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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrantRegistrant /X/
Filed by a partyParty other than the registrantRegistrant / /
Check the appropriate box:
/ / Preliminary proxy statementProxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statementProxy Statement
/ / Definitive additional materialsAdditional Materials
/ / Soliciting material pursuantMaterial Pursuant to Rule 14a-11(c)Section 240.14a-11(c) or
Rule 14a-12Section 240.14a-12
SERVICE CORPORATION INTERNATIONAL
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(Name of Registrant as Specified in Itsits Charter)
Curtis G. Briggs
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(Name of Person(s) Filing Proxy Statement)Statement, if other than the Registrant)
Payment of filing feeFiling Fee (Check the appropriate box):
/X/ $125 per Exchange Act RuleRules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)14a-6(i)(2).
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactionstransaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the formForm or scheduleSchedule and the date of its filing.
(1) Amount previously paid:Previously Paid:
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(2) Form, scheduleSchedule or registration statement no.Registration Statement No.:
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(3) Filing party:Party:
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(4) Date filed:Filed:
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(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
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SERVICE CORPORATION INTERNATIONAL
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PROXY STATEMENT AND 19941995 ANNUAL MEETING NOTICE
[See Appendix A for a Description of Graphic Material][PHOTO]
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TABLE OF CONTENTS
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NOTICE OF ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.............................................. 3
SOLICITATION AND REVOCABILITY OF PROXIES . . . . . . . . . . . . . . . . . . . . . . ............................... 5
ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................................................. 5
PROPOSAL TO APPROVE THE 1995 STOCK PLAN
FOR NON-EMPLOYEE DIRECTORS ........................................ 8
PROPOSAL TO APPROVE THE 1995 INCENTIVE EQUITY PLAN .................... 9
PROPOSAL WITH RESPECT TO THE 1993 LONG-TERM
INCENTIVE STOCK OPTION PLAN AND THE AWARDS MADE THEREUNDER IN 1993 . . . . . . . . . . . . . . . . . . . . . . . . 8...................................... 12
OVERVIEW OF EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . 13................................... 16
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . 15.............. 18
CERTAIN INFORMATION WITH RESPECT TO OFFICERS AND DIRECTORS . . . . . . . . . . . . . . 18........... 21
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION . . . . . . . . . . . . . . 23.......... 25
CERTAIN TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23................................................. 26
VOTING SECURITIES AND PRINCIPAL HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . 26.............................. 29
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.............................................. 30
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29........................................................ 32
ANNEX A
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SERVICE CORPORATION INTERNATIONAL 1995 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
ANNEX B
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SERVICE CORPORATION INTERNATIONAL 1995 INCENTIVE EQUITY PLAN
ANNEX C
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SERVICE CORPORATION INTERNATIONAL 1993 LONG-TERM INCENTIVE STOCK OPTION PLAN
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SERVICE CORPORATION INTERNATIONAL
Proxy Statement and
19941995 Annual Meeting
Notice
SERVICE CORPORATION INTERNATIONALService Corporation International
1929 Allen Parkway, P.O. Box 130548
Houston, Texas 77219-0548
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 12, 199411, 1995
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Service Corporation International
will be held in the Texas Commerce Center Auditorium, First Floor, Texas
Commerce Center, 601 Travis, Houston, Texas, on Thursday, May 12, 1994,11, 1995, at
10:00 a.m., Houston time, for the following purposes:
(1) To elect five directors as members of the class of directors to serve
until the third succeeding Annual Meeting of Shareholders and until their
successors have been elected and qualified;
(2) To consider and act on a proposal to approve the adoption of1995 Stock Plan for
Non-Employee Directors;
(3) To consider and act on a proposal to approve the 1995 Incentive Equity
Plan;
(4) To consider and act on a proposal with respect to the 1993 Long-Term
Incentive Stock Option PlanPlan; and
the awards made thereunder in
1993; and
(3)(5) To act on such other business that may properly come before the meeting
or any adjournment(s) thereof.
The transfer books of the Company will not be closed, but only holders of
Common Stock of record at the close of business on March 25, 199424, 1995 will be
entitled to notice of and to vote at the Annual Meeting. A majority of the
outstanding stock entitled to vote is required for a quorum.
The management sincerely desires your presence at the meeting. However, so
that we may be sure that your vote will be included, please sign and date the
enclosed proxy and return it promptly in the enclosed stamped envelope. If
you attend the meeting, you may revoke your proxy and vote in person.
By Order of the Board of Directors
James M. Shelger, Secretary
Houston, Texas
April 12, 199417, 1995
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PROXY STATEMENT
SERVICE CORPORATION INTERNATIONALService Corporation International
1929 Allen Parkway, P.O. Box 130548
Houston, Texas 77219-0548
SOLICITATION AND REVOCABILITY OF PROXIES
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of Service Corporation International, a Texas
corporation ("SCI" or the "Company"), of proxies to be used at the Annual
Meeting of Shareholders to be held in the Texas Commerce Center Auditorium,
First Floor, Texas Commerce Center, 601 Travis, Houston, Texas, on Thursday,
May 12, 1994,11, 1995, at 10:00 a.m., Houston time, and at any recess or adjournments
thereof. This proxy statement and the accompanying form of proxy are being
mailed to shareholders on or about April 12, 1994.17, 1995. A copy of the Annual
Report to Shareholders of the Company for the fiscal year ended December 31,
1993,1994, including the consolidated financial statements, is being mailed with
this proxy statement to all shareholders entitled to vote at the Annual
Meeting.
At March 25, 1994,24, 1995, the Company had outstanding and entitled to vote
85,837,87795,916,424 shares of Common Stock, $1.00 par value ("Common Stock"). The
holders of Common Stock will be entitled to one vote per share on each matter
considered. A majority of the votes entitled to be cast must be represented
at the meeting, in person or by proxy, so that a quorum may be present for
the transaction of business. Only shareholders of record at the close of
business on March 25, 199424, 1995 will be entitled to vote at the Annual Meeting.
The affirmative vote of a majority of the total shares represented in person
or by proxy and entitled to vote at the meeting is required for (a) the
election of directors, (b) the approval of the 1995 Stock Plan for
Non-Employee Directors, (c) the approval of the 1995 Incentive Equity Plan,
(d) the approval of the proposal with respect to the 1993 Long-Term Incentive
Stock Option Plan, (the "1993
Plan"), and (c)(e) the approval of such other matters as may properly
come before the meeting or any adjournment thereof.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy by a later dated proxy or by
written notice of revocation filed with the Secretary of the Company.
Shareholders who attend the Annual Meeting may revoke their proxies and vote
in person.
In the election of directors, a shareholder has the right to vote the
number of shares owned by the shareholder for as many persons as there are
directors to be elected. The Company's articles of incorporation do not
permit cumulative voting. Abstentions are counted toward the calculation of a
quorum. An abstention has the same effect as a vote against the proposal or,
in the case of the election of directors, as shares to which voting power has
been withheld. Under Texas law, any unvoted position in a brokerage account
with respect to any matter will be considered as not voted and will not be
counted toward fulfillment of quorum requirements as to that matter.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes which have staggered
terms of three years each. The five directors whose terms expire at this
Annual Meeting have been renominated for three yearthree-year terms expiring at the
19971998 Annual Meeting of Shareholders. The terms of office of the directors in
the other two classes expire at the Annual Meetings of Shareholders to be
held in 19951996 and 1996.1997.
The enclosed form of proxy provides a means for the holders of Common Stock
to vote for all of the nominees listed therein, to withhold authority to vote
for one or more of such nominees or to withhold authority to vote for all of
such nominees. Each properly executed proxy received in time for the meeting
will be voted as specified therein, or if a shareholder does not specify how
the shares represented by his or her proxy are to be voted, such shares shall
be voted for the nominees listed therein or for other nominees as provided
below.
Although the Board of Directors does not contemplate that any of the
nominees will be unable to serve, if such a situation arises prior to the
meeting, the proxies that do not withhold authority to vote for directors
will be voted for a substitute nominee(s) chosen by the Board of Directors.
The following table sets forth, as to each nominee for election and each
director whose term will continue, such person's name, the committees on which
such person serves, the person's principal occupation during the past five
years, certain other directorships, if any, held by such person, the year in
which such person was first elected a director of the Company and the person's
age. Unless otherwise indicated, each person listed below has been engaged in
the principal occupation stated for the past five years.
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NOMINEES FOR TERMS EXPIRING AT
THE 1997 ANNUAL MEETING:
ANTHONY L. COELHO {Photo}8
Nominees for terms expiring
at the 1998 Annual Meeting:
[PHOTO] Retired.
Audit Committee
DOUGLAS M. CONWAY
Year First Became A Director: 1981 Age: 74
[PHOTO] Retired. Mr. Gavin is a member of the Board of Directors
of Stepan Company, BWIP International and Huntco Inc. and
a Trustee of Benchmark Funds.
Audit Committee
JAMES J. GAVIN, JR.
Year First Became A Director: 1986 Age: 72
[PHOTO] Chairman of the Board and Chief Executive Officer of
Huntco Inc. (intermediate steel processor). Mr. Hunter is
a member of the Board of Directors of Huntco Inc., Mark
Twain Bancshares, Inc., Cash America International, Inc.
and Celebrity, Inc.
Executive Committee
B.D. HUNTER
Year First Became A Director: 1986 Age: 65
[PHOTO] Chairman of the Board of Directors, The John W. Mecom
Company (personal and family investments).
Compensation Committee
JOHN W. MECOM, JR.
Year First Became A Director: 1983 Age: 55
[PHOTO] Executive Vice President of the Company since February
1995. From February 1993 to February 1995, Mr. Rizzo was
Executive Vice President and Chief Financial
Officer/Treasurer. From February 1990 to February 1993,
Mr. Rizzo was Executive Vice President and Chief Financial
Officer. From May 1989 to February 1990, Mr. Rizzo was
Senior Vice President and Executive Assistant to the
Chairman. Mr. Rizzo is a member of the Board of Directors
of Cash America International, Inc., Hallmark Financial
Services and Tanknology Environmental, Inc.
Corporate Finance Committee,
Investment Committee
SAMUEL W. RIZZO
Year First Became A Director: 1990 Age: 59
Directors whose terms expire
at the 1996 Annual Meeting:
[PHOTO] Personal and family trust investments.
Executive Committee,
Audit Committee,
Investment Committee
JACK FINKELSTEIN
Year First Became A Director: 1965 Age: 67
[PHOTO] Chairman, Shelton W. Greer Co., Inc. (engineering,
manufacturing, fabrication and installation of building
specialty products). Mr. Greer is a member of the Board
of Directors of Cash America International, Inc.,
AmeriCredit Corp. and Tanknology Environmental, Inc.
Compensation Committee
JAMES H. GREER
Year First Became A Director: 1978 Age: 68
[PHOTO] President and Chief Operating Officer of the Company since
February 1990. Prior thereto, Mr. Heiligbrodt was
Executive Vice President of the Company since May 1989.
Mr. Heiligbrodt is a member of the Board of Directors of BJ
Services Company.
Corporate Finance Committee,
Executive Committee,
Investment Committee,
Directors Stock Committee
L. WILLIAM HEILIGBRODT
Year First Became A Director: 1975 Age: 53
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[PHOTO] Chairman, President and Chief Executive Officer of
AmeriCredit Corp. (financing of automotive vehicles)
since July 1, 1988. Mr. Morris is also a member of the
Board of Directors of AmeriCredit Corp. and Cash America
International, Inc.
Corporate Finance Committee
CLIFTON H. MORRIS, JR.
Year First Became A Director: 1990 Age: 59
[PHOTO] Executive Vice President Operations of the Company since
February 1991, and Chairman of the Board and President of
Service Corporation International (Canada) Limited (a
subsidiary of the Company) since January 1990. From
February 1990 to February 1991, Mr. Waltrip was Executive
Vice President and Chief Executive Officer of the
Company's Funeral Division. Prior thereto, Mr. Waltrip
was Executive Vice President since May 1989. Mr. Waltrip
is a member of the Board of Directors of Tanknology
Environmental, Inc.
Corporate Finance Committee,
Executive Committee,
Investment Committee,
Directors Stock Committee
W. BLAIR WALTRIP
Year First Became A Director: 1986 Age: 5140
Director whose terms expire
at the 1997 Annual Meeting:
[PHOTO] President and Chief Executive Officer, Wertheim Schroder
Investment Services, Inc. (asset management firm) since
January 1990 and Managing Director, Wertheim Schroder &
Co., Inc. (investment banking firm) since October 1989.
Prior thereto, from 1979 to June 1989, Mr. Coelho was a
member of the U.S. House of Representatives. Mr. Coelho
is a member of the Board of Directors of ICF Kaiser
International, Inc., Tanknology Environmental, Inc.,
Circus Circus Enterprises, Inc., Specialty Retail Group,
Inc. and Telecommunications, Inc.
Corporate Finance Committee
A. J. FOYT, JR. {Photo}ANTHONY L. COELHO
Year First Became A Director: 19741991 Age: 5952
[PHOTO] President, A. J. Foyt Enterprises, Inc. (designer,
manufacturer and exhibitor of high speedhigh-speed engines and racing
vehicles and marketer of automotive vehicles). Mr. Foyt
is a member of the Board of Directors of Adesa Auction
Corp.
Corporate Finance Committee
E. H. THORNTON,A. J. FOYT, JR. {Photo}
Year First Became A Director: 19621974 Age: 8460
[PHOTO] Attorney, Thornton & Burnett, Attorneys at Law
Executive Committee,
Audit Committee,
Compensation Committee
R. L. WALTRIP {Photo}E. H. THORNTON, JR.
Year First Became A Director: 1962 Age: 6385
[PHOTO] Chairman of the Board and Chief Executive Officer of the
Company. Mr. Waltrip is a member of the Board of Directors
of Cash America International, Inc. and Tanknology
Environmental, Inc.
Executive Committee,
Investment Committee,
Directors Stock Committee
EDWARD E. WILLIAMS {Photo}R. L. WALTRIP
Year First Became A Director: 19911962 Age: 4864
[PHOTO] Henry Gardiner Symonds Professor and Director of the
Entrepreneurship Program ofat the Jesse H. Jones Graduate
School of Administration at Rice University, Chairman of the Board and President of Texas Capital Investment Advisers, Inc.
(investment advisor firm) and Managing
Director of First Texas Venture Capital
Corporation (investment
company). Mr. Williams is a member of the Board of
Directors of EquusEQUUS II, Incorporated.
Executive Committee,
Audit Committee,
Investment Committee
DIRECTORS WHOSE TERMS EXPIRE AT
THE 1995 ANNUAL MEETING:
DOUGLAS M. CONWAY {Photo}EDWARD E. WILLIAMS
Year First Became A Director: 19811991 Age: 73
Retired.
Audit Committee
JAMES J. GAVIN, JR. {Photo}
Year First Became A Director: 1986
Age: 71
Retired. Mr. Gavin is a member of the Board of Directors of Stepan Company,
BWIP International, Huntco Inc.49
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Meetings and Trustee of Benchmark Funds.
Audit Committee
B. D. HUNTER {Photo}
Year First Became A Director: 1986
Age: 64
Chairman of the Board and Chief Executive Officer of Huntco Inc. (intermediate
steel processor). Vice Chairman of the Board of the Company from September 1986
to May 1989. Mr. Hunter is a member of the Board of Directors of Huntco Inc.,
Mark Twain Bancshares, Inc., Cash America International, Inc., Celebrity, Inc.
and Everest & Jennings International, Ltd.
Executive Committee
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JOHN W. MECOM, Jr. {Photo}
Year First Became A Director: 1983
Age: 54
ChairmanCommittees
of the Board of Directors
The John W. Mecom Company (personal and
family investments).
Compensation Committee
SAMUEL W. RIZZO {Photo}
Year First Became A Director: 1990
Age: 58
Executive Vice President and Chief Financial Officer/Treasurer of the Company
since February 1993. From February 1990 to February 1993, Mr. Rizzo was
Executive Vice President and Chief Financial Officer. From November 1987 to May
1989, Mr. Rizzo was Vice President and Executive Assistant to the Chairman and
became a Senior Vice President in May 1989. Mr. Rizzo is a member of the Board
of Directors of Cash America International, Inc., Hallmark Financial Services
and Tanknology Environmental, Inc.
Corporate Finance Committee, Executive Committee,
Investment Committee, Directors Stock Committee
DIRECTORS WHOSE TERMS EXPIRE AT
THE 1996 ANNUAL MEETING:
JACK FINKELSTEIN {Photo}
Year First Became A Director: 1965
Age: 66
Personal and family trust investments.
Executive Committee, Audit Committee,
Investment Committee
JaMES H. GREER {Photo}
Year First Became A Director: 1978
Age: 67
Chairman, Shelton W. Greer Co., Inc. (engineering, manufacturing, fabrication
and installation of building specialty products). Mr. Greer is a member of the
Board of Directors of Cash America International, Inc., AmeriCredit Corp. and
Tanknology Environmental, Inc.
Compensation Committee
L. WILLIAM HEILIGBRODT {Photo}
Year First Became A Director: 1975
Age: 52
President and Chief Operating Officer of the Company since February 1990. Prior
thereto, Mr. Heiligbrodt was Executive Vice President of the Company since May
1989 and, from March 1988 to May 1989, was Senior Vice President Financial
Services of the Company. Mr. Heiligbrodt is a member of the Board of Directors
of BJ Services Company.
Corporate Finance Committee, Executive Committee,
Investment Committee, Directors Stock Committee
CLIFTON H. MORRIS, JR. {Photo}
Year First Became A Director: 1990
Age: 58
Chairman, President and Chief Executive Officer of AmeriCredit Corp. (financing
of automotive vehicles) since July 1, 1988. Mr. Morris is also a member of the
Board of Directors of AmeriCredit Corp. and Cash America International, Inc.
Corporate Finance Committee
W. BLAIR WALTRIP {Photo}
Year First Became A Director: 1986
Age: 39
Executive Vice President Operations of the Company since February 1991, and
Chairman of the Board and President of Service Corporation International
(Canada) Limited since January 1990. From February 1990 to February 1991, Mr.
Waltrip was Executive Vice President and Chief Executive Officer of the
Company's Funeral Division. Prior thereto, Mr. Waltrip was Executive Vice
President since May 1989 and was Senior Vice President Real Estate of the
Company since September 1987. Mr. Waltrip is a member of the Board of Directors
of Tanknology Environmental, Inc.
Corporate Finance Committee, Executive Committee,
Investment Committee, Directors Stock Committee
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MEETINGS AND COMMITTEES OF
THE BOARD OF DIRECTORS
The Board of Directors held fourfive meetings during 1993.1994. Standing committees
of the Board include the Executive Committee, Audit Committee, Compensation
Committee, Investment Committee, Corporate Finance Committee and Directors
Stock Committee.
The Executive Committee has authority to exercise many of the powers of the
Board, including selections made upon its own motion of nominees for election
to the Board, and generally acts during periods when there is no regular
meeting of the Board. The Executive Committee held eleventwelve meetings during
1993.1994.
The primary functions of the Audit Committee are to review the scope and
results of audits by the Company's independent and internal auditors, internal
accounting controls, non-audit services performed by the independent accountants
and the cost of all accounting and financial services. During 1993,1994, the Audit
Committee held threetwo meetings.
The Compensation Committee, which has the general duty to review and approve
compensation for officers, including the granting of bonuses and the
administration of the Company's stock and stock option plans, held three
meetings during 1993.1994.
The Investment Committee's primary functions are to establish overall
guidelines and review the transactions in the investment portfolios of
independent trusts which hold funds collected by the trust
activities of the Company.Company and required to be
trusted under various state laws. During 1993,1994, the Investment Committee held
twelve meetings.
The purpose of the Corporate Finance Committee which did not meet in
1993, is to review certain
transactions which materially affect the financial condition of the Company,
including issuances of securities of the Company. During 1994, this committee
held one meeting.
The Directors Stock Committee administers the 1990 Stock Plan For
Non-Employee Directors. This committee did not hold any meetings in 1993.1994.
During 1993,1994, each director attended at least 75% of the total number of
meetings of the Board of Directors and committees on which he served.
PROPOSAL TO APPROVE THE 1995
STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
The Board of Directors has adopted, subject to approval by shareholders,
the Service Corporation International 1995 Stock Plan for Non-Employee Directors
(the "Stock Plan"). Approval of the proposed Stock Plan will require the
affirmative vote of a majority in interest of the holders of all the Company's
securities voting thereon. The Stock Plan will replace the 1990 Stock Plan for
Non-Employee Directors which expired after the Company's 1994 Annual Meeting of
Shareholders. The Stock Plan provides for the automatic awards from time to time
to directors and directors emeritus who are not employees of the Company or its
subsidiaries (12 persons at present), of restricted shares up to an aggregate of
120,000 shares of Common Stock. The purpose of the Stock Plan is to provide a
means through which the Company may attract able persons who are not employees
to serve as directors of the Company and to provide a means whereby those
non-employee directors and directors emeritus whose present and potential
contributions to the welfare of the Company are essential, can acquire and
maintain stock ownership, thereby strengthening their concern for the
welfare of the Company and their desire to serve as directors and directors
emeritus. The Board of Directors recommends that shareholders vote in favor of
adopting the Stock Plan. The following summary description of the Stock Plan is
qualified in its entirety by reference to the full text of the Stock Plan,
which is attached to this Proxy Statement as Annex A.
Awards Under the Stock Plan. If approved by the shareholders, the
Stock Plan shall, from 1995 to 2000 inclusive, automatically provide yearly
awards of restricted Common Stock to each director who is serving on the Board
and to each director emeritus at the time of such award and who is not also an
employee of the Company or its subsidiaries. No consideration is paid by a
participant upon award of restricted Common Stock. Each award will be made on
the second Thursday of May for an amount of 1,500 shares. Each award will have
a restriction period which will lapse on the second Thursday in May of the year
following the year the award is granted. If the director or director emeritus
terminates service as a director or director emeritus for any reason other than
disability or death prior to the lapse of the restriction period, the
restricted shares shall be forfeited. The restrictions shall lapse upon the
occurrence of death or total and permanent disability of the participant. While
the restrictions are in effect, the shares cannot be sold, pledged or
transferred. Except for the restrictions described above, a participant in the
Stock Plan who has been awarded shares of restricted Common Stock has all the
rights of a holder of Common Stock, including the right to receive dividends
paid on such shares and the right to vote such shares.
The Stock Plan will be administered by the Directors Stock Committee of
the Board of Directors. The Directors Stock Committee will be authorized to
interpret the Stock Plan but will have no discretion with respect to the
selection of directors or directors emeritus to receive awards of restricted
Common Stock or the number of shares subject to the Stock Plan or to each grant
thereunder. No member of the Directors Stock Committee is eligible to
participate in the Stock Plan. The Board may suspend or terminate the Stock
Plan or revise or amend it in certain respects.
Each recipient of an award of restricted stock must enter into an agreement
with the Company that sets forth the terms and conditions of such award and
such other matters as the
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Directors Stock Committee may determine, including compliance with applicable
securities laws. Each certificate for the shares of the Common Stock issued
under the Stock Plan as restricted stock will be registered in the name of
the participant, and such certificate, together with a stock power endorsed
in blank, will be deposited with the Company. Each such certificate will be
released upon the conclusion of the period during which the restrictions are
effective.
Other Provisions. The Stock Plan provides that the number of shares subject
thereto and restricted Common Stock awards made thereunder are subject to
equitable adjustment in the event of stock dividends, stock splits, or other
capital readjustments before delivery by the Company of all shares subject to
the Stock Plan.
The Stock Plan provides that, in the event a "Stock Plan Change of Control"
(as hereinafter defined) occurs, then the restrictions imposed with respect to
all shares of restricted Common Stock held by the participants will terminate.
"Stock Plan Change of Control" shall be deemed to have occurred in the
event (i) a change in the ownership of Common Stock occurs where a corporation,
person or group acting in concert as described in Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), holds or
acquires beneficial ownership of more than 20% of outstanding shares of Common
Stock within the meaning of Rule 13d-3 promulgated under the Exchange Act and
after having been advised that such ownership level has been reached, the Board
of Directors does not, within 90 days, adopt a resolution specifically approving
that level of Common Stock by such person, or (ii) during any consecutive
twelve-month period, a change in one-third of the members of the Board of
Directors occurs.
Federal Tax Consequences. A participant who has been granted a restricted
stock award will not realize taxable income at the time of grant, and the
Company will not be entitled to a deduction at that time. Upon expiration of the
forfeiture restrictions, the participant will realize ordinary income in an
amount equal to the fair market value of the shares at such time, and the
Company will be entitled to a corresponding deduction. Dividends paid to the
participant during the restriction period will also be compensation income to
the participant and deductible as such by the Company. A participant who has
been granted a restricted stock award may elect to be taxed at the time of grant
of the restricted stock award on the market value of the shares at that time, in
which case (1) the Company will be entitled to a deduction at the same time and
in the same amount, (2) dividends paid to the participant during the restriction
period will be taxable as dividends to him and not deductible by the Company,
and (3) there will be no further Federal income tax consequences when the
forfeiture restrictions lapse. When a restricted stock award is made, the value
of the shares at the date of grant will be charged against corporate earnings
pro rata over the period of the forfeiture restrictions. If the participant does
not elect to be taxed on the grant of his restricted stock award, a tax
deduction by the Company at the expiration of the period of the forfeiture
restrictions would be greater than the amount charged to earnings if the price
of the Common Stock has increased and less if the price has declined.
Other Information. If the Stock Plan had been in effect during the year
ended December 31, 1994, the following table sets forth the benefits that would
have been received by the 12 persons eligible to participate in the Stock Plan.
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Dollar Number
Name Value ($) of Units
- -------------------------------------------------------------
Non-Executive
Director Group $429,750(1) 18,000
- -------------------------------------------------------------
(1) Based on the closing price of the Common Stock on May 12, 1994.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
ADOPTION OF THE 1995 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS.
PROPOSAL TO APPROVE THE
1995 INCENTIVE EQUITY PLAN
The Board of Directors of the Company has adopted, subject to approval by
shareholders, the Service Corporation International 1995 Incentive Equity Plan
(the "Incentive Plan"). Approval of the proposed Incentive Plan will require the
affirmative vote of a majority in interest of the holders of all the Company's
securities voting thereon.
The full text of the Incentive Plan is set forth in Annex B to this Proxy
Statement. Although the major features of the Incentive Plan are summarized
below, this is only a summary and is qualified in its entirety by reference to
the complete text of the Incentive Plan.
Purpose. The purpose of the Incentive Plan is to provide a means whereby
certain key employees of the Company and its affiliates may develop a sense of
proprietorship and personal involvement in the development and financial success
of the Company, and to encourage them to remain with, and devote their best
efforts to, the business of the Company, thereby advancing the interests of the
Company and its shareholders. The Company believes that the possibility of
participation in the Incentive Plan through receipt of options ("Plan Options")
to purchase stock, or by the grant of certain bonuses ("Bonus Awards") based on
achievement of pre-established performance goals (some or all of which bonuses
may be paid in Common Stock), will provide key employees an incentive to perform
more effectively and will assist the Company in obtaining and retaining people
of outstanding training and ability.
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Term. The Incentive Plan was adopted effective November 9, 1994, subject to
approval by shareholders at this Annual Meeting. No Plan Option or Bonus Award
may be granted under the Incentive Plan after November 8, 2004.
Administration. The Incentive Plan is administered by the Compensation
Committee of the Board of Directors (the "Committee"). The Committee is
comprised solely of at least two members who are both disinterested persons and
outside directors (as defined in the Incentive Plan). No member of this
Committee is eligible to participate in the Incentive Plan. All questions of
interpretation and application of the Incentive Plan, Plan Options and Bonus
Awards shall be determined by the Committee.
Participation. Participation in the Incentive Plan is limited to key
employees ("Employees") selected by the Committee. The Company estimates
approximately 220 Employees will be eligible to participate in the Incentive
Plan
Shares of Stock Available For Awards. A total of 2,000,000 shares of Stock
is available for issuance under Plan Options or in payment of Bonus Awards. The
shares may be treasury shares or authorized but unissued shares. In the event a
Plan Option expires, or terminates for any reason, or is surrendered, the
shares of Common Stock allocable to the unexercised portion of that Plan Option
may again be subject to a Plan Option or Bonus Award under the Incentive Plan.
The maximum number of shares subject to Plan Options which may be granted
to any Employee under the Incentive Plan during each year is 40,000 shares. The
maximum number of shares which may be issued in payment of Bonus Awards during
the life of the Incentive Plan is 100,000 shares.
The Incentive Plan provides that the number of shares subject thereto and
shares covered by Plan Options outstanding are subject to equitable adjustment
in the event of stock dividends, stock splits, or other capital readjustments
before delivery by the Company of all shares subject to the Incentive Plan.
Stock Options. The Committee may designate a Plan Option as an Incentive
Option or as a Nonqualified Option. The terms of each Plan Option shall be
set out in a written Plan Option Agreement which incorporates the terms of
the Incentive Plan.
The Plan Option price may not be less than 100% of the fair market value of
the Common Stock on the date of grant and may not be exercisable after 10 years
from the date of grant. In the case of an Incentive Option issued to a 10%
Shareholder (as defined in the Incentive Plan) of the Company (i) the Incentive
Option price may not be less than 110% of the fair market value of the Common
Stock on the date of grant, and (ii) the period over which the Incentive Option
is exercisable may not exceed five years.
Exercise of Options. Plan Options may be exercised by written notice of
exercise and payment of the Plan Option price in cash or in previously owned
shares of Common Stock valued at fair market value on the date of exercise.
Special rules apply which limit the time of exercise of a Plan Option following
an Employee's termination of employment. The Committee may impose restrictions
on the exercise of any Plan Option. In the event of a "Change in Control" (as
defined in the Incentive Plan and in all materials respects the same as "Change
in Control" described under "Proposal with Respect to the 1993 Long-Term
Incentive Stock Option Plan" hereinbelow), all Plan Options then outstanding
become immediately exercisable in full.
Bonus Awards. The Committee may designate certain key Employees who become
eligible to earn a Bonus Award if certain pre-established performance goals are
satisfied. In determining which employees shall be eligible for a Bonus Award,
the Committee will consider the nature of the employee's duties, past and
potential contributions to the success of the Company and its affiliates, and
such other factors as the Committee deems relevant in connection with
accomplishing the purposes of the Incentive Plan.
The Committee shall determine the terms of a Bonus Award, if any, for each
measurement period (either a semi-annual or annual period). The performance
goals determined by the Committee may be based on increases in the following
business criteria: net profits, operating income, stock price, earnings per
share, sales and/or return on equity. Before any Bonus Award may be paid, the
Committee must certify in writing that the performance goal has been satisfied.
The maximum amount of any Bonus Award payable to any one Employee in each
calendar year may not exceed $3,000,000. The Committee retains the discretion
to make downward adjustments to Bonus Awards otherwise payable if the
performance goal is attained.
The Committee intends to establish performance goals in accordance with
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
to enable the Company to deduct in full the total payment of any Bonus Award.
Under proposed regulations issued by the Internal Revenue Service, since the
Committee retains discretion to change the targets under the performance goals,
the material terms of the performance goals for a "covered employee" must be
disclosed to and reapproved by the shareholders no later than the first
shareholder meeting that occurs in the fifth year following the year of
approval of the Incentive Plan (2000). (See discussion below under
"Compensation Deduction Limitation".)
Amendment or Termination of Incentive Plan. The Board of Directors of the
Company may amend, terminate or suspend the Incentive Plan at any time, in
its sole and absolute discretion; provided, however, that to the extent
required to qualify this Incentive Plan under Rule 16b-3 promulgated under Sec
tion 16 of the Exchange Act, no amendment that would (a) materially increase
the number of shares of Common Stock that may be issued under the Incentive
Plan, (b) materially
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modify the requirements as to eligibility for participation in the Incentive
Plan, or (c) otherwise materially increase the benefits accruing to
participants under the Incentive Plan, shall be made without the approval of
the Company's shareholders. To the extent required to maintain the status of
any Incentive Option under the Code, no amendment that would (a) change the
aggregate number of shares of Common Stock which may be issued under Incentive
Options, (b) change the class of employees eligible to receive Incentive
Options, or (c) decrease the Incentive Option price for Incentive Options below
the Fair Market Value of the Common Stock at the time it is granted, shall be
made without the approval of the Company's shareholders.
Federal Tax Consequences. The grant of Incentive Options to an Employee does
not result in any income tax consequences. The exercise of an Incentive Option
does not result in any income tax consequences to the Employee if the Incentive
Option is exercised by the Employee during his employment with the Company or a
subsidiary, or within a specified period after termination of employment.
However, the excess of the fair market value of the shares of Common Stock as
of the date of exercise over the Incentive Option price is a tax preference
item for purposes of determining an Employee's alternative minimum tax, if
applicable. An Employee who sells shares acquired pursuant to the exercise of
an Incentive Option after the expiration of (i) two years from the date of
grant of the Incentive Option, and (ii) one year after the transfer of the
shares to him (the "Waiting Period") will generally recognize a long-term
capital gain or loss on the sale.
An Employee who disposes of his Incentive Option shares prior to the
expiration of the Waiting Period (an "Early Disposition") generally will
recognize ordinary income in the year of sale in an amount equal to the excess,
if any, of (a) the lesser of (i) the fair market value of the shares as of the
date of exercise or (ii) the amount realized on the sale, over (b) the
Incentive Option price. Any additional amount realized on an Early Disposition
should be treated as capital gain to the Employee, short or long term,
depending on the Employee's holding period for the shares. If the shares are
sold for less than the option price, the Employee will not recognize any
ordinary income but will recognize a capital loss, short or long term,
depending on the holding period.
The Company will not be entitled to a deduction as a result of the grant of
an Incentive Option, the exercise of an Incentive Option, or the sale of
Incentive Option shares after the Waiting Period. If an Employee disposes of
Incentive Option shares in an Early Disposition, the Company would be entitled
to deduct the amount of ordinary income recognized by the Employee.
The grant of Nonqualified Options under the Incentive Plan will not result
in the recognition of any taxable income by the Employee. An Employee will
recognize ordinary income on the date of exercise of the Nonqualified Option
equal to the difference between (i) the fair market value on that date of the
shares acquired, and (ii) the exercise price. The tax basis of these shares for
purpose of a subsequent sale includes the Nonqualified Option price paid and
the ordinary income reported on exercise of the Nonqualified Option. The income
reportable on exercise of a Nonqualified Option is subject to federal income
and employment tax withholding.
Generally, the Company will be entitled to a deduction in the amount
reportable as income by the Employee on the exercise of a Nonqualified Option.
Bonus Awards paid in cash result in taxable income to the recipient and a
compensation deduction by the Company. Bonus Awards paid in shares of Common
Stock result in taxable income to the recipient at the fair market value of
the Common Stock on the date of transfer and result in a corresponding
compensation deduction for the Company. Bonus Awards are subject to federal
income and employment tax withholding.
Compensation Deduction Limitation. In the Omnibus Budget Reconciliation Act
of 1993 ("OBRA"), Congress generally limited to $1 million per year per
employee the tax deduction available to public companies for certain
compensation paid to designated executives ("covered employees"). These covered
employees include the Chief Executive Officer and the next four highest
compensated officers of the Company. OBRA provides an exception from this
deduction limitation, for certain "performance-based" compensation, if
specified requirements are satisfied. The Incentive Plan is designed to satisfy
these statutory requirements for Incentive and Nonqualified Options and Bonus
Awards. Therefore, if this Incentive Plan is approved by shareholders, the
Company anticipates being entitled to deduct an amount equal to the ordinary
income reportable by each optionee on exercise of a Nonqualified Option, the
Early Disposition of shares of stock acquired by exercise of an Incentive
Option, and the payment of Bonus Awards in Common Stock or in cash.
1995 Awards. No Plan Options have been granted under the Incentive Plan.
With respect to the Bonus Awards, the Committee has selected certain
semi-annual and annual performance goals for 1995 based on achievement of
certain earnings per share goals. The Committee has designated certain key
employees to be eligible for 1995 bonuses and has set a formula for the bonus
amounts based on percentages of base salaries and the extent to which the
performance goals are met or exceeded. The participants selected for Bonus
Awards include Messrs. R. L. Waltrip, Chairman of the Board and Chief Executive
Officer, L. William Heiligbrodt, President and Chief Operating Officer, W.
Blair Waltrip, Executive Vice President Operations, John W. Morrow, Jr.,
Executive Vice President Corporate Development, and 16 other key employees.
Since the bonus amounts will be based on 1995 semi-annual and annual earnings
per share goals, the amounts of bonuses for 1995, as well as the amounts of
bonuses which
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would have been payable for 1994 if the Incentive Plan had been in effect in
1994, are not determinable.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO APPROVE THE
ADOPTION OF THE SERVICE CORPORATION INTERNATIONAL 1995 INCENTIVE EQUITY PLAN.
PROPOSAL WITH RESPECT TO THE 1993
LONG-TERM INCENTIVE STOCK OPTION PLAN AND THE
AWARDS MADE THEREUNDER IN 1993
The Service Corporation International 1993 Long-Term Incentive Stock Option
Plan (the "1993 Plan") was adopted by the Compensation Committee of the Board
of Directors of the Company (the "Compensation Committee") on November 10, 1993 and by the Board of Directors
as a whole on November 11, 1993. The 1993
Plan and the 1993 Awards (defined below) are being submitted to the Company's
shareholders for approval. The description of the 1993 Plan set forth below is a
summary only and is qualified in its entirety by reference to the text of the
1993 Plan, which is attached to this Proxy Statement as Annex A.
OnAlso on November 10, 1993, the Compensation Committee
awarded Options,options ("Options"), subject to shareholder approval of the 1993 Plan,
to the executive officers listed in the table to the right,below, covering the number of
shares of Common Stock indicated (collectively, the "1993 Awards").
NAME AND POSITION DOLLAR VALUE* NUMBER OF SHARES
----------------- ------------- ----------------- ------------------------------------------------------------------------
Name and Position Dollar Value* Number of Shares
- ------------------------------------------------------------------------
R. L. Waltrip $14,548,106 1,550,000
Chairman of the Board and
Chief Executive Officer
- ------------------------------------------------------------------------
L. William Heiligbrodt 8,916,581 950,000
President and
Chief Operating Officer
- ------------------------------------------------------------------------
W. Blair Waltrip 5,162,231 550,000
Executive Vice President
Operations
- ------------------------------------------------------------------------
Samuel W. Rizzo 4,458,291 475,000
Executive Vice President
and
Chief Financial Officer/Treasurer- ------------------------------------------------------------------------
John W. Morrow, Jr. 4,458,291 475,000
Executive Vice President
Corporate Development
- ------------------------------------------------------------------------
Executive Group $37,543,500 4,000,000
- ------------------------------------------------------------------------
Non-executive Director Group __ __--- ---
- ------------------------------------------------------------------------
Non-executive Officer
Employee Group __ __--- ---
- ------------------------------------------------------------------------
* This column reflects the present value at the date of grant (November 10,
1993) of options, based on a present value model known as the "Black-Scholes
option pricing model." The choice of such valuation method does not reflect any
belief by SCI's management that such method, or any other valuation method, can
accurately assign a value to an option at the grant date. The assumptions used
for valuing the SCI grants are: volatility rate 21.79%; annual dividend rate
of $0.42 per share; risk free interest rate 6%; and adjustment for risk of
forfeiture 3% per year for four years.
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AdoptionThe 1993 Plan and the 1993 Awards were approved by the Company's
shareholders at the 1994 annual meeting of shareholders on May 12, 1994.
On August 9, 1994 the Committee determined that one provision of the 1993
Plan did not accurately reflect the Committee's intention with respect to the
1993 Plan. Accordingly, the Committee and the Board of Directors as a whole
have adopted, subject to shareholder approval, a correction to the 1993 Plan
designed to conform the affected provision of the 1993 Awards requirePlan to the Committee's
original intention.
The affected provision of the 1993 Plan relates to the vesting and
exercisability of Option awards made under the 1993 Plan in the case where the
employment of the executive granted an award terminates as a result of death or
disability, or is terminated by the Company without cause, in each case prior
to the vesting of such award and prior to the fourth anniversary of the date
such award was granted. The 1993 Plan, as originally approved by the
shareholders, provided that in these circumstances the Option award would
become exercisable only if the Target Price (as defined below) for the
Company's Common Stock provided in the award was achieved prior to the fourth
anniversary of the date the Option was granted. In that case, the Option would
be exercisable during the one-year period beginning on the fourth anniversary
of the date the Option was granted.
As proposed to be corrected, the 1993 Plan would provide as follows: If an
executive has been granted an Option under the 1993 Plan and the executive's
employment terminates as a result of death or disability, or is terminated by
the Company without cause, in each case prior to the vesting of such Option and
prior to the fourth anniversary of the date the Option was granted,
(1) if the Target Price for the Company's Common Stock is
achieved after the termination of employment but on or
before the fourth anniversary of the date of grant, the
Option will be exercisable during the one-year period
beginning on the fourth annivers ary of the date of
grant; and
(2) if the Target Price for the Company's Common Stock is not
achieved before the fourth anniversary of the date of grant,
the Option will be exercisable during the one-year period
beginning on the thirteenth anniversary of the date of grant.
The proposed correction would apply to all awards under the 1993 Plan,
including the 1993 Awards. Thus, the performance period for the Target Price
of the Common Stock for purposes of the 1993 awards will remain the four-year
period ending November 10, 1997.
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Adoption of the proposed correction to the 1993 Plan requires the
affirmative vote of holders of a majority of the shares of Common Stock present
(in person or by proxy) and entitled to vote at the Annual Meeting. ForIn the
event the proposed correction is not approved, the 1993 Plan will remain in
effect in the form previously approved by the shareholders.
Set forth below is a description of the 1993 Plan incorporating the effect
of the proposed correction. The description set forth herein is a summary only
and is qualified in its entirety by reference to the text of the 1993 Plan,
including the corrections being presented for shareholder approval, which is
attached to this purpose, sharesProxy Statement as to which an abstaining vote is cast will be considered as
present and entitled to vote, so an abstention will have the same effect as a
vote against the proposal. Shares held through a broker that are not voted
because such broker has not received voting instructions from the beneficial
owner will be considered as not being present at the meeting.Annex C.
General. The 1993 Plan provides that 4,650,000 shares of Common Stock will
be available for the grant of stock options ("Options")Options during the term of the 1993 Plan. Based
on the closing market price of the Common Stock on March 25, 1994,24, 1995, such shares
had an aggregate market value of $123,806,250.$132,525,000. If an Option granted under the
1993 Plan expires, terminates or lapses for any reason, without the issuance of
shares of Common Stock thereunder, such shares will not be available for other
awards under the 1993 Plan. None of the Options will be "incentive stock
options" within the meaning of Section 422 of the Internal
Revenue Code (the "Code").Code.
In the event of a merger, reorganization, consolidation, recapitalization,
spin-off, stock dividend, stock split or extraordinary distribution with
respect to the Common Stock or any other similar event, the
Compensation Committee shall
make such adjustments in the aggregate number of shares reserved for issuance,
the number of shares covered by outstanding Options and the exercise prices
specified therein as the Compensation Committee may determine to be appropriate. An employee
may satisfy a tax withholding requirement by applying shares to which the
employee is entitled as a result of the exercise of an Option.
Eligibility and Participation. Participants in the 1993 Plan are selected
by the Compensation Committee, which will administer the 1993 Plan. The 1993 Plan
contemplates that Options will be granted to such officers and other employees
of the Company and its subsidiaries as from time to time are designated by the
Compensation Committee. None of the persons who received the 1993 Awards will receive any
further awards under the 1993 Plan.
Administration. The 1993 Plan requires that the Compensation Committee consist of at
least two directors of the Company, who areeach of whom is a "disinterested persons,person,"
as such term is used in Rule 16b-3 under the Securities Exchange Act, of 1934, as amended (the "Exchange Act"), and areis an "outside
directors"director" within the meaning of Section 162(m) of the Code. Accordingly,
members of the Compensation Committee are not eligible to participate in the 1993 Plan.
Directors who become members of the Compensation Committee in the future must not have been
eligible to participate in the 1993 Plan within one year prior to serving on
the Compensation Committee. Under the 1993 Plan and subject to the limitations thereunder,
the Compensation Committee is authorized (i) to select participants in the 1993 Plan, (ii)
to determine whether and to what extent Options are to be granted, (iii) to
determine the number of shares of Common Stock to be covered by each Option,
and (iv) to determine the terms and conditions of any Option. The Compensation Committee
also has authority to adopt, alter and repeal administrative rules, guidelines
and practices, to interpret the terms and provisions of the 1993 Plan and any
Option issued thereunder and to otherwise supervise the administration of the
1993 Plan.
Term of Options. The term of each Option will be 14 years, unless earlier
terminated under the circumstances described below.
Pricing of Options. Under the 1993 Plan, an employee to whom an Option is
granted will have the right to purchase the number of shares of Common Stock
covered by the Option, subject to the terms and provisions of the 1993 Plan.
The exercise price to be paid by a participant is determined by the Compensation Committee
and will be set forth in an agreement between the Company and the participant.
Such price cannot be less than 100% of the fair market value of the Common
Stock on the date on which the Option in respect thereof is granted. The
exercise price with respect to each of the 1993 Awards is $25.75 per share,
which is the average of the high and low prices for the Common Stock as
reported on the New York Stock Exchange Composite Tape on the date the 1993
Awards were granted (November 10, 1993). The Committee may not adjust the
exercise price of 1993 Awards except in connection with a merger,
reorganization, consolidation, recapitalization, spin-off, stock dividend,
stock split or extraordinary distribution with respect to the Common Stock or
any other similar event. The Company has not and will not receive any payment
or other consideration in exchange for the grant of any Option.
Under the 1993 Plan, the exercise price of an Option is payable (i) in cash
or (ii) by the surrender, at the fair market value on the date on which the
Option is exercised, of shares of unrestricted Common Stock already owned by
the optionee.
Exercisability and Vesting of Options. For each Option the Compensation
Committee will
select a target price (the "Target Price") for the Common Stock so that such
Option will vest immediately if, within four years after the date of grant,
the fair market value of the Common Stock is greater than or equal to the
Target Price for 20 consecutive trading days. In the case of the 1993 Awards,
the Compensation Committee selected a Target Price of $50 per share for half the award made
to each recipient and a Target Price of $60 per share for the remaining half.
Accordingly, if the fair market value of the Common Stock
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11 exceeds or equals $50
per share or $60 per share for 20 consecutive trading days during the four-year
period commencing November 10, 1993, 50% of the 1993 Awards or 100% of the 1993
Awards, as the case may be, will then vest. "Fair market value" is defined as
the average of the high and low prices for the Common Stock on the specified
date as reported
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on the New York Stock Exchange Composite Tape. Each Option will also vest on
the thirteenth anniversary of the date of its grant if it remains outstanding
as of such date.
Each Option will also vest in the following circumstances. If the optionee's
employment with the Company terminates after the fourth anniversary of the date
of grant as a result of death, disability or retirement at age 55 or greater,
or if employment is terminated by the Company without cause, vesting will occur
upon termination of employment. In any such event, such options will be
exercisable during the one-year period beginning on the thirteenth anniversary
of the date of grant. Options that have not previously been terminated or
cancelled will also become fully vested and exercisable upon a Change in
Control (as defined below). If an optionee voluntarily terminates employment
with the Company (other than through retirement) or is terminated for cause, or
if an optionee retires prior to the fourth anniversary of the date of grant,
any Option that has not previously vested will be canceled.
If an optionee's employment is terminated on or prior to the fourth
anniversary of the date of grant by death or disability or by the Company
without cause, the Option will be exercisable if and only if the Target Price is reached (either before or after termination of employment) during the initial
four-year period. In that case,employment
but prior to such fourth anniversary, the Option will be exercisable during the
12-month period beginning on the fourth anniversary of the date of grant and
will terminate at the end of such 12-month period. If an optionee's employment
is terminated on or prior to the fourth anniversary of the date of grant by
death or disability or by the Company without cause, and the Target Price is
not reached during the initial four-year period, the Option will be exercisable
during the 12-month period beginning on the thirteenth anniversary of the date
of grant.
If the Target Price of an Option is reached during the initial four-year
period, such Option will become exercisable at the end of such four-year period
and (except as provided above or as set forth below) remain exercisable for the
balance of its term. If the holder of such an Option terminates employment with
the Company for any reason after the fourth anniversary of the date of grant,
such vested Option will terminate 18 months after the date of termination of
employment (or, if earlier, at the original termination date of the Option). If
the holder of such an Option voluntarily terminates employment with the Company
(whether through retirement or otherwise) after the Target Price is reached but
before the fourth anniversary of the date of grant, such Option will be
exercisable during the 18-month period beginning on such fourth anniversary.
The right of any participant to exercise an Option may not be transferred
in any way other than (i) by will or the laws of descent and distribution or
(ii) pursuant to a qualified domestic relations order. All Options are
exercisable by a participant during his or her lifetime only by the optionee,
or any guardian or legal representative or permitted transferee.
Change in Control. For purposes of the 1993 Plan, a "Change in Control"
means (i) an acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of 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 (the
"Outstanding 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 Voting Securities"); except that the
following acquisitions will not constitute a Change in Control: (1) any
acquisition directly from the Company (excluding an acquisition by virtue of
the exercise of a conversion privilege), (2) any acquisition by the Company,
(3) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any Person controlled by the Company or (4) any
acquisition by any Person pursuant to a transaction which complies with
subclauses (a), (b) and (c) of clause (iii) of this paragraph; or (ii)
individuals who, as of November 10, 1993, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a majority of the Board;
except that any individual becoming a director subsequent to such date whose
election, or nomination for election by the shareholders of the Company, was
approved by (x) a vote of at least a majority of the directors then comprising
the Incumbent Board or (y) a vote of at least a majority of the directors then
constituting the Executive Committee of the Board at a time when such committee
comprised 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 the foregoing clause (x), will 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 (iii) approval by the shareholders of the
Company of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination") unless following such Business Corporation, (a) more
than 60% of, respectively, the then Outstanding Common Stock, and the
combined voting power of the then Outstanding Voting Securities, entitled to
vote generally in the election of directors, of the corporation resulting from
such Business Combination (including, without limitation, a corporation which,
as a result of such transaction owns the Company or all or substantially all of
the Company's assets) 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 Common Stock and
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Outstanding Voting Securities immediately prior to such
10
12 Business Combination in
substantially the same proportions as their ownership, immediately prior to
such Business Combination, of the Outstanding Common Stock and Outstanding
Voting Securities, as the case may be, (b) no Person (excluding the Company,
any employee benefit plan (or related trust) of the Company, the corporation
resulting from such Business Combination or any Person beneficially owning,
immediately prior to such Business Combination, 20% or more of the Outstanding
Common Stock or Outstanding Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 20% or more of, respectively, the outstanding
shares of common stock of the corporation resulting from such Business
Combination 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 Business Combination were members of the
Incumbent Board at the time such Business Combination was approved by the
Board; or (iv) approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
The 1993 Plan further provides that during the 60-day period following a
Change in Control, the holder of an Option has the right to surrender such
Option for cash in an amount equal to the difference between the "change in
control price" (as defined in the 1993 Plan) and the exercise price.
Amendment and Termination. The 1993 Plan will terminate on November 10,
2003. Options granted and outstanding as of the date the 1993 Plan terminates
are not affected or impaired by such termination.
The Compensation Committee may amend the 1993 Plan without shareholder approval to take
into account changes in law and tax and accounting rules, but no such amendment
may impair the rights of participants under outstanding Options without the
consent of the participants affected thereby (except for any amendment made to
cause the plan to qualify for an exemption provided by Securities and Exchange
Commission Rule 16b-3 ("Rule 16b-3")) or make any change that would disqualify
the 1993 Plan from the exemption provided by Rule 16b-3.
Restrictions on Resale. No person who acquires shares of Common Stock under
the 1993 Plan may, during any period of time that such person is an "affiliate"
of the Company within the meaning of the rules and regulations of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), offer or sell such shares of
Common Stock unless such offer and sale is made (i) pursuant to an effective
registration statement under the Securities Act, which is current and includes
the shares to be sold or (ii) pursuant to an appropriate exemption from the
registration requirements of the Securities Act, such as that set forth in Rule
144 promulgated under the Securities Act.
Under Section 16 of the Exchange Act, any person who is a beneficial owner
of more than 10% of any equity security of the Company registered under the
Exchange Act (such as the Common Stock), or an executive officer or director of
the Company, may be liable to the Company for any profit realized from any sale
of any equity security of the Company within a period of less than six months
before or after any purchase of an equity security of the Company, irrespective
of the intention on the part of such person in entering the transaction. In
determining whether any person is a beneficial owner of more than 10% of any
equity security of the Company registered under the Exchange Act, such person
may be required to include shares issuable on exercise of options or warrants
or upon conversion of convertible securities.
Federal Income Tax Considerations. The discussion which follows is a summary,
based on current law, of some of the significant federal income tax
considerations relating to awards under the 1993 Plan. Participants in the 1993
Plan should consult their tax advisors with respect to their individual
federal income tax status. In addition, because the following discussion is
limited to United States federal tax matters, all participants subject to
taxation by other authorities (including state and local jurisdictions) should
consult their tax advisors with respect to the applicable tax laws of such
other jurisdictions.
A participant will not realize income at the time an Option which is a
nonqualified option is granted. Upon exercise, where the exercise price is paid
in cash, the participant will realize ordinary income, except as noted below in
the case of a participant subject to the provisions of Section 16(b) of the
Exchange Act (the "Section 16 Restrictions"), in the amount by which the market
value of the shares acquired on the exercise date exceeds the exercise price.
When the shares are subsequently sold, any amount recognized in excess of the
market value on the exercise date will be reportable as short-term or long-term
capital gain, as appropriate, or, if the amount realized is less than the
market value of the shares at the time of exercise, any loss recognized will be
reportable as short-term or long-term capital loss, as appropriate. Capital
losses on the sale of shares may generally be used only to offset capital
gains. If capital losses exceed capital gains, then up to $3,000 of the excess
losses may be deducted from ordinary income in any one year. Any capital losses
not deductible in a given year are carried forward to future tax years. If the
exercise price of an Option is paid in whole or in part with already owned
shares of Common Stock, the participant's tax basis in, and holding period
for, the old shares will carry over to the same number of shares received upon
exercise on a share-for-share basis and the participant will not recognize
compensation income with respect to such shares received. The fair market value
of the additional shares received will constitute compensationcompen-
15
18
sation taxable to the
11
13 participant as ordinary income. The tax basis for the
additional shares received will equal their fair market value as so determined,
and their holding period will begin on the day after the date as of which such
fair market value is determined.
Recognition of taxable income at the time of the exercise of an Option should
be deferred pursuant to Section 83 of the Code for a participant if the sale of
the Common Stock acquired upon such exercise would be subject to the Section 16
Restrictions. Such deferral would be for the lesser of six months or until such
Section 16 Restrictions lapse. The participant may, however, file with the
Internal Revenue Service, within thirty days after exercise of the Option, an
election, pursuant to Section 83(b) of the Code, to be taxed at the time of the
exercise of the Option.
Tax Consequences to the Company. Subject to any limitation imposed by
Section 162(m) of the Code, the Company will be allowed a deduction in the year
of exercise equal to the amount of income realized by the participant, provided
the Company satisfies certain federal income tax withholding requirements.
Section 162(m) of the Code provides for a limit, subject to certain exceptions,
of $1,000,000 on the amount of compensation expense that a publicly owned
corporation may claim as a deduction for federal income tax purposes with
respect to compensation paid to each of its five most highly compensated
executives in any given year. Although Section 162(m) was recently enacted in 1993 and
there are no precedents available with respect to how the provision will be
interpreted by the Internal Revenue Service, and the Treasury regulations
issued with respect thereto are in proposed form only, the Company believes
that the 1993 Plan qualifies for an exception to such limitation which would
permit the Company to exclude any compensation paid pursuant to the exercise of
an option granted under the 1993 Plan from such limitation and to take a
deduction for the full amount of compensation recognized by such executives as
a result of the exercise of any such option.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL WITH RESPECT TO APPROVE THE
ADOPTION OF
THE 1993 LONG-TERM INCENTIVE STOCK OPTION PLAN AND THE AWARDS MADE
THEREUNDER IN 1993.
12
14PLAN.
OVERVIEW OF EXECUTIVE COMPENSATION
During 1993,1994, SCI enjoyed increased revenues and net income and also expanded
into an additional foreign market -- Australia.- the United Kingdom. In management's
opinion, SCI has generated excellent returns for its shareholders. For example,
an investment of $100 in SCI's stock at the end of 1989 would have been worth
$276$298 by year-end 1993,1994, producing a total shareholder return (assuming quarterly
reinvestment of dividends) of 176%198% for this period. During the same period, a
$100 investment in the S&P 500 Index would have been worth $149,$152, which
represents a 49%52% total return. Thus, SCI's total shareholder return over the
four-yearfive-year period ended December 31, 19931994 was more than three times the return
generated by the broader market index.
In 1993,1994, the Company underscoredsignificantly accelerated its international expansion
with its acquisition of the international aspect of its name by
acquiring Pine Grove FuneralGreat Southern Group Australia'splc and Plantsbrook Group plc,
the United Kingdom's two largest publicly-held funeral and cremation
services provider.service companies. With
the Australia acquisition,these acquisitions, SCI subsidiaries owned 7921,471 funeral homes, 220 cemeteries
and 192 cemeteries102 crematories in 3941 states, the District of Columbia, Canada, Australia
and Australiathe United Kingdom as of the end of 1993.1994.
SCI remains committed to a path of growth and continued focus on increasing
shareholder value. To achieve these aims, the Company's Board of Directors
believes that it is crucial to provide key employees with substantial incentive
compensation opportunities tied to performance. These incentive programs (which
are described in detail in the Compensation Committee Report set forth below)
are intended to enable the Company to retain and attract the core talent needed
to sustain the results achieved over the last four years. The central focus of
SCI's total compensation program is intended to forge a direct link between the
economic interests of shareholders and management.
SCI's Board of Directors and employees are proud of the Company's
accomplishments in 1993.
PERFORMANCE GRAPHS1994.
Performance Graphs
The following graph presents the Company's cumulative shareholder return
over the period of December 31, 19881989 to December 31, 1993.1994. The Company is
compared to the S&P 500 Index and to the S&P Miscellaneous Index, of which the
Company is a member. Each Index assumes $100 invested at the close of trading
on December 31, 1988 and is calculated assuming quarterly reinvestment of dividends
and quarterly weighting by market capitalization.
THE DATA SOURCE FOR ALL GRAPHS IN THIS PROXY STATEMENT IS
S&P COMPUSTAT SERVICES.
COMPARISON OF CUMULATIVE SHAREHOLDER RETURN
1988-1993
{CHART}
At December 31,
----------------------------------
1988 1989 1990 1991 1992 1993
---- ---- ---- ---- ---- ----
SCI 100 92 136 167 174 254
S&P 500 Index 100 132 127 166 179 197
S&P Misc. Index 100 119 111 149 167 196
The Company believes that a more appropriate comparison of its
performance relative to the S&P 500 Index and the S&P Miscellaneous Index can be
seen in the period of December 31, 1989 to December 31, 1993. In 1989, the
Company developed a new strategic focus and restructuring program. As the next
performance graph on the following page indicates, the Company's stock since the
new strategic initiative has significantly outperformed the broad market. Each
Index assumes $100 invested at the close of trading on December 31, 1989 and is calculated assuming quarterly reinvestment of
dividends and quarterly weighting by market capitalization.
13The data source for all graphs in this proxy statement is
S&P Compustat Services.
16
15
COMPARISON OF CUMULATIVE SHAREHOLDER RETURN
1989-1993
{CHART}19
Comparison of Cumulative Shareholder Return
1989-1994
[GRAPH]
At December- -------------------------------------------------------------------
AT DECEMBER 31,
----------------------------
1989 1990 1991 1992 1993 ---- ---- ---- ---- ----1994
SCI 100 148 182149 183 189 276277 298
S&P 500 Index 100 97 126 136 149150 152
S&P Misc. Index 100 93 125 14098 123 138 159 164
- -------------------------------------------------------------------
The Company attributes the performance reflected in the preceding graph to
its strong growth in revenues, operating income, and earnings per share since
theits restructuring in 1989. The following three charts compare these three
performance criteria for SCI and the Index companies for the four years
1989-1992 (19931989-1993 (1994 information is still incomplete). The figures in the following
charts are not weighted by market capitalization.
4-YEAR SALES GROWTH (1989-1992)
{CHART}
4-YEAR OPERATING INCOME GROWTH (1989-1992)
{CHART}
4-YEAR4-Year Sales Compound Growth (1989-1993)
[GRAPH]
4-Year Operating Income Compound Growth (1989-1993)
[GRAPH]
4-Year EPS GROWTH (1989-1992)
{CHART}
14Compound Growth (1989-1993)
[GRAPH]
17
1620
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is a committee of
outside Directors that is chaired by Mr. E. H. Thornton, Jr. Other members are
Mr. James H. Greer and Mr. John W. Mecom, Jr. This committee is responsible for
reviewing and approving all elements of the total compensation program for
officers of Service Corporation International, including long-term incentive
arrangements. The Committee has ultimate responsibility for aligning the
Company's total compensation programs with its business strategy and for
assuring shareholders that pay delivery programs are effective, responsible and
competitive when compared to similarly situated organizations. This Committee
report documents the basis on which 19931994 compensation determinations were made
and further describes the components of officer compensation programs for the
Company.
COMPENSATION PHILOSOPHY AND OBJECTIVES OF EXECUTIVE
COMPENSATION PROGRAMSCompensation Philosophy and Objectives of
Executive Compensation Programs
It is the philosophy of the Company and the Committee that all compensation
programs should provide a direct link between the performance of the Company
and the compensation of its officers. To that effort, all of the executive
compensation and benefit plans have been designed to attract, motivate, reward
and retain the broad-based management talent required to achieve corporate
objectives and increase shareholder value. In particular, the Company has
designed its compensation program for officers to focus strongly on stock-based
compensation, since this form of compensation provides the clearest link to
enhanced shareholder value. From time to time, the Committee works with
compensation consultants to assist with the design, implementation and
communication of various compensation plans.
The Company's compensation programs for executives include base salaries,
annual performance-based incentives and long-term incentives. Each of these
pay delivery programs is further detailed below.
BASE SALARIESBase Salaries
Base salaries for the Company's officers are reviewed on an annual basis through comparisons
with a group of approximately 120 companies of similar size (as measured by
revenues and profitability)level of earnings) across various industries (the "Comparison
Group"). The competitive pay data is not drawn from the entire groupsgroup of
companies which comprise the indexesS&P Miscellaneous Index reflected in the
various
performance graphs contained in this proxy statement, since the Committee believes
revenue size and profitabilityearnings level comparisons are more appropriate criteria for
establishing base salary and annual incentive compensation rates. Actual salaries are basedThere is no
attempt to tie together the performance graph companies and the Comparison
Group although there is some overlap between the groups. The Committee does not
consider any financial performance criteria on a formula basis in determining
salary increases. Rather, the Committee, using its discretion, considers
market base salary rates at the 75th percentile, average annual salary
increases for executives in companies of all sizes across the country, and
considers earnings per share growth, operating income growth, sales growth, and
total shareholder return. The Committee also makes a subjective review of
individual performance contributions, position in the Company and market comparisons. Individual performance assessmentsmaking base salary increase decisions for officers.
These criteria are conductedassessed in a non-formula fashion and also consider overall company financial
performance (looking at such measures as earnings per share growth).are not weighted. All
of the officers shown in the summary compensation table (the "Named
Executives") have employment agreements (see "Executive Employment
Agreements"). Under these agreements, the Committee has the sole discretion for
determining any increase in base salary; however, under the agreements, base
salaries may not be decreased. In 1993,1994, the Named Executives received salary
increases ranging from 52.4 percent to 5.62.5 percent over the prior year. The
current base salary levels for Named Executives are, overall, consistent with
the Company's philosophy of targeting the 75th percentile of the Comparison
Group. With respect to an item of compensation of an executive, the term "75th
percentile" means a level of compensation which is greater than the
compensation of peer executives at 75% of the companies in a survey or selected
group of companies.
ANNUAL INCENTIVE COMPENSATIONAnnual Incentive Compensation
All of the Company's officers have a significant portion of their total
compensation at risk through annual incentive opportunities that are linked to
key financial and operational objectives for the Company on a consolidated
basis. The objective of this policy is to focus the Named Executives on the
attainment of objectives that the Committee believes are primary determinants
of share price over time. ForWhile the Named Executives,Committee has discretion to consider other
factors (including operating income growth, sales growth and total shareholder
return), the primary basis for determining awards is earnings per share growth.
Actual awards are proportionately decreased or increased on the basis of the
Company's earnings per share growth compared to target, subject to maximum
award amounts. Target award levels are set at approximately the 75th percentile
of the Comparison Group.
Payments are generally made in cash and are subject to the discretion of
the Committee. Annual incentive awards earned for 19931994 performance were well
above target for the Named Executives because the Company's results exceeded
19931994 targeted levels of 10% growth in earnings per share. No corporate performance
criteria or factor other than earnings per share growth was considered for
1994. The awards were paid in 1993.
LONG-TERM INCENTIVE COMPENSATIONseveral installments in 1994 and 1995.
In addition, the Committee approved discretionary cash awards to the Named
Executives in recognition of their contributions to the successful completion
of the acquisitions of the Great Southern Group and the Plantsbrook Group,
the United Kingdom's two largest publicly-held funeral service
18
21
companies. In determining the size of the discretionary cash awards, the
Committee did not consider the amounts of other cash remuneration.
Long-Term Incentive Compensation
The Committee believes that the Company's key employees should have an
ongoing stake in the long-term success of the business. The Committee also
believes that key employees
15
17 should have a considerable portion of their total
compensation paid in the form of stock, since stock related compensation
provides an incentive for enhancement of shareholder value.
To accomplish these objectives, the Company has traditionally provided its
employees with long-term incentive awards in two forms: (1) time vested
restricted stock grants (which are intended to provide actual stock ownership
to employees and to emphasize the importance of total shareholder returns)
and (2) stock options (which focus on increasing shareholder value). In
recent years, time vested restricted stock has been the primary form of
long-term incentives used for the Company's officers.
In early 1993, the Company granted restricted
stock which vested at a rate of 50 percent six months after grant and 50 percent
twelve months after the grant date. Tax gross-up payments were made as these
grants vested.
Later in 1993, the Committee decided that the Company's stock based compensation
programs should have a greater focus on generating returns for shareholders. To
this end, the Committee structured long-term restricted stock grants to vest
five percent per year with full vesting at the end of ten years (compared to
the Company's traditional method of time vesting over several years), regardless
of performance, provided, however, that vesting will be accelerated if certain
events occur or if certain specified earnings per share growth targets are
achieved. Such grants are herein called "Incentive Grants". For additional information on
such grants including a description of events which will accelerate vesting, see
footnote (4) to the Summary Compensation Table. In determining the
size of the 1993 Incentive Grants, the Committee considered a national
executive compensation survey of long-term incentive practices of 276 companies
of various sizes in various industries (the "Survey Group"). There is no
attempt to tie together the performance graph companies and the Survey Group,
although there is some overlap between the groups.
For the Named Executives, the 1993 Incentive Grants were made in amounts
equal to approximately three times the Survey Group's 75th percentile level of
annual long-term incentive awards; however, there will be no on-going annual
Incentive Grants to these executives until after the 1993 Incentive Grants have
fully vested.awards. The grants were established in such amounts in order to provide a
significant incentive to the Company's senior officers for producing outstanding
earningshad not fully vested as of
December 31, 1994 and share price performance. The 1993 Incentive Grants to Named
Executives were structured so that (i) the Named Executives will not be eligible
to receiveno additional Incentive Grants until after the 1993 Incentive Grants
fully vest, and (ii) the Company will not provide any gross-up tax payments towere authorized for Named
Executives as the 1993 Incentive Grants vest.in 1994.
Incentive Grants to executives other than the Named Executives were also
made in
1993. However, these1994. These grants were for amounts normally made during a single year and were
made in anticipation of on-going annual grants to these executives. Tax
gross-up payments will be made as these grants vest. The size of grants to this
group of executives reflectreflects approximately 75th percentile of grant levels for
the Survey Group, including the effect of the tax gross-up payments. In
determining the size of the grants made in 1994, the Committee considered
restricted stock grants made in prior years but did not consider the number and
value of stock options held by such officers.
On May 12, 1994, shareholders approved the 1993 Long Term Incentive Stock
Option Plan, which is intended to provide incentives more directly linked to
the Company's profitability and increases in stockholder value. The Committee
has since determined that one provision related to the vesting and
exercisability of option awards did not accurately reflect the Committee's
intention; therefore, the Committee has approved, subject to shareholder
approval, a correction to the 1993 plan. For additional information, see
"Proposal with Respect to the 1993 Long Term Incentive Stock Option Plan."
During 1993,1994, the Committee ratified stock option grants covering 145,000
shares to the Named
Executives made on a discretionary basis by Service Corporation International (Canada) Limited ("SCIC"), a
Canadian subsidiary.subsidiary, covering 210,000 shares of SCIC common stock. The awards
of options of SCIC shares were made on a discretionary basis and were not based
on any specific performance criteria. These options vest in increments of
one-third on each anniversary of the grant date and contain exercise prices ten
percent lower than the fair market value of SCIC stock on the date of grant.
The Committee has also adopted, subjectdid not consider the size or value of any other restricted stock
grants or stock options held by the Named Executives in ratifying the SCIC
option grants.
During 1994, the Committee awarded to shareholder approval, the 1993 Long-Term Incentive Stock Option Plan authorizing the use of 4,650,000
shares forNamed Executives, stock option
grants.grants covering 300,000 shares of Equity Corporation International ("ECI"), a
public company of which the Company owns approximately 40% of the outstanding
common stock. The intentpurpose of this plan is to attract, retain
and motivate participants and to provide incentives more directly linked to the
Company's profitability and increases in stockholder value.
During its November 1993 meeting, the Committee grantedthese grants, which were made on a discretionary
basis, subjectwas to shareholder approval,develop a totalsense of 4,000,000 stockproprietorship and personal involvement in the
development and financial success of ECI. These options to the Named Executives. However, the stock option grants were
structured to vest at the earlierin increments of
13 years after the dateone-third on each anniversary of grant or at the
time the Company's stock price meets targeted levels or upon the occurrence of
certain other events. If the fair market value of the Common Stock exceeds or
equals $50 per share or $60 per share for 20 consecutive days during the
four-year period commencing November 10, 1993, 50% of the stock options or 100%
of the stock options, as the case may be, will then vest. For additional
information, including a description of all events which will accelerate
vesting, see "Proposal to Approve the 1993 Long-Term Incentive Stock Option Plan
and the Awards Made Thereunder in 1993."
The Committee believes there are two key points which shareholders
should note in considering the proposed plan. First, attainment of the $50 stock
price performance target at the end of four years from the grant date, would
represent a compounded growth rate of 18.1% per year overwith an exercise price equal
to the grant date per
shareinitial public offering price of $25.75. If the $60 stock price performance target is achieved at
the end of such period, the compounded growth rate would be 23.6% per year.ECI stock. The Committee believes achieving such levelsdid not
consider the number and value of performance within four years would
constitute outstanding growthany other restricted stock or stock options
held by the Named Executives in shareholder value. Second,determining the officers
participating under this plan are not eligible to receive any additional stock
option awards under this plan although they remain eligible for benefits under
other plans .
1993 CHIEF EXECUTIVE OFFICER PAYsize of the ECI options.
1994 Chief Executive Officer Pay
As described above, the Company manages its pay for all executives, including
the Chief Executive Officer (or "CEO"),
16
18 considering both a pay-for-performance
philosophy and market rates of compensation for each executive position.
Specific actions taken by the Committee regarding the CEO's compensation are
summarized below.
Base Salary
In 1994, Mr. R. L. Waltrip's salary was increased from $700,000$735,000 to $735,000.$753,500,
a 2.5 percent increase. This base salary adjustment represents a five percent increase which is consistent with marketthe Company's
philosophy of targeting the 75th percentile of the Comparison Group. Mr.
Waltrip's base salary increase was determined on the same basis as salary
increases for CEOs generally in 1993.other officers.
19
22
Annual Incentive Compensation
The annual incentive earned by the CEO for 19931994 performance was $882,000,$1,150,100,
which was paid in cash.
This annual incentive award reflectswas calculated using a performance/payout formula
with earnings per share growth as the Company'ssole corporate performance measure
used in the Company's annual incentive awards.measure. The
actual annual incentive award was above target since the Company's earnings per
share performance strongly
exceededwas well above target. TheWhile the Committee had discretionary
authority to consider other factors, the Committee concluded the CEO's
individual performance was evaluated by the Committee
to be at the same level as the Company's financial performance for the year.
Long-Term Incentive
The CEO received 171,000 shares of long-term restricted stock previously
described as a 1993 Incentive Grant. This grant represents an amount equal to
three times the 75th percentile of the Survey Group's annual long-term incentive
awards; however, there will not be any on-going annual Incentive Grants to the
CEO until after this grant has fully vested. These grants provide for
accelerated vesting, including vesting based on the attainment of specified
earnings per
share growth targets.performance, so no adjustment to the annual incentive calculation
was made by the Committee.
In addition, the Committee approved a discretionary cash bonus of $100,000
to the CEO in recognition of his contribution to the successful completion of
the United Kingdom acquisitions. In determining the size of the bonus, the
Committee did not consider the amounts of other cash remuneration.
Long-Term Incentive Compensation
The CEO will not receive any tax gross-up
payments as these grants vest and will not be eligible to receive another
Incentive Grant until after this grant has fully vested. The CEO also received a
time-vested restricted stock grant of 13,450 shares early in 1993.
The CEO also received an option to acquire 45,00070,000 shares of SCIC common stock.
This option, which was granted on a discretionary basis, vests in increments
of one-third on each anniversary of the grant date (or earlier upon death or
disability or a change of control of the Company) and contains an exercise
price ten percent lower than the fair market value of SCIC stock on the date
of grant.
In addition, the CEO received an option to acquire 1,550,000105,000 shares of SCIECI
common stock, subject to shareholder approval, under the proposed 1993
Long-Term Incentive Stock Option Plan.stock. This option grant, which was made on a discretionary basis, is
structured in the same fashion described in the previous section of this
report and is intended to provide substantial
incentives more directly linked to the Company's profitability and increases in
stockholder value.report. The exercise price of the option is equal to the fair market
valueinitial public
offering price of the stock at the date of grant.
LIMITATION OF TAX DEDUCTION FOR EXECUTIVE COMPENSATION
The Omnibus Budget Reconciliation ActLimitation of 1993 (the "Act")Tax Deduction for Executive Compensation
OBRA prevents publicly traded companies from receiving a tax deduction on
compensation paid to proxy-named executive officers in excess of $1 million
annually, effective for compensation paid after 1993. Although the Committee
has not adopted a policy relating to the Act, the Committee believes that there
will be little if any impact from this limitation to the Company in 19941995 due to
various exceptions to the $1 million limitation.
The Committee made 1993 long-term restricted stock grants (described
previously as Incentive Grants) to Named Executives which are taxable to the
executive and deductible to the Company in 1993, and thus are nothas adopted, subject to shareholder approval, the new limitations.1995
Incentive Equity Plan which authorizes 2,000,000 shares of the Company's common
stock to be granted to key employees as stock options and which allows cash
awards (and up to 100,000 shares) to be granted based upon the achievement of
specific performance measures to be determined each performance period by the
Committee. For additional information, see "Proposal to Approve the 1995
Incentive Equity Plan."
The Company believes that the proposed 1993 Long-Term1995 Incentive Stock OptionEquity Plan qualifies
for an exception to the $1 million limit. The Committee believes that the
Company's other compensation programs which will result in amounts of
compensation in 19941995 will either qualify for exceptions to the $1 million limit
or that in the aggregate such amounts of compensation will not significantly
exceed $1 million for each Named Executive.
Compensation Committee:
E.H. Thornton, Jr., Chairman
James H. Greer
John W. Mecom, Jr.
1720
1923
CERTAIN INFORMATION WITH RESPECT
TO OFFICERS AND DIRECTORS
CASH COMPENSATIONCash Compensation
The following table sets forth information for the three years ended
December 31, 19931994 with respect to the Chief Executive Officer and the four
other most highly compensated executive officers of the Company. The
determination as to which executive officers were most highly compensated was
made with reference to the amounts required to be disclosed under the
"Salary" and "Bonus" columns in the table.
SUMMARY COMPENSATION TABLESummary Compensation Table
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS- --------------------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
Annual -------------------------------------
------------------------ ----------
RESTRICTED LONG-TERM
NAME AND OTHER ANNUAL STOCK STOCK INCENTIVE ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)Compensation Awards Payouts
---------------------------------- ----------------------- ---------
Name and Other Restricted Long-term All
Principal Annual Stock Stock Incentive Other
Position Year Salary Bonus Compen- Award(s) Options Payouts Compen-
(1) sation (2) AWARD(S)(3)(4) OPTIONS PAYOUTS(5) COMPENSATION(1)(6)
------------------ ---- ------ ----- ------------------ -------------- ------- ---------- ------------------sation (5)
- --------------------------------------------------------------------------------------------------------------------------------
R. L. Waltrip 1993 $717,500 $882,000 $775,663 $4,239,432 1,595,000 $0 $170,4181994 $794,500 $1,250,100 $1,105,555 $ 0 175,000 $ 0 $ 78,410
Chairman and 1992 700,0001993 759,500 882,000 775,663 4,239,432 1,595,000 0 381,975 $1,570,781 0 1,200,000 211,440128,418
Chief Executive Officer 1991 700,000 700,0001992 742,000 0 381,975 1,570,781 0 01,200,000 169,440
- --------------------------------------------------------------------------------------------------------------------------------
L. William Heiligbrodt 1994 531,250 761,400 855,043 0 135,000 0 739
President and 1993 462,500504,500 522,500 579,499579,599 2,571,218 985,000 0 42,322
President and322
Chief Operating Officer 1992 450,000492,000 0 310,000 1,055,771 0 1,200,000 43,134
Chief Operating Officer 1991 450,000 404,000 0 0 01,134
- --------------------------------------------------------------------------------------------------------------------------------
W. Blair Waltrip 1994 372,827 450,900 399,192 0 130,000 0 830
Executive Vice President 1993 307,500349,500 315,000 263,436 1,478,693 585,000 0 42,383
Executive Vice383
Operations 1992 275,000317,000 0 144,750 566,511 0 600,000 43,323
President Operations 1991 274,423 220,000 0 0 01,323
- --------------------------------------------------------------------------------------------------------------------------------
Samuel W. Rizzo 1994 343,750 360,000 505,510 0 35,000 0 1,360
Executive Vice President 1993 282,500324,500 261,000 372,698 1,315,505 505,000 0 42,599
Executive Vice President,599
1992 275,000317,000 0 179,209 798,266 0 600,000 43,111
Chief Financial Officer 1991 274,423 220,000 0 0 0
and Treasurer1,111
- --------------------------------------------------------------------------------------------------------------------------------
John W. Morrow, Jr. 1994 293,500 360,000 324,722 0 35,000 0 1,360
Executive Vice President 1993 282,500 261,000 219,059 1,311,743 475,000 0 599
Executive Vice PresidentCorporate Development 1992 274,327 0 112,629 386,258 0 0 1,073
Corporate Development 1991 250,000 200,000 0 0 0- --------------------------------------------------------------------------------------------------------------------------------
(1) Pursuant to the transitional provisions set forth in the proxy rules,
amountsSalary includes director fees of Other Annual Compensation$50,250 each for Mr. R. L. Waltrip,
Mr. Heiligbrodt and All Other Compensation are excludedMr. Rizzo, $53,827 for the Company's 1991 fiscal year.Mr. W. Blair Waltrip.
(2) Figures include tax gross-up payments on restricted stock award vestings
which are taken into consideration when determining the total value of each
award. Figures also include other executive perquisites and benefits,
including, for 1993, $22,0441994, $20,018 for use of a car, $28,644$23,246 for use of aircraft and
$34,560 in$187,447 for Interest Reimbursement (defined below) for Mr. R. L. Waltrip;
$10,808 for use of a car, $27,385 for use of aircraft, $15,000 for tax and
financial planning services and $110,263 for Interest Reimbursement for Mr.
R. L. Waltrip;
$17,349Heiligbrodt; $10,808 for use of a car, $20,307$3,502 for use of aircraft, and $13,490 in$3,300 for
tax and financial planning services and $66,158 for Interest Reimbursement for
Mr. Heiligbrodt; $10,410W. Blair Waltrip; $10,099 for use of a car, $5,842$10,993 for use of aircraft,
and $1,350 in$4,423 for tax and financial planning services and $57,888 for Interest
Reimbursement for Mr. W. Blair Waltrip; $10,575Rizzo; and $10,808 for use of a car, $10,891$4,365 for use of
aircraft, and $19,067 in$11,000 for tax and financial planning services and $57,888 for
Mr. Rizzo; and $10,135 for use of a car, $9,910 for use of aircraft, and
$10,000 in tax and financial planning servicesInterest Reimbursement for Mr. Morrow. "Interest Reimbursement" means a payment
to the individual as reimbursement of interest paid by him on the loan from the
Company described in the sixth paragraph under "Certain Transactions," together
with a related tax gross-up payment.
(3) At December 31, 1993,1994, the number and value of restricted stock holdings
not vested of the listed executives were as follows:
- --------------------------------------------------------------------
Shares Value
------ ------ --------------------------------------------------------------------
R. L. Waltrip 252,350 $6,624,188106,015 $2,941,916
- --------------------------------------------------------------------
L. William Heiligbrodt 157,025 4,121,90665,940 1,829,835
- --------------------------------------------------------------------
W. Blair Waltrip 89,125 2,339,53137,422 1,038,461
- --------------------------------------------------------------------
Samuel W. Rizzo 91,500 2,401,87537,394 1,037,684
- --------------------------------------------------------------------
John W. Morrow 71,525 1,877,53131,394 871,184
- --------------------------------------------------------------------
(4) Shares of restricted stock were awarded on February 10, 1993 as follows:
Mr. R. L. Waltrip--13,450 shares; Mr. Heiligbrodt--7,800 shares; Mr. W.
Blair Waltrip--4,250 shares; Mr. Rizzo--4,250 shares; and Mr. Morrow--4,050
shares. These shares vest 50% six months after the grant date and 50% one
year after the grant date. These awards vest 100% in the event of death,
disability, retirement at age 65, attaining the age of 70 or upon a change
of control (as defined in the Amended 1987 Stock Plan) of the Company.
Incentive Grants were awarded on August 10, 1993 as follows: Mr. R. L.
Waltrip--171,000 shares; Mr. Heiligbrodt--104,000 shares; Mr. W. Blair
Waltrip--60,000 shares; Mr. Rizzo--53,000 shares; and Mr. Morrow--53,000
shares. These shares vest 5% per year and fully at the end of ten years from
the grant date; however, vesting may be accelerated if the Earnings Per
Share ("EPS") growth targetsDividends are met. EPS growth targets and vesting
percentages are based on audited financial results for each fiscal year and
are as follows: less than 8%--5% vesting; from 8% to 10%--10% vesting; 10%
or greater--two times the EPS growth rate (that is, a 12% EPS growth would
result in 24% vesting). The 1993 Incentive Grants will vest 100% in the
event of death, disability or upon a change of control (as defined in the
Amended 1987 Stock Plan) of the Company. Dividends will be paid on the restricted shares.
(5)(4) These amounts were paid in 1992 in connection with the termination of
the Partnership Equity Plan for Provident Services, Inc. Key Executives and
Directors and the cancellation of the awards granted in February 1990 under
such plan.
(6)(5) Consists of the following: $127,560$76,467 for split dollar life insurance $858and
$1,943 for term life insurance and $42,000 in director fees for Mr. R. L. Waltrip; $322$739 for term life
insurance and $42,000 in director fees for Mr. Heiligbrodt; $383$830 for term life insurance and $42,000 in director fees for Mr. W. Blair
Waltrip; $599$1,360 for term life insurance and $42,000 in director
fees for Mr. Rizzo; and $599$1,360 for term
life insurance for Mr. Morrow.
1821
20
STOCK OPTIONS
OPTION GRANTS IN 199324
Stock Options
Option Grants in 1994
NUMBER- ------------------------------------------------------------------------------------------------------------------------------------
Number of % OF TOTAL GRANT
OF SHARES OPTIONS DATE
UNDERLYING GRANTED TO EXERCISE MARKET PRESENT
GRANT OPTIONS EMPLOYEES IN PRICE PRICE EXPIRATION VALUEof Total Grant
Shares Options Date
Underlying Granted to Exercise Market Present
Grant Options Employees Price Price Expiration Value
Date Stock Granted in 1994 per Share per Share Date (U.S. $)
(1) (2) (3) (4) (4) (4) (5)
NAME DATE STOCK(1) GRANTED(2) 1993 PER SHARE(3) PER SHARE(3) DATE(4) (U.S. DOLLARS)
---- ---- -------- ---------- ---- ------------ ------------ ------- --------------- ------------------------------------------------------------------------------------------------------------------------------------
R. L. Waltrip 5/26/9394 SCIC 45,000 24.0% $21.7270,000 14.2% $ 14.0625 C $24.13$15.625 C 5/26/0001 $ 336,631
11/331,592
10/93 SCI 1,550,000 36.3 25.75 25.75 11/19/94 ECI 105,000 20.6% 13.00 13.00 10/07 14,548,10619/04 764,400
- ------------------------------------------------------------------------------------------------------------------------------------
L. William Heiligbrodt 5/26/9394 SCIC 35,000 18.7 21.7260,000 12.2% 14.0625 C 24.1315.625 C 5/26/00 261,824
11/01 284,222
10/93 SCI 950,000 22.3 25.75 25.75 11/19/94 ECI 75,000 14.7% 13.00 13.00 10/07 8,916,58119/04 546,000
- ------------------------------------------------------------------------------------------------------------------------------------
W. Blair Waltrip 3/24/935/26/94 SCIC 20,000 10.7 20.2580,000 16.2% 14.0625 C 22.50 C 3/24/00 139,507
5/26/93 SCIC 15,000 8.0 21.72 C 24.1315.625 C 5/26/00 112,210
11/01 378,962
10/93 SCI 550,000 12.9 25.75 25.75 11/19/94 ECI 50,000 9.8% 13.00 13.00 10/07 5,162,23119/04 364,000
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel W. Rizzo 5/26/93 SCIC 30,000 16.0 21.72 C 24.13 C 5/26/00 224,421
11/10/93 SCI 475,000 11.1 25.75 25.75 11/19/94 ECI 35,000 6.9% 13.00 13.00 10/07 4,458,29119/04 254,800
- ------------------------------------------------------------------------------------------------------------------------------------
John W. Morrow, Jr. 11/10/93 SCI 475,000 11.1 25.75 25.75 11/19/94 ECI 35,000 6.9% 13.00 13.00 10/07 4,458,29119/04 254,800
- ------------------------------------------------------------------------------------------------------------------------------------
(1) During 1993,1994, the named executive officers were granted options to
acquire Common Stock of SCI and options to acquire common stock of Service
Corporation International (Canada) Limited ("SCIC"),SCIC, a public Canadian company that is approximately
70% owned by SCI, and options to acquire common stock of ECI, a public
company that is approximately 40% owned by SCI.
(2) The SCISCIC stock options were granted, subject to shareholder approval,
under the 1993 Long-Term Incentive Stock Option Plan and will vest upon the
occurrence of certain events, including vesting at the earlier of 13 years
after the date of the grant, or at the time the Common Stock meets certain
targeted levels during the first 4 years from the date of the grant. If the
fair market value of the Common Stock exceeds or equals $50 per share or $60
per share for 20 consecutive days during the four-year period commencing
November 10, 1993, 50% of the stock options or 100% of the stock options, as
the case may be, will then vest. For additional information, including a
description of all events which will accelerate vesting, see "Proposal to
Approve the 1993 Long-Term Incentive Stock Option Plan and the Awards Made
Thereunder in 1993." The SCICECI stock options vest in increments of
1/3 eachper year or upon death or disability or upon a change in control of the
Company. Grants of SCIC reflect SCIC's two-for-one stock split in June 1994.
(3) The exercise pricespercentages included in the table were prepared for SCI options are referenced in U.S. dollarseach company on
a separate basis and foramount to 42.6% of the total SCIC options and 58.9% of
total ECI options.
(4) The exercise price for the SCIC stock is referenced in Canadian dollars
denoted with a "C". The exercise price and for the SCI stock is the average market price at the date of the grant.ECI options in U.S. dollars. The exercise price
for the SCIC stock is 10% less than the market price at the date of the
grant. The exercise dateprice for the SCIECI stock is no sooner than 4
years fromthe initial public offering
price on the date of grant (except upon a change in control of the Company)
and no later than 14 years from date of grant.
(4) The expiration date for the SCIC options is 7seven
years from the date of the grant. The expiration date for the SCIECI options is
no later than 1410 years from the date of the grant.
(5) The present value of options is based on a present value model known as
the "Black-Scholes option pricing model" to arrive at the values shown.
Canadian dollars were converted to U.S. dollars using the exchange rate in
effect at December 31, 1993.1994. The choice of the Black-Scholes valuation method
does not reflect any belief by SCI's management that such method, or any
other valuation method, can accurately assign a value to an option at the
grant date. The assumptions used for valuing the SCI grants are:
volatility rate 21.79%; annual dividend rate of $0.42 per share; risk free
interest rate 6%; and adjustment for risk of forfeiture 3% per year for four
years. The valuation assumptions for the SCIC grants are: volatility
rate 21.79%19.3%; dividend yield $0; interest rate 5.6%7.1%; and adjustment for risk of
forfeiture 3% per year for three years. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND DECEMBERThe assumptions used for valuing the
ECI grants are: volatility rate 30.79%; dividend yield $0; interest rate
8.0%; and adjustment for risk of forfeiture 3% per year for three years.
Aggregated Option Exercises in Last Fiscal Year and December 31, 1993 OPTION VALUES1994 Option
Values
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DECEMBER- -------------------------------------------------------------------------------------------------------------------------------
Number of Shares Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at December 31, 1993
SHARES DECEMBER1994
Acquired Value December 31, 19931994 (U.S. DOLLARS)
ACQUIRED VALUE ---------------------------------- ---------------------------------
NAME ON EXERCISE REALIZEDDollars)
Name On Exercise Realized ($) EXERCISABLE(1) UNEXERCISABLE(2) EXERCISABLE(1) UNEXERCISABLE(2)
---- ----------- ------------ -------------- ---------------- -------------- ----------------Exercisable Unexercisable Exercisable Unexercisable
(1) (2) (3) (2) (3)
- -------------------------------------------------------------------------------------------------------------------------------
R. L. Waltrip 0 0 24,000 1,595,000 $294,996 $995,27554,000 1,785,000 $432,490 $3,406,895
- -------------------------------------------------------------------------------------------------------------------------------
L. William Heiligbrodt 0 0 19,500 985,000 239,997 646,32542,833 1,131,667 348,187 2,143,193
- -------------------------------------------------------------------------------------------------------------------------------
W. Blair Waltrip 0 0 29,500 585,000 351,985 468,53329,000 249,072 33,833 726,667 232,898 1,373,046
- -------------------------------------------------------------------------------------------------------------------------------
Samuel W. Rizzo 0 0 18,000 505,000 221,247 384,35038,000 550,000 315,910 1,094,076
- -------------------------------------------------------------------------------------------------------------------------------
John W. Morrow, Jr. 0 0 9,000 475,000 120,744 237,500510,000 134,244 958,750
- -------------------------------------------------------------------------------------------------------------------------------
(1) The amounts in the table regarding Mr. W. Blair Waltrip include exercisable
options for 10,000acquired 9,000 shares of common stock of SCIC having a valueSCI and
20,000 shares (adjusted for SCIC's 2-for-1 stock split of $111,988 at December 31, 1993.June 1994) of common
stock of SCIC.
(2) The amounts in the table include unexercisableexercisable options to acquire shares
of common stock of SCIC as follows:
R. L. Waltrip
- - 45,00030,000 shares valued at $220,275$101,494 at December 31, 19931994
L. William Heiligbrodt
- - 35,00023,333 shares valued at $171,325$78,940 at December 31, 19931994
W. Blair Waltrip
- - 35,00043,333 shares valued at $193,533$212,811 at December 31, 19931994
Samuel W. Rizzo
- - 30,00020,000 shares valued at $146,850$67,663 at December 31, 1993
191994
(3) The amounts in the table include unexercisable options as follows:
R. L. Waltrip - 130,00 shares of SCIC valued at $280,645 and 105,000 shares
of ECI valued at $26,250 at December 31, 1994
L. William Heiligbrodt - 106,667 shares of SCIC valued at $224,443 and 75,000
shares of ECI valued at $18,570 at December 31, 1994
W. Blair Waltrip - 126,667 shares of SCIC valued at $260,546 and 50,000
shares of ECI valued at $12,500 at December 31, 1994
22
21
RETIREMENT PLANS25
Samuel W. Rizzo- 40,000 shares of SCIC valued at $135,326 and 35,000 shares
of ECI valued at $8,750 at December 31, 1994
John W. Morrow- 35,000 shares of ECI valued at $8,750 at December 31, 1994
Retirement Plans
Cash Balance Plan
The SCI Cash Balance Plan is a defined benefit plan. Each participant in
the plan has an account, which will be credited, each year that a participant
qualifies, with a Company contribution (based on annual compensation and years
of benefit service) and interest. The chart below is the percentage applied to
total compensation for determining the Company contribution for each
participant.
- ----------------------------------------------------------------------------
Percent of
Years of Benefit Service Compensation
- ----------------------------------------------------------------------------
Less than six years 5.5%
- ----------------------------------------------------------------------------
Six to ten years 6.5%
- ----------------------------------------------------------------------------
Eleven or more years 8.0%
- ----------------------------------------------------------------------------
The maximum compensation used in computing benefits under the SCI Cash
Balance Plan for 1994 was limited to $150,000.
For the period January 1, 1994 to December 31, 1994, interest for each
account was credited at the annual rate of 4.5%.
Estimated Annual Benefits Payable at Age 65
- ----------------------------------------------------------------------------
Name Annual Benefit
- ----------------------------------------------------------------------------
R. L. Waltrip $118,852
- ----------------------------------------------------------------------------
L. William Heiligbrodt $29,141
- ----------------------------------------------------------------------------
W. Blair Waltrip $87,124
- ----------------------------------------------------------------------------
Samuel W. Rizzo $20,489
- ----------------------------------------------------------------------------
John W. Morrow, Jr. $15,152
- ----------------------------------------------------------------------------
Normal Retirement Age is defined in the SCI Cash Balance Plan as (1) the
date upon which a member attains age 65 or (2) in the case of an employee who
becomes a member of the SCI Cash Balance Plan after the age of 60, it will be
the fifth anniversary of the date that such member became a participant.
The predecessor plan, the SCI Pension Plan, was restated and renamed the
SCI Cash Balance Plan effective October 1, 1993. The SCI Pension Plan, a
defined benefit plan, assumed employment continued to a normal retirement
date of age 65. The annuity, payable for life with 120 monthly payments
certain, would provide a monthly benefit computed as follows: 40% of final
average monthly compensation for the highest five consecutive years
multiplied by a fraction of which the numerator is the years of benefit
service (not to exceed 30) and the denominator is 30.
Participants' opening account balances in the SCI Cash Balance Plan were
actuarially determined, based on the accrued benefit provided by the formula
from the SCI Pension Plan. The SCI Cash Balance Plan account will be credited,
each year that a participant qualifies, with a Company contribution (based on
annual compensation and years of benefit service) and interest. The chart below
is the percentage applied to total compensation for determining the Company
contribution for each participant.
PERCENTAGE OF
YEARS OF BENEFIT SERVICE COMPENSATION
Less than six years 5.5%
Six to ten years 6.5%
Eleven or more years 8.0%
The maximum compensation used in computing benefits under the SCI
Pension Plan and the SCI Cash Balance Plan for 1993 was limited to $235,840.
For the period October 1, 1993 to December 31, 1993, interest for each
account was credited at the annual rate of 4.5%.
ESTIMATED ANNUAL BENEFITS PAYABLE AT AGE 65
NAME ANNUAL BENEFIT
R. L. Waltrip $102,126
L. William Heiligbrodt $ 29,141
W. Blair Waltrip $ 87,124
Samuel W. Rizzo $ 20,489
John W. Morrow, Jr. $ 15,152
Normal Retirement Age is defined in the SCI Cash Balance Plan as (1) the
date upon which a member attains age 65 or (2) in the case of an employee who
becomes a member of the SCI Cash Balance Plan after the age of 60, it will be
the fifth anniversary of the date that such member became a participant.
Employees at least age 60 years old with 10 years of benefit service on
September 30, 1993 will receive the greater of the benefit they would have
earned under the SCI Pension Plan or the benefit earned under the SCI Cash
Balance Plan.
The credited years of service under the SCI Cash Balance Plan as of
December 31, 1993,1994, for the following named individuals are set opposite their
names: R. L. Waltrip (37)(38), L. William Heiligbrodt (6)(7), W. Blair Waltrip (16)(17),
Samuel W. Rizzo (6)(7) and John W. Morrow, Jr. (4)(5). Base salary and bonus payments
are covered by the SCI Cash Balance Plan; however, with respect to the persons
listed in the Summary Compensation Table, their compensation covered by the SCI
Cash Balance Plan is limited to $235,840$150,00 for 1993.1994.
Supplemental Executive Retirement Plan
for Senior Officers
The Supplemental Executive Retirement Plan for Senior Officers ("SERP for
Senior Officers") is a non-qualified deferred compensation plan which covered
officers and subsidiary operating presidents on December 31, 1993,1994, including
the individuals listed in the Summary Compensation Table. The Plan was
amended on December 31, 1993 to allow cost-of-living adjustments based on the
change in the annual Consumer Price Index up to a maximum of 7% per annum.
Benefits under the
SERP for Senior Officers do not consist of compensation deferred at the
election of participants. Benefits for individuals listed in the Summary
Compensation Table are computed in the table set forth below based upon years
of benefit service credited under the SCI Cash Balance Plan and the
cost-of-living adjustments for 1992, 1993 and 1993.1994. Such benefits will be in
addition to SCI Cash Balance Plan benefits.
20
22
ANNUAL BENEFITS
YEARS OF SERVICE
LESS THAN MORE THAN
5 5 - 10 10 - 15 15 - 20 20 - 25 25
--------- ------ ------- ------- ------- ---------
Robert L. Waltrip $264,196 $528,392 $686,909 $792,587 $898,266 $1,056,783
L. William Heiligbrodt 158,517 317,035 582,392 634,070 739,748 845,426
W. Blair Waltrip 105,678 184,937 290,615 369,874 449,133 528,392
Samuel W. Rizzo 105,678 184,937 290,615 369,874 449,133 528,392
John W. Morrow, Jr. 105,678 158,517 264,196 317,035 369,874 422,713
Benefit payments will be made in the form of 180 monthly installments
commencing at the later of severance of employment or the attainment of age
fifty-five. Prior to retirement, if a participant dies or in the event of a
change of control (as defined in the SERP for Senior Officers) of the Company,
the Company will promptly pay to each beneficiary or participant a lump sum
equal to the present value of the benefit that the participant would have been
entitled to if he had continued to accrue benefit service from the date of
death or the date of the change of control to the date of his 65th birthday.
EXECUTIVE EMPLOYMENT AGREEMENTSThe SERP for Senior Officers was amended in 1994 to allow participants to begin
receiving reduced monthly installments while still an active employee (1) on
January 1, 1995, if the participant was age 60 or older on November 9, 1994, or
(2) on the later of January 1, 1996 or attainment of age 60 if the participant
was less than age 60 on November 9, 1994 and if the participant provides a
written election to the Company one year prior to commencement of payments.
Such installments will be reduced for early commencement to reasonably reflect
the time value of money. Mr. R. L. Waltrip has elected to receive reduced
monthly installments beginning January 1, 1995. The amendment also permits a
participant to receive a lump sum payment of an actuarially reduced benefit on
the participant's retirement if the election is made not less than 12 months
prior to the retirement date.
23
26
Annual Benefits
- ------------------------------------------------------------------------------------------------------------------------
Years of Service
More Than
5 - 10 10 - 15 15 - 20 20 - 25 25
- ------------------------------------------------------------------------------------------------------------------------
Robert L. Waltrip $ N/A $ N/A $ N/A $ N/A $1,040,664 (1)
- ------------------------------------------------------------------------------------------------------------------------
L. William Heiligbrodt 325,595 542,658 651,190 759,721 868,253
- ------------------------------------------------------------------------------------------------------------------------
W. Blair Waltrip 189,930 298,462 379,861 461,259 542,658
- ------------------------------------------------------------------------------------------------------------------------
Samuel W. Rizzo 189,930 298,462 379,861 461,259 542,658
- ------------------------------------------------------------------------------------------------------------------------
John W. Morrow, Jr. 162,797 271,329 325,595 379,861 434,126
- ------------------------------------------------------------------------------------------------------------------------
(1) This is Mr. R. L. Waltrip's actual annual benefit which, pursuant to his
election, will be paid in the form of monthly installments beginning January 1,
1995.
Executive Employment Agreements
In November 1991, the Company entered into new executive employment
agreements with its executive officers, including Messrs. R. L. Waltrip,
Heiligbrodt, W. Blair Waltrip, Rizzo and Morrow. The agreements have an
initial term of five years for Mr. R. L. Waltrip, four years for Mr.
Heiligbrodt and three years for each of Messrs. W. Blair Waltrip, Rizzo and
Morrow. TheUpon annual authorization by the Board of Directors, the terms are
extended for an additional year upon each anniversary date unless notice of non-renewal is given by
either party. If such notice is given by the Company or if the Board of
Directors does not authorize renewal, the employment period is extended so as
to terminate the same number of years after the date of such notice as the
original term of the agreement. The agreements provide for base salaries, which
may be increased by the Board of Directors, and the right to participate in
bonus and other compensation and benefit arrangements. As of March 25, 1994,24, 1995,
the base salaries for Messrs. R. L. Waltrip, Heiligbrodt, W. Blair Waltrip,
Rizzo and Morrow were $735,000,
$475,000, $315,000, $290,000$753,500, $487,000, $323,000, $297,000 and $290,000$297,000
respectively.
In the event of termination of employment due to disability or death, the
executive or his estate will be entitled to receive any accrued and unpaid
salary or other compensation, a pro rata portion (based on the portion of the
year elapsed at the date of termination) of the highest bonus the executive
received in the preceding three years and continuation of welfare plan
benefits. If an executive is terminated without cause, he will be entitled to
continuation of compensation and certain other benefits for the remaining term
of his employment agreement. In the event of a change of control (as defined in
the agreements) of the Company, the executive will be entitled to terminate his
employment for certain specified reasons generally relating to a failure by the
Company to honor the terms of the employment agreement ("Good Reason"), or
without any reason during the 30-day period beginning one year after the change
of control (the "Window Period"), and receive a lump-sum payment equal to (a)
any accrued and unpaid salary or other compensation plus (b) a pro rata portion
(based on the portion of the year elapsed at the date of termination) of the
highest bonus the executive received in the preceding three years plus (c) a
multiple (equal to the number of years in the initial term) of both the
executive's base salary and his highest recent bonus.
Upon termination of his employment, each executive will be subject, at the
Company's option, to a non-competition obligation for a period equal to the
number of years in the executive's initial term (except for Mr. R. L. Waltrip,
whose 10-year non-competition obligation is described below). If the Company
elects to have the non-competition provisions apply, during the non-competition
period the Company will make payments to the executive (other than Mr. R. L.
Waltrip) at a rate equal to his base salary at the time of termination, unless
such termination was for cause or if the executive terminates his employment
other than for Good Reason or during the Window Period, in which case the
executive will be bound by the non-competition provisions without the Company
making the corresponding payments. Any payments relating to the non-competition
provisions (except the payment already made to Mr. R. L. Waltrip as described
below) will be reduced to the extent the executive has received a lump-sum
payment in lieu of salary and bonus after termination of employment.
Each executive employment agreement contains provisions giving the Company
full ownership of any intellectual property developed by the executive in the
course of his employment, imposing an obligation of confidentiality on the
executive with respect to the Company's proprietary information and prohibiting
certain actions by the executive (whether or not the Company elects to have the
non-competition provisions described in the preceding paragraph apply) that
could be harmful to the Company after termination of the executive's
employment.
21
23
If any payments under the executive employment agreement or under the
benefit plans of the Company (including the Amended 1987 Stock Plan, the SERP
for Senior Officers, or the proposed 1993 Long-Term Incentive Stock Option Plan and the
proposed 1995 Incentive Equity Plan) would subject the executive to any excise
tax under the Internal Revenue Code, the executive will also be entitled to
receive an additional payment in an amount such that, after the payment of all
taxes (income and excise), the executive will be in the same after-tax position
as if no excise tax had been imposed.
24
27
The Company's employment agreement with Mr. R. L. Waltrip provides for a
10-year non-competition period applicable to Mr. Waltrip beginning on the date
of his retirement. This provision was incorporated into the November 1991
employment agreement from an earlier employment agreement that was terminated
in November 1991. In connection with such termination, Mr. Waltrip received a
payment of the present value of amounts that would have become payable under
the earlier employment agreement during the non-competition period. Mr.
Waltrip's current employment agreement does not provide for any further payment
in consideration for Mr. Waltrip's covenant not to compete.
OTHER COMPENSATIONThe Company's employment agreement with Mr. Samuel W. Rizzo was modified in
February 1995 to provide that Mr. Rizzo's employment period with the Company
will terminate in February 1998. Until such date, Mr. Rizzo will continue to
serve as Executive Vice President or in such other capacity as the Chief
Executive Officer may designate and participate in the compensation
arrangements covered by the employment agreement except for performance-based
incentive awards for periods beginning or after January 1, 1995. The
modification also provides that there will not be any non-competition
obligations of, or payments to, Mr. Rizzo after February 1998.
Other Compensation
In July 1988, the Company entered agreements with all executive officers and
certain former officers to provide payments to their estates in the event of
death. These agreements replaced certain insurance policy arrangements which
the Company terminated in 1988. Under the agreements as amended, the payments,
when paid, will be taxable and will amount to $2,777,778 for Mr. R. L. Waltrip,
$2,083,333 for Mr. Heiligbrodt, $1,388,888 for each of Messrs. W. Blair
Waltrip, Rizzo and Morrow. The benefit amount under each of these agreements is
payable in full immediately in the event of death while the officer is
employed. After termination of employment, the death benefit remains payable to
the extent it has vested. The death benefit will vest at the rate, whichever is
greater, of (i) 50% after ten100% vesting upon attainment of Executive Vice President level
or higher and five years of employment and 5% per year thereafter,SCI Cash Balance Plan vesting service, or (ii) 30%
after three years of service as an officer and 10% per year thereafter.
DIRECTOR COMPENSATIONDirector Compensation
The current rates of directors' and committee fees are $5,250 quarterly
plus $5,250$6,000 for each meeting of the Board attended (payable to all directors),
and $1,500 for each committee meeting attended (payable to non-employee
directors only). Each year, the Company provides each director the opportunity
to defer his director fees pursuant to a deferred compensation agreement. The
agreements allow the directors to specify the percentage of fees to be deferred
and the date(s) for the payout of such fees. The Company maintains a
bookkeeping account for any deferred fees and credits the account quarterly
with interest at a rate which is one-half percentage point lower than the
Company's quarterly bank borrowing rate.
In addition, eleven directors who are not employees of the Company or its
subsidiaries automatically receivereceived yearly awards of restricted Common Stock throughin
1994 pursuant to the 1990 Stock Plan For Non-Employee Directors. Each award will bewas
made on the second Thursday of May 12, 1994 for an amount of 1,500 shares. Each award will havehas a
restriction period which will lapse on the second
Thursday in May of the year following the year the award is granted.11, 1995. If the director terminates
service as a director for any reason other than disability or death prior to
the lapse of the restriction period, the restricted shares shall be forfeited.
The restrictions shall lapse upon the occurrence of death or total and
permanent disability of the director or upon a change of control (as defined in
the plan) of the Company. While the restrictions are in effect, the shares
cannot be sold, pledged or transferred. Except for the restrictions described
above, a participant in the Plan who has been awarded shares of restricted
Common Stock has all the rights of a holder of Common Stock, including the
right to receive dividends paid on such shares and the right to vote such
shares. In 1993, each ofThe Plan expired after the eleven directors who were not employees
received an award of 1,500 shares underMay 12, 1994 grants and is being replaced,
subject to shareholder approval, with the plan.1995 Stock Plan for Non-Employee
Directors. See "Proposal to Approve the 1995 Stock Plan for Non-Employee
Directors."
In 1992, the Company adopted the Retirement Plan for Non-Employee
Directors. Under this plan, each of the directors who are not employees of the
Company, including the Director Emeritus, was designated as a plan participant
and will be entitled to receive annual retirement benefits of $42,500 for ten
years, subject to a vesting schedule. The retirement benefits will vest in 25%
increments at the end of five years, eight years, eleven years and fifteen
years of credited service, except that the benefits will automatically vest
100% in the event of death while a director or in the event of a change in
control (as defined in the plan) of the Company.
22
24
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
In 1994, the members of the Compensation Committee of the Board of Directors
of the Company were Messrs. James H. Greer, John W. Mecom, Jr. and E. H.
Thornton, Jr.
Mr. R. L. Waltrip, Chairman and Chief Executive Officer of the Company, served as a member of the Compensation Committeewas
Chairman of the Board of Directors of Tanknology Environmental, Inc. ("TEI")
in 1994 and also served as Chief Executive Officer of TEI until April 1993.1994.
Mr. Samuel W. Rizzo, Executive Vice President and Chief Financial Officer/Treasurer of the Company, also served as
a member of such committeethe Compensation Committee of TEI in 1993. Mr. Waltrip is also Chairman1994. Regarding transactions
of the BoardCompany with Messrs. Waltrip and Chief Executive Officer of TEI.Rizzo, see "Certain Transactions"
below.
Mr. Waltrip receives no salary or other compensation from TEI in his
capacity as Chairman and Chief Executive Officer to TEI, other than director
fees and noncash compensation paid to other nonemployee directors of TEI. Mr.
Waltrip
25
28
devotes substantially all of his time to his duties as Chairman of the Board
and Chief Executive Officer of the Company.
CERTAIN TRANSACTIONS
On December 10, 1981, the Company consummated the acquisition of IFS
Industries, Inc. ("IFS"). On such date Douglas M. Conway, then Executive Vice
President and a director of IFS, was elected to the Board of Directors of the
Company. At the time of the IFS acquisition, Mr. Conway had an employment
agreement and a deferred compensation agreement with IFS which were continued in
accordance with their terms. Mr. Conway retired from IFS in February 1983. His
deferred compensation agreement, which provided for monthly payments of $1,667
for a period of 120 months, went into effect on March 1, 1983 and expired in
February 1993. The Company paid Mr. Conway $1,667 under the agreement for 1993.
In August 1989, the Company acquired from J. W. Morrow Investment Company
its funeral home businesses located in Henderson, Texas and Charlotte, North
Carolina. John W. Morrow, Jr. was the primary shareholder of J. W. Morrow
Investment Company and was elected Executive Vice President of the Company in
August 1989. Mr. Morrow is currently the Executive Vice President Corporate
Development of the Company. In the August 1989 transaction, Mr. Morrow received
shares of Common Stock of the Company as his share of the acquisition price
and, in addition, entered a ten yearten-year Agreement-Not-To-Compete with the Company.
Under the Agreement-Not-To-Compete, Mr. Morrow received a cash payment and
monthly payments scheduled to continue for a total of 96 months, which monthly
payments totaled $152,000 in 1993.1994. Each of Mr. Morrow's adult children entered
a ten year Agreement-Not-To-Compete under which the Company is obligated to
make monthly payments
of $1,000 per child per month for the term of such agreements. The Company paid $12,000$36,000
in 1993 to each of three children1994 under theirthe children's agreements.
In 1993,1994, the Company provided compensation of $281,846$307,531 and granted 3,5002,500
shares of restricted stock of the Company and an option to acquire 18,000
shares of ECI common stock to T. Craig Benson, son-in-law of R. L. Waltrip, in
his capacity as a Vice President of the Company. From SCIC, Mr. Benson also received
director's fees of $3,577 and an option to acquire 2,50010,000 shares of SCIC common
stock at an exercise price ten percent lower than the fair market value of SCIC
stock on the date of grant. From ECI, Mr. Benson received director's fees of
$5,750 and an option to acquire 15,000 shares of ECI common stock. The ECI
options have exercise prices equal to the initial public offering price of ECI
stock.
In 1993,1994, the Company paid $42,000$44,250 cash remuneration and awarded 1,500 shares
of Common Stock of the Company to Wanda A. McGee, mother of R. L. Waltrip, in
her capacity as Director Emeritus of the Company. Pursuant to a resolution
adopted by the Board in 1983, Ms. McGee is entitled as Director Emeritus to
receive such fees and other emoluments as may be paid or awarded to directors
of the Company.
Provident Services, Inc. and its subsidiaries ("Provident") provide various
types of financing in the funeral and cemetery industry, including loans to
certain employees and directors of the Company. Provident Services, Inc. is a
subsidiary of the Company. During 1993,1994, Provident had outstanding loans of
$60,000 or more to officers and directors as indicated in the table on the
following page. All such loans are secured and contain terms which, in the
opinion of management, are as favorable to Provident as could have been
negotiated with any third party.
In addition, Provident leased six vehicles in 1993 to companies owned by
Mr. R. L. Waltrip and received rentals aggregating $38,148.$37,774. Provident also
leased fiveseven vehicles to a company owned by Mr. Heiligbrodt and received
rentals aggregating $36,705.$37,624. All of the leases were entered at market rates and
contain terms which, in the opinion of management, are as favorable to
Provident as could have been negotiated with any third party.
In connection with grants of restricted stock under the Amended 1987 Stock
Plan on August 10, 1993, the Company on August 19, 1993 made loans of
$1,700,000 to Mr. R. L. Waltrip, $1,000,000 to Mr. Heiligbrodt, $600,000 to Mr.
W. Blair Waltrip, $525,000 to Mr. Rizzo and $525,000 to Mr. Morrow. The loans
were made to enable such officers to pay the estimated federal income taxes
resulting from their receipt of the August 10, 1993 restricted stock grants.
Each of the loans remained outstanding in 1994, is due August 10, 2003 and
bears interest at 6-1/2% per annum.annum, which interest is reimbursed (together with
a tax gross-up payment) by the Company.
In connection with the informal investigation by the staff of the Commission
referred to under "Independent Accountants," the Company, pursuant to
authorization of the Board of Directors, has advanced the expenses incurred by
Messrs. R. L. Waltrip, Heiligbrodt and Rizzo for separate legal counsel for
such investigation in the respective amounts of $37,532, $17,630 and $9,030
through March 31, 1995.
The Company acquired AMEDCO Inc. ("AMEDCO") in 1986. Prior to the
acquisition, Mr. B. D. Hunter, a director of the Company, served as Chairman of
the Board, President and Chief Executive Officer of AMEDCO. Immediately prior
to the closing of the acquisition of AMEDCO by the Company, AMEDCO sold, among
other things, its health care operations to Huntco Manufacturing, Inc. ("HMI") and its
23
25
LOANS FROM PROVIDENT
LARGEST LOAN
LOAN BALANCE AT
BALANCE IN DEC. 31, INTEREST
NAME 1993 1993 RATE NATURE OF LOAN
---- ---------- ---------- -------- --------------
George R. Champagne $168,304 $0 9.10% Mortgage Loan
Vice President and Assistant to 104,375 $104,375 Prime Loan to Exercise Stock Options
Chief Operating Officer
Anthony L. Coelho $872,000 866,424 7.20% Mortgage Loan
Director
G. Kyle Guinn $386,629 $382,604 7.55% Mortgage Loan
Former Senior Vice President and Treasurer 230,813 0 Prime Loan to Exercise Stock Options
L. William Heiligbrodt $119,313 $119,313 7.45% Mortgage Loan
President 377,468 373,884 7.70% Mortgage Loan
and Chief Operating Officer 99,916 99,000 7.60% Mortgage Loan
Glenn G. McMillen $ 13,500 $ 13,500 Prime Loan for Personal Use/
Senior Vice President Australia Secured by Stock
John W. Morrow, Jr. $413,800 $0 9.05% Mortgage Loan
Executive Vice President
Corporate Development
Henry M. Nelly, III $129,121 $123,181 9.10% Mortgage Loan
President of Provident 104,375 104,375 Prime Loan to Exercise Stock Options
E. Keith Payne $ 99,115 $ 99,115 Prime Loan to Exercise Stock Options
Former Senior Vice President and Secretary
Jerald L. Pullins $250,000 $250,000 Prime Loan for Personal Use/
Senior Vice President Secured by Stock
Samuel W. Rizzo $643,840 $0 8.55% Mortgage Loan
Executive Vice President and $100,000 $ 99,560 6.95% Mortgage Loan
Chief Financial Officer/Treasurer
Jack D. Rottman $255,234 $252,916 9.10% Mortgage Loan
Former Vice President Operations
Richard T. Sells $272,993 $262,128 7.80% Mortgage Loan
Vice President Prearranged Sales
Jack L. Stoner $249,003 $239,104 7.20% Mortgage Loan
Senior Vice President Administration
steel operations to Huntco Steel, Inc. ("Huntco Steel").
HMI and Huntco Steel
werewas a wholly-owned subsidiariessubsidiary of Huntco Acquisitions Holding, Inc. ("HAH").
All of the outstanding shares of capital stock of HAH are owned by a company
which is owned approximately 40%41% by Mr. Hunter, 40% by Huntco Enterprises,
Inc. ("Huntco"HEI") and 19% by Huntco Farms, Inc. (of which Mr. Hunter owns 10%9% and HuntcoHEI
owns 85%). Mr. Hunter is a director of Huntco,HEI, owns HuntcoHEI preferred stock which
gives him voting control of HuntcoHEI and serves as co-trustee of irrevocable trusts
which own approximately 85% of the common stock of Huntco.HEI. The trusts are for the
benefit of Mr. Hunter's adult children, and Mr. Hunter has the power to appoint
a successor co-trustee. Mr. Hunter disclaims beneficial interest in the shares
of stock owned by such trusts.
In April 1991 the Company, HAH, HMI, Huntco Steel and Mr. Hunter entered
into a Property Exchange and Settlement Agreement, pursuant to which, among
other things, the Company acquired shares of non-voting common stock of Huntco
Steel representing 19% of its outstanding common stock. In November 1992, the
Company sold its common stock of Huntco Steel to HAH in exchange for a
$2,500,000 promissory note (the "HAH note") due November 30, 1993. The HAH note
bore interest at the prime rate plus 2% and was secured by: (i) a promissory
note from HMH Investments, Inc., which is owned 49% by Mr. Hunter, to HMI (owned
by HAH) due
24
26
April 17, 1997 with an outstanding principal balance of $1,230,000; (ii)
984,000 shares of Class A common stock of Everest & Jennings International,
Ltd. to the extent such shares secure the promissory note from HMH Investments,
Inc.; (iii) all the senior preferred stock of Huntco Steel; and (iv) all the
common stock of Huntco Steel. On July 7, 1993, the HAH note was paid in full and
the collateral was released. The total payment was $2,619,954, consisting of
$2,500,000 in principal and $119,954 in accrued interest.
In connection with the sale of AMEDCO's health care operations in 1986, the
Company agreed to retain title to a tract of land and a manufacturing
facility in Wright City, Missouri pending its sale. The property was
encumbered by liens securing industrial revenue bonds. HMI assumed the
liabilities under the industrial revenue bonds, the Company agreed to
26
29
Loans from Provident
- ----------------------------------------------------------------------------------------------------------------------------------
Largest Loan
Loan Balance at
Balance in Dec. 31, Interest
Name 1994 1994 Rate Nature of Loan
- ----------------------------------------------------------------------------------------------------------------------------------
Gregory L. Cauthen $ 205,890 $ 196,148 7.10% Mortgage Loan
Vice President Treasurer
- ----------------------------------------------------------------------------------------------------------------------------------
George R. Champagne $ 104,375 $ 0 Prime Loan to Exercise Stock Options
Senior Vice President
Chief Financial Officer
- ----------------------------------------------------------------------------------------------------------------------------------
Anthony L. Coelho $ 866,424 $ 548,582 7.20% Mortgage Loan
Director
- ----------------------------------------------------------------------------------------------------------------------------------
L. William Heiligbrodt $ 119,313 $ 119,029 7.45% Mortgage Loan
President and 373,884 370,156 7.70% Mortgage Loan
Chief Operating Officer 99,000 98,014 7.60% Mortgage Loan
- ----------------------------------------------------------------------------------------------------------------------------------
Lowell A. Kirkpatrick, Jr. $ 322,556 $ 318,739 6.50% Mortgage Loan
Vice President
Corporate Development
- ----------------------------------------------------------------------------------------------------------------------------------
Henry M. Nelly, III $ 123,181 $ 116,910 9.10% Mortgage Loan
President of Provident 104,375 104,375 Prime Loan to Exercise Stock Options
- ----------------------------------------------------------------------------------------------------------------------------------
Jerald L. Pullins $ 250,000 $ 250,000 Prime Loan for Personal Use/
Executive Vice President Secured by Stock
European Operations 66,174 66,174 9.20% Mortgage Loan
- ----------------------------------------------------------------------------------------------------------------------------------
Samuel W. Rizzo $ 99,560 $ 95,600 6.95% Mortgage Loan
Executive Vice President
- ----------------------------------------------------------------------------------------------------------------------------------
Richard T. Sells $ 262,128 $ 250,807 7.80% Mortgage Loan
Vice President 130,000 130,000 Prime Loan for Personal Use/
Prearranged Sales Secured by Stock
- ----------------------------------------------------------------------------------------------------------------------------------
Jack L. Stoner $ 239,104 $ 228,641 7.20% Mortgage Loan
Senior Vice President
Administration
- ----------------------------------------------------------------------------------------------------------------------------------
pay HMI any sales proceeds in excess of amounts necessary to discharge the
bonds, and HMI agreed to indemnify the Company if the sales proceeds were
insufficient to discharge the bonds. The property has not been sold but has
instead been used in the health care operations of HMI and its successors, who
have assumed HMI's obligations to the Company relating to the property,
although HMI remains liable. During 1993,1994, HMI's successors paid all installments of principal and interest due on the
industrial revenue bonds, consisting of principal of
$500,000$100,000 and interest of $97,333.$34,916 on the bonds. At December 31, 1993,1994, the
outstanding principal balance due onof the bonds was $700,000.
The Company leased office facilities$600,000 and is due to be paid
in Springfield, Illinois pursuant
to a lease that expired in 1993. The lessor was a company owned by HAH. During
1993, the Company paid the lessor $235,060 pursuant to the lease.six monthly principal installments of $100,000 plus accrued interest.
As a result of its acquisition of AMEDCO, the Company is liable for the
payment of a promissory note to Huntcoa company controlled by Mr. Hunter dated
December 16, 1985, which had a principal balance of $607,377$321,621 as of December 31,
1993.1994. Such note bears interest at an annual rate of 12%. The principal and
interest on such note are payable in quarterly installments. During 1993,1994, the
Company paid $253,891$285,756 in principal and $92,208$60,343 in interest on such note.
In 1993,The Company has entered transactions with various subsidiaries of J. P.
Morgan & Co. Incorporated ("Morgan"), which holds more than 5% of the
outstanding shares of Common Stock of the Company, received $312,500 in connection with services rendered to the Company
in the underwriting of a public offering of debt by the Company. In February
1993, the Company and a Morgan subsidiary entered a swap agreement with respect
to an amount of $150,000,000, under which the Morgan subsidiary was obligated to
pay the Company a fixed rate of 5.5425% for four and one-half years and the
Company was obligated to pay the Morgan subsidiary a variable rate (initially
3.4175%) that reprices to a floating LIBOR rate every six months. Effective in
April 1993, the Morgan subsidiary paid a $2,900,000 fee to the Company and the
swap transaction was terminated. In connection with anthe
Company's acquisition of an Australian company in August 1993, the Company paid a $750,000 advisory fee to a
Morgan subsidiary. In August 1993, the Company and
a Morgan subsidiary entered a
seven year and four month swap transaction under which the Morgan
subsidiary paid $110,000,000 Australian Dollars ("AUD") in August 1993 to the
Company and became obligated to pay the Company (i) $73,590,000 US Dollars
("USD") in December 2000 and (ii) a variable rate of interest on $73,590,000
USD that reprices to a floating LIBOR rate every six months. In the
transaction, the Company paid $73,590,000 USD in August 1993 to the Morgan
subsidiary and became obligated to pay
27
30
the subsidiary (i) $110,000,000 AUD in December 2000 and (ii) a fixed rate of
7.235% on $66,000,000 AUD and a variable rate of interest on $44,000,000 AUD
that reprices every six months. This transaction expires December 29, 2000.
During 1994, the Company paid $7,213,161 AUD to the Morgan subsidiary and
received $3,209,231 USD from the Morgan subsidiary under this transaction.
In November 1993, the Company and a Morgan subsidiary entered an agreement providingagreed to a swap transaction
which became effective February 1994 with respect to a notional amount of
$150,000,000. In May 1994, the Company paid $4,693,000 to the Morgan subsidiary
an
optionin exchange for the reduction of the notional amount to put into effect a swap$75,000,000. Under the
agreement, with respect to an amount of
$150,000,000, under which the Morgan subsidiary would beis obligated to pay the Company a fixed rate
of 5.36% on the notional amount for five years and the Company would beis obligated to
pay the Morgan subsidiary a variable rate that would repricereprices to a floating LIBOR
rate every six months. If the option to effect the swap had not been
exercised,the Morgan subsidiary would have been obligated to pay $1,160,000 to
the Company. On December 31, 1993, the swap became effective. The Morgan
subsidiary then paid $714,000 toThis transaction expires March 1, 1999. In 1994, the
Company and the Company provided an optionpaid $1,272,656 to the Morgan subsidiary and received $2,010,000 from
the subsidiary under this agreement.
In connection with an acquisition of a United Kingdom company in 1994, the
Company paid a $1,000,000 advisory fee to cancela Morgan subsidiary. With regard to
the financing of the acquisition, a Morgan subsidiary in February or AugustSeptember 1994 entered
an agreement to loan to a subsidiary of the Company up to pound sterling
185,000,000 GBP. The largest loan balance outstanding in 1994 was pound
sterling 184,000,000 GBP and pound sterling 165,000,000 GBP was outstanding at
December 31, 1994. The swaploan was not
canceledguaranteed by the Company, bore interest
calculated at a rate equal to United Kingdom pound sterling LIBOR plus 20 basis
points and was scheduled to mature on August 30, 1995. In February 1995, the
Company paid off the loan with proceeds obtained from the December 1994 public
offerings and the January 1995 private offering discussed below.
In the Company's public offering of debt and equity securities commenced in
FebruaryDecember 1994 and remainscompleted in effect atJanuary 1995, Morgan subsidiaries, among others,
were underwriters. The Morgan subsidiaries received $6,291,546 in discounts or
fees for services provided in the date hereof.
25underwriting of the public offering.
In December 1994, the Company and a Morgan subsidiary entered a swap
transaction under which the Morgan subsidiary paid pound sterling 129,019,336
British Pounds ("GBP") to the Company in January 1995 and became obligated to
pay the Company (i) $200,000,000 USD in December 2004 and (ii) a fixed rate of
8.488% on $200,000,000 USD. In the transaction, the Company paid $201,432,212
to the Morgan subsidiary in January 1995 and became obligated to pay the
subsidiary (i) pound sterling 128,139,416 GBP in December 2004 and (ii) a
variable rate of interest on pound sterling 128,139,416 GBP that reprices to a
floating LIBOR rate every six months. This transaction expires
December 15, 2004.
Additionally in December 1994, the Company and a Morgan subsidiary entered a
swap transaction under which the Morgan subsidiary paid pound sterling
10,769,509 GBP to the Company in January 1995 and became obligated to pay the
Company (i) $72,500,000 USD in December 2004 and (ii) a fixed rate of 7.973% on
$72,500,000 USD. In the transaction, the Company paid $17,467,577 USD to the
Morgan subsidiary in January 1995 and became obligated to pay the subsidiary
(i) pound sterling 46,450,538 GBP in December 2004 and (ii) a variable rate of
interest on pound sterling 46,450,538 GBP that reprices to a floating LIBOR
rate every six months. This transaction expires December 15, 2004.
In January 1995, the Company completed a private offering of $199,011,000 of
8.72% fixed rate, seven year amortizing notes issued by a Company subsidiary
and guaranteed by the Company. A Morgan subsidiary, acting as underwriter,
received from the Company a combined management and underwriting commission and
an arrangement fee totaling $3,500,000. In connection with the offering, the
Company and a Morgan subsidiary entered a swap transaction under which the
Morgan subsidiary paid pound sterling 127,712,273 GBP to the Company in January
1995 and became obligated to pay the Company $19,290,647 every six months. In
the transaction, the Company paid $199,010,865 USD to the Morgan subsidiary in
January 1995 and became obligated to pay the subsidiary (i) pound sterling
10,202,500 GBP every six months, (ii) scheduled amounts every six months, which
amounts vary from pound sterling 1,319,735 GBP due July 27, 1995 to pound
sterling 2,433,361 GBP due January 2002, and (iii) a variable rate of interest
that reprices to a floating LIBOR rate every six months, plus a spread of
0.685%, on scheduled notional amounts, which notional amounts decrease from
pound sterling 25,542,455 GBP in January 1995 to pound sterling 2,433,361 in
July 2001. This transaction expires January 27, 2002.
With respect to potential international transactions, the Company retained
a Morgan subsidiary in May 1994 to evaluate certain opportunities in Mexico
and paid fees of $105,000 to the Morgan subsidiary in 1994. The Company
retained a Morgan subsidiary in August 1994 to assist in the evaluation of a
French company and paid fees of $225,000 to the Morgan subsidiary in 1994. In
1995, the Company retained a Morgan subsidiary, for fees of $50,000, to
evaluate certain opportunities in Canada.
28
2731
VOTING SECURITIES AND PRINCIPAL HOLDERS
PRINCIPAL SHAREHOLDERSPrincipal Shareholders
The table below sets forth information as of March 25, 1994, with respect to any person who is
known to the Company as of March 24, 1995 to be the beneficial owner of more
than five percent of the Company's Common Stock.
AMOUNT PERCENT
NAME AND ADDRESS BENEFICIALLY OF
OF BENEFICIAL OWNER OWNED CLASS
------------------- ------------ -------
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109 5,399,229(1) 6.3%
J. P. Morgan & Co. Incorporated
60 Wall Street
New York, New York 10015 6,491,505(2) 7.6%
- ----------------------------------------------------------------------------
Amount Percent
Name and Address Benefically of
of Beneficial Owner Owned Class
- ----------------------------------------------------------------------------
J. P. Morgan Incorporated
60 Wall Street
New York, New York 10015 11,230,058(1) 11.8%
- ----------------------------------------------------------------------------
(1) Derived from a filing of FMR Corp. as of February 11, 1994, which reported
sole voting power for 1,107,254 shares and sole investment power for
5,399,299 shares.
(2) Derived fromBased on a filing of J. P. Morgan & Co. Incorporated as of December 31,
1993,30,
1994, which reported sole voting power for 4,121,2057,208,950 shares, shared voting
power for 5,800no shares, sole investment power for 6,423,80511,225,058 shares and shared
investment power for 61,9005,000 shares.
SECURITY OWNERSHIP OF MANAGEMENTSecurity Ownership of Management
The table to the right sets forth, as of March 25, 1994,24, 1995, the amount of the
Company's Common Stock beneficially owned by each executive officer named in
the Summary Compensation Table, each director and nominee for director, and
all directors and executive officers as a group, based upon information
obtained from such persons. Securities reported as beneficially owned include
those for which the persons listed have voting or investment power, unless
otherwise noted. Such persons have sole voting power and investment power
unless otherwise stated.
AMOUNT PERCENT
BENEFICIALLY OF
NMAE OF INDIVUDUAL OR GROUP OWNED(1) CLASS
--------------------------- ------------ -------
R. L. Waltrip 664,135 (2) *
L. William Heiligbrodt 299,347 (3) *
W. Blair Waltrip 923,542 (4) 1.1%
Samuel W. Rizzo 199,867 (5) *
John W. Morrow, Jr 176,786 (6) *
Anthony L. Coelho 5,850 *
Douglas M. Conway 99,113 *
Jack Finkelstein 265,999 (7) *
A. J. Foyt, Jr 12,600 (8) *
James J. Gavin, Jr 36,226 (9) *
James H. Greer 8,137 *
B. D. Hunter 61,817 (10) *
John W. Mecom, Jr 5,500 *
Clifton H. Morris, Jr 9,517 (11) *
E. H. Thornton, Jr 60,365 *
Edward E. Williams 6,158 *
Executive Officers and Directors 3,217,286 (12) 3.7%
as a Group (25- ----------------------------------------------------------------------------
Amount
Benefically Percent
Name of Individual or Group Owned(1) of Class
- ----------------------------------------------------------------------------
R. L. Waltrip 589,135(2) *
- ----------------------------------------------------------------------------
L. William Heiligbrodt 300,077(3) *
- ----------------------------------------------------------------------------
W. Blair Waltrip 924,042(4) *
- ----------------------------------------------------------------------------
Samuel W. Rizzo 199,867(5) *
- ----------------------------------------------------------------------------
John W. Morrow, Jr. 176,286(6) *
- ----------------------------------------------------------------------------
Anthony L. Coelho 7,625 *
- ----------------------------------------------------------------------------
Douglas M. Conway 91,813(7) *
- ----------------------------------------------------------------------------
Jack Finkelstein 273,145(8) *
- ----------------------------------------------------------------------------
A. J. Foyt, Jr. 15,800(9) *
- ----------------------------------------------------------------------------
James J. Gavin, Jr. 37,726(10) *
- ----------------------------------------------------------------------------
James H. Greer 9,637 *
- ----------------------------------------------------------------------------
B. D. Hunter 63,317(11) *
- ----------------------------------------------------------------------------
John W. Mecom, Jr. 7,000 *
- ----------------------------------------------------------------------------
Clifton H. Morris, Jr. 11,017(12) *
- ----------------------------------------------------------------------------
E. H. Thornton, Jr. 58,865 *
- ----------------------------------------------------------------------------
Edward E. Williams 10,358 *
- ----------------------------------------------------------------------------
Executive Officers and Directors
as a Group (27 persons)
3,210,229(13) 3.3%
- ----------------------------------------------------------------------------
* Less than one percent
- ----------------------------------------------------------------------------
(1) For each of Messrs. Coelho, Conway, Finkelstein, Foyt, Gavin, Greer,
Hunter, Mecom, Morris, Thornton and Williams, the amounts include 1,500 shares
held under the 1990 Stock Plan for Non-Employee Directors, and each such
director has sole voting and shared investment power with respect to such
shares.
(2) Includes 234,192 shares held in two trusts (under one of which trusts Mr.
R. L. Waltrip's wife is a beneficiary) under which Mr. R. L. Waltrip's three
children, as trustees, either share or have sole voting and investment powers.
These shares are also included in the shares owned by Mr. W. Blair Waltrip. See
Footnote (4). Also includes 12,860 shares held by a charitable foundation of
which Mr. R. L. Waltrip is a director. The information herein regarding
ownership of equity securities by the trusts and the foundation is for
informational purposes only and is not to be construed as a statement that Mr.
R. L. Waltrip is a beneficial owner of any such securities, as any beneficial
ownership thereof is expressly disclaimed by Mr. R. L. Waltrip. Also includes
124,39013,235 shares held under the Amended 1987 Stock Plan, for which Mr. R. L.
Waltrip has sole voting and shared investment power, as well as 24,000 shares
which may be acquired upon exercise of stock options exercisable within 60
days. Mr. R. L. Waltrip also holds presently exercisable options to purchase
30,000 shares of common stock (less than one percent) of SCIC.
29
32
(3) Includes 3,375 shares owned by a trust ofand 730 shares held in two trusts for which
Mr. Heiligbrodt is trustee and 915 shares owned by Mr. Heiligbrodt's wife and
daughter, of which shares Mr. Heiligbrodt disclaims beneficial ownership. Also
includes 77,7538,050 shares held under the Amended 1987 Stock Plan, for which Mr.
Heiligbrodt has sole voting and shared investment power, as well as 19,500
shares which may be acquired upon exercise of stock options exercisable within
60 days. Mr. Heiligbrodt also holds presently exercisable options to purchase
23,333 shares of common stock (less than one percent) of SCIC.
(4) Includes 62,84063,340 shares held in a trust for the benefit of Mr. W. Blair
Waltrip, 536,112 shares held in three trusts under which Mr. W. Blair Waltrip,
his brother and his sister are trustees and have either shared or sole voting
and investment power and 12,795 shares held in other family trusts. Of the
shares attributable to the trusts, 234,192 shares are 26
28
also included in the
shares owned by Mr. R. L. Waltrip. See Footnote (2). Mr. W. Blair Waltrip is
the son of Mr. R. L. Waltrip. Also includes 43,9854,644 shares held under the Amended
1987 Stock Plan, for which Mr. W. Blair Waltrip has sole voting and shared
investment power, as well as 19,50010,500 shares which may be acquired upon exercise
of stock options exercisable within 60 days. Mr. W. Blair Waltrip also holds
presently exercisable options to purchase 16,60036,666 shares of common stock (less
than one percent) of SCIC. Mr. W. Blair Waltrip also owns 20,000 shares of
common stock (less than one percent) of SCIC.
(5) Includes 750 shares owned by Mr. Rizzo's wife, and 1,000 shares held by a
trust for his wife.wife and 7,750 shares held by a trust of which Mr. Rizzo is a
trustee. Mr. Rizzo disclaims beneficial ownership of such shares. Also includes
46,5824,102 shares held under the Amended 1987 Stock Plan, for which Mr. Rizzo has
sole voting and shared investment power, as well as 18,000 shares which may be
acquired upon exercise of stock options exercisable within 60 days. Mr. Rizzo
also holds presently exercisable options to purchase 20,000 shares of common
stock (less than one percent) of SCIC.
(6) Includes 35,33210,000 shares held by a charitable foundation of which Mr. Morrow
is a director. Mr. Morrow has shared voting and investment power for such
shares and disclaims beneficial ownership of such shares. Also includes 4,102
shares held under the Amended 1987 Stock Plan, for which Mr. Morrow has sole
voting and shared investment power, as well as 9,000 shares which may be
acquired upon exercise of stock options exercisable within 60 days.
(7) Includes 90,413 shares held by a family trust of which Mr. Conway is a
trustee and as to which he shares voting and investment power.
(8) Includes 251,954 shares held in threefive trusts for the benefit of other
family members and/or himself, 1,005 shares held by a charitable foundation of
which Mr. Finkelstein is President. As trustee, Mr. Finkelstein has sole voting
and investment power with respect to 168,887 shares and shares voting and
investment power with respect to 84,072 shares. Mr. Finkelstein disclaims
beneficial ownership as to 84,072 shares held in such trusts and by the
foundation. (8)Also includes 6,646 shares which may be acquired through conversion
of TECONs, of which shares Mr. Finkelstein disclaims beneficial ownership.
(9) Includes 3,6004,300 shares held by Mr. Foyt as custodian for family members, of
which sharesmembers.
Mr. Foyt has sole voting and investment power for such shares and disclaims
beneficial ownership.
(9)ownership of such shares.
(10) Includes 1,442 shares held by a charitable foundation of which Mr. Gavin
is a director,President, of which shares Mr. Gavin disclaims beneficial ownership. Mr.
Gavin also owns 5,00010,000 shares of common stock (less than one percent) of SCIC.
(10)SCIC
and 10,000 shares of common stock (less than one percent) of ECI.
(11) Includes 6,7428,242 shares held directly by Mr. Hunter, 19,204 shares
indirectly controlled by Mr. Hunter (of which Mr. Hunter disclaims beneficial
ownership) and 35,871 shares held by Mr. Hunter's Individual Retirement
Account.
(11)(12) Includes 2,017 shares owned by Mr. Morris' wife. Mr. Morris disclaims
beneficial ownership of such shares.
(12)(13) Includes 16,500 shares held under the 1990 Stock Plan for Non-Employee
Directors and 414,209102,578 shares held under the Amended 1987 Stock Plan, for all of
which shares the individual has sole voting and shared investment power, as
well as 142,424151,672 shares which may be acquired upon exercise of stock options
exercisable within 60 days. In addition, the Executive Officers and Directors
as a group hold 30,000 shares of common stock of SCIC and options exercisable
within 60 days for 111,665 shares of common stock of SCIC, which together
represent approximately 1.4% of SCIC's outstanding shares. Further, such group
also holds 46,625 shares of common stock (less than one percent) of ECI.
INDEPENDENT ACCOUNTANTS
GENERALGeneral
The Board of Directors of the Company has selected Coopers & Lybrand L.L.P.,
Certified Public Accountants ("Coopers"), to serve as the independent
accountants for the Company for the fiscal year ending December 31, 1994.1995. A
representative of Coopers is expected to be present at the Annual Meeting of
Shareholders, will have the opportunity to make a statement if he or she
desires to do so and will be available to respond to appropriate questions at
such meeting.
CHANGE OF ACCOUNTANTSChange of Accountants
Ernst & Young LLP, Certified Public Accountants ("E&Y"), served as the
independent accountants for the Company for the fiscal year ended December 31,
1992. E&Y was dismissed as the independent accounting firm for the Company
effective March 25, 1993, with Coopers having been so engaged as of that date.
The decision to change the independent accounting firm for the Company was
recommended by management and by the Audit Committee of the Board of Directors
of the Company and was approved by the Board of Directors.
The report of E&Y dated February 8, 1993 on the consolidated financial
statements of the Company as of December 31, 1992 and 1991 and for the three
years in the period ended December 31, 1992 contained no adverse opinion or a
disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope or accounting principle. Similarly, the report of Coopers dated
February 8, 1994March 10, 1995 on the consolidated financial statements of the Company as of
December 31, 1994 and 1993 and for the yearyears then ended contained no adverse
opinion or a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principle.
FromAs previously reported by the Company in, among other places, its Form 8-K
dated March 31, 1993, from time to time during the several years preceding
January 1, 1993, meetings were held between members of senior management of
the Company and local and national office partners of E&Y
30
33
regarding potential accounting policies for reporting preneed funeral and
cemetery sales. As previously reported by the
Company in, among other places, its Form 8-K dated March 31, 1993, theThe Company and E&Y did not reach agreement on any new method
of accounting for such sales. In the Company's opinion, such meetings did not result in a "disagreement"
between it and E&Y within the meaning of the rules promulgated by the Securities
and Exchange Commission (the "SEC"). Thus, asThe Company has previously reported by the Company
in, among other places, such Form 8-K, while there was a failure to reach
agreement,that, in the
Company's opinion, during the two years ended December 31, 1992 and the first
quarter of 1993, there was no reportable "disagreement" between the Company and
E&Y regarding any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreement, if not
resolved to the satisfaction of E&Y, would have caused E&Y to make reference to
the subject of the disagreement in connection with its report.
27
29
As also previously reported by the Company in, among other places, an
amendment, dated April 6, 1993, to the Company's Form 8-K, dated March 31,
1993, E&Y, however, has stated that it believes that a reportable
"disagreement" occurred between it and the Company. Accordingly, at the request
of E&Y, the Company included the following (references to E&Y and the Company
have been conformed to the usage in this proxy statement) in its proxy
statementstatements dated April 12, 1993 and 1994 for the last1993 and 1994 annual meetingmeetings
of stockholders.
"On several occasions over the years, the Company has proposed that its
accounting policy for preneed funeral services be changed to a method
whereby revenue would be recognized at the date a preneed funeral contract
is signed, accompanied by appropriate provision for the estimated cost of
providing such services. E&Y's consistent position has been that the
Company's proposed accounting policy would not be acceptable under
generally accepted accounting principles.
"At a meeting on April 1, 1992 held to discuss this issue, a reportable
disagreement occurred in that Company management stated that if E&Y would
not support the Company's proposed accounting they would find another
firm that would. This disagreement was communicated to the Company's Audit
Committee at its August 13, 1992 meeting.
"Moreover, on February 19, 1993 (after completion of the 1992 audit),
Company management presented the accounting proposal set forth in a
December 28, 1992 'Invitation to Comment' prepared by Patrick B. Collins,
CPA, and asked E&Y to support this proposed accounting method. That
'Invitation to Comment' advocates recognition of revenue for preneed
funeral services at the time of sale rather than when the services are
performed, and solicits comments from interested parties concerning this
and other matters. On February 26, 1993 and again on March 2, 1993, E&Y
informed Company management that it would be unable to support the
proposal presented in the 'Invitation to Comment.'
"On March 16, 1993, management informed E&Y that the Company was no
longer pursuing the accounting method advocated in the 'Invitation to
Comment' but rather was considering a modified approach. E&Y informed
management that at least one element of the modified approach--amortizationapproach --
amortization of a portion of deferred revenue that would be associated
with the fixed cost of maintaining funeral homes--was,homes -- was, in E&Y's view,
not acceptable under generally accepted accounting principles."
The modified approach referred to above by E&Y is also referred to in the
third paragraph from the end of this section "INDEPENDENT ACCOUNTANTS," except
that at the time of its discussion with Coopers the element E&Y noted as being
objectionable was no longer being considered.
As indicated above, E&Y's position was also disclosed in an amendment
dated April 6, 1993 to a Form 8-K dated March 31, 1993 filed by the Company.
Following such disclosure, the Company filed a second amendment to such
Form 8-K, in which the Company set forth its belief that the references to
"disagreements" bytook issue with certain of E&Y,&Y's statements.
Further, as well as other matters, were factually inaccurate.
Further,previously reported, the Company disputeshas disputed that a reportable
"disagreement" was communicated by E&Y to the Audit Committee on August 13,
1992. In response to the second amendment to such Form 8-K, E&Y responded
(which response was included in a third amendment) that there was nothing in
the second amendment of which E&Y was unaware at the time it stated its
position disclosed in the April 6, 1993 amendment.
The Company is currently discussing with the staff of the SEC is conducting anDivision of
Enforcement ("Staff") of the Securities and Exchange Commission settlement of
the matters arising out of the previously disclosed informal private investigation by
the Staff with respect to the Company's disclosure about the change in
accountants. Such investigation was initially disclosed by the Company in May
1993. The Staff has advised that it intends to recommend to the Commission that
it institute a cease and desist administrative proceeding against the Company
for alleged violations of Section 13(a) of the Exchange Act with respect to the
Company's disclosure in the March 31, 1993 Form 8-K, as amended, relating to
the change in the Company's accountants,accountants. The Company had previously disclosed,
initially in October 1994, that the Staff was considering such recommendation
against the Company. The Staff has advised that, depending upon the outcome of
the settlement discussions, the Staff will finalize its recommendation to the
Commission as to whether Mr. Robert L. Waltrip, Chairman and Chief Executive
Officer, Mr. L. William Heiligbrodt, President and Chief Operating Officer, and
Mr. Samuel W. Rizzo, Executive Vice President, would be named as respondents in
the proceeding. There is no assurance that the settlement discussions between
the Company and the Company's Form 8-K
dated March 31, 1993, as amended in April 1993, reporting such change, as well
asStaff will be satisfactorily concluded. In any event, the
Company's current accounting and reporting of preneed sales. The staff
has advisedCommission will subsequently make the Company that the investigation should not be construed as an
indicationfinal determinations on any action
recommended by the Commission or its staff that any violations of law have
occurred, or as a reflection upon any person, entity or security. The
investigation is continuing.Staff in these matters.
On March 25, 1993, the Company's Board of Directors approved the
recommendation of management and the Audit Committee that Coopers be engaged
as the Company's new independent accountants. During the two fiscal years
ended December 31, 1992 and the interim period of 1993, Coopers was not
consulted by the Company on the application of accounting principles to a
specified transaction, either
31
34
completed or proposed, or the type of audit opinion that might be rendered on
the financial statements of the Company. During the interim period of 1993, as
part of the proposal process, Coopers indicated its general agreement with the
Company's desire to modify its accounting policies for preneed funeral and
cemetery sales so that such policies more accurately reflect the economics of
these sales. In this connection, the Company expressed to Coopers its desire to
improve the financial reporting for preneed funeral sales by including in the
balance sheet, as a long term asset and corresponding deferred revenue, all
preneed funeral contracts whether funded by insurance or trust funds. Revenue
from funeral services would be recognized when the services are performed,
which is consistent with the Company's then and current policy. The Company
also discussed with Coopers deferring funeral trust earnings until the service
is performed. Under the Company's prior policy, these trust earnings were
recognized in current income. Additionally, 28
30
the Company expressed its views
that accounting for preneed cemetery sales using the accounting principles
prescribed for sales of real estate may not be the most appropriate method of
accounting. Coopers orally expressedex-pressed their general agreement with these
concepts but were not asked to and did not express an opinion on any specific
transaction or accounting change, either orally or in writing.
The accounting principles adopted by the Company in 1993 for reporting
preneed funeral and cemetery sales are set forth, among other places, in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993
filed with the SEC.Commission. Coopers has issued a preferability letter with
respect to such principles. A copy of such letter is filed as an Exhibit to the
Company's Form 10-Q for the quarter ended March 31, 1993. As indicated above,
Coopers has issued an unqualified opinion with respect to the Company's
consolidated financial statements as at and for the periodperiods ended December 31,
1993.1993 and 1994.
The Company provided the foregoing to E&Y, and E&Y advised the Company that
it had nothing further to add beyond its statement as previously reported.
OTHER MATTERS
COMPLIANCE WITH SECTIONCompliance with Section 16(a)
OF
THE EXCHANGE ACTof the Exchange Act
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and written representations from reporting persons that no Form
5 was required, the Company believes that (i) L. William Heiligbrodt, President
and Chief Operating Officer,Wesley T. McRae, Managing
Director-Financial Reporting, filed late one Form 4 three days late3 and one Form 5 reporting
six transactions and that a trust of which Mr. HeiligbrodtSamuel W. Rizzo, Executive Vice
President, is a trustee, filed late one Form 3 fifteen days late, (ii)
Glenn G. McMillen, Senior Vice President Australia, filed a Form 4 late with
respect to three minor transactions reportable on three Form 4s, and (iii)
Jerald L. Pullins, Senior Vice President Corporate Development, filed one Form 4
six days late.
PROXY SOLICITATION3.
Proxy Solicitation
In addition to solicitation by mail, further solicitation of proxies may be
made by telephone, telegraph or oral communication following the original
solicitation by directors, officers and regular employees of the Company who
will not be additionally compensated therefor, or by its transfer agent. The
expense of such solicitation will be borne by the Company and will include
reimbursement paid to brokerage firms and other custodians, nominees and
fiduciaries for their expenses in forwarding solicitation material regarding
the meeting to beneficial owners. In addition, the Company has retained
Kissel Blake Inc. to aid in the solicitation of proxies from shareholders
generally in connection with the Annual Meeting of Shareholders. Such
solicitations may be by mail, facsimile, telephone, telegraph or personal
interview. The fee of such firm is not expected to exceed $12,000 plus
reimbursement for reasonable expenses.
OTHER BUSINESSOther Business
The Board of Directors of the Company is not aware of other matters to be
presented for action at the meeting; however, if any such matters are
presented for action, it is the intention of the persons named in the
enclosed form of proxy to vote in accordance with their judgment.
29
31
SUBMISSION OF SHAREHOLDER PROPOSALSSubmission of Shareholder Proposals
Any proposal to be presented by a shareholder at the Company's 19951996 Annual
Meeting of Shareholders scheduled to be held on May 11, 19959, 1996 must be received
by the Company by December 13, 1994,19, 1995, so that it may be considered by the
Company for inclusion in its proxy statement relating to that meeting.
It is important that proxies be returned to avoid unnecessary expense.
Therefore, shareholders are urged, regardless of the number of shares of stock
owned, to date, sign and return the enclosed proxy in the enclosed business
reply envelope.
Service Corporation International
1929 Allen Parkway,
P.O. Box 130548
Houston, Texas 77219-0548
April 12, 1994
{LOGO}17, 1995
[SCI LOGO]
is a registered service mark of Service Corporation International
3032
3235
ANNEX A
SERVICE CORPORATION INTERNATIONAL 1995 STOCK PLAN FOR NON-EMPLOYEE DIRECTORS
1. Purpose.
The purpose of the Service Corporation International 1995 Stock
Plan for Non-Employee Directors (the "Plan") is to provide a means through
which Service Corporation International, a Texas corporation (the "Company")
may attract able persons who are not employees to serve as directors of the
Company and to provide a means whereby those non-employee directors whose
present and potential contributions to the welfare of the Company are
essential, can acquire and maintain stock ownership, thereby strengthening
their concern for the welfare of the Company and their desire to serve as
directors. So that the incentive can be provided each non-employee director,
the Plan provides for granting Restricted Stock Awards.
2. Definitions.
The following definitions shall be applicable throughout the Plan:
(a) "Award" means any Restricted Stock Award.
(b) "Board" means the Board of Directors of Service Corporation
International.
(c) "Change of Control" shall be deemed to have occurred in the event
(i) a change in the ownership of Common Stock occurs where a
corporation, person or group acting in concert as described in Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), holds or acquires beneficial ownership of more than 20%
of outstanding shares of Common Stock within the meaning of Rule 13d-3
promulgated under the Exchange Act and after having been advised that
such ownership level has been reached, the Board does not, within 90
days, adopt a resolution specifically approving the acquisition of that
level of Common Stock by such persons, or (ii) during any consecutive
twelve-month period, a change in one-third of the members of the Board
occurs.
(d) "Code" means the Internal Revenue Code of 1986. Reference
in the Plan to any section of the Code shall be deemed to include any
amendments or successor provisions to such section and any regulations
under such section.
(e) "Committee" means a committee consisting of directors who are not
eligible to participate in the Plan.
(f) "Common Stock" means the common stock of Service Corporation
International.
(g) "Company" means Service Corporation International.
(h) "Forfeiture Restriction" means the prohibition against transfer
of and the obligation to forfeit and surrender shares of Common Stock to
the Company upon the occurrence of certain specified events.
(i) "Forfeiture Restriction Period" means the period of time during which
Forfeiture Restrictions imposed with respect to an Award are in effect.
(j) "Holder" means a non-employee director or a non-employee director
emeritus of the Company who has been granted an Award.
(k) "Personal Representative" means the person or persons who upon the death,
disability or incompetency of a Holder shall have acquired, by will or
by the laws of descent and distribution or by other legal proceedings,
the right to an Award, theretofore granted or made to such Holder.
(l) "Plan" means the Service Corporation International 1995 Stock Plan for
Non-Employee Directors.
3. Effective Date and Duration of the Plan.
The Plan shall become effective upon approval by the shareholders of
Service Corporation International at the annual meeting of shareholders to be
held on May 11, 1995, or any adjournment thereof. No further Awards may be
granted under the Plan after 2000. The Plan shall remain in effect until all
Forfeiture Restrictions imposed upon outstanding Awards have been eliminated
or have resulted in a forfeiture of Common Stock subject to an Award.
4. Administration.
(a) Committee. The Plan shall be administered by the Committee. A
majority of the Committee shall constitute a quorum. The Committee shall
act by majority action at a meeting, except that action permitted to be
taken at a meeting may be taken without a meeting if written consent
thereto is given by all members of the Committee.
(b) Powers. Subject to the provisions of the Plan, the Committee
shall be authorized to interpret the Plan, to establish, amend, and
rescind any rules and regulations relating to the Plan, and to make all
other determinations necessary or advisable for the administration of
the Plan; provided, however, that the Committee shall have no discretion
with respect to the eligibility or selection of directors or directors
emeritus to receive Awards under the Plan, the number of Shares of Stock
subject to any such Awards or the Plan, the timing of such Awards or the
Forfeiture Restrictions and Forfeiture Restriction Periods, and provided
further that the Committee shall not have the authority to take any
action or make any determination that would materially increase the
benefits accruing to participants under the Plan. The determination of
the Committee in the administration of the Plan, as described herein,
shall be final and conclusive and binding upon all persons including,
without limitation, the Company, its shareholders and persons granted
Awards under the Plan. Each Award under this Plan shall be evidenced by
a written agreement in such form as the Committee shall
A 1
36
from time to time approve. The Secretary of the Company shall be
authorized to implement the Plan in accordance with its terms and to
take such actions of ministerial nature as shall be necessary to
effectuate the intent and purposes thereof. The validity, construction,
and effect of the Plan and any rules and regulations relating to the
Plan shall be determined in accordance with the laws of the State of
Texas.
5. Restricted Stock Awards;
Shares Subject to the Plan
(a) Stock Grant Limit. Awards will be granted to non-employee
directors and directors emeritus eligible for participation in the Plan
in accordance with the provisions of Section 6. Subject to Section 8,
the aggregate number of shares of Common Stock that may be issued under
the Plan shall not exceed 120,000 shares. Shares shall be deemed to have
been issued under the Plan only to the extent actually issued and
delivered pursuant to an Award. To the extent that an Award is forfeited
or the rights of its Holder terminate, any shares of Common Stock
subject to such Award shall again be available for the grant of an
Award.
(b) Stock Offered. The stock to be granted constituting an Award may
be authorized but unissued Common Stock or Common Stock previously
issued and outstanding and reacquired by the Company.
6. Eligibility
Awards may be granted only to directors or directors emeritus of the
Company who, at the time of grant, are not employees of the Company or of
any subsidiary of the Company. Awards may not be granted to any person who is
an employee of the Company or of any subsidiary of the Company.
7. Restricted Stock Awards
(a) Awards. Awards for 1,500 shares of Common Stock (as adjusted
pursuant to Section 8) shall be granted automatically to each eligible
director and director emeritus on the second Thursday in May of each
year, beginning on May 11, 1995. Each Award shall have a Forfeiture
Restriction Period which shall expire as of the second Thursday in May
of the year following the year of the grant. The Forfeiture Restriction
Period applicable to a particular Award shall not be changed except as
permitted by Paragraph 8, unless death, total and permanent disability
or a Change of Control occurs. If a Change of Control occurs, the
Forfeiture Restriction Period for all Awards shall expire and the
Forfeiture Restrictions imposed with respect to all Awards shall lapse
immediately upon occurrence of the Change of Control, except as provided
in Paragraph 10(d). In the event of termination of service by reason of
death or the total and permanent disability of a director, the
Forfeiture Restriction Period for such director's Awards shall expire
and the Forfeiture Restrictions imposed with respect to such director's
Awards shall lapse immediately.
(b) Other Terms and Conditions. Common Stock awarded pursuant to an
Award shall be represented by a stock certificate registered in the name
of the Holder of such Award. The Holder shall have the right to receive
dividends during the Forfeiture Restriction Period, to vote Common Stock
subject thereto and to enjoy all other shareholder rights, except that
(i) the Holder shall not be entitled to delivery of the stock
certificate until the Forfeiture Restriction Period shall have expired,
(ii) the Company shall retain custody of the stock during the Forfeiture
Restriction Period, (iii) the Holder may not sell, transfer, pledge,
exchange, hypothecate or otherwise dispose of the stock during the
Forfeiture Restriction Period, and (iv) a breach of any of the terms and
conditions of the Award shall cause a forfeiture of the Award in
accordance with the Forfeiture Restrictions.
(c) Payment for Restricted Stock. A Holder shall not be required to
make any payment for Common Stock received pursuant to an Award, except
to the extent otherwise required by law.
8. Change in Capital Structure
In the event of changes in the outstanding Common Stock by reason of
stock dividends, stock splits, recapitalizations, reorganizations or other
relevant changes in capitalization occurring after the date hereof, the
aggregate number of shares remaining available under the Plan and the size of
each future Award shall be appropriately adjusted as hereinafter described. If
after the date of adoption of this Plan the Company shall effect a
subdivision or consolidation of shares of Common Stock or the payment of a
stock dividend on the Common Stock, the number of shares of Common Stock
remaining available for the grant of future Awards and the number of shares
constituting a future Award (i) in the event of an increase in the number of
outstanding shares shall be proportionately increased and (ii) in the event
of a reduction in the number of outstanding shares shall be proportionately
reduced. If the Company recapitalizes or otherwise changes its capital
structure, thereafter future Awards, in lieu of the number of shares of
Common Stock then constituting an Award, shall be the number and class of
shares of stock and securities to which a stockholder would have been
entitled pursuant to the terms of such recapitalization if, immediately prior
to such recapitalization, such stockholder had been the holder of record of
the number of shares of Common Stock then constituting an Award and the
number of shares remaining available for grant shall be the number and class
of shares of stock to which a stockholder of the Company would have been
entitled if, immediately prior to such recapitalization, such stockholder had
been the holder of record of the number of shares of Common Stock then
available for future Awards.
A 2
37
9. Amendment of the Plan
The Board may suspend or terminate the Plan or revise or amend it in any
respect at any time, provided that the provisions of Section 7 may not be
amended more often than every six months, other than to comport with changes
in the Code, the Employee Retirement Income Security Act or the rules
thereunder. In addition, any amendment to the Plan that would (i) materially
increase the benefits to participants under the Plan, (ii) materially
increase the number of shares of Common Stock that may be issued under the
Plan, or (iii) materially modify the requirements as to eligibility for
participation in the Plan must be approved by the affirmative votes of
holders of a majority of the securities of the Company present, or
represented, and entitled to vote at a meeting duly called and held in
accordance with the Texas Business Corporation Act.
10. Effect of the Plan
(a) No Right to an Award. Neither the adoption of the Plan or any
action of the Board or of the Committee shall be deemed to give a
director a right to an Award or any other rights hereunder except as may
be evidenced by an Award duly executed on behalf of the Company, and
then only to the extent and on the terms and conditions expressly set
forth herein. The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any other
segregation of funds or assets to assure the payment of any award.
(b) No Employment Rights Conferred. Nothing contained in the Plan
shall (i) confer upon any director any right with respect to
continuation of service as a director with the Company or (ii) interfere
in any way with the right of the Company to terminate his or her service
at any time.
(c) Other Laws; Withholding. The Company shall not be obligated to
issue any shares of Common Stock until there has been compliance with
such laws and regulations as the Company may deem applicable. No
fractional shares of Common Stock shall be delivered. The Company shall
have the right to deduct in connection with all Awards any taxes
required by law to be withheld and to require any payments required to
enable it to satisfy its withholding obligations.
A 3
38
ANNEX B
SERVICE CORPORATION INTERNATIONAL 1995
INCENTIVE EQUITY PLAN
TABLE OF CONTENTS
39
ARTICLE I
Plan
1.1 Purpose. The Service Corporation International 1995 Incentive Equity
Plan is intended to provide a means whereby certain Employees of
Service Corporation International, a Texas corporation, and its
Affiliates may develop a sense of proprietorship and personal involvement
in the development and financial success of the Company, and to encourage
them to remain with and devote their best efforts to the business of
the Company, thereby advancing the interests of the Company and its
stockholders. Accordingly, the Company may grant to certain key
Employees the option to purchase shares of the $1.00 par value common
stock of the Company under the terms of this Plan. Options granted
under the Plan may be either incentive stock options within the meaning
of section 422 of the Internal Revenue Code of 1986, as amended, or
nonqualified stock options which do not constitute incentive stock
options under the Code. The Company may also grant bonuses to certain
key Employees of the Company based on achievement of pre-established
performance goals, which bonuses may be paid in shares of Stock or in
cash, at the discretion of the Committee subject to the terms of the
Plan.
1.2 Effective Date of Plan. The Plan is effective January 1, 1995, if
within 12 months of November 9, 1994, it shall have been approved by at
least a majority vote of stockholders voting in person or by proxy at a
duly held stockholders' meeting, or if the provisions of the corporate
charter, by-laws or applicable state law prescribes a greater degree of
stockholder approval for this action, the approval by the holders of
that percentage, at a duly held meeting of stockholders. No Incentive
or Nonqualified Option or Bonus Award shall be granted pursuant to the
Plan after November 8, 2004.
ARTICLE II
Definitions
The words and phrases defined in this Article shall have the meaning set
out in these definitions throughout this Plan, unless the context in which
any such word or phrase appears reasonably requires a broader, narrower, or
different meaning.
2.1 "Affiliate" means any parent corporation and any subsidiary corporation.
The term "parent corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company
if, at the time of the action or transaction, each of the corporations
other than the Company owns stock possessing more than 50% of the total
combined voting power of all classes of stock in one of the other
corporations in the chain. The term "subsidiary corporation" means any
corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if, at the time of the action
or transaction, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing more than 50%
of the total combined voting power of all classes of stock in one of
the other corporations in the chain.
2.2 "Board of Directors" means the board of directors of the Company.
2.3 "Bonus Award" means an Award made to an Employee under Article VI which
is intended to qualify as performance based compensation as defined in
Section 162(m) of the Code and regulations issued thereunder.
2.4 "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: (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
consolidations, 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 th
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 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, 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
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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 2, 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 consolidations, (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 for 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 for 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.
2.5 "Code" means the Internal Revenue Code of 1986, as amended.
2.6 "Committee" means the Compensation Committee of the Board of Directors
or such other committee designated by the Board of Directors. The
Committee shall be comprised solely of at least two members who are
both Disinterested Persons and Outside Directors.
2.7 "Company" means Service Corporation International.
2.8 "Disinterested Person" means a "disinterested person" as that term is
defined in Rule 16b-3 under the Securities Exchange Act of 1934.
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2.9 "Employee" means a key employee employed by the Company or any Affiliate
to whom an Option or a Bonus Award is granted.
2.10 "Fair Market Value" of the Stock as of any date means (a) the average
of the high and low sale prices of the Stock on that date on the principal
securities exchange on which the Stock is listed; or (b) if the Stock is
not listed on a securities exchange, the average of the high and low sale
prices of the Stock on that date as reported on the NASDAQ National Market
System; or (c) if the Stock is not listed on the NASDAQ National Market
System, the average of the high and low bid quotations for the Stock on
that date as reported by the National Quotation Bureau Incorporated; or
(d) if none of the foregoing is applicable, the average between the
closing bid and ask prices per share of stock on the last preceding date
on which those prices were reported or that amount as determined by
the Committee.
2.11 "Incentive Option" means an option granted under this Plan
which is designated as an "Incentive Option" and satisfies the
requirements of Section 422 of the Code.
2.12 "Nonqualified Option" means an option other than an Incentive Option.
2.13 "Option" means both an Incentive Option and a Nonqualified Option
granted under this Plan to purchase shares of Stock.
2.14 "Option Agreement" means the written agreement which sets out the terms
of an Option.
2.15 "Outside Director" means a member of the Board of Directors
serving on the Committee who satisfies Section 162(m) of the Code.
2.16 "Plan" means the Service Corporation International 1995
Incentive Equity Plan, as set out in this document and as it may be
amended from time to time.
2.17 "Stock" means the common stock of the Company, $1.00 par value
or, in the event that the outstanding shares of common stock are later
changed into or exchanged for a different class of stock or securities
of the Company or another corporation, that other stock or security.
2.18 "10% Stockholder" means an individual who, at the time the
Option is granted, owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of any
Affiliate. An individual shall be considered as owning the stock owned,
directly or indirectly, by or for his brothers and sisters (whether by
the whole or half blood), spouse, ancestors, and lineal descendants;
and stock owned, directly or indirectly, by or for a corporation,
partnership, estate, or trust, shall be considered as being owned
proportionately by or for its stockholders, partners, or beneficiaries.
ARTICLE III
Eligibility
The individuals who shall be eligible to receive Incentive Options,
Nonqualified Options, and Bonus Awards shall be those key Employees as the
Committee shall determine from time to time. However, no member of the
Committee shall be eligible to receive any Option, or Bonus Award or to
receive stock, stock options, or stock appreciation rights under any other
plan of the Company or any of its Affiliates, if receipt of it would cause
the individual not to be a Disinterested Person or Outside Director. The
Board of Directors may designate one or more individuals who shall not be
eligible to receive any Option or Bonus Award under this Plan or under other
similar plans of the Company.
ARTICLE IV
General Provisions Relating to Options
and Bonus Awards
4.1 Authority to Grant Options and Bonus Awards. The Committee may grant to
those key Employees as it shall from time to time determine, Options or
Bonus Awards under the terms and conditions of this Plan. Subject only
to any applicable limitations set out in this Plan, the number of
shares of Stock to be covered by any Option or Bonus Award to be
granted to an Employee shall be as determined by the Committee.
4.2 Dedicated Shares. The total number of shares of Stock with respect to
which Options and Bonus Awards may be granted under the Plan shall be
2,000,000 shares. The shares may be treasury shares or authorized but
unissued shares. The maximum number of shares subject to Options which
may be issued to any Employee under the Plan during each year is 40,000
shares. The maximum number of shares which may be granted during the
life of the Plan in payment of Bonus Awards is 100,000 shares. The
number of shares stated in this Section 4.2 shall be subject to
adjustment in accordance with the provisions of Section 4.5.
In the event that any outstanding Option shall expire or terminate
for any reason or any Option is surrendered, the shares of Stock
allocable to the unexercised portion of that Option may again be
subject to an Option or Bonus Award under the Plan.
4.3 Non-Transferability. Incentive Options shall not be transferable by the
Employee otherwise than by will or under the laws of descent and
distribution, and shall be exercisable, during the Employee's lifetime,
only by him. Except as otherwise determined by the Committee in
compliance with Rule 16b-3 under the Securities Exchange Act of 1934, as
amended, Nonqualified Options shall not be transferable by the Employee
otherwise than by will or under the laws of descent and distribution, and
shall be exercisable, during the Employee's lifetime, only by him.
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4.4 Requirements of Law. The Company shall not be required to sell or
issue any Stock under any Option or Bonus Award if issuing that Stock
would constitute or result in a violation by the Employee or the Company
of any provision of any law, statute, or regulation of any governmental
authority. Specifically, in connection with any applicable statute or
regulation relating to the registration of securities, upon exercise of
any Option or pursuant to any Bonus Award, the Company shall not be
required to issue any Stock unless the Committee has received evidence
satisfactory to it to the effect that the holder of that Option or Bonus
Award will not transfer the Stock except in accordance with applicable
law, including receipt of an opinion of counsel satisfactory to the
Company to the effect that any proposed transfer complies with applicable
law. The determination by the Committee on this matter shall be final,
binding and conclusive. The Company may, but shall in no event be
obligated to, register any Stock covered by this Plan pursuant to
applicable securities laws of any country or any political subdivision.
In the event the Stock issuable on exercise of an Option or pursuant to a
Bonus Award is not registered, the Company may imprint on the certificate
evidencing the Stock any legend that counsel for the Company considers
necessary or advisable to comply with applicable law. The Company shall
not be obligated to take any other affirmative action in order to cause
the exercise of an Option or the issuance of shares under an Option or
Bonus Award, to comply with any law or regulation of any governmental
authority.
4.5 Changes in the Company's Capital Structure.
(a) The existence of the Plan and the Options or Bonus Awards
granted hereunder shall not affect or authorize any adjustment,
recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the
Company, any issue of bonds, debentures, preferred or prior
preference stocks ahead of or affecting Stock or the rights thereof,
the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other
corporate act or proceeding.
(b) The shares with respect to which Options may be granted are
shares of Stock as presently constituted, but if, and whenever,
prior to the expiration of an Option theretofore granted, the
Company shall effect a subdivision or consolidation of shares of
stock or the payment of a stock dividend on Stock without receipt of
consideration by the Company, the number of shares of Stock with
respect to which such Option may thereafter be exercised (i) in the
event of an increase in the number of outstanding shares shall be
proportionately increased, and the purchase price per share shall be
proportionately reduced, and (ii) in the event of reduction in the
number of outstanding shares shall be proportionately reduced, and
the purchase price per share shall be proportionately increased.
(c) If the Company recapitalizes or otherwise changes its capital
structure, thereafter upon any exercise of an Option theretofore
granted the optionee shall be entitled to purchase under such
Option, in lieu of the number of shares of Stock as to which such
Option shall then be exercisable, the number and class of shares of
stock and securities to which the optionee would have been entitled
pursuant to the terms of such recapitalization if, immediately prior
to such recapitalization, the optionee had been the holder of record
of the number of shares of Stock as to which such Option is then
exercisable. In the event of a change in the Company's capital
structure described in this Section 4.5, the number of shares of
Stock available for payment of Bonus Awards shall be adjusted
accordingly.
4.6 Election Under Section 83(b) of the Code. No Employee shall exercise
the election permitted under Section 83(b) of the Code without written
approval of the Committee. Any Employee doing so shall forfeit all
Options issued to him under this Plan.
ARTICLE V
Options
5.1 Type of Option. The Committee shall specify whether a given option
shall constitute an Incentive Option or a Nonqualified Option.
5.2 Written Agreement. Each Option shall be embodied in a written Option
Agreement which shall be subject to the terms and conditions of this
Plan and shall be signed by the Employee and by the Company. The Option
Agreement may contain any other provisions that the Committee in its
discretion shall deem advisable which are not inconsistent with the
terms of this Plan.
5.3 Option Price. The price at which Stock may be purchased under an
Incentive Option shall not be less than the greater of: (a) 100% of
the Fair Market Value of the shares of Stock on the date the Option is
granted or (b) the aggregate par value of the shares of Stock on the
date the Option is granted. The Committee in its discretion may provide
that the price at which shares of Stock may be purchased shall be more
than 100% of Fair Market Value. In the case of any 10% Stockholder,
the price at which shares of Stock may be purchased under an Incentive
Option shall not be less than 110% of the Fair Market Value of the
Stock on the date the Incentive Option is granted.
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The price at which shares of Stock may be purchased under a
Nonqualified Option shall not be less than the greater of: (a) 100% of
the Fair Market Value of the shares of Stock on the date the Option is
granted or (b) the aggregate par value of the shares of Stock on the date
the Option is granted. The Committee in its discretion may provide that
the price at which shares of Stock may be purchased shall be more than
100% of Fair Market Value.
5.4 Duration of Options. No Option shall be exercisable after the
expiration of 10 years from the date the Option is granted. In the case
of a 10% Stockholder, no Incentive Option shall be exercisable after
the expiration of five years from the date the Incentive Option is
granted.
5.5 Amount Exercisable. Each Option may be exercised from time to time, in
whole or in part, in the manner and subject to the conditions the
Committee, in its discretion, may provide in the Option Agreement, as
long as the Option is valid and outstanding, provided that no Option
may be exercisable within six (6) months of the date of grant. To the
extent that the aggregate Fair Market Value (determined as of the time
an Incentive Option is granted) of the Stock with respect to which
Incentive Options first become exercisable by the Optionee during any
calendar year (under this Plan and any other incentive stock option
plan(s) of the Company or any Affiliate) exceeds $100,000, the
Incentive Options shall be treated as Nonqualified Options. In making
this determination, Incentive Options shall be taken into account in
the order in which they were granted. The Committee may, in its
discretion, accelerate the time at which an Option may be exercised.
5.6 Exercise of Options. 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, and/or (c) 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.
Whenever an Option is exercised by exchanging shares of Stock owned by
the Employee, the Employee shall deliver to the Company certificates
registered in the name of the Employee representing a number of shares of
Stock legally and beneficially owned by the Employee, free of all liens,
claims, and encumbrances of every kind, accompanied by stock powers duly
endorsed in blank by the record holder of the shares represented by the
certificates, (with signature guaranteed by the Company or a commercial
bank or trust company or by a brokerage firm having a membership on a
registered national stock exchange). The delivery of certificates upon
the exercise of Options is subject to the condition that the person
exercising the Option provide the Company with the information the
Company might reasonably requestpertaining to exercise, sale or other
disposition.
Notwithstanding any other provisions of this plan, all outstanding
Options shall become immediately exercisable to the full extent of the
grant upon a Change of Control. From and after a Change of Control,
Options, other than Incentive Stock Options, shall remain exercisable
for the lesser of (x) the balance of their original term, and (y) six
months and one day after termination of an Employee's employment, one
year in the case of termination of employment due to death, total and
permanent disability or retirement.
5.7 Exercise on Termination of Employment. Unless it is expressly provided
otherwise in the Option Agreement:
(a) If an Employee's employment with the Company terminates for any
reason other than disability or death, the Option may be exercised
by the Employee (or his estate or the person who acquires the
Option by bequest or inheritance or by reason of the death of the
Employee) at any time during the period of three months following
such termination, but only as to the number of shares the Employee
was entitled to purchase under the Option as of the date his
employment so terminates.
(b) If an Employee's employment with the Company terminates by
reason of disability (within the meaning of Section 22(e)(3) of the
Code), the Option may be exercised by the Employee (or his estate
or the person who acquires the Option by bequest or inheritance or
by reason of the death of the Employee) at any time during the
period of one year following such termination, but only as to the
number of shares the Employee was entitled to purchase under the
Option as of the date his employment so terminates.
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(c) If an Employee dies while in the employ of the Company, his
estate, or the person who acquires the Option by bequest or
inheritance or by reason of the death of the Employee, may exercise
the Option at any time during the period of one year following the
date of the Employee's death, but only as to the number of shares
the Employee was entitled to purchase under the Option as of the
date of his death.
In determining the employment relationship between the Company and
the Employee, employment by any Affiliate shall be considered
employment by the Company, as shall employment by a corporation
issuing or assuming a stock option in a transaction to which Section
424(a) of the Code applies, or by a parent corporation or subsidiary
corporation of the corporation issuing or assuming a stock option
(and for this purpose, the phrase "corporation issuing or assuming a
stock option" shall be substituted for the word "Company" in the
definitions of parent corporation and subsidiary corporation in
Section 2.1, and the parent-subsidiary relationship shall be
determined at the time of the corporate action described in
Section 424(a) of the Code).
5.8 Substitution Options. Options may be granted under this Plan from time
to time in substitution for stock options held by employees of other
corporations who are about to become employees of or affiliated with
the Company or any Affiliate as the result of a merger or consolidation
of the employing corporation with the Company or any Affiliate, or the
acquisition by the Company or any Affiliate of the assets of the
employing corporation, or the acquisition by the Company or any
Affiliate of stock of the employing corporation as the result of which
it becomes an Affiliate of the Company. The terms and conditions of the
substitute Options granted may vary from the terms and conditions set
out in this Plan to the extent the Committee, at the time of grant, may
deem appropriate to conform, in whole or in part, to the
provisions of the stock options in substitution for which they are
granted.
5.9 No Rights as Stockholder. No Employee shall have any rights as a
stockholder with respect to Stock covered by his Option until the date
a stock certificate is issued for the Stock.
ARTICLE VI
Bonus Awards
6.1 Bonus Awards and Eligibility. The Committee, in its sole discretion,
may designate certain key Employees of the Company who then become
eligible to earn a Bonus Award if certain pre-established performance
goals are met. In determining which employees shall be eligible for a
Bonus Award, the Committee shall, in its discretion, consider the
nature of the employee's duties, past and potential contributions to
the success of the Company and its Affiliates, and such other factors
as the Committee deems relevant in connection with accomplishing the
purposes of the Plan. A director of the Company, who is not also an
employee of the Company, shall not be eligible to receive a Bonus
Award. An Employee who has received a Bonus Award or Awards in one year
may receive an additional Award or Awards in subsequent years.
6.2 Establishment of Bonus Award. The Committee shall determine the terms
of the Bonus Award, if any, to be made to an individual employee for
each semi-annual or annual period (the "Measurement Period"). The
performance goals shall be pre-established in accordance with Section
162(m) of the Code and regulations issued thereunder. The Committee shall
have the discretion to make downward adjustments to Bonus Awards otherwise
payable if the performance goal is attained.
6.3 Criteria for Performance Goals. Performance Goals determined by the
Committee may be based on increases in net profits, operating income,
Stock price, earnings per share, sales and/or return on equity.
6.4 Committee Certification. The Committee must certify in writing that a
performance goal has been met prior to payment to any Employee of the
Bonus Award by issuance of a certificate for Stock or payment in cash.
If the Committee certifies the entitlement of an Employee to the
performance based Bonus Award, the payment shall be made to the Employee
as soon as administratively practicable, and subject to other applicable
provisions of the Plan, including but not limited to, all legal
requirements and tax withholding.
6.5 Payment and Limitations. Bonus Awards shall be paid on or before
the 90th day following both (a) the end of the Measurement Period, and
(b) certification by the Committee that the performance goals and any
other material terms of the Bonus Award and this Plan have been
satisfied, or as soon thereafter as is reasonably practicable. The Bonus
Award may be paid in Stock, cash, or a combination of Stock and cash, in
the sole discretion of the Committee. If paid in whole or in part in
Stock, the Stock shall be valued at Fair Market Value as of the date the
Committee directs payment to be made in whole or in part in Stock.
However, no fractional shares of Stock shall be issued, and the balance
due, if any, shall be paid in cash.
The maximum amount which may be paid to any Employee pursuant to a
Bonus Award under this Article VI for a Measurement Period shall not
exceed $3,000,000; provided that the maximum amount of any Bonus Awards
payable to any one Employee in each calendar year shall not exceed
$3,000,000.
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6.6 Termination of Employment During Measurement Period. If an Employee's
employment with the Company and all Affiliates terminates during a
Measurement Period, he shall not be entitled to any payment under this
Article VI for that Measurement Period.
ARTICLE VII
Administration
The Plan shall be administered by the Committee. All questions of
interpretation and application of the Plan, Options or Bonus Awards shall be
subject to the determination of the Committee. A majority of the members of
the Committee shall constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. Any decision or determination
reduced to writing and signed by a majority of the members shall be as
effective as if it had been made by a majority vote at a meeting properly
called and held. This Plan shall be administered in such a manner as to
permit the Options granted under it which are designated to be Incentive
Options to qualify as Incentive Options. In carrying out its authority under
the Plan, the Committee shall have full and final authority and discretion,
including but not limited to the following rights, powers and authorities,
to:
(a) determine the Employees to whom and the time or times at which
Options or Bonus Awards will be made,
(b) determine the number of shares and the purchase price of Stock
covered in each Option or Bonus Award, subject to the terms of the Plan,
(c) determine the terms, provisions and conditions of each Option and
Bonus Award, which need not be identical,
(d) define the effect, if any, on an Option or Bonus Award of the death,
disability, retirement, or termination of employment of the Employee,
(e) proscribe, amend and rescind rules and regulations relating to
administration of the Plan, and
(f) make all other determinations and take all other actions deemed
necessary, appropriate, or advisable for the proper administration of the
Plan.
The actions of the Committee in exercising all of the rights, powers, and
authorities set out in this Article and all other Articles of this Plan, when
performed in good faith and in its sole judgment, shall be final, conclusive
and binding on all parties.
ARTICLE VIII
Amendment or Termination of Plan
The Board of Directors of the Company may amend, terminate or suspend the
Plan at any time, in its sole and absolute discretion; provided, however, that
to the extent required to qualify this Plan under Rule 16b-3 promulgated under
Section 16 of the Securities Exchange Act of 1934, as amended, no amendment
that would (a) materially increase the number of shares of Stock that may be
issued under the Plan, (b) materially modify the requirements as to eligibility
for participation in the Plan, or (c) otherwise materially increase the
benefits accruing to participants under the Plan, shall be made without the
approval of the Company's stockholders; provided further, however, that to the
extent required to maintain the status of any Incentive Option under the Code,
no amendment that would (a) change the aggregate number of shares of Stock
which may be issued under Incentive Options, (b) change the class of employees
eligible to receive Incentive Options, or (c) decrease the Option price for
Incentive Options below the Fair Market Value of the Stock at the time it is
granted, shall be made without the approval of the Company's stockholders.
Subject to the preceding sentence, the Board shall have the power to make any
changes in the Plan and in the regulations and administrative provisions under
it or in any outstanding Incentive Option as in the opinion of counsel for the
Company may be necessary or appropriate from time to time to enable any
Incentive Option granted under this Plan to continue to qualify as an incentive
stock option or such other stock option as may be defined under the Code so as
to receive preferential federal income tax treatment.
ARTICLE IX
Miscellaneous
9.1 No Establishment of a Trust Fund. No property shall be set aside nor
shall a trust fund of any kind be established to secure the rights of
any Employee under this Plan. All Employees shall at all times rely
solely upon the general credit of the Company for the payment of any
benefit which becomes payable under this Plan.
9.2 No Employment Obligation. The granting of any Option or Bonus Award
shall not constitute an employment contract, express or implied, nor
impose upon the Company or any Affiliate any obligation to employ or
continue to employ any Employee. The right of the Company or any
Affiliate to terminate the employment of any person shall not be
diminished or affected by reason of the fact that an Option or
Bonus Award has been granted to him.
9.3 Tax Withholding. The Company or any Affiliate shall be entitled to
deduct from other compensation payable to each Employee any sums
required by federal, state, or local tax law to be withheld with
respect to the grant or exercise of an Option, the cash payment of a
Bonus Award or issuance of Stock in payment of a Bonus Award. In the
alternative, the Company may require the Employee (or other person
exercising the Option or receiving Stock) to pay the sum directly to
the employer corporation. If the Employee (or other person exercising
the Option or receiving the Stock) is required to pay the sum directly,
payment in cash or by check of such sums
B 8
46
for taxes shall be delivered within 10 days after (a) the date of
exercise, or (b) notice of the Committee's decision to pay all or part of
a Bonus Award in Stock, whichever is applicable. The Company shall have
no obligation upon exercise of any Option, or notice of the Committee's
decision to pay all or part of the Bonus Award in Stock, until payment
has been received, unless withholding (or offset against a cash payment)
as of or prior to the date of exercise or issuance of Stock is sufficient
to cover all sums due with respect to that exercise or issuance of
Stock. The Company and its Affiliates shall not be obligated to advise an
Employee of the existence of the tax or the amount which the employer
corporation will be required to withhold.
9.4 Indemnification of the Committee and the Board of Directors. With
respect to administration of the Plan, the Company shall indemnify each
present and future member of the Committee and the Board of Directors
against, and each member of the Committee and the Board of Directors
shall be entitled without further act on his part to indemnity from the
Company for, all expenses (including the amount of judgments and the
amount of approved settlements made with a view to the curtailment of
costs of litigation, other than amounts paid to the Company itself)
reasonably incurred by him in connection with or arising out of any
action, suit, or proceeding in which he may be involved by reason of
his being or having been a member of the Committee and/or the Board of
Directors, whether or not he continues to be a member of the Committee
and/or the Board of Directors at the time of incurring the expenses.
However, this indemnity shall not include any expenses incurred by any
member of the Committee and/or the Board of Directors (a) in respect of
matters as to which he shall be finally adjudged in any action, suit or
proceeding to have been guilty of gross negligence or willful
misconduct in the performance of his duty as a member of the Committee
and the Board of Directors, or (b) in respect of any matter in which
any settlement is effected, to an amount in excess of the amount
approved by the Company on the advice of its legal counsel. In
addition, no right of indemnification under this Plan shall be
available to or enforceable by any member of the Committee and the Board
of Directors unless, within 60 days after institution of any action,
suit or proceeding, he shall have offered the Company, in writing, the
opportunity to handle and defend same at its own expense. This right of
indemnification shall inure to the benefit of the heirs, executors or
administrators of each member of the Committee and the Board of
Directors and shall be in addition to all other rights to which a
member of the Committee and the Board of Directors may be entitled as a
matter of law, contract, or otherwise.
9.5 Gender. If the context requires, words of one gender when used in this
Plan shall include the others and words used in the singular or plural
shall include the other.
9.6 Headings. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of the Plan
and shall not be used in construing the terms of the Plan.
9.7 Other Compensation Plans. The adoption of this Plan shall not affect
any other stock option, incentive or other compensation or benefit
plans in effect for the Company or any Affiliate, nor shall the Plan
preclude the Company from establishing any other forms of incentive or
other compensation for employees of the Company or any Affiliate.
9.8 Other Options or Awards. The grant of an Option or Bonus Award shall
not confer upon the Employee the right to receive any future or other
Options or Bonus Awards under this Plan, whether or not Options or
Bonus Awards may be granted to similarly situated Employees, or the
right to receive future Options or Bonus Awards upon the same terms or
conditions as previously granted.
9.9 Governing Law. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Texas.
B 9
47
ANNEX C
SERVICE CORPORATION INTERNATIONAL
1993 LONG-TERM INCENTIVE STOCK OPTION PLAN
SECTION 1. PURPOSE; DEFINITIONS.Purpose; Definitions.
The purpose of the Plan is to give Service Corporation International a
competitive opportunity in attracting, retaining and motivating officers and
employees and to provide the Company and its subsidiaries with the ability to
provide incentives more directly linked to the profitability of the Company's
businesses and increases in stockholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
a. "Affiliate" means a corporation or other entity controlled by the
Company and designated by the Committee from time to time as such.
b. "Board" means the Board of Directors of the Company.
c. "Cause" means (i) a material breach by an optionee of his or her
duties as an employee 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 (other than a breach arising from
the failure of the optionee to work as a result of incapacity due to
physical or mental illness) and which is not remedied in a reasonable
period of time after receipt of written notice from the Company
specifying such breach or (ii) the conviction of the optionee 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.
d. "Change in Control" and "Change in Control Price" have the meanings
set forth in Sections 6(b) and 6(c), respectively.
e. "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
f. "Commission" means the Securities and Exchange Commission or any
successor agency.
g. "Committee" means the Committee referred to in Section 2.
h. "Company" means Service Corporation International, a Texas corporation.
i. "Disability" means the inability of the optionee to perform his or her
duties as an employee 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 optionee or the optionee's legal representative (such
agreement as to acceptability not to be withheld unreasonably).
j. "Disinterested Person" shall mean a member of the Board who
qualifies as a disinterested person as defined in Rule 16b-3(c)(2), as
promulgated by the Commission under the Exchange Act, or any successor
definition adopted by the Commission and also qualifies as an "outside
director" for purposes of Section 162(m) of the Code and the regulations
promulgated thereunder.
k. "Eligible Person" has the meaning stated in Section 4 of the Plan.
l. "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.
m. "Fair Market Value" means, as of any given date, the average of the
highest and lowest reported sales prices of the Stock on the New York
Stock Exchange Composite Tape or, if not listed on such exchange, on any
other national securities exchange on which the Stock is listed or on
NASDAQ. If there is no regular public trading market for such Stock, the
Fair Market Value of the Stock shall be determined by the Committee in
good faith.
n. "Plan" means the Service Corporation International 1993 Long-Term
Incentive Stock Option Plan, as set forth herein and as hereinafter
amended from time to time.
o. "Retirement" means retirement from active employment by the Company
or any of its subsidiaries at or after age 55.
p. "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission
under Section 16(b) of the Exchange Act, as amended from time to time.
q. "Stock" means common stock, par value $1.00 per share, of the
Company.
r. "Stock Option" means an option granted under Section 5.
s. "Termination of Employment" means the termination of the participant's
employment with the Company and any subsidiary or Affiliate. An A 1
33
employee
shall be deemed to have terminated employment if he or she ceases to
perform services for the Company or its subsidiaries or Affiliates on a
full-time basis, notwithstanding the fact that such employee continues to
receive compensation or benefits pursuant to an employment contract or
other agreement or arrangement with the Company or any of its
subsidiaries or Affiliates. A participant on a non-medical leave of
absence shall, unless such leave of absence is otherwise approved by the
Committee, be deemed to incur a Termination of Employment. A participant
employed by a subsidiary or an Affiliate shall also be deemed to incur a
Termination of Employment if the subsidiary or Affiliate ceases to be
such a subsidiary or Affiliate, as the case may be, and the participant
does not immediately thereafter become an employee of the Company or
another subsidiary or Affiliate.
C 1
48
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
SECTION 2. ADMINISTRATION.Administration.
The Plan shall be administered by the Compensation Committee of the Board
or such other committee of the Board, composed solely of not less than two
Disinterested Persons, each of whom shall be appointed by and serve at the
pleasure of the Board. If at any time no Committee shall be in office, the
functions of the Committee specified in the Plan shall be exercised by the
Board.
The Committee shall have plenary authority to grant Stock Options pursuant
to the terms of the Plan to officers and other key employees of the Company
and its subsidiaries and Affiliates.
Among other things, the Committee shall have the authority, subject to
the terms of the Plan:
(a) to select the Eligible Persons to whom Stock Options may from time
to time be grantedgranted;
(b) to determine the number of shares of Stock to be covered by each
Stock Option granted hereunder; and
(c) to determine the terms and conditions of any Stock Option granted
hereunder including, but not limited to, the option price (subject to
Section 5(a)) and any vesting condition, restriction or limitation (which
may be related to the performance of the participant, the Company or any
subsidiary or Affiliate), based on such factors as the Committee shall
determine.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it
shall, from time to time, deem advisable, to interpret the terms and
provisions of the Plan and any Stock Option issued under the Plan (and any
agreement relating thereto) and to otherwise supervise the administration of
the Plan.
The Committee may act only by a majority of its members then in office,
except that the members thereof may authorize any one or more of their number
or any officer of the Company to execute and deliver documents on behalf of
the Committee.
Any determination made by the Committee or pursuant to delegated authority
pursuant to the provisions of the Plan with respect to any Stock Option shall
be made in the sole discretion of the Committee or such delegate at the time
of the grant of the Stock Option or, unless in contravention of any express
term of the Plan, at any time thereafter. All decisions made by the Committee
or any appropriately delegated officer pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and
Plan participants.
SECTION 3. STOCK SUBJECT TO PLAN.Stock Subject to Plan.
Subject to adjustment as provided herein, the total number of shares of
Stock available for grant under the Plan shall be 4,650,000. Shares subject
to a Stock Option under the Plan may be authorized and unissued shares or may
be treasury shares.
If any Stock Option terminates without being exercised, shares subject to
such Stock Option shall not be available for further awards in connection
with Stock Options under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, or extraordinary distribution
with respect to the Stock or other change in corporate structure affecting
the Stock, the Committee or Board may make such substitution or adjustments
in the aggregate number and kind of shares reserved for issuance under the
Plan, in the number, kind and option price of shares subject to outstanding
Stock Options, and/or such other equitable substitution or adjustments as it
may determine to be appropriate in its sole discretion; provided, however,
that the number of shares subject to any Stock Option shall always be a whole
number.
SECTION 4. ELIGIBILITY.Eligibility.
Officers and employees of the Company, its subsidiaries and Affiliates who
are responsible for or contribute to the management, growth and profitability
of the business of the Company, A 2
34
its subsidiaries and Affiliates are eligible
to be granted Stock Options under the Plan ("Eligible Persons").
SECTION 5. STOCK OPTIONS.Stock Options.
Any Stock Option granted under the Plan shall be in the form attached
hereto as Annex A, which is incorporated herein and made a part of the Plan,
with such changes as the Committee may from time to time approve which are
consistent with the Plan. None of the Stock Options granted under the Plan
shall be "incentive stock options" within the meaning of Section 422 of the
Code. The maximum number of shares of Stock that may be subject to Stock
Options granted hereunder during the term of the Plan to any individual shall
be 1,550,000.
The grant of a Stock Option shall occur on the date the Committee selects
an individual to be a participant in any grant of a Stock Option, determines
the number of shares of Stock to be subject to such Stock Option to be
granted to such individual and specifies the terms and provisions of the
Stock Option. Such selection shall be evidenced in the records of the Company
whether in the minutes of the meetings of the Committee or by consent in
writing. The Company shall notify a participant of any grant of a Stock
Option, and a written option agreement or agreements shall be duly executed
and delivered by the Company to the participant.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions
as the Committee shall deem desirable:
C 2
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(a) Option Price. The option price per share of Stock purchasable under a
Stock Option shall be determined by the Committee and set forth in the
option agreement, and shall not be less than the Fair Market Value of
the Stock on the date of grant.
(b) Option Term. The term of each Stock Option shall be 14 years,
unless earlier terminated.
(c) Exercisability. Except as otherwise provided herein, each Stock
Option shall be exercisable during its term only if such Stock Option has
vested and only after the fourth anniversary of its date of grant.
(d) Vesting. Each Stock Option shall have assigned to it by the
Committee a target price (the "Target Price") which will be used to
provide for accelerated vesting of such Stock Option as set forth in the
agreement evidencing such Stock Option. Any Stock Option that remains
outstanding and unvested on the thirteenth anniversary of its date of
grant shall vest at such time.
(e) Method of Exercise. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, by giving written
notice of exercise to the Company specifying the number of shares of
Stock subject to the Stock Option to be purchased.
The option price of Stock to be 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
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).
Payment for any shares subject to a Stock Option may also be made by
delivering a properly executed exercise notice to the Company, together
with a copy of irrevocable instructions to a broker to deliver promptly
to the Company the amount of sale or loan proceeds to pay the purchase
price, and, if requested, the amount of any federal, state, local or
foreign withholding taxes. To facilitate the foregoing, the Company may
enter into agreements for coordinated procedures with one or more
brokerage firms.
No shares of Stock shall be issued until full payment therefor has
been made. An optionee shall have all of the rights of a stockholder of
the Company holding the Stock that is subject to such Stock Option
(including, if applicable, the right to vote the shares and the right to
receive dividends), only when the optionee has given written notice of
exercise, has paid in full for such shares and, if requested, has given
the representation described in Section 9(a).
(f) Non-transferability of Stock Options. No Stock Option shall be
transferable by the optionee other than (i) by will or by the laws of
descent and distribution or (ii) pursuant to a qualified domestic
relations order (as defined in the Code or Title I of the Employee
Retirement Income Security Act of 1974, as amended, or the rules
thereunder). All Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee or by the guardian or legal
representative of the optionee or its alternate payee pursuant to such
qualified domestic relations order, it being understood that the terms
"holder" and "optionee" include the guardian and legal representative of
the optionee named in the option agreement and any person to whom an
option is transferred by A 3
35
will or the laws of descent and distribution or
pursuant to a qualified domestic relations order. The Committee may
establish such procedures as it deems appropriate for a participant to
designate a beneficiary to whom any amounts payable in the event of the
participant's death are to be paid or by whom any rights of the
participant, after the participant's death, may be exercised.
- -------------------------------------------------------------------------------
THIS EXISTING SECTION 5(g) WILL BE DELETED IF SHAREHOLDERS
APPROVE THE PROPOSAL WITH RESPECT TO THIS PLAN.
(g) Termination by Death, Disability or Retirement or by the Company
Without Cause. If an optionee's employment terminates by reason of
death, Disability or Retirement, or if such employment is terminated by
the Company without Cause, in each case prior to the vesting of a Stock
Option held by the optionee, the following provisions shall apply:
(1) if termination by death or Disability or by the Company
without Cause occurs on or prior to the fourth anniversary of
the date of grant of such Stock Option, such Stock Option shall
be exercisable only during the period after the fourth
anniversary of the date of grant and ending on the fifth
anniversary of the date of grant and only if such Stock Option
has become vested;
(2) if termination by Retirement occurs on or prior to the
fourth anniversary of the date of grant of such Stock Option,
such Stock Option shall terminate immediately; and
(3) if termination by death, Disability or Retirement or by
the Company without Cause occurs after the fourth anniversary
of the date of grant of a Stock Option held by the optionee,
such Stock Option shall be exercisable only during the period
after the 13th anniversary of the date of grant and ending upon
the expiration of such Stock Option.
- -------------------------------------------------------------------------------
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- -------------------------------------------------------------------------------
THIS CORRECTED SECTION 5(G) WILL BE ADDED IF SHAREHOLDERS
APPROVE THE PROPOSAL WITH RESPECT TO THIS PLAN.
(g) Termination by Death, Disability or Retirement or by the Company
Without Cause. If an optionee's employment terminates by reason of
death, Disability or Retirement, or if such employment is terminated by
the Company without Cause, in each case prior to the vesting of a Stock
Option held by the optionee, the following provisions shall apply:
(1) if termination by death or Disability or by the Company
without Cause occurs on or prior to the fourth anniversary of
the date of grant of such Stock Option, and if the Target Price
vesting condition provided in such Stock Option is satisfied
after such termination and on or prior to such fourth
anniversary, such Stock Option shall be exercisable only during
the period after the fourth anniversary of the date of grant
and ending on the fifth anniversary of the date of grant and
shall terminate at the close of business on such fifth
anniversary;
(2) if termination by death or Disability or by the Company
without Cause occurs on or prior to the fourth anniversary of
the date of grant of such Stock Option, and if the Target Price
vesting condition provided in such Stock Option is not
satisfied on or prior to such fourth anniversary, such Stock
Option shall be exercisable only during the period after the
13th anniversary of the date of grant and ending upon the
expiration of such Stock Option;
(3) if termination by Retirement occurs on or prior to the
fourth anniversary of the date of grant of such Stock Option,
such Stock Option shall terminate immediately; and
(4) if termination by death, Disability or Retirement or
by the Company without Cause occurs after the fourth
anniversary of the date of grant of a Stock Option held by the
optionee, such Stock Option shall be exercisable only during
the period after the 13th anniversary of the date of grant and
ending upon the expiration of such Stock Option.
- -------------------------------------------------------------------------------
(h) Termination by the Company for Cause; Voluntary Termination. If an
optionee's employment is terminated voluntarily
by the optionee (other than through Retirement) or by the Company for
Cause, in either case prior to the vesting of a Stock Option, such Stock
Option shall terminate immediately.
(i) Termination After Vesting. If an optionee's employment
is terminated for any reason after a Stock Option has vested,
the following provisions shall apply:
(1) if such termination occurs prior to the fourth
anniversary of the date of grant of such Stock Option, such
Stock Option shall be exercisable during the 18-month period
beginning on such fourth anniversary, and shall terminate at
the end of such 18-month period; and
(2) if such termination occurs on or after the fourth
anniversary of the date of grant of such Stock Option, such
Stock Option shall be exercisable during the period beginning
on the date of such termination and ending on the earlier of
(x) the original termination date of such Stock Option and (y)
the date that is 18 months after the date of termination of
employment, and shall terminate at the end of such period.
(j) Change in Control Cash Out. Notwithstanding any other provision
of the Plan, upon the occurrence of a Change of Control all outstanding
Stock Options shall immediately vest and become fully exercisable, and
during the 60-day period from and after such Change in Control (the
"Exercise Period"), an optionee shall have the right, in lieu of the
payment of the exercise price for the shares of Stock being purchased
under the Stock Option and by giving notice to the Company, to elect
(within the Exercise Period) to surrender all or part of the Stock Option
to the Company and to receive cash, within 30 days of such notice, in an
amount equal to the amount by which the Change in Control Price per share
of Stock on the date of such election shall exceed the exercise price per
share of Stock under the Stock Option (the "Spread") multiplied by the
number of shares of Stock granted under the Stock Option as to which the
right granted under this Section 5(j) shall have been exercised;
provided, however, that if the Change in Control occurs within six months
of the date of grant of a particular Stock Option held by an optionee who
is an officer or director of the Company and is subject to Section 16(b)
of the Exchange Act no such election shall be made by such optionee with
respect to such Stock Option prior to six months from the date of grant.
Notwithstanding any other provision hereof, if the end of such 60-day
period from and after a Change in Control is within six months of the
date of grant of a Stock Option held by an optionee who is an officer or
director of the Company and is subject to Section 16(b) of the Exchange
Act, such Stock Option shall be cancelled in exchange for a cash payment
to the optionee, effected on the day which is six months and one day
after the date of grant of such Option, equal to the Spread multiplied by
the number of shares of Stock granted under the Stock Option.
Notwithstanding the foregoing, if any right granted pursuant to this
Section 5(j) would make a Change in Control transaction ineligible for
pooling of interests accounting under APB No. 16 that but for this
Section 5(j) would otherwise be eligible for such accounting treatment,
the Committee shall have the authority to replace the cash payable
pursuant to this A 4
36
Section 5(j) with Stock having a Fair Market Value equal
to the cash that would otherwise be payable hereunder. For purposes of
this paragraph (j) only, the date of grant of any Stock Option approved
by the Committee on November 10, 1993 shall be deemed to be the date on
which the Plan is
C 4
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approved by the Company's stockholders.
(k) Initial Grants. The Committee granted on November 10, 1993 the
following awards to the individuals listed below, in the share amounts
and at the Target Prices and exercise prices indicated, subject to the
approval of the stockholders of the Company:
OPTIONEE NUMBER OF SHARES EXERCISE PRICE TARGET PRICE
- -------- ---------------- -------------- --------------------------------------------------------------------------------------------
OptioneE Number of Exercise Target
Shares Price Price
- --------------------------------------------------------------------------------
R. L. Waltrip 775,000 $25.75 $50
- --------------------------------------------------------------------------------
R. L. Waltrip 775,000 25.75 60
- --------------------------------------------------------------------------------
L. W. Heiligbrodt 475,000 25.75 50
- --------------------------------------------------------------------------------
L. W. Heiligbrodt 475,000 25.75 60
- --------------------------------------------------------------------------------
W. B. Waltrip 275,000 25.75 50
- --------------------------------------------------------------------------------
W. B. Waltrip 275,000 25.75 60
- --------------------------------------------------------------------------------
S. W. Rizzo 237,500 25.75 50
- --------------------------------------------------------------------------------
S. W. Rizzo 237,500 25.75 60
- --------------------------------------------------------------------------------
J. W. Morrow, Jr. 237,500 25.75 50
- --------------------------------------------------------------------------------
J. W. Morrow, Jr. 237,500 25.75 60
- --------------------------------------------------------------------------------
The foregoing individuals shall not be eligible to receive any additional
awards under the Plan.
SECTION 6. CHANGE IN CONTROL PROVISIONS.Change In Control Provisions.
(a) Impact of Event. Notwithstanding any other provision of the Plan
to the contrary, in the event of a Change in Control, any Stock Options
outstanding as of the date such Change in Control is determined to have
occurred and not then exercisable and vested shall become fully
exercisable and vested to the full extent of the original grant.
(b) Definition of Change in Control. For purposes of the Plan, a
"Change in Control" shall mean the happening of any of the following
events:
(i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of 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
(x) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (y) 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"); excluding, however,
the following acquisitions of Outstanding Company Common Stock and
Outstanding Company Voting Securities: (1) any acquisition
directly from the Company (other than an acquisition pursuant to
the exercise of a conversion privilege), (2) any acquisition by
the Company, (3) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (4) any acquisition by
any Person pursuant to a reorganization, merger or consolidation
if, following such reorganization, merger or consolidation, the
conditions described in clauses (1), (2) and (3) of subsection
(iii) of this Section 6(b) are satisfied; or
(ii) Individuals who, as of the effective date of the Plan, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual who becomes a member of the Board subsequent
to such effective date, whose election, or nomination for
election by the Company's shareholders, was approved by (1) a
vote of at least a majority of directors then comprising the
Incumbent Board, or (2) a vote of at least a majority of the
directors then constituting the Executive Committee of the Board
at a time when such committee comprised 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 (1) of this subparagraph (ii), shall be
considered as though such individual were a member of the
Incumbent Board; but, provided further, that 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 shall
not be so considered as a member of the Incumbent Board; or
(iii) Approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company ("Business
Combination"); excluding, however, such a Business Combination
pursuant to which (1) all or substantially all of the individuals
and entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and A 5
37
Outstanding Company Voting
Securities immediately prior to such Business Combination own,
directly or indirectly, more than 60% of, respectively, the
outstanding shares of common stock, and the combined voting power
of the then outstanding voting securities entitled to vote
generally in the election
C 5
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of directors, as the case may be, of the corporation resulting
from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company
or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such
Business Combination, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (2) no
Person (other than the Company, any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or such corporation
resulting from such Business Combination and any Person
beneficially owning, immediately prior to such Business
Combination, directly or indirectly, 20% or more of the
Outstanding Company Common Stock or Outstanding Company Voting
Securities, as the case may be) will beneficially own, directly or
indirectly, 20% or more of, respectively, the outstanding shares
of common stock of the corporation resulting from such Business
Combination or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the
election of directors and (3) at least a majority of the members
of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the
time of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination; or
(iv) The approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(c) Change in Control Price. For purposes of the Plan, "Change in Control
Price" means the higher of (i) the highest reported sales price, regular
way, of a share of Stock in any transaction reported on the New York
Stock Exchange Composite Tape or other national securities exchange on
which such shares are listed or on NASDAQ, as applicable, during the
60-day period prior to and including the date of a Change in Control and
(ii) if the Change in Control is the result of a tender or exchange
offer or a Business Combination, the highest price per share of Stock
paid in such tender or exchange offer or Business Combination; provided,
however, that in the case of a Stock Option which (A) is held by an
optionee who is an officer or director of the Company and is subject to
Section 16(b) of the Exchange Act and (B) was granted within 240 days of
the Change in Control, then the Change in Control Price for such Stock
Option shall be the Fair Market Value of the Stock on the date such
Stock Option is exercised or cancelled. To the extent that the
consideration paid in any such transaction described above consists all
or in part of securities or other non-cash consideration, the value of
such securities or other non-cash consideration shall be determined in
the solesolE discretion of the Board.
SECTION 7. TERM, AMENDMENT AND TERMINATION.Term, Amendment and Termination.
The Plan will terminate on November 10, 2003. Stock Options outstanding as
of November 10, 2003 shall not be affected or impaired by the termination of
the Plan.
The Committee shall have authority to amend the Plan without the approval
of the Company's stockholders to take into account changes in law and tax and
accounting rules, including Rule 16b-3 and Section 162(m) of the Code;
provided that no amendment shall be made which would (i) impair the rights of
an optionee under a Stock Option theretofore granted without the optionee's
consent, except such an amendment made to cause the Plan to qualify for the
exemption provided by Rule 16b-3, or (ii) disqualify the Plan from the
exemption provided by Rule 16b-3.
SECTION 8. UNFUNDED STATUS OF PLAN.Unfunded Status of Plan.
It is presently intended that the Plan constitute an "unfunded" plan
for incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver Stock or make payments; provided, however, that,
unless the Committee otherwise determines, the existence of such trusts or
other arrangements is consistent with the "unfunded" status of the Plan.
SECTION 9. GENERAL PROVISIONS.General Provisions.
(a) The Committee may require each person purchasing shares pursuant to
a Stock Option to represent to and
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such person is acquiring the shares without a view to the distribution
thereof. The certificates for such shares may include any legend which
the Committee deems appropriate to reflect any restrictions on transfer.
Notwithstanding any other provision of the Plan or agreements made
pursuant thereto, the Company shall not be required to issue or deliver
any certificate or certificates for shares of Stock under the Plan prior
to fulfillment of all of the following conditions:
(1) the listing or approval for listing upon notice of
issuance, of such shares on the New York Stock Exchange, Inc.,
or such other securities exchange as may at the time be the
principal market for the Stock;
(2) any registration or other qualification of such shares
of the Company under any state or federal law or regulation, or
the maintaining in effect of any such registration or other
qualification which the Committee shall, in its absolute
discretion upon the advice of counsel, deem necessary or
advisable; and
(3) the obtaining of any other consent, approval, or permitper-
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mit from any state or federal governmental agency which the
Committee shall, in its absolute discretion after receiving the
advice of counsel, determine to be necessary or advisable.
(b) Nothing contained in the Plan shall prevent the Company or any
subsidiary or Affiliate from adopting other or additional compensation
arrangements for its employees.
(c) The adoption of the Plan shall not confer upon any employee any
right to continued employment nor shall it interfere in any way with the
right of the Company or any subsidiary or Affiliate to terminate the
employment of any employee at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for federal income tax
purposes with respect to any Stock Option under the Plan, the participant
shall pay to the Company, or make arrangements satisfactory to the
Company regarding the payment of, any federal, state, local or foreign
taxes of any kind required by law to be withheld by the Company with
respect to such amount. Withholding obligations may be settled with Stock
in an amount having a Fair Market Value not exceeding the minimum
withholding tax payable by the participant with respect to the income
recognized, including Stock that is subject to the Stock Option that
gives rise to the withholding requirement. The obligations of the Company
under the Plan shall be conditional on such payment or arrangements, and
the Company, its subsidiaries and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the participant. The Committee shall establish
such procedures as it deems appropriate, including the making of
irrevocable elections, for the settlement of withholding obligations with
Stock.
(e) In the case of a grant of a Stock Option to any employee of a
Company subsidiary, the Company, may, if the Committee so directs, issue
or transfer the shares of Stock covered by the Stock Option to the
subsidiary, for such lawful consideration as the Committee may specify,
upon the condition or understanding that the subsidiary will transfer the
shares of Stock to the employee in accordance with the terms of the Stock
Option specified by the Committee pursuant to the provisions of
the Plan.
(f) The Plan and all Stock Options made and actions taken thereunder
shall be governed by and construed in accordance with the laws of the
State of Texas, without reference to principles of conflict of law.
SECTION 10. EFFECTIVE DATE OF PLAN.Effective Date of Plan.
Subject to the approval of the stockholders of the Company, the Plan shall
be effective on November 10, 1993.
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STOCK OPTION AGREEMENT
THIS AGREEMENT dated as of the _________ day of _______________,_________, between Service
Corporation International, a Texas corporation (the "Company"), and
___________________________________________ (the "Employee").
W I T N E S S E T H:
The Company has adopted the Service Corporation International 1993
Long-Term Incentive Stock Option Plan (the "Plan"). The Plan is made a part
hereof with the same effect as if set forth in this Agreement. All
capitalized terms that are used herein and not otherwise defined shall have
the meanings set forth in the Plan.
In consideration of the mutual promises and covenants made herein and the
mutual benefits to be derived herefrom, the parties hereto agree as follows:
1. GRANT OF OPTIONS.Grant of Options.
Subject to the provisions of this Agreement and to the Plan, the Company
hereby grants to the Employee the right and option (the "Options") to
purchase (i) _______________ shares of common stock, par value $1.00 per share ("Common
Stock"), of the Company at an exercise price of $ ________$_______ per share and a
Target Price of $________$_______ per share and (ii) ______________ shares of Common Stock at
an exercise price of $ ________$_______ per share and a Target Price of $ ________$_______ per
share.
2. EXERCISABILITY OF OPTIONS.Exercisability of Options.
Any Option that is vested may be exercised in whole or in part at the
times and in the manner set forth in the Plan; provided, however, that an
Option may not be exercised at any one time as to fewer than 100 shares (or
such number of shares as to which such Option is then exercisable if such
number of shares is less than 100).
3. VESTING OF OPTIONS.Vesting of Options.
Each Option granted hereunder shall vest in the circumstances set forth in
the Plan or as set forth in this paragraph. During the four-year period
commencing on the date of this Agreement each Option granted hereunder shall
vest at such time as the Fair Market Value of the Common Stock shall have
been equal to or greater than the Target Price with respect to such Option
for each day in any period of 20 consecutive trading days. Any Option that
has not vested at or prior to the close of business on the fourth anniversary
of the date of this Agreement shall vest at the close of business on the
thirteenth anniversary of the date of this Agreement if such Option has not
previously terminated.
4. NO RIGHT TO EMPLOYMENT.No Right to Employment.
Nothing in this Agreement or the Plan shall confer upon the Employee any
right to continue in the employ of the Company or any of its affiliate
corporations or interfere in any way with the right of the Company or any
such affiliate corporation to terminate such employment at any time.
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5. EFFECT OF CERTAIN CHANGES.Effect of Certain Changes.
(a) If there is any change in the number of issued shares of Common
Stock through the declaration of stock dividends, or through
recapitalization resulting in stock splits, or combinations or exchanges
of such shares, the number of Options granted pursuant to this Agreement
that have not been exercised or lapsed, and the price per share of such
Options shall be proportionately adjusted by the Committee to reflect any
increase or decrease in the number of shares of Common Stock, provided,
however, that any fractional shares resulting from such adjustment shall
be eliminated.
(b) In the event of a change in the Common Stock of the Company as
presently constituted, which is limited to a change of all of its
authorized shares with a par value into the same number of shares with a
different par value or without par value, the shares resulting from any
such change shall be deemed to be a Common Stock within the meaning of
this Agreement and the Plan.
(c) To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding
and conclusive.
6. PAYMENT OF TRANSFER TAXES, FEES AND OTHER EXPENSES.Payment of Transfer Taxes, Fees
and Other Expenses.
The Company agrees to pay any and all original issue taxes and stock
transfer taxes that may be imposed on the issuance of
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40 shares acquired pursuant
to exercise of the Options, together with any and all other fees and expenses
necessarily incurred by the Company in connection therewith.
7. TAXES AND WITHHOLDINGS.Taxes and Withholdings.
No later than the date of exercise of any Options granted hereunder, the
Employee shall pay to the Company or make arrangements satisfactory to the
Committee regarding payment of any federal, state or local taxes of any kind
required by law to be withheld upon the exercise of such Options and the
Company shall, to the extent permitted or required by law, have the right to
deduct from any payment of any kind otherwise due to the Employee, federal,
state and local taxes of any kind required by law to be withheld upon the
exercise of such Options.
8. NOTICES.Notices.
Any notice to be given under the terms of this Agreement shall be in
writing and addressed to the Company at 1929 Allen Parkway, Houston, Texas
77219, Attention: General Counsel and to the Employee at the address set
forth on the last page of this Agreement or at such other address as either
party may hereafter designate in writing to the other.
9. EFFECT OF AGREEMENT.Effect of Agreement.
Except as otherwise provided hereunder, this Agreement shall be binding
upon and shall inure to the benefit of any successor or successors of the
Company.
10. LAWS APPLICABLE TO CONSTRUCTION.Laws Applicable to Construction.
The Options have been granted, executed and delivered in the State of
Texas, and the interpretation, performance and enforcement of this Agreement,
shall be governed by the laws of the State of Texas, as applied to contracts
executed in and performed wholly within the State of Texas.
11. INTERPRETATION.Interpretation.
In the event of any ambiguity in this Agreement, any term which is not
defined in this Agreement, or any matters as to which this Agreement is
silent, the Plan shall govern including, without limitation, the provisions
thereof pursuant to which the Committee has the power, among others, to
(i) interpret the Plan, (ii) prescribe, amend and rescind rules and
regulations relating to the Plan and (iii) make all other determinations
deemed necessary or advisable for the administration of the Plan.
12. HEADINGS.Headings.
The headings of paragraphs herein are included solely for convenience of
reference and shall not affect the meaning or interpretation of any of the
provisions of this Agreement.
13. AMENDMENT.Amendment.
This Agreement may not be modified, amended or waived in any manner except
by an instrument in writing signed by both parties hereto. The waiver by
either party of compliance with any provision of this Agreement shall not
operate or be construed as a waiver of any other provision of this Agreement,
or of any subsequent breach by such party of a provision of this Agreement.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed on
its behalf by a duly authorized officer and the Employee has hereunto set his
hand.
SERVICE CORPORATION INTERNATIONAL
________________________________________________________________________________
By:
___________________________________________________________________________
________________________________________________________________________________- ----------------------------------------------------------------------------
(Employee's name)
________________________________________________________________________________- ----------------------------------------------------------------------------
(Address)
________________________________________________________________________________
________________________________________________________________________________
A 9- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
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[SCI LOGO]
Service Corporation International
1929 Allen Parkway
P.O. Box 130548
Houston, Texas 77219-0548
4256
P R O X Y
SERVICE CORPORATION INTERNATIONAL
This Proxy is Solicited By the Board of DirectorsTHIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints ROBERTRobert L. WALTRIP,Waltrip, L. WILLIAM
P HEILIGBRODT, SAMUEL W. RIZZO AND JAMESWilliam Heiligbrodt,
GEORGE R. CHAMPAGNE and James M. SHELGERShelger and each or any of them as attorneys,
agents and proxies of the undersigned with full power of
R substitution, for and
in the name, place and stead of the undersigned, to attend the annual meeting
of shareholders of Service Corporation O International (the "Company") to be held
in the Texas Commerce Center Auditorium, First Floor, Texas Commerce Center,
601 Travis, Houston, Texas, X on Thursday, May 12, 1994,11, 1995, at 10:00 a.m., Houston
time, and any adjournment(s) thereof, and to vote thereat the number of shares
of Common
Y Stock of the Company which the undersigned would be entitled to vote
if personally present as indicated below and on the reverse side hereof and, in
their discretion, upon any other business which may properly come before said
meeting.
(change of address)
Election of Directors, Nominees: ______________________________
Anthony L. Coelho ______________________________
A.J. Foyt,_________________________________
Douglas M. Conway
James J. Gavin, Jr. ______________________________
E.H. Thornton,_________________________________
B. D. Hunter
John W. Mecom, Jr. ______________________________
(if_________________________________
Samuel W. Rizzo
_________________________________
(If you have written in the
R.L. Waltrip above
space, please mark the
corresponding box on the Edward E. Williams reverse
side of this card).
-----------
SEE REVERSE
SIDE
-----------
4357
/X/ Please mark your
votes as in this
example.
WITHHOLD
FOR AUTHORITY
1. Election
of Directors / / / /
Vote FOR, except vote withheld from the following nominee(s) (to withhold
authority to vote for any individual nominee(s) write that nominee's name in
the space provided below):
______________________________________
FOR AGAINST ABSTAIN
2. Approval of the adoption of the / / / / / /
1993 Long-Term Incentive Stock Option
Plan and the awards made thereunder
in 1993.
If a choice is specified, this Proxy
will be voted as indicated. If no choice
is specified, this Proxy will be voted FOR
election of directors listed in the proxy
statement and FOR approval of the adoption
of the 1993 Long-Term Incentive Stock Option
Plan and the awards made thereunder in 1993.PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
WITHHOLD
FOR AUTHORITY FOR AGAINST ABSTAIN
1. Election / / / / 2. Approval of the 1995 Stock Plan / / / / / /
of Directors for Non-Employee Directors.
Vote FOR, except vote withheld from the 3. Approval of the 1995 Incentive / / / / / /
following nominee(s) (to withhold authority Equity Plan.
to vote for any individual nominee(s) write
that nominee's name in the space provided 4. Approval of the proposal / / / / / /
below): correcting the 1993 Long-Term
Incentive Stock Option Plan.
___________________________________________
If a choice is specified, this Proxy will be voted as
indicated. If no choice is specified, this Proxy will be
voted FOR election of directors listed in the proxy
statement, FOR approval of the 1995 Stock Plan for
Non-Employee Directors, FOR approval of the 1995 Incentive
Equity Plan and FOR approval of the proposal correcting
the 1993 Long-Term Incentive Stock Option Plan.
SIGNATURE(S) ___________________________________ Date ____________, 1994_____________________________________________ DATE __________, 1995
SIGNATURE(S) ____________________________________Date ____________, 1994
Please sign your name exactly as it appears hereon. Joint owners must each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give your full title as it appears hereon.
44
Appendix A: Description of graphic materials.
Cover: 1. Logos for SCI and Proxy Statement '94
2. Picture of SCI facility.
Banner: Service
Corporation
International
Banner on Cover, pages 5 thru A-9 of Proxy Statement._____________________________________________ DATE __________, 1995
PLEASE SIGN YOUR NAME EXACTLY AS IT APPEARS HEREON. JOINT OWNERS MUST EACH
SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE YOUR FULL TITLE AS IT APPEARS HEREON.