<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, 1997
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
HOUSTON, TEXAS 77019
(Address of principal executive offices) (Zip code)
</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
------------------- -----------------------------------------
<S> <C>
Common Stock ($1 par value) New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
</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 $10,632,528,700 based upon a closing market price of $42.50 on
March 26, 1998 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 26, 1998 was 255,840,952 (excluding treasury shares).
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement in connection with its 1998
Annual Meeting of Shareholders (Part III)
================================================================================
<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, 1997, the Company operated 3,127 funeral service locations, 392
cemeteries and 166 crematoria located in 17 countries on five continents. 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 1997, the Company acquired 294 funeral service locations, 51
cemeteries and 19 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 two North American divisions covering the United States and
Canada and an international division responsible for all operations in Europe,
the Pacific Rim and South America. 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. At December 31, 1997, the
Company owned 147 funeral service location/cemetery combinations and operated 54
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, 1997, the Company's unfulfilled
prearranged funeral contracts, including accumulated trust fund earnings and
increased benefits on insurance products, amounted to $3.163 billion, of which
$274 million is estimated to be fulfilled in 1998. The unfulfilled prearranged
funeral
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contracts at December 31, 1996 were $2.726 billion. For additional information
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 1997, the Company,
including companies acquired by it, performed approximately 10%, 28%, 14% and
25% 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.
2
<PAGE> 4
At December 31, 1997, Provident had $199 million in loans outstanding and
$50 million of unfunded loan commitments. At December 31, 1996, Provident had
$146 million in loans outstanding and $55 million of unfunded loan commitments.
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, 1997, the Company employed 24,072 (15,403 in the United
States) persons on a full time basis and 12,120 (8,421 in the United States)
persons on a part time basis. Of the full time employees, 23,430 were in the
Funeral and Cemetery Operations, eight were in Financial Services and 634 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.
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 Monopoly was eliminated in 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 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, 1997, the Company owned the real estate and buildings of
2,552 of its funeral service and cemetery locations and leased facilities in
connection with 1,133 of such operations. In addition, the Company leased four
aircraft pursuant to cancelable leases. At December 31, 1997, the Company
operated 11,498 vehicles, of which 8,641 were owned and 2,857 were leased. For
additional information regarding leases, see Note 10 to the consolidated
financial statements in Item 8 of this Form 10-K.
3
<PAGE> 5
The Company's 392 cemeteries contain an aggregate of approximately 30,677
acres, of which approximately 54% 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.
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 26, 1998 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........................ (67) Chairman of the Board and Chief Executive 1962
Officer
L. William Heilbrodt................. (56) President and Chief Operating Officer 1988
W. Blair Waltrip..................... (43) Executive Vice President Operations 1980
Jerald L. Pullins.................... (56) Executive Vice President International 1992
Operations
John W. Morrow, Jr. ................. (62) Executive Vice President Special Services 1989
George R. Champagne.................. (44) Senior Vice President Chief Financial Officer 1989
Glenn G. McMillen.................... (55) Senior Vice President Operations 1993
Richard T. Sells..................... (58) Senior Vice President Preneed Sales 1987
James M. Shelger..................... (48) Senior Vice President General Counsel 1987
and Secretary
Jack L. Stoner....................... (52) Senior Vice President Administration 1992
T. Craig Benson...................... (36) Vice President International Operations 1990
Gregory L. Cauthen................... (40) Vice President Treasurer 1995
J. Daniel Garrison................... (46) Vice President International Operations 1998
W. Mark Hamilton..................... (33) Vice President Prearranged Funeral Services 1996
Lowell A. Kirkpatrick, Jr. .......... (39) Vice President Operations, Finance and 1994
Development
Stephen M. Mack...................... (46) Vice President Corporate Operations 1998
Todd A. Matherne..................... (43) Vice President Operations, Finance 1996
and Development
Vincent L. Visosky................... (50) Vice President Operational Controller 1989
Michael R. Webb...................... (40) Vice President International Corporate 1998
Development
Henry M. Nelly, III.................. (53) President -- Provident Services, 1989
Inc., a subsidiary of the Company
</TABLE>
- ---------------
(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.
4
<PAGE> 6
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 and
in February 1998 to Vice President Operations, Finance and Development. 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. W. Blair Waltrip is a son of
R. L. Waltrip, T. Craig Benson is a son-in-law of R. L. Waltrip and 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, 1997, there were 7,720 holders of record of
the Company's common stock.
The Company has declared 99 consecutive quarterly dividends on its common
stock since it began paying dividends in 1974. The dividend rate is currently
$.09 per share per quarter, or an indicated annual rate of $.36 per share. For
the three years ended December 31, 1997, dividends per share were $.30, $.24 and
$.22, respectively.
The table below shows the Company's quarterly high and low common stock
prices:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1997 1996 1995
--------------- --------------- ---------------
HIGH LOW HIGH LOW HIGH LOW
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
First............................. $33.88 $26.88 $24.75 $19.44 $14.56 $13.13
Second............................ 36.00 29.63 30.13 24.13 15.81 13.44
Third............................. 35.75 29.81 29.44 27.63 19.75 15.19
Fourth............................ 38.00 27.88 30.75 26.50 22.00 18.81
</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.
5
<PAGE> 7
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues........................ $ 2,468,402 $2,294,194 $1,652,126 $1,117,175 $ 899,178
Income before extraordinary loss
and cumulative effect of
change in accounting
principle..................... 374,552 265,298 183,588 131,045 103,092
Net income...................... 333,750 265,298 183,588 131,045 101,061
Earnings per share**:
Income before extraordinary
loss and cumulative effect
of change in accounting
principle --
Basic.................... 1.53 1.13 .92 .76 .62
Diluted.................. 1.47 1.08 .86 .71 .59
Net income --
Basic.................... 1.36 1.13 .92 .76 .61
Diluted.................. 1.31 1.08 .86 .71 .58
Dividends per share............. .30 .24 .22 .21 .20
Total assets.................... 10,306,863 8,869,770 7,672,387 5,161,888 3,683,304
Long-term debt.................. 2,634,699 2,048,737 1,712,464 1,330,177 1,062,222
Convertible preferred securities
of SCI Finance LLC............ -- 172,500 172,500 172,500 --
Stockholders' equity............ 2,726,004 2,235,317 1,975,345 1,196,622 884,513
Shares outstanding.............. 252,924 236,193 234,542 189,714 169,718
Ratio of earnings to fixed
charges*...................... 4.29 3.24 2.84 3.13 3.19
</TABLE>
- ---------------
* 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.
** Earnings per share amounts have been restated to reflect the December 1997
adoption of Statement of Financial Accounting Standards No. 128.
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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)
A primary objective of the Company is to maximize shareholder value. To
accomplish this goal, one of the Company's strategies has been to provide
consistent growth in earnings per share. This growth strategy initiates with the
Company producing significant cash flow from its existing cluster operations,
then continues 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 acquisitions 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 enhancing products, services and systems;
leveraging operating and overhead costs; strengthening buying power; and
expanding preneed sales.
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 fluctuations 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 approximately 400 clusters, which range in size
from two operations to 67 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 1997 compared to 1996
Segment information for the Company's three lines of business was as
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, PERCENTAGE
----------------------------------------- INCREASE INCREASE
1997 1996 (DECREASE) (DECREASE)
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Funeral............. $ 1,727,003 $ 1,663,387 $ 63,616 3.8%
Cemetery............ 724,862 612,421 112,441 18.4
Financial
services......... 16,537 18,386 (1,849) (10.1)
----------- ----------- -------- -----
2,468,402 2,294,194 174,208 7.6
Costs and expenses:
Funeral............. (1,318,920) (1,282,546) 36,374 2.8
Cemetery............ (452,965) (397,700) 55,265 13.9
Financial
services......... (8,905) (9,496) (591) (6.2)
----------- ----------- -------- -----
(1,780,790) (1,689,742) 91,048 5.4
Gross profit margin
and percentage:
Funeral............. 408,083 23.6% 380,841 22.9% 27,242 7.2
Cemetery............ 271,897 37.5% 214,721 35.1% 57,176 26.6
Financial
services......... 7,632 46.2% 8,890 48.4% (1,258) (14.2)
----------- ----- ----------- ----- -------- -----
$ 687,612 27.9% $ 604,452 26.3% $ 83,160 13.8%
=========== ===== =========== ===== ======== =====
</TABLE>
7
<PAGE> 9
Funeral
Funeral revenues were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, PERCENTAGE
------------------------- INCREASE INCREASE
1997 1996 (DECREASE) (DECREASE)
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Existing clusters:
United States......................... $ 892,451 $ 820,860 $ 71,591 8.7%
France................................ 485,264 537,079 (51,815) (9.6)
Other European........................ 186,238 162,830 23,408 14.4
Other foreign......................... 114,389 115,707 (1,318) (1.1)
---------- ---------- -------- ----
1,678,342 1,636,476 41,866 2.6
---------- ---------- -------- ----
New clusters:*
United States......................... 21,061 4,475 16,586
Other European........................ 16,378 2,847 13,531
Other foreign......................... 2,113 -- 2,113
---------- ---------- --------
39,552 7,322 32,230
---------- ---------- -------- ----
Total clusters........................ 1,717,894 1,643,798 74,096 4.5
Non-cluster and disposed operations..... 9,109 19,589 (10,480)
---------- ---------- -------- ----
Total funeral revenues........ $1,727,003 $1,663,387 $ 63,616 3.8%
========== ========== ======== ====
</TABLE>
- ---------------
* Represents new geographic cluster areas entered into since the beginning of
1996 for the period that those businesses were owned by the Company.
The $41,866 increase in revenues at existing clusters was the result of a
2.4% increase in the number of funeral services performed (515,733 compared to
503,476) and a slightly higher average sales price ($3,254 compared to $3,250).
Acquisitions since January 1, 1996, included in existing clusters, accounted for
$97,843 of the existing cluster revenue increase. Excluding a $68,138 decrease
in French revenue caused exclusively by a change in the US dollar / French franc
exchange rate, businesses owned before 1996 had a revenue increase of $12,161.
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 improved
merchandising of funeral services and products. The Company is the world's
largest in the funeral service industry and currently performs approximately
10%, 28%, 14% and 25% 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, 1997, the Company sold (net of
cancellations) approximately $509,000 of prearranged funeral services compared
to approximately $512,000 for the same period in 1996. 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.
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<PAGE> 10
Funeral costs and expenses were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, PERCENTAGE
------------------------- INCREASE INCREASE
1997 1996 (DECREASE) (DECREASE)
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Existing clusters:
United States......................... $ 581,633 $ 528,918 $ 52,715 10.0%
France................................ 415,056 466,136 (51,080) (11.0)
Other European........................ 144,513 123,517 20,996 17.0
Other foreign......................... 78,944 76,816 2,128 2.8
---------- ---------- -------- -----
1,220,146 1,195,387 24,759 2.1
---------- ---------- -------- -----
New clusters:*
United States......................... 15,805 3,192 12,613
Other European........................ 13,770 2,438 11,332
Other foreign......................... 1,753 -- 1,753
---------- ---------- -------- -----
31,328 5,630 25,698
---------- ---------- -------- -----
Total clusters........................ 1,251,474 1,201,017 50,457 4.2
Non-cluster and disposed operations..... 12,730 19,209 (6,479)
Administrative overhead................. 54,716 62,320 (7,604) (12.2)
---------- ---------- -------- -----
Total funeral costs and
expenses.................... $1,318,920 $1,282,546 $ 36,374 2.8%
========== ========== ======== =====
</TABLE>
The $24,759 increase in costs and expenses from existing clusters is
primarily the result of the period to period increase in the number of funeral
services performed. Acquisitions since January 1, 1996, included in existing
clusters, accounted for $73,762 of the existing cluster cost increase. Excluding
a $60,399 decrease in French costs caused exclusively by a change in the US
dollar/French franc exchange rate, businesses owned before 1996 had a cost
increase of $11,396. The gross profit margin before administrative overhead for
existing clusters increased to 27.3% in 1997 from 27.0% in 1996. 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.
The overall funeral gross profit margin improved in 1997 to 23.6%, compared
to 22.9% in 1996. Contributing to this period to period improvement were the
Company's French operations which had a margin improvement to 11.0% from 9.8%.
This margin percentage is consistent with the Company's expectations for these
operations.
Administrative overhead costs expressed as a percentage of total funeral
revenues, decreased to 3.2%, compared to 3.7% in 1996.
Cemetery
Cemetery revenues were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------- PERCENTAGE
1997 1996 INCREASE INCREASE
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Existing clusters:
United States............................ $637,136 $546,462 $ 90,674 16.6%
Other European........................... 21,010 15,271 5,739 37.6
Other foreign............................ 49,024 46,155 2,869 6.2
-------- -------- -------- -----
707,170 607,888 99,282 16.3
-------- -------- -------- -----
New clusters*.............................. 10,517 -- 10,517
-------- -------- -------- -----
Total clusters................... 717,687 607,888 109,799 18.1
Non-cluster and disposed operations........ 7,175 4,533 2,642 58.3
-------- -------- -------- -----
Total cemetery revenues.......... $724,862 $612,421 $112,441 18.4%
======== ======== ======== =====
</TABLE>
9
<PAGE> 11
Revenues from existing clusters increased $99,282. Included in the existing
cluster increase were $49,935 in increased revenues from cemeteries acquired
since the beginning of 1996, while revenues from existing cluster locations
owned before 1996 increased $49,347 due primarily to increased preneed sales of
property and merchandise, higher average sales prices for these items and higher
investment earnings on trusted amounts. 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.
Cemetery costs and expenses were as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------- PERCENTAGE
1997 1996 INCREASE INCREASE
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Existing clusters:
United States............................ $365,437 $329,530 $35,907 10.9%
Other European........................... 12,378 9,571 2,807 29.3
Other foreign............................ 26,875 25,288 1,587 6.3
-------- -------- ------- ----
404,690 364,389 40,301 11.1
-------- -------- ------- ----
New clusters*.............................. 8,191 13 8,178
-------- -------- ------- ----
Total clusters................... 412,881 364,402 48,479 13.3
Non-cluster and disposed operations........ 4,681 3,913 768 19.6
Administrative overhead.................... 35,403 29,385 6,018 20.5
-------- -------- ------- ----
Total cemetery costs and
expenses....................... $452,965 $397,700 $55,265 13.9%
======== ======== ======= ====
</TABLE>
Costs and expenses at existing clusters increased $40,301 due primarily to
an increase of $31,667 from cemeteries acquired since the beginning of 1996,
while costs from existing cluster cemeteries acquired before 1996 increased
$8,634. The overall cemetery gross profit margin increased to 37.5% in 1997 from
35.1% 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 4.9% of
revenues this year compared to 4.8% last year. 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") reported gross profit of $7,632 for the year ended December 31,
1997, compared to $8,890 for the same period in 1996. Provident's average
outstanding loan portfolio during the current year decreased to $182,375
compared to $190,936 in 1996, and the average interest rate spread also
decreased to 3.18% compared to 3.64% in 1996.
Other Income and Expenses
Expressed as a percentage of revenues, general and administrative expenses
decreased slightly to 2.7% in 1997 compared to 2.8% in 1996. These expenses
increased $3,566 or 5.6% during the year primarily from increased personnel
costs.
Interest expense, which excludes the amount incurred by financial service
operations, decreased $1,837 or 1.3% during the current year. The decreased
interest expense reflects an approximately 130 basis point decrease in average
interest rates on indebtedness offset by the Company's higher debt level in
1997. The decreased average interest rate is primarily attributable to the
Company's 1997 refinancing of certain long-term debt and hedging programs
associated with its international investments.
During the first quarter of 1997, the Company sold its interest in Equity
Corporation International ("ECI") producing a before tax gain of $68,100.
Dividends on preferred securities of SCI Finance LLC were
10
<PAGE> 12
$4,382 in 1997 compared to $10,781 in 1996, a decrease of $6,399 or 59.4%. This
decrease is the result of the May 1997 redemption of all outstanding shares of
its convertible preferred securities of SCI Finance LLC.
The provision for income taxes reflects a 35.4% effective tax rate for 1997
as compared to a 35.9% effective tax rate in 1996. The decrease in the effective
tax rate is due primarily to lower taxes from international operations (1997
included a tax benefit relating to enacted tax rate changes in certain foreign
tax jurisdictions), partially offset by the tax impact from the gain on sale of
the Company's interest in ECI which is reflected at the Company's higher
domestic tax rate.
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>
11
<PAGE> 13
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>
- ---------------
* Represents new geographic cluster areas entered into since the beginning of
1995 for the period that those businesses were owned by the Company.
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 in
August 1995.
During the year ended December 31, 1996, the Company sold (net of
cancellations) approximately $512,000 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.
12
<PAGE> 14
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% in 1995. Acquisitions since the beginning
of 1995, included in existing clusters, accounted for $23,980 of the existing
gross profit increase. 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% in 1995 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% in 1995) was the Company's French operations. French
operations had an increased gross profit margin of 9.8% in 1996, compared to
9.4% in 1995, however 1996 reflects a full year's 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% in 1995. 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.
13
<PAGE> 15
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 year's results from a large United States acquisition
in October 1995. A majority of these properties were additions to existing
clusters. The remaining existing cluster revenue increase of $37,216 was
contributed by operations acquired before 1995.
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
United Kingdom........................ 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 $48,864 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% in
1995. 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 in
1996 compared to 3.8% in 1995. This administrative overhead cost increase was
primarily
14
<PAGE> 16
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.
Financial Services
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 1996 to
approximately $191,000 with an average interest rate spread of 3.6% compared to
approximately $206,000 and 3.7%, respectively, in 1995.
Other Income and Expenses
Expressed as a percentage of revenues, general and administrative expenses
were 2.8% in 1996 compared to 3.2% in 1995. 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
("Commission") that offered to acquire 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
exchange offer for Loewen.
Interest expense, which excludes the amount incurred by financial service
operations, increased $20,409 or 17.3% during 1996 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
December 31, 1996, compared to 1995. 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 1995. The decrease in the
effective tax rate is due primarily to lower taxes from international
operations.
FINANCIAL CONDITION AND LIQUIDITY AT DECEMBER 31, 1997:
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 Commission. The Company believes cash from operations,
additional funds available under its revolving credit agreements, proceeds from
public and private offerings of securities will be sufficient to continue its
current acquisition program and operating policies.
At December 31, 1997, the Company had net working capital of $275,966 and a
current ratio of 1.52:1, compared to working capital of $106,497 and a current
ratio of 1.18:1 at December 31, 1996.
Revolving Credit Agreements
The Company has various revolving credit facilities and lines of credit
which currently provide for aggregate borrowings of approximately $1,140,000. At
December 31, 1997, approximately $530,000 was available under these facilities.
These facilities have financial compliance provisions that contain certain
restrictions on levels of net worth, debt, liens and guarantees.
15
<PAGE> 17
Sources and Uses of Cash
Cash Flows from Operating Activities: Net cash provided by operating
activities was $299,436 for the year ended December 31, 1997, compared to
$209,857 for the same period in 1996, an increase of $89,579. This increase was
primarily due to improved operating results in 1997. 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 $633,444 for the year ended December 31, 1997, compared to $480,126 for the
same period in 1996, an increase of $153,318. This increase was primarily due to
a $130,411 increase in cash used in acquisitions and $37,380 of increased
capital expenditures including new construction of facilities and major
improvements to existing properties. Cash used for capital expenditures was
$230,532 during the year ended December 31, 1997. Additionally, the Company used
approximately $88,000 to increase its investment in existing equity investees,
while approximately $147,000 in cash was provided by the sale of the Company's
interest in ECI. Cash used relating to prearranged funeral activities decreased
due to the timing of cash payments to and withdrawals from trusts, offset by
increased cash outlays on prearranged marketing efforts.
Cash Flows from Financing Activities: Net cash provided by financing
activities was $336,754 for the year ended December 31, 1997, compared to
$256,916 for the same period in 1996, an increase of $79,838.
As of December 31, 1997, the Company's debt to capitalization ratio was
49.8% compared to 47.3% at December 31, 1996. The interest rate coverage ratio
for the year ended December 31, 1997 was 4.43:1 (excluding the gain on the sale
of the Company's investment in ECI), compared to 3.62:1 for the same period in
1996. 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, 1997, the Company had approximately $530,000 of available borrowings under
various revolving credit facilities and lines of credit. At December 31, 1997,
the Company had the ability to issue $550,000 in securities registered with the
Commission under a shelf registration (In March 1998, the company issued
$500,000 of long-term notes under the shelf to repay borrowings under the
company's credit facilities). In addition, 15,369,000 shares of common stock and
a total of $201,000 of guaranteed promissory notes and convertible debentures
are registered with the Commission 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. During 1997, the Company 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 investment
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
16
<PAGE> 18
maturity of the policies. The Company is currently reallocating the portfolio to
achieve a new asset allocation of approximately 65% equity and 35% fixed income.
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 by 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
will stimulate future revenue growth. Prearranged funeral services fulfilled as
a percent of the total North American funerals performed annually approximates
25% 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 1997, 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 fewer sales dollars than a traditional
funeral service, the Company 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 ("FAS")
No. 132 "Employers' Disclosures about Pensions and Other Postretirement
Benefits", FAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information", and FAS No. 130 "Reporting Comprehensive Income" for the year
ended December 31, 1998. FAS No. 132 revises disclosures about pension and other
postretirement benefit plans, FAS No. 131 revises standards for reporting
information about operating segments, and FAS No. 130 establishes standards for
reporting and display of comprehensive income. The adoption of these disclosure
standards will not have a material impact on the consolidated financial
statements.
Year 2000 Issue
The "Year 2000" issue refers to the inability of certain computer programs
to correctly differentiate the century from a date in which the year is
represented by only two digits. A computer system which is not year 2000
compliant might not be able to process certain data or possibly cause the entire
computer system to malfunction. The Company is currently assessing any potential
impact that changing to the year 2000 will have on the computer programs that
operate within the Company or are used by major vendors or service providers.
Cautionary Statement on Forward-looking Statements
The statements contained in this Annual Report that are not historical
facts are forward-looking statements within the meaning of the private
Securities Litigation Reform Act of 1995. These statements may
17
<PAGE> 19
be accompanied by words such as "believe," "estimate," "expect," "anticipate,"
or "predict," that convey the uncertainty of future events or outcomes. These
statements are based on assumptions that the Company believes are reasonable;
however many important factors could cause the Company's actual results in the
future to differ materially from the forward-looking statements made herein and
in any other documents or oral presentations made by, or on behalf of, the
Company. Important factors which could cause actual results to differ materially
from those in forward-looking statements include, among others, the following:
(1) Changes in general economic conditions both domestically and
internationally impacting financial markets (e.g. marketable security
values as well as currency and interest rate fluctuations).
(2) Changes in domestic and international political and/or regulatory
environments in which the Company operates, including tax and accounting
policies. Changes in regulations may impact the Company's ability to enter
or expand new markets.
(3) Changes in consumer demand for the Company's services caused by
several factors such as changes in local death rates, cremation rates,
competitive pressures and local economic conditions.
(4) The Company's ability to identify and complete additional
acquisitions on terms that are favorable to the Company, to successfully
integrate acquisitions into the Company's business and to realize expected
cost savings in connection with such acquisitions. The Company's future
results may be materially impacted by changes in the level of acquisition
activity.
The Company assumes no obligation to publicly update or revise any
forward-looking statements made herein or any other forward-looking statements
made by the Company.
Quantitative and Qualitative Disclosures about Market Risk
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
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.
Fair values included herein have been determined based on market prices provided
by counterparties. The information presented below should be read in conjunction
with notes four, eight and nine to the consolidated financial statements.
In general, interest rates are managed such that 40% to 60% 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, the Company's total debt has been converted
into approximately $1,078,000 of fixed interest rate debt at a weighted average
rate of 7.0% and approximately $1,386,000 of floating interest rate debt at a
weighted average rate of 5.5%. At December 31, 1997, a one percent increase in
the various floating rate indices referenced in the debt and swaps (excluding
amounts borrowed to issue loans by Provident) would cause a $13,860 net increase
in interest expense. However, the Company's overall sensitivity to floating
interest rates is diversified in that approximately 40% of the Company's
floating rate exposure is based in four markets other than the United States.
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, approximately 6% of the Company's net
assets and approximately 8% of the Company's operating earnings are subject to
translation risk.
18
<PAGE> 20
Equity-Price Risk Management
In connection with prearranged funeral operations and preneed cemetery
merchandise sales, the Company owns investments in equity securities and mutual
funds which are sensitive to current market prices. Cost and market values as of
December 31, 1997 and 1996, are presented in notes four and five to the
consolidated financial statements.
Market-Rate Sensitive Instruments and Risk Management
The following discussion about the Company's risk-management activities
includes "forward-looking statements" that involve risk and uncertainties.
Actual results could differ materially from those projected in the
forward-looking statements.
The following table summarizes the financial instruments and derivative
instruments held by the Company at December 31, 1997, which are sensitive to
changes in interest rates, foreign exchange rates, and equity prices. The
Company uses interest rate swaps and cross-currency interest rate swaps to
manage these primary market exposures associated with underlying assets and
liabilities. The Company uses these instruments to reduce risk by essentially
creating offsetting market exposures. The instruments held by the Company are
not leveraged and are held for non-speculative purposes.
For certain assets and debt, the table below presents principal cash flows
that exist by maturity date and the related average interest rate. For swaps,
the table presents the notional amounts and expected interest rates that the
Company will receive and pay that exist by contractual dates. The notional
amount represents the foreign currency notional amount converted to US dollars
at an estimated future currency exchange rate, and is used to calculate the
contractual payments to be exchanged under the contract. The variable rates are
estimated based on implied forward rates in the yield curve.
19
<PAGE> 21
<TABLE>
<CAPTION>
FAIR VALUE
1998 1999 2000 2001 2002 THEREAFTER ASSET/(LIABILITY)
-------- --------- --------- --------- --------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
- -----
Provident receivables....... $ 15,922 $ 22,528 $ 21,264 $ 52,917 $ 58,218 $ 27,072 $ 197,921
Average rate.............. 9.34% 7.58% 9.99% 9.96% 8.48% 8.67%
Auxia debt securities....... 2,809 17,014 59,739 24,300 67,522 142,901 314,285
Average rate.............. 5.97% 5.97% 6.30% 6.82% 6.16% 6.16%
LIABILITIES
- --------
Fixed rate debt............. (64,570) (62,192) (193,285) (196,661) (328,456) (1,050,596) (2,016,511)
Average rate.............. 7.78% 7.83% 6.80% 7.12% 7.09% 7.35%
Floating rate debt
Floating rate notes....... (200,000) (200,000)
Bank revolving credit and
commercial paper........ (416,139) (200,450) (616,589)
Average rate.............. 5.97% 5.19%
DERIVATIVE CONTRACTS
- -----------------
INTEREST RATE SWAPS
US fixed to US floating..... 950,000 950,000 950,000 800,000 500,000 500,000 30,951
Average receive rate...... 6.87% 6.87% 6.87% 6.93% 7.19% 7.19%
Average pay rate.......... 5.74% 5.78% 5.95% 5.99% 6.06% 6.15%
US floating to US fixed..... 200,000 200,000 200,000 200,000 200,000 200,000 783
Average receive rate...... 5.73% 5.77% 5.94% 5.99% 6.06% 6.15%
Average pay rate.......... 5.72% 5.72% 5.72% 5.72% 5.72% 5.72%
Foreign currency floating to
foreign currency fixed.... 341,475 263,721 264,514 265,116 267,067 82,858 (20,085)
Average receive rate...... 4.83% 5.03% 5.35% 5.55% 5.76% 6.51%
Average pay rate.......... 6.60% 6.80% 6.80% 6.80% 6.79% 6.90%
Foreign currency floating to
foreign currency
floating.................. 81,992 83,301 84,275 85,062 85,736 85,736 (1,479)
Average receive rate...... 3.84% 4.12% 4.61% 4.93% 5.23% 5.42%
Average pay rate.......... 4.03% 4.33% 4.81% 5.11% 5.41% 5.66%
Foreign currency fixed to
foreign currency
floating.................. 82,325 83,639 84,617 85,408 86,084 86,084 3,036
Average receive rate...... 6.80% 6.80% 6.80% 6.80% 6.80% 6.80%
Average pay rate.......... 4.03% 4.33% 4.81% 5.11% 5.41% 5.66%
CROSS-CURRENCY INTEREST RATE
SWAPS
US fixed to foreign currency
fixed..................... 702,391 682,268 532,955 506,191 407,039 407,039 83,237
Average receive rate...... 7.49% 7.43% 7.59% 7.52% 7.92% 7.92%
Average pay rate.......... 7.38% 7.29% 7.29% 7.15% 7.61% 7.61%
US fixed to foreign currency
floating.................. 368,448 285,933 282,575 276,260 275,168 189,097 20,956
Average receive rate...... 6.69% 6.67% 6.63% 6.57% 6.54% 7.07%
Average pay rate.......... 4.81% 4.90% 5.18% 5.36% 5.58% 6.14%
US floating to foreign
currency fixed............ 247,037 227,430 (40,619)
Average receive rate...... 5.73% 5.77%
Average pay rate.......... 5.39% 5.26%
US floating to foreign
currency floating......... 56,429 56,658 26,866 26,750 26,488 49,937
Average receive rate...... 5.73% 5.77% 5.94% 5.99% 6.06%
Average pay rate.......... 5.18% 5.50% 6.13% 6.36% 6.67%
</TABLE>
20
<PAGE> 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS AND RELATED SCHEDULE
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... 22
Consolidated Statement of Income for the three years ended
December 31, 1997......................................... 23
Consolidated Balance Sheet as of December 31, 1997 and
1996...................................................... 24
Consolidated Statement of Cash Flows for the three years
ended December 31, 1997................................... 25
Consolidated Statement of Stockholders' Equity for the three
years ended December 31, 1997............................. 26
Notes to Consolidated Financial Statements.................. 27
Financial Statement Schedule:
II -- Valuation and Qualifying Accounts..................... 50
</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.
21
<PAGE> 23
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, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1997. We have also audited
the financial statement schedule for the three years ended December 31, 1997,
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, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, 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 18, 1998
22
<PAGE> 24
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1997 1996 1995
-------------- -------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues............................................ $ 2,468,402 $ 2,294,194 $ 1,652,126
Costs and expenses.................................. (1,780,790) (1,689,742) (1,186,905)
----------- ----------- -----------
Gross profit........................................ 687,612 604,452 465,221
General and administrative expenses................. (66,781) (63,215) (53,600)
----------- ----------- -----------
Income from operations.............................. 620,831 541,237 411,621
Interest expense.................................... (136,720) (138,557) (118,148)
Dividends on preferred securities of SCI Finance
LLC............................................... (4,382) (10,781) (10,781)
Other income........................................ 100,244 21,982 11,519
----------- ----------- -----------
(40,858) (127,356) (117,410)
----------- ----------- -----------
Income before income taxes and extraordinary loss... 579,973 413,881 294,211
Provision for income taxes.......................... (205,421) (148,583) (110,623)
----------- ----------- -----------
Income before extraordinary loss.................... 374,552 265,298 183,588
Extraordinary loss on early extinguishment of debt
(net of income taxes of $23,383).................. (40,802) -- --
----------- ----------- -----------
Net income.......................................... $ 333,750 $ 265,298 $ 183,588
=========== =========== ===========
Earnings per share:
Basic:
Income before extraordinary loss.................. $ 1.53 $ 1.13 $ .92
Extraordinary loss on early extinguishment of
debt........................................... (0.17) -- --
----------- ----------- -----------
Net income........................................ $ 1.36 $ 1.13 $ .92
=========== =========== ===========
Diluted:
Income before extraordinary loss.................. $ 1.47 $ 1.08 $ .86
Extraordinary loss on early extinguishment of
debt........................................... (0.16) -- --
----------- ----------- -----------
Net income........................................ $ 1.31 $ 1.08 $ .86
=========== =========== ===========
Basic weighted average number of shares............. 245,470 235,299 199,603
=========== =========== ===========
Diluted weighted average number of shares........... 257,781 252,870 229,967
=========== =========== ===========
</TABLE>
(See notes to consolidated financial statements)
23
<PAGE> 25
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1996
------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 46,877 $ 44,131
Receivables, net of allowances............................ 557,481 494,576
Inventories............................................... 172,169 139,019
Other..................................................... 34,881 36,314
----------- -----------
Total current assets.............................. 811,408 714,040
----------- -----------
Investments -- insurance subsidiary......................... 574,728 601,565
Prearranged funeral contracts............................... 2,610,632 2,159,348
Long-term receivables....................................... 981,121 809,287
Cemetery property, at cost.................................. 1,636,859 1,380,213
Property, plant and equipment, at cost (net)................ 1,644,137 1,457,075
Deferred charges and other assets........................... 549,862 371,608
Names and reputations (net)................................. 1,498,116 1,376,634
----------- -----------
$10,306,863 $ 8,869,770
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.................. $ 425,631 $ 440,797
Current maturities of long-term debt...................... 64,570 113,876
Income taxes.............................................. 45,241 52,870
----------- -----------
Total current liabilities......................... 535,442 607,543
----------- -----------
Long-term debt.............................................. 2,634,699 2,048,737
Deferred income taxes....................................... 701,221 527,460
Other liabilities........................................... 546,140 552,443
Deferred prearranged funeral contract revenues.............. 3,163,357 2,725,770
Commitments and contingencies............................... -- --
Company obligated, mandatorily redeemable, convertible
preferred securities of SCI Finance LLC................... -- 172,500
Stockholders' equity:
Common stock, $1 per share par value, 500,000,000 shares
authorized, 252,923,784 and 236,193,427, respectively,
issued and outstanding................................. 252,924 236,193
Capital in excess of par value............................ 1,493,246 1,237,783
Retained earnings......................................... 983,353 728,108
Foreign currency translation adjustment................... (7,480) 22,315
Unrealized gain on securities available for sale, net of
tax.................................................... 3,961 10,918
----------- -----------
Total stockholders' equity........................ 2,726,004 2,235,317
----------- -----------
$10,306,863 $ 8,869,770
=========== ===========
</TABLE>
(See notes to consolidated financial statements)
24
<PAGE> 26
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
----------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................................... $ 333,750 $ 265,298 $ 183,588
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 157,550 129,819 92,541
Provision for deferred income taxes............. 19,212 56,902 45,164
Extraordinary loss on early extinguishment of
debt, net of income taxes..................... 40,802 -- --
Gains from dispositions (net)................... (89,252) (9,930) (1,024)
Change in assets and liabilities net of effects
from acquisitions:
(Increase) in receivables..................... (174,429) (167,338) (115,888)
(Increase) in other assets.................... (24,904) (36,781) (36,496)
Increase (decrease) in other liabilities...... 36,045 (26,365) 7,473
Other......................................... 662 (1,748) (3,860)
----------- ----------- ---------
Net cash provided by operating activities............ 299,436 209,857 171,498
----------- ----------- ---------
Cash flows from investing activities:
Capital expenditures............................... (230,532) (193,152) (125,231)
Changes in prearranged funeral balances............ (5,537) (51,485) (44,549)
Purchases of securities -- insurance subsidiary.... (1,407,588) (1,212,305) (86,014)
Sales of securities -- insurance subsidiary........ 1,383,934 1,177,499 49,769
Proceeds from sales of property and equipment...... 46,908 30,121 12,655
Acquisitions, net of cash acquired................. (409,731) (279,320) (693,627)
Loans issued by finance subsidiary................. (98,446) (86,858) (38,184)
Principal payments received on loans by finance
subsidiary...................................... 45,915 156,064 24,312
Proceeds from sale of equity investment............ 147,700 -- --
Purchases of equity investments.................... (87,643) (39,752) (16,076)
Other.............................................. (18,424) 19,062 (8,190)
----------- ----------- ---------
Net cash used in investing activities................ (633,444) (480,126) (925,135)
----------- ----------- ---------
Cash flows from financing activities:
Increase (decrease) in borrowings under revolving
credit agreements............................... 304,505 96,441 (453,959)
Long-term debt issued.............................. 650,000 300,000 862,848
Early extinguishment of debt....................... (449,998) -- --
Payments of debt................................... (91,464) (109,458) (135,960)
Common stock issued................................ -- -- 331,063
Dividends paid..................................... (69,888) (55,262) (43,676)
Bank overdrafts and other.......................... (6,401) 25,195 32,464
----------- ----------- ---------
Net cash provided by financing activities............ 336,754 256,916 592,780
----------- ----------- ---------
Net increase (decrease) in cash and cash
equivalents........................................ 2,746 (13,353) (160,857)
Cash and cash equivalents at beginning of period..... 44,131 57,484 218,341
----------- ----------- ---------
Cash and cash equivalents at end of period........... $ 46,877 $ 44,131 $ 57,484
=========== =========== =========
</TABLE>
(See notes to consolidated financial statements)
25
<PAGE> 27
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL IN FOREIGN UNREALIZED
COMMON EXCESS OF RETAINED CURRENCY GAIN
STOCK PAR VALUE EARNINGS TRANSLATION ON SECURITIES
-------- ---------- -------- ----------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
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 ($.22 per
share)................................ (46,535)
Foreign currency translation............. 349
Net change in unrealized gain on
securities............................ 5,786
-------- ---------- -------- ------- -------
Balance at December 31, 1995............... 234,542 1,214,708 518,562 1,747 5,786
Add (deduct):
Net income............................... 265,298
Common Stock issued:
Stock option exercises and stock
grants.............................. 723 6,940
Acquisitions.......................... 811 15,012 796
Debenture conversions................. 117 1,123
Dividends on common stock ($.24 per
share)................................ (56,548)
Foreign currency translation............. 20,568
Net change in unrealized gain on
securities............................ 5,132
-------- ---------- -------- ------- -------
Balance at December 31, 1996............... 236,193 1,237,783 728,108 22,315 10,918
Add (deduct):
Net income............................... 333,750
Common Stock issued:
Stock option exercises and stock
grants.............................. 820 9,296
Acquisitions.......................... 3,958 79,215 (3,832)
Debenture conversions................. 492 5,925
Conversion of convertible preferred
securities of SCI Finance LLC......... 11,461 161,027
Dividends on common stock ($.30 per
share)................................ (74,673)
Foreign currency translation............. (29,795)
Net change in unrealized gain on
securities............................ (6,957)
-------- ---------- -------- ------- -------
Balance at December 31, 1997............... $252,924 $1,493,246 $983,353 $(7,480) $ 3,961
======== ========== ======== ======= =======
</TABLE>
(See notes to consolidated financial statements)
26
<PAGE> 28
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, 1997, the Company operated 3,127 funeral service locations, 392
cemeteries and 166 crematoria located in 17 countries on five continents.
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 with no effect on the
consolidated financial position, results of operations or cash flows.
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, 1997,
depreciation expense was $87,571, $74,854 and $52,828, 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 until such time that the funeral
27
<PAGE> 29
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
service is performed (see note four). The Company considers price guaranteed
prearranged funeral contracts to be investments made to retain and expand future
market share.
Cemetery Operations: All cemetery interment right sales, together with
associated merchandise, are recorded as 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, 1997 and 1996 were $515,051 and $390,534, respectively
(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, which are expensed as incurred.
Perpetual care funds trusted at December 31, 1997 and 1996 were $371,984 and
$318,868, 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, 1997, the earnings recognized from all cemetery trusts were
$74,971, $51,601 and $33,795, 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 $37,649, $33,836 and $25,226 for the three years ended
December 31, 1997, respectively. Accumulated amortization of names and
reputations as of December 31, 1997 and 1996 was $136,398 and $101,426,
respectively.
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 swaps are
being amortized into interest expense over the remaining lives of the original
agreements ($394 net unamortized loss at December 31, 1997).
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 these estimates.
28
<PAGE> 30
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE THREE
ACQUISITIONS
The Company acquired certain funeral and cemetery operations both domestically
and internationally during the years ended December 31, 1997 and 1996. The
operating results of these acquisitions have been included since their
respective dates of acquisition. The following table is a summary of the
acquisitions made during the two years ended December 31, 1997:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Number acquired:
Funeral service locations................................. 294 210
Cemeteries................................................ 51 35
Crematoria................................................ 19 9
Purchase price.............................................. $643,000 $362,651
</TABLE>
The purchase price in both years consisted primarily of combinations of
cash, Company common stock, issued and assumed debt.
The effect of the above acquisitions on the consolidated balance sheet at
December 31, was as follows:
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
Current assets.............................................. $ 38,569 $ 30,542
Prearranged funeral contracts............................... 86,452 61,994
Long-term receivables....................................... 31,522 (10,559)
Cemetery property........................................... 298,466 210,507
Property, plant and equipment............................... 162,992 93,482
Deferred charges and other assets........................... 13,417 (1,244)
Names and reputations....................................... 215,204 164,414
Current liabilities......................................... (67,464) (62,817)
Long-term debt.............................................. (63,307) (32,532)
Deferred income taxes and other liabilities................. (120,340) (85,635)
Deferred prearranged funeral contract revenues.............. (106,439) (72,213)
Stockholders' equity........................................ (79,341) (16,619)
--------- --------
Cash used for acquisitions........................ $ 409,731 $279,320
========= ========
</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"). 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
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
29
<PAGE> 31
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 average life of the prearranged contract.
PREARRANGED FUNERAL CONTRACTS
At December 31, 1997, $1,201,141 relate to trust funded contracts (which
includes $326,310 of amounts that have not yet been collected from customers)
and $1,409,491 relate to third party insurance funded contracts which will be
available to the Company at the time the funeral services are performed. At
December 31, 1996, $962,389 related to trust funded contracts ($235,433 due from
customers) and $1,196,959 relate to third party insurance funded contracts.
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, 1997. The cumulative trust funded 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, 1997 DECEMBER 31, 1996
---------------------- --------------------
COST MARKET COST MARKET
-------- ---------- -------- --------
<S> <C> <C> <C> <C>
Debt securities:
Government.......................... $333,626 $ 358,607 $245,736 $259,910
Corporate........................... 114,066 116,435 121,887 122,322
Equity securities..................... 411,489 461,016 164,630 208,082
Money market/other.................... 134,211 134,428 274,949 275,581
-------- ---------- -------- --------
$993,392 $1,070,486 $807,202 $865,895
======== ========== ======== ========
</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" with
unrealized gains and losses excluded from earnings and reported net of income
taxes in stockholders' equity.
The cost, market value and unrealized gains or losses related to Auxia's
debt and equity securities were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
--------------------------------------- ---------------------------------------
UNREALIZED UNREALIZED
----------------- -----------------
COST MARKET GAINS LOSSES COST MARKET GAINS LOSSES
-------- -------- ------- ------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt securities:
Foreign government...................... $292,991 $296,320 $ 3,503 $ (174) $220,256 $236,443 $16,187 $ --
Corporate............................... 17,883 17,965 95 (13) 210,235 210,428 385 (192)
Equity securities......................... 141,512 162,129 23,640 (3,023) 96,157 96,735 6,166 (5,588)
Mutual funds:
Money market/other...................... 29,027 29,235 208 -- 27,749 27,942 193 --
Debt.................................... 53,276 53,276 -- -- 61,471 61,471 -- --
-------- -------- ------- ------- -------- -------- ------- -------
$534,689 $558,925 $27,446 $(3,210) $615,868 $633,019 $22,931 $(5,780)
======== ======== ======= ======= ======== ======== ======= =======
</TABLE>
30
<PAGE> 32
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The contractual maturities of Auxia's debt securities (at market value) as
of December 31, 1997, were as follows:
<TABLE>
<S> <C>
Within one year............................................. $ 2,809
After one year through five years........................... 168,575
After five years through ten years.......................... 107,303
After ten years............................................. 35,598
--------
$314,285
========
</TABLE>
The following table summarizes the activity in prearranged funeral
contracts and investments-insurance subsidiary:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Beginning balance........................................... $2,760,913 $2,368,932
Net sales................................................. 490,297 503,150
Acquisitions.............................................. 86,452 61,994
Realized earnings and increasing insurance benefits....... 164,853 111,950
Maturities................................................ (250,134) (249,705)
Increase in cancellation reserve.......................... (33,481) (25,962)
Distributed earnings, effect of foreign currency and
other.................................................. (33,540) (9,446)
---------- ----------
Ending balance.............................................. $3,185,360 $2,760,913
========== ==========
</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, 1997 and 1996 were $190,595
and $151,008, respectively. The Company defers 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 recognizes
the fixed contract price as well as total accumulated trust earnings and
increasing insurance benefits as funeral revenues.
The following table summarizes the activity in deferred prearranged funeral
contract revenues:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Beginning balance........................................... $2,725,770 $2,362,053
Net sales................................................. 509,447 512,497
Acquisitions.............................................. 106,439 72,213
Realized earnings and increasing insurance benefits....... 164,853 111,950
Maturities................................................ (255,147) (252,603)
Increase in cancellation reserve.......................... (33,481) (25,962)
Deferred obtaining costs.................................. (67,742) (61,421)
Effect of foreign currency and other...................... 13,218 7,043
---------- ----------
Ending balance.............................................. $3,163,357 $2,725,770
========== ==========
</TABLE>
31
<PAGE> 33
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The recognition of future funeral revenues is estimated to occur in the
following years:
<TABLE>
<S> <C>
1998........................................................ $ 274,091
1999........................................................ 241,042
2000........................................................ 224,249
2001........................................................ 210,179
2002........................................................ 196,635
2003 through 2007........................................... 781,902
2008 and thereafter......................................... 1,235,259
----------
$3,163,357
==========
</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, 1997 DECEMBER 31, 1996
------------------- -------------------
COST MARKET COST MARKET
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Debt securities:
Government............................... $169,823 $172,440 $ 72,394 $ 72,101
Corporate................................ 64,474 65,468 35,060 34,560
Equity securities.......................... 227,424 230,931 71,239 75,297
Money market/other......................... 53,330 53,254 211,841 211,896
-------- -------- -------- --------
$515,051 $522,093 $390,534 $393,854
======== ======== ======== ========
</TABLE>
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,
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
United States........................................ $474,478 $309,431 $257,318
Foreign.............................................. 105,495 104,450 36,893
-------- -------- --------
$579,973 $413,881 $294,211
======== ======== ========
</TABLE>
32
<PAGE> 34
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income tax expense (benefit) consisted of the following:
<TABLE>
<S> <C> <C> <C>
Current:
United States...................................... $157,450 $ 65,709 $ 43,396
Foreign............................................ 7,022 14,158 12,949
State and local.................................... 21,737 11,814 9,114
-------- -------- --------
186,209 91,681 65,459
-------- -------- --------
Deferred:
United States...................................... 15,045 45,330 39,767
Foreign............................................ 1,432 3,238 (1,498)
State and local.................................... 2,735 8,334 6,895
-------- -------- --------
19,212 56,902 45,164
-------- -------- --------
Total provision...................................... $205,421 $148,583 $110,623
======== ======== ========
</TABLE>
The Company made income tax payments of approximately $155,356, $99,377 and
$65,859, for the three years ended December 31, 1997, respectively. The
provision for income taxes for the year ended December 31, 1997, includes a
decrease to deferred taxes of $5,491 related to enacted tax law changes in the
United Kingdom and France.
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,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Computed tax provision at the applicable U.S.
federal statutory income tax rate................ $202,991 $144,858 $102,974
State and local taxes, net of federal income tax
benefits......................................... 15,906 13,097 10,406
Dividends received deduction and tax exempt
interest......................................... (1,618) (2,108) (1,939)
Amortization of names and reputations.............. 5,622 4,765 4,554
Enacted foreign tax rate change.................... (5,491) -- --
Foreign jurisdiction tax rate difference........... (12,909) (11,849) (5,309)
Other.............................................. 920 (180) (63)
-------- -------- --------
Provision for income taxes....................... $205,421 $148,583 $110,623
-------- -------- --------
Total effective tax rate........................... 35.4% 35.9% 37.6%
======== ======== ========
</TABLE>
33
<PAGE> 35
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>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Receivables, principally due to sales of cemetery interment
rights and related products............................... $186,900 $152,069
Inventories and cemetery property, principally due to
purchase accounting adjustments........................... 460,592 383,687
Property, plant and equipment, principally due to
depreciation and to purchase accounting adjustments....... 129,796 110,907
Other....................................................... 40,773 --
-------- --------
Deferred tax liabilities.................................... 818,061 646,663
-------- --------
Deferred revenue on prearranged funeral contracts,
principally due to earnings from trust funds.............. (50,862) (34,092)
Accrued liabilities......................................... (24,768) (38,337)
Carry-forwards and foreign tax credits...................... (21,053) (7,484)
Other....................................................... -- (4,367)
-------- --------
Deferred tax assets......................................... (96,683) (84,280)
-------- --------
Valuation allowance......................................... 15,327 6,128
-------- --------
Net deferred income taxes................................... $736,705 $568,511
======== ========
</TABLE>
During the three years ended December 31, 1997, tax expense resulting from
allocating certain tax benefits directly to capital in excess of par value
totaled $3,799, $2,410 and $1,165, 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.
At December 31, 1997 and 1996, United States income taxes had not been
provided on $252,369 and $153,598, respectively, of undistributed earnings of
foreign subsidiaries since it is the Company's intention to reinvest such
earnings indefinitely.
As of December 31, 1997 the Company has United States foreign tax credit
carry-forwards of $5,311 which will expire in the years 2000 through 2002.
Various subsidiaries have federal and state operating loss carry-forwards of
$49,337 with expiration dates through 2012. The Company believes that some
uncertainty exists with respect to future realization of these tax credit and
loss carry-forwards, therefore a valuation allowance has been established for
the carry-forwards not expected to be realized. The increase in the valuation
allowance is primarily attributable to foreign tax credits and operating losses
generated in the current year.
34
<PAGE> 36
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE SEVEN
DEBT
Debt was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Bank revolving credit agreements and commercial paper....... $ 616,589 $ 325,875
6.375% notes due in 2000.................................... 150,000 150,000
6.75% notes due in 2001..................................... 150,000 150,000
8.72% amortizing notes due in 2002.......................... 141,108 165,761
8.375% notes due in 2004.................................... 51,840 200,000
7.375% notes due in 2004.................................... 250,000 --
7.2% notes due in 2006...................................... 150,000 150,000
6.875% notes due in 2007.................................... 150,000 150,000
6.95% amortizing notes due in 2010.......................... 58,859 61,576
7.70% notes due in 2009..................................... 200,000 --
Floating rate notes due in 2011 (putable in 1999)........... 200,000 --
7.875% debentures due in 2013............................... 55,627 150,000
7.0% notes due in 2015 (putable in 2002).................... 300,000 300,000
Medium term notes, maturities through 2019, fixed average
interest rate of 9.31%.................................... 35,720 186,040
Convertible debentures, interest rates range from
4.75% -- 5.5%, due through 2007, conversion price ranges
from $11.25 -- $43.72..................................... 45,673 44,140
Mortgage and other notes payable with maturities through
2015, average interest rate of 7.05%...................... 156,931 151,836
Deferred loan costs......................................... (13,078) (22,615)
---------- ----------
Total debt.................................................. 2,699,269 2,162,613
Less current maturities..................................... (64,570) (113,876)
---------- ----------
Total long-term debt........................................ $2,634,699 $2,048,737
========== ==========
</TABLE>
The Company's primary revolving credit agreement provides for borrowings up
to $1,000,000 and consists of two committed facilities -- a 364-day facility and
5-year, multi-currency facility -- which are primarily used to support
commercial paper issuance and for general corporate needs.
The 364-day portion allows for borrowings up to $300,000. This facility
expires June 26, 1998, but has provisions to be extended for additional 364-day
terms. At the end of any term, the outstanding balance may be converted into a 2
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 of 0.06% is
paid quarterly on the total commitment amount.
The 5-year facility allows for borrowings up to $700,000, including
$500,000 in various foreign currencies. This facility expires June 27, 2002.
Interest rates are based on various indices as determined by the Company. A
facility fee is paid quarterly on this facility's total commitment amount. The
facility fee, which ranges from 0.07% to 0.15%, is based on the Company's senior
debt ratings, and is currently set at 0.08%. At December 31, 1997, there was
$200,250 outstanding under this agreement at a weighted average interest rate of
5.19%.
As of December 31, 1997, there was $320,889 of commercial paper outstanding
backed by the above two facilities at a weighted average interest rate of 6.36%.
35
<PAGE> 37
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The commercial paper borrowings and revolving notes generally have
maturities ranging from one to 90 days.
On October 3, 1997, Service Corporation International (Canada), ("SCIC"), a
wholly owned subsidiary of the Company, entered into a 364-day, $105,000
revolving credit agreement. This facility is used primarily to support
acquisition and working capital requirements of the Company's Canadian
subsidiaries. The facility fee is currently set at 0.08%. At December 31, 1997,
there was approximately $67,400 outstanding under this facility at an average
interest rate of 4.6%.
SCIC partially restructured its Canadian debt in March 1998, placing
approximately $147,000 into a new facility, replacing the immediately above
described facility. This new facility has a one year revolving period, and
allows SCIC, at its option, to convert to a five year term loan. This new
facility carries no facility fee. Interest rates are based on various indices as
determined by SCIC. The indebtedness has a put feature allowing the lender to
require the Company to purchase any outstanding indebtedness upon request.
The Company has several other bank lines of credit for approximately
$116,000 at rates similar to the primary revolving credit agreements. At
December 31, 1997, there was approximately $30,600 outstanding under those
agreements.
The credit facilities described above have financial compliance provisions
that contain certain restrictions on levels of net worth, debt, liens, and
guarantees.
The Company's outstanding commercial paper and other borrowings under its
various credit facilities at December 31, 1997 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 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 a shelf registration filed with the Securities and
Exchange Commission (Commission).
During the first quarter of 1997, the Company initiated a tender offer for
three issues of its higher coupon debt and repurchased approximately $386,000 of
the three series, resulting in a $40,802 extraordinary loss, using commercial
paper and its revolving credit facility. In April 1997, the Company refinanced
these and other working capital borrowings by issuing $250,000 7.375% notes due
April 2004, and $200,000 7.7% notes due April 2009, which were sold through an
underwritten public offering as well as $200,000 of floating rate notes due
April 2011 (putable to the Company in April 1999) through a private placement.
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.
Approximately $80,000 of the Company's facilities and cemetery properties
are pledged as collateral for the mortgage notes at December 31, 1997.
At December 31, 1997, the Company had $40,169 in letters of credit
outstanding primarily to guarantee funding of certain insurance claims.
In March 1998, the Company issued $500,000 of notes in an underwritten
offering pursuant to the Company's $1,000,000 shelf registration filed with the
Commission. These notes mature in 2008 as to the
36
<PAGE> 38
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$200,000 and 2020 as to the $300,000 and have initial interest rates of 6.5% and
6.3%, respectively. The $300,000 notes contain certain early tender dates.
The aggregate principal payments on debt for the five years subsequent to
December 31, 1997, excluding amounts due to banks under revolving credit loan
agreements are: 1998-$64,570; 1999-$262,192; 2000-$193,285; 2001-$196,661 and
2002-$328,458.
Cash interest payments for the three years ended December 31, 1997 totaled
$162,521, $150,961 and $111,609, respectively.
Approximately $1,832,000 of the Company's debt consists of foreign
denominated debt of which approximately $1,504,000 was converted to foreign
currencies as a result of the 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, 1997, pursuant to a shelf
registration filed with the Commission 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 NY, Inc. .......................... (475)
SCI Indiana Funeral Services, Inc. ........................ (500)
SCI Illinois Services, Inc. ............................... (400)
SCI Michigan Funeral Services, Inc. ....................... (740)
SCI Illinois Services, Inc. ............................... (400)
SCI Michigan Funeral Services, Inc. ....................... (740)
SCI Illinois Services, Inc. ............................... (2,486)
SCI Texas Funeral Services, Inc. .......................... (678)
</TABLE>
NOTE EIGHT
DERIVATIVES
The Company enters into 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 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 convert US dollar debt into the respective
foreign currency of the Company's various foreign operations. 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
37
<PAGE> 39
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
generally offset by a corresponding movement in the earnings of the foreign
operation. The following tables present information about the Company's
derivatives:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-------------------------------------------------------------------
WEIGHTED AVERAGE
CARRYING INTEREST RATE
NOTIONAL AMOUNT ASSET ---------------- FAIR
AMOUNT (LIABILITY) MATURITY RECEIVE PAY VALUE
---------- ------------ --------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps:
US dollar fixed to US dollar floating.... $ 450,000 $ -- 2001-2002 6.53% 5.89% $ 4,392
US dollar fixed to US dollar floating.... 300,000 -- 2004-2006 7.02% 5.78% 14,295
US dollar fixed to US dollar floating.... 200,000 -- 2009 7.43% 5.76% 12,264
US dollar floating to US dollar fixed.... 200,000 -- 2004 5.81% 5.72% 783
Canadian dollar floating to Canadian
dollar fixed........................... 78,138 -- 1999 2.64% 3.97% (4,024)
Canadian dollar floating to Canadian
dollar fixed........................... 38,456 -- 2007 1.41% 1.95% (1,927)
Canadian dollar floating to Canadian
dollar fixed effective 11/98........... 94,777 -- 2003 -- -- (5,559)
Australian dollar floating to Australian
dollar fixed........................... 42,270 -- 2006 5.91% 7.81% (3,672)
French franc floating to German mark
floating............................... 81,820 -- 2006 3.69% 3.99% (1,479)
French franc fixed to German mark
floating............................... 82,152 -- 2006 6.80% 5.38% 3,036
German mark floating to French franc
fixed.................................. 82,152 -- 2003 5.38% 6.20% (4,903)
Cross-Currency Interest Rate Swaps:
US dollar fixed to French franc fixed.... 250,000 44,736 2000-2002 6.05% 5.89% 42,540
US dollar fixed to French franc fixed.... 150,000 26,722 2007 7.00% 6.93% 20,516
US dollar fixed to French franc
floating............................... 100,000 13,183 2006 7.20% 3.93% 18,408
US dollar fixed to German mark
floating............................... 100,000 17,861 2003 5.37% 3.25% 19,016
US dollar fixed to British pound fixed... 385,386 (23,509) 2002-2004 8.46% 8.43% 20,181
US dollar fixed to British pound
floating............................... 28,222 (1,949) 2002 8.72% 7.94% (28,581)
US dollar floating to Australian dollar
fixed.................................. 132,296 11,526 1999-2000 5.91% 6.51% (36,676)
US dollar floating to Australian dollar
floating............................... 59,196 4,571 2000-2003 5.91% 5.07% 49,937
US dollar fixed to Canadian dollar
floating............................... 100,000 5,223 2010 6.95% 4.83% 7,264
US dollar fixed to Canadian dollar
floating............................... 81,727 3,589 1999 6.66% 3.94% 4,849
US dollar floating to French franc
fixed.................................. 117,834 (4,189) 2000 5.88% 4.23% (3,943)
---------- -------- --------
$3,154,426 $ 97,764 $126,717
========== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------------------------------
WEIGHTED AVERAGE
CARRYING INTEREST RATE
NOTIONAL AMOUNT ASSET ---------------- FAIR
AMOUNT (LIABILITY) MATURITY RECEIVE PAY VALUE
---------- ------------ --------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Interest Rate Swaps:
US dollar fixed to US dollar floating.... $ 525,000 $ -- 1999-2002 6.36% 5.57% $ (3,383)
US dollar fixed to US dollar floating.... 50,000 -- 2006 6.50% 5.50% (744)
Canadian dollar floating to Canadian
dollar fixed........................... 40,134 -- 1999 2.94% 7.57% (3,096)
Canadian dollar floating to Canadian
dollar fixed (effective 11/98)......... 98,911 -- 2003 -- -- (984)
Australian dollar floating to Australian
dollar fixed (effective 12/97)......... 51,656 -- 2006 -- -- 745
French franc floating to German mark
floating............................... 94,808 -- 2006 3.50% 3.47% (2,683)
French franc fixed to German mark
floating............................... 95,194 -- 2006 6.80% 5.10% (1,226)
German mark floating to French franc
fixed.................................. 95,194 -- 1998 5.10% 6.20% (193)
</TABLE>
38
<PAGE> 40
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------------------------------------------------
WEIGHTED AVERAGE
CARRYING INTEREST RATE
NOTIONAL AMOUNT ASSET ---------------- FAIR
AMOUNT (LIABILITY) MATURITY RECEIVE PAY VALUE
---------- ------------ --------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Cross-Currency Interest Rate Swaps:
US dollar fixed to French franc fixed.... 350,000 16,972 2002-2003 6.20% 5.94% 466
US dollar fixed to French franc fixed.... 150,000 7,151 2007 7.00% 6.93% (4,317)
US dollar fixed to French franc
floating............................... 100,000 (599) 2006 7.20% 3.74% 2,686
US dollar fixed to British pound fixed... 405,109 (40,394) 2002-2004 8.47% 7.98% 21,816
US dollar fixed to British pound
floating............................... 33,152 (3,477) 2002 8.72% 6.56% (37,755)
US dollar floating to British pound
floating............................... 76,375 (4,113) 1997 5.50% 6.30% (4,136)
US dollar floating to Australian dollar
fixed.................................. 67,568 (10,881) 1999-2000 5.63% 7.02% (54,636)
US dollar floating to Australian dollar
floating............................... 29,436 (5,531) 2000 5.63% 5.93% 38,604
US dollar fixed to Canadian dollar
fixed.................................. 75,000 133 1999 6.66% 6.64% (2,463)
US dollar fixed to Canadian dollar
floating............................... 100,000 1,089 2010 6.95% 3.54% (2,939)
---------- -------- --------
$2,437,537 $(39,650) $(54,238)
========== ======== ========
</TABLE>
At December 31, 1997, after giving consideration to the interest rate and
cross-currency swaps, the Company's debt (excluding $150,000 of Provident debt)
consists of approximately $1,078,000 of fixed interest rate debt at a weighted
average rate of 7.00% and approximately $1,386,000 of floating interest rate
debt at a weighted average rate of 5.50%. Additionally, approximately $1,832,000
of the Company's debt consists of foreign denominated debt.
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 addition, as of December 31, 1997, $566,594
of the interest rate swaps contain provisions which require termination of the
swap or convert the swap to a new index if certain interest rate conditions are
met. 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 notional amounts
relating to derivative financial instruments held on December 31, 1997, are as
follows: 1999- $183,280; 2000-$406,152; 2001-$150,000; 2002-$541,108; and
thereafter -- $1,873,886.
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.
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). Fair values were obtained from
counterparties to the agreements and represent their estimate of the amount the
Company would pay or receive to terminate the swap agreements based upon the
existing terms and current market conditions. The net fair value of the
Company's various swap agreements at December 31, 1997 is an asset of $126,717
(see note eight). At December 31, 1996, the net fair value was a liability of
$54,238. The fair value
39
<PAGE> 41
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1997 is remote (see note eight).
Fair value of debt was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Bank revolving credit agreements and commercial paper....... $ 616,589 $ 325,875
6.375% notes due in 2000.................................... 150,285 149,220
6.75% notes due in 2001..................................... 151,755 149,876
8.72% amortizing notes due in 2002.......................... 150,266 174,861
8.375% notes due in 2004.................................... 57,055 215,404
7.375% notes due in 2004.................................... 260,725 --
7.2% notes due in 2006...................................... 155,730 150,087
6.875% notes due in 2007.................................... 152,265 146,154
6.95% notes due in 2010..................................... 60,336 60,388
7.70% notes due in 2009..................................... 214,980 --
Floating rate notes due in 2011 (putable in 1999)........... 200,000 --
7.875% debentures due in 2013............................... 61,001 155,048
7.0% notes due in 2015 (putable in 2002).................... 336,840 307,938
Medium term notes, maturities through 2018, fixed average
interest rate of 9.31%.................................... 43,636 214,178
Convertible debentures, interest rates range from
4.75% -- 5.5%, due through 2007, conversion price ranges
from $11.25 -- $43.72..................................... 83,258 39,243
Mortgage and other notes payable with maturities through
2015, average interest rate of 7.05%...................... 138,379 154,720
---------- ----------
Total debt........................................ $2,833,100 $2,242,992
========== ==========
</TABLE>
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
common 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 approximately $50,000 at December 31, 1997
($55,017 at December 31, 1996) to extend credit. Provident's total loans
outstanding at December 31, 1997 were approximately $199,000. Provident
evaluates each borrower's creditworthiness 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
40
<PAGE> 42
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
because of the wide dispersion of the customers served. Procedures are in effect
to monitor the creditworthiness 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>
1998........................................................ $62,462
1999........................................................ 44,340
2000........................................................ 32,928
2001........................................................ 24,517
2002........................................................ 19,481
Thereafter.................................................. 79,160
</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, 1997, rental expense was $71,225, $64,073 and $47,848,
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, 1997, $68,667, $55,688 and $55,419, respectively, were
charged to expense. At December 31, 1997, the maximum estimated future expense
under all agreements with a remaining term in excess of one year is $321,265,
including $11,477 with certain officers of the Company.
The Company has 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 December
1998 and contains a remaining purchase commitment of $54,815. During the three
years ended December 31, 1997, the Company purchased caskets for $57,574,
$54,431 and $48,828, respectively, under this agreement.
NOTE ELEVEN
CONVERTIBLE PREFERRED SECURITIES OF SCI FINANCE LLC
During 1997, the Company redeemed all the outstanding shares of its
convertible preferred shares into 11,178,522 shares of Company common stock and
cash.
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, 1997. At December
31, 1997, 500,000,000 common shares of $1 par value were authorized, 252,923,784
shares were issued and outstanding (236,193,427 at December 31, 1996), net of
66,373 shares held, at cost, in treasury (9,813 at December 31, 1996).
41
<PAGE> 43
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, 1997, 15,668,000 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. If the pre-determined stock prices are not met in the
required time period, the options will fully vest in periods ranging from seven
to nine years from date of grant. At December 31, 1997 and 1996, 7,628,350 and
14,802,500 shares, respectively, were reserved for future option grants under
all stock option plans.
The following tables set forth certain stock option information:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE
---------- ----------------
<S> <C> <C>
Outstanding at December 31, 1994......................... 10,374,052 $12.01
Granted................................................ 2,854,000 16.35
Exercised.............................................. (668,552) 7.53
Cancelled.............................................. (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
Cancelled.............................................. (47,338) 20.45
---------- ------
Outstanding at December 31, 1996......................... 13,049,269 15.09
---------- ------
Granted................................................ 7,144,150 30.37
Exercised.............................................. (775,716) 12.51
Cancelled.............................................. (104,252) 22.85
---------- ------
Outstanding at December 31, 1997......................... 19,313,451 $20.81
---------- ------
Exercisable at December 31, 1997......................... 9,488,214 $14.07
========== ======
Exercisable at December 31, 1996......................... 1,055,435
==========
Exercisable at December 31, 1995......................... 1,206,762
==========
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------- ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
NUMBER AVERAGE AVERAGE NUMBER AVERAGE
RANGE OF OUTSTANDING REMAINING EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICE AT 12/31/97 CONTRACTUAL LIFE PRICE AT 12/31/97 PRICE
- -------------- ------------ ---------------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
$ 8.33- 9.41 272,004 1.7 $ 9.01 272,004 $ 9.01
12.88-18.38 9,827,954 9.0 13.83 8,334,298 13.34
20.09-29.59 4,756,993 4.6 25.64 881,912 22.60
31.56-33.31 4,456,500 3.5 31.76 -- --
------------ ---------- --- ------ --------- ------
$ 8.33-33.31 19,313,451 6.5 $20.81 9,488,214 $14.07
============ ========== === ====== ========= ======
</TABLE>
The Company's 1996 Incentive 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. The Company's 1996
Non-qualified Incentive Plan reserves 4,000,000 shares of common stock for
future
42
<PAGE> 44
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 three years ended December 31, 1997, 73,000, 49,600 and 128,600
shares of restricted stock were awarded at average fair values of $33.35, $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," and 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,
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net income
As reported........................................ $333,750 $265,298 $183,588
Pro forma.......................................... 315,733 252,929 181,285
Basic earnings per share
As reported........................................ $ 1.36 $ 1.13 $ .92
Pro forma.......................................... 1.30 1.07 .91
Diluted earnings per share
As reported........................................ $ 1.31 $ 1.08 $ .86
Pro forma.......................................... 1.25 1.03 .85
</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 1997, 1996 and 1995, respectively: dividend
yield of 1%, 1% and 1%; expected volatility of 26.6%, 25.3% and 25.3%; a risk
free interest rate of 6.5%, 6.8% and 5.8%; and an expected holding period of 8,
9 and 7 years.
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, and
marketable equity securities. The marketable equity securities include shares of
Company common stock with a value of $12,141 at
43
<PAGE> 45
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1997. 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,
------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost -- benefits earned during the period.... $ 9,806 $ 8,550 $ 6,996
Interest cost on projected benefit obligation........ 10,033 9,400 9,114
Return on plan assets................................ (22,121) (13,341) (15,752)
Net amortization and deferral of gain................ 15,838 9,747 12,189
-------- -------- --------
$ 13,556 $ 14,356 $ 12,547
======== ======== ========
</TABLE>
The plans' funded status were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
1997 1996
--------------------- ---------------------
FUNDED NON-FUNDED FUNDED NON-FUNDED
PLAN PLANS PLAN PLANS
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Vested benefit obligation................ $ 88,220 $ 38,388 $ 76,701 $ 40,130
======== ======== ======== ========
Accumulated benefit obligation........... $ 92,767 $ 39,754 $ 80,228 $ 40,245
======== ======== ======== ========
Projected benefit obligation............. $101,293 $ 39,840 $ 88,080 $ 40,280
Plans' assets at fair value.............. 125,166 -- 103,603 --
-------- -------- -------- --------
Plans' assets in excess (deficit) of
projected benefit obligation........... 23,873 (39,840) 15,523 (40,280)
Unrecognized net (gain) loss from past
experience and effects of changes in
assumptions............................ (5,539) 5,823 1,634 7,484
Prior service (benefit) cost not yet
recognized in net periodic pension
cost................................... (1,674) 8,364 (2,035) 10,749
-------- -------- -------- --------
Prepaid (accrued) pension cost........... 16,660 (25,653) 15,122 (22,047)
Adjustment for additional minimum
liability.............................. -- (14,101) -- (18,198)
-------- -------- -------- --------
Retirement plan asset (liability)........ $ 16,660 $(39,754) $ 15,122 $(40,245)
======== ======== ======== ========
</TABLE>
44
<PAGE> 46
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>
1997 1996
------------------- -------------------
FUNDED NON-FUNDED FUNDED NON-FUNDED
PLAN PLANS PLAN PLANS
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Discount rate used to determine obligations........... 7.25% 7.25% 7.5% 7.5%
Assumed rate of compensation increase................. 5.5 5.5 5.5 5.5
Assumed rate of return on plan assets................. 9.0 -- 8.5 --
</TABLE>
NOTE FOURTEEN
MAJOR SEGMENTS OF BUSINESS
The Company conducts funeral and cemetery operations in 17 countries and
offers financial services in the United States.
<TABLE>
<CAPTION>
FINANCIAL
FUNERAL CEMETERY SERVICES CORPORATE CONSOLIDATED
---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Revenues:
1997.............................. $1,727,003 $ 724,862 $ 16,537 $ -- $ 2,468,402
1996.............................. 1,663,387 612,421 18,386 -- 2,294,194
1995.............................. 1,166,247 463,754 22,125 -- 1,652,126
Income from operations:
1997.............................. $ 408,083 $ 271,897 $ 7,632 $ (66,781) $ 620,831
1996.............................. 380,841 214,721 8,890 (63,215) 541,237
1995.............................. 295,151 160,442 9,628 (53,600) 411,621
Identifiable assets:
1997.............................. $6,553,708 $3,309,431 $ 200,562 $ 243,162 $10,306,863
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
Depreciation and amortization:
1997.............................. $ 127,359 $ 21,611 $ 5 $ 8,575 $ 157,550
1996.............................. 103,696 18,601 9 7,513 129,819
1995.............................. 72,477 11,772 33 8,259 92,541
Capital expenditures:(1)
1997.............................. $ 273,191 $ 404,100 $ 2 $ 14,698 $ 691,991
1996.............................. 234,673 268,039 -- 11,582 514,294
1995.............................. 442,227 480,372 10 6,090 928,699
Number of operating locations at
year end (unaudited):
1997.............................. 3,244 441 -- -- 3,685
1996.............................. 2,987 390 -- -- 3,377
1995.............................. 2,836 360 -- -- 3,196
</TABLE>
- ---------------
(1) Includes $461,459, $321,142 and $803,468 for the three years ended December
31, 1997, respectively, for purchases of property, plant, and equipment and
cemetery property of acquired businesses.
45
<PAGE> 47
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:
1997............................... $1,588,831 $ 485,264 $ 225,087 $169,220 $ 2,468,402
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
Income from operations:
1997............................... $ 471,237 $ 54,541 $ 44,747 $ 50,306 $ 620,831
1996............................... 400,622 52,204 37,376 51,035 541,237
1995............................... 314,698 18,743 34,214 43,966 411,621
Identifiable assets:
1997............................... $7,340,407 $1,171,877 $1,059,238 $735,341 $10,306,863
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
Number of operating locations at year
end (unaudited):
1997............................... 1,574 1,101 712 298 3,685
1996............................... 1,441 1,056 631 249 3,377
1995............................... 1,274 1,067 618 237 3,196
Number of funerals (unaudited):
1997............................... 231,243 148,223 102,985 50,678 533,129
1996............................... 217,471 150,269 92,491 50,039 510,270
1995............................... 198,682 49,298 81,101 44,381 373,462
</TABLE>
46
<PAGE> 48
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE FIFTEEN
SUPPLEMENTARY INFORMATION
The detail of certain balance sheet accounts was as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
---------- --------
<S> <C> <C>
Cash and cash equivalents:
Cash...................................................... $ 41,264 $ 41,344
Commercial paper and temporary investments................ 5,613 2,787
---------- --------
$ 46,877 $ 44,131
========== ========
Receivables and allowances:
Current:
Trade accounts......................................... $ 312,931 $273,696
Cemetery contracts..................................... 269,503 236,578
Loans and other........................................ 80,109 69,174
---------- --------
662,543 579,448
---------- --------
Less:
Allowance for contract cancellations and doubtful
accounts............................................. 52,597 45,155
Unearned finance charges............................... 52,465 39,717
---------- --------
105,062 84,872
---------- --------
$ 557,481 $494,576
========== ========
Long-term:
Cemetery contracts..................................... $ 387,566 $311,847
Trusted cemetery merchandise sales..................... 486,139 371,400
Loans and other........................................ 207,687 206,897
---------- --------
1,081,392 890,144
---------- --------
Less:
Allowance for contract cancellations and doubtful
accounts............................................. 35,964 29,951
Unearned finance charges............................... 64,307 50,906
---------- --------
100,271 80,857
---------- --------
$ 981,121 $809,287
========== ========
</TABLE>
47
<PAGE> 49
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interest rates on cemetery contracts and loans and other notes receivable
range from 1.5% to 19.0% at December 31, 1997. Included in loans and other notes
receivable are $16,049 in notes with officers and employees of the Company, the
majority of which are collateralized by real estate, and $24,095 in notes with
other related parties.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cemetery property:
Undeveloped land.......................................... $1,234,321 $1,003,961
Developed land, lawn crypts and mausoleums................ 402,538 376,252
---------- ----------
$1,636,859 $1,380,213
========== ==========
Property, plant and equipment:
Land...................................................... $ 422,877 $ 355,017
Buildings and improvements................................ 1,152,235 1,017,334
Operating equipment....................................... 413,108 358,577
Leasehold improvements.................................... 46,853 45,606
---------- ----------
2,035,073 1,776,534
---------- ----------
Less: accumulated depreciation............................ (390,936) (319,459)
---------- ----------
$1,644,137 $1,457,075
========== ==========
Accounts payable and accrued liabilities:
Trade payables............................................ $ 63,868 $ 68,912
Dividends................................................. 18,975 14,189
Payroll................................................... 70,957 78,233
Interest.................................................. 31,665 28,984
Insurance................................................. 41,799 33,263
Bank overdraft............................................ 29,977 48,312
Other..................................................... 168,390 168,904
---------- ----------
$ 425,631 $ 440,797
========== ==========
</TABLE>
NON-CASH TRANSACTIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
-------- ------- --------
<S> <C> <C> <C>
Common stock issued under restricted stock plans.... $ 2,405 $ 1,278 $ 1,868
Minimum liability under retirement plans............ (4,097) (2,235) 4,213
Debenture conversions to common stock............... 6,417 1,240 188,707
Common stock issued in acquisitions................. 83,173 15,823 109,277
Debt issued in acquisitions......................... 21,325 26,467 114,609
Conversion of preferred securities of SCI Finance
LLC............................................... 167,911 -- --
</TABLE>
48
<PAGE> 50
SERVICE CORPORATION INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE SIXTEEN
EARNINGS PER SHARE
In 1997, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 128, "Earnings Per Share". All prior periods presented
have been restated to conform to this new standard. A reconciliation of the
numerators and denominators of the basic and diluted per share computations for
income before extraordinary item follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
---------- ---------- ----------
(THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Income (numerator):
Income before extraordinary item -- basic........ $374,552 $265,298 $183,588
After tax interest on convertible debentures..... 4,611 8,031 13,384
-------- -------- --------
Income before extraordinary item -- diluted...... $379,163 $273,329 $196,972
======== ======== ========
Shares (denominator):
Shares -- basic.................................. 245,470 235,299 199,603
Stock options and warrants.................... 4,827 3,919 3,709
Convertible debentures........................ 2,212 2,187 15,190
Convertible preferred securities of SCI
Finance LLC................................. 5,272 11,465 11,465
-------- -------- --------
Shares -- diluted................................ 257,781 252,870 229,967
======== ======== ========
Earnings per share before extraordinary item:
Basic............................................ $ 1.53 $ 1.13 $ .92
Diluted.......................................... $ 1.47 $ 1.08 $ .86
======== ======== ========
</TABLE>
NOTE SEVENTEEN
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FIRST* SECOND THIRD FOURTH YEAR
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
Revenues:
1997............................. $638,449 $601,141 $584,818 $643,994 $2,468,402
1996............................. 575,453 564,749 544,500 609,492 2,294,194
Gross profit:
1997............................. 188,152 163,183 151,772 184,505 687,612
1996............................. 160,168 144,063 131,378 168,843 604,452
Net income:
1997............................. 90,345 78,801 72,724 91,880 333,750
1996............................. 71,897 62,250 57,395 73,756 265,298
Basic earnings per share:
1997............................. .38 .33 .29 .36 1.36
1996............................. .31 .26 .25 .31 1.13
Diluted earnings per share:
1997............................. .36 .31 .28 .36 1.31
1996............................. .29 .25 .24 .30 1.08
</TABLE>
- ---------------
* The quarter ended March 31, 1997 includes (1) a $68,100 gain ($42,000 after
tax) on the sale of the Company's interest in ECI and (2) a $40,802
extraordinary loss (net of tax) on the early extinguishment of debt.
49
<PAGE> 51
SERVICE CORPORATION INTERNATIONAL
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1997
<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, 1997.... $45,155 $23,400 $ 5,333 $(21,291) $ 52,597
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
Due After One Year -- Allowance for
contract cancellations and doubtful
accounts:
Year ended December 31, 1997.... $29,951 $ 6,202 $ 1,123 $ (1,312) $ 35,964
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
</TABLE>
- ---------------
(1) Uncollected receivables written off, net of recoveries.
(2) Primarily acquisitions and dispositions of operations.
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 Graph" 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.
50
<PAGE> 52
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 schedule are listed in the accompanying Index
to Financial Statements and Related Schedule on page 21 of this report.
(3) Exhibits:
The exhibits listed on the accompanying Exhibit Index on pages 54-56 are
filed as part of this report.
(b) Reports on Form 8-K:
The Company did not file any reports on Form 8-K during the quarter ended
December 31, 1997.
(c) Included in (a) above.
(d) Included in (a) above.
51
<PAGE> 53
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 27, 1998 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 March 27, 1998
- ----------------------------------------------------- Executive Officer
(R. L. Waltrip)
GEORGE R. CHAMPAGNE* Senior Vice President Chief Financial March 27, 1998
- ----------------------------------------------------- Officer (Principal Financial
(George R. Champagne) Officer)
WESLEY T. MCRAE Corporate Controller of SCI March 27, 1998
- ----------------------------------------------------- Management Corporation, a
(Wesley T. McRae) subsidiary of the Registrant
(Principal Accounting Officer)
ANTHONY L. COELHO* Director March 27, 1998
- -----------------------------------------------------
(Anthony L. Coelho)
DOUGLAS M. CONWAY* Director March 27, 1998
- -----------------------------------------------------
(Douglas M. Conway)
JACK FINKELSTEIN* Director March 27, 1998
- -----------------------------------------------------
(Jack Finkelstein)
A. J. FOYT, JR.* Director March 27, 1998
- -----------------------------------------------------
(A. J. Foyt, Jr.)
JAMES J. GAVIN, JR.* Director March 27, 1998
- -----------------------------------------------------
(James J. Gavin, Jr.)
JAMES H. GREER* Director March 27, 1998
- -----------------------------------------------------
(James H. Greer)
L. WILLIAM HEILIGBRODT* Director March 27, 1998
- -----------------------------------------------------
(L. William Heiligbrodt)
</TABLE>
52
<PAGE> 54
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
B. D. HUNTER* Director March 27, 1998
- -----------------------------------------------------
(B. D. Hunter)
JOHN W. MECOM, JR.* Director March 27, 1998
- -----------------------------------------------------
(John W. Mecom, Jr.)
CLIFTON H. MORRIS, JR.* Director March 27, 1998
- -----------------------------------------------------
(Clifton H. Morris, Jr.)
E. H. THORNTON, JR.* Director March 27, 1998
- -----------------------------------------------------
(E. H. Thornton, Jr.)
W. BLAIR WALTRIP* Director March 27, 1998
- -----------------------------------------------------
(W. Blair Waltrip)
EDWARD E. WILLIAMS* Director March 27, 1998
- -----------------------------------------------------
(Edward E. Williams)
* By JAMES M. SHELGER
-------------------------------------------------
(James M. Shelger, as Attorney-In-Fact
For each of the Persons indicated)
</TABLE>
53
<PAGE> 55
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-3).
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,
1996).
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. (Incorporated by
reference to Exhibit 10.3 to Form 10-K for the fiscal
year ended December 31, 1996).
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 January 1, 1998, between SCI
Executive Services, Inc. and L. William Heiligbrodt.
10.6 -- Employment Agreement, dated January 1, 1998, between SCI
Executive Services, Inc. and W. Blair Waltrip.
10.7 -- Employment Agreement, dated January 1, 1998, between SCI
Executive Services, Inc. and John W. Morrow, Jr.
</TABLE>
54
<PAGE> 56
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
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, and further amended and
restated as of January 1, 1995, between Service
Corporation International 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, dated February 12,
1997. (Incorporated by reference to Exhibit 10.11 to Form
10-K for the fiscal year ended December 31, 1996).
10.12 -- Amendment to 1986 Stock Option Plan, dated November 13,
1997.
10.13 -- Amended 1987 Stock Plan. (Incorporated by reference to
Appendix A to Proxy Statement dated April 1, 1991).
10.14 -- 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).
10.15 -- 1993 Long-Term Incentive Stock Option Plan. (Incorporated
by reference to Exhibit 4.12 to Registration Statement
No. 333-00179 on Form S-8).
10.16 -- Amendment to 1993 Long-Term Incentive Stock Option Plan,
dated February 12, 1997. (Incorporated by reference to
Exhibit 10.15 to Form 10-K for the fiscal year ended
December 31, 1996).
10.17 -- Amendment to 1993 Long-Term Incentive Stock Option Plan,
dated November 13, 1997.
10.18 -- 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).
10.19 -- 1995 Incentive Equity Plan. (Incorporated by reference to
Annex B to Proxy Statement dated April 17, 1995).
10.20 -- Amendment to 1995 Incentive Equity Plan, dated February
12, 1997. (Incorporated by reference to Exhibit 10.18 to
Form 10-K for the fiscal year ended December 31, 1996).
10.21 -- Amendment to 1995 Incentive Equity Plan, dated November
13, 1997.
10.22 -- 1995 Stock Plan for Non-Employee Directors. (Incorporated
by reference to Annex A to Proxy Statement dated April
17, 1995).
10.23 -- 1996 Incentive Plan. (Incorporated by reference to Annex
A to Proxy Statement dated April 15, 1996).
10.24 -- Amendment to 1996 Incentive Plan, dated February 12,
1997. (Incorporated by reference to Exhibit 10.22 to Form
10-K for the fiscal year ended December 31, 1996).
10.25 -- Amendment to 1996 Incentive Plan, dated November 13,
1997.
10.26 -- Split Dollar Life Insurance Plan. (Incorporated by
reference to Exhibit 10.36 to Form 10-K for the fiscal
year ended December 31, 1995).
</TABLE>
55
<PAGE> 57
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.27 -- 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).
10.28 -- 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).
10.29 -- 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).
10.30 -- Second Amendment to Supplemental Executive Retirement
Plan for Senior Officers. (Incorporated by reference to
Exhibit 10.1 to Form 10-Q for the fiscal quarter ended
June 30, 1997).
10.31 -- Deferred Compensation Plan.
10.32 -- Second Supplemental Indenture, dated January 19, 1996,
between the Company and Texas Commerce Bank National
Association regarding Indenture dated May 1, 1970.
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 -- Financial Data Schedules.
</TABLE>
In the above list, the management contracts or compensatory plans or
arrangements are set forth in Exhibits 10.1 through 10.26 and 10.28 through
10.31.
56
<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
Dated: March 27, 1998
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as
of this 1st day of January, 1998, by and between SCI EXECUTIVE SERVICES, INC.,
a Delaware corporation (the "Company") wholly owned by SERVICE CORPORATION
INTERNATIONAL, a Texas corporation (the "Parent") and successor by assignment
to all of the rights, duties and obligations under this Agreement, and L.
William Heiligbrodt (the "Employee");
WHEREAS, the Company, the Parent and the Employee desire to join
in the execution of this Agreement to 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; and
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 continued
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 hereof and ending as of the close of business on December
31, 2001 (such period together with all extensions thereof, is referred to
hereinafter as the "Employment Period"); provided, however, that commencing on
the date one year after the date hereof, and on each January 1 thereafter (each
such date shall be hereinafter referred to as a "Renewal Date") the Employment
Period shall be automatically extended so as to terminate four (4) year(s) from
such Renewal Date if (i) the Compensation Committee of the Board of Directors
of the Parent (hereinafter referred to as the "Compensation Committee")
authorizes such extension during the 60-day period preceding such Renewal Date
and (ii) the Employee has not previously given the Company written notice that
the Employment Period shall not be so extended. In the event that the Company
gives the Employee written notice at any time that the Compensation Committee
has determined not to authorize such extension, or if the Company fails to
notify the Employee of the Compensation Committee's determination prior to the
Renewal Date (the "Renewal Deadline"), the Employment Period shall be extended
so as to terminate four (4) year(s) after the date such notice is given (or, in
case of a failure to notify, four (4) year(s) after the Renewal Deadline) and
shall not thereafter be further 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") 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
-2-
<PAGE> 3
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.
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 $645,000 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
Compensation Committee may from time to time direct such upward
adjustments to Annual Base Salary as the Compensation Committee 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 Compensation Committee (such aggregate awards for each year are
hereinafter referred to as the "Annual Bonus") and at the discretion of
the Compensation Committee to receive awards from any plan of the
Company or any of its affiliated companies providing for the payment of
-3-
<PAGE> 4
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 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,
-4-
<PAGE> 5
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) Change of Control. 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 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
-5-
<PAGE> 6
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);
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<PAGE> 7
(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 16(c), provided that the
successor referred to in Section 16(c) has received at least ten days
prior written notice from the Company or the Employee of the
requirements of Section 16(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.
(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. Notwithstanding
the foregoing, if the Company gives the Employee written notice pursuant to the
second sentence of Section 1 hereof, then "Date of Termination" shall mean the
last day of the four (4)-year period
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<PAGE> 8
for which the Employment Period is extended pursuant to such sentence.
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) (it being understood that if the
Company gives the Employee written notice that the Compensation Committee has
determined not to authorize an extension, or fails to notify the Employee of
the Compensation Committee's determination prior to the Renewal Deadline, in
either case as contemplated by the second sentence of Section 1 hereof, the
giving of such notice or the failure to so notify the Employee shall not be
deemed a termination of the employment of the Employee with the Company during
the Employment Period for purposes of this Section 5(a)).
(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:
(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
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<PAGE> 9
(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
(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
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<PAGE> 10
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) year(s) 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
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<PAGE> 11
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, 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,
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<PAGE> 12
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 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")
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<PAGE> 13
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 an accounting firm of national reputation selected by the Company (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 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
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<PAGE> 14
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 to effectively 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 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
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<PAGE> 15
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
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<PAGE> 16
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 Parent or the Company any
facts which might involve a conflict of interest that have not been approved by
the Company. The Board hereby acknowledges and agrees that the 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 of 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
or the Parent, 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
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<PAGE> 17
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
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.
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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 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
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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.
(a) During the Employment Period and, subject to the conditions of Sections
13(b) and 13(c), for a period of four (4) year(s) thereafter (the "Non-
Competition Period"), 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.
(b) If Employee's employment is discontinued: (i) by
Company for Cause pursuant to Section 4(b); or (ii) by Employee because of any
reason other than for Good Reason or other than during the Window Period
pursuant to 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
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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 Employee's employment is terminated due to the expiration
of the Employment Period in accordance with the provisions of 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 on or
within one (1) month after: (i) the date the Company gives the Employee notice
that the Employment Period will not be extended (or in the case of failure to
notify, on or within one month after the Renewal Deadline), in accordance with
Section 1; or (ii) in the case of termination due to Employee's disability or
by the Company without Cause, the 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 period, 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 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) year(s) following the
Date of Termination, he shall not at any time, directly or indirectly for the
benefit of any
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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 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 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
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<PAGE> 22
terminated or there is a change in the circumstances of the Employee's
employment which constitutes Good Reason, and if it is reasonably demonstrated
by the Employee that such termination or change in circumstances: (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:
(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 constituting 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
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<PAGE> 23
when such committee consisted 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 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
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<PAGE> 24
(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, 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 supersedes all previous
agreements and discussions relating to the same or similar subject matters
between Employee and the Company and shall be
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<PAGE> 25
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
If to the Parent:
Service Corporation International
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
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<PAGE> 26
shall be required to be withheld pursuant to any applicable law or regulation.
(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, the Company have caused this Agreement to be
executed this 1st day of January, 1998.
L. WILLIAM HEILIGBRODT
/s/ L. William Heiligbrodt
-----------------------------
"EMPLOYEE"
SCI EXECUTIVE SERVICES, INC.
By: /s/ Curtis G. Briggs
Name: Curtis G. Briggs
Title: Vice President
"COMPANY"
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<PAGE> 27
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
Name: James M. Shelger
Senior Vice President
General Counsel
and Secretary
"PARENT"
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<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as
of this 1st day of January, 1998, by and between SCI EXECUTIVE SERVICES, INC.,
a Delaware corporation (the "Company") wholly owned by SERVICE CORPORATION
INTERNATIONAL, a Texas corporation (the "Parent") and successor by assignment
to all of the rights, duties and obligations under this Agreement, and W. Blair
Waltrip (the "Employee");
WHEREAS, the Company, the Parent and the Employee desire to join
in the execution of this Agreement to 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; and
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 continued
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 hereof and ending as of the close of business on December
31, 2000 (such period together with all extensions thereof, is referred to
hereinafter as the "Employment Period"); provided, however, that commencing on
the date one year after the date hereof, and on each January 1 thereafter (each
such date shall be hereinafter referred to as a "Renewal Date") the Employment
Period shall be automatically extended so as to terminate three (3) year(s)
from such Renewal Date if (i) the Compensation Committee of the Board of
Directors of the Parent (hereinafter referred to as the "Compensation
Committee") authorizes such extension during the 60-day period preceding such
Renewal Date and (ii) the Employee has not previously given the Company written
notice that the Employment Period shall not be so extended. In the event that
the Company gives the Employee written notice at any time that the Compensation
Committee has determined not to authorize such extension, or if the Company
fails to notify the Employee of the Compensation Committee's determination
prior to the Renewal Date (the "Renewal Deadline"), the Employment Period shall
be extended so as to terminate three (3) year(s) after the date such notice is
given (or, in case of a failure to notify, three (3) year(s) after the Renewal
Deadline) and shall not thereafter be further 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") 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
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<PAGE> 3
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.
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 $425,000 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
Compensation Committee may from time to time direct such upward
adjustments to Annual Base Salary as the Compensation Committee 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 Compensation Committee (such aggregate awards for each year are
hereinafter referred to as the "Annual Bonus") and at the discretion of
the Compensation Committee to receive awards from any plan of the
Company or any of its affiliated companies providing for the payment of
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<PAGE> 4
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 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,
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<PAGE> 5
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) Change of Control. 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 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
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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);
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<PAGE> 7
(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 16(c), provided that the
successor referred to in Section 16(c) has received at least ten days
prior written notice from the Company or the Employee of the
requirements of Section 16(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.
(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. Notwithstanding
the foregoing, if the Company gives the Employee written notice pursuant to the
second sentence of Section 1 hereof, then "Date of Termination" shall mean the
last day of the three (3)-year period
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for which the Employment Period is extended pursuant to such sentence.
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) (it being understood that if the
Company gives the Employee written notice that the Compensation Committee has
determined not to authorize an extension, or fails to notify the Employee of
the Compensation Committee's determination prior to the Renewal Deadline, in
either case as contemplated by the second sentence of Section 1 hereof, the
giving of such notice or the failure to so notify the Employee shall not be
deemed a termination of the employment of the Employee with the Company during
the Employment Period for purposes of this Section 5(a)).
(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:
(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
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<PAGE> 9
(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
(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
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<PAGE> 10
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) year(s) 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
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<PAGE> 11
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, 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,
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<PAGE> 12
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 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")
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<PAGE> 13
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 an accounting firm of national reputation selected by the Company (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 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
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<PAGE> 14
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 to effectively 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 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
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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
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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 Parent or the Company any
facts which might involve a conflict of interest that have not been approved by
the Company. The Board hereby acknowledges and agrees that the 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 of 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
or the Parent, 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
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<PAGE> 17
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
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.
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<PAGE> 18
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 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
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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.
(a) During the Employment Period and, subject to the conditions of Sections
13(b) and 13(c), for a period of three (3) year(s) thereafter (the "Non-
Competition Period"), 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.
(b) If Employee's employment is discontinued: (i) by
Company for Cause pursuant to Section 4(b); or (ii) by Employee because of any
reason other than for Good Reason or other than during the Window Period
pursuant to 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
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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 Employee's employment is terminated due to the expiration
of the Employment Period in accordance with the provisions of 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 on or
within one (1) month after: (i) the date the Company gives the Employee notice
that the Employment Period will not be extended (or in the case of failure to
notify, on or within one month after the Renewal Deadline), in accordance with
Section 1; or (ii) in the case of termination due to Employee's disability or
by the Company without Cause, the 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 period, 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 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) year(s) following
the Date of Termination, he shall not at any time, directly or indirectly for
the benefit of any
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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 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 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
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terminated or there is a change in the circumstances of the Employee's
employment which constitutes Good Reason, and if it is reasonably demonstrated
by the Employee that such termination or change in circumstances: (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:
(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 constituting 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
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when such committee consisted 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 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
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<PAGE> 24
(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, 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 supersedes all previous
agreements and discussions relating to the same or similar subject matters
between Employee and the Company and shall be
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<PAGE> 25
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
If to the Parent:
Service Corporation International
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
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<PAGE> 26
shall be required to be withheld pursuant to any applicable law or regulation.
(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, the Company have caused this Agreement to be
executed this 1st day of January, 1998.
W. BLAIR WALTRIP
/s/ W. Blair Waltrip
-----------------------------
"EMPLOYEE"
SCI EXECUTIVE SERVICES, INC.
By: /s/ Curtis G. Briggs
Name: Curtis G. Briggs
Title: Vice President
"COMPANY"
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<PAGE> 27
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
Name: James M Shelger
Senior Vice President
General Counsel
and Secretary
"PARENT"
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<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as
of this 1st day of January, 1998, by and between SCI EXECUTIVE SERVICES, INC., a
Delaware corporation (the "Company") wholly owned by SERVICE CORPORATION
INTERNATIONAL, a Texas corporation (the "Parent") and successor by assignment to
all of the rights, duties and obligations under this Agreement, and John W.
Morrow, Jr. (the "Employee");
WHEREAS, the Company, the Parent and the Employee desire to join
in the execution of this Agreement to 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; and
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 continued
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 hereof and ending as of the close of business on December
31, 2000 (such period together with all extensions thereof, is referred to
hereinafter as the "Employment Period"); provided, however, that commencing on
the date one year after the date hereof, and on each January 1 thereafter (each
such date shall be hereinafter referred to as a "Renewal Date") the Employment
Period shall be automatically extended so as to terminate three (3) year(s) from
such Renewal Date if (i) the Compensation Committee of the Board of Directors of
the Parent (hereinafter referred to as the "Compensation Committee") authorizes
such extension during the 60-day period preceding such Renewal Date and (ii) the
Employee has not previously given the Company written notice that the Employment
Period shall not be so extended. In the event that the Company gives the
Employee written notice at any time that the Compensation Committee has
determined not to authorize such extension, or if the Company fails to notify
the Employee of the Compensation Committee's determination prior to the Renewal
Date (the "Renewal Deadline"), the Employment Period shall be extended so as to
terminate three (3) year(s) after the date such notice is given (or, in case of
a failure to notify, three (3) year(s) after the Renewal Deadline) and shall not
thereafter be further 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") 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
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<PAGE> 3
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.
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
$350,000 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 Compensation Committee may from
time to time direct such upward adjustments to Annual Base Salary as the
Compensation Committee 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 Compensation Committee (such aggregate awards for each year are
hereinafter referred to as the "Annual Bonus") and at the discretion of
the Compensation Committee to receive awards from any plan of the Company
or any of its affiliated companies providing for the payment of
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<PAGE> 4
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 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,
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<PAGE> 5
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) Change of Control. 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 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
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<PAGE> 6
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);
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<PAGE> 7
(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 16(c), provided that the successor referred to
in Section 16(c) has received at least ten days prior written notice from
the Company or the Employee of the requirements of Section 16(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.
(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. Notwithstanding the
foregoing, if the Company gives the Employee written notice pursuant to the
second sentence of Section 1 hereof, then "Date of Termination" shall mean the
last day of the three (3)-year period
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for which the Employment Period is extended pursuant to such sentence.
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) (it being understood that if the
Company gives the Employee written notice that the Compensation Committee has
determined not to authorize an extension, or fails to notify the Employee of the
Compensation Committee's determination prior to the Renewal Deadline, in either
case as contemplated by the second sentence of Section 1 hereof, the giving of
such notice or the failure to so notify the Employee shall not be deemed a
termination of the employment of the Employee with the Company during the
Employment Period for purposes of this Section 5(a)).
(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:
(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
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<PAGE> 9
(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
(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
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<PAGE> 10
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) year(s) 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
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<PAGE> 11
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, 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,
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<PAGE> 12
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 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")
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<PAGE> 13
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 an accounting firm of national reputation selected by the Company (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 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
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<PAGE> 14
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 to effectively 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 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
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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
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<PAGE> 16
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 Parent or the Company any facts
which might involve a conflict of interest that have not been approved by the
Company. The Board hereby acknowledges and agrees that the 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 of
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 or the
Parent, 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
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<PAGE> 17
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 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.
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<PAGE> 18
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 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
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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. (a)
During the Employment Period and, subject to the conditions of Sections 13(b)
and 13(c), for a period of three (3) year(s) thereafter (the "Non-Competition
Period"), 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.
(b) If Employee's employment is discontinued: (i) by Company
for Cause pursuant to Section 4(b); or (ii) by Employee because of any reason
other than for Good Reason or other than during the Window Period pursuant to
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
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<PAGE> 20
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 Employee's employment is terminated due to the expiration of
the Employment Period in accordance with the provisions of 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 on or within one (1) month after: (i)
the date the Company gives the Employee notice that the Employment Period will
not be extended (or in the case of failure to notify, on or within one month
after the Renewal Deadline), in accordance with Section 1; or (ii) in the case
of termination due to Employee's disability or by the Company without Cause, the
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 period,
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 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) year(s) following the
Date of Termination, he shall not at any time, directly or indirectly for the
benefit of any
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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 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 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
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terminated or there is a change in the circumstances of the Employee's
employment which constitutes Good Reason, and if it is reasonably demonstrated
by the Employee that such termination or change in circumstances: (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:
(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 constituting 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
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<PAGE> 23
when such committee consisted 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 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
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<PAGE> 24
(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, 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 supersedes all previous
agreements and discussions relating to the same or similar subject matters
between Employee and the Company and shall be
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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
If to the Parent:
Service Corporation International
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
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<PAGE> 26
shall be required to be withheld pursuant to any applicable law or regulation.
(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, the Company have caused this Agreement to be
executed this 1st day of January, 1998.
JOHN W. MORROW, JR.
/s/ John W. Morrow
----------------------------------
"EMPLOYEE"
SCI EXECUTIVE SERVICES, INC.
By:/s/ Curtis G. Briggs
----------------------------------
Name: Curtis G. Briggs
----------------------------
Title: Vice President
----------------------------
"COMPANY"
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<PAGE> 27
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
Name: James M. Shelger
Senior Vice President
General Counsel
and Secretary
"PARENT"
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<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made and entered into as of this 1st day of December,
1991, amended and restated as of August 12, 1992, further amended as of May 12,
1993 and further amended and restated as of January 1, 1995 by and between
SERVICE CORPORATION INTERNATIONAL, a Texas corporation (the "Company") and
JERALD L. PULLINS (the "Employee");
WHEREAS, Employee is employed by the Company in an executive 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 continued 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:
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 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
<PAGE> 2
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 be employed as Executive Vice President
European Operations of the Company. In such employment, the Employee's duties
and powers shall include, but not be limited to, all of the duties and powers of
holding the offices described above pursuant to the Bylaws of the Company, as in
effect on the date hereof, or 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 at any time during
the 90-day period immediately preceding the Change of Control Date.
(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.
3. Compensation. The Employee shall receive the following compensation for
his services:
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<PAGE> 3
(a) Salary. During the Employment Period, he shall be paid an annual base
salary ("Annual Base Salary") at the rate of not less than $280,000 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 peer
executives of 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 Compensation
Committee 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 peer executives of 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,
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<PAGE> 4
employee life, group life, accidental death and travel accident insurance plans
and programs) to the extent applicable generally to other peer executives of 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
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 peer executives of 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 peer executives of 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 peer executives of 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 18(b) of its intention to
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<PAGE> 5
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 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 as
contemplated by Section 2 or any other action by the Company 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
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<PAGE> 6
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 to comply with and satisfy Section
16(c), provided that the successor referred to in Section 16(c) has
received at least ten days prior written notice from the Company or the
Employee of the requirements of Section 16(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.
(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 18(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
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<PAGE> 7
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:
(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
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<PAGE> 8
(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; and
(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 peer
executives 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 peer executives of 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
(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 peer executives of 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 peer executives of the
Company and its affiliated companies and their families.
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<PAGE> 9
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 Continuation Benefits 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 peer executives 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 peer executives of 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 peer executives 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 thereafter with
respect to other peer executives of 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
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<PAGE> 10
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
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<PAGE> 11
any guarantee of performance thereof (including as a result 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 Ernst & Young (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
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<PAGE> 12
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 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
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<PAGE> 13
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 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.
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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's Compensation Committee. The Board hereby
acknowledges and agrees that the 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,
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<PAGE> 15
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 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
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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 Obligation 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
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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.
(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 18(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
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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 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. 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.
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
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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, as set forth in Section 2(a), 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:
(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 Company (the "Outstanding Company Common Stock") or (B) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that the following
acquisitions shall not constitute a Change of Control: (A) any acquisition
directly from the Company (excluding an acquisition by virtue of the
exercise of a conversion privilege), (B) any acquisition by the Company,
(C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company 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 the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of the Company; provided,
however, that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by (A) a vote of at least a majority of the
directors then comprising the Incumbent Board of the Company, or (B) a vote
of at least a majority of the directors then comprising the Executive
Committee of the Board at a time when such committee was comprised of at
least five members and
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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 the Company; or
(iii) Approval by the shareholders of the Company 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 Company Common Stock and Outstanding Company Voting
Securities immediately prior to such organization, merger or consolidation
in substantially the same proportions as their ownership, immediately prior
to such reorganization, merger or consolidation, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be,
(B) no Person (excluding the Company, any employee benefit plan or related
trust of the Company or such corporation resulting from such
reorganization, merger or consolidation and any Person beneficially owning,
immediately prior to such reorganization, merger or consolidation, directly
or indirectly, 20% or more of the Outstanding Company Common Stock or
Outstanding Company 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 Company of (A) a complete
liquidation or dissolution of the Company or (B) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale or other
disposition, (A)
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<PAGE> 22
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 i.e. then beneficially owned,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and outstanding Company Voting Securities immediately
prior to such sale or other disposition in substantially the same
proportion as their ownership, immediately prior to such sale or other
disposition, of the outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (B) no Person (excluding the
Company and any employee benefit plan or related trust of the Company or
such corporation and any Person beneficially owning, immediately prior to
such sale or other disposition, directly or indirectly, 20% or more of the
outstanding Company Common Stock or Outstanding Company 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
the Company providing for such sale or other disposition of assets of the
Company.
(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, 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,
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<PAGE> 23
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, Connecticut 06840
If to the Company:
Service Corporation International
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.
(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
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<PAGE> 24
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.
18. Other Provisions. The Company acknowledges that Employee was an
employee of the Company or one of its affiliates from December 1, 1969 until
April 4, 1979 ("Prior Employment Period"), and Employee was a participant in a
company pension plan which required five (5) years of Vesting Service to fully
vest. The Company acknowledges that under applicable law and under Section 7.03
of the current SCI Pension Plan that the Prior Employment Period must be
credited together with all subsequent years of employment of the same employer
or an affiliate thereof for computation of Benefit Service under the SCI Pension
Plan and SCI Supplemental Executive Retirement Plan. By confirmation of dates of
employment hereof the Company does not change, add or incur additional expenses
or liabilities for the payment of benefits that may be due or become due to
Employee pursuant to applicable statutes and the SCI Pension Plan.
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 as of the day and year first above written.
JERALD L. PULLINS
/s/ JERRY L. PULLINS
--------------------
SERVICE CORPORATION
INTERNATIONAL
By: /s/ JAMES M. SHELGER
------------------------
James M. Shelger
Senior Vice President
and General Counsel
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<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as
of this 1st day of January, 1998, by and between SCI EXECUTIVE SERVICES, INC.,
a Delaware corporation (the "Company") wholly owned by SERVICE CORPORATION
INTERNATIONAL, a Texas corporation (the "Parent") and successor by assignment
to all of the rights, duties and obligations under this Agreement, and
_________________________________________________ (the "Employee");
WHEREAS, the Company, the Parent and the Employee desire to join
in the execution of this Agreement to 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; and
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 continued
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 hereof and ending as of the close of business on December
31, 199___ (such period together with all extensions thereof, is referred to
hereinafter as the "Employment Period"); provided, however, that commencing on
the date one year after the date hereof, and on each January 1 thereafter (each
such date shall be hereinafter referred to as a "Renewal Date") the Employment
Period shall be automatically extended so as to terminate _________________
year(s) from such Renewal Date if (i) the Compensation Committee of the Board
of Directors of the Parent (hereinafter referred to as the "Compensation
Committee") authorizes such extension during the 60-day period preceding such
Renewal Date and (ii) the Employee has not previously given the Company written
notice that the Employment Period shall not be so extended. In the event that
the Company gives the Employee written notice at any time that the Compensation
Committee has determined not to authorize such extension, or if the Company
fails to notify the Employee of the Compensation Committee's determination
prior to the Renewal Date (the "Renewal Deadline"), the Employment Period shall
be extended so as to terminate __________________ year(s) after the date such
notice is given (or, in case of a failure to notify, ____________ year(s) after
the Renewal Deadline) and shall not thereafter be further 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") 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
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<PAGE> 3
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.
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
Compensation Committee may from time to time direct such upward
adjustments to Annual Base Salary as the Compensation Committee 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 Compensation Committee (such aggregate awards for each year are
hereinafter referred to as the "Annual Bonus") and at the discretion of
the Compensation Committee to receive awards from any plan of the
Company or any
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<PAGE> 4
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 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,
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<PAGE> 5
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) Change of Control. 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 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
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<PAGE> 6
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);
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<PAGE> 7
(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 16(c), provided that the
successor referred to in Section 16(c) has received at least ten days
prior written notice from the Company or the Employee of the
requirements of Section 16(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.
(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. Notwithstanding
the foregoing, if the Company gives the Employee written notice pursuant to the
second sentence of Section 1 hereof, then "Date of Termination" shall mean the
last day of the ________________-year
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<PAGE> 8
period for which the Employment Period is extended pursuant to such sentence.
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) (it being understood that if the
Company gives the Employee written notice that the Compensation Committee has
determined not to authorize an extension, or fails to notify the Employee of
the Compensation Committee's determination prior to the Renewal Deadline, in
either case as contemplated by the second sentence of Section 1 hereof, the
giving of such notice or the failure to so notify the Employee shall not be
deemed a termination of the employment of the Employee with the Company during
the Employment Period for purposes of this Section 5(a)).
(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:
(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
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<PAGE> 9
(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
(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
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<PAGE> 10
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) _______________ year(s) 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
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<PAGE> 11
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, 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,
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<PAGE> 12
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 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")
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<PAGE> 13
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 an accounting firm of national reputation selected by the Company (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 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
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<PAGE> 14
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 to effectively 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 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
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<PAGE> 15
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
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<PAGE> 16
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 Parent or the
Company any facts which might involve a conflict of interest that have not been
approved by the Company. The Board hereby acknowledges and agrees that the
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 of 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
or the Parent, 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
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<PAGE> 17
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
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.
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<PAGE> 18
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 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
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<PAGE> 19
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.
(a) During the Employment Period and, subject to the conditions of Sections
13(b) and 13(c), for a period of _________________________ year(s) thereafter
(the "Non-Competition Period"), 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.
(b) If Employee's employment is discontinued: (i) by
Company for Cause pursuant to Section 4(b); or (ii) by Employee because of any
reason other than for Good Reason or other than during the Window Period
pursuant to 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
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<PAGE> 20
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 Employee's employment is terminated due to the
expiration of the Employment Period in accordance with the provisions of
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 on or
within one (1) month after: (i) the date the Company gives the Employee notice
that the Employment Period will not be extended (or in the case of failure to
notify, on or within one month after the Renewal Deadline), in accordance with
Section 1; or (ii) in the case of termination due to Employee's disability or
by the Company without Cause, the 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 period, 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 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 _______________
year(s) following the Date of Termination, he shall not at any time, directly
or indirectly for the benefit of
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<PAGE> 21
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 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 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
-21-
<PAGE> 22
terminated or there is a change in the circumstances of the Employee's
employment which constitutes Good Reason, and if it is reasonably demonstrated
by the Employee that such termination or change in circumstances: (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:
(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
constituting 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
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<PAGE> 23
when such committee consisted 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 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
-23-
<PAGE> 24
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, 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 supersedes 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
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<PAGE> 25
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:
Name
Address
Address
If to the Company:
SCI Executive Services, Inc.
1929 Allen Parkway
Houston, Texas 77019
Attention: Corporate Secretary
If to the Parent:
Service Corporation International
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> 26
(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, the Company have caused this Agreement to be
executed this 1st day of January, 1998.
NAME
----------------------------------------
"EMPLOYEE"
SCI EXECUTIVE SERVICES, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
"COMPANY"
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.
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<PAGE> 27
SERVICE CORPORATION
INTERNATIONAL
By:
-----------------------------
Name:
--------------------------
Title:
-------------------------
"PARENT"
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<PAGE> 1
EXHIBIT 10.12
SERVICE CORPORATION INTERNATIONAL
AMENDMENT TO THE 1986 STOCK OPTION PLAN
AMENDMENT, dated as of November 13, 1997, to the Service Corporation
International 1986 Stock Option Plan, as Amended and Restated on November 12,
1991, and as further amended on February 12, 1997 (the "1986 Plan").
1. The 1986 Plan is hereby amended effective as of the date hereof, as
follows:
Article III is hereby amended and restated in its entirety as follows:
Each Option shall be evidenced by an Option Agreement and shall contain
such terms and conditions, and may be exercisable for such persons (up to
ten years from the date of the grant), as may be approved by the Committee.
The terms and conditions of the respective Option Agreements need not be
identical. Specifically, an Option Agreement may provide the right
("Right") to surrender the Option to purchase any shares subject to the
Option in return for a payment in cash and/or shares of Stock equal to the
excess of the fair market value of the shares with respect to which the
Option is surrendered over the option price therefor, on such terms and
conditions as the Committee in its sole discretion may prescribe. In
addition, an Option Agreement may provide for the payment of the option
price (i) by the delivery of a number of shares of Stock plus cash, if any,
having a fair market value equal to such option price or (ii) by the
delivery of an executed attestation form acceptable to the Company
attesting to the ownership of shares of Stock, plus cash, if any, having a
fair market value equal to such option price. Each Option and all rights
granted thereunder shall not be transferable other than by will or the laws
of descent and distribution, and shall be exercisable during the optionee's
lifetime only by the optionee.
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 immediate 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 subsequently transferred by the transferee except by the will or the
laws of
<PAGE> 2
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 transferred shall be entitled to the same rights
as the grantee hereunder, as if no transfer had taken place. As used
herein, "immediately 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> 1
EXHIBIT 10.17
SERVICE CORPORATION INTERNATIONAL
AMENDMENT TO THE 1993 LONG-TERM INCENTIVE STOCK OPTION PLAN
AMENDMENT, dated as of November 13, 1997, to the Service Corporation
International 1993 Long-Term Incentive Stock Option Plan, as amended on
February 12, 1997 (the "1993 Plan").
1. The 1993 Plan is hereby amended effective as of the date hereof, as
follows:
The second paragraph of Section 5(e), is hereby amended and restated in
its entirety as follows:
The option price of Stock to purchased upon exercise of any Option shall
be paid in full (i) in cash (by certified or bank check or such other
instrument as the Company may accept), (ii) in the form of unrestricted
Stock already owned by the optionee for six months or more, either
physically delivered or attested to on an executed attestation form
acceptable to the Company, and based on the Fair Market Value of the Stock
on the date the Stock Option is exercised, or (iii) by a combination
thereof. If an optionee is subject to Section 16(b) of the Exchange Act,
any election to make payment pursuant to clause (ii) of the preceding
sentence shall comply with the requirements of Rule 16b-3(e).
<PAGE> 1
EXHIBIT 10.21
SERVICE CORPORATION INTERNATIONAL
AMENDMENT TO THE 1995 INCENTIVE EQUITY PLAN
AMENDMENT, dated as of November 13, 1997, to the Service Corporation
International 1995 Incentive Equity Plan, as amended on
February 12, 1997 (the "1995 Plan").
1. The 1995 Plan is hereby amended effective as of the date hereof, as
follows:
The first paragraph of Article V, Section 5.6, is hereby amended and
restated in its entirety as follows:
Options shall be exercised by the delivery of written notice to the
Company setting forth the number of shares with respect to which the
Option is to be exercised, together with: (a) cash, check, certified
check, bank draft, or postal or express money order payable to the order
of the Company for an amount equal to the option price of the shares, (b)
Stock at its Fair Market Value on the date of exercise, (c) an executed
attestation form acceptable to the Company attesting to ownership of Stock
at its Fair Market Value on the date of exercise, and/or (d) any other
form of payment which is acceptable to the Committee, and specifying the
address to which the certificates for the shares are to be mailed. As
promptly as practicable after receipt of written notification and payment,
the Company shall deliver to the Employee certificates for the number of
shares with respect to which the Option has been exercised, issued in the
Employee's name. If shares of Stock are used in payment, the Fair Market
Value of the shares of Stock tendered must be less than the Option Price
of the shares being purchased, and the difference must be paid by check.
Delivery shall be deemed effected for all purposes when the Company or a
stock transfer agent of the Company shall have deposited the certificates
in the United States mail, addressed to the optionee, at the address
specified by the Employee.
<PAGE> 1
EXHIBIT 10.25
SERVICE CORPORATION INTERNATIONAL
AMENDMENT TO THE 1996 INCENTIVE PLAN
AMENDMENT, dated as of November 13, 1997, to the Service Corporation
International 1996 Incentive Plan, as amended on February 12, 1997 (the
"1996 Plan").
1. The 1996 Plan is hereby amended effective as of the date hereof, as
follows:
The first paragraph of Article V, Section 5.5, is hereby amended and
restated in its entirety as follows:
Options shall be exercised by the delivery of written notice to the Company
setting forth the number of shares with respect to which the Option is to
be exercised, together with: (a) cash, check, certified check, bank draft,
or postal or express money order payable to the order of the Company for an
amount equal to the Option Price of the shares, (b) Stock at its Fair
Market Value equal to the Option Price of the shares on the date of
exercise, (c) an executed attestation form acceptable to the Company
attesting to ownership of Stock at its Fair Market Value equal to the
Option Price of the shares on the date of exercise, and/or (d) any other
form of payment which is acceptable to the Committee, and specifying the
address to which the certificates for the shares are to be mailed. As
promptly as practicable after receipt of written notification and payment,
the Company shall deliver to the Employee certificates for the number of
shares with respect to which the Option has been exercised, issued in the
Employee's name. If shares of Stock are used in payment, the Fair Market
Value of the shares of Stock tendered must be less than the Option Price of
the shares being purchased, and the difference must be paid by check.
Delivery shall be deemed effected for all purposes when the Company or a
stock transfer agent of the Company shall have deposited the certificates
in the United States mail, addressed to the optionee, at the address
specified by the Employee.
<PAGE> 1
EXHIBIT 10.31
SERVICE CORPORATION INTERNATIONAL
DEFERRED COMPENSATION PLAN
ARTICLE I
Purpose
I.1 Purpose of Plan. The purpose of the Service Corporation
International Deferred Compensation Plan (the "Plan") is to advance the
interests of Service Corporation International (the "Company") and its
subsidiaries and affiliates (hereinafter sometimes collectively or individually
referred to as the "Employer") and of its shareholders by attracting and
retaining in its employ highly qualified individuals for the successful conduct
of its business. The Employer hopes to accomplish these objectives by helping
to provide for the retirement of a select group of management or highly
compensated Eligible Employees.
I.2 ERISA Status. The Plan is intended to qualify for the exemptions
under Title I of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") provided for plans that are unfunded and maintained primarily
for the purpose of providing deferred compensation for a select group of
management or highly compensated employees.
I.3 Rabbi Trust. The Employer may, but is not obligated to,
establish a grantor trust which shall qualify as a "rabbi trust" for the
purpose of holding assets to provide benefits under the terms of the Plan.
ARTICLE II
Definitions
II.1 "Account" means all amounts credited to the account of the
Participant under this Plan.
II.2 "Accruals" means the debits and credits to be posted to
Participant's Accounts as set forth under this Plan.
II.3 "Administrative Committee" or "Committee" means the Compensation
Committee of the Board of Directors of the Company.
II.4 "Beneficiary" means the person or persons designated in writing
to receive benefits, if any, upon the death of the Participant. If no such
designation is made, the designated Beneficiary shall be the deceased
Participant's spouse, or if the Participant is not married, his or her estate.
Notwithstanding the preceding sentence, if the designated Beneficiary of a
married Participant is not the Participant's spouse, the spouse must consent in
writing to the Participant's naming a non-spouse Beneficiary. The consent of
the spouse to a non-spouse Beneficiary shall be irrevocable by the spouse. In
the event an unmarried Participant marries, such Participant's designated
Beneficiary shall be the Participant's spouse
<PAGE> 2
regardless of an existing Beneficiary designation which shall be deemed revoked
as of the date of marriage unless subsequently consented to in writing by the
Participant's spouse.
II.5 "Board" means the Board of Directors of the Company.
II.6 "Change of Control" means the happening of any of the following
events:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person"), of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (A) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that the following acquisitions shall not
constitute a Change of Control under this subsection (a): (i) any acquisition
directly from the Company (excluding an acquisition by virtue of the exercise
of a conversion privilege), (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
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 (c) of this
definition of "Change of Control" are satisfied; or
(b) Individuals who, as of the effective date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the effective date of the Plan whose
election, or nomination for election by the Company's shareholders, was
approved by (A) a vote of at least a majority of the directors then comprising
the Incumbent Board, or (B) a vote of at least a majority of the directors then
comprising the Executive Committee of the Board 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 (b), shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies or consents
by or on behalf of a person other than the Board; or
(c) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation, (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
<PAGE> 3
to vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such reorganization,
merger or consolidation, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B) no Person
(excluding the Company, any employee benefit plan (or related trust) of the
Company or such corporation resulting from such reorganization, merger or
consolidation, and any Person beneficially owning, immediately prior to such
reorganization, merger or consolidation, directly or indirectly, 20% or more of
the Outstanding Company Common Stock or Outstanding Company 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
(d) Approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company or (B) the sale or other
disposition of all or substantially all of the assets of the Company, other
than to a corporation, with respect to which following such sale or other
disposition, (i) 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 Company Common Stock and
Outstanding Company Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their ownership,
immediately prior to such sale or other disposition, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding the Company and any employee benefit plan (or related
trust) of the Company 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 Company Common Stock or Outstanding Company
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 (iii) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent Board at the
time of the execution of the initial agreement or action of the Board providing
for such sale or other disposition of assets of the Company.
II.7 "Compensation" means, as to each Participant, the Participant's
total wages, salaries, and other amounts received for personal services
actually rendered in the course of
<PAGE> 4
employment with the Employer, including commissions, compensation based on a
percentage of profits and elective contributions to any plans or programs
maintained by the Employer, but excluding bonuses. For the purposes of this
Plan, elective contributions are amounts excludable from the Participant's
gross income under applicable statutory provisions and contributed by the
Employer, at the Participant's election, to a Section 401(k) arrangement or a
cafeteria plan.
II.8 "Deferral Contribution" means the amount of Compensation, bonus
and/or Company stock option gains, that a Participant elects to defer receipt
of and instead have such amounts credited by the Employer to his or her Account
in any Plan Year pursuant to the provisions of this Plan.
II.9 "Discretionary Employer Contribution" means a discretionary
amount contributed by the Employer and credited to a Participant's Account in
any Plan Year pursuant to the provisions of this Plan.
II.10 "Effective Date" means May 7, 1997, which is the effective date
of this Plan.
II.11 "Eligible Employee" means a highly compensated or management
employee of the Employer who meets the criteria established by the Board to
determine eligibility for the Plan and who has been selected and approved to
participate in the Plan by the Board, or in any other authorized manner
determined by the Employer.
II.12 "Participant" means an Eligible Employee who is a Participant in
the Plan.
II.13 "Plan Obligations" means the sum of the Account values of all
Participants. With respect to each Participant, "Plan Obligations" means such
Participant's Account value.
II.14 "Plan" means this Service Corporation International Deferred
Compensation Plan and any amendments hereto.
II.15 "Plan Year" means the calendar year, except with respect to the
first Plan Year, which will be the period of May 7, 1997 through December 31,
1997.
II.16 "President" means the president of the Company.
II.17 "Selected Index" (or "Selected Indices") means, with respect to
any Account, the investment vehicle with reference to which Accruals to such
Account are determined under this Plan.
<PAGE> 5
ARTICLE III
Deferral Contributions
III.1 Amount of Deferral Contributions. For each Plan Year,
Participants may elect to defer the present payment of all or any portion of
the following:
o Compensation;
o Bonus; and
o Company stock option gains
and instead have such amounts credited to the Participant's Account under this
Plan.
III.2 Manner of Deferral; Annual Election. Elections to make Deferral
Contributions shall be in writing, signed by the Participant and in a form
prescribed by the Administrative Committee. Except as otherwise provided
herein, the form shall be completed and returned to the Administrative
Committee on a date which shall be specified by the Administrative Committee:
o In the case of deferral of Compensation or bonus, such
form must be completed and returned to the Administrative
Committee prior to the beginning of the applicable Plan
Year for which the election is to take effect, or at such
other times as determined by the Administrative Committee;
o In the case of an election to defer Company stock option
gains, such form must be completed and returned to the
Administrative Committee at least six months prior to the
date the Participant elects to exercise his or her
applicable stock option(s) relating to such deferral
election, or at such other times as determined by the
Administrative Committee.
Once an election to make Deferral Contributions has been made,
such election shall be irrevocable.
The Administrative Committee shall notify each Eligible Employee
of his or her eligibility to participate in the Plan prior to the date by which
the election form is due to be filed. In the event that an Eligible Employee
becomes eligible to participate in the Plan after the beginning of a Plan Year,
the Administrative Committee shall allow such Eligible Employee to make an
election in a manner similar to that provided above to make Deferral
Contributions subsequent to the date of such election for the remainder of the
Plan Year in which he or she becomes a Participant; provided, however, that
such election shall apply only to Compensation or bonus earned after the
election form is completed.
III.3 Administrative Committee to Prescribe Rules Governing Deferral
Contributions. Deferral Contributions shall be made and credited under the
Plan in accordance with such rules and regulations as may be prescribed from
time to time by the Administrative Committee.
<PAGE> 6
ARTICLE IV
Employer Contribution/Vesting
IV.1 Discretionary Employer Contribution. Subject to the sole
discretion of the Board, the Employer may make a Discretionary Employer
Contribution under the Plan on behalf of Participants in such amounts as
determined by the Board. Such Discretionary Employer Contribution, to the
extent determined by the Board, for a Plan Year, shall be credited to
Participants Accounts at such time as the Administrative Committee prescribes.
IV.2 Vesting. Discretionary Employer Contributions shall vest in such
manner and at such times as determined in the sole discretion of the
Administrative Committee.
ARTICLE V
Accounts
V.1 Participant Accounts. The Administrative Committee shall
establish and maintain an individual bookkeeping account (the "Account") for
each Participant. The Administrative Committee shall credit the amount of each
Deferral Contribution and Discretionary Employer Contribution (if any), made on
behalf of a Participant to such Participant's Account at times prescribed by
the Administrative Committee. The Administrative Committee shall further debit
and/or credit the Account with all Accruals in accordance with the terms of
this Plan.
The sole purpose of the Account is to record and reflect the
Employer's obligations to each Participant under the Plan (the "Plan
Obligation"). Also for this sole purpose, the Employer shall maintain a
reserve account on its books to which all Plan Obligations shall be credited.
No Employer shall be required hereunder to segregate any of its assets with
respect to Plan Obligations, nor shall any provision of the Plan be construed
as constituting such segregation. The liabilities of the Employer and the
rights of the Participants under the Plan shall be those of a debtor and
creditors, respectively, and no such obligations shall be deemed to be secured
by any pledge or other encumbrance on any property of the Employer.
V.2 Accruals to the Account. (a) The Administrative Committee
shall, in its sole discretion and as it deems appropriate, designate Selected
Indices, if any, for the purpose of determining amounts to be debited and/or
credited to the Accounts.
(b) The "Selected Indices" are solely for the purpose of
determining Accruals to the Accounts, and nothing herein shall obligate the
Employer to invest any part of its assets in those investment vehicles, if any,
serving as the Selected Indices or in any other investments.
(c) Within 30 days following the close of each Plan Year, or
such shorter period as determined by the Administrative Committee ("Accounting
Period"), the
<PAGE> 7
Administrative Committee shall debit or credit each Account with any increase
or decrease in value with respect to the Selected Index as of the end of the
preceding Accounting Period.
(d) The Administrative Committee shall permit each Participant
to request that the amounts credited to the Participant's Account be invested
in any one or a combination of the Selected Indices designated as available for
hypothetical investment under the Plan. Each Participant's investment request
shall be in a form and manner prescribed by the Administrative Committee.
Notwithstanding the foregoing, the Administrative Committee may, but is not
obligated, to follow the Participant's investment request.
(e) Notwithstanding anything to the contrary herein, in the
case of a Deferral Contribution relating to Company stock option gains, unless
the Administrative Committee determines otherwise, the amount of such gain
deferred hereunder shall be recorded under this Plan in the form of one or more
of the following, as determined in the sole discretion of the Administrative
Committee: (i) Company common stock units, (ii) Company common stock, or (iii)
any other investment medium as the Committee deems appropriate.
For purposes of this Plan, a Company common stock unit shall be
the equivalent of a hypothetical share of Company common stock determined as of
the date of exercise of the underlying Company stock option(s) relating to such
deferral election, such that the value of a Company common stock unit shall be
the equivalent of the value of one share of Company common stock as of such
date. In the event the Company should declare a stock dividend or authorize a
split of shares of Company common stock, Company common stock units shall be
adjusted to reflect and take into account such stock dividend or stock split,
as the case may be. In the event of any dividend payments payable on Company
common stock, such amounts shall be credited as an addition to the Account of a
Participant whose Account consists of Company common stock units.
V.3 Nature and Source of Payments. The obligation to make
distributions under this Plan with respect to each Participant shall constitute
a liability of the Employer to the Participant and any Beneficiary in
accordance with the terms of this Plan. All distributions payable hereunder
shall be made from the general assets of the Employer, and nothing herein shall
be deemed to create a trust of any kind between the Employer and any
Participant or other person. Except as otherwise provided in this Plan, no
special or separate fund need be established nor need any other segregation of
assets be made to assure that distributions will be made under this Plan. No
Participant or Beneficiary shall have any interest in any particular asset of
the Employer.
Distributions under this Plan shall be made in such medium (e.g., cash,
mutual fund shares, etc.) as determined by the Administrative Committee.
<PAGE> 8
ARTICLE VI
Distributions
VI.1 Occasions for Distributions. The Employer shall distribute the
vested portion of a Participant's Account upon the events and in the manner set
forth in this Article.
VI.2 Distribution on Account of Termination of Employment. No later
than 90 days after a Participant terminates employment with the Employer for
any reason, the Employer shall distribute the value of the Participant's vested
Account in a single lump sum. However, the Administrative Committee may, in
its sole discretion, accelerate distributions under this provision if a
Participant ceases to perform services on a full-time basis for the Employer,
notwithstanding the fact that such Participant continues to receive
compensation or benefits pursuant to an employment contract or other agreement
or arrangement with the Employer.
VI.3 Change of Control. The Employer shall distribute to each
Participant in a single lump sum payment the full value of his or her Account
immediately following a Change of Control. The Employer, any successor
thereto, or any successor to substantially all of the assets of the Employer,
shall gross-up the Participant for any golden parachute excise tax liability
that may arise in the event of any distribution under the Plan.
VI.4 Hardship Distribution. Notwithstanding any provision of this
Plan, in the event of financial need that is beyond the control of a
Participant (or Beneficiary) and upon the written request of such Participant
(or Beneficiary), the Administrative Committee, in its sole discretion, may
authorize and direct the Employer to make a distribution under this Plan to
such Participant (or Beneficiary) in a lump sum. Such a distribution may be
authorized only if disallowance of the distribution would result in financial
hardship to the Participant (or Beneficiary). Such distributions may be made
only to the extent that the distribution is necessary to enable the Participant
(or Beneficiary) to resolve the financial need.
In the event the Administrative Committee authorizes a hardship
distribution, a Participant's Deferral Contribution election shall cease on a
prospective basis and be suspended for the duration of the Plan Year.
VI.5 Distribution on Account of Completion of Deferral Period. Unless
otherwise provided hereunder, no later than 90 days after completion of the
previously elected deferral period, the value of the vested portion of a
Participant's Account shall be paid in a single lump sum. Distributions under
this provision shall be made in accordance with the Participant's prior written
election in such form as prescribed by the Administrative Committee.
VI.6 Payment to Beneficiary in the Event of Participant's Death. In
the event of a Participant's death prior to the commencement of payments from
his or her Account, the vested balance in his or her Account prior to his or
her death shall be paid to his or her Beneficiary in a single lump sum. Such
distribution shall be made no later than 90 days after the Administrative
Committee receives written notice of his or her death together with any
<PAGE> 9
documents, instruments or other evidence that the Administrative Committee may
require to render a distribution based on the fact of the Participant's death.
VI.7 Alternative Form of Distribution. Notwithstanding the foregoing
provisions of this Plan, a Participant may elect to receive his or her benefits
payable under this Plan in an installment form of payment not to exceed ten
years, provided such Participant files such election with the Administrative
Committee at least two years prior to the date benefits are to commence.
VI.8 Alternative Time of Distribution. Notwithstanding the foregoing
provisions of this Plan, a Participant may elect to defer the receipt of
benefits payable under this Plan beyond the otherwise applicable distribution
date by filing such election with the Administrative Committee at least two
years prior to the date benefits are otherwise scheduled to commence.
VI.9 Continuation of Accounts After Commencement of Distributions.
After distributions to a Participant have commenced from his or her Account,
the remaining value of his or her Account (if any) shall continue to be
credited with any income (or losses) in accordance with the provisions of the
Plan until the entire remaining value of his or her Account has been paid.
ARTICLE VII
Administrative Committee
VII.1 Rights, Powers and Authority. The Administrative Committee shall
be responsible for the general supervision of the administration of the Plan
according to the terms and provisions of the Plan and shall have all powers
necessary to accomplish such purposes, including but not limited to, the right,
power and authority:
(a) To adopt rules and regulations for the administration of
the Plan;
(b) To construe all terms, provisions, conditions and
limitations of the Plan;
(c) To select the Eligible Employees to participate in the
Plan;
(d) To determine all matters relating to the administration of
the Plan (including the promulgation of forms and procedures to Participants
and Beneficiaries with respect to the payment of benefits, filing claims for
benefits under this Plan and adequate written notices of any denial of such
claims and an opportunity for a review of any such denial); and
(e) To maintain the Plan in compliance with applicable legal
requirements.
VII.2 Procedures. The Administrative Committee shall establish
appropriate procedures to conduct its operations and to carry out its rights
and duties under the Plan. These procedures shall cover meetings, quorums and
voting.
<PAGE> 10
VII.3 Compensation and Expenses. The members of the Administrative
Committee shall serve without compensation for their services, but all expenses
of the Administrative Committee and all other expenses incurred in
administering the Plan shall be paid by the Employer.
VII.4 Statement to Participants. No later than 90 days after the end
of each calendar year, the Administrative Committee shall transmit to each
Participant (or Beneficiary) a written statement showing, as of the end of such
calendar year, the value of the Participant's (or Beneficiary) Account. These
statements shall be binding for purposes of determining the Employer's Plan
Obligations to the Participant (or Beneficiary), unless contested in writing by
the Participant (or Beneficiary) within 15 days after the Participant receives
such written statement.
VII.5 Indemnification. The Company shall indemnify the members of the
Administrative Committee against the reasonable expenses, including attorneys'
fees, actually and necessarily incurred by them in connection with the defense
of any action, suit or proceeding, or in connection with any appeal thereto, to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan and against all amounts
paid by them in settlement thereof (provided such settlement is approved by
independent legal counsel selected by the Company) and against all amounts paid
by them in satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such Administrative Committee member is liable for
fraud, deliberate dishonesty or willful misconduct in the performance of his or
her duties; provided that within 60 days after the institution of any such
action, suit or proceeding an Administrative Committee member has offered in
writing to allow the Company, at its own expense, to handle and defend any such
action, suit or proceeding.
ARTICLE VIII
Amendment and Termination
VIII.1 Power to Amend Reserved. The Board shall have the right to amend
the terms of the Plan at any time, provided, however, that no such amendment
shall reduce any amounts otherwise credited to the Accounts of Participants
under the Plan (to the extent vested) as of the date of such amendment.
VIII.2 Termination of the Plan. The Board may terminate the Plan at any
time, and as soon as practicable thereafter, Participants shall receive in a
single lump sum payment the value of their Accounts (to the extent vested) as
of the date of such termination.
<PAGE> 11
ARTICLE IX
Miscellaneous
IX.1 Plan Does Not Affect the Rights of Employee. Nothing contained
in this Plan shall be deemed to give any Participant the right to be retained
in the employment of the Employer,to interfere with the rights of the Employer
to discharge any Participant at any time or to interfere with a Participant's
right to terminate his or her employment at any time.
IX.2 Nonalienation and Nonassignment. Except for debts owed the
Employer by a Participant or Beneficiary, no amounts payable or to become
payable under the Plan to a Participant or Beneficiary shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to so anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same by a Participant or
Beneficiary prior to distribution as herein provided shall be null and void.
IX.3 Tax Withholding. The Employer shall have the right to deduct
from any payments to a Participant or Beneficiary under the Plan any taxes
required by law to be withheld with respect to such payments. In addition, the
Employer shall have the right to deduct from any Plan contributions any
applicable employment taxes or other required withholdings with respect to a
Participant.
IX.4 Setoffs. To the fullest extent permitted by law, any amounts
owed by a Participant or Beneficiary to the Employer may be deducted by the
Employer from the value of such Participant's Account at the time and to the
extent that such Account is otherwise payable hereunder.
IX.5 Construction. Unless the context clearly indicates to the
contrary, the masculine gender shall include the feminine and neuter, and the
singular shall include the plural and vice versa.
IX.6 Applicable Law. The terms and provisions of the Plan shall be
construed in accordance with the laws of the State of Texas, except to the
extent preempted by ERISA or other federal law.
IX.7 Successors. The Plan shall be binding upon the Employer and its
successors and assigns, in accordance with its terms.
IX.8 ERISA Claims Procedure. A claim for benefits under this Plan by
any person shall be filed with the Administrative Committee in a manner
governed by procedures set forth in the Company's tax-qualified cash balance
plan, as amended from time to time, or other procedures established by the
Administrative Committee.
<PAGE> 12
IN WITNESS HEREOF, this Plan has been adopted as of May 21, 1997, effective as
provided herein.
SERVICE CORPORATION INTERNATIONAL
By:
/s/ JACK L. STONER
- ------------------------------------------
Name:
Jack L. Stoner
- ------------------------------------------
Title:
Senior Vice President/Administration
- ------------------------------------------
<PAGE> 1
EXHIBIT 10.32
SECOND SUPPLEMENTAL INDENTURE
Dated as of January 19, 1996
between
SERVICE CORPORATION INTERNATIONAL
and
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Trustee
to
INDENTURE
Dated as of May 1, 1970
between
SERVICE CORPORATION INTERNATIONAL
and
FIRST CITY NATIONAL BANK OF HOUSTON,
as Trustee
Guarantees of Promissory Notes of Subsidiaries
of Service Corporation International
<PAGE> 2
SECOND SUPPLEMENTAL INDENTURE, dated as of January 19, 1996, by and
between SERVICE CORPORATION INTERNATIONAL, a Texas corporation (the "Company"),
and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association
duly organized and existing under the laws of the United States of America, as
Trustee (the "Trustee");
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered to First
City National Bank of Houston (the "Predecessor Trustee") that certain
Indenture dated as of May 1, 1970, by and between the Company and the
Predecessor Trustee (said Indenture, as supplemented by the First Supplemental
Indenture referenced hereinbelow, is referred to herein as the "Indenture");
WHEREAS, the Company has heretofore executed and delivered to Trustee
that certain First Supplemental Indenture dated as of June 15, 1992, by and
between the Company and the Trustee; and
WHEREAS, the Company is desirous of amending Section 2.01 of the
Indenture;
NOW, THEREFORE, in order to comply with the provisions of the
Indenture and for and in consideration of the premises and the covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Trustee agree as follows:
ARTICLE I
1.01 The first sentence of Section 2.01 of the Indenture is hereby
amended to read in its entirety as follows:
Upon the execution and delivery of this Indenture, Guarantees
of notes of Subsidiaries covering an unlimited amount of
indebtedness may be executed by the Guarantor, and may be
issued from time to time as determined by the Board of
Directors of the Guarantor or by officers of the Guarantor who
are authorized by the Board of Directors of the Guarantor to
make determinations to issue Guarantees.
1.02 Unless otherwise defined herein, all terms used in this Second
Supplemental Indenture that are defined in the Indenture shall have the same
meanings as used therein.
ARTICLE II
Miscellaneous
2.01 Except as expressly supplemented by this Second Supplemental
Indenture, the Indenture is in all respects ratified and confirmed and all of
the rights, remedies, terms, conditions, covenants and agreements of the
Indenture and the Guarantees issued thereunder shall remain in full force and
effect.
<PAGE> 3
2.02 This Second Supplemental Indenture is executed as and shall
constitute an indenture supplemental to the Indenture and shall be construed in
connection with and as part of the Indenture. This Second Supplemental
Indenture shall be governed by and construed in accordance with the laws of the
jurisdiction which governs the Indenture and it construction.
2.03 This Second Supplemental Indenture may be executed in any
number of counterparts, each of which shall be deemed to be an original for all
purposes; but such counterparts shall together be deemed to constitute but one
and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Second Supplemental
Indenture to be duly executed as of the day and year first written above.
SERVICE CORPORATION INTERNATIONAL
By:/s/ JAMES M. SHELGER
------------------------------------
James M. Shelger
Senior Vice President
General Counsel and Secretary
TEXAS COMMERCE BANK
NATIONAL ASSOCIATION
By:/s/ WAYNE MENTZ
------------------------------------
Name: Wayne Mentz
----------------------------------
Title: Assistant Vice President
---------------------------------
and Trust Officer
---------------------------------
-2-
<PAGE> 1
EXHIBIT 12.1
SERVICE CORPORATION INTERNATIONAL
RATIO OF EARNINGS TO FIXED CHARGES
(Thousands, except ratio amounts)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Pretax income ................................................................. $579,973 $413,881 $294,211 $219,021 $173,492
Undistributed income of less than 50% owned equity investees................... (4,267) (6,173) (3,847) (1,019) (325)
Minority interest in income of majority owned subsidiaries with fixed charges.. 124 933 1,878 2,234 1,938
Add fixed charges as adjusted (from below)..................................... 170,278 178,291 155,552 102,370 78,841
-------- -------- -------- -------- --------
$746,108 $586,932 $447,794 $322,608 $253,946
Fixed charges:
Interest expense:
Corporate................................................................... $135,560 $136,008 $118,148 $ 80,123 $ 59,631
Financial services.......................................................... 8,015 8,913 10,782 9,912 7,725
Capitalized................................................................. 3,787 3,099 1,865 584 705
Amortization of debt costs................................................... 1,160 2,549 1,093 311 288
1/3 of rental expense........................................................ 21,161 20,040 14,748 11,485 11,197
Dividends on preferred securities of SCI Finance LLC......................... 4,382 10,781 10,781 539 -
-------- -------- -------- -------- --------
Fixed charges.................................................................. 174,065 181,390 157,417 102,954 75,546
Fixed charges as adjusted:
Less: Capitalized interest................................................... (3,787) (3,099) (1,865) (584) (705)
-------- -------- -------- -------- --------
Fixed charges as adjusted...................................................... $170,278 $178,291 $155,552 $102,370 $ 78,841
-------- -------- -------- -------- --------
Ratio (earnings divided by fixed charges)...................................... 4.29 3.24 2.84 3.13 3.19
</TABLE>
<PAGE> 1
EXHIBIT 21.1
March 23, 1998
<TABLE>
<CAPTION>
<S> <C>
ALABAMA OWNERSHIP
- ------- ---------
SCI Funeral Services, Inc. (Iowa Corp) Alabama subsidiaries
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 subsidiaries
SCI Alaska Funeral Services, Inc.-------------------------------100%
ARIZONA
- -------
SCI Funeral Services, Inc. (Iowa Corp.) Arizona subsidiaries
National Cremation Society, Inc.--------------------------------100%
SCI Arizona Funeral Services, Inc.------------------------------100%
Grimshaw Mortuary, Inc.--------------------------------100%
Redwood Memorial Gardens, Inc.-------------------------100%
Valley of the Sun Memorial Park, Inc.------------------100%
ARKANSAS
- --------
SCI Funeral Services, Inc. (Iowa Corp) Arkansas subsidiaries
SCI Arkansas Funeral Services, Inc.-----------------------------100%
The East Funeral Benefit Assurance Company----------------------100%
CALIFORNIA
- ----------
SCI Funeral Services, Inc. (Iowa Corp.) California subsidiaries
Hong Kong Funeral Homes-----------------------------------------100%
International Funeral Parlours----------------------------------100%
SCI California Funeral Services, Inc.---------------------------100%
CWFD, Inc.---------------------------------------------100%
Ellis-Olson Mortuary-----------------------------------100%
Hotchkiss Mortuary, Incorporated-----------------------100%
Lakeside Memorial Lawn---------------------------------100%
La Verne Cemetery Corporation--------------------------100%
Mount Vernon Memorial Park-----------------------------100%
Oakdale Memorial Park----------------------------------100%
Oakdale Mortuary---------------------------------------100%
Oak Hill Improvement Company---------------------------100%
Pierce Brothers----------------------------------------100%
Redding Memorial Park----------------------------------100%
Sacramento Memorial Lawn-------------------------------100%
SCI Southern California Region, Inc.-------------------100%
The Valley Funeral Home--------------------------------100%
Tinkler Mission Chapel---------------------------------100%
World Funeral Home-------------------------------------100%
COLORADO
- --------
SCI Funeral Services, Inc. (Iowa Corp.) Colorado subsidiaries
SCI Colorado Funeral Services, Inc.-----------------------------100%
SCI Western Division, Inc.-----------------------------100%
CONNECTICUT
- -----------
SCI Funeral Services, Inc. (Iowa Corp.) Connecticut subsidiaries
SCI Connecticut Funeral Services, Inc.--------------------------100%
DELAWARE
- --------
Christian Funeral Services, Inc.----------------------------------------100%
Provident Services, Inc.------------------------------------------------100%
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 Funeral Services, Inc.--------------------------------------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 subsidiaries
IFC-York, Inc.-----------------------------------------100%
SCIT Holdings, Inc.---------------------------------------------100%
</TABLE>
1
* State Law Not-For-Profit-Corporation
<PAGE> 2
<TABLE>
<S> <C>
SCI Iowa Funeral Services, Inc. (IA Corp.) Delaware
subsidiaries
SCI Iowa Finance Company-------------------------------100%
SCI Pennsylvania Funeral Services, Inc. (PA Corp.) Delaware
subsidiaries
Gabauer Funeral Home, Inc.-----------------------------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
subsidiaries
IFC-YP, Inc.-----------------------------------100%
SCI Management Corporation--------------------------------------100%
International Funeral Services, Inc.-------------------100%
SCI European Aviation, Inc.----------------------------100%
SCI Management Finance Company-------------------------100%
DISTRICT OF COLUMBIA
- --------------------
SCI Funeral Services, Inc. (Iowa Corp.) DC subsidiaries
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%
Woodlawn Memorial Park, Inc.---------------------------100%
GEORGIA
- -------
SCI Funeral Services, Inc. (Iowa corp.) Georgia subsidiaries
SCI Georgia Funeral Services, Inc. (Delaware Corp.) Georgia
subsidiaries
Memorial Gardens of Rome, Inc.-------------------------100%
SCI Georgia Land, Inc.---------------------------------100%
SCI Southern Division, Inc.----------------------------100%
HAWAII
- ------
SCI Funeral Services, Inc. (Iowa Corp.) Hawaii subsidiaries
SCI Hawaii Funeral Services, Inc.-------------------------------100%
*Hawaiian Memorial Park Cemetery---------------------------- -0-
Garden Life Plan, Ltd.--------------------------50%
Hawaiian Memorial Life Plan, Ltd.--------------100%
IDAHO
- -----
NO SUBSIDIARIES
ILLINOIS
- --------
Remmert Acquisition Corp.-----------------------------------------------100%
SCI Funeral Services, Inc. (Iowa Corp.) Illinois subsidiaries
Rosehill Memorials, Inc.----------------------------------------100%
SCI Illinois Services, Inc.-------------------------------------100%
Charles T. Bisch & Son, Inc.---------------------------100%
Chris J. Balodimas, Ltd.-------------------------------100%
Elias-Smith Funeral Homes, Inc.------------------------100%
Humes Funeral Home, Inc.-------------------------------100%
IFS Illinois, Inc.-------------------------------------100%
Kolbus Funeral Home, Inc.------------------------------100%
Marsh Funeral Home, Inc.-------------------------------100%
Pete Gaerdner Funeral Home, Inc.-----------------------100%
Remmert Funeral Home, Ltd.-----------------------------100%
Sourek Funeral Homes, 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%
Gibraltar Mausoleum of Indiana, Inc.-------------------100%
Gibraltar Services, Inc.-------------------------------100%
Gold Crusader Insurance Agency, Inc.-------------------100%
SCI Indiana Funeral Services, Inc.------------------------------100%
Greenlawn Memorial Park, Inc.--------------------------100%
Indiana Cemetery Services, Inc.------------------------100%
Klaehn Funeral Homes, Inc.-----------------------------100%
Roselawn Memorial Association, Inc.--------------------100%
</TABLE>
2
* State Law Not-For-Profit-Corporation
<PAGE> 3
<TABLE>
<S> <C>
IOWA
- ----
DMP Acquisition Corp.---------------------------------------------------100%
SCI Funeral Services, Inc.----------------------------------------------100%
Bunker's Eden Vale, Inc.----------------------------------------100%
SCI Iowa Funeral Services, Inc.---------------------------------100%
Davenport Memorial Park Inc.---------------------------100%
Meyer Funeral Home, Inc.-------------------------------100%
KANSAS
- ------
SCI Funeral Services, Inc. (Iowa Corp.) Kansas subsidiaries
SCI Kansas Funeral Services, Inc.-------------------------------100%
Resthaven Gardens of Memory, 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%
Highland Memory Gardens, Inc.-----------------------------------100%
LOUISIANA
- ---------
SCI Funeral Services, Inc. (Iowa Corp) Louisiana subsidiaries
SCI Louisiana Funeral Services, Inc.----------------------------100%
Affiliated Enterprises, Inc.---------------------------100%
MAINE
- -----
SCI Funeral Services, Inc. (Iowa Corp) Maine subsidiaries
SCI Maine Funeral Services, Inc.--------------------------------100%
MARYLAND
- --------
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.---------------------------------55.17%
Hubbard Funeral Home, Inc.--------------------------------------100%
AEFH, Inc.---------------------------------------------100%
Bradley-Ashton-Dabrowski-Matthews Funeral Home, Inc.---100%
Danzansky-Goldberg Memorial Chapels, Inc.--------------100%
Edward Sagel Funeral Direction, Inc.-------------------100%
Fleck Funeral Home, 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-Dabrowski Funeral Home, Inc.--------------100%
Sterling-Ashton Funeral Home, Inc.---------------------100%
The Dippel Funeral Homes, Incorporated-----------------100%
SCI Maryland Funeral Services, Inc.-----------------------------100%
George Washington Cemetery Company, Inc.---------------100%
The Behrens Corporation--------------------------------100%
MASSACHUSETTS
- -------------
Provident Services, Inc. (Delaware Corp.) Massachusetts subsidiaries
PSI Massachusetts, Inc.-----------------------------------------100%
SCI Funeral Services, Inc. (Iowa Corp.) Massachusetts subsidiaries
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%
PFH, Inc.----------------------------------------------100%
Pillsbury Funeral Homes, Inc.---------------------------40%
Sullivan Funeral Homes, Inc.----------------------------40%
MFS Holding Company, Inc.---------------------------------------100%
Messier Funeral Home, Inc.------------------------------40%
Perlman Funeral Home, Inc.------------------------------40%
Stanetsky Memorial Chapels, Inc.------------------------40%
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%
Elton Black & Son Funeral Home, Inc.-------------------100%
Estes-Leadley Co.--------------------------------------100%
</TABLE>
3
* State Law Not-For-Profit-Corporation
<PAGE> 4
<TABLE>
<S> <C>
MINNESOTA
- ---------
SCI Funeral Services, Inc. (Iowa Corp.) Minnesota subsidiaries
SCI Minnesota Funeral Services, Inc.----------------------------100%
Crystal Lake Cemetery Association----------------------100%
MISSISSIPPI
- -----------
SCI Funeral Services, Inc. (Iowa Corp.) Mississippi subsidiaries
SCI Mississippi Funeral Services, Inc.--------------------------100%
Southwest Mississippi Funeral Service, Inc.------------100%
MISSOURI
- --------
SCI Funeral Services, Inc. (Iowa Corp) Missouri subsidiaries
SCI Missouri Funeral Services, Inc.-----------------------------100%
Memorial Guardian Plans, Inc.--------------------------100%
MONTANA
- -------
NO SUBSIDIARIES
NEBRASKA
- --------
SCI Funeral Services, Inc. (Iowa Corp) Nebraska subsidiaries
SCI Nebraska Funeral Services, Inc.-----------------------------100%
NEVADA
- ------
SCI Funeral Services, Inc. (Iowa Corp) Nevada subsidiaries
Ross, Burke & Knobel Mortuary-----------------------------------100%
SCIT Holdings, Inc. (Delaware Corp.) Texas subsidiaries
SCI Texas Funeral Services, Inc. (Texas Corp) Nevada
subsidiaries
SCI Texas Finance Company----------------------100%
NEW HAMPSHIRE
- -------------
NO SUBSIDIARIES
NEW JERSEY
- ----------
A & C Acquisition Corp.-------------------------------------------------100%
SCI Funeral Services, Inc. (Iowa Corp) New Jersey subsidiaries
SCIT Holdings, Inc. (Delaware Corp.) New Jersey subsidiaries
SCI New Jersey Funeral Services, Inc.------------------100%
Anderson & Campbell, Inc.----------------------100%
Funeral Livery Co., Inc.-----------------------100%
Garden State Crematory, Inc.-------------------100%
La Monica Memorial Home------------------------100%
Michael Hegarty Funeral Home, Inc.-------------100%
Quinn Funeral Service--------------------------100%
Wien & Wien, Inc.------------------------------100%
NEW MEXICO
- ----------
SCI Funeral Services, Inc. (Iowa Corp) New Mexico subsidiaries
Memorial Guardian Plans, Inc. (Delaware Corp) New Mexico
subsidiaries
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%
NEW YORK
- --------
SCI Funeral Services, Inc. (Iowa Corp) New York subsidiaries
SCI Funeral Services of New York, Inc.--------------------------100%
Bordynski-Hollis Funeral Home, Inc.--------------------100%
Chas. Peter Nagel Inc.---------------------------------100%
Farone and Son, Inc.-----------------------------------100%
I. J. Morris, Inc.-------------------------------------100%
Marsellus Casket Company, Inc.-------------------------100%
Nesconset Funeral Home, Inc.---------------------------100%
New York Funeral Chapels, Inc.-------------------------100%
SCI Eastern Division, Inc.-----------------------------100%
725 RTE. 347 CORP -------------------------------------100%
Thomas M. Quinn & Sons, Inc.----------------------------80%
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 subsidiaries
SCI North Carolina Funeral Services, Inc.-----------------------100%
Skyline Memory Gardens, Inc.---------------------------100%
The P.E. Moody Funeral Home, Inc.----------------------100%
NORTH DAKOTA
- ------------
SCI Funeral Services, Inc. (Iowa Corp) North Dakota subsidiaries
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%
</TABLE>
4
* State Law Not-For-Profit-Corporation
<PAGE> 5
<TABLE>
<S> <C>
The Knollwood Cemetery Company-----------------------------100%
Memorial Guardian Plans, Inc. (Delaware Corp.) Ohio subsidiaries
Ensure Agency of Ohio, Inc.--------------------------------100%
SCI Ohio Funeral Services, Inc.--------------------------------------80%
BKB Funeral Home, Inc.--------------------------------------90%
M-D Memorial Chapel, Inc.-----------------------------------90%
JLIW Funeral Homes, Inc.------------------------------------90%
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%
Walton-Schrader Funeral Home, Inc.-------------------------100%
W-S Funeral Home, Inc.------------------------------90%
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 subsidiaries
IFC-Amedco, Inc. ------------------------------------------100%
SCI Oklahoma Funeral Services, Inc.---------------------------------100%
Hillcrest Memorial Park Trust------------------------------100%
Memorial Park Cemetery of Bartlesville, Oklahoma,
A Business Trust-----------------------------------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%
Sentinel Security Plans, Inc.(Virginia Corp.) Oklahoma
Subsidiaries
SSP Limited Liability Company-------------------------------50%
OREGON
- ------
SCI Funeral Services, Inc. (Iowa Corp) Oregon subsidiaries
SCI Oregon Funeral Services, Inc.-----------------------------------100%
Hughes Ransom Mortuary, Inc.-------------------------------100%
Uniservice Corporation-------------------------------------100%
PENNSYLVANIA
- ------------
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%
Remembrance Services, Inc.---------------------------------100%
Stephen R. Haky Funeral Home, Inc.-------------------------100%
Memorial Guardian Plans, Inc.( Delaware Corp) Pennsylvania
subsidiaries
Ensure Agency of Pennsylvania, Inc.------------------------100%
SCI Pennsylvania Funeral Services, Inc.-----------------------------100%
Aeternum, Inc.---------------------------------------------100%
Auman Funeral Home, Inc.-----------------------------------100%
Cedar Hill Memorial Park, Inc.-----------------------------100%
Funeral Corporation Pennsylvania---------------------------100%
Luther M. Kniffen, Inc.----------------------------100%
Rohland Funeral Home-------------------------------100%
Parklawns, Inc.--------------------------------------------100%
Sylvania Hills Memorial Park, Incorporated-----------------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 subsidiaries
SCI South Carolina Funeral Services, Inc.---------------------------100%
Greenville Vault Co., Inc.---------------------------------100%
SOUTH DAKOTA
- ------------
NO SUBSIDIARIES
</TABLE>
5
* State Law Not-For-Profit-Corporation
<PAGE> 6
<TABLE>
<S> <C>
TENNESSEE
- ---------
SCI Funeral Services, Inc. (Iowa Corp) Tennessee subsidiaries
SCI Tennessee Funeral Services, Inc.-----------------------------100%
Collierville Funeral Home, 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 subsidiaries
Gibraltar Mausoleum of Texas, Inc.----------------------100%
SCIT Holdings, Inc. (Delaware Corp.) Texas subsidiaries
SCI Texas Funeral Services, Inc.------------------------100%
EFH, Inc.---------------------------------------100%
Futrell, Inc.-----------------------------------100%
Grammier-Oberle Funeral Home, Inc.--------------100%
Grand Prairie Funeral Home, Inc.----------------100%
H.R.E., Inc.------------------------------------100%
Memorial Funeral Services, Inc.-----------------100%
Moore & Sons Funeral Home and Cemetery, Inc.----100%
SCI Central Division, Inc.----------------------100%
SCI Holdings of Texas, Inc.---------------------100%
Sunset Memorial Gardens, Inc.-------------------100%
The New Rose Hill Memorial Park, 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 subsidiaries
SCI Utah Funeral Services, Inc.----------------------------------100%
Wasatch Land and Improvement Company--------------------100%
Wasatch Lawn Cemetery Association-----------------------100%
Wasatch Lawn Mortuary Corporation-----------------------100%
VERMONT
- -------
NO SUBSIDIARIES
VIRGINIA
- --------
SCI Funeral Services, Inc. (Iowa Corp.) Virginia subsidiaries
Gibraltar Mausoleum Corporation (DE Corp.) Virginia subsidiaries
Kellum Funeral Home, Inc.-------------------------------100%
Memorial Guardian Plans, Inc. (Delaware Corp)
Sentinel Security Plans, Inc.---------------------------100%
SCI Virginia Funeral Services, Inc.------------------------------100%
Peninsula Memorial Park Corporation---------------------100%
WASHINGTON
- ----------
SCI Funeral Services, Inc. (Iowa Corp.) Washington subsidiaries
SCI Washington Funeral Services, Inc.----------------------------100%
WEST VIRGINIA
- -------------
SCI Funeral Services, Inc. (Iowa Corp.) West Virginia subsidiaries
Gibraltar Mausoleum Corporation (DE Corp.) WV subsidiaries
Gibraltar Mausoleum of West Virginia, Inc.--------------100%
SCI West Virginia Funeral Services, Inc.-------------------------100%
Woodmere, Inc.------------------------------------------100%
Ridgelawn Cemetery Association------------------100%
WISCONSIN
- ---------
SCI Funeral Services, Inc. (Iowa Corp.) Wisconsin subsidiaries
Cemetery Services, Inc.------------------------------------------100%
*Appleton Highland Memorial Park, Inc.-------------------------0-*
SCI Wisconsin Funeral Services, Inc.-------------------------------------100%
ATK Corporation-----------------------------------------100%
WYOMING
- -------
SCI Funeral Services, Inc. (Iowa Corp.) Wyoming subsidiaries
Memorial Guardian Plans, Inc.------------------------------------100%
</TABLE>
6
* State Law Not-For-Profit-Corporation
<PAGE> 7
<TABLE>
<S> <C>
AUSTRALIA
---------
SCI International Limited (Delaware Corp.) Australia subsidiaries
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
- ------
SCI International Limited (Delaware Corp.) Canada subsidiaries
Service Corporation International (Canada) Limited-----------------------100%
1252973 Ontario Inc.-(Ontario)----------------------------------100%
Westside Cemeteries Limited-(Ontario)-------------------100%
Westside Cemetery Holdings Limited-(Ontario)---100%
Barthel Funeral Home Ltd.-(Ontario)-----------------------------100%
Brennen Funeral Home Ltd.- (Alberta)----------------------------100%
Can Ensure Group, Inc.-(Federal)--------------------------------100%
Centre Funeraire Cote-des-Neiges Inc.-(Quebec)-------------------49%
CFCDN Holdings Inc.-(Quebec)------------------------------------100%
Christensen Salmon Funeral Homes Ltd.- (Alberta)----------------100%
Harmony Funeral Services, Inc.-(AB)-----------------------------100%
Hetherington and Deans Limited-(Ontario)------------------------100%
Hong Kong Funeral Homes B.C. Ltd-(British Columbia)-------------100%
Hulse & English Funeral Home Inc.-(Ontario)---------------------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%
Lion Holdings, Limited-(NS)-------------------------------------100%
Fillmore & Whitman Funeral Home Limited-(NS)------------100%
Iverness Funeral Home Limited-(NS)----------------------100%
Patten Funeral Home (1987) Limited-(NS)-----------------100%
T. W. Curry Limited--(NS)-------------------------------100%
McEvoy-Shields Funeral Homes Ltd.-(Ontario)---------------------100%
Needham Funeral Service Inc.-(Ontario)--------------------------100%
Placements Darche, Inc.-(Quebec)--------------------------------100%
Residence Funeraire Mongeau Ltee--------------------------------100%
Rosar-Morrison Funeral Home Limited-(Ontario)-------------------100%
Rose Garden Chapels Ltd.-(Alberta)------------------------------100%
Barrhead Community Chapel-(Alberta)---------------------100%
Salmon Funeral Home Ltd.- (Alberta)-----------------------------100%
S.C.I.C. (Quebec) Holdings Limited-(Quebec)---------------------100%
SCI Holdings Canada, Inc.---------------------------------------100%
SCI Northwest Region, Inc. - (B.C.)-----------------------------100%
Services Funeraires Cowansville Inc.-(PQ)-----------------------100%
Swackhamer, Truscott, Brown and Dwyer Funeral Homes of
Hamilton Limited-(Ontario)------------------------------100%
Dwyer Funeral Home Limited -(Ontario)-------------------100%
Sydney Crematorium Limited-(NS)---------------------------------100%
Sylvio Marceau Inc.-(Quebec)------------------------------------100%
The Markey Family Funeral Homes Limited-(Ontario)---------------100%
The Thorpe Brothers Funeral Home Co. Limited-(Ontario)----------100%
William-Lee-Ingram Funeral Home, Inc.---------------------------100%
World Funeral Home B.C. Ltd.-(British Columbia)-----------------100%
611102 Saskatchewan Ltd.-------------------------------------------------100%
</TABLE>
7
* State Law Not-For-Profit-Corporation
<PAGE> 8
<TABLE>
<S> <C>
CAYMAN ISLANDS
- --------------
SCI International Limited (Delaware Corp.) Cayman Islands subsidiaries
SCI Cayman II Ltd-------------------------------------------------------------------------100%
SCI Latin America Ltd---------------------------------------------------------------------100%
FRANCE
- ------
SCI International Limited (Delaware Corp.) French subsidiaries
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 Handels-und 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%
UNITED KINGDOM
- --------------
SCI International Limited (Delaware Corp.) United Kingdom subsidiaries
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>
8
* State Law Not-For-Profit-Corporation
<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. 333-33101, 333-00177,
333-00179, 33-9790, 33-17982, 333-02665, 333-19863 and 33-50987) of our report
dated March 18, 1998, on our audits of the consolidated financial statements and
financial statement schedule of Service Corporation International as of December
31, 1997 and 1996, and for each of the three years in the period ended December
31, 1997, which report is included in this Annual Report on Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
Houston, Texas
March 27, 1998
<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,
1997 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
12th day of February, 1998.
/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,
1997 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
23rd day of March, 1998.
/s/ George R. Champagne
---------------------------
GEORGE R. CHAMPAGNE
<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,
1997 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
12th day of February, 1998.
/s/ Anthony L. Coelho
---------------------------
ANTHONY L. COELHO
<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,
1997 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
12th day of February, 1998.
/s/ Douglas M. Conway
---------------------------
DOUGLAS M. CONWAY
<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,
1997 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
12th day of February, 1998.
/s/ Jack Finkelstein
---------------------------
JACK FINKELSTEIN
<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,
1997 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
12th day of February, 1998.
/s/ A. J. Foyt, Jr.
---------------------------
A. J. FOYT, 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,
1997 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
12th day of February, 1998.
/s/ James J. Gavin, Jr.
---------------------------
JAMES J. GAVIN, JR.
<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,
1997 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
12th day of February, 1998.
/s/ James H. Greer
---------------------------
JAMES H. GREER
<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,
1997 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
12th day of February, 1998.
/s/ L. William Heiligbrodt
---------------------------
L. WILLIAM HEILIGBRODT
<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,
1997 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
12th day of February, 1998.
/s/ B. D. Hunter
---------------------------
B. D. HUNTER
<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,
1997 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
12th day of February, 1998.
/s/ John W. Mecom, Jr.
---------------------------
JOHN W. MECOM, 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,
1997 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
12th day of February, 1998.
/s/ Clifton H. Morris, Jr.
---------------------------
CLIFTON H. MORRIS, 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,
1997 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
12th day of February, 1998.
/s/ E. H. Thornton, Jr.
---------------------------
E. H. THORNTON, JR.
<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,
1997 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
12th day of February, 1998.
/s/ W. Blair Waltrip
---------------------------
W. BLAIR WALTRIP
<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 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,
1997 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
12th day of February, 1998.
/s/ Edward E. Williams
---------------------------
EDWARD E. WILLIAMS
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF SERVICE CORPORATION INTERNATIONAL AS OF THE
APPLICABLE PERIOD END DATE AND THE RELATED STATEMENT OF INCOME FOR THE PERIOD
THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
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<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> DEC-31-1997 SEP-30-1997 JUN-30-1997 MAR-31-1997
<CASH> 46,877 62,114 31,557 47,411
<SECURITIES> 558,925 537,379 528,256 533,695
<RECEIVABLES> 1,131,195 1,067,705 1,060,733 1,052,246
<ALLOWANCES> 88,561 95,677 90,509 81,216
<INVENTORY> 172,169 151,418 150,803 141,421
<CURRENT-ASSETS> 811,408 755,471 719,268 731,110
<PP&E> 2,035,073 1,936,922 1,876,020 1,808,930
<DEPRECIATION> 390,936 372,213 354,764 341,182
<TOTAL-ASSETS> 10,306,863 9,737,921 9,408,557 9,081,072
<CURRENT-LIABILITIES> 535,422 606,688 539,692 574,351
<BONDS> 2,634,699 2,317,259 2,268,369 2,128,708
0 0 0 0
0 0 0 0
<COMMON> 252,924 251,837 251,469 239,005
<OTHER-SE> 2,473,080 2,365,706 2,316,405 2,065,970
<TOTAL-LIABILITY-AND-EQUITY> 10,306,863 9,737,921 9,408,557 9,081,072
<SALES> 2,330,303 1,725,269 1,180,906 602,763
<TOTAL-REVENUES> 2,468,402 1,824,408 1,239,590 638,449
<CGS> 1,769,510 1,314,846 884,041 450,297
<TOTAL-COSTS> 1,780,790 1,321,301 888,255 450,297
<OTHER-EXPENSES> 67,671 49,813 32,935 16,848
<LOSS-PROVISION> 22,603 10,790 7,364 3,631
<INTEREST-EXPENSE> 144,735 106,222 71,350 36,250
<INCOME-PRETAX> 579,973 438,407 326,814 205,524
<INCOME-TAX> 205,421 155,735 116,866 74,377
<INCOME-CONTINUING> 374,552 282,672 209,948 131,147
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 40,802 40,802 40,802 40,802
<CHANGES> 0 0 0 0
<NET-INCOME> 333,750 241,870 169,146 90,345
<EPS-PRIMARY> 1.36 1.00 0.71 0.38
<EPS-DILUTED> 1.31 0.95 0.67 0.36
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF SERVICE CORPORATION INTERNATIONAL AS OF THE
APPLICABLE PERIOD END DATE AND THE RELATED STATEMENT OF INCOME FOR THE PERIOD
THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 9-MOS 6-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> DEC-31-1996 SEP-30-1996 JUN-30-1996 MAR-31-1996
<CASH> 44,131 16,436 98,823 38,708
<SECURITIES> 633,019 543,480 519,794 547,410
<RECEIVABLES> 997,736 910,043 999,600 978,947
<ALLOWANCES> 75,102 74,129 67,102 61,205
<INVENTORY> 139,019 140,627 133,247 120,642
<CURRENT-ASSETS> 714,040 651,757 731,931 649,970
<PP&E> 1,776,534 1,678,282 1,629,635 1,570,386
<DEPRECIATION> 319,459 303,144 287,025 266,712
<TOTAL-ASSETS> 8,869,770 8,339,178 8,308,133 7,935,428
<CURRENT-LIABILITIES> 607,543 496,967 456,024 480,921
<BONDS> 2,048,737 1,953,333 2,122,614 1,871,869
0 0 0 0
0 0 0 0
<COMMON> 236,193 235,642 235,318 234,980
<OTHER-SE> 1,999,124 1,907,571 1,858,647 1,805,609
<TOTAL-LIABILITY-AND-EQUITY> 8,869,770 8,339,178 8,308,133 7,935,428
<SALES> 2,171,496 1,599,126 1,083,337 548,829
<TOTAL-REVENUES> 2,294,194 1,684,702 1,140,202 575,453
<CGS> 1,680,246 1,241,274 830,172 412,354
<TOTAL-COSTS> 1,689,742 1,249,093 835,971 415,285
<OTHER-EXPENSES> 63,798 41,045 28,890 13,995
<LOSS-PROVISION> 12,147 7,839 5,249 2,652
<INTEREST-EXPENSE> 147,470 110,270 73,375 35,869
<INCOME-PRETAX> 413,881 299,565 210,791 113,223
<INCOME-TAX> 148,583 108,023 76,644 41,326
<INCOME-CONTINUING> 265,298 191,542 134,147 71,897
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 0 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 265,298 191,542 134,147 71,897
<EPS-PRIMARY> 1.13 0.82 0.57 0.31
<EPS-DILUTED> 1.08 0.78 0.54 0.29
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF SERVICE CORPORATION INTERNATIONAL AS OF DECEMBER
31, 1995 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>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 57,484
<SECURITIES> 517,630
<RECEIVABLES> 834,708
<ALLOWANCES> 57,445
<INVENTORY> 120,805
<CURRENT-ASSETS> 659,601
<PP&E> 1,520,767
<DEPRECIATION> 247,045
<TOTAL-ASSETS> 7,672,387
<CURRENT-LIABILITIES> 611,751
<BONDS> 1,712,464
0
0
<COMMON> 234,542
<OTHER-SE> 1,740,803
<TOTAL-LIABILITY-AND-EQUITY> 7,672,387
<SALES> 1,566,292
<TOTAL-REVENUES> 1,652,126
<CGS> 1,174,408
<TOTAL-COSTS> 1,186,905
<OTHER-EXPENSES> 55,315
<LOSS-PROVISION> 11,852
<INTEREST-EXPENSE> 131,888
<INCOME-PRETAX> 294,211
<INCOME-TAX> 110,623
<INCOME-CONTINUING> 183,588
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 183,588
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0.86
</TABLE>
