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<!-- Begin Block Tagged Note 13 - us-gaap:DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>NOTE 13. STOCK-BASED COMPENSATION</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">We have stock-based compensation plans under which employees and non-employee directors may be
granted options to purchase shares of Company common stock at the fair market value at the time of
grant. In addition to stock options, the Company grants performance-based stock options,
performance share units (“PSUs”) and deferred stock share awards otherwise known as restricted
stock units (“RSUs”) to certain management level employees and vested deferred stock to
non-employee directors. We also offer eligible employees the opportunity to buy shares of our
common stock at a discount via an Employee Stock Purchase Plan (“ESPP”). The ESPP was approved by
our shareholders in February 2009 and did not have a significant impact on our financial statements
in fiscal years 2010 and 2009.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Our primary stock-based compensation program is the Stock Incentive Plan, which has been approved
by our shareholders. In February 2009, our shareholders approved an amendment to the Stock
Incentive Plan to reserve an additional 5.5 million shares for issuance increasing the total number
of shares authorized to 15.3 million shares. At September 30, 2010, 6.7 million shares were
available for future grants under our stock-based compensation plans. We generally settle our
stock-based awards with treasury shares. As of September 30, 2010, we had 17.5 million treasury
shares available for use to settle stock-based awards.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The following table sets forth a summary of the annual stock-based compensation cost that was
charged against income for all types of awards for fiscal years 2010, 2009 and 2008:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total stock-based compensation cost (pre-tax)
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>12.0</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">12.1</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">23.2</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total income tax benefit
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>(4.4</b></td>
<td nowrap="nowrap"><b>)</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(4.5</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(8.6</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total stock-based compensation cost, net of tax
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>7.6</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7.6</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">14.6</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Allocated to discontinued operations
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>—</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3.7</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Included in continuing operations
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>7.6</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7.6</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">10.9</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Modification Due to the Spin-off</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">As mentioned previously, on March 31, 2008, we completed the spin-off of Hillenbrand, Inc., our
former funeral services business operating under the Batesville Casket name. In March 2008, in
contemplation of the spin-off, the Board of Directors’ Compensation and Management Development
Committee (“Compensation Committee”) modified the terms of our Stock Incentive Plan to require the
equitable conversion and/or adjustment of outstanding stock-based awards in the event of the
spin-off. With that modification, the fair values of all outstanding stock option awards were
remeasured. As a result, the modification related to certain stock options resulted in incremental
compensation cost of $9.8 million. Of this amount, $7.1 million was recorded in our second fiscal
quarter of 2008 for vested stock options ($1.3 million in discontinued operations) and $2.7
million, reduced for forfeitures, have been subject to amortization over the remaining vesting
periods of the affected stock options ending in 2010 (all in continuing operations). Additionally,
the vesting of certain RSUs held by employees of the funeral services business was accelerated
according to provisions triggered by the spin-off. As a result of the accelerated vesting of these
RSUs, a $3.2 million charge was recorded in our second fiscal quarter of 2008, all of which was
reflected within discontinued operations.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Pursuant to the modification described above, stock options and RSUs outstanding and held by
current employees and current board members of either of the separated companies on the date of the
spin-off were generally converted to stock options and RSUs in the post-spin company for whom they
were employed or served. As such, stock options and RSUs held by Hill-Rom employees, as well as
stock options and RSUs held by directors who serve on only the Hill-Rom Board, remained as Hill-Rom
stock options and RSUs and were adjusted. The outstanding stock options and related exercise prices
and RSUs were converted and/or adjusted using a ratio based on our closing stock price ($25.99)
divided by the sum of our closing stock price and Hillenbrand, Inc.’s closing stock price ($22.10)
on March 31, 2008, as reported by the New York Stock Exchange. Thus, immediately after the
spin-off, the awards maintained the same intrinsic value that existed immediately before the
spin-off.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Performance-based stock awards were generally converted or adjusted in a similar manner to
outstanding stock options and RSUs. Vested deferred stock, which are stock awards which have been
vested and elected by current or former employees or directors to be distributed in the future, as
well as stock awards of retirees of either company, common directors of both companies, and former
Hill-Rom directors, were converted to stock awards in both companies using the conversion ratio
outlined above.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The following sets forth further details on our stock options, performance-based stock options,
RSUs, PSUs and vested deferred stock.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Stock Options</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Stock options granted by our Compensation Committee under the Stock Incentive Plan are
non-qualified stock options. These awards are generally granted with exercise prices equal to the
average of the high and low prices of our common stock on the date of grant. They vest in equal
annual installments over a three or four year period and the maximum contractual term is ten years.
We use a Binomial option-pricing model to estimate the fair value of stock options, and
compensation cost is recognized on a straight-line basis over the requisite service period.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The following table sets forth the weighted average fair value per share of stock options and the
related valuation assumptions used in the determination of those fair values for fiscal years 2010,
2009 and 2008, excluding performance-based stock options:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">After March 31</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Before March 31</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average fair value per share
</div></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>7.86</b></td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5.63</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8.52</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">12.43</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Valuation assumptions:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Risk-free interest rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>2.4</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td nowrap="nowrap" align="right">0.8 – 2.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td nowrap="nowrap" align="right">1.6 – 3.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td nowrap="nowrap" align="right">2.9 – 3.9</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Expected dividend yield
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>1.7</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">1.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">1.6</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td nowrap="nowrap" align="right">1.8 – 2.1</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Expected volatility
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right"><b>37.2</b></td>
<td nowrap="nowrap"><b>%</b></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">30.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">28.0</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">21.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Weighted average expected life
</div></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right"><b>5.6</b></td>
<td nowrap="nowrap"><b>  years</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">6.2</td>
<td nowrap="nowrap">  years</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">7.2</td>
<td nowrap="nowrap">  years</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">8.2</td>
<td nowrap="nowrap">  years</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The risk-free interest rate is based upon observed U.S. Treasury interest rates appropriate for the
term of our employee stock options. Expected dividend yield is based on the history and our
expectation of dividend payouts. Expected volatility for options granted after the spin-off and
during fiscal years 2010 and 2009 was based on the median volatility of our Peer Group. For options
granted prior to the spin-off, expected volatility was based on historical experience. Expected
life represents the weighted average period the stock options are expected to remain outstanding
and is a derived output of the Binomial model. The expected life of employee stock options is
impacted by the above assumptions as well as the post-vesting forfeiture rate and the exercise
factor used in the Binomial model. These two variables are based on the history of exercises and
forfeitures for previous stock options granted by Hillenbrand Industries, Inc., predecessor to the
Company.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The following table summarizes transactions under our stock option plans, excluding
performance-based stock options, for fiscal year 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Average</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Average</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Aggregate</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Number of</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Average</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Remaining</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Intrinsic</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Shares</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Exercise</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Contractual</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Value (1)</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(in thousands)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Price</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Term</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(in millions)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance Outstanding at October 1, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right">3,370</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">26.46</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">736</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">24.29</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Exercised
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(821</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">26.50</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Cancelled/Forfeited
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(365</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">25.48</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Balance Outstanding at September 30, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>2,920</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>26.02</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>7.0</b></td>
<td nowrap="nowrap"><b>  years</b></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>28.8</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Exercisable at September 30, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,482</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>28.95</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>5.5</b></td>
<td nowrap="nowrap"><b>  years</b></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>10.3</b></td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Options Expected to Vest</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>1,250</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>22.99</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>8.5</b></td>
<td nowrap="nowrap"><b>  years</b></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>16.1</b></td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>
<div style="text-align: justify">The aggregate intrinsic value represents the total pre-tax intrinsic value, based on our
closing stock price of $35.89, as reported by the New York Stock Exchange on September 30, 2010.
This amount, which changes continuously based on the fair value of our common stock, would have
been received by the option holders had all option holders exercised their options as of the
balance sheet date.
</div></td>
</tr>
</table>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The total intrinsic value of options exercised during fiscal years 2010, 2009 and 2008 was $3.9
million, $15 thousand and $1.6 million. Amounts related to periods prior to March 31, 2008, include
options exercised by employees of our former funeral services business.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">As of September 30, 2010, there was $6.3 million of unrecognized compensation expense related to
stock options granted under the Plan. This unrecognized compensation expense does not reflect a
reduction for our estimate of potential forfeitures, and is expected to be recognized over a
weighted average period of 2.7 years.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Performance-Based Stock Options</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Our Compensation Committee sometimes grants performance-based stock options to a limited number of
our executives. These awards are consistent with our compensation program’s guiding principles and
are designed to align management’s interests with those of shareholders. Option prices and the term
of such awards are similar to our stock options; however, vesting of the performance grants is
contingent upon the achievement of performance targets and corresponding service requirements.
Performance targets are set at the date of grant with a threshold, target and maximum level. The
number of options that ultimately vests increases at each level of performance attained. Expense
recognized to date related to performance-based stock options has not been significant.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The fair values of the performance options are estimated on the date of the grant using the
Binomial option-pricing model and related valuation assumptions for stock options, as previously
discussed. For certain performance awards with a market condition such as total shareholder return,
as described below, a Monte-Carlo simulation method is used to determine fair value. The
Monte-Carlo simulation is a generally accepted statistical technique used to generate a defined
number of stock price paths in order to develop a reasonable estimate of the range of future
expected stock prices of the Company and the Peer Group and minimizes standard error.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">As of September 30, 2010, the total number of performance-based stock options granted and
outstanding ranged from approximately 0.3 million shares at the threshold performance level of
achievement to approximately 0.9 million shares at maximum achievement. There was $2.3 million of
unrecognized compensation expense as of September 30, 2010 related to performance-based stock
options. This unrecognized compensation expense does not reflect a reduction for our estimate of
potential forfeitures, and will be recognized by the end of fiscal 2011 if performance targets are
met. The amount of unrecognized compensation expense for performance-based stock options that we
ultimately realize is subject to change based on the probable achievement of the established
performance targets, which are assessed each quarter.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">There were no performance-based stock options granted during fiscal year 2010. The following table
sets forth the weighted average fair value per share for performance-based stock options and the
related valuation assumptions used in the determination of those fair values for fiscal years 2009
and 2008.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted average fair value per share
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">4.88</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">7.20</td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Valuation assumptions:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Risk-free interest rate
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td nowrap="nowrap" align="right">0.8 – 2.7</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td nowrap="nowrap" align="right">1.6 – 3.5</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Expected dividend yield
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">1.5</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">1.6</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Expected volatility
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">30.4</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">28.0</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Weighted average expected life
</div></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">6.2</td>
<td nowrap="nowrap">  years</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="right">7.6</td>
<td nowrap="nowrap">  years</td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The basis for the assumptions listed above is similar to the valuation assumptions used for
non-performance-based stock options, as discussed previously.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The following table summarizes our stock option activity related to performance-based stock options
for fiscal year 2010. None of the performance-based stock options were exercisable as of September
30, 2010.
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Average</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Average</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Aggregate</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Number of</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Average</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Remaining</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Intrinsic</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Shares</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Exercise</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Contractual</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Value (1)</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(in thousands)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Price</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Term</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(in millions)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Balance Outstanding at October 1, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right">2,343</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">22.10</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Exercised
</div></td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Cancelled/Forfeited
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,446</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">23.79</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Balance Outstanding at September 30, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>897</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>19.39</b></td>
<td> </td>
<td> </td>
<td> </td>
<td align="right"><b>8.2</b></td>
<td nowrap="nowrap"><b>  years</b></td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>14.8</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>
<div style="text-align: justify">The aggregate intrinsic value represents the total pre-tax intrinsic value, based on our
closing stock price of $35.89, as reported by the New York Stock Exchange on September 30, 2010.
This amount, which changes continuously based on the fair value of our common stock, would have
been received by the option holders had the maximum performance targets been achieved and all
option holders met the maximum performance targets and exercised their options as of the balance
sheet date.
</div></td>
</tr>
</table>
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Restricted Stock Units</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">RSUs are granted to certain employees with fair values equal to the average of the high and low
prices of our common stock on the date of grant, multiplied by the number of units granted. RSU
grants are contingent upon continued employment and vest over periods ranging from one to five
years. Dividends, payable in common stock equivalents, accrue on the grants and are subject to the
same specified terms as the original grants, including the risk of forfeiture.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">The following table summarizes transactions for our nonvested RSUs for fiscal year 2010:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Weighted</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Number of</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Average</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Share Units</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2">Grant Date</td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Restricted Stock Units</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">(in thousands)</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000">Fair Value</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Nonvested RSUs at October 1, 2009
</div></td>
<td> </td>
<td> </td>
<td align="right">799</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">25.15</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">415</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">25.15</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Vested
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(283</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">27.24</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Forfeited
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(138</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">24.07</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Nonvested RSUs at September 30, 2010</b>
</div></td>
<td> </td>
<td> </td>
<td align="right"><b>793</b></td>
<td> </td>
<td> </td>
<td align="left"><b>$</b></td>
<td align="right"><b>24.66</b></td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">As of September 30, 2010, there was $10.9 million of total unrecognized compensation expense
related to nonvested RSUs granted under the Stock Incentive Plan. This unrecognized compensation
expense does not reflect a reduction for our estimate of potential forfeitures, and is expected to
be recognized over a weighted average period of 2.4 years. The total vest date fair value of shares
that vested during fiscal years 2010, 2009 and 2008 was $7.3 million, $1.9 million and $8.7
million. Amounts related to periods prior to March 31, 2008, include vesting of RSUs held by
employees of our former funeral services business.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="justify" style="font-size: 10pt; margin-top: 10pt"><b>Performance Share Units</b>
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">Our Compensation Committee grants PSUs to a limited number of our senior executives. These awards
are subject to any stock dividends, stock splits, and other similar rights inuring to common stock,
but unlike our RSUs are not entitled to cash dividend reinvestment or common stock equivalents.
Vesting of the grants is contingent upon achievement of performance targets and corresponding
service requirements. Expense recognized to date related to PSU grants has not been significant.
</div>
<div align="justify" style="font-size: 10pt; margin-top: 10pt">As of September 30, 2010, there was $0.9 million of unrecognized compensation expense related to
PSUs granted under the Stock Incentive plan based on the expected achievement of certain
performance targets. This unrecognized compensation expense does not reflect a reduction for our
estimate of potential forfeitures, and is expected to be recognized by the end of fiscal 2012, if
the performance targets are met. The amount of unrecognized compensation expense for the PSUs that
we ultimately realize is subject to change based on the probable achievement of the established
performance targets, which are assessed each quarter.
</div>
</div>
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