EMPLOYMENT AND NONCOMPETITION
AGREEMENT
THIS AGREEMENT is
made and effective this 1st day of January, 2004 between SCI
Executive Services, Inc., a Delaware corporation (the
“Company”), and James M. Shelger (the
“Employee”):
1.1 Employment
Term. The Company agrees to employ the Employee and the Employee
agrees to accept such employment, in accordance with the terms and
conditions of this Agreement, for the period beginning on the date
of this Agreement and ending as of the close of business on
December 31, 2004 (such period together with all extensions thereof
are referred to hereinafter as the “Employment Term”);
provided, however, that commencing on January 1, 2005, and on
each January 1 thereafter (each such date shall be hereinafter
referred to as a “Renewal Date”), the Employment Term
shall be extended so as to terminate one year from such Renewal
Date if (i) the Company notifies the Employee in writing of
such extension at least thirty days prior to such Renewal Date and
(ii) the Employee has not previously given the Company written
notice that the Employment Term shall not be so extended. In the
event that the Company gives the Employee written notice at any
time of its intention not to renew the Employment Term, then the
Employment Term shall terminate on December 31 of the year in
which such notice of non-renewal is given and shall not thereafter
be further extended. If the Company fails to notify the Employee at
least thirty days prior to a Renewal Date either of its intention
to extend the Employment Term as provided above or its intention
not to so extend the Employment Term, then the Employment Term
shall not be extended and shall terminate as of the day prior to
such Renewal Date.
1.2 Duties. The
Employee shall serve the Company in an executive or managerial
capacity and shall hold such title as may be authorized from time
to time by the Board of Directors of Service Corporation
International (“SCI”). The Employee shall have the
duties, powers and authority consistent therewith and such other
powers as are delegated to him in writing from time to time by the
Board of Directors of SCI. If the Employee is elected to any office
or other position with the Company during the term of this
Agreement, the Employee will serve in such capacity or capacities
without further compensation unless the Compensation Committee (the
“Compensation Committee”) of the Board of Directors of
SCI authorizes additional compensation. The Employee’s title
and duties may be changed from time to time at the discretion of
the Company. The Employee also agrees to perform, without
additional compensation, such other services for the Company and
for any subsidiary or affiliated corporations of the Company or for
any partnerships in which the Company has an interest, as the
Company shall from time to time specify. The term
“Company” as used hereinafter shall be deemed to
include and refer to subsidiaries and affiliated corporations and
partnerships. Employee agrees and acknowledges that he owes, and
will comply with, a fiduciary duty of loyalty, fidelity and
allegiance to act at all times in the best interests of the Company
and to take no action or fail to take action if such action or
failure to act would injure the Company’s business, its
interests or its reputation.
1.3 Extent of
Service. During the Employment Term, the Employee shall devote his
full time, attention and energy to the business of the Company,
and, except as may be specifically permitted by the Company, shall
not be engaged in any other business activity during the term of
this Agreement. The foregoing shall not be construed as preventing
the Employee from making passive investments in other businesses or
enterprises, provided, however, that such investments will not:
(1) require services on the part of the Employee which would
in any way impair the performance of his duties under this
Agreement, or (2) in any manner significantly interfere with
Employee’s responsibilities as an Employee of the Company in
accordance with this Agreement.
(a) Salary.
The Company shall pay to the Employee a salary at the rate in
effect for Employee at the date of this Agreement. Such salary is
to be payable in installments in accordance with the payroll
policies of the Company in effect from time to time during the term
of this Agreement. The Company may (but is not required to) make
such upward adjustments to the Employee’s salary as it deems
appropriate from time to time.
(b) Incentive
Compensation. In addition to the above salary, the Employee shall
be eligible annually for incentive compensation at the discretion
of the Compensation Committee.
(c) Other
Benefits. The Employee shall be reimbursed in accordance with the
Company’s normal expense reimbursement policy for all of the
actual and reasonable costs and expenses accrued by Employee in the
performance of his or her services and duties hereunder, including
but not limited to, travel and entertainment expenses. The Employee
shall be entitled to participate in all insurance, stock options,
retirement plans and other benefit plans or programs as may be from
time to time specifically adopted and approved by the Company for
its employees, in accordance with the eligibility requirements and
any other terms and conditions of such plans. It is understood and
agreed between the parties hereto that the Company reserves the
right, at its sole discretion, to modify, amend or terminate such
plans, programs or benefits at any time.
(a) Death.
If the Employee dies during the term of this Agreement and while in
the employ of the Company, this Agreement shall automatically
terminate and the Company shall have no further obligation to the
Employee or his estate except that (i) the Company shall
continue to pay the Employee’s estate the Employee’s
salary in installments through the end of the Employment Term which
was in effect immediately prior to Employee’s death, and
(ii) the Company shall pay the Employee’s estate any
applicable Pro Rated Bonus (defined hereinbelow).
(b) Disability.
If during the term of this Agreement, the Employee shall be
prevented from performing his duties hereunder by reason of
disability, then the Company, on 30 days’ prior notice
to the Employee, may terminate Employee’s employment under
this Agreement. For purposes of this Agreement, the Employee shall
be deemed to have become disabled when the Company, upon the advice
of a qualified physician, shall have determined that the Employee
has become physically or mentally incapable (excluding infrequent
and temporary absences due to
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ordinary
illness) of performing his duties under this Agreement. In the
event of a termination pursuant to this paragraph 1.5(b), the
Company shall be relieved of all of its obligations under this
Agreement, except that the Company shall pay to the Employee (or
his estate, in the event of his subsequent death), (i) the
Employee’s salary in installments through the end of the
Employment Term which was in effect immediately prior to
Employee’s disability, and (ii) any applicable Pro Rated
Bonus. Before making any termination decision pursuant to this
Section 1.5(b), the Company shall determine whether there is
any reasonable accommodation (within the meaning of the Americans
With Disabilities Act) which would enable the Employee to perform
the essential functions of the Employee’s position under this
Agreement despite the existence of any such disability. If such a
reasonable accommodation is possible, the Company shall make that
accommodation and shall not terminate the Employee’s
employment hereunder during the Employment Term based on such
disability.
(c) Certain
Discharges. Prior to the end of the Employment Term, the Company
may discharge the Employee for Cause and terminate Employee’s
employment hereunder without notice and without any further
liability hereunder to Employee or his estate. For purposes of this
Agreement, “Cause” shall mean a determination by the
Company that Employee: (i) has been convicted of a crime
involving moral turpitude; (ii) has regularly failed or
refused to follow policies or directives established by the Company
or the Board of Directors of SCI; (iii) has willfully and
persistently failed to attend to his duties; (iv) has
committed acts amounting to gross negligence or willful misconduct
to the detriment of the Company or its affiliates; (v) has
violated any of his obligations under Articles II or III of this
Agreement; or (vi) has otherwise breached any of the terms or
provisions of this Agreement.
(d) Without
Cause. Prior to the end of the Employment Term, the employment of
the Employee with the Company may be terminated by the Company
other than for Cause, death or disability. If such event occurs
prior to a Change of Control (defined hereinbelow), the Company
shall have no further obligation to Employee or his estate except
that the Company shall pay or provide to the Employee (or his
estate, in the event of his subsequent death), (i) the
Employee’s salary as in effect immediately prior to
Employee’s termination in installments for a period ending
two years from such date of termination, provided that the Company
at its sole option may prepay all or any portion of such payments
at any time, (ii) any applicable Pro Rated Bonus and
(iii) continuation of Employee’s Group Health and Dental
coverage and Exec-U-Care program (including pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1986
(“Cobra”) to the extent applicable) for a period of
twenty-four months beginning the month following such date of
termination, with Employee paying such amount of premiums as would
have been applicable if Employee had remained an employee of the
Company.
(e) Voluntary
Termination by Employee. If during the term of this Agreement, the
Employee voluntarily terminates his employment with the Company
prior to any Change of Control, the Company shall be relieved of
all of its obligations under this Agreement, except that the
Company shall pay the Employee (or his estate, in the event of his
subsequent death) (i) the Employee’s salary through the
date of Employee’s termination, and (ii) any incentive
compensation under Section 1.4(b) determined by the Compensation
Committee for any fiscal period ended prior to the date of
Employee’s termination which had not been paid at the time of
his termination. All such payments to the Employee or his estate
shall be made in the same
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manner and at
the same times as the Employee’s salary or incentive
compensation would have been paid to the Employee had he not
terminated his employment.
(f) Change
of Control. If (i) a Change of Control occurs during the
Employment Term and (ii) within twenty four months after such
Change of Control the Employee’s employment is
(x) terminated by the Company other than for Cause, death or
disability, or (y) terminated by Employee after an occurrence
of any Good Reason (except under circumstances which would be
grounds for termination of Employee by the Company for Cause), then
the Company shall be relieved of all of its obligations under this
Agreement, except that the Company shall pay or provide the
Employee (or his estate, in the event of his subsequent death) the
following amounts:
(1) Three,
multiplied by the sum of Employee’s most recently set Target
Bonus plus his annual salary in effect immediately prior to the
Change of Control, which amount will be paid in a lump sum in cash
within 30 days after the Employee’s date of termination;
and
(2) Partial
Bonus, to be paid within 30 days after the Employee’s
date of termination; and
(3) Continuation
of Employee’s Group Health and Dental coverage and
Exec-U-Care program (including pursuant to COBRA to the extent
applicable) for a period of thirty-six months beginning the month
following such date of termination, with Employee paying such
amount of premiums as would have been applicable if Employee had
remained an employee of the Company.
In addition,
Company shall pay to Employee an amount that, on an after-tax basis
(including federal income, employment, excise and social security
taxes, state and local income and employment taxes, and any other
applicable taxes), equals any excise tax that is determined to be
payable by Employee pursuant to Section 4999 (or any successor
provision) of the Internal Revenue Code of 1986, as amended (and
any interest or penalties related to the imposition of such excise
tax) at any time, by reason of both entitlements under this
Agreement (including any and all payments under this
Section 1.5(f)) and entitlements outside of this Agreement
that are described in Section 280G(b)(2)(A)(i) of the Code (or any
successor provision) with reference to Company. For purposes of
this paragraph, Employee shall be deemed to pay federal, state and
local income taxes at the highest marginal rate of taxation. Such
amount will be made payable by Company or its successor within
thirty (30) days after Employee delivers a written request for
reimbursement accompanied by a statement from a nationally
recognized legal, consulting or accounting firm as may be agreed to
by the parties setting forth the amount owed pursuant to this
paragraph. Company shall pay all fees and costs incurred by
Employee related to the preparation, delivery and resolution of
such written request for reimbursement.
The obligations of
the Company under this Section 1.5(f) shall remain in effect
for twenty-four months after any Change of Control that occurs
during the Employment Term notwithstanding the fact that such
twenty four month period may extend beyond the expiration of the
Employment Term.
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(g) Post
Employment Term Matters. In the event the Employment Term
terminates because it is not extended or renewed pursuant to
Section 1.1, then the Company shall be relieved of all of its
obligations under this Agreement and Employee will thereafter be an
employee “at will” of the Company.
2.1
Nondisclosure of Information. The Employee acknowledges that in the
course of his employment by the Company he will receive certain
trade secrets, which may include, but are not limited to, programs,
lists of acquisition or disposition prospects and knowledge of
acquisition strategy, financial information and reports, lists of
customers or potential customers and other confidential information
and knowledge concerning the business of the Company (hereinafter
collectively referred to as “Information”) which the
Company desires to protect. The Employee understands that the
Information is confidential and agrees not to reveal the
Information to anyone outside the Company so long as the
confidential or secret nature of the Information shall continue,
unless compelled to do so by any federal or state regulatory agency
or by a court order. If Employee becomes aware that disclosure of
any Information is being sought by such an agency or through a
court order, Employee will immediately notify the Company. The
Employee further agrees that he will at no time use the Information
in competing with the Company. Upon termination of Employee’s
employment with the Company, the Employee shall surrender to the
Company all papers, documents, writings and other property produced
by him or coming into his possession by or through his employment
or relating to the Information, and the Employee agrees that all
such materials are and will at all times remain the property of the
Company and to the extent the Employee has any rights therein, he
hereby irrevocably assigns such rights to the Company.
2.2 Disclosure of
Information, Ideas, Concepts, Improvements, Discoveries and
Inventions. As part of the Employee’s fiduciary duties to the
Company, Employee agrees that during his employment by the Company,
and for a period of six months after the termination of the
employment relationship for any reason, Employee shall promptly
disclose in writing to the Company all information, ideas,
concepts, improvements, discoveries and inventions, whether
patentable or not, and whether or not reduced to practice, which
are conceived, developed, made or acquired by Employee, either
individually or jointly with others, and which relate to the
business, products or services of the Company or any of its
subsidiaries or affiliates, irrespective of whether Employee
utilized the Company’s time or facilities and irrespective of
whether such information, idea, concept, improvement, discovery or
invention was conceived, developed, discovered or acquired by the
Employee on the job, at home, or elsewhere. This obligation extends
to all types of information, ideas and concepts, including
information, ideas and concepts relating to new types of services,
corporate opportunities, acquisition prospects, the identity of key
representatives within acquisition prospect organizations,
prospective names or service marks for the Company’s business
activities, and the like.
2.3 Ownership of
Information, Ideas, Concepts, Improvements, Discoveries and
Inventions and All Original Works of Authorship.
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(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 and which relate
to the Company’s business, products or services (including
but not limited to 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 organization
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 a
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