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EXHIBIT 10.13
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of this
1st day of January, 1999, by and between SCI EXECUTIVE SERVICES, INC., a
Delaware corporation (the "Company") wholly owned by SERVICE CORPORATION
INTERNATIONAL, a Texas corporation (the "Parent") and successor by assignment to
all of the rights, duties and obligations under this Agreement, and James M.
Shelger (the "Employee").
1. Employment and Term. The Company agrees to employ the Employee and
the Employee agrees to remain in the employ of the Company, in accordance with
the terms and provisions of this Agreement, for the period beginning on the date
hereof and ending as of the close of business on December 31, 2000 (such period
together with all extensions thereof, is referred to hereinafter as the
"Employment Period"); provided, however, that commencing on the date one year
after the date hereof, and on each January 1 thereafter (each such date shall be
hereinafter referred to as a "Renewal Date") the Employment Period shall be
automatically extended so as to terminate two (2) year(s) from such Renewal Date
if (i) the Compensation Committee of the Board of Directors of the Parent
(hereinafter referred to as the "Compensation Committee") authorizes such
extension during the 60-day period preceding such Renewal Date and (ii) the
Employee has not previously given the Company written notice that the Employment
Period shall not be so extended. In the event that the Company gives the
Employee written notice at any time that the Compensation Committee has
determined not to authorize such extension, or if the Company fails to notify
the Employee of the Compensation Committee's determination prior to the Renewal
Date (the "Renewal Deadline"), the Employment Period shall be extended so as to
terminate two (2) year(s) after the date such notice is given (or, in case of a
failure to notify, two (2) year(s) after the Renewal Deadline) and shall not
thereafter be further extended.
2. Duties and Powers of Employee. During the Employment Period, the
Employee shall serve as the Senior Vice President General Counsel and Secretary
of the Parent and the Company and shall have the duties, powers and authority
heretofore possessed by the holder of such offices and such other powers
consistent therewith as are delegated to him in writing from time to time by
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the Board of Directors of the Parent (the "Board"). The Employee's services
shall be performed at the location where the Employee is currently employed or
any office which is the headquarters of the Company and is less than 50 miles
from such location. During the Change of Control Period, the Employee's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned with or
by the Company or the Parent at any time during the 90-day period immediately
preceding the Change of Control Date (as defined in Section 15(a) below).
3. Compensation. The Employee shall receive the following compensation
for his services:
(a) Salary. During the Employment Period, he shall be paid an
annual base salary ("Annual Base Salary") at the rate of not less than
$330,000 per year, in substantially equal bi-weekly installments, and
subject to any and all required withholdings and deductions for Social
Security, income taxes and the like. The Compensation Committee may from
time to time direct such upward adjustments to Annual Base Salary as the
Compensation Committee deems to be appropriate or desirable; provided,
however, that during the Change of Control Period, the Annual Base Salary
shall be reviewed at least annually and shall be increased at any time and
from time to time as shall be substantially consistent with increases in
base salary awarded to Employee prior to the Change of Control Period.
Annual Base Salary shall not be reduced after any increase thereof pursuant
to this Section 3(a). Any increase in Annual Base Salary shall not serve to
limit or reduce any other obligation of the Company under this Agreement.
(b) Incentive Cash Compensation. During the Employment Period, he
shall be eligible annually for a cash bonus at the discretion of the
Compensation Committee (such aggregate awards for each year are hereinafter
referred to as the "Annual Bonus") and at the discretion of the
Compensation Committee to receive awards from any plan of the Company or
any of its affiliated companies (as defined in Section 15(d) below)
providing for the payment of bonuses in cash to senior management employees
of the Company or its affiliated companies (such plans being referred to
herein collectively as
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the "Cash Bonus Plans") in accordance with the terms thereof; provided,
however, that, during the Change of Control Period, the Employee shall be
awarded, for each fiscal year ending during the Change of Control Period,
an Annual Bonus at least equal to the Highest Recent Bonus (as defined in
Section 15(e) below). Each Annual Bonus shall be paid no later than the end
of the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Employee shall elect to defer
the receipt of such Annual Bonus.
(c) Incentive and Savings and Retirement Plans. During the
Employment Period, the Employee shall be entitled to participate in all
incentive and savings (in addition to the Cash Bonus Plans) and retirement
plans, practices, policies and programs applicable generally to other
senior management employees of the Company and its affiliated companies.
(d) Welfare Benefit Plans. During the Employment Period, the
Employee and/or the Employee's family, as the case may be, shall be
eligible for participation in all welfare benefit plans, practices,
policies and programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally
to other senior management employees of the Company and its affiliated
companies.
(e) Expenses. During the Employment Period and for so long as the
Employee is employed by the Company, he shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Employee in
accordance with the policies, practices and procedures of the Company and
its affiliated companies from time to time in effect.
(f) Fringe Benefits. During the Employment Period, the Employee
shall be entitled to fringe benefits in accordance with the plans, past
practices, programs and policies of the Company and its affiliated
companies from time to time in effect.
(g) Office and Support Staff. During the Employment Period, the
Employee shall be entitled to an office or offices of a size and with
furnishings and other appointments,
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and to exclusive personal secretarial and other assistance, commensurate
with his position.
(h) Vacation and Other Absences. During the Employment Period,
the Employee shall be entitled to paid vacation and such other paid
absences whether for holidays, illness, personal time or any similar
purposes, in accordance with the plans, policies, programs and practices of
the Company and its affiliated companies.
(i) Change of Control. During the Change of Control Period, the
Employee's benefits listed under Sections 3(c), 3(d), 3(e), 3(f), 3(g) and
3(h) above shall be at least commensurate in all material respects with the
most valuable and favorable of those received by the Employee at any time
during the one-year period immediately preceding the Change of Control
Date.
4. Termination of Employment. (a) Death or Disability. The Employment
Period shall terminate automatically upon the Employee's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Employee has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Employee written
notice in accordance with Section 16(b) of its intention to terminate the
Employment Period. In such event, the Employment Period shall terminate
effective on the 30th day after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that, within the 30 days after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
inability of the Employee to perform the Employee's duties with the Company on a
full-time basis as a result of incapacity due to mental or physical illness
which continues for more than one year after the commencement of such
incapacity, such incapacity to be determined by a physician selected by the
Company or its insurers and acceptable to the Employee or the Employee's legal
representative (such agreement as to acceptability not to be withheld
unreasonably).
(b) Cause. The Company may terminate the Employment Period for
Cause. For purposes of this Agreement, "Cause" shall mean (i) the Employee's
deliberate and intentional continuing refusal to substantially perform his
duties and obligations under this Agreement (other than a breach of the
Employee's obligations under this Agreement arising from the
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failure of the Employee to work as a result of incapacity due to physical or
mental illness) if he shall have either failed to remedy such alleged breach
within 60 days from his receipt of written notice from the Secretary of the
Company demanding that he remedy such alleged breach, or shall have failed to
take reasonable steps in good faith to that end during such 60 day period and
thereafter, or (ii) the conviction of the Employee of a felony involving malice
which conviction has been affirmed on appeal or as to which the period in which
an appeal can be taken has lapsed.
(c) Good Reason; Window Period. The Employee's employment may be
terminated (i) by the Employee for Good Reason (as defined below) or (ii) during
the Window Period (as defined below) by the Employee without any reason. For
purposes of this Agreement, the "Window Period" shall mean the 30-day period
immediately following the first anniversary of the Change of Control Date. For
purposes of this Agreement, "Good Reason" shall mean
(i) the assignment to the Employee of any duties inconsistent in
any respect with the Employee's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities prior to
the date of such assignment or any other action by the Company or the
Parent which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated and insubstantial
action not taken in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 3, other than an isolated and insubstantial failure
not occurring in bad faith and which is remedied by the Company promptly
after receipt of notice thereof given by the Employee;
(iii) the Company's requiring the Employee to be based at any
office or location other than that described in Section 2(a);
(iv) any purported termination by the Company of the Employee's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company or the Parent to comply with and
satisfy Section 14(c), provided that
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the successor referred to in Section 14(c) has received at least ten days
prior written notice from the Company or the Employee of the requirements
of Section 14(c).
For purposes of this Section 4(c), during the Change of Control Period, any good
faith determination of "Good Reason" made by the Employee shall be conclusive.
(d) Notice of Termination. Any termination by the Company for
Cause or by the Employee without any reason during the Window Period or for Good
Reason shall be communicated by Notice of Termination to the other party hereto
given in accordance with Section 16(b). For purposes of this Agreement, a
"Notice of Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Employment Period under the provision
so indicated ,(iii) if the Date of Termination (as defined below) is other than
the date of receipt of such notice, specifies the termination date (which date
shall be not more than 15 days after the giving of such notice) and (iv) if the
termination is by the Company for Cause, indicates that the Board has determined
that a basis for termination for Cause exists, that the Employee has failed to
take reasonable steps in good faith to remedy the alleged basis for such
termination, and contains a certified copy of a resolution of the Board adopted
by the affirmative vote of not less than two-thirds of the entire membership of
the Board in a meeting called and held for that purpose in which the Employee
was given an opportunity to be heard, finding that a basis for termination for
Cause exists and that the Employee has failed to take reasonable steps in good
faith to remedy such alleged basis for termination. The failure by the Employee
or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Employee or the Company hereunder or preclude the
Employee or the Company from asserting such fact or circumstance in enforcing
the Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
Employee's employment is terminated by the Company for Cause, or by the Employee
during the Window Period or for Good Reason, the date of receipt of the Notice
of Termination or any later date specified therein, as the case may be, (ii) if
the Employee's employment is terminated by the Company other than
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for Cause or Disability, or by the Employee other than for Good Reason or during
the Window Period, the Date of Termination shall be the date on which the
Company or the Employee, as the case may be, notifies the other of such
termination and (iii) if the Employee's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of the
Employee or the Disability Effective Date, as the case may be. Notwithstanding
the foregoing, if the Company gives the Employee written notice pursuant to the
second sentence of Section 1 hereof, then "Date of Termination" shall mean the
last day of the two (2) year period for which the Employment Period is extended
pursuant to such sentence.
5. Obligations of the Company Upon Termination. (a) Certain
Terminations Prior to Change of Control Date. If, during the Employment Period
prior to any Change of Control Date, the employment of the Employee with the
Company shall be terminated (i) by the Company other than for Cause, death or
Disability or (ii) by the Employee for Good Reason, then, in lieu of the
obligations of the Company under Section 3, (i) the Company shall pay to the
Employee in a lump sum in cash within 30 days after the Date of Termination all
Unpaid Agreement Amounts (as defined in Section 5(b)(i)(A) below) and (ii)
notwithstanding any other provision hereunder, for the longer of (A) the
remainder of the Employment Period or (B) to the extent compensation and/or
benefits are provided under any plan, program, practice or policy, such longer
period, if any, as such plan, program, practice or policy may provide, the
Company shall continue to provide to the Employee the compensation and benefits
provided in Sections 3(a), 3(b)(based on the Highest Recent Bonus), 3(c) and
3(d) (it being understood that if the Company gives the Employee written notice
that the Compensation Committee has determined not to authorize an extension, or
fails to notify the Employee of the Compensation Committee's determination prior
to the Renewal Deadline, in either case as contemplated by the second sentence
of Section 1 hereof, the giving of such notice or the failure to so notify the
Employee shall not be deemed a termination of the employment of the Employee
with the Company during the Employment Period for purposes of this Section
5(a)).
(b) Certain Terminations After Change of Control Date. If, during
the Change of Control Period, the employment of the Employee with the Company
shall be terminated (i) by the Company other than for Cause, death or Disability
or (ii) by the Employee either for Good Reason or without any reason during the
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Window Period, then, in lieu of the obligations of the Company under Section 3
and notwithstanding any other provision hereunder:
(i) the Company shall pay to the Employee in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
(A) the sum of (1) all unpaid amounts due to the Employee
under Section 3 through the Date of Termination, including without
limitation, the Employee's Annual Base Salary and any accrued vacation
pay, (2) the product of (x) the Highest Recent Bonus and (y) a
fraction, the numerator of which is the number of days in the current
fiscal year through the Date of Termination, and the denominator of
which is 365 and (3) any compensation previously deferred by the
Employee (together with any accrued interest or earnings thereon) to
the extent not theretofore paid (the sum of the amounts described in
clauses (1), (2) and (3) shall be hereinafter referred to as the
"Accrued Obligations" and the sum of the amounts described in clauses
(1) and (3) shall be hereinafter referred to as the "Unpaid Agreement
Amounts"); and
(B) the amount (such amount shall be hereinafter referred to
as the "Severance Amount") equal to the sum of
(1) Two (2) multiplied by the Employee's Annual Base Salary,
plus
(2) Two (2) multiplied by the Employee's Highest Recent Bonus;
(ii) for the longer of (A) the remainder of the Employment Period
or (B) to the extent benefits are provided under any plan, program,
practice or policy, such longer period as such plan, program, practice or
policy may provide, the Company shall continue benefits to the Employee
and/or the Employee's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 3(d) if the Employee's employment had not
been terminated, in accordance with the most favorable plans, practices,
programs or policies of the Company and its affiliated companies as in
effect and applicable generally to other employees of
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comparable rank and their families during the 90-day period immediately
preceding the Change of Control Date or, if more favorable to the Employee,
as in effect generally at any time thereafter with respect to other
employees of comparable rank with the Company and its affiliated companies
and their families; provided, however, that if the Employee becomes
reemployed with another employer and is eligible to receive medical or
other welfare benefits under another employer provided plan, the medical
and other welfare benefits described herein shall be required only to the
extent not provided under such other plan during such applicable period of
eligibility. For purposes of determining eligibility of the Employee for
retiree benefits pursuant to such plans, practices, programs and policies,
the Employee shall be considered to have remained employed until the end of
the Employment Period and to have retired on the last day of such period;
and
(iii) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Employee and/or the Employee's family
for the remainder of the Employment Period any other amounts or benefits
required to be paid or provided or which the Employee and/or the Employee's
family is eligible to receive pursuant to this Agreement and under any
plan, program, policy or practice or contract or agreement of the Company
and its affiliated companies as in effect and applicable generally to other
employees of comparable rank with the Company and its affiliated companies
and their families during the 90-day period immediately preceding the
Change of Control Date or, if more favorable to the Employee, as in effect
generally thereafter with respect to other employees of comparable rank
with the Company and its affiliated companies and their families.
Such amounts received under this Section 5(b) shall be in lieu of any other
amount of severance relating to salary or bonus continuation to be received by
the Employee upon termination of employment of the Employee under any severance
plan, policy or arrangement of the Company.
(c) Termination as a Result of Death. If the Employee's employment is
terminated by reason of the Employee's death during the Employment Period, in
lieu of the obligations of the Company under Section 3, the Company shall pay or
provide to the Employee's estate (i) all Accrued Obligations (which shall be
paid in a lump sum in cash within 30 days after the Date of
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Termination) and the timely payment or provision of the Welfare Benefit
Continuation (as defined below) and the Other Benefits (as defined below) and
(ii) any cash amount to be received by the Employee or the Employee's family as
a death benefit pursuant to the terms of any plan, policy or arrangement of the
Company and its affiliated companies. "Welfare Benefit Continuation" shall mean
the continuation of benefits to the Employee and/or the Employee's family for
the longer of (i) two (2) year(s) from the Date of Termination or (ii) the
period provided by the plans, programs, policies or practices described in
Section 3(d) in which the Employee participates as of the Date of Termination,
such benefits to be at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 3(d) if the Employee's employment had not been terminated, in accordance
with the most favorable plans, practices, programs or policies of the Company
and its affiliated companies as in effect and applicable generally to other
employees of comparable rank and their families on the Date of Termination or,
if the Date of Termination occurs after the Change of Control Date, during the
90-day period immediately preceding the Change of Control Date or, if more
favorable to the Employee, as in effect generally at any time thereafter with
respect to other employees of comparable rank with the Company and its
affiliated companies and their families. "Other Benefits" shall mean the timely
payment or provision to the Employee and/or the Employee's family of any other
amounts or benefits required to be paid or provided or which the Employee and/or
the Employee's family is eligible to receive pursuant to this Agreement and
under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies as in effect and applicable generally to
other employees of comparable rank and their families on the Date of Termination
or, if the Date of Termination occurs after the Change of Control Date, during
the 90-day period immediately preceding the Change of Control Date or, if more
favorable to the Employee, as in effect generally thereafter with respect to
other employees of comparable rank with the Company and its affiliated companies
and their families.
(d) Termination as a Result of Disability. If the Employee's employment
is terminated by reason of the Employee's Disability during the Employment
Period, in lieu of the obligations of the Company under Section 3, the Company
shall pay or provide to the Employee (i) all Accrued Obligations which shall be
paid in a lump sum in cash within 30 days after the Date of Termination and the
timely payment or provision of the Welfare Benefit Continuation and the Other
Benefits, provided, however,
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that if the Employee becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer provided plan,
the Welfare Benefit Continuation shall be required only to the extent not
provided under such other plan during such applicable period of eligibility, and
(ii) any cash amount to be received by the Employee as a disability benefit
pursuant to the terms of any plan, policy or arrangement of the Company and its
affiliated companies.
(e) Cause; Other than for Good Reason. If the Employee's employment
shall be terminated during the Employment Period by the Company for Cause or by
the Employee other than during the Window Period and other than for Good Reason,
in lieu of the obligations of the Company under Section 3, the Company shall pay
to the Employee in a lump sum in cash within 30 days after the Date of
Termination all Unpaid Agreement Amounts.
6. Non-exclusivity of Rights. Except as provided in Sections 5(a),
5(b)(i)(B), 5(b)(ii), 5(c) and 5(d), nothing in this Agreement shall prevent or
limit the Employee's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Employee may qualify, nor shall anything herein limit or
otherwise affect such rights as the Employee may have under any contract or
agreement with the Company or any of its affiliated companies. Amounts which are
vested benefits or which the Employee is otherwise entitled to receive under any
plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement.
7. Full Settlement; Resolution of Disputes. (a) The Company's
obligation to make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Employee or others. In no event shall the Employee
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Employee under any of the provisions of
this Agreement and, except as provided in Sections 5(b)(ii) and 5(d), such
amounts shall not be reduced whether or not the Employee obtains other
employment. The Company agrees to pay promptly as incurred, to the full extent
permitted by law, all legal fees and expenses which the Employee may reasonably
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incur as a result of any contest (regardless of the outcome thereof) by the
Company, the Employee or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Employee about the amount
of any payment pursuant to this Agreement), plus in each case interest on any
payment required to be made under this Agreement but not timely paid at the rate
provided for in Section 280G(d)(4) of the Internal Revenue Code of 1986, as
amended (the "Code").
(b) If there shall be any dispute between the Company and the
Employee (i) in the event of any termination of the Employee's employment by the
Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Employee, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that the
determination by the Employee of the existence of Good Reason was not made in
good faith, the Company shall pay all amounts, and provide all benefits, to the
Employee and/or the Employee's family or other beneficiaries, as the case may
be, that the Company would be required to pay or provide pursuant to Section
5(a) or 5(b) as though such termination were by the Company without Cause or by
the Employee with Good Reason. The Employee hereby undertakes to repay to the
Company all such amounts to which the Employee is ultimately adjudged by such
court not to be entitled.
8. Certain Additional Payments by the Company. (a) Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution by the Company to or for the benefit of the
Employee (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 8) (a "Payment") would be
subject to the excise tax imposed by Section 4999 (or a successor provision of
like import) of the Code or any interest or penalties are incurred by the
Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed
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upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by an accounting
firm of national reputation selected by the Company (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and the
Employee within 15 business days of the receipt of notice from the Employee that
there has been a Payment, or such earlier time as is requested by the Company.
In the event that the Accounting Firm is serving (or has served within the two
(2) years preceding the Change of Control Date) as accountant or auditor for the
individual, entity or group effecting the Change of Control, or is unwilling or
unable to perform its obligations pursuant to this Section 8, the Employee shall
appoint another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 8, shall be paid by the Company to the Employee within five days of
the receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Employee, it shall furnish the
Employee with a written opinion that failure to report the Excise Tax on the
Employee's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and the Employee. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 8(c) and the Employee thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee.
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(c) The Employee shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Employee is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Employee gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Employee in writing prior to the
expiration of such period that it desires to contest such claim, the Company,
subject to the provisions of this Section 8(c), shall control all proceedings
taken in connection with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim and may, at its sole option,
either direct the Employee to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner. In this connection, the Employee
agrees, subject to the provisions of this Section 8(c), to (i) prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine, (ii) give the Company any information reasonably requested by the
Company relating to such claim, (iii) take such action in connection with
contesting such claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Company, (iv)
cooperate with the Company in good faith in order to effectively contest such
claim and (v) permit the Company to participate in any proceedings relating to
such claim. The foregoing is subject, however, to the following: (A) the Company
shall bear and pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such contest and shall
indemnify and hold the Employee harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect thereto)
imposed in connection therewith and the payment of costs and expenses in such
connection, (B) if the Company directs the Employee to pay such claim and sue
for a refund, the Company shall advance the amount of such payment to the
Employee, on an interest-free basis, and shall indemnify and hold the Employee
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed
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with respect to such advance or with respect to any imputed income with respect
to such advance, (C) any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Employee with respect to which such
contested amount is claimed to be due shall be limited solely to such contested
amount and (D) the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Employee shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 8(c), the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall (subject to the
Company's complying with the requirements of Section 8(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Employee
of an amount advanced by the Company pursuant to Section 8(c), a determination
is made that the Employee shall not be entitled to any refund with respect to
such claim and the Company does not notify the Employee in writing of its intent
to contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Employee
during the Employee's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Employee or representatives of the Employee in violation of this
Agreement). After termination of the Employee's employment with the Company or
any of its affiliated companies, the Employee shall not, without the prior
written consent of the Company or as may otherwise be required by law or legal
process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an
asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Employee under
this Agreement. Subject to the previous sentence, nothing herein shall be
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construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach, including the recovery of damages
from the Employee.
10. Employee's Obligation to Avoid Conflicts of Interest. (a) The
Employee shall comply with he conflict of interest policy of the Parent as in
effect from time to time.
11. Ownership of Information, Ideas, Concepts, Improvements,
Discoveries and Inventions and all Original Works of Authorship. (a) All
information, ideas, concepts, improvements, discoveries and inventions, whether
patentable or not, which are conceived, made, developed or acquired by Employee
or which are disclosed or made known to Employee, individually or in conjunction
with others, during Employee's employment by the Company or any of its
affiliated companies and which relate to the Company's or any of its affiliated
companies' business, products or services (including all such information
relating to corporate opportunities, research, financial and sales data, pricing
and trading terms, evaluations, opinions, interpretations, acquisition
prospects, the identity of customers or their requirements, the identity of key
contacts within the customer's organizations or within the organization of
acquisition prospects, or marketing and merchandising techniques, prospective
names and marks) are and shall be the sole and exclusive property of the
Company. Moreover, all drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, maps and all
other writings or materials of any type embodying any of such information,
ideas, concepts, improvements, discoveries and inventions are and shall be the
sole and exclusive property of the Company.
(b) In particular, Employee hereby specifically sells, assigns and
transfers to the Company all of his worldwide right, title and interest in and
to all such information, ideas, concepts, improvements, discoveries or
inventions, and any United States or foreign applications for patents,
inventor's certificates or other industrial rights that may be filed thereon,
including divisions, continuations, continuations-in-part, reissues and/or
extensions thereof, and applications for registration of such names and marks.
Both during the period of Employee's employment by the Company or any of its
affiliated companies and thereafter, Employee shall assist the Company and its
nominee at all times in the protection of such information, ideas, concepts,
improvements, discoveries or inventions, both in the United States and all
foreign countries, including but not
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limited to, the execution of all lawful oaths and all assignment documents
requested by the Company or its nominee in connection with the preparation,
prosecution, issuance or enforcement of any applications for United States or
foreign letters patent, including divisions, continuations,
continuations-in-part, reissues, and/or extensions thereof, and any application
for the registration of such names and marks.
(c) Moreover, if during Employee's employment by the Company or
any of its affiliated companies, Employee creates any original work of
authorship fixed in any tangible medium of expression which is the subject
matter of copyright (such as videotapes, written presentations on acquisitions,
computer programs, drawings, maps, architectural renditions, models, manuals,
brochures or the like) relating to the Company's or any of its affiliated
companies' business, products, or services, whether such work is created solely
by Employee or jointly with others, the Company shall be deemed the author of
such work if the work is prepared by Employee in the scope of his or her
employment; or, if the work is not prepared by Employee within the scope of his
or her employment but is specially ordered by the Company as a contribution to a
collective work, as a part of a motion picture or other audiovisual work, as a
translation, as a supplementary work, as a compilation or as an instrumental
text, then the work shall be considered to be work made for hire and the Company
shall be the author of the work. In the event such work is neither prepared by
the Employee within the scope of his or her employment or is not a work
specially ordered and deemed to be a work made for hire, then Employee hereby
agrees to assign, and by these presents does assign, to the Company all of
Employee's worldwide right, title and interest in and to such work and all
rights of copyright therein. Both during the period of Employee's employment by
the Company or any of its affiliated companies and thereafter, Employee agrees
to assist the Company and its nominee, at any time, in the protection of the
Company's worldwide right, title and interest in and to the work and all rights
of copyright therein, including but not limited to, the execution of all formal
assignment documents requested by the Company or its nominee and the execution
of all lawful oaths and applications for registration of copyright in the United
States and foreign countries.
12. Employee's Post-Employment Non-Competition Obligations. (a) During
the Employment Period and, subject to the conditions of Sections 12(b) and
12(c), for a period of two (2) year(s) thereafter (the "Non-Competition
Period"), Employee
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shall not, acting alone or in conjunction with others, directly or indirectly,
in any of the business territories in which the Company or any of its affiliated
companies is presently or at the time of termination of employment conducting
business, engage in any business in competition with the business conducted by
the Company or any of its affiliated companies at the time of the termination of
the employment relationship, whether for his own account or by soliciting,
canvassing or accepting any business or transaction for or from any other
company or business in competition with such business of the Company or any of
its affiliated companies.
(b) If Employee's employment is discontinued: (i) by Company for
Cause pursuant to Section 4(b); or (ii) by Employee because of any reason other
than for Good Reason or other than during the Window Period pursuant to Section
4(c), Employee shall be bound by the obligations of Section 12(a) and the
Company shall have no obligation to make the Non-Competition Payments (as
defined in Section 12(c) below). However, if the employment relationship is
terminated by any other circumstance or for any other reason, Employee's
post-employment non-competition obligations required by Section 12(a) shall be
subject to the Company's obligation to make the Non-Competition Payments
specified in Section 12(c).
(c) Notwithstanding the provisions of Section 4 of this Agreement,
whenever Employee's employment is terminated due to the expiration of the
Employment Period in accordance with the provisions of Section 1, or due to
Employee's Disability (Section 4(a)), or by the Company without Cause (Section
4(b)), or by Employee for Good Reason or during the Window Period pursuant to
Section 4(c) unless the Company exercises its option as hereinafter provided,
Employee shall be entitled to continue to receive payments (the "Non-Competition
Payments") equal to his then current Annual Base Salary (as of the Date of
Termination) during the Non-Competition Period. During the Non-Competition
Period, the Employee shall not, however, be deemed to be an employee of the
Company or be entitled to continue to receive any other employee benefits other
than as set forth in Section 5 or Section 8. Moreover, the Non-Competition
Payments shall be reduced to the extent Employee has already received lump-sum
payments in lieu of salary pursuant to Section 5. The Company shall have the
option, exercisable at any time on or within one (1) month after: (i) the date
the Company gives the Employee notice that the Employment Period will not be
extended (or in the case of failure to notify, on or within one month after the
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Renewal Deadline), in accordance with Section 1; or (ii) in the case of
termination due to Employee's disability or by the Company without Cause, the
Date of Termination, to cancel Employee's post-employment non-competition
obligations under Section 12(a) and the Company's corresponding obligation to
make the Non-Competition Payments. Such option shall be exercised by the Company
mailing a written notice thereof to Employee in accordance with Section 16(b);
if the Company does not send such notice within the prescribed one-month period,
the Company shall remain obligated to make the Non-Competition Payments and
Employee shall remain obligated to comply with the provisions of Section 12(a).
The amounts to be paid by the Company are not intended to be liquidated damages
or an estimate of the actual damages that would be sustained by the Company if
Employee breaches his post-employment non-competition obligations. If Employee
breaches his post-employment non-competition obligations, the Company shall be
entitled to cease making the Non-Competition Payments and shall be entitled to
all of its remedies at law or in equity for damages and injunctive relief.
13. Obligations to Refrain From Competing Unfairly. In addition to the
other obligations agreed to by Employee in this Agreement, Employee agrees that
during the Employment Period and for two (2) year(s) following the Date of
Termination, he shall not at any time, directly or indirectly for the benefit of
any other party than the Company or any of its affiliated companies, (a) induce,
entice, or solicit any employee of the Company or any of its affiliated
companies to leave his employment, or (b) contact, communicate or solicit any
customer of the Company or any of its affiliated companies derived from any
customer list, customer lead, mail, printed matter or other information secured
from the Company or any of its affiliated companies or their present or past
employees, or (c) in any other manner use any customer lists or customer leads,
mail, telephone numbers, printed material or material of the Company or any of
its affiliated companies relating thereto.
14. Successors. (a) This Agreement is personal to the Employee and
without the prior written consent of the Company shall not be assignable by the
Employee otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Employee's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
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(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. The Parent will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Parent or the Parent to
assume expressly and agree to perform the Parent's obligations hereunder in the
same manner and to the same extent that the Parent would be required to perform
them if no such succession had taken place. As used in this Agreement, "Parent"
shall mean the Parent as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform the Parent's
obligations hereunder by operation of law, or otherwise.
15. Certain Definitions. The following defined terms used in this
Agreement shall have the meanings indicated:
(a) The "Change of Control Date" shall mean the first date on
which a Change of Control occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Employee's employment
with the Company is terminated or there is a change in the circumstances of the
Employee's employment which constitutes Good Reason, and if it is reasonably
demonstrated by the Employee that such termination or change in circumstances:
(i) was at the request of a third party who has taken steps reasonably
calculated to effect the Change of Control; or (ii) otherwise arose in
connection with or anticipation of the Change of Control, then, for all purposes
of this Agreement, the "Change of Control Date" shall mean the date immediately
prior to the date of such termination or cessation.
(b) The "Change of Control Period" shall mean the period
commencing on the Change of Control Date and ending on the last day of the
Employment Period.
(c) "Change of Control" shall mean:
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(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended the "Exchange Act") (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either (A) the then outstanding shares of Common
Stock of the Parent (the "Outstanding Parent Common Stock") or (B) the
combined voting power of the then outstanding voting securities of the
Parent entitled to vote generally in the election of directors (the
"Outstanding Parent Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Parent (excluding an acquisition by virtue of
the exercise of a conversion privilege), (B) any acquisition by the Parent,
(C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Parent or any corporation controlled by the
Parent or (D) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses (A), (B) and
(C) of subsection (iii) of this definition of "Change of Control" are
satisfied; or
(ii) Individuals who, as of the effective date hereof, constitute
the Board of Directors of the Parent (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors of the
Parent; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Parent's shareholders, was approved by (A) a vote of at least a
majority of the directors then constituting the Incumbent Board of the
Parent, or (B) a vote of at least a majority of the directors then
comprising the Executive Committee of the Board of Directors of the Parent
at a time when such committee consisted of at least five members and all
members of such committee were either members of the Incumbent Board or
considered as being members of the Incumbent Board pursuant to clause (A)
of this subsection (ii), shall be considered as though such individual were
a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of either
an actual or threatened election contest (as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board of Directors of the Parent; or
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(iii) Approval by the shareholders of the Parent of a
reorganization, merger or consolidation, in each case, unless, following
such reorganization, merger or consolidation, (A) more than 60% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation and
the combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively,
of the Outstanding Parent Common Stock and Outstanding Parent Voting
Securities immediately prior to such organization, merger or consolidation
in substantially the same proportions as their ownership, immediately prior
to such reorganization, merger or consolidation, of the Outstanding Parent
Common Stock and Outstanding Parent Voting Securities, as the case may be,
(B) no Person (excluding the Parent, any employee benefit plan or related
trust of the Parent or such corporation resulting from such reorganization,
merger or consolidation and any Person beneficially owning, immediately
prior to such reorganization, merger or consolidation, directly or
indirectly, 20% or more of the Outstanding Parent Common Stock or
Outstanding Parent Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation or the combined voting power of the
then outstanding voting securities of such corporation entitled to vote
generally in the election of directors and (C) at least a majority of the
members of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent Board
at the time of the execution of the initial agreement providing for such
reorganization, merger or consolidation; or
(iv) Approval by the shareholders of the Parent of (A) a complete
liquidation or dissolution of the Parent or (B) the sale or other
disposition of all or substantially all of the assets of the Parent, other
than to a corporation, with respect to which following such sale or other
disposition, (A) more than 60% of, respectively, the
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then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively,
of the Outstanding Parent Common Stock and Outstanding Parent Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to
such sale or other disposition, of the Outstanding Parent Common Stock and
Outstanding Parent Voting Securities, as the case may be, (B) no Person
(excluding the Parent and any employee benefit plan or related trust of the
Parent or such corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or indirectly, 20% or
more of the Outstanding Parent Common Stock or Outstanding Parent Voting
Securities, as the case may be) beneficially owns, directly or indirectly,
20% or more of, respectively, the then outstanding shares of common stock
of such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the
election of directors and (C) at least a majority of the members of the
Board of Directors of such corporation were members of the Incumbent Board
at the time of the execution of the initial agreement or action of the
Board of Directors of the Parent providing for such sale or other
disposition of assets of the Parent.
(d) The term "affiliated company" shall mean any company
controlled by, controlling or under common control with the Company.
(e) The term "Highest Recent Bonus" shall mean the highest Annual
Bonus (annualized for any fiscal year consisting of less than twelve full
months) paid or payable, including by reason of any deferral, to the Employee by
the Company and its affiliated companies in respect of the three most recent
full fiscal years ending on or prior to, (i) if prior to a Change of Control,
the Date of Termination, or (ii) if after a Change of Control, the Change of
Control Date.
16. Miscellaneous. (a) This Agreement supersedes all previous
agreements and discussions relating to the same or similar subject matters
between Employee and the Company and shall be governed by and construed in
accordance with the laws of the
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State of Texas, without reference to principles of conflict of laws. The
captions of this Agreement are not part of the provisions hereof and shall have
no force or effect. This Agreement may not be amended, modified, repealed,
waived, extended or discharged except by an agreement in writing signed by the
party against whom enforcement of such amendment, modification, repeal, waiver,
extension or discharge is sought. No person, other than pursuant to a resolution
of the Board or a duly authorized committee thereof, shall have authority on
behalf of the Company or the Parent to agree to amend, modify, repeal, waive,
extend or discharge any provision of this Agreement or anything in reference
thereto.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Employee:
James M. Shelger
15 The Oval
Sugar Land, TX 77479
If to the Company:
SCI Executive Services, Inc.
1929 Allen Parkway
Houston, Texas 77019
Attention: Corporate Secretary
If to the Parent:
Service Corporation International
1929 Allen Parkway
Houston, Texas 77019
Attention: Corporate Secretary
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
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(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(e) The Employee's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Employee or the Company may have hereunder,
including, without limitation, the right of the Employee to terminate employment
for Good Reason pursuant to Section 4(c) of this Agreement, shall not be deemed
to be a waiver of such provision or right or any other provision or right of
this Agreement.
(f) No breach, whether actual or alleged, of this Agreement by the
Employee shall constitute grounds for the Company to withhold or offset any
payment or benefit due to the Employee under any other agreement, contract,
plan, program, policy or practice of the Company.
IN WITNESS WHEREOF, the Employee and, pursuant to due authorization
from the Board, the Company have caused this Agreement to be executed this 1st
day of January, 1999.
JAMES M. SHELGER
/s/ James M. Shelger
-------------------------------
"EMPLOYEE"
SCI EXECUTIVE SERVICES, INC.
By: /s/ Curtis G. Briggs
-----------------------------
Name: Curtis G. Briggs
Title: Vice President
"COMPANY"
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Pursuant to due authorization from its Board of Directors, the Parent,
by its execution hereof, absolutely and unconditionally guarantees to Employee
the full and timely payment and performance of each obligation of the Company to
Employee under this Agreement, waives any and all rights that it may otherwise
have to require Employee to proceed against the Company for nonpayment or
nonperformance, waives any and all defenses that would otherwise be a defense to
this guarantee, and agrees to remain liable to Employee for all payment and
performance obligations of the Company under this Agreement, whether arising
before, on or after the date of this Agreement, until this Agreement shall
terminate pursuant to its terms.
SERVICE CORPORATION INTERNATIONAL
By: /s/ Jack L. Stoner
---------------------------------
Name: Jack L. Stoner
Title: Senior Vice President
Administration
"PARENT"
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