, (B) no Person (excluding the Parent
and any employee benefit plan or related trust of the Parent or such
corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 20% or more of
the Outstanding Parent Common Stock or Outstanding Parent Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, 20% 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 of Directors of the
Parent providing for such sale or other disposition of assets of the
Parent.
(d) The term "affiliated company" shall mean any company
controlled by, controlling or under common control with the Company.
(e) The term "Highest Recent Bonus" shall mean the
highest Annual Bonus (annualized for any fiscal year consisting of less than
twelve full months) paid or payable,
19
<PAGE> 20
including by reason of any deferral, to the Employee by the Company and its
affiliated companies in respect of the three most recent full fiscal years
ending on or prior to, (i) if prior to a Change of Control, the Date of
Termination, or (ii) if after a Change of Control, the Change of Control Date.
17. Miscellaneous. (a) This Agreement replaces and merges
all previous agreements and discussions relating to the same or similar subject
matters between Employee and the Company and shall be governed by and construed
in accordance with the laws of the State of Texas, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended, modified, repealed, waived, extended or discharged except by an
agreement in writing signed by the party against whom enforcement of such
amendment, modification, repeal, waiver, extension or discharge is sought. No
person, other than pursuant to a resolution of the Board or a duly authorized
committee thereof, shall have authority on behalf of the Company to agree to
amend, modify, repeal, waive, extend or discharge any provision of this
Agreement or anything in reference thereto.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
ADDRESS
ADDRESS
ADDRESS
If to the Company:
SCI Executive Services, Inc.
1929 Allen Parkway
Houston, Texas 77019
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
20
<PAGE> 21
(e) The Employee's or the Company's failure to insist
upon strict compliance with any provision hereof or any other provision of this
Agreement or the failure to assert any right the Employee or the Company may
have hereunder, including, without limitation, the right of the Employee to
terminate employment for Good Reason pursuant to Section 4(c) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
(f) No breach, whether actual or alleged, of this
Agreement by the Employee shall constitute grounds for the Company to withhold
or offset any payment or benefit due to the Employee under any other agreement,
contract, plan, program, policy or practice of the Company.
IN WITNESS WHEREOF, the Employee and, pursuant to due
authorization from the Board of Directors of the Company, the Company have
caused this Agreement to be executed this 1st day of January, 1997, effective
as of the day and year first above written.
NAME
--------------------------------
"EMPLOYEE"
SCI EXECUTIVE SERVICES, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
"COMPANY"
21
<PAGE> 22
Pursuant to due authorization from its Board of Directors, the Parent,
by its execution hereof, absolutely and unconditionally guarantees to Employee
the full and timely payment and performance of each obligation of the Company
to Employee under this Agreement, WAIVES any and all rights that it may
otherwise have to require Employee to proceed against the Company for
nonpayment or nonperformance, WAIVES any and all defenses that would otherwise
be a defense to this guarantee, and agrees to remain liable to Employee for all
payment and performance obligations of the Company under this Agreement,
whether arising before, on or after the date of this Agreement, until this
Agreement shall terminate pursuant to its terms.
SERVICE CORPORATION INTERNATIONAL
By:
--------------------------------
James M. Shelger
Senior Vice President
General Counsel & Secretary
"PARENT"
22
<PAGE> 1
EXHIBIT 10.11
SERVICE CORPORATION INTERNATIONAL
AMENDMENT TO 1986 STOCK OPTION PLAN
AMENDMENT, dated as of February 12, 1997, to the Service
Corporation International 1986 Stock Option Plan, as Amended and Restated on
November 12, 1991 (the "1986 Plan").
1. The 1986 Plan is hereby amended effective as of the
date hereof, as follows:
Article III is hereby amended by adding the following at the
end thereof:
The Committee may amend outstanding Non-qualified Stock
Options to make such Non-qualified Stock Options transferable,
without payment of consideration, to immediate family members
of the grantee or to trusts or partnerships established for
the exclusive benefit of one or more members of such person's
immediately family (collectively, "Transferees"). A transfer
of a Non-qualified Stock Option pursuant to this Section may
only be effected by the Company at the written request of a
grantee and shall become effective only when recorded in the
Company's record of outstanding Non-qualified Stock Options.
In the event a Non-qualified Stock Option is transferred as
contemplated hereby, such Non-qualified Stock Option may not
be subsequently transferred by the transferee except by will
or the laws of descent and distribution. In the event a
Non-qualified Stock Option is transferred as contemplated
hereby, such Non-qualified Stock Option will continue to be
governed by and subject to the terms of this Plan and the
relevant grant, and the transferee shall be entitled to the
same rights as the grantee hereunder, as if no transfer had
taken place. As used herein, "immediate family" shall mean,
with respect to any person, such person's child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in- law, or sister-in-law, and shall include adoptive
relationships.
<PAGE> 2
2. Article II is hereby amended by deleting the second
sentence thereof and replacing it with the following:
All members of the Committee shall be "Disinterested Persons",
as such term is defined in Rule 16b-3 under the Securities
Exchange Act of 1934, who are also persons eligible to be
"outside directors" for purposes of the Internal Revenue Code
and the regulations promulgated thereunder.
<PAGE> 1
EXHIBIT 10.15
SERVICE CORPORATION INTERNATIONAL
AMENDMENT TO 1993 LONG-TERM INCENTIVE STOCK OPTION PLAN
AMENDMENT, dated as of February 12, 1997, to the Service
Corporation International 1993 Long-Term Incentive Stock Option Plan (the "1993
Plan").
1. The 1993 Plan is hereby amended effective as of the
date hereof, as follows:
Section 5(f) is hereby amended by adding the following at the
end thereof:
The Committee may amend outstanding Stock Options to make such
Stock Options transferable, without payment of consideration,
to immediate family members of the grantee or to trusts or
partnerships established for the exclusive benefit of one or
more members of such person's immediate family (collectively,
"Transferees"). A transfer of a Stock Option pursuant to this
Section may only be effected by the Company at the written
request of a grantee and shall become effective only when
recorded in the Company's record of outstanding Stock Options.
In the event a Stock Option is transferred as contemplated
hereby, such Stock Option may not be subsequently transferred
by the transferee except by will or the laws of descent and
distribution. In the event a Stock Option is transferred as
contemplated hereby, such Stock Option will continue to be
governed by and subject to the terms of this Plan and the
relevant grant, and the transferee shall be entitled to the
same rights as the grantee hereunder, as if no transfer had
taken place. As used herein, "immediate family" shall mean,
with respect to any person, such person's child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in- law, or sister-in-law, and shall include adoptive
relationships.
<PAGE> 2
2. Subsection j of Section 1 is hereby amended to read
in its entirety as follows:
j. "Disinterested Person" means a "Non-Employee
Director" as that term is defined in Rule 16b-3 under
the Exchange Act, or any successor definition adopted
by the Commission, who also qualifies as an "outside
director" for purposes of Section 162(m) of the Code
and the regulations promulgated thereunder.
<PAGE> 1
EXHIBIT 10.18
SERVICE CORPORATION INTERNATIONAL
AMENDMENT TO 1995 INCENTIVE EQUITY PLAN
AMENDMENT, dated as of February 12, 1997, to the Service
Corporation International 1995 Incentive Equity Plan (the "1995 Plan").
The 1995 Plan is hereby amended effective as of the date
hereof, as follows:
1. Section 4.3 is hereby amended by adding the following
at the end thereof:
The Committee may amend outstanding Nonqualified Options to
make such Nonqualified Options transferable, without payment
of consideration, to immediate family members of the Employee
or to trusts or partnerships established for the exclusive
benefit of one or more members of such person's immediate
family (collectively, "Transferees"). A transfer of a
Nonqualified Option pursuant to this Section may only be
effected by the Company at the written request of an Employee
and shall become effective only when recorded in the Company's
record of outstanding Nonqualified Options. In the event a
Nonqualified Option is transferred as contemplated hereby,
such Nonqualified Option may not be subsequently transferred
by the transferee except by will or the laws of descent and
distribution. In the event a Nonqualified Option is
transferred as contemplated hereby, such Nonqualified Option
will continue to be governed by and subject to the terms of
this Plan and the relevant grant, and the transferee shall be
entitled to the same rights as the Employee hereunder, as if
no transfer had taken place. As used herein, "immediate
family" shall mean, with respect to any person, such person's
child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, brother-in-law, or sister-in-law, and shall
include adoptive relationships.
1
<PAGE> 2
2. Section 2.8 is hereby deleted; a new Section 2.12 is
added as set forth below; existing Sections 2.9 through 2.12 are renumbered as
2.8 through 2.11; and the table of contents is revised to reflect the
foregoing.
3. A new Section 2.12 is added as follows:
Section 2.12. "Non-Employee Director" means a "Non-Employee
Director" as that term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934.
4. All references in the 1995 Plan to the term
"Disinterested Person" shall be deleted and replaced with the term
"Non-Employee Director".
2
<PAGE> 1
EXHIBIT 10.22
SERVICE CORPORATION INTERNATIONAL
AMENDMENT TO 1996 INCENTIVE PLAN
AMENDMENT, dated as of February 12, 1997, to the Service
Corporation International 1996 Incentive Plan (the "1996 Plan").
The 1996 Plan is hereby amended effective as of the date
hereof, as follows:
1. Section 4.3 of the 1996 Plan is hereby amended by
adding the following at the end thereof:
A trust or partnership will be deemed to be for the benefit of
immediate family members if it is established for the exclusive
benefit of one or more members of such person's immediate family. A
transfer of a Nonqualified Option pursuant to this Section may only be
effected by the Company at the written request of an Employee and
shall become effective only when recorded in the Company's record of
outstanding Nonqualified Options. In the event a Nonqualified Option
is transferred as contemplated hereby, such Nonqualified Option may
not be subsequently transferred by the transferee except by will or
the laws of descent and distribution. In the event a Nonqualified
Option is transferred as contemplated hereby, such Nonqualified Option
will continue to be governed by and subject to the terms of this Plan
and the relevant grant, and the transferee shall be entitled to the
same rights as the Employee hereunder, as if no transfer had taken
place. As used herein, "immediate family" shall mean, with respect to
any person, such person's child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, and shall include adoptive relationships.
2. Section 2.11 is hereby deleted; a new Section 2.15 is
added as set forth below; existing Sections 2.12 through 2.15 are renumbered as
2.11 through 2.14; and the table of contents is revised to reflect the
foregoing.
<PAGE> 2
3. A new Section 2.15 is added as follows:
Section 2.15. "Non-Employee Director" means a "non-Employee
Director" as that term is defined in Rule 16b-3 under the
Securities Exchange Act of 1934.
4. All references in the 1996 Plan to the term
"Disinterested Person" shall be deleted and replaced with the term
"Non-Employee Director".
<PAGE> 1
EXHIBIT 10.32
JP MORGAN
TRANSACTION
Date: 15 March 1996
The purpose of this letter agreement is to confirm the terms and conditions of
the Transaction entered into between:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
and
SERVICE CORPORATION INTERNATIONAL
on the Trade Date and identified by the Morgan Deal Number specified below (the
"Transaction"). This letter agreement constitutes a "Confirmation" as referred
to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swap Dealers Association, Inc.) are incorporated
into this Confirmation. In the event of any inconsistency between those
definitions and provisions and this Confirmation, this Confirmation will govern.
Morgan Guaranty Trust Company of New York is, together with other United Kingdom
listed institutions, subject to the Bank of England's Code of Conduct. In
connection therewith, this and certain future wholesale money market
transactions will be outside the Financial Services Act, but you will have the
benefit of the Code of Conduct.
1. This Confirmation supplements, forms part of, and is subject to, the ISDA
Master Agreement dated as of 4 February 1993, as amended and supplemented from
time to time (the "Agreement"), between MORGAN GUARANTY TRUST COMPANY OF NEW
YORK ("MORGAN") and SERVICE CORPORATION INTERNATIONAL (the "Counterparty"). All
provisions contained in the Agreement govern this Confirmation except as
expressly modified below:
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
Morgan Deal Number: 151442
Trade Date: 15 March 1996
Effective Date: 19 March 1996
Termination Date: 1 April 1998, subject to adjustment in
accordance with the Modified Following
Business Day Convention
FIXED AMOUNTS:
Fixed Rate Payer: Counterparty
- -------------------------------------------------------------------------------
<PAGE> 2
JP MORGAN
Notional Amount: 494,000,000.00 FRF
Fixed Rate Payer Payment Dates: Each 1 April starting with 1 April 1996
up to, and including, the Termination
Date, subject to adjustment in
accordance with the Modified Following
Business Day Convention and there will
be an adjustment to the Calculation
Period.
Fixed Rate: 6.20000 percent
Fixed Rate Day Count Fraction: 30/360
First Full Coupon:
From: 18 March 1996 To: 1 April 1996
(subject to adjustment in accordance
with the Modified Following Business
Day Convention)
Morgan Fixed Rate: 6.20000 percent
FLOATING AMOUNTS:
Floating Rate Payer: Morgan
Notional Amount: 494,000,000.00 FRF
Floating Rate Payer Payment Dates: Each 1 April starting with 1 April 1996
up to, and including, the Termination
Date, subject to adjustment in
accordance with the Modified Following
Business Day Convention and there will
be an adjustment to the Calculation
Period.
Floating Rate Option: DEM-LIBOR-BBA
Designated Maturity: 3 Month
Spread: Plus 1.97000 percent
Floating Rate Day Count Fraction: Actual/360
Reset Dates: Each 1 April, 1 July, 1 October, 1
January
Compounding: Applicable
Method of Compounding: Flat at 3 month FRF-PIBOR-AFB
Compounding Dates: Each 1 July, 1 October, 1 January, 1
April
- -------------------------------------------------------------------------------
<PAGE> 3
JP MORGAN
First Full Coupon:
From: 18 March 1996 To: 1 April 1996
(subject to adjustment in accordance
with the Modified Following Business
Day Convention)
Counterparty Floating Rate Option: 3.34766 percent
*Currency protected swap - DEM-LIBOR-BBA - sets TWO business day prior &
compounds flat at 3 month FRF-PIBOR-AFB.
Business Day Locations for Morgan: Paris, New York
Business Day Locations for
Counterparty: Paris, New York
Payments will be: Net
3. Account Details
PAYMENTS TO MORGAN:
Account for payments in FRF: Morgan Bank Paris
14 Place Vendome
75001 Paris
France
Favour: Morgan Guaranty Trust Co of New York -
London Office
ABA/Bank No.:
Account No.: 43504300G0090
Reference: Further Credit to Swaps Group Account:
10004942
Please send MT100 cover cable to MGT
London
PAYMENTS TO COUNTERPARTY:
Account for payments in FRF:
Favour: SERVICE CORPORATION INTERNATIONAL
ABA/Bank No.: Societe Generale, Paris
Account No.: Code De Banque 30003
Reference: Code De Guichet 03630
F/C: Service Corporation International
Account #09920023632 RIB 52
- --------------------------------------------------------------------------------
<PAGE> 4
JP MORGAN
4. Offices
(a) The Office of Morgan for the Swap Transaction is LONDON; and
(b) The Office of the Counterparty for the Swap Transaction is HOUSTON
All enquiries regarding payments and/or rate resettings only should be sent to:
Morgan Guaranty Trust Company of New York
60 Victoria Embankment
London. EC4Y 0JP
Attention: Joanne Case
Telephone: 44 1 71 325 3783
Facsimile: 44 1 71 325 3862/3863
Telex: 896631 MGT G
Cable: Morganbank
Please quote the Morgan Deal Number indicated above.
All enquiries regarding confirmations should be sent to:
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
Attention: Wendy Webbe
Documentation Control Group
Telephone: 1-212-648-2991
Facsimile: 1-212-648-5117
Please quote the Morgan Deal Number indicated above.
J P MORGAN SECURITIES INCORPORATED is acting solely as agent for Morgan and will
have no obligations under this Transaction.
Each party represents that (i) it is entering into the transaction evidenced
hereby as principal (and not as agent or in any other capacity); (ii) the other
party is not acting as a fiduciary for it; (iii) it is not relying upon any
representations except those expressly set forth in the Agreement or this
Confirmation; (iv) it has consulted with its own legal, regulatory, tax,
business, investment, financial, and accounting advisors to the extent it has
deemed necessary, and it has made its own investment, hedging, and trading
decisions based upon its own judgment and upon any advice from such advisors as
it has deemed necessary and not upon any view expressed by the other party; and
(v) it is entering into this transaction with a full understanding of the terms,
conditions and risks thereof and is capable of and willing to assume those
risks.
<PAGE> 5
JP MORGAN
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this confirmation and returning it to us or by
sending to us a letter, telex or facsimile substantially similar to this
letter, which letter, telex or facsimile sets forth the material terms of the
Transaction to which this confirmation relates and indicates agreement to those
terms. When referring to this confirmation, please indicate: Morgan Deal
Number: 151442.
Yours sincerely,
JP MORGAN SECURITIES INCORPORATED,
as Agent for and signing on behalf of:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ RAJAN KUNDRA
-------------------
Name: RAJAN KUNDRA
Title: Associate
Confirmed as of the
date first above written:
SERVICE CORPORATION INTERNATIONAL
By: /s/ GREGORY L. CAUTHEN
-----------------------------
Name: Gregory L. Cauthen
Title: Vice President/Treasurer
<PAGE> 6
JP MORGAN
TRANSACTION
Date: 23 May 1996
The purpose of this letter agreement is to confirm the terms and
conditions of the Transaction entered into between:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
and
SERVICE CORPORATION INTERNATIONAL
on the Trade Date and identified by the Morgan Deal Number specified below (the
"Transaction"). This letter agreement constitutes a "Confirmation" as referred
to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions
(as published by the International Swap Dealers Association, Inc.) are
incorporated into this Confirmation. In the event of any inconsistency between
those definitions and provisions and this Confirmation, this Confirmation will
govern.
THIS CONFIRMATION REPRESENTS AN AMENDMENT AND RESTATEMENT OF ANY PRIOR
DOCUMENTS OR OTHER CONFIRMING COMMUNICATIONS BETWEEN THE PARTIES WITH RESPECT
TO THE TRANSACTION.
Morgan Guaranty Trust Company of New York is, together with other
United Kingdom listed institutions, subject to the Bank of England's Code of
Conduct. In connection therewith, this and certain future wholesale money
market transactions will be outside the Financial Services Act, but you will
have the benefit of the Code of Conduct.
1. This Confirmation supplements, forms part of, and is subject to, the ISDA
Master Agreement dated as of 4 February 1993, as amended and supplemented from
time to time (the "Agreement"), between MORGAN GUARANTY TRUST COMPANY OF NEW
YORK ("Morgan") and SERVICE CORPORATION INTERNATIONAL (the "Counterparty"). All
provisions contained in the Agreement govern this Confirmation except as
expressly modified below.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
Morgan Deal Number: 151337
Trade Date: 23 May 1996
Effective Date: 26 April 1996
Termination Date: 1 June 2006
- ------------------------------------------------------------------------------
<PAGE> 7
JP MORGAN
FLOATING AMOUNTS:
Floating Rate Payer: Counterparty
Notional Amount: 492,000,000.00 FRF
Floating Rate Payment Dates: 26 July 1996, subject to adjustment in
accordance with the Modified Following
Business Day Convention and there will
be an adjustment to the Calculation
Period.
Floating Rate Option: DEM-LIBOR-BBA
Designated Maturity: 3 Month
Spread: Plus 0.23000 percent
Floating Rate Day Count Fraction: Actual/360
Reset Dates: Two Business days prior to each
calculation period.
Compounding: Inapplicable
FLOATING AMOUNTS:
Floating Rate Payer: Morgan
Notional Amount: 492,000,000.00 FRF
Floating Rate Payer Payment Dates: 26 July 1996, subject to adjustment in
accordance with the Modified Following
Business Day Convention and there will
be an adjustment to the Calculation
Period.
Floating Rate Option: FRF-PIBOR-AFB
Designated Maturity: 3 Month
Spread: None
Floating Rate Day Count Fraction: Actual/360
Reset Dates: Two Business days prior to each
Calculation Period.
Compounding: Inapplicable
- --------------------------------------------------------------------------------
<PAGE> 8
JPMORGAN
FLOATING AMOUNTS:
Floating Rage Payer: Counterparty
Notional Amount: 492,000,000.00 FRF
Floating Rage Payer Payment Dates: Each 1 December, 1 June starting with 1
December 1996 up to, and including, the
Termination Date, subject to adjustment
in accordance with the Modified
Following Business Day Convention and
there will be an adjustment to the
Calculation Period.
Floating Rate Option: DEM-LIBOR-BBA
Designated Maturity: 3 Month
Spread: Plus 0.23000 percent
Floating Rate Day Count Fraction: Actual/360
Reset Dates: Each 1 December, 1 March, 1 June, 1
September
Compounding: Applicable
Method of Compounding: Flat
Compounding Dates: Each 1 March, 1 June, 1 September, 1
December
Additional Rate Formula:
Currency Protected Swap: Compounds at 3M FRF-PIBOR-AFB set Two
Business days prior to each Calculation
Period.
Initial Stub Period:
From: 26 July 1996 To: 1 December 1996
(subject to adjustment in accordance
with the Modified Following Business Day
Convention)
Counterparty Floating Rate Option: DEM-LIBOR-BBA
Designated Maturity from 26 July 1995
to 1 September 1996: Interpolated between 1 Month and 2
Month.
Designated Maturity from 1 September Compounded at FRF-PIBOR-AFB
1996 to 1 December 1996: 3 Month
- -------------------------------------------------------------------------------
<PAGE> 9
JP MORGAN
FLOATING AMOUNTS:
Floating Rate Payer: Morgan
Notional Amount: 492,000,000.00 FRF
Floating Rate Payer Payment Dates: Each 1 December, 1 June starting with 1
December 1996 up to, and including, the
Termination Date, subject to adjustment
in accordance with the Modified
Following Business Day Convention and
there will be an adjustment to the
Calculation Period.
Floating Rate Option: FRF-PIBOR-AFB
Designated Maturity: 3 Month
Spread: None
Floating Rate Day Count Fraction: Actual/360
Reset Dates: Each 1 December, 1 March, 1 June,
1 September
Compounding: Applicable
Method of Compounding: Flat
Compounding Dates: Each 1 March, 1 September
Initial Stub Period:
From: 26 July 1996 To: 1 December 1996
(subject to adjustment in accordance
with the Modified Following Business
Day Convention)
Morgan Floating Rate Option: FRF-PIBOR-AFB
Designated maturity from 26 July
1996 to 1 September 1996: Interpolated between 1 Month and
2 Month
Designated Maturity from
1 September 1996 to
1 December 1996 3 Month
Business Day Locations
for Counterparty: New York, Paris
Business Day Locations
for Morgan: New York, Paris
Payments will be: Net
- --------------------------------------------------------------------------------
<PAGE> 10
JP MORGAN
3. Account Details
PAYMENTS TO MORGAN:
Account for payments in FRF: Morgan Bank Paris
14 Place Vendome
75001 Paris
France
Favour: Morgan Guaranty Trust Co of New York -
London Office
Account No.: 43504300G0090
Reference: Further Credit to Swaps Group Account:
10004942
Please send MT100 cover cable to MGT
London
PAYMENTS TO COUNTERPARTY:
Account for payments in FRF:
Favour: SERVICE CORPORATION INTERNATIONAL
Account No.: Societe Generale, Paris
Reference: Code De Banque 30003
Code De Guichet 03630
4. Offices F/C: Service Corporation International
Account #09920023632 RIB 52
(a) The Office of Morgan for the Swap Transaction is LONDON; and
(b) The Office of the Counterparty for the Swap Transaction is HOUSTON.
All enquiries regarding payments and/or rate resettings only should be sent to:
Morgan Guaranty Trust Company of New York
60 Victoria Embankment
London. EC4Y 0JP
Attention: Joanne Case
Telephone: 44 1 71 325 3783
Facsimile: 44 1 71 325 3862/3863
Telex: 896631 MGT G
Cable: Morganbank
Please quote the Morgan Deal Number indicated above.
All enquiries regarding confirmations should be sent to:
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, New York 10260
- -------------------------------------------------------------------------------
<PAGE> 11
JP MORGAN
ATTENTION: WENDY WEBBE
DOCUMENTATION CONTROL GROUP
TELEPHONE: 1-212-648-6493
FACSIMILE: 1-212-648-5117
PLEASE QUOTE THE MORGAN DEAL NUMBER INDICATED ABOVE.
J P MORGAN SECURITIES INCORPORATED is acting solely as agent for Morgan
and will have no obligations under this Transaction.
Each party represents that (i) it is entering into the transaction
evidenced hereby as principal (and not as agent or in any other capacity); (ii)
the other party is not acting as a fiduciary for it; (iii) it is not relying
upon any representations except those expressly set forth in the Agreement or
this Confirmation; (iv) it has consulted with its own legal, regulatory, tax,
business, investment, financial, and accounting advisors to the extent it has
deemed necessary,and it has made its own investment, hedging,and trading
decisions based upon its own judgment and upon any advice from such advisors as
it has deemed necessary and not upon any view expressed by the other party; and
(v) it is entering into this transaction with a full understanding of the
terms, conditions and risks thereof and it is capable of and willing to assume
those risks.
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter, telex or facsimile substantially similar to this
letter, which letter, telex or facsimile sets forth the material terms of the
Transaction to which this Confirmation relates and indicates agreement to those
terms. When referring to this Confirmation, please indicate: Morgan Deal
Number: 151337.
Yours sincerely,
J P MORGAN SECURITIES INCORPORATED,
as Agent for and signing on behalf of:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ RAJAN KUNDRA
------------------------------
Name: Rajan Kundra
Title: Associate
Confirmed as of the
date first above written:
SERVICE CORPORATION INTERNATIONAL
By: /s/ GREGORY L. CAUTHEN
--------------------------------
Name: Gregory L. Cauthen
Title: Vice President/Treasurer
- -----------------------------------------------------------------------------
<PAGE> 12
JP MORGAN
Transaction
Date: 30 May 1996
The purpose of this letter agreement is to confirm the terms and conditions of
the Transactions entered into between:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
and
SERVICE CORPORATION INTERNATIONAL
on the Trade Date and identified by the Morgan Deal Number specified below (the
"Transaction"). This letter agreement constitutes a "Confirmation" as referred
to in the ISDA Master Agreement specified below.
The definitions and provisions contained in the 1991 ISDA Definitions (as
published by the International Swap Dealers Association, Inc.) are incorporated
into this Confirmation. In the event of any inconsistency between those
definitions and provisions and this Confirmation, this Confirmation will govern.
Morgan Guaranty Trust Company of New York is, together with other United
Kingdom listed institutions, subject to the Bank of England's Code of Conduct.
In connection therewith, this and certain future wholesale money market
transactions will be outside the Financial Services Act, but you will have the
benefit of the Code of Conduct.
1. This Confirmation supplements, forms part of, and is subject to, the ISDA
Master Agreement dated as of 4 February 1993, as amended and supplemented from
time to time (the "Agreement"), between MORGAN GUARANTY TRUST COMPANY OF NEW
YORK ("Morgan") and SERVICE CORPORATION INTERNATIONAL (the "Counterparty"). All
provisions contained in the Agreement govern this Confirmation except as
expressly modified below.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
Morgan Deal Number: 151341
Trade Date: 14 March 1996
Effective Date: 19 March 1996
Termination Date: 1 April 2006, subject to adjustment in
accordance with the Modified Following
Business Day Convention
FIXED AMOUNTS:
Fixed Rate Payer: Morgan
- -------------------------------------------------------------------------------
<PAGE> 13
Notional Amount: 494,000,000.00 FRF
Fixed Rate Payer Payment Dates: Each 1 April starting with 1 April 1996
up to, and including, 1 April 1998,
subject to adjustment in accordance
with the Modified Following Business
Day Convention and there will be an
adjustment to the Calculation Period.
Fixed Rate: 6.80000 percent
Fixed Rate Day Count Fraction: 30/360
Initial Stub Period:
From: 18 March 1996 To: 1 April 1996
(subject to adjustment in accordance
with the Modified Following Business
Day Convention)
Morgan Fixed Rate: 6.80000 percent
FLOATING AMOUNTS:
Floating Rate Payer: Counterparty
Notional Amount: 494,000,000.00 FRF
Floating Rate Payer Payment Dates: Each 1 April starting with 1 April 1996
up to, and including, the Termination
Date, subject to adjustment in
accordance with the Modified Following
Business Day Convention and there will
be an adjustment to the Calculation
Period.
Floating Rate Option: DEM-LIBOR-BBA
Designated Maturity: 3 Month
Spread: Plus 1.97000 percent from 18 March 1996
to 1 April 1998.
Plus .23000 percent from 1 April 1998
to 1 April 2006.
Floating Rate Day Count Fraction: Actual/360
Reset Dates: Each 1 April, 1 July, 1 October,
1 January
<PAGE> 14
Compounding: Applicable
Method of Compounding: Flat at 3 month FRF-PIBOR-AFB
Compounding Dates: Each 1 July, 1 October, 1 January,
1 April
Initial Stub Period:
From: 18 March 1996 To: 1 April 1996
(subject to adjustment in accordance
with the Modified Following Business
Day Convention)
Floating Rate for Initial 3.34766 percent (Excluding Spread
Calculation Period: where applicable)
Currency protected swap - DEM-LIBOR-BBA - sets TWO business day prior &
compounds flat at 3 month FRF-PIBOR-AFB.
FLOATING AMOUNTS:
Floating Rate Payer: Morgan
Notional Amount: 494,000,000.00 FRF
Floating Rate Payer Payment Dates: Each 1 April starting with 1 April 1999
up to, and including, the Termination
Date, subject to adjustment in
accordance with the Modified Following
Business Day Convention and there will
be an adjustment to the Calculation
Period.
Floating Rate Option: FRF-PIBOR-AFB
Designated Maturity: 3 Month
Spread: None
Floating Rate Day Count Fraction: Actual/360
Reset Dates: Each 1 April, 1 July, 1 October,
1 January
Compounding: Applicable
Method of Compounding Flat
Compounding Dates: Each 1 July, 1 October, 1 January,
1 April
<PAGE> 15
JP MORGAN
Business Day Locations for Counterparty: Paris, New York
Business Day Locations for Morgan: Paris, New York
Payments will be: Net
3. Account Details
PAYMENTS TO MORGAN:
Account for payments in FRF: Morgan Bank Paris
14 Place Vendome
75001 Paris
France
Favour: Morgan Guaranty Trust Co of
New York - London Office
ABA/Bank No.:
Account No.: 43504300G0090
Reference: Further Credit to Swaps Group
Account: 10004942
Please send MT100 cover cable
to MGT London
PAYMENTS TO COUNTERPARTY:
Account for payments in FRF:
Favour: SERVICE CORPORATION
INTERNATIONAL
ABA/Bank No.: Societe Generale, Paris
Account No.: Code De Banque 30003
Reference: Code De Guichet 03630
F/C: Service Corporation
International
Account #09920023632 RIB 52
4. Offices
(a) The Office of Morgan for the Swap Transaction is LONDON; and
(b) The Office of the Counterparty for the Swap Transaction is HOUSTON.
ALL ENQUIRIES REGARDING PAYMENTS AND/OR RATE RESETTINGS ONLY SHOULD BE SENT TO:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
60 VICTORIA EMBANKMENT
LONDON EC4Y 0JP
ATTENTION: JOANNE CASE
TELEPHONE: 44 1 71 325 3783
FACSIMILE: 44 1 71 325 3862/3863
TELEX: 896631 MGT G
CABLE: MORGANBANK
PLEASE QUOTE THE MORGAN DEAL NUMBER INDICATED ABOVE.
- --------------------------------------------------------------------------------
<PAGE> 16
JP MORGAN
ALL ENQUIRIES REGARDING CONFIRMATIONS SHOULD BE SENT TO:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
60 WALL STREET
NEW YORK, NEW YORK 10260
ATTENTION: WENDY WEBBE
DOCUMENTATION CONTROL GROUP
TELEPHONE: 1-212-648-2991
FACSIMILE: 1-212-648-5117
PLEASE QUOTE THE MORGAN DEAL NUMBER INDICATED ABOVE.
JP MORGAN SECURITIES INCORPORATED is acting solely as agent for Morgan and
will have no obligations under this Transaction.
Each party represents that (i) it is entering into the transaction evidenced
hereby as principal (and not as agent or in any other capacity); (ii) the other
party is not acting as a fiduciary for it; (iii) it is not relying upon any
representations except those expressly set forth in the Agreement or this
Confirmation; (iv) it has consulted with its own legal, regulatory, tax,
business, investment, financial, and accounting advisors to the extent it has
deemed necessary, and it has made its own investment, hedging, and trading
decisions based upon its own judgment and upon any advice from such advisors as
it has deemed necessary and not upon any view expressed by the other party; and
(v) it is entering into this transaction with a full understanding of the
terms, conditions and risks thereof and it is capable of and willing to assume
those risks.
- ------------------------------------------------------------------------------
<PAGE> 17
JP MORGAN
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing a copy of this Confirmation and returning it to us or by
sending to us a letter, telex or facsimile substantially similar to this
letter, which letter, telex or facsimile sets forth the material terms of the
Transaction to which this Confirmation relates and indicates agreement to those
terms. When referring to this Confirmation, please indicate: Morgan Deal
Number: 151341.
Yours sincerely,
JP MORGAN SECURITIES INCORPORATED,
as Agent for and signing on behalf of:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/ RAJAN KUNDRA
------------------
Name: Rajan Kundra
Title: Associate
Confirmed as of the
date first above written:
SERVICE CORPORATION INTERNATIONAL
By: /s/ GREGORY L. CAUTHEN
------------------------
Name: Gregory L. Cauthen
Title: Vice President/Treasurer
- ------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 11.1
SERVICE CORPORATION INTERNATIONAL
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------
1996 1995 1994
-------- -------- --------
(Thousands, except per share amounts)
<S> <C> <C> <C>
PRIMARY:
Net income........................... $265,298 $183,588 $131,045
======== ======== ========
Average number of common shares
outstanding......................... 235,432 201,597 173,018
Common stock equivalents applicable
to options outstanding resulting
from application of the "treasury
stock method" using average stock
price............................... 5,746 2,550 834
-------- -------- --------
Average common and common equivalent
shares used in earnings per share... 241,178 204,147 173,852
======== ======== ========
Primary Earnings Per Common Share:
Net income.......................... $ 1.10 $ .90 $ .75
======== ======== ========
FULLY DILUTED:
Net income........................... $265,298 $183,588 $131,045
Add after tax interest expense
applicable to convertible
debentures.......................... 8,077 13,548 8,501
-------- -------- --------
$273,375 $197,136 $139,546
======== ======== ========
Average number of common shares
outstanding......................... 235,432 201,597 173,018
Common stock equivalents applicable
to options outstanding resulting
from application of the "treasury
stock method" using end of period
stock price (if greater than average
stock price for period)............. 6,091 3,038 984
Assuming conversion of convertible
debentures.......................... 13,662 26,670 20,814
-------- -------- --------
Average shares used in fully diluted
earnings per share................. 255,185 231,305 194,816
======== ======== ========
Fully Diluted Earnings Per Common
Share:
Net income........................ $ 1.07 $ .85 $ .72
======== ======== ========
</TABLE>
<PAGE> 1
EXHIBIT 12.1
SERVICE CORPORATION INTERNATIONAL
RATIO OF EARNINGS TO FIXED CHARGES
(Thousands, except ratio amounts)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Pretax income .......................... $413,881 $294,211 $219,021 $173,492 $139,336
Undistributed income of less than
50% owned equity investees............ (6,173) (3,847) (1,019) (325) (718)
Minority interest in income of
majority owned subsidiaries
with fixed charges.................... 933 1,878 2,234 1,938 1,798
Add fixed charges as adjusted
(from below).......................... 178,291 155,552 102,370 78,841 68,584
-------- -------- -------- -------- --------
$586,932 $447,794 $322,606 $253,946 $209,000
-------- -------- -------- -------- --------
Fixed charges:
Interest expense:
Corporate........................... $136,008 $118,148 $ 80,123 $ 59,631 $ 53,902
Financial services.................. 8,913 10,782 9,912 7,725 5,826
Capitalized......................... 3,099 1,865 584 705 481
Amortization of debt costs............ 2,549 1,093 311 288 328
1/3 of rental expense................. 20,040 14,748 11,485 11,197 8,528
Dividends on preferred securities
of SCI Finance LLC.................. 10,781 10,781 539 -- --
-------- -------- -------- -------- --------
Fixed charges........................... 181,390 157,417 102,954 79,546 69,065
Less: Capitalized interest............ (3,099) (1,865) (584) (705) (481)
-------- -------- -------- -------- --------
Fixed charges as adjusted............... $178,291 $155,552 $102,370 $ 78,841 $ 68,584
-------- -------- -------- -------- --------
Ratio (earnings divided by fixed
charges).............................. 3.24 2.84 3.13 3.19 3.03
</TABLE>
<PAGE> 1
EXHIBIT 21.1
March 10, 1997
<TABLE>
<S> <C>
ALABAMA
- -------
SCI Funeral Services, Inc. (Iowa Corp) Alabama subsidiary
SCI Alabama Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Cedar Oak Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
EC Land Company, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Heritage Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Memory Chapel Funeral Homes, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Memory Hill Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Pineland Memorial Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Walker Memory Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
ALASKA
- ------
SCI Funeral Services, Inc. (Iowa Corp.) Alaska subsidiary
SCI Alaska Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
ARIZONA
- -------
MMI Acquisition Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Funeral Services, Inc. (Iowa Corp.)
National Cremation Society, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Arizona Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Melcher Mortuaries, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Sunland Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
ARKANSAS
- --------
SCI Funeral Services, Inc. (Iowa Corp)
SCI Arkansas Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
The East Funeral Benefit Assurance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
CALIFORNIA
- ----------
SCI Funeral Services, Inc. (Iowa Corp.) California subsidiaries
Eternal Hills Cemetery Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Fremont Cemetery Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Greenwood Memorial Park, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Hong Kong Funeral Homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
International Funeral Parlours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Lima-Salmon-Erickson, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Maridon, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Mish Acquisition Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Mt. View Cemetery of San Bernardino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Green Acres Memorial Park and Mortuary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Oak Hill Improvement Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Ocean View Cemetery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Redding Memorial Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Pierce Brothers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Pierce Brothers Crematorium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Pierce Holdings (California), Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Ted M. Mayr Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI California Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Acheson & Graham Mortuary, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
CWFD, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Ellis-Olson Mortuary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
J. B. Draper Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Joshua Memorial Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
LaFamCo, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
La Verne Cemetery Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Mac Dougall Mortuaries, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Malinow & Silverman, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Miller Enterprises, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Mount Vernon Memorial Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Oakdale Memorial Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Oakdale Mortuary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Southern California Region, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
World Funeral Home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Turner & Stevens Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
COLORADO
- --------
SCI Funeral Services, Inc. (Iowa Corp.) Colorado subsidiary
SCI Colorado Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Western Division, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
CONNECTICUT
- -----------
SCI Funeral Services, Inc. (Iowa Corp.) Connecticut subsidiary
SCI Connecticut Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
DELAWARE
- --------
New Service Corporation International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Provident Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Franklin Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
1
<PAGE> 2
<TABLE>
<S> <C>
Provident Credit Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Aviation, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Executive Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Finance Management Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Funeral Services, Inc. (Iowa Corp.) Delaware subsidiaries
First Memorial Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Gibraltar Mausoleum Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Gibraltar Mausoleum Construction Company, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Rose Hill Securities Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
IFC-Boyertown, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Memorial Guardian Plans, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Alabama Funeral Services, Inc. (Alabama Corp.)
Delaware subsidiary
Jules, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Funeral Services of New York, Inc. (New York Corp.)
Delaware subsidiary
Community Funeral Management Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Georgia Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI International Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Kenyon International Emergency Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Missouri Funeral Services, Inc. (Missouri Corp.)
Delaware subsidiary
IFC-York, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCIT Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Texas Funeral Services, Inc. (TX Corp.) Delaware
subsidiary
SCI Iowa Finance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI International Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Capital Holdings, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70%
SCI Financing Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Special, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Capital Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Investment Capital Corporation (Texas Corp.) Delaware
subsidiary
IFC-YP, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Management Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
International Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Management Finance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
DISTRICT OF COLUMBIA
- --------------------
SCI Funeral Services, Inc. (Iowa Corp.) DC subsidiary
Witzke Funeral Homes, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
FLORIDA
- -------
SCI Funeral Services, Inc. (Iowa Corp) Florida subsidiaries
Gibraltar Mausoleum Corporation (DE Corp.) Florida subsidiaries
Fountainhead Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Gibraltar Mausoleum of Florida, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Hillsboro Memorial Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Lakeview Memorial Gardens, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Funeral Services of Florida, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Dorsey Funeral Home, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
FM Cemetery, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Memorial Plans, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Wallace & White Funeral Home & Crematory, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Woodlawn Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
GEORGIA
- -------
SCI Funeral Services, Inc. (Iowa corp.) Georgia subsidiaries
SCI Georgia Funeral Services, Inc. (Delaware Corp.) Georgia
subsidiary
H.M. Patterson & Son, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Georgia Land, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Southern Division, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Striffler-Hamby Mortuary, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
HAWAII
- ------
SCI Funeral Services, Inc. (Iowa Corp.) Hawaii subsidiaries
SCI Hawaii Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Garden Life Plan, Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50%
Hawaiian Memorial Life Plan, Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
IDAHO
- -----
NO SUBSIDIARIES
</TABLE>
2
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<TABLE>
<S> <C>
ILLINOIS
- --------
Gaerdner Acquisition Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Funeral Services, Inc. (Iowa Corp.) Illinois subsidiaries
Rosehill Memorials, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Illinois Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Central Cemetery Co. of Illinois . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80%
IFS Illinois, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Kolbus Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Leo V. Hennessy Funeral Homes, Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
M&SFH, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
NFS Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Great Lakes Region, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Vault Company of Illinois, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
INDIANA
- -------
SCI Funeral Services, Inc. (Iowa Corp.) Indiana subsidiaries
Gibraltar Mausoleum Corporation (DE Corp.) Indiana subsidiaries
Alpha Services Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Evergreen Sales Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Gibraltar Mausoleum of Indiana, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Gibraltar Services, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Gold Crusader Insurance Agency, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Pioneer Insurance Agency, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Indiana Funeral Services, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Greenlawn Memorial Park, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Roselawn Memorial Association, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Central Region, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Stilinovich & Wiatrolick, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Thomas Funeral Home, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
IOWA
- ----
SCI Funeral Services, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Bunker's Eden Vale, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Iowa Funeral Services, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Rose Hill Memorial Gardens Association, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Iowa Memorial Gardens Association, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
KANSAS
- ------
SCI Funeral Services, Inc. (Iowa Corp.) Kansas subsidiaries
SCI Kansas Funeral Services, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Services of Kansas, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
KENTUCKY
- --------
SCI Funeral Services, Inc. (Iowa Corp) Kentucky subsidiaries
Gibraltar Mausoleum Corporation (DE Corp.) Kentucky subsidiaries
Kentucky Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Kentucky Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99%
Resthaven Memorial Cemetery Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Rose Hill Burial Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
LOUISIANA
- ---------
SCI Funeral Services, Inc. (Iowa Corp) Louisiana subsidiary
SCI Louisiana Funeral Services, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
MAINE
- -----
SCI Funeral Services, Inc. (Iowa Corp) Maine subsidiary
SCI Maine Funeral Services, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
MARYLAND
- --------
LB Acquisition Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Funeral Services, Inc. (Iowa Corp.) Maryland subsidiaries
Gibraltar Mausoleum Corporation (DE Corp.) Maryland subsidiaries
Holly Hill Memorial Gardens, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Witzke Funeral Home of Catonsville, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Witzke, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Hubbard Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Bradley-Ashton Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Danzansky-Goldberg Memorial Chapels, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Edward Sagel Funeral Direction, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Gary L. Kaufman Funeral Home at
Meadowridge Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Gary L. Kaufman Funeral Home of Elkridge, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Gary L. Kaufman Funeral Home Southwest, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
John C. Miller, Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Lemmon Funeral Home of Dulaney Valley, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Loring Byers Funeral Directors, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Moran-Ashton Funeral Home, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Sterling-Ashton Funeral Home, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
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<TABLE>
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MASSACHUSETTS
- -------------
Provident Services, Inc. (Delaware Corp.) Massachusetts subsidiary
PSI Massachusetts, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Funeral Services, Inc. (Iowa Corp.) Massachusetts subsidiary
Affiliated Family Funeral Service, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
AFFS Boston, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%
AFFS North, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%
AFFS Norwood, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%
AFFS Quincy, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%
AFFS South Coast East, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%
AFFS South Coast West, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%
AFFS West, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30%
MFS Holding Company, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Messier Funeral Home, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%
Perlman Funeral Home, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%
Stanetsky Memorial Chapels, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40%
Waring Acquisition Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
MICHIGAN
- --------
SCI Funeral Services, Inc. (Iowa Corp) Michigan subsidiaries
Gibraltar Mausoleum Corporation (DE Corp.) Michigan subsidiaries
Memorial Land Company, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Michigan Funeral Services, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
MINNESOTA
- ---------
SCI Funeral Services, Inc. (Iowa Corp.) Minnesota subsidiary
SCI Minnesota Funeral Services, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Crystal Lake Cemetery Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Crystal Lake Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Hodroff & Sons Funeral Chapel, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
The Crawford Mortuary, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
MISSISSIPPI
- -----------
SCI Funeral Services, Inc. (Iowa Corp.) Mississippi subsidiary
SCI Mississippi Funeral Services, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
MISSOURI
- --------
SCI Funeral Services, Inc. (Iowa Corp) Missouri subsidiary
SCI Missouri Funeral Services, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
C. H. Blackman & Son, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Life Appreciation Funeral Service, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Memorial Guardian Plans, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
MONTANA
- -------
NO SUBSIDIARIES
NEBRASKA
- --------
SCI Funeral Services, Inc. (Iowa Corp) Nebraska subsidiary
SCI Nebraska Funeral Services, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
NEVADA
- ------
SCI Funeral Services, Inc. (Iowa Corp) Nevada subsidiary
Ross, Burke & Knobel Mortuary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCIT Holdings, Inc. (Delaware Corp.) Texas subsidiary
SCI Texas Funeral Services, Inc. (Texas Corp) Nevada subsidiary
SCI Texas Finance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
NEW HAMPSHIRE
- -------------
NO SUBSIDIARIES
NEW JERSEY
- ----------
Goble Acquisition Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Funeral Services, Inc. (Iowa Corp) New Jersey subsidiary
SCIT Holdings, Inc. (Delaware Corp.) New Jersey subsidiaries
SCI New Jersey Funeral Services, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Biondi Funeral Home, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Bloomfield-Cooper Jewish Chapels, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Funeral Livery Co., Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Garden State Crematory, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Gutterman-Musicant Funeral Directors, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Quinn Funeral Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Goble Funeral Home, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Wien & Wien, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
NEW MEXICO
- ----------
SCI Funeral Services, Inc. (Iowa Corp) New Mexico subsidiaries
Memorial Guardian Plans, Inc. (Delaware Corp) New Mexico
subsidiary
Ensure Agency of New Mexico, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI New Mexico Funeral Services, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Alameda Funeral Services, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Lawn Haven Memorial Gardens, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
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<TABLE>
<S> <C>
NEW YORK
- --------
SCI Funeral Services, Inc. (Iowa Corp) New York subsidiary
SCI Funeral Services of New York, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Chas. Peter Nagel Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Community Funeral Management Corporation (Delaware Corp.)
New York subsidiaries
Regan & Denny Funeral Service, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
The Urban Funeral Homes of Greater Buffalo, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
David Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
I. J. Morris, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Kirschenbaum Bros. Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Michael J. Higgins Funeral Service, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
New York Funeral Chapels, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Pirro & Sons Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Eastern Division, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Singleton-Healy Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Thomas M. Quinn & Sons, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80%
George Werst, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Werst Realty Co. Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Services of New York, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
*The Acacia Park Cemetery Association, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
NORTH CAROLINA
- --------------
SCI Funeral Services, Inc. (Iowa Corp) North Carolina subsidiary
SCI North Carolina Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Oaklawn Memorial Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Ridge Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
The P.E. Moody Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
NORTH DAKOTA
- ------------
SCI Funeral Services, Inc. (Iowa Corp) North Dakota subsidiary
Memorial Guardian Plans, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
OHIO
- ----
SCI Funeral Services, Inc. (Iowa Corp.) Ohio subsidiaries
Gibraltar Mausoleum Corporation (DE Corp.) Ohio subsidiaries
Burton Funeral Home-Greenlawn Chapel, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90%
Ciriello Funeral Home - Rose Hill Chapel, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90%
Pioneer of Ohio Insurance Agency, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Selby-Cole Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85%
The Knollwood Cemetery Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Memorial Guardian Plans, Inc. (Delaware Corp.) Ohio subsidiary
Ensure Agency of Ohio, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Ohio Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90%
BKB Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90%
M-D Memorial Chapel, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90%
JLIW Funeral Homes, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90%
Karlo & Sons Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
K & S Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90%
Ohio Cemetery Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
STE Acquisition Corp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Sunset Trust Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Walter-Schoedinger Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
W-K Funeral Homes, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90%
OKLAHOMA
- --------
SCI Funeral Services, Inc. (Iowa Corp.) Oklahoma subsidiaries
AED, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Memorial Gardens Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
RMG Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Resthaven Memory Gardens of Oklahoma City Trust . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Rose Hill Burial Park, a Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90%
Gibraltar Mausoleum Corporation (DE Corp.) Oklahoma subsidiaries
Rose Hill Memorial Park Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
IFC-YP, Inc. (Delaware Corp) Oklahoma subsidiary
IFC-Amedco, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Oklahoma Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Bahner-Fox Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Clagg Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Hillcrest Memorial Park Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Jim Epperson Funeral Service, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Kelley Funeral Homes, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Memory Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SSP Limited Liability Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50%
SSP Insurance Agency, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Sunset Memorial Park Cemetery Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Woodland Memorial Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
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Sentinel Security Plans, Inc.(Virginia Corp.) Oklahoma Subsidiary
SSP Limited Liability Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50%
OREGON
- ------
SCI Funeral Services, Inc. (Iowa Corp) Oregon subsidiaries
Lincoln Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Oregon Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
All Coast Cremation Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Hughes Ransom Mortuary, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
South Coast Funeral Directors, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Uniservice Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
PENNSYLVANIA
- ------------
Cedar Hill Acquisition Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Funeral Services, Inc. (Iowa Corp) Pennsylvania subsidiaries
Gibraltar Mausoleum Corporation (DE Corp.) Pennsylvania
subsidiaries
Forest Lawn Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50%
Speer-Anthony Kaprive Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50%
Grandview Cemetery Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Harold B. Mulligan Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Harold B. Mulligan, Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Remembrance Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Memorial Guardian Plans, Inc.( Delaware Corp) Pennsylvania
subsidiary
Ensure Agency of Pennsylvania, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Pennsylvania Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Auman Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Berks County Memorial Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Cemetery Sales System, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Ed Melenyzer Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Funeral Corporation Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Linwood W. Ott Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Rohland Funeral Home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Hamilton World Crypts, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Lawn-Garden Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Noah's Garden Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Theo. C. Auman, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Auman's, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Forest Hills Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Francis F. Seidel, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Memorial Services Planning Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
RHODE ISLAND
- ------------
NO SUBSIDIARIES
SOUTH CAROLINA
- --------------
SCI Funeral Services, Inc. (Iowa corp.) South Carolina subsidiary
SCI South Carolina Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Greenville Vault Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SOUTH DAKOTA
- ------------
NO SUBSIDIARIES
TENNESSEE
- ---------
SCI Funeral Services, Inc. (Iowa Corp) Tennessee subsidiaries
SCI Tennessee Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Hamilton Memorial Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Lily of the Valley, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Lynnhurst Cemetery, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Memorial Guardian Plans, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Memphis Memory Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Sherwood Memorial Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Woodlawn East, Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Woodlawn Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
TEXAS
- -----
SCI Funeral Services, Inc. (Iowa Corp) Texas subsidiaries
Gibraltar Mausoleum Corporation (DE Corp.) Texas subsidiary
Gibraltar Mausoleum of Texas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCIT Holdings, Inc. (Delaware Corp.) Texas subsidiaries
Moore & Sons Funeral Home and Cemetery, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Texas Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Alonzo Funeral Home Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Brookside Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Brookside Funeral Home West, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Brookside Memorial Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Carroll-Wallace Funeral Directors, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
EFH, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Grand Prairie Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
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Restwood Memorial Park, Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Central Division, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Holdings of Texas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
The New Rose Hill Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Valley Memorial Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Stillbrooke Corporation of Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI International Limited (Delaware Corp.)
Service Corporation International PLC (UK Corp.)
SCI Capital LLC - (TX limited liability company) . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Special, Inc. (Delaware Corp.)
SCI Capital Corporation (Delaware Corp.) Texas subsidiaries
Great Lakes, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Investment Capital Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
UTAH
- ----
SCI Funeral Services, Inc. (Iowa Corp.) Utah subsidiary
SCI Utah Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
VERMONT
- -------
NO SUBSIDIARIES
VIRGINIA
- --------
SCI Funeral Services, Inc. (Iowa Corp.) Virginia subsidiaries
Gibraltar Mausoleum Corporation (DE Corp.) Virginia subsidiary
Kellum Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Memorial Guardian Plans, Inc. (Delaware Corp)
Sentinel Security Plans, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Virginia Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Hampton Memorial Gardens, Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
National Mausoleum Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Parklawn Memorial Park, Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Reid Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Superior Vault Manufacturing Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
WASHINGTON
- ----------
SCI Funeral Services, Inc. (Iowa Corp.) Washington subsidiary
SCI Washington Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Sunset Hills Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Sunset Hills Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Cedar Lawns Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
WEST VIRGINIA
- -------------
SCI Funeral Services, Inc. (Iowa Corp.) West Virginia subsidiary
Gibraltar Mausoleum Corporation (DE Corp.) WV subsidiary
Gibraltar Mausoleum of West Virginia, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI West Virginia Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
WISCONSIN
- ---------
SCI Funeral Services, Inc. (Iowa Corp.) Wisconsin subsidiaries
Cemetery Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Wisconsin Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
ATK Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
WYOMING
- -------
SCI Funeral Services, Inc. (Iowa Corp.) Wyoming subsidiary
Memorial Guardian Plans, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
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AUSTRALIA
- ---------
SCI International Limited (Delaware Corp.) Australia subsidiary
Service Corporation International Australia Pty., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Australian Cremation Society Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
John Hansen Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Hansen Funeral Services Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Lakeside Memorial Park & Crematorium. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 006%
Lakeside Memorial Park & Crematorium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49.997%
Kitleaf Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Labor Funerals Contribution Fund Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Lakeside Memorial Park & Crematorium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49.997%
LePine Holdings Pty. Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
E Taylor & Sons Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Garnar & Son Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
J Ferguson & Son Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
LePine Funeral Services Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
LePine Timbercraft Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
LPH Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Mulqueen Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
W.G. Apps & Sons Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Memorial Guardian Plan Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Metro. Burial & Cremation Society Funeral Cont. Fund . . . . . . . . . . . . . . . . . . . . . . . . . 100%
New South Wales Cremation Company Pty., Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Peter Woodward Funeral Services Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Pine Grove Forest Lawn Funeral Benefit Co. Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . 100%
Purslowe Funeral Homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Mareena Purslowe & Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Tweed Crematorium Pty Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
CANADA
- ------
New Service Corporation International (DE Corp.) Canada subsidiary
SCI Canada Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI International Limited (Delaware Corp.) Canada subsidiary
Service Corporation International (Canada) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
3103-1586 Quebec Inc. - (PQ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Services Funeraires Cowansville Inc. - (PQ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50%
Barthel Funeral Home Ltd. - (Ontario) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Can Ensure Group, Inc. - (Federal) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Christensen Salmon Funeral Homes Ltd. - (Alberta) . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Developpement Woodson Inc. - (PQ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Services Funeraires Cowansville Inc. - (PQ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.5%
Gestion Destin Inc. - (PQ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Services Funeraires Cowansville Inc. - (PQ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.5%
Gestion K. Morris Inc. - (PQ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Services Funeraires Cowansville Inc. - (PQ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.5%
Gestion Laquin Inc. - (PQ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Services Funeraires Cowansville Inc. - (PQ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.5%
Harmony Funeral Services, Inc. - (AB) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Hetherington and Deans Limited - (Ontario) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Hong Kong Funeral Homes B.C. Ltd - (British Columbia) . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Ingram Funeral Home Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
International Funeral Parlours B.C. Ltd - (B.C.) . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Jewell Funeral Home Limited - (ON) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Kaye Funeral Home Limited - (Ontario) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Laurent Theriault Inc. - (PQ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Les Salons Funeraires J.F. Fortin & Fils Ltee - (PQ) . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
McEvoyShields Funeral Homes Ltd. - (Ontario) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Placements Darche, Inc. - (Quebec) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Ed Darche Et Fils, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
RosarMorrison Funeral Home Limited - (Ontario) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Rose Garden Chapels Ltd. - (Alberta) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Salmon Funeral Home Ltd. - (Alberta) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
S.C.I.C. (Quebec) Holdings Limited - (Quebec) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Northwest Division, Inc. - (B.C.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Sylvio Marceau Inc. - (Quebec) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
The Markey Family Funeral Homes Limited - (Ontario) . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
The Thorpe Brothers Funeral Home Co. Limited - (Ontario) . . . . . . . . . . . . . . . . . . . . . . . 100%
WilliamLeeIngram Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
World Funeral Home B.C. Ltd. - (British Columbia) . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
611102 Saskatchewan Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
8
<PAGE> 9
<TABLE>
<S> <C>
FRANCE
- ------
SCI International Limited (Delaware Corp.) French subsidiary
Service Corporation International France (France) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Omnium De Gestion Et De Financement (France) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Groupe Auxia (France) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99%
Funeral International Services (Netherlands) . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9%
FUBUS Handelsund Verwaltungsgesellschaft mbH
(Germany) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
FUNERAL SA (Belgium) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Pompes Funebres Generales (France) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97%
Compania General de Servicios Funerarios
(Spain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26%
Funeral International Services (Netherlands) . . . . . . . . . . . . . . . . . . . . . . . . . . 90.2%
Bahau Funeral Services SDN BHD
(Malaysia) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.33%
Bahau Memorial Park SDN BHD (Malaysia) . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.7%
Compagnia Internazionale Partecipazioni
(Italy) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Organizzazione Funeraria Italiana
(Italy) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98.76%
Onoranze Funebri Toscane Srl
(Italy) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.47%
Agenzia Funebre Lucchese
Franceschini srl
(Italy) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91.72%
Organizzazione Funeraria
Italiana (Italy) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.24%
Societa Imprese Funebri
Empolesi srl (Italy) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.75%
Pompes Funebres Michel SA (Belgium) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%
OSEFI Holding SA (Switzerland) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
PAX (Czech Republic) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57.97%
PFG Lausanne SA (Switzerland) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Funeral International Services
(Netherlands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9%
Pompes Funebres Reunies (Belgium) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Malibran SA (Belgium) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Societe D'Etude Et De Service Pour La
Cremation (Belgium) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35%
Societe De Cremation De Charleroi
(Belgium) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90%
Pompes Funebres Michel SA (Belgium) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%
Singapore Casket Company PLC (Singapore) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.57%
Bahau Funeral Services SDN BHD (Malaysia) . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.33%
Bahau Memorial Park SDN BHD (Malaysia) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.7%
Bahau Funeral Services SDN BHD
(Malaysia) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.33%
Casket Palace Company PLC (Singapore) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
9
<PAGE> 10
<TABLE>
<S> <C>
UNITED KINGDOM
- --------------
SCI International Limited (Delaware Corp.) United Kingdom subsidiary
Service Corporation International PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Carrwood (Funeral Supplies) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Chosen Heritage Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50%
Cooksley & Son Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Demetriou and English Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Dignity Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95%
Down's Crematorium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Great Southern Group PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
The Crematorium Company Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
TJ Davies & Sons Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
White Lady Funerals Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Family Funeral Directors Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Funeral Services London . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Grimmett & Timms Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Kenyon Air Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
JD Fields & Sons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Monumental Masons Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Plantsbrook Group PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Hodgson Holdings PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Kenyon Securities PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
Pitcher and LeQuesne Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
SCI Capital LLC(TX limited liability company) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
</TABLE>
10
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Service Corporation International on Form S-3 (File No. 333-10867), Form S-4
(File Nos. 333-01857 and 33-54996) and Form S-8 (File Nos. 333-00177,
333-00179, 33-9790, 33-17982, 333-02665, 333-19863 and 33-50987) of our report
dated March 21, 1997, on our audits of the consolidated financial statements
and financial statement schedule of Service Corporation International as of
December 31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996, which report is included in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Houston, Texas
March 28, 1997
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an
officer or director or both, of Service Corporation International, a Texas
corporation (the "Company"), does hereby constitute and appoint George R.
Champagne and James M. Shelger his true and lawful attorneys and agents (each
with authority to act alone), with power and authority to sign for and on
behalf of the undersigned the name of the undersigned as officer or director,
or both, of the Company to the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year of the Company ending
December 31, 1996 and to any amendments thereto filed with the Securities and
Exchange Commission, and to any instrument or document filed as a part of, as
an exhibit to or in connection with said Report or amendments; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 13th day of February, 1997.
/s/ R. L. Waltrip
----------------------------
R. L. WALTRIP
<PAGE> 2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an
officer or director or both, of Service Corporation International, a Texas
corporation (the "Company"), does hereby constitute and appoint George R.
Champagne and James M. Shelger his true and lawful attorneys and agents (each
with authority to act alone), with power and authority to sign for and on
behalf of the undersigned the name of the undersigned as officer or director,
or both, of the Company to the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year of the Company ending
December 31, 1996 and to any amendments thereto filed with the Securities and
Exchange Commission, and to any instrument or document filed as a part of, as
an exhibit to or in connection with said Report or amendments; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 13th day of February, 1997.
/s/ ANTHONY L. COELHO
----------------------------
ANTHONY L. COELHO
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an
officer or director or both, of Service Corporation International, a Texas
corporation (the "Company"), does hereby constitute and appoint George R.
Champagne and James M. Shelger his true and lawful attorneys and agents (each
with authority to act alone), with power and authority to sign for and on
behalf of the undersigned the name of the undersigned as officer or director,
or both, of the Company to the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year of the Company ending
December 31, 1996 and to any amendments thereto filed with the Securities and
Exchange Commission, and to any instrument or document filed as a part of, as
an exhibit to or in connection with said Report or amendments; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 13th day of February, 1997.
/s/ Douglas M. Conway
----------------------------
DOUGLAS M. CONWAY
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an
officer or director or both, of Service Corporation International, a Texas
corporation (the "Company"), does hereby constitute and appoint George R.
Champagne and James M. Shelger his true and lawful attorneys and agents (each
with authority to act alone), with power and authority to sign for and on
behalf of the undersigned the name of the undersigned as officer or director,
or both, of the Company to the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year of the Company ending
December 31, 1996 and to any amendments thereto filed with the Securities and
Exchange Commission, and to any instrument or document filed as a part of, as
an exhibit to or in connection with said Report or amendments; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 13th day of February, 1997.
/s/ Jack Finkelstein
----------------------------
JACK FINKELSTEIN
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an
officer or director or both, of Service Corporation International, a Texas
corporation (the "Company"), does hereby constitute and appoint George R.
Champagne and James M. Shelger his true and lawful attorneys and agents (each
with authority to act alone), with power and authority to sign for and on
behalf of the undersigned the name of the undersigned as officer or director,
or both, of the Company to the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year of the Company ending
December 31, 1996 and to any amendments thereto filed with the Securities and
Exchange Commission, and to any instrument or document filed as a part of, as
an exhibit to or in connection with said Report or amendments; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 13th day of February, 1997.
/s/ A. J. Foyt, Jr.
----------------------------
A. J. FOYT, JR.
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an
officer or director or both, of Service Corporation International, a Texas
corporation (the "Company"), does hereby constitute and appoint George R.
Champagne and James M. Shelger his true and lawful attorneys and agents (each
with authority to act alone), with power and authority to sign for and on
behalf of the undersigned the name of the undersigned as officer or director,
or both, of the Company to the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year of the Company ending
December 31, 1996 and to any amendments thereto filed with the Securities and
Exchange Commission, and to any instrument or document filed as a part of, as
an exhibit to or in connection with said Report or amendments; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 13th day of February, 1997.
/s/ James J. Gavin, Jr.
----------------------------
JAMES J. GAVIN, JR.
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an
officer or director or both, of Service Corporation International, a Texas
corporation (the "Company"), does hereby constitute and appoint George R.
Champagne and James M. Shelger his true and lawful attorneys and agents (each
with authority to act alone), with power and authority to sign for and on
behalf of the undersigned the name of the undersigned as officer or director,
or both, of the Company to the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year of the Company ending
December 31, 1996 and to any amendments thereto filed with the Securities and
Exchange Commission, and to any instrument or document filed as a part of, as
an exhibit to or in connection with said Report or amendments; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 13th day of February, 1997.
/s/ James H. Greer
----------------------------
JAMES H. GREER
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an
officer or director or both, of Service Corporation International, a Texas
corporation (the "Company"), does hereby constitute and appoint George R.
Champagne and James M. Shelger his true and lawful attorneys and agents (each
with authority to act alone), with power and authority to sign for and on
behalf of the undersigned the name of the undersigned as officer or director,
or both, of the Company to the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year of the Company ending
December 31, 1996 and to any amendments thereto filed with the Securities and
Exchange Commission, and to any instrument or document filed as a part of, as
an exhibit to or in connection with said Report or amendments; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 13th day of February, 1997.
/s/ L. William Heiligbrodt
----------------------------
L. WILLIAM HEILIGBRODT
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an
officer or director or both, of Service Corporation International, a Texas
corporation (the "Company"), does hereby constitute and appoint George R.
Champagne and James M. Shelger his true and lawful attorneys and agents (each
with authority to act alone), with power and authority to sign for and on
behalf of the undersigned the name of the undersigned as officer or director,
or both, of the Company to the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year of the Company ending
December 31, 1996 and to any amendments thereto filed with the Securities and
Exchange Commission, and to any instrument or document filed as a part of, as
an exhibit to or in connection with said Report or amendments; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 13th day of February, 1997.
/s/ B. D. Hunter
----------------------------
B. D. HUNTER
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an
officer or director or both, of Service Corporation International, a Texas
corporation (the "Company"), does hereby constitute and appoint George R.
Champagne and James M. Shelger his true and lawful attorneys and agents (each
with authority to act alone), with power and authority to sign for and on
behalf of the undersigned the name of the undersigned as officer or director,
or both, of the Company to the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year of the Company ending
December 31, 1996 and to any amendments thereto filed with the Securities and
Exchange Commission, and to any instrument or document filed as a part of, as
an exhibit to or in connection with said Report or amendments; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 13th day of February, 1997.
/s/ John W. Mecom, Jr.
----------------------------
JOHN W. MECOM, JR.
<PAGE> 11
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an
officer or director or both, of Service Corporation International, a Texas
corporation (the "Company"), does hereby constitute and appoint George R.
Champagne and James M. Shelger his true and lawful attorneys and agents (each
with authority to act alone), with power and authority to sign for and on
behalf of the undersigned the name of the undersigned as officer or director,
or both, of the Company to the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year of the Company ending
December 31, 1996 and to any amendments thereto filed with the Securities and
Exchange Commission, and to any instrument or document filed as a part of, as
an exhibit to or in connection with said Report or amendments; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 13th day of February, 1997.
/s/ Clifton H. Morris, Jr.
----------------------------
CLIFTON H. MORRIS, JR.
<PAGE> 12
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an
officer or director or both, of Service Corporation International, a Texas
corporation (the "Company"), does hereby constitute and appoint George R.
Champagne and James M. Shelger his true and lawful attorneys and agents (each
with authority to act alone), with power and authority to sign for and on
behalf of the undersigned the name of the undersigned as officer or director,
or both, of the Company to the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year of the Company ending
December 31, 1996 and to any amendments thereto filed with the Securities and
Exchange Commission, and to any instrument or document filed as a part of, as
an exhibit to or in connection with said Report or amendments; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 13th day of February, 1997.
/s/ E. H. Thornton, Jr.
----------------------------
E. H. THORNTON, JR.
<PAGE> 13
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an
officer or director or both, of Service Corporation International, a Texas
corporation (the "Company"), does hereby constitute and appoint George R.
Champagne and James M. Shelger his true and lawful attorneys and agents (each
with authority to act alone), with power and authority to sign for and on
behalf of the undersigned the name of the undersigned as officer or director,
or both, of the Company to the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year of the Company ending
December 31, 1996 and to any amendments thereto filed with the Securities and
Exchange Commission, and to any instrument or document filed as a part of, as
an exhibit to or in connection with said Report or amendments; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 13th day of February, 1997.
/s/ W. Blair Waltrip
----------------------------
W. BLAIR WALTRIP
<PAGE> 14
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an
officer or director or both, of Service Corporation International, a Texas
corporation (the "Company"), does hereby constitute and appoint George R.
Champagne and James M. Shelger his true and lawful attorneys and agents (each
with authority to act alone), with power and authority to sign for and on
behalf of the undersigned the name of the undersigned as officer or director,
or both, of the Company to the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the fiscal year of the Company ending
December 31, 1996 and to any amendments thereto filed with the Securities and
Exchange Commission, and to any instrument or document filed as a part of, as
an exhibit to or in connection with said Report or amendments; and the
undersigned does hereby ratify and confirm as his own act and deed all that
said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 13th day of February, 1997.
/s/ Edward E. Williams
----------------------------
EDWARD E. WILLIAMS
<PAGE> 15
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an
officer or director or both, of Service Corporation International, a Texas
corporation (the "Company"), does hereby constitute and appoint James M.
Shelger his true and lawful attorney and agent with power and authority to sign
for and on behalf of the undersigned the name of the undersigned as officer or
director, or both, of the Company to the Company's Annual Report to the
Securities and Exchange Commission on Form 10-K for the fiscal year of the
Company ending December 31, 1996 and to any amendments thereto filed with the
Securities and Exchange Commission, and to any instrument or document filed as
a part of, as an exhibit to or in connection with said Report or amendments;
and the undersigned does hereby ratify and confirm as his own act and deed all
that said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 21st day of March, 1997.
/s/ George R. Champagne
----------------------------
GEORGE R. CHAMPAGNE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEET OF SERVICE CORPORATION INTERNATIONAL AS OF DECEMBER 31, 1996 AND
THE RELATED STATEMENT OF INCOME FOR THE TWELVE MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 44,131
<SECURITIES> 565,145
<RECEIVABLES> 997,736
<ALLOWANCES> 75,102
<INVENTORY> 139,019
<CURRENT-ASSETS> 714,040
<PP&E> 1,776,534
<DEPRECIATION> 319,459
<TOTAL-ASSETS> 8,869,770
<CURRENT-LIABILITIES> 607,543
<BONDS> 2,048,737
0
0
<COMMON> 236,193
<OTHER-SE> 1,999,124
<TOTAL-LIABILITY-AND-EQUITY> 8,869,770
<SALES> 2,171,496
<TOTAL-REVENUES> 2,294,194
<CGS> 1,680,246
<TOTAL-COSTS> 1,689,742
<OTHER-EXPENSES> 63,798
<LOSS-PROVISION> 12,147
<INTEREST-EXPENSE> 147,470
<INCOME-PRETAX> 413,881
<INCOME-TAX> 148,583
<INCOME-CONTINUING> 265,298
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 265,298
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.07
</TABLE>
