<SUBMISSION>
<ACCESSION-NUMBER>0001047469-04-012643
<TYPE>DEF 14A
<PUBLIC-DOCUMENT-COUNT>5
<PERIOD>20040518
<FILING-DATE>20040420
<EFFECTIVENESS-DATE>20040420
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>CARRIAGE SERVICES INC
<CIK>0001016281
<ASSIGNED-SIC>7200
<IRS-NUMBER>760423828
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>DEF 14A
<ACT>34
<FILE-NUMBER>001-11961
<FILM-NUMBER>04742507
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1300 POST OAK BLVD STE 1500
<CITY>HOUSTON
<STATE>TX
<ZIP>77056
<PHONE>2815567400
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>1300 POST OAK BLVD
<CITY>HOUSTON
<STATE>TX
<ZIP>77056
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>a2133939zdef14a.htm
<DESCRIPTION>DEF 14A
<TEXT>
<HTML>
<HEAD>

</HEAD>
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<FONT SIZE=3 ><A HREF="#04HOU1198_1">QuickLinks</A></FONT>
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<P ALIGN="CENTER"><FONT SIZE=2><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION<BR>
Washington, D.C. 20549  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B> SCHEDULE 14A</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>Proxy
Statement Pursuant to Section 14(a) of<BR>
the Securities Exchange Act of 1934 (Amendment No.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;) </FONT></P>

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<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2>Filed by the Registrant <FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><BR><FONT SIZE=2>Filed by a Party other than the Registrant <FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><FONT SIZE=2><BR>
Check the appropriate box:</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Preliminary Proxy Statement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><BR><FONT SIZE=2><B>Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Definitive Proxy Statement</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Definitive Additional Materials</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="95%"><FONT SIZE=2><BR>
Soliciting Material Pursuant to &sect;240.14a-12<BR></FONT>
</TD>
</TR>
</TABLE>
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<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><BR><FONT SIZE=2><B>Carriage Services, Inc.</B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> (Name of Registrant as Specified In Its Charter)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><BR><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5 ALIGN="CENTER"><HR NOSHADE><FONT SIZE=2> (Name of Person(s) Filing Proxy Statement, if other than the Registrant)</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=5><FONT SIZE=2>Payment of Filing Fee (Check the appropriate box):</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#253;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
No fee required.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and&nbsp;0-11.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Title of each class of securities to which transaction applies:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Aggregate number of securities to which transaction applies:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(4)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Proposed maximum aggregate value of transaction:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(5)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Total fee paid:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
Fee paid previously with preliminary materials.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
<FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=2><BR>
Check box if any part of the fee is offset as provided by Exchange Act Rule&nbsp;0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2><BR>
(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2><BR>
Amount Previously Paid:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Form, Schedule or Registration Statement No.:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(3)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Filing Party:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=2>(4)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="89%"><FONT SIZE=2>Date Filed:<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
</TABLE>
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<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=1,EFW="2133939",CP="CARRIAGE SERVICES, INC.",DN="1",CHK=867876,FOLIO='blank',FILE='DISK043:[04HOU8.04HOU1198]BA1198A.;5',USER='MTRAN',CD='19-APR-2004;15:29' -->
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<P ALIGN="CENTER"><FONT SIZE=2><B>
<IMG SRC="g785383.jpg" ALT="LOGO" WIDTH="318" HEIGHT="97">
  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>CARRIAGE SERVICES,&nbsp;INC.<BR>  </B></FONT><FONT SIZE=2><B>1900 St. James Place, 4<SUP>th</SUP> Floor<BR>
Houston, Texas 77056  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>April 20, 2004 </FONT></P>


<P><FONT SIZE=2>Dear
Carriage Stockholder: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I
am pleased to invite you to Carriage's Annual Meeting of Stockholders. The meeting will be held at the Courtyard on St. James Place, 1885 St. James Place, Houston, Texas 77056 on
Tuesday, May&nbsp;18, 2004, at 10:00&nbsp;a.m., Houston time. If you cannot be present at the Annual Meeting, I ask that you participate by completing the enclosed proxy and returning it at your
earliest convenience. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At
the meeting, you and the other stockholders will elect two directors to Carriage's Board of Directors and vote on certain other matters discussed in the accompanying Proxy Statement.
You will also have the opportunity to hear what has happened in our business in the past year and to ask questions. I encourage you to read the enclosed Notice of Annual Meeting and Proxy Statement,
which contains information about the Board of Directors and its committees and personal information about each of the nominees for the Board. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
hope you can join us on May&nbsp;18. Whether or not you can attend personally, it is important that your shares are represented at the Meeting. Please </FONT> <FONT SIZE=2><B>mark</B></FONT><FONT SIZE=2> your votes on the enclosed proxy, </FONT><FONT
SIZE=2><B>sign and date the proxy</B></FONT><FONT SIZE=2>, and </FONT> <FONT SIZE=2><B>return</B></FONT><FONT SIZE=2> it to us in the enclosed envelope. Your vote is important, so please return your proxy promptly. </FONT></P>

<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>

<P><FONT SIZE=2>Sincerely, </FONT></P>

<P><FONT SIZE=2><B>
<IMG SRC="g863.jpg" ALT="Melvin C. Payne" WIDTH="280" HEIGHT="64">
  </B></FONT></P>

<P><FONT SIZE=2>MELVIN
C. PAYNE<BR></FONT> <FONT SIZE=2><I>Chairman of the Board,<BR>
President and Chief Executive Officer</I></FONT></P>

</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=4><B>CARRIAGE SERVICES,&nbsp;INC.<BR>  </B></FONT><FONT SIZE=2><B>1900 St. James Place, 4th Floor<BR>
Houston, Texas 77056  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">
<P ALIGN="CENTER"><FONT SIZE=3><B>NOTICE OF ANNUAL MEETING OF STOCKHOLDERS<BR>  </B></FONT><FONT SIZE=2><B>To be held May&nbsp;18, 2004  </B></FONT></P>

<HR NOSHADE ALIGN="CENTER" WIDTH="120">

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carriage Services,&nbsp;Inc. will hold its Annual Meeting of Stockholders at the Courtyard on St. James Place, 1885 St. James Place, Houston,
Texas, 77056, on Tuesday, May&nbsp;18, 2004, at 10:00&nbsp;a.m., Houston time. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
are holding this meeting: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>To
elect two Class&nbsp;II directors, each to serve for a three-year term expiring at the annual meeting of stockholders in 2007 and until their respective
successors are elected and qualified.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>To
amend our 1997 Employee Stock Purchase Plan to increase the number of shares available thereunder from 1,000,000 to 2,000,000 shares.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>To
amend and restate our 1996 Stock Option Plan (in the form of a Second Amended and Restated 1996 Stock Incentive Plan) to authorize restricted stock grants (without
increasing total share availability under the Plan).
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>To
transact such other business as may properly come before the meeting or any adjournments thereof. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Your
Board of Directors has selected March&nbsp;24, 2004, as the record date for determining stockholders entitled to vote at the meeting. A list of stockholders as of that date will
be available for inspection at our corporate headquarters, 1900 St. James Place, 4th Floor, Houston, Texas for ten days before the meeting. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
are cordially invited to attend the meeting. If, however, you are unable to attend the Meeting, YOU ARE REQUESTED TO SIGN AND DATE THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN
THE ENCLOSED ENVELOPE. If you attend the meeting, and wish to do so, you may vote in person regardless of whether you have given your proxy. In any event, a proxy may be revoked at any time before it
is exercised. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This
Proxy Statement, proxy and Carriage's 2003 Annual Report to Stockholders are being distributed on or about April&nbsp;22, 2004. </FONT></P>

<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
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<UL>
<UL>

<P><FONT SIZE=2>By
Order of the Board of Directors </FONT></P>


<P><FONT SIZE=2><B>
<IMG SRC="g275675.jpg" ALT="LOGO" WIDTH="216" HEIGHT="100">
  </B></FONT></P>

<P><FONT SIZE=2>Joseph
Saporito<BR></FONT> <FONT SIZE=2><I>Senior Vice President, Chief<BR>
Financial Officer and Secretary</I></FONT></P>

</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>

<P><FONT SIZE=2>Houston,
Texas<BR>
April 20, 2004 </FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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NAME="page_bg1198_1_1"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="bg1198_table_of_contents"> </A>
<A NAME="toc_bg1198_1"> </A>
<BR></FONT><FONT SIZE=2><B>TABLE OF CONTENTS    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="78%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Page<BR>
No.</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2>GENERAL INFORMATION</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
RECORD DATE AND VOTING SECURITIES</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
3</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Stock Ownership of Certain Beneficial Owners</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>5</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
PROPOSAL NO. 1 ELECTION OF DIRECTORS</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
5</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Organization and Committees of the Board</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>8</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Corporate Governance Principles</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>9</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
11</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
CERTAIN TRANSACTIONS</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
11</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
EXECUTIVE COMPENSATION</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
12</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Summary Compensation Table</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>12</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Stock Option Grants in 2003</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>13</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>2003 Option Exercises and Year-End Option Holdings</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>13</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Equity Compensation Plan Information</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>14</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Separation Agreement with a Departed Officer</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>14</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Compensation of Directors</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>14</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Employment Agreements</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>15</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
16</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Base Salaries</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>17</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Bonuses for Named Executive Officers for 2003</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>17</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Restricted Stock Bonus Award for 2003</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>17</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Compensation Policies for the Chief Executive Officer</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>18</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
COMPARATIVE STOCKHOLDER RETURN</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
19</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
19</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
PROPOSAL NO. 2 AMENDMENT OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
20</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Amendment to Increase Authorized Shares</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Summary of Employee Stock Purchase Plan</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
PROPOSAL NO. 3 AMENDMENT OF THE 1996 STOCK OPTION PLAN</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
22</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Amendment to Authorize Restricted Stock Grants</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>22</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Summary Description of the 1996 Plan</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>23</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
AUDIT COMMITTEE REPORT</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
24</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Review and Discussions</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Change in Independent Auditors</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Audit Fees</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>24</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Selection for 2004</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>25</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Audit-Related Fees</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>25</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Tax Fees</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>25</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>All Other Fees</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>25</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Pre-Approval Policy for Services of Independent Auditors</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>25</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Recommendation to Include Audited Financial Statements in Annual Report</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>25</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
OTHER BUSINESS</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
25</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
STOCKHOLDER'S PROPOSALS</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
26</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
ADDITIONAL INFORMATION</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
26</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Annual Report</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>26</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="90%" VALIGN="TOP"><FONT SIZE=2>Number of Proxy Statements and Annual Reports</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>26</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
APPENDIX A&#151;AUDIT COMMITTEE CHARTER</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
A-1</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
APPENDIX B&#151;AMENDMENT NO. 1 TO 1997 EMPLOYEE STOCK PURCHASE PLAN</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
B-1</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2 VALIGN="TOP"><FONT SIZE=2><BR>
APPENDIX C&#151;SECOND AMENDED AND RESTATED 1996 STOCK OPTION PLAN</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
C-1</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2>i</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="da1198_general_information"> </A>
<A NAME="toc_da1198_1"> </A>
<BR></FONT><FONT SIZE=2><B>GENERAL INFORMATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Q:&nbsp;&nbsp;&nbsp;&nbsp;Who is soliciting my proxy?  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>We&#151;the
Board of Directors of Carriage Services,&nbsp;Inc.&#151;are sending you this Proxy Statement in connection with our solicitation of proxies for use at
Carriage's 2004 Annual Meeting of Stockholders. Certain directors, officers and employees of Carriage, American Stock Transfer&nbsp;&amp; Trust Company ("AST"), and Georgeson Shareholder
Communications,&nbsp;Inc. ("Georgeson") also may solicit proxies on our behalf by mail, phone, fax or in person. </FONT></DD></DL>

<P><FONT SIZE=2><B>Q:&nbsp;&nbsp;&nbsp;&nbsp;Who is paying for this solicitation?  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>Carriage
will pay for the solicitation of proxies, including the cost of preparing and mailing this Proxy Statement. Carriage also will reimburse banks, brokers, custodians, nominees
and fiduciaries for their reasonable charges and expenses to forward our proxy materials to the beneficial owners of Carriage stock. No additional fee beyond the $950&nbsp;monthly fee paid to AST to
act as Carriage's transfer agent, together with AST's out-of-pocket expenses, will be paid to AST. Georgeson is receiving a one-time fee of $6,500 for acting as
proxy solicitor in connection with the Meeting. </FONT></DD></DL>

<P><FONT SIZE=2><B>Q:&nbsp;&nbsp;&nbsp;&nbsp;What am I voting on?  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>(1)
The election of Vincent D. Foster and Mark F. Wilson to the Board of Directors as Class&nbsp;II directors.
<BR><BR></FONT>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>An
amendment to our 1997 Employee Stock Purchase Plan to increase the number of shares available thereunder from 1,000,000 to 2,000,000 shares.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>An
amendment and restatement of our 1996 Stock Option Plan (in the form of a Second Amended and Restated 1996 Stock Incentive Plan) to authorize restricted stock grants (without
increasing total share availability under the Plan). </FONT></DD></DL>
</DD></DL>

<P><FONT SIZE=2><B>Q:&nbsp;&nbsp;&nbsp;&nbsp;Who can vote?  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>Stockholders
as of the close of business on March&nbsp;24, 2004 are entitled to vote at the Annual Meeting. </FONT></DD></DL>

<P><FONT SIZE=2><B>Q:&nbsp;&nbsp;&nbsp;&nbsp;How do I vote?  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>You
may vote your shares either in person or by proxy. To vote by proxy, you should mark, date, sign and mail the enclosed proxy in the prepaid envelope. Giving a proxy will not affect
your right to vote your shares if you attend the Annual Meeting and want to vote in person&#151;by voting in person you automatically revoke your proxy. You also may revoke your proxy at any
time before the meeting by giving the Secretary written notice of your revocation or by submitting a later-dated proxy. If you return your proxy but do not mark your voting preference, the individuals
named as proxies will vote your shares </FONT><FONT SIZE=2><B>FOR</B></FONT><FONT SIZE=2> the election of each of the nominees for director and </FONT><FONT SIZE=2><B>FOR</B></FONT><FONT SIZE=2>
each of the other proposals described in this Proxy Statement. </FONT></DD></DL>

<P><FONT SIZE=2><B>Q:&nbsp;&nbsp;&nbsp;&nbsp;How does the Board recommend I vote on the proposals?  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>The
Board recommends a vote </FONT><FONT SIZE=2><B>FOR</B></FONT><FONT SIZE=2> each of the nominees and the other proposals. </FONT></DD></DL>

<P><FONT SIZE=2><B>Q:&nbsp;&nbsp;&nbsp;&nbsp;Is my vote confidential?  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>Proxy
cards, ballots and voting tabulations that identify individual stockholders are mailed or returned directly to Carriage and handled in a manner intended to protect your voting
privacy. Your vote will not be disclosed </FONT><FONT SIZE=2><I>except</I></FONT><FONT SIZE=2>: (1)&nbsp;as needed to permit Carriage to tabulate and certify the vote; (2)&nbsp;as required by
law; or (3)&nbsp;in limited circumstances, such as a proxy contest in opposition to the Board (which is not currently anticipated). Additionally, all comments written on the proxy </FONT></DD></DL>
<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_da1198_1_2"> </A>
<UL>

<P><FONT SIZE=2>card
or elsewhere will be forwarded to management, but your identity will be kept confidential unless you ask that your name be disclosed. </FONT></P>

</UL>

<P><FONT SIZE=2><B>Q:&nbsp;&nbsp;&nbsp;&nbsp;How many shares can vote?  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>As
of the record date, March&nbsp;24, 2004, Carriage had outstanding 17,702,329 shares of Common Stock. Each share of Common Stock is entitled to one (1)&nbsp;vote. </FONT></DD></DL>

<P><FONT SIZE=2><B>Q:&nbsp;&nbsp;&nbsp;&nbsp;What happens if I withhold my vote for an individual director?  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>Because
the individual directors are elected by a plurality of the votes cast at the meeting, a withheld vote will not have an effect on the outcome of the election of an individual
director. </FONT></DD></DL>

<P><FONT SIZE=2><B>Q:&nbsp;&nbsp;&nbsp;&nbsp;Can I vote on other matters?  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>Carriage's
By-laws limit the matters presented at an annual meeting to those in the notice of the meeting and those otherwise properly presented before the meeting. We do
not expect any other matter to come before the meeting. If any other matter is presented at the Annual Meeting, your signed proxy gives the individuals named as proxies authority to vote your shares
on such matters at their discretion. </FONT></DD></DL>

<P><FONT SIZE=2><B>Q:&nbsp;&nbsp;&nbsp;&nbsp;When are stockholder proposals due for the annual stockholders meeting in 2005?</B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>To
be considered for inclusion in the proxy statement for Carriage's 2005 annual meeting, a stockholder proposal must be received at Carriage's offices no later than December&nbsp;1,
2004. A stockholder proposal submitted outside the processes of Rule&nbsp;14a-8 of the SEC, if received by Carriage after February&nbsp;15, 2005, will be considered untimely for
presentation at Carriage's 2005 annual meeting of stockholders. </FONT></DD></DL>

<P><FONT SIZE=2><B>Q:&nbsp;&nbsp;&nbsp;&nbsp;How do I nominate someone to be a Carriage director?  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>A
stockholder may recommend nominees for director by giving the Secretary a written notice not less than ninety (90)&nbsp;days prior to the anniversary date of the immediately
preceding annual meeting. For the annual meeting in 2005, the deadline will be February&nbsp;17, 2005, based upon this year's meeting occurring on May&nbsp;18. The notice must include the full
name, age, business and residence address, principal occupation or employment of the nominee, the number of shares of Common Stock that the nominee beneficially owns, any other information about the
nominee that must be disclosed in proxy solicitations under Rule&nbsp;14(a) of the Securities Exchange Act of 1934, and the nominee's written consent to the nomination and to serve, if elected. </FONT></DD></DL>

<P><FONT SIZE=2><B>Q:&nbsp;&nbsp;&nbsp;&nbsp;How can I communicate directly with a Carriage director?  </B></FONT></P>

<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>A:</FONT></DT><DD><FONT SIZE=2>Stockholders
and other interested parties may contact any member of our Board or Committee thereof via U.S. mail, by addressing any correspondence to the Board, the applicable
Committee or any individual director by either name or title, in care of Carriage Services,&nbsp;Inc., 1900 St. James Place, 4<SUP>th</SUP> Floor, Houston, Texas 77056; Attn: Joseph Saporito,
Senior Vice President and Secretary. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>2</FONT></P>

<HR NOSHADE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_dc1198_1_3"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dc1198_record_date_and_voting_securities"> </A>
<A NAME="toc_dc1198_1"> </A>
<BR></FONT><FONT SIZE=2><B>RECORD DATE AND VOTING SECURITIES    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only holders of record of the Common Stock at the close of business on March&nbsp;24, 2004, the record date for the Meeting, are entitled to notice of and to
vote at the Meeting. On that date, Carriage had outstanding 17,702,329 shares of Common Stock, each of which is entitled to one vote. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
presence at the Meeting, in person or by proxy, of the holders of a majority of the total voting power of the issued and outstanding shares of Common Stock is necessary to constitute
a quorum to transact business. In the absence of a quorum at the Meeting, the Meeting may be adjourned without notice other than announcement at the Meeting until a quorum shall be formed. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With
respect to the election of directors, stockholders may vote (a)&nbsp;in favor of all nominees, (b)&nbsp;to withhold votes as to all nominees, or (c)&nbsp;to withhold votes as
to specific nominees. If a quorum is present at the Meeting, the nominees for Class&nbsp;II directors will be elected by a plurality vote. Votes withheld, or abstentions, will be treated as present
for purposes of determining a quorum; however, because directors are elected by a plurality, votes withheld will not affect the outcome of the election. With respect to each proposal (and any other
matter properly brought before the Meeting) other than the election of directors, the affirmative vote of the holders of a majority of the voting power present or represented by proxy at the Meeting
will be required for approval, except as noted below in regards to the Amendment to the 1997 Employee Stock Purchase Plan and the Amendment to the 1996 Stock Option Plan. Abstentions will have the
effect of a vote against any of these proposals. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
the rules of the New York Stock Exchange ("NYSE"), the proposal to elect directors is considered a "discretionary" item. This means that brokerage firms may vote in their
discretion on this matter on behalf of clients who have not furnished voting instructions at least fifteen days before the date of the Meeting. In contrast, the proposals to approve the Amendment of
the 1997 Employee Stock Purchase Plan and the Amendment of the 1996 Stock Option Plan are "non-discretionary" items. This means brokerage firms that have not received voting instructions
from their clients on these matters may not vote on these proposals. These so-called "broker non-votes" will not be considered in determining the number of votes necessary for
approval and, therefore, will have no effect on the outcome of the vote for these proposals. To satisfy the NYSE listing requirements, the total votes cast on the proposals to approve the Amendment of
the 1997 Employee Stock Purchase Plan and the Amendment of the 1996 Stock Option Plan must represent over 50% of the outstanding Common Stock entitled to vote. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All
properly signed Proxies received prior to the Meeting will be voted in accordance with the choices specified. If no choice has been specified in the Proxy, the shares will be voted
in favor of all proposals described in this Proxy Statement and in the discretion of the persons named in the Proxy in connection with any other business that may properly come before the Meeting. A
stockholder giving a Proxy may revoke it at any time before it is voted at the Meeting by filing with the Secretary an instrument revoking it, by signing and delivering to the Secretary a Proxy
bearing a later date, or by voting in person at the Meeting after giving notice to the Chairman of the Meeting of the stockholder's intention to vote in person notwithstanding the fact that the
stockholder previously delivered a Proxy. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dc1198_security_ownership_of_director__sec03273"> </A>
<A NAME="toc_dc1198_2"> </A>
<BR></FONT><FONT SIZE=2><B>SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS<BR>  AND CERTAIN BENEFICIAL OWNERS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, as of March&nbsp;24, 2004, the number of shares beneficially owned and percent of the Common Stock held by: (i)&nbsp;each
director and director nominee of Carriage, (ii)&nbsp;the Chief Executive Officer, (iii)&nbsp;the other executive officers named in the Summary Compensation Table set forth under "Executive
Compensation" below, and (iv)&nbsp;all current executive officers and directors of Carriage as a group. Under the rules of the Securities and Exchange Commission ("SEC"), a person is deemed to own
beneficially all securities as to which that person owns or shares voting or investment power, as well as all securities which such person may acquire within 60&nbsp;days through the exercise of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>3</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=7,EFW="2133939",CP="CARRIAGE SERVICES, INC.",DN="1",CHK=230201,FOLIO='3',FILE='DISK043:[04HOU8.04HOU1198]DC1198A.;6',USER='MTRAN',CD='19-APR-2004;15:34' -->
<A NAME="page_dc1198_1_4"> </A>
<BR>

<P><FONT SIZE=2>currently
available conversion rights or options. Each person named in the table below has sole voting and investment power with respect to the shares indicated, except as otherwise stated in the
notes to the table. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="88%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="57%" ALIGN="LEFT"><FONT SIZE=1><B>Beneficial Owner<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="21%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Shares<BR>
Beneficially Owned(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Percent of<BR>
Common Stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Melvin C. Payne</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>1,207,344</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>6.5</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Joe R. Davis</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>24,421</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Stuart W. Stedman(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>450,942</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>2.4</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Ronald A Erickson(3)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>69,000</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Mark F. Wilson(4)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>503,621</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>2.7</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Greg M. Brudnicki</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>291,451</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>1.6</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Vincent D. Foster</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>85,406</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Joseph Saporito</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>100,000</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>James J. Benard</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>85,292</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>George J. Klug</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>53,874</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Jay D. Dodds</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>170,469</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>Mark Groeneman</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>98,547</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>*</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="57%"><FONT SIZE=2>All directors and executive officers as a group (12 persons)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="21%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>3,140,367</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="BOTTOM"><FONT SIZE=2>16.9</FONT></TD>
<TD WIDTH="2%" VALIGN="BOTTOM"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>*</FONT></DT><DD><FONT SIZE=2>Indicates
less than one percent.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>The
ownership of shares of Common Stock shown in the table includes shares which may be acquired within 60&nbsp;days upon exercise of outstanding stock options granted under our
stock option plans by each of the persons and groups, as follows: Mr.&nbsp;Payne&#151;300,000 shares granted on 12-22-00, and 60,000 shares granted on
2-11-02; Mr.&nbsp;Stedman&#151;50,000 shares granted on 12-22-00, 6,000 shares granted on 5-7-02, and 6,000 shares
granted on 5-13-03; Mr.&nbsp;Erickson&#151;50,000 shares granted on 12-22-00, 6,000 shares granted on 5-7-02, and 6,000
shares granted on 5-13-03; Mr.&nbsp;Wilson&#151;50,000 shares granted on 12-22-00, 6,000 shares granted on 5-7-02, and
6,000 shares granted on 5-13-03; Mr.&nbsp;Brudnicki&#151;50,000 shares granted on 12-22-00, 6,000 shares granted on
5-7-02, and 6,000 shares granted on 5-13-03; Mr.&nbsp;Foster&#151;5,000 shares vested (100% of one-third) out of 15,000 granted on
11-4-99, 50,000 shares granted on 12-22-00, 6,000 shares granted on 5-7-02, and 6,000 shares granted on
5-13-03; Mr.&nbsp;Benard&#151;7,124 shares granted on 6-9-00, 11,250 shares vested (75%) out of 15,000 granted on
12-22-00, and 25,000 shares granted on 2-11-02; Mr.&nbsp;Dodds&#151;26,212 shares granted on 6-9-00, 50,000 shares
granted on 12-22-00, and 20,000 shares granted on 2-11-02; Mr.&nbsp;Groeneman&#151;35,000 shares granted on 12-22-00,
and 15,000 shares granted on 2-11-02; and Mr.&nbsp;Klug&#151;7,500 shares vested (50%) out of 15,000 granted on 7-27-01, and 20,000 shares
granted on 2-11-02.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Stedman's
holdings include: </FONT>
<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>33,998
shares of Common Stock which are held by the Betty Ann Stedman Trust, of which Mr.&nbsp;Stedman is a trustee; </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>1,425
shares of Common Stock which are held by the Betty Ann West Stedman Descendants Trust, of which Mr.&nbsp;Stedman is a trustee; </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>12,982
shares of Common Stock which are held by the Wesley West Descendants Trust, of which Mr.&nbsp;Stedman is a trustee; </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>4,847
shares of Common Stock which are held by the Courtney Lynn Meagher Trust, of which Mr.&nbsp;Stedman is a trustee; </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>3,369
shares of Common Stock which are held by the Evan Everett Meagher 1989 Trust, of which Mr.&nbsp;Stedman is a trustee; </FONT></DD></DL>
</UL>
</DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>4</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_dc1198_1_5"> </A>
<UL>
<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>172,708
shares of Common Stock which are held by the Stedman West Family Partnership&nbsp;Ltd. (formerly Wesley West Long Term Partnership), a partnership of which
Mr.&nbsp;Stedman serves as the manager of the general partner; </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>43,550
shares of Common Stock which are held by the Wesley West Flexible Partnership, a partnership of which Mr.&nbsp;Stedman serves as the managing partner. </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>28,500
shares of Common Stock which are held by the Neva and Wesley West Foundation, of which Mr.&nbsp;Stedman is trustee; </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>2,150
shares of Common Stock which are held by the Lynn Stedman Meagher Children's 1997 Trust, of which Mr.&nbsp;Stedman is trustee; </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>5,605
shares of Common Stock which are held by the Wesley West Stedman 1987 Trust f/b/o Mr.&nbsp;Stedman's minor son; </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>3,425
shares of Common Stock which are held by the Stuart W. Stedman, Jr. 1996 Trust<BR>
f/b/o Mr.&nbsp;Stedman's minor son; and </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>2,150
shares of Common Stock which are held by the Stuart W. Stedman Children's 1997 Trust f/b/o Mr.&nbsp;Stedman's children.
<BR><BR></FONT></DD></DL>
</UL>
</UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Erickson's
holdings consist of 7,000 shares of Common Stock held by Mr.&nbsp;Erickson's son, David S. Erickson.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Wilson's
holdings include 378,363 shares of Common Stock held by the Mark F. Wilson and Anne Pedersen Wilson Living Trust; 31,629 shares of Common Stock held by the Wilson
Trust B U/A/D 9/9/77 by Francis Wilson; and 31,629 shares of Common Stock held by the Wilson Trust C U/A/D 9/9/77 by Francis Wilson. </FONT></DD></DL>

<P><FONT SIZE=2><B><I>Stock Ownership of Certain Beneficial Owners  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;24, 2004, the persons named below were, to our knowledge, the only beneficial owners of more than 5% of the outstanding Common Stock,
determined in accordance with Rule&nbsp;13d-3 of the Securities Exchange Act of 1934, other than directors and executive officers whose beneficial ownership is described in the above
table. </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="88%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="60%" ALIGN="LEFT"><FONT SIZE=1><B>Beneficial Owner<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="19%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Shares<BR>
Beneficially Owned</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="16%" ALIGN="CENTER"><FONT SIZE=1><B>Percent of<BR>
Common Stock</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="60%" VALIGN="TOP"><FONT SIZE=2>Dimensional Fund Advisors, Inc.(1)<BR>
1299 Ocean Ave., 11th. Floor<BR>
Santa Monica, CA 90401</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>1,112,650</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>6.0</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="60%" VALIGN="TOP"><FONT SIZE=2>William D. Witter, Inc.(2)<BR>
153 E. 53<SUP>rd</SUP> St., 51<SUP>st</SUP> Fl.<BR>
New York, NY 10022</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>1,034,100</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>5.6</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>%</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="60%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="60%" VALIGN="TOP"><FONT SIZE=2>Total</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="19%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>2,146,750</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="16%" ALIGN="RIGHT" VALIGN="TOP"><FONT SIZE=2>11.6</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=2>%</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Based
solely on schedule&nbsp;13G filed with the SEC on February&nbsp;6, 2004. </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Based
solely on schedule&nbsp;13G filed with the SEC on March&nbsp;26, 2004. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dc1198_proposal_no._1_election_of_directors"> </A>
<A NAME="toc_dc1198_3"> </A>
<BR></FONT><FONT SIZE=2><B>PROPOSAL NO. 1<BR>  ELECTION OF DIRECTORS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carriage currently has six directors on its Board that each serve staggered three-year terms. At the Meeting, you and the other stockholders will
elect two individuals to serve as Class&nbsp;II directors for a new three-year term expiring at the 2007 annual meeting and until their successors are duly elected and qualified. The two
current Class&nbsp;II directors whose terms are expiring at the Meeting are Vincent D. Foster and Greg M. Brudnicki. Upon recommendation of the Corporate Governance Committee, the Board of Directors
has nominated Mr.&nbsp;Foster for re-election at the Meeting to serve for a new </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>5</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<A NAME="page_dc1198_1_6"> </A>
<BR>

<P><FONT SIZE=2>three-year
term. In the place of Mr.&nbsp;Brudnicki, the Board of Directors (also upon the Corporate Governance Committee's recommendation) has nominated Mark F. Wilson as the other
Class&nbsp;II director for consideration at the 2004 Meeting. As explained under "Certain Transactions" on page 10 of this Proxy Statement, we agreed to place Mr.&nbsp;Wilson's name in nomination
for election at the upcoming Meeting. Proxies may be voted for two directors. Biography descriptions for Messrs.&nbsp;Foster and Wilson are set forth below. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>We recommend that you vote "FOR" the election of each nominee listed in Proposal No.&nbsp;1 as a Class&nbsp;II Director. The individuals named as proxies will
vote the enclosed proxy "FOR" the election of all nominees unless you direct them to withhold your votes for one or more of the nominees.</B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
may not cumulate your votes in the election of directors. The two nominees receiving the highest number of affirmative votes will be elected to the Board. You may withhold authority
to vote for any or all nominees for directors. If any nominee becomes unable to serve as a director before the Meeting (or decides not to serve), the individuals named as proxies will vote FOR the
remainder of the nominees and for such other nominees as we may designate as a replacement or substitute for those who become unavailable. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following table sets forth the names, ages and titles of the persons who have been nominated for election as Class&nbsp;II directors and our other current directors and executive
officers. </FONT></P>

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<TABLE WIDTH="78%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="45%" ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Age</B></FONT><HR NOSHADE></TH>
<TH WIDTH="3%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="45%" ALIGN="LEFT"><FONT SIZE=1><B>Title<BR> </B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="45%" VALIGN="TOP"><FONT SIZE=2><B>Nominees for Class II Directors<BR>
(Term expiring at 2007 annual meeting)</B></FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="45%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>Vincent D. Foster(2)(3)(4)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>47</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="45%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>Mark F. Wilson</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>57</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="45%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="45%" VALIGN="TOP"><BR><FONT SIZE=2><B>Existing Class II Director<BR>
(Term expiring at 2004 annual meeting)</B></FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="45%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>Greg M. Brudnicki</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>48</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="45%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="45%" VALIGN="TOP"><BR><FONT SIZE=2><B>Continuing Class III Directors<BR>
(Term expiring at 2005 annual meeting)</B></FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="45%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>Stuart W. Stedman(2)(3)(4)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>46</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="45%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>Ronald A. Erickson(3)(4)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>67</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="45%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="45%" VALIGN="TOP"><BR><FONT SIZE=2><B>Continuing Class I Directors<BR>
(Term expiring at 2006 annual meeting)</B></FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="45%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>Melvin C. Payne(1)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>61</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="45%"><FONT SIZE=2>Chairman of the Board, Chief Executive Officer, President and Director</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>Joe R. Davis(2)</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>61</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="45%"><FONT SIZE=2>Director</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD WIDTH="45%" VALIGN="TOP"><BR><FONT SIZE=2><B>Executive Officers who are not Directors</B></FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
<TD WIDTH="3%" VALIGN="TOP"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="45%" VALIGN="TOP"><FONT SIZE=2><BR>
&nbsp;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>Joseph Saporito</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>50</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="45%"><FONT SIZE=2>Senior Vice President, Chief Financial Officer and Secretary</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>James J. Benard</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>47</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="45%"><FONT SIZE=2>Senior Vice President of Sales &amp; Cemetery Operations</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="45%"><FONT SIZE=2>George J. Klug</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>59</FONT></TD>
<TD WIDTH="3%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="45%"><FONT SIZE=2>Senior Vice President of Information Systems and Chief Information Officer</FONT></TD>
</TR>
</TABLE>
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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Member
of Executive Committee </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Member
of Compensation Committee </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Member
of Audit Committee </FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>Member
of Corporate Governance Committee </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>6</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
forth below is a brief description of the business experience of the directors and executive officers of our company. </FONT></P>

<P><FONT SIZE=2><B><I>Directors</I></B></FONT><FONT SIZE=2><I> (listed in same order as table set forth above)  </I></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B><I>Vincent D. Foster</I></B></FONT><FONT SIZE=2> became a director of Carriage in November&nbsp;1999. Mr.&nbsp;Foster is a Senior Managing
Director of Main Street Mezzanine Fund, LLC, a licensed small business investment corporation, and
served as Senior Managing Director of Main Street Equity Ventures II, L.P. (and its predecessor firm), a venture capital firm, from 1997 through 2002. Mr.&nbsp;Foster is a director of Quanta
Services,&nbsp;Inc., and served as its nonexecutive Chairman of the Board of Directors from February&nbsp;1998 through May&nbsp;2002. Mr.&nbsp;Foster is also a director of U.S.
Concrete,&nbsp;Inc. From September&nbsp;1988 through October&nbsp;1997, Mr.&nbsp;Foster was a partner of Andersen Worldwide and Arthur Andersen LLP, where he served as the director of the
corporate finance practice and the mergers and acquisitions practice in the southwestern United States. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Mark F. Wilson</I></B></FONT><FONT SIZE=2> became a director in January&nbsp;1997 when CNM merged with Carriage. Mr.&nbsp;Wilson served as the President of CNM
from 1988 until its merger with Carriage in January&nbsp;1997, when he became President of our California operations. CNM owned and operated nine Wilson&nbsp;&amp; Kratzer Funeral Homes and the
Rolling Hills Memorial Park Cemetery in Alameda and Contra Costa Counties, California. In connection with the CNM merger, Carriage agreed to increase the Board of Directors by one member and appoint
Mr.&nbsp;Wilson as a director. Mr.&nbsp;Wilson served as Senior Vice President of Cemetery Operations for our Western Region from November&nbsp;2000 until November&nbsp;2001, at which time he
stepped aside upon the elevation of Jim Benard to head up our Cemetery Operations, but Mr.&nbsp;Wilson maintained his role as President of our California operations. Mr.&nbsp;Wilson's term as
director expired at the 2003 annual meeting, but he continued to have Board meeting visitation rights over the course of the previous year, and we agreed to place his name in nomination to the Board
at this year's Meeting. See "Certain Transactions." Mr.&nbsp;Wilson also serves on the Board of Directors of Mechanics Bank, Richmond, California. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Greg M. Brudnicki</I></B></FONT><FONT SIZE=2> became a director of Carriage in November&nbsp;1997 when Forest Lawn/Evergreen Management Corp. merged with a
subsidiary of Carriage. Forest Lawn and its affiliate owned and operated three funeral homes and three cemeteries in Panama City and Fort Walton Beach, Florida and Dothan, Alabama.
Mr.&nbsp;Brudnicki served as the President and Chief Executive Officer of Forest Lawn until the merger, when he became the Co-Manager of the Forest Lawn cemeteries and funeral homes
operated by Carriage. In connection with the merger, Carriage agreed to increase the Board of Directors by one member and appoint Mr.&nbsp;Brudnicki to fill the resulting vacancy.
Mr.&nbsp;Brudnicki served as Senior Vice President of Cemetery Operations for our Eastern Region from November&nbsp;2000 until November&nbsp;2001, at which time he stepped aside upon the
elevation of Jim Benard to head up our Cemetery Operations, whereupon Mr.&nbsp;Brudnicki resumed his previous role with our operations in Northwest Florida. Mr.&nbsp;Brudnicki's term on our Board
expires at the 2004 Meeting. Mr.&nbsp;Brudnicki serves as a trustee for Bay Medical Center, a non-profit hospital in Panama City, Florida; director of Peoples 1st Community Bank; and as
Chairman of the Florida Board of Funeral and Cemetery Services. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Stuart W. Stedman</I></B></FONT><FONT SIZE=2> has been a director of Carriage since it went public in August&nbsp;1996. For the past 19&nbsp;years,
Mr.&nbsp;Stedman has been President of Wesley West Interests,&nbsp;Inc., a management company responsible for various family holdings, including marketable securities, oil, gas and coal
properties, ranch lands and urban real estate. Mr.&nbsp;Stedman also serves as a Manager and a member of the compensation committee of Strand Energy, L.L.C., a private exploration and production
company. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Ronald A. Erickson</I></B></FONT><FONT SIZE=2> has been a director of Carriage since it went public in August&nbsp;1996. Mr.&nbsp;Erickson is Chief Executive
Officer of Holiday Companies, Minneapolis, Minnesota, a family business consisting primarily of convenience stores and sporting goods stores. Mr.&nbsp;Erickson is also a </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>7</FONT></P>

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<P><FONT SIZE=2>director
(and member of the board's compensation committee) of Andersen Corporation, a privately held manufacturer of windows and patio doors. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Melvin C. Payne</I></B></FONT><FONT SIZE=2>, a management founder of Carriage, has been Chairman of the Board and Chief Executive Officer since December&nbsp;1996.
Prior to then, he had been the President, Chief Executive Officer and a director of Carriage since its inception in 1991. Mr.&nbsp;Payne resumed the additional position of President in
December&nbsp;2000. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>Joe R. Davis</I></B></FONT><FONT SIZE=2> has been a director of Carriage since 2003. He has been the Chief Executive Officer and Chairman of the Board of Consolidated
Graphics&nbsp;Inc. ("CGX") since he founded it in 1985. Mr.&nbsp;Davis serves on the Executive Committee of CGX's Board of Directors. </FONT></P>

<P><FONT SIZE=2><B><I>Executive Officers Who Are Not Directors  </I></B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B><I>Joseph Saporito</I></B></FONT><FONT SIZE=2> has been Senior Vice President, Chief Financial Officer and Secretary of Carriage since
September&nbsp;2002. Mr.&nbsp;Saporito, a certified public accountant, has responsibility for the financial and administrative functions of Carriage. Prior to joining Carriage, he was a partner of
Andersen Worldwide and Arthur Andersen LLP for 15&nbsp;years and served as Division Head of the Houston Commercial Audit Division. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>James J. Benard</I></B></FONT><FONT SIZE=2> has been Senior Vice President of Sales and Cemetery Operations for Carriage since November&nbsp;2001. Mr.&nbsp;Benard
joined Carriage in 1998 as a Regional Vice President of Sales. He has over 22&nbsp;years of professional funeral home and cemetery experience. Prior to joining Carriage, he was affiliated with
Service Corporation International in various roles for ten years. Mr.&nbsp;Benard is a member of the International Cemetery and Funeral Association. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B><I>George J. Klug</I></B></FONT><FONT SIZE=2> has been Senior Vice President and Chief Information Officer of Carriage since May&nbsp;2002. Before joining Carriage in
July&nbsp;2001, Mr.&nbsp;Klug served as Vice President of Information Technology at Allright Corporation from 1997 to 2000. Prior to Allright, Mr.&nbsp;Klug served as Vice President of
Information Technology for various retail companies, including Oshmans, Sportstown and Zaks. </FONT></P>

<P><FONT SIZE=2><B>Organization and Committees of the Board  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2003, Carriage's Board met six times and acted by unanimous written consent one time. Each of the directors attended all of the meetings of the Board. The
functions of the Executive, Audit, Compensation and Corporate Governance Committees of the Board, and the number of meetings held during 2003, are described below. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
primary function of the Executive Committee is to exercise many of the powers of the Board in between regular Board meetings, including the authorization of contracts, leases and
loan documents. The Executive Committee did not meet in 2003 and did not take any action by unanimous written consent. For all of 2003, Melvin C. Payne was the sole member of the Executive Committee.
The full Board has suspended all actions of the Executive Committee for so long as it has only one member and will consider reactivating the Executive Committee when additional members are appointed
by the Board. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Compensation Committee reviews and makes recommendations to the Board concerning the compensation of Carriage's executive officers and approves grants to all officers and employees
under our stock incentive plans. The Compensation Committee also administers, and makes grants of stock options under, Carriage's stock option plans. The members of the Compensation Committee are
Vincent D. Foster, Chairman, Stuart W. Stedman and Joe R. Davis. In 2003, the Compensation Committee held two meetings (and all Committee members were present at each meeting) and acted by unanimous
consent twice. See the report of the Compensation Committee on page 15 of this Proxy Statement. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>8</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Audit Committee evaluates, appoints and engages Carriage's independent auditors and reviews the plan, scope and results of the audit with the auditors and Carriage's officers. The
Audit Committee also reviews with the auditors the principal accounting policies and internal accounting controls of Carriage. The members of the Audit Committee are Vincent D. Foster, Chairman,
Stuart W. Stedman and Ronald A. Erickson. The Audit Committee met eight times during 2003, and each member of the Audit Committee was present at the meetings. See the report of the Audit Committee on
page 21 of this Proxy Statement. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2003, Carriage's Board adopted a new written charter to be the governing instrument for the Audit Committee. In 2004, the charter was amended, and a copy of the amended charter is
included as Appendix&nbsp;A. The NYSE, upon which our Common Stock is traded, requires that each of its listed companies maintain an independent audit committee. None of the members of our Audit
Committee has a relationship with Carriage that may interfere with the exercise of his independence from
management or Carriage. No member of our Audit Committee is or has been in the last three years an employee of Carriage or in a business relationship with Carriage. Also, no immediate family member
related to a member of our Audit Committee is an executive officer of Carriage or any of its affiliates. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
addition to the independence standard, the NYSE requires that each member of the Audit Committee be financially literate and at least one member must have accounting or related
financial management expertise. Each member of our Audit Committee is financially literate. Mr.&nbsp;Foster, the Committee's financial expert, is a certified public accountant with over
20&nbsp;years of public accounting experience. Currently, Mr.&nbsp;Foster is a managing director of a small business investment corporation for which he reviews and analyzes financial statements
as part of his daily functions. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Corporate Governance Committee reviews the structure of the full Board and makes recommendations regarding the size of the Board and the number and classification of directors. The
Corporate Governance Committee also conducts a search for suitable and qualified candidates to serve as directors when the terms of office are up for election at each year's annual meeting of
stockholders, and submits the names of candidates for such positions for consideration by the Board. The members of the Corporate Governance Committee are Stuart W. Stedman, Chairman, Vincent D.
Foster and Ronald A. Erickson. The Corporate Governance Committee met once in 2003 (and all Committee members were present) and acted by unanimous consent once. </FONT></P>

<P><FONT SIZE=2><B>Corporate Governance Principles  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have long been committed to integrity, reliability and transparency in our disclosures to the public. In early 2003, before the corporate governance listing
standards of the NYSE and recently adopted regulations of the Securities and Exchange Commission (the "SEC") became effective, we adopted new charters for our Board committees, a set of corporate
governance guidelines, and a code of business conduct and ethics for our directors, officers and employees, and we moved to increase the independence of our Board members. In early 2004, following the
final release of the NYSE and SEC rules, we amended the committee charters and corporate governance guidelines, and all these materials as well as our code of business conduct and ethics are
accessible through the Investor Relations Section of our website at <U>http://www.carriageservices.com</U>, or you may receive copies without charge by writing to us at Carriage
Services,&nbsp;Inc., 1900 St. James Place, 4<SUP>th</SUP> Floor, Houston, Texas 77056, Attn: Investor Relations. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Independence.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our corporate governance guidelines require that our Board composition comply with the NYSE guidelines,
including the requirement that a majority of our Board consist of independent directors within the meaning of the NYSE rules. Our Corporate Governance Committee reviewed our Board composition in early
2004 and determined that four of six of our existing directors meet the independence standard, and that this ratio will be maintained if our current nominees are elected to the Board at the upcoming
Meeting. In addition, all directors serving on our Audit, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>9</FONT></P>

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<P><FONT SIZE=2>Compensation
and Corporate Governance Committees satisfy these independence requirements. In accordance with our corporate governance guidelines, the independent directors routinely (at least
quarterly) meet in executive session, outside of the presence of non-independent directors or other members of management, both with the independent accountants and then without anyone
else present. At present, Mr.&nbsp;Stedman, Chairman of the Corporate Governance Committee, presides over these executive sessions, but the independent directors have agreed that the function of
presiding independent director may rotate from time to time. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Board Composition.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Corporate Governance Committee is responsible for reviewing the requisite skills and characteristics
of new Board members as well as the composition of the Board as a whole. Nominees for directorship will be selected by the Corporate Governance Committee in accordance with the policies and principles
in its charter. The Corporate Governance Committee believes that the minimum qualifications for serving as a director are that a nominee demonstrate an ability to make a meaningful contribution to the
Board's oversight of our business and affairs and have a reputation for ethical conduct. Nominees for director will include individuals who, taking into account their diversity, age, skills, and
experience in the context of the needs of the Board, as well as other relevant factors such as conflicts of interest and other commitments, would enhance the Board's ability to manage and direct our
affairs and business. No director may serve on more than five other public company boards or on the audit committee for more than three other public companies. We have not established term limits as
we do not wish to risk losing the contribution of directors who have been able to develop, over a period of time, increasing insight into our business and operations. However, we have determined that
no director may be nominated to a new term if he or she would be age 75 or older at the time of the election. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Corporate Governance Committee identifies candidates by asking our current directors and executive officers to notify the Committee if they become aware of individuals who meet the
criteria described above. The Corporate Governance Committee has the authority to engage firms that specialize in identifying director candidates, although we have not heretofore engaged such a firm.
The Corporate Governance Committee will also consider candidates recommended by stockholders. Once the Corporate Governance Committee has identified a potential candidate, the Committee collects and
reviews available information regarding the individual, and if the Committee determines that the candidate warrants further consideration, the Committee Chair or another Committee member will contact
the person. Generally, if the individual expresses a willingness to be considered for election to the Board, the Corporate Governance Committee will request information from the candidate, review the
individual's qualifications, and conduct one or more interviews with the candidate. When the Corporate Governance Committee has completed this process, it tenders its recommendation to the full Board
for consideration. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Board's Interaction With Stockholders.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our Chief Executive Officer and other corporate officers are responsible for
establishing effective communications with our stockholders. It is our policy that management speaks for Carriage. This policy does not preclude independent directors from meeting with stockholders,
but where appropriate, management should be present at such meetings. Stockholders may submit communications to directors by writing in care of Carriage Services,&nbsp;Inc., 1900 St. James Place,
4<SUP>th</SUP> Floor, Houston, Texas 77056; Attn: Joseph Saporito, Senior Vice President and Secretary. </FONT></P>

<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Board and CEO Evaluation.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;We have instituted an annual process for the Board and each Committee to perform
self-evaluations. In addition, the Compensation Committee performs an annual evaluation of the Chief Executive Officer's performance. As part of the long-range planning, the
Corporate Governance Committee is charged with considering Chief Executive Officer succession, both in the event of emergency and upon retirement. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>10</FONT></P>

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<P><FONT SIZE=2><I>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Business Conduct and Ethics.</I></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Our code of business conduct and ethics requires all of our directors, officers and employees to
adhere to certain basic principles to uphold our mission to be the most professional, ethical and highest quality funeral and cemetery service organization in the death care industry. Our code
requires them to comply with the law, avoid conflicts of interest, compete fairly and honestly, maintain a safe and healthy work environment, and preserve company assets. We do not presently believe
that there would be any occasion requiring any changes in or waivers under the code, but in the event of exceptional circumstances in which such a change or waiver becomes necessary, it would require
Board approval and, where appropriate, prompt public disclosure. Our code includes specific compliance procedures and a mechanism for reporting violations through our Human Resources Department. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dc1198_section_16(a)_beneficia__dc102042"> </A>
<A NAME="toc_dc1198_4"> </A>
<BR></FONT><FONT SIZE=2><B>SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;16(a) of the Securities Exchange Act of 1934 requires Carriage's directors and executive officers, and persons who own more than 10% of a
registered class of Carriage's equity securities, to file with the SEC reports of ownership and changes in ownership of Common Stock and other equity securities of Carriage. Executive officers,
directors and greater than 10% beneficial owners are required by SEC regulations to furnish Carriage with copies of all Section&nbsp;16(a) forms they file. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based
solely on a review of the copies of such reports furnished to Carriage or written representations that no other reports were required, Carriage believes that all filing
requirements applicable to its executive officers, directors and greater than 10% beneficial owners were complied with during 2003,
except as follows: Greg M. Brudnicki and Mark F. Wilson each filed their respective Form&nbsp;4 on May&nbsp;23, 2003 to report a grant of stock options that occurred effective May&nbsp;13, 2003. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dc1198_certain_transactions"> </A>
<A NAME="toc_dc1198_5"> </A>
<BR></FONT><FONT SIZE=2><B>CERTAIN TRANSACTIONS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Greg Brudnicki and Mark Wilson are prior owners of businesses that Carriage acquired in 1997. As an incentive, we entered into arrangements with them to pay them
each 10% of the amount by which the annual field level cash flow exceeds predetermined targets on certain businesses in their respective geographic region through 2007, with a final payment in 2008
equal to a multiple of six times the average of the last three years payments. The business purpose of the arrangements was to incentivise the individuals to provide Carriage with high quality
acquisition targets and to have input in the competitive strategies of those businesses post-acquisition so that cash flows grow over time. The incentives earned by the two individuals
totaled approximately $60,000 for 2003. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company rents office space, at an annual rate of $19,000 per year through 2005, from an entity in which Greg Brudnicki has a financial interest. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Company was reimbursed during 2003 for the cost of personnel and office expenses totaling approximately $87,000 from an entity in which Carriage owns a minority (12%) interest and
one of the entity's directors is Melvin Payne. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
connection with the production our 2003 annual report, printing costs of approximately $20,000 were paid during 2003 to an entity in which Joe Davis is the chief executive officer.
The printing services were competitively bid, and we believe the amount paid represents market cost. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;When
we acquired CNM in January&nbsp;1997, we agreed to nominate Mr.&nbsp;Wilson to our Board of Directors for so long as he and other former CNM shareholders collectively owned a
certain minimum level of our Common Stock, and he served on our Board from 1997 through 2003. The Board in early 2003 discussed its desire to achieve as quickly as practicable a majority of its
members who would qualify as independent, and we agreed with Mr.&nbsp;Wilson and the other former CNM shareholders that Mr.&nbsp;Wilson would not stand for re-election in 2003, so as
to make room for another candidate (Mr.&nbsp;Davis) who could serve as an independent director. Mr.&nbsp;Wilson continued to have certain rights to attend regular and special meetings of the Board
as a non-voting visitor and to receive certain materials available to directors. The Board further agreed that (if the minimum stock ownership threshold is still met) it would nominate
Mr.&nbsp;Wilson as a Class&nbsp;II director for consideration at the 2004 annual meeting of stockholders, and we have done so as reflected in Proposal No.&nbsp;1. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>11</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=9,SEQ=15,EFW="2133939",CP="CARRIAGE SERVICES, INC.",DN="1",CHK=524528,FOLIO='11',FILE='DISK043:[04HOU8.04HOU1198]DC1198B.;5',USER='MTRAN',CD='19-APR-2004;15:34' -->
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="page_de1198_1_12"> </A> </FONT></P>

<!-- TOC_END -->
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1198_executive_compensation"> </A>
<A NAME="toc_de1198_1"> </A>
<BR></FONT><FONT SIZE=2><B>EXECUTIVE COMPENSATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Summary Compensation Table  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information regarding the compensation for the years ended December&nbsp;31, 2003, 2001 and 2000, with respect to the Chief
Executive Officer and the four other most highly compensated executive officers of Carriage whose total annual salary and bonus during 2003 exceeded $100,000 (collectively, the "Named Executive
Officers"). </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="24%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=12 ALIGN="CENTER"><FONT SIZE=1><B>Annual Compensation</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=4 ALIGN="CENTER"><FONT SIZE=1><B>Long Term<BR>
Compensation Awards</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="24%" ALIGN="LEFT"><FONT SIZE=1><B>Name and<BR>
Principal Position<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="5%" ALIGN="CENTER"><FONT SIZE=1><B>Year</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Salary</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Bonus</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="14%" ALIGN="CENTER"><FONT SIZE=1><B>Other<BR>
Annual<BR>
Compensation(1)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Restricted<BR>
Stock<BR>
Awards(2)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="10%" ALIGN="CENTER"><FONT SIZE=1><B>Securities<BR>
Underlying<BR>
Options(3)</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>All Other<BR>
Compen-<BR>
sation(4)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="24%"><FONT SIZE=2><B>Melvin C. Payne</B></FONT><FONT SIZE=2><BR>
Chairman of the Board,<BR>
Chief Executive Officer and President</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2>2003<BR>
2002<BR>
2001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>399,808<BR>
375,000<BR>
375,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>190,000<BR>
200,000<BR>
187,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2>&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>&#151;<BR>
277,900<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2>&#151;<BR>
&#151;<BR>
60,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2>21,075<BR>
16,061<BR>
15,663</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="24%"><BR><FONT SIZE=2><B>Joseph Saporito</B></FONT><FONT SIZE=2><BR>
Senior Vice President,<BR>
CFO and Secretary</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2003<BR>
2002<BR>
2001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR>$<BR></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
239,885<BR>
63,173<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR>$<BR></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
120,000<BR>
30,000<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR><BR></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
466,000<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,153<BR>
87<BR>
&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="24%"><BR><FONT SIZE=2><B>James J. Benard</B></FONT><FONT SIZE=2><BR>
Senior Vice President-Sales&nbsp;&amp; Cemetery Operations</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2003<BR>
2002<BR>
2001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
200,000<BR>
200,000<BR>
200,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
50,000<BR>
50,000<BR>
35,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR><BR>$<BR></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
79,400<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
25,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,316<BR>
2,710<BR>
180</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="24%"><BR><FONT SIZE=2><B>George J. Klug</B></FONT><FONT SIZE=2><BR>
Senior Vice President<BR>
Chief Information Officer</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2003<BR>
2002<BR>
2001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
164,885<BR>
149,962<BR>
59,551</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR>$<BR></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
70,000<BR>
20,000<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR><BR>$<BR></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
99,250<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
35,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,013<BR>
621<BR>
218</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="24%"><BR><FONT SIZE=2><B>Jay D. Dodds(5)</B></FONT><FONT SIZE=2><BR>
Senior Vice President of Funeral Operations</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2003<BR>
2002<BR>
2001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
189,923<BR>
180,000<BR>
180,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
10,000<BR>
60,000<BR>
50,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR><BR>$<BR></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
79,400<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
20,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,012<BR>
2,601<BR>
2,309</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="24%"><BR><FONT SIZE=2><B>Departed Officer<BR>
Mark Groeneman(6)</B></FONT><FONT SIZE=2><BR>
Senior Vice President-Human Resources</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="5%" ALIGN="RIGHT"><FONT SIZE=2><BR>
2003<BR>
2002<BR>
2001</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
159,923<BR>
150,000<BR>
150,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
45,000<BR>
35,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="14%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR><BR>$<BR></FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
79,400<BR>
&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="10%" ALIGN="RIGHT"><FONT SIZE=2><BR>
&#151;<BR>
&#151;<BR>
15,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$<BR>$<BR>$</FONT></TD>
<TD WIDTH="8%" ALIGN="RIGHT"><FONT SIZE=2><BR>
1,266<BR>
2,355<BR>
1,918</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Excludes
perquisites and other personal benefits unless the aggregate amount of such compensation exceeded the lesser of $50,000 or 10% of the total of annual salary and bonus
reported for the Named Executive Officer.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Represents
the value of Common Stock issued to the Named Executive Officer at the time of grant based upon the closing price of a share of Common Stock on the grant date.
Mr.&nbsp;Saporito's stock grant for the 2003&nbsp;year covering 100,000 shares was effective January&nbsp;29, 2004, when the price was $4.66 per share. All stock grants for the 2002&nbsp;year
were granted effective January&nbsp;9, 2003 when the price was $3.97 per share, as follows: Mr.&nbsp;Payne&#151;70,000 shares; Mr.&nbsp;Benard&#151;20,000 shares;
Mr.&nbsp;Klug&#151;25,000 shares; and Mr.&nbsp;Groeneman&#151;20,000 shares.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>Options
granted for the 2001&nbsp;year were granted in February&nbsp;2002.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>Each
of the amounts in this column reflect contributions by Carriage to its 401(k) Plan for the executive's benefit plus payment or reimbursement of life insurance premiums where the
Company was not the named beneficiary.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(5)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Dodds
is an executive officer and remains an employee but was not a Named Executive Officer as of December&nbsp;31, 2003 as a result of a change in duties.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(6)</FONT></DT><DD><FONT SIZE=2>Mr.&nbsp;Groeneman
was an executive officer as of December&nbsp;31, 2003 but voluntarily resigned in February&nbsp;2004. See "Separation Agreement with a Departed Officer,"
below. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>12</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
<!-- ZEQ.=1,SEQ=16,EFW="2133939",CP="CARRIAGE SERVICES, INC.",DN="1",CHK=282570,FOLIO='12',FILE='DISK043:[04HOU8.04HOU1198]DE1198A.;13',USER='MTRAN',CD='19-APR-2004;15:41' -->
<A NAME="page_de1198_1_13"> </A>

<P><FONT SIZE=2><B>Stock Option Grants in 2003  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have four stock incentive plans: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
1995 Stock Incentive Plan (the "1995 Plan");
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
1996 Stock Incentive Plan (the "1996 Plan");
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
1996 Directors' Stock Option Plan (the "Directors' Plan"); and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>the
1998 Stock Option Plan for Consultants (the "Consultants Plan"). </FONT></DD></DL>
</UL>
<BR>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
total of 1,450,000 shares of Common Stock are reserved for issuance under the 1995 Plan, 1,300,000 shares of Common Stock are reserved for issuance under the 1996 Plan, 350,000 shares
of Common Stock are reserved for issuance under the Directors' Plan, and 30,000 shares of Common Stock are reserved for issuance under the Consultants Plan. Options issued under the 1995 Plan and the
1996 Plan may be either "Incentive Stock Options" as defined in Section&nbsp;422 of the Internal Revenue Code of 1986, as amended (the "Code"), or non-qualified stock options. Options
issued under the Directors' Plan and Consultants Plan are non-qualified stock options. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No
Named Executive Officer received a grant of options to acquire shares of Common Stock during the year ended December&nbsp;31, 2003. </FONT></P>

<P><FONT SIZE=2><B>2003 Option Exercises and Year-End Option Holdings  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, with respect to the Named Executive Officers, information concerning the exercise of stock options during the year ended
December&nbsp;31, 2003, and the year-end value of unexercised options: </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1198_aggregate_option_exercises_in___agg03169"> </A>
<A NAME="toc_de1198_2"> </A>
<BR></FONT><FONT SIZE=2><B>Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values    <BR>    </B></FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TH>
<TH WIDTH="8%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=3 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Number of Unexercised<BR>
Options Held at<BR>
December&nbsp;31, 2003</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=5 ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Value of Unexercised<BR>
In-the-Money Options at<BR>
December&nbsp;31, 2003(1)</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="28%" ROWSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Name<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Shares<BR>
Acquired<BR>
on Exercise</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%" ROWSPAN=2><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="8%" ROWSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Value<BR>
Realized</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="9%" ALIGN="CENTER"><FONT SIZE=1><B>Exercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="11%" ALIGN="CENTER"><FONT SIZE=1><B>Unexercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Exercisable</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Unexercisable</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Melvin C. Payne</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>360,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>641,250</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Joseph Saporito</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>James J. Benard</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>43,374</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>3,750</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>34,143</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>9,422</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>George J. Klug</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>27,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>7,500</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Jay D. Dodds</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>96,212</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>147,250</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="28%"><FONT SIZE=2>Mark Groeneman</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="8%"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>65,000</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="9%" ALIGN="RIGHT"><FONT SIZE=2>125,625</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="11%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
</TABLE>
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<HR NOSHADE ALIGN="LEFT" WIDTH="120">
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>An
option is "in-the-money" if the market value of the Common Stock exceeds the exercise price of the option. The values of the options set forth in these
columns are based upon the difference between the closing price of $3.70 on the NYSE on December&nbsp;31, 2003 and any lesser exercise price. </FONT></DD></DL>
<P ALIGN="CENTER"><FONT SIZE=2>13</FONT></P>

<HR NOSHADE>
<P style='page-break-before:always'></p>
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<P><FONT SIZE=2><B>Equity Compensation Plan Information  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides information about our Common Stock that may be issued under equity compensation plans as of December&nbsp;31, 2003: </FONT></P>

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH COLSPAN=2 ALIGN="LEFT"><FONT SIZE=1><B>Plan Category<BR> </B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="20%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Securities<BR>
to be Issued Upon<BR>
Exercise of<BR>
Outstanding Options,<BR>
Warrants and Rights</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>Weighted-Average<BR>
Exercise Price of<BR>
Outstanding<BR>
Options, Warrants<BR>
and Rights</B></FONT><HR NOSHADE></TH>
<TH WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH WIDTH="20%" ALIGN="CENTER"><FONT SIZE=1><B>Number of Shares<BR>
Remaining Available for<BR>
Future Issuance Under<BR>
Equity Compensation<BR>
Plans (excluding shares<BR>
Reflected in the First Column)</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Equity compensation plans approved by security holders(1)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>1,772,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>3.70</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>717,000</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="BOTTOM">
<TD COLSPAN=2><FONT SIZE=2>Equity compensation plans not approved by security holders(2)</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>&#151;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><HR NOSHADE></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="BOTTOM">
<TD WIDTH="2%">&nbsp;</TD>
<TD WIDTH="29%"><FONT SIZE=2>TOTAL</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>1,772,000</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="17%" ALIGN="RIGHT"><FONT SIZE=2>3.70</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="20%" ALIGN="RIGHT"><FONT SIZE=2>717,000</FONT></TD>
</TR>
</TABLE>
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<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>Reflects
options under our 1995 Plan, 1996 Plan, Directors' Plan and Consultants Plan, all of which have been approved by our stockholders. Does not include 152,000 shares which
remain available under our 1997 Employee Stock Purchase Plan, which has also received stockholder approval (1,152,000 shares if Proposal No.&nbsp;2 is approved).
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>Does
not include arrangements with certain former owners of businesses sold to Carriage in which they may become entitled to receive payments based upon the field-level financial
performance of locations within their designated geographic area, and under which they have the right to accept such payments in cash or our Common Stock. To date, all such payments have been made in
cash. Also does not include fees that directors from time to time elect to receive in our Common Stock in lieu of cash. See "Compensation of Directors" below. </FONT></DD></DL>

<P><FONT SIZE=2><B>Separation Agreement with a Departed Officer  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;29, 2004, Mark Groeneman, Carriage's former Senior Vice President of Human Resources, resigned from his positions as an officer and employee of
Carriage. In connection with this resignation, Carriage and Mr.&nbsp;Groeneman entered into a Separation Agreement and Release under which, among other things, we agreed to pay him severance from
March through December&nbsp;2004 at his then-current base compensation rate of $160,000 per year, and include him in our group health benefit program during that period. This Separation
Agreement superseded our employment agreement with Mr.&nbsp;Groeneman dated September&nbsp;21, 1999, except for those provisions (such as restrictive covenants and confidentiality) which by their
terms survived the expiration thereof. We also agreed to accelerate the vesting of a restricted stock grant which Mr.&nbsp;Groeneman received in January&nbsp;2003. </FONT></P>

<P><FONT SIZE=2><B>Compensation of Directors  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We compensate our directors through cash payments, including quarterly retainers and meeting attendance fees, and through stock options. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
"outside director" is entitled to an annual retainer of $20,000, payable quarterly. A director qualifies as outside if that director either is an independent director or is not an
employee of our parent corporation or any subsidiary; currently, outside directors consist of Messrs.&nbsp;Stedman, Erickson, Foster and Davis. In addition, the Chair of the Audit Committee (who is
required to be an independent director, currently Mr.&nbsp;Foster) receives an annual grant of 5,000 fully vested shares of our Common Stock. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
a general rule, each outside director is entitled to $1,000 for each regular or special meeting of the full Board attended in person, and $500 if attended by phone. In addition, Audit
Committee </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>14</FONT></P>

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<P><FONT SIZE=2>members
receive $1,500 for each committee meeting held in person and $1,000 for each such meeting held by phone, except that those amounts are reduced by one-half if the committee meeting
occurs on the same day as a full Board meeting. Members of the other committees receive $750 for each committee meeting held in person and $500 for each such meeting held by phone. The amounts are
$1,125 and $750, respectively, for the chair of such committees, and no attendance fees are payable for these other committees for a meeting that occurs on the same day as a full Board meeting. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Outside
directors have the ability to elect to receive all or any portion of the cash retainer and attendance fees in shares of our Common Stock, based on the fair market value thereof
as of the date the amount is earned. Currently, Mr.&nbsp;Davis receives 100% of his fees in Common Stock, Mr.&nbsp;Stedman receives 60% and Mr.&nbsp;Foster receives 50%. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
also have the ability to issue discretionary options and restricted stock grants under the Directors' Plan. The eligibility to receive options and grants is broader than the
definition of outside directors, by including all directors who are not executive officers of our parent corporation, but who may be employees ("eligible directors"). At present, eligible directors
under the Directors Plan include Messrs.&nbsp;Stedman, Erickson, Foster, Davis and Brudnicki, and it is expected that Mr.&nbsp;Wilson will similarly qualify as an outside director if he is elected
to the Board. Each grant under the Directors Plan must be approved by (1)&nbsp;at least two-thirds of all members of the entire Board, and (2)&nbsp;a majority of all members of the
Board who are not eligible to receive options under the Directors' Plan. In addition, shares issued upon exercise of options granted under the Directors' Plan may not, without Board approval, be sold
or disposed of within six months following the date of grant. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There
are an aggregate of 350,000 shares of Common Stock reserved for issuance under the Directors' Plan. In May&nbsp;2003, Carriage granted to each of Messrs.&nbsp;Stedman,
Erickson, Foster, Wilson and Brudnicki an option to purchase up to 6,000 shares of our Common Stock at an exercise price of $3.60 per share. In addition, Carriage issued to Mr.&nbsp;Davis a
restricted stock grant for 20,000 shares upon his election to the Board in May&nbsp;2003. It is anticipated that every eligible director will receive a grant of 6,000 fully vested options
immediately following the 2004 annual meeting. </FONT></P>

<P><FONT SIZE=2><B>Employment Agreements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective November&nbsp;8, 1999, we entered into an employment agreement with Melvin C. Payne. The employment agreement with Mr.&nbsp;Payne has an initial
term of approximately five years with an evergreen two-year extension continuing after the first three years of the employment agreement unless either Carriage or Mr.&nbsp;Payne gives
90&nbsp;days notice of termination. Pursuant to this agreement, Mr.&nbsp;Payne is entitled to receive a base salary of not less than his current level of $400,000 per year, and a bonus to be
determined on an annual basis by the Board of Directors. If Mr.&nbsp;Payne is terminated without cause during the term of the agreement, he will receive a monthly severance payment until the end of
the term as if he had not been terminated plus a proportionate amount of the bonus earned for the year of termination. Such monthly severance payment would be equal to the average monthly amount
(including salary and bonus) earned by Mr.&nbsp;Payne during the three calendar years prior to his termination. During the period that Mr.&nbsp;Payne receives the monthly severance payment, he
also would be entitled to participate in any employee benefit plans or programs in which he was participating at the time of his termination. In addition, the agreement contains a covenant prohibiting
Mr.&nbsp;Payne from competing with Carriage during the period he is receiving compensation under his agreement, provided, however, that following termination of employment, he may elect to forego
certain severance payments which he would be entitled to under the employment agreement and thereafter would not be prohibited from competing with us. In addition, the agreement contains customary
benefits and perquisites. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carriage
is also a party to separate employment agreements with Joseph Saporito, James J. Benard, George J. Klug and Jay D. Dodds dated effective September&nbsp;16, 2002,
January&nbsp;1, 2001, May&nbsp;7, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>15</FONT></P>

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<BR>

<P><FONT SIZE=2>2002
and November&nbsp;8, 1999, respectively, providing for initial annual base salaries to them of $225,000, $200,000, $150,000 and $130,000, respectively, plus certain benefits including but not
limited to eligibility for a year-end bonus based on performance, eligibility for stock option grants, and other benefits generally available to employees. Their agreements extend through
September&nbsp;30, 2005, December&nbsp;31, 2006, December&nbsp;31, 2004 and November&nbsp;8, 2004, respectively, and each agreement may sooner terminate with no further obligation of Carriage
for additional payments upon the death or disability of the employee or his termination from employment for cause. If the employee is terminated without cause, Carriage is obligated to continue to pay
the employee his salary and provide benefits for the remainder of the contract term (in the case of Mr.&nbsp;Dodds) or a period of one year (in all other cases). Each such employee has agreed that
for a two-year period following the termination of his employment agreement, he will not compete with Carriage or will induce any employees of Carriage to leave Carriage, with no option to
elect out of the covenant. In addition, if Carriage undergoes a "Corporate Change" (as defined in our 1996 Plan) and Mr.&nbsp;Saporito leaves our employment, then he would be entitled to receive
compensation and benefits for 12&nbsp;months or until the remainder of his contract term, whichever is longer. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
each case, the annual base salaries have been reviewed and from time to time adjusted, most recently in January&nbsp;2004 to the following levels:
Mr.&nbsp;Payne&#151;$400,000; Mr.&nbsp;Saporito&#151;$260,000; Mr.&nbsp;Benard&#151;$210,000; Mr.&nbsp;Klug&#151;$180,000; and
Mr.&nbsp;Dodds&#151;$190,000. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="de1198_compensation_committee___de102378"> </A>
<A NAME="toc_de1198_3"> </A>
<BR></FONT><FONT SIZE=2><B>COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee (the "Committee") is responsible for recommending compensation arrangements for our Chief Executive Officer, approving compensation
arrangements for other executive officers, making recommendations with respect to employee benefit plans, making grants under the 1995 Plan and the 1996 Plan and administering the 1997 Employee Stock
Purchase Plan. Each member of the Committee is independent of Carriage within the meaning of the NYSE corporate governance guidelines. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
goal of the Committee is to enhance performance and maximize stockholder value through, among other things, establishing appropriate executive compensation levels and incentives. The
Committee believes that compensation levels should be tied to performance on both an individual and corporate level so that management will be properly motivated to achieve Carriage's annual and long
term performance goals and to maximize stockholder value. Our executive compensation policies are designed to: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Allow
us to attract and retain qualified executives with the leadership and other skills needed by Carriage at this stage in its development;
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Provide
strong incentives to achieve our annual and long term performance goals, with rewards for both individual and corporate performance; and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>&#149;</FONT></DT><DD><FONT SIZE=2>Solidly
align the interests of management with those of the stockholders. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each
year, the Committee considers individualized methods to implement these policy goals, which includes a review of base salary as well as consideration of annual incentives, which may
consist of one or a combination of cash bonuses, stock options, restricted stock grants and other incentives. The emphasis since 2003 has been focused on cash incentives and restricted stock awards.
The Compensation Committee again reviewed the compensation structure for the management team in January&nbsp;2004 and authorized salary increases, cash bonuses and a restricted stock grant to the
senior management team, all as further described below. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>16</FONT></P>

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<P><FONT SIZE=2><B>Base Salaries  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The base salaries for each of our executive officers are determined on an individual basis, taking into account such factors as the duties and levels of
responsibility of the individual and compensation levels set by other companies within the industry, as well as other companies in the service sector of comparable revenue size. The Committee believes
that maintaining a reasonable base salary structure is necessary to attract and retain talented executives. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
early 2003, the Committee approved new annual base salaries following its review of 2002 performance, and the increases averaged 5.5% for the six individuals who then comprised our
senior management team. In the third quarter 2003, as we began to restructure our field-level management and incentive programs, the management responsibilities in our funeral organization were also
realigned, with Mr.&nbsp;Payne assuming leadership of funeral operations and Mr.&nbsp;Dodds focusing his efforts on the Western Region. Mr.&nbsp;Benard has accepted the additional role of
leading the preneed funeral activities. With the departure in February&nbsp;2004 of Mr.&nbsp;Groeneman, whose functions have been reallocated among Carriage's corporate staff, the senior
management team presently consists of
Messrs.&nbsp;Payne, Saporito, Benard and Klug. Given the realignment, the performance of our company as a whole in 2003 and each executive officer's individual performance, the Committee approved
base salary increases in early 2004 averaging 4.5% for the senior management team. </FONT></P>

<P><FONT SIZE=2><B>Bonuses for Named Executive Officers for 2003  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of the performance review process described above, the Committee evaluated the appropriate levels of bonuses which should be considered for each executive
officer. The approach in January&nbsp;2004 was essentially the same as in early 2003. The previous year's performance for each individual and his area of responsibility was measured against the
goals set for that executive at the beginning of the year, and then the Committee approved cash bonuses to the individuals as a percentage of base salary based upon how the Committee felt those
objectives had been achieved. The Committee approved cash bonuses averaging 43% of the executives' 2003 base salary level, and these are reflected in the Summary Compensation Table. </FONT></P>

<P><FONT SIZE=2><B>Restricted Stock Bonus Award for 2003  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have been deemphasizing the use of stock options as a means of incentivizing our executive officers, and consequently no options were issued to them in 2003 or
2004. Instead, we are focusing on increasing the ownership in Carriage through restricted stock awards, and in 2003 we awarded a total of 160,000 shares to five of the six executive officers. As a
general rule, restricted stock awards are subject to a vesting schedule and remain subject to forfeiture if the executive leaves before shares are vested. As part of the annual review process in early
2004, the Committee elected not to issue across-the-board restricted shares, given the grants made in early 2003, but the Committee did authorize the grant of 100,000
restricted shares to Mr.&nbsp;Saporito. We felt this individualized grant was appropriate given that Mr.&nbsp;Saporito did not receive any options when he joined us in September&nbsp;2002, he
was not included in the group that received restricted stock grants in January&nbsp;2003 because he had then been employed by Carriage for only a few months, and to recognize his contributions in
2003. Like the other grants, Mr.&nbsp;Saporito's award has a vesting schedule of 25% per year on the first through fourth anniversaries of the January&nbsp;29, 2004 grant date, when our stock
price was $4.66. The shares were issued under our 1995 Plan and are consequently registered on Form&nbsp;S-8, but unvested shares are held in escrow pending satisfaction of vesting
requirements. In future years, the Committee intends to continue to use restricted stock awards as a means to incentivize our executive officers and other key members of the management team, and the
proposed amendment to the 1996 Plan will help give us needed flexibility in this regard. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>17</FONT></P>

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<A NAME="page_de1198_1_18"> </A>
<BR>

<P><FONT SIZE=2><B>Compensation Policies for the Chief Executive Officer  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Melvin C. Payne has served as our Chief Executive Officer since Carriage was founded in 1991. He assumed the additional title of Chairman of the Board in
December&nbsp;1996. Mr.&nbsp;Payne took on the additional responsibilities as President at the end of 2000, in which capacity he has been effectively functioning as chief operating officer.
Following the realignment of our funeral organization in the third quarter of 2003, Mr.&nbsp;Payne has also been leading our funeral operations. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under
our charter, the Committee recommends compensation for the Chief Executive Officer for approval by the full Board. Mr.&nbsp;Payne's base salary was significantly increased in
early 2000 to bring it more in line with market, but his base salary has increased by just 6.7% over the intervening four years. Nevertheless, at Mr.&nbsp;Payne's request, the Committee recommended
that Mr.&nbsp;Payne's base salary remain unchanged at $400,000 per year. The Committee also undertook a review of Mr.&nbsp;Payne's performance in 2003, and based upon the objectives he achieved,
the Committee felt that it was appropriate to award Mr.&nbsp;Payne a cash bonus of $190,000, or 48% of his base salary level, slightly less than Mr.&nbsp;Payne's cash bonus for the previous year. </FONT></P>

<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>

<P><FONT SIZE=2><I>Compensation Committee</I></FONT><FONT SIZE=2><BR>
<BR>
Vincent D. Foster, Chairman<BR>
Stuart W. Stedman<BR>
Joe R. Davis </FONT></P>

</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2>18</FONT></P>

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<P style='page-break-before:always'></p>
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NAME="page_dg1198_1_19"> </A> </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1198_comparative_stockholder_return"> </A>
<A NAME="toc_dg1198_1"> </A>
<BR></FONT><FONT SIZE=2><B>COMPARATIVE STOCKHOLDER RETURN    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following graph compares on a cumulative basis the percentage change during the last five fiscal years in the total stockholder return on (i)&nbsp;our
Common Stock, (ii)&nbsp;the Standard&nbsp;&amp; Poor's 500 Stock Price Index, and (iii)&nbsp;a peer group index of the two other companies in the death care industry that were publicly traded
throughout the entire five-year period (Service Corporation International and Stewart Enterprises,&nbsp;Inc.). This graph assumes that the value of an investment in our Common Stock and
in each index was $100 on December&nbsp;31, 1998. The returns for each company in the Peer Group are weighted according to its stock market capitalization for which a return is indicated. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=1><B> Comparison of Stockholder return Among Carriage Services, Inc., the S&amp;P 500 Index, and an Industry Peer Group  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=1><B>
<IMG SRC="g935059.jpg" ALT="GRAPHIC" WIDTH="568" HEIGHT="415">
  </B></FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="BOTTOM">
<TH WIDTH="41%" ALIGN="LEFT"><FONT SIZE=2>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=17 ALIGN="CENTER"><FONT SIZE=1><B>Comparison of Stockholder Returns</B></FONT><HR NOSHADE></TH>
</TR>
<TR VALIGN="BOTTOM">
<TH WIDTH="41%" ALIGN="LEFT"><FONT SIZE=1>&nbsp;</FONT><BR></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>12/31/98</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>12/31/99</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>12/31/00</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>12/31/01</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>12/31/02</B></FONT><HR NOSHADE></TH>
<TH WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TH>
<TH COLSPAN=2 ALIGN="CENTER"><FONT SIZE=1><B>12/31/03</B></FONT><HR NOSHADE></TH>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="41%"><FONT SIZE=2>Carriage Services, Inc.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>100</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>21</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>6</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>20</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>15</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2>14</FONT></TD>
</TR>
<TR BGCOLOR="White" VALIGN="TOP">
<TD WIDTH="41%"><FONT SIZE=2><BR>
S&amp;P 500 Index</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
100</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
120</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
107</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
93</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
72</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
90</FONT></TD>
</TR>
<TR BGCOLOR="#CCEEFF" VALIGN="TOP">
<TD WIDTH="41%"><FONT SIZE=2><BR>
Peer Group</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
100</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
21</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
6</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
18</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
14</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=2><BR>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=2><BR>$</FONT></TD>
<TD WIDTH="7%" ALIGN="RIGHT"><FONT SIZE=2><BR>
19</FONT></TD>
</TR>
</TABLE>
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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1198_compensation_committee___dg102499"> </A>
<A NAME="toc_dg1198_2"> </A>
<BR></FONT><FONT SIZE=2><B>COMPENSATION COMMITTEE INTERLOCKS<BR>  AND INSIDER PARTICIPATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2003, the members of the Compensation Committee were Vincent D. Foster, Chairman, Stuart W. Stedman and Joe R. Davis. No member of the
Compensation Committee was an officer or employee of Carriage at any time during 2003. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
2003, no executive officer or employee of Carriage served as (i)&nbsp;a member of the compensation committee (or other board committee performing equivalent functions) of
another entity, </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>19</FONT></P>

<HR NOSHADE>
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<A NAME="page_dg1198_1_20"> </A>
<BR>

<P><FONT SIZE=2>one
of whose executive officers served on the Compensation Committee of the Board of Directors; (ii)&nbsp;a director of another entity, one of whose executive officers served on the Compensation
Committee of the Board of Directors; or (iii)&nbsp;a member of the compensation committee (or other board committee performing equivalent functions) of another entity, one of whose executive
officers served as a director of Carriage. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1198_proposal_no._2_amendment_of_th__pro02325"> </A>
<A NAME="toc_dg1198_3"> </A>
<BR></FONT><FONT SIZE=2><B>PROPOSAL NO. 2<BR>  AMENDMENT OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Amendment to Increase Authorized Shares  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On February&nbsp;17, 2004, the Board of Directors approved an amendment to the 1997 Employee Stock Purchase Plan (the "Stock Purchase Plan"), to increase the
number of shares available for issuance thereunder from 1,000,000 to 2,000,000 shares. The amendment, a copy of which is attached as Appendix&nbsp;B, was made subject to approval by the stockholders
at the Meeting. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Stock Purchase Plan was originally adopted on February&nbsp;4, 1998 and was approved by the stockholders at the 1998 annual meeting. Its purpose is to provide employees of the
Company and its subsidiaries with an opportunity to purchase shares of Common Stock at a discount from the prevailing market price through a payroll deduction system. The Stock Purchase Plan provides
an incentive for employees to acquire or increase their ownership interest in the Company. Management believes that employee stock ownership is one of the guiding principles of the Company and is
critical for the Company's success. The Stock Purchase Plan is open to all employees, including part-time employees. We believe that participation in the Stock Purchase Plan has been one
of many components that has encouraged employees to view their contribution to the Company from the perspective of an owner. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
of February&nbsp;2004, a cumulative total of 848,000 shares had been purchased through the Stock Purchase Plan, leaving 152,000 shares remaining available for future issuance. The
Board felt that the Stock Purchase Plan served many worthwhile purposes and should be continued, but its availability was estimated to reach the 1,000,000 level in 2004, four years before the Stock
Purchase Plan is set to expire. The Board has therefore authorized the increase in availability to 2,000,000 shares to provide for ample opportunity for the Stock Purchase Plan to continue to function
through its natural life. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
affirmative vote of a majority of the voting power of the shares of capital stock present or represented by proxy at the Meeting will be required to approve this proposal. </FONT> <FONT SIZE=2><B>We recommend that you vote "FOR" this proposal to
amend the 1997 Employee Stock Purchase Plan.</B></FONT></P>

<P><FONT SIZE=2><B>Summary of Employee Stock Purchase Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The terms of the Stock Purchase Plan, after giving effect to the amendment described above, are summarized below: </FONT></P>


<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares available under the stock purchase plan.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Subject to adjustment as provided in the Stock Purchase Plan, the maximum
number of shares of Common Stock that may be sold under the Stock Purchase Plan is 2,000,000. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eligibility.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;All employees, including part-time employees, of the Company and those subsidiaries designated by
the Board are eligible to participate in the Stock Purchase Plan. An eligible employee, however, may not participate (i)&nbsp;if the employee would own 5% or more of the total combined voting power
or value of all classes of stock of the Company, taking into account any stock options and stock that may be purchased under the Stock Purchase Plan or (ii)&nbsp;if such option would permit the
employee to purchase, under all stock purchase plans of the Company, Common Stock with a fair market value of more than $25,000 (determined at the time such options are granted) in any calendar year. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>20</FONT></P>

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<A NAME="page_dg1198_1_21"> </A>
<BR>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Offering Periods; Purchase Periods.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Stock Purchase Plan will be implemented by a series of one-year offering
periods ("Offering Periods") starting on January&nbsp;1 of each year. Each Offering Period will have four purchase periods ("Purchase Periods) of three months each, starting on January&nbsp;1,
April&nbsp;1, July&nbsp;1 and October&nbsp;1. Employees are allowed to begin participating in the Stock Purchase Plan at the beginning of an Offering Period or at the beginning of a Purchase
Period within an Offering Period. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Participation Procedure.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;An eligible employee may become a participant by completing a subscription agreement prior to the
beginning of a Purchase Period. A participant may elect to have payroll deductions of between 1% and 15% of such participant's compensation on each payday, which is credited to the participant's
account under the Stock Purchase Plan. No participant, however, may make payroll deductions during any year in excess of $21,250 nor may a participant purchase more than 5,000 shares of Common Stock
during any Offering Period. On the last day of each Purchase Period, the amount in each participant's account is used to purchase shares of Common Stock. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Purchase Price Of Shares.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The purchase price for the shares of Common Stock on any purchase date will be the lower of
(i)&nbsp;85% of the fair market value of a share of Common Stock on the beginning date of the annual Offering Period (or the beginning date of the first Purchase Period if the employee
entered the Stock Purchase Plan after the beginning of the first Offering Period), or (ii)&nbsp;85% of the fair market value of a share of Common Stock on the purchase date (i.e. last date of the
Purchase Period); </FONT><FONT SIZE=2><I>provided, however</I></FONT><FONT SIZE=2>, that for any employee who becomes a participant after the beginning date of the Offering Period, the amount in
clause&nbsp;(i) will be the higher of 85% of the fair market value of a share of Common Stock on the beginning date of the Offering Period or the beginning date of the first Purchase Period. The
fair market value of a share of Common Stock on a given date will be determined by the Board based on the closing price of the Common Stock on the NYSE for such date as reported in </FONT> <FONT SIZE=2><I>The Wall Street Journal</I></FONT><FONT
SIZE=2>. If the Common Stock is not traded on such date, the price will be determined on the immediately preceding trading date on which
there was a closing price. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Delivery Of Shares To Participants.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Shares of Common Stock purchased with a participant's payroll deductions will issued to
the participant as promptly as practicable after each purchase date. Delivery may be made by direct deposit into a book entry account or brokerage account in the name of the participant. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Termination Of Employment.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;Upon a participant's termination of employment for any reason including death or disability,
participation in the Stock Purchase Plan ceases and all amounts credited to the participant's account will be immediately distributed to the participant or in the event of the participant's death, the
participant's beneficiary. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Voluntary Withdrawal.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;A participant may voluntarily withdraw all contributions credited to his or her account at any time
prior to two business days prior to the last day of a Purchase Period. Should a participant voluntarily withdraw during an Offering Period, the participant will not be eligible to participate in the
Stock Purchase Plan until the next Offering Period. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Transferability.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;No interest in the Stock Purchase Plan or in payroll deductions credited to a participant's account may be
transferred or assigned by a participant except by will or the laws of descent and distribution. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Adjustments.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The maximum number of shares of Common Stock that may be issued under the Stock Purchase Plan are subject to
adjustment in the event of stock dividends, stock splits, combinations or reclassification of shares, reverse stock splits, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration, provided that no adjustment will be made upon conversion of any convertible securities of the Company. In the event of </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>21</FONT></P>

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<BR>

<P><FONT SIZE=2>a
merger of the Company with another corporation, each option under the Stock Purchase Plan will be either assumed or substituted by the successor corporation, provided that the Board of Directors
retains the sole discretion to shorten any Purchase Period in lieu of such assumption or substitution. </FONT></P>


<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendments.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Stock Purchase Plan may be amended or terminated at any time by the Board, but no termination or amendment
may adversely affects options previously granted. To the extent necessary for any amendments to comply with Rule&nbsp;16b-3 under the Securities Exchange Act of 1934, or under
Section&nbsp;423 of the Internal Revenue Code of 1986, the Company will obtain any shareholder approval so required. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Administration.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Stock Purchase Plan may be administered by the Board of Directors, or by a committee appointed by the
Board. Currently, the Compensation Committee administers the Stock Purchase Plan. The Compensation Committee has the full power to adopt, amend and rescind any rules deemed desirable and appropriate
to administer the Stock Purchase Plan. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1198_proposal_no._3_amendmen__dg101941"> </A>
<A NAME="toc_dg1198_4"> </A>
<BR></FONT><FONT SIZE=2><B>PROPOSAL NO. 3<BR>  AMENDMENT OF THE 1996 STOCK OPTION PLAN    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Amendment to Authorize Restricted Stock Grants  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has approved a proposal to amend our 1996 Stock Option Plan to authorize the issuance of restricted stock grants thereunder. The Board of
Directors' approval of this amendment to the 1996 Plan was subject to stockholder approval. The amendment is incorporated into a Second Amended and Restated 1996 Stock Incentive Plan (the "1996
Plan"), a copy of which is attached as Appendix&nbsp;C. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
1996 Plan was originally adopted on August&nbsp;13, 1996. It was amended and restated on January&nbsp;7, 1997, amended on February&nbsp;4, 1998 and further amended on
January&nbsp;27, 1999. The Board adopted a Second Amended and Restated Plan on February&nbsp;17, 2004. Although a number of cosmetic changes were made throughout the 1996 Plan (including the
change of its name from "Stock Option Plan" to "Stock Incentive Plan"), the only substantive change is to add restricted stock grants as among the incentives which are authorized to be issued
thereunder. Prior to the amendment, our only incentive plan that authorized restricted stock grants was the 1995 Stock Incentive Plan ("1995 Plan"), which in February&nbsp;2004 had 70,000 shares
remaining available for issuance. Rather than increase the number of shares available under the 1995 Plan, the Board elected to add this feature to the 1996 Plan, which had 307,000 shares available
for issuance in February&nbsp;2004. As a matter of compensation philosophy, particularly among the senior management team, we intend to place an increasing emphasis on restricted stock grants,
rather than options. We issued 100,000 shares under a restricted stock grant in February&nbsp;2004 (</FONT><FONT SIZE=2><I>see</I></FONT><FONT SIZE=2> "Restricted Stock Bonus Awards for 2003" on
page 16 of this Proxy Statement), but did so under the 1995 Plan, rather than the 1996 Plan. Because of the greater availability of shares for future issuance under the 1996 Plan, we believe it best
to have the flexibility to issue restricted stock grants under the 1996 Plan in the future. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
January&nbsp;2004, the Compensation Committee reviewed the four stock incentive plans, including the 1996 Plan, and recommended no increase in the number of shares in any of those
plans. The Committee amended the Consultants Plan to decrease the number of shares available thereunder from 100,000 to 30,000 shares (which is not being submitted for stockholder approval, because
decreases in share availability do not require submission to stockholders for approval), resulting in a net decrease among the four plans by 70,000 shares. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
affirmative vote of a majority of the voting power of the shares of capital stock present or represented by Proxy at the Meeting will be required to approve this proposal. </FONT> <FONT SIZE=2><B>We recommend that you vote "FOR" this proposal to
amend the 1996 Stock Option Plan.</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>22</FONT></P>

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<BR>

<P><FONT SIZE=2><B>Summary Description of the 1996 Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The terms of the 1996 Plan, after giving effect to the amendment described above, are summarized below: </FONT></P>


<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Administration.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The 1996 Plan is administered by the Compensation Committee, which is constituted to permit the 1996 Plan to
comply with Section&nbsp;162(m) under the Code. The Compensation Committee has sole and complete authority and discretion to select participants and grant awards under the 1996 Plan; determine the
terms and conditions upon which awards under the 1996 Plan are granted including any vesting schedule; and make all determinations deemed necessary or advisable for the administration of the 1996
Plan. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Eligibility.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;All employees (including officers and directors who are also employees) of Carriage and its subsidiaries are
eligible to receive awards under the 1996 Plan, subject to approval of the Compensation Committee. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Available Shares and Individual Award Limitations.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The maximum number of shares of Common Stock that may be issued under the
1996 Plan is 1,300,000 shares. The maximum number of shares of Common Stock that may be the subject of awards granted under the 1996 Plan to any one employee during any calendar year is 200,000
shares. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock Options.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The 1996 Plan provides for the grant to eligible employees of incentive stock options under Section&nbsp;422
of the Code and non-qualified stock options. The exercise price for any stock options are determined by the Compensation Committee and cannot be less than the fair market value on the date
of grant. The fair market value of the Common Stock on any date means the closing price on such trading date as reported by the NYSE and published in </FONT><FONT SIZE=2><I>The Wall Street
Journal</I></FONT><FONT SIZE=2>. The exercise price of an option granted under the 1996 Plan may be paid in cash, in shares of Common Stock (valued at fair market value at the date of exercise) or by
a combination of such means of payment as may be determined by the Compensation Committee. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock Appreciation Rights.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The 1996 Plan provides that stock appreciation rights may be granted to employees in conjunction
with options. Stock appreciation rights give the holder, among other things, the right to a payment in an amount equal to the difference between the fair market value of the Common Stock at the date
of exercise and the option exercise price. Such payment may be made, at the election of the holder (subject to the consent or disapproval of the Compensation Committee of any election to receive
cash), in cash, in shares of Common Stock (valued at fair market value at the date of exercise), or by a combination thereof. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Bonus Stock Awards.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The 1996 Plan, as amended, provides for the issuance of shares of Common Stock which may be subject to
forfeiture under circumstances specified by the Compensation Committee at the time of the award of such shares ("bonus stock"). Pursuant to a bonus stock award, shares of Common Stock will be issued
to the individual at the time the award is made without any payment to Carriage (other than any payment amount that may be determined by the Compensation Committee in its discretion), but such shares
may be, if so specified by the Compensation Committee, subject to a vesting schedule, certain restrictions on the disposition thereof and certain obligations to forfeit such shares to Carriage, as
determined in the discretion of the Compensation Committee. The Compensation Committee may provide that the restrictions on the transfer of bonus stock will lapse upon (i)&nbsp;the attainment of one
or more performance targets established by the Compensation Committee that are based on (a)&nbsp;the price of a share of Common Stock, (b)&nbsp;Carriage's earnings per share, (c)&nbsp;Carriage's
revenue, (d)&nbsp;the revenue of a business unit of Carriage designated by the Compensation Committee, (e)&nbsp;the return on stockholders' equity achieved by Carriage, or (f)&nbsp;Carriage's
pre-tax cash flow from operations, (ii)&nbsp;the participant's continued employment with Carriage for a specified period of time, or (iii)&nbsp;a combination of any of the foregoing. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>23</FONT></P>

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<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock Splits and Capital Readjustments.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The 1996 Plan provides that the total number of shares covered by each award will be
proportionately adjusted in the event of a stock split, reverse stock split, or other similar capital adjustment effected without the receipt of consideration by Carriage. Further, the total number of
shares covered by the 1996 Plan, the exercise price per share under each option, the annual limitation on the number of shares that may be subject to awards granted to each employee, and any other
matters deemed appropriate by the Compensation Committee, may be appropriately adjusted in event of a stock dividend or distribution, recapitalization, merger, consolidation, split-up,
combination, exchange of shares, or similar transaction. </FONT></P>

<P><FONT SIZE=2><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendment.</B></FONT><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee may amend, modify or terminate the 1996 Plan at any time, but no amendment may be made
without approval of the stockholders of Carriage which (i)&nbsp;increases the maximum aggregate number of shares of Common Stock which may be issued under the 1996 Plan, or (ii)&nbsp;changes the
class of individuals who are eligible to receive awards under the 1996 Plan. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1198_audit_committee_report"> </A>
<A NAME="toc_dg1198_5"> </A>
<BR></FONT><FONT SIZE=2><B>AUDIT COMMITTEE REPORT    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As members of the Audit Committee of the Board of Directors, we are responsible for helping to ensure the reliability of Carriage's financial statements. In
keeping with this goal, the Audit Committee operates according to a written charter approved by the Board of Directors. A new charter was adopted in 2003 and amended this year. A copy of the amended
charter is included as Appendix&nbsp;A. </FONT></P>

<P><FONT SIZE=2><B>Review and Discussions  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee has reviewed and discussed Carriage's audited financial statements with management. It has also discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standard Nos. 61 and 90. Additionally, the Audit Committee has received the written disclosures and the letter from the independent auditors
at KPMG LLP, as required by Independent Standards Board Standard No.&nbsp;1 (Independence Discussions with Audit Committees) and has discussed with the independent auditors their independence. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
an effort to maintain the auditor's independence, the Audit Committee has considered whether KPMG LLP's rendering of non-audit services is compatible with maintaining its
independence. We have concluded that the rendering of both audit and tax services does not result in a conflict, principally because of the value of the tax fees relative to the audit fees. </FONT></P>

<P><FONT SIZE=2><B>Change in Independent Auditors  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As disclosed in the Form&nbsp;8-K Current Report, Carriage dismissed Arthur Andersen LLP as its principal auditor on May&nbsp;20, 2002, and
subsequently engaged KPMG LLP as its principal auditor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Arthur
Andersen LLP reviewed the financial statements included in Carriage's Form&nbsp;10-Q for the three months ended March&nbsp;31, 2002. KPMG LLP audited the financial
statements included in Carriage's Form&nbsp;10-Ks as of and for the years ended December&nbsp;31,
2002 and 2003, and reviewed the financial statements included in Carriage's Forms 10-Q for the periods ended June&nbsp;30, 2002, September&nbsp;30, 2002, March&nbsp;31, 2003,
June&nbsp;30, 2003 and September&nbsp;30, 2003. </FONT></P>

<P><FONT SIZE=2><B>Audit Fees  </B></FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fees billed for services by KPMG LLP during 2002 and 2003 related to the financial statement audits and reviews of quarterly financial statements filed in the
reports on Form&nbsp;10-Q totaled $112,750 and $204,500, respectively. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Arthur
Andersen LLP billed Carriage $9,000 for their review of the financial statements included in Carriage's Form&nbsp;10-Q for the three months ended March&nbsp;30,
2002. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>24</FONT></P>

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<P><FONT SIZE=2><B>Selection for 2004  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee has reappointed KPMG LLP as the independent public accounting firm to audit our financial statements for the fiscal year ending
December&nbsp;31, 2004. Representatives of KPMG LLP are expected to be present at the Meeting and will have an opportunity to make a statement if they so desire and will be available to respond to
appropriate questions. </FONT></P>

<P><FONT SIZE=2><B>Audit-Related Fees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KPMG LLP did not bill Carriage for audit-related services during 2002 and 2003. </FONT></P>


<P><FONT SIZE=2><B>Tax Fees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KPMG LLP billed Carriage $21,105 and $4,500 for state income tax consulting services during 2002 and 2003, respectively. </FONT></P>

<P><FONT SIZE=2><B>All Other Fees  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to KPMG LLP's appointment as independent auditors of Carriage in 2002, KPMG LLP provided assistance to Carriage with respect to regulatory reporting and
billed Carriage $102,805 for those services. </FONT></P>

<P><FONT SIZE=2><B>Pre-Approval Policy for Services of Independent Auditors  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of its duties, the Audit Committee is required to pre-approve audit and non-audit services performed by the independent auditors
in order to assure that the provision of such services does not impair the auditors' independence. On an annual basis, the Audit Committee will review and provide pre-approval for certain
types of services that may be provided by the independent auditors without obtaining specific pre-approval from the Audit Committee. If a type of service to be provided by the independent
auditors has not received pre-approval during this annual process, it will require specific pre-approval by the Audit Committee. Currently, the Audit Committee has preapproved
state tax consulting services by KPMG LLP which, as previously stated, totaled $21,105 and $4,500 during 2002 and 2003, respectively. The Audit Committee does not delegate to management its
responsibilities to pre-approve services performed by the independent auditors. </FONT></P>


<P><FONT SIZE=2><B>Recommendation to Include Audited Financial Statements in Annual Report  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on the Audit Committee's discussions with management and the independent accountants, and its review of the representation of management and the report of
the independent accountants to the Audit Committee, the Audit Committee recommended that the Board of Directors include the audited consolidated financial statements in the Company's Annual Report on
Form&nbsp;10-K for the year ended December&nbsp;31, 2003, with the SEC. </FONT></P>

<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>

<P><FONT SIZE=2>Audit
Committee </FONT></P>

<P><FONT SIZE=2>Vincent
D. Foster, Chairman<BR>
Stuart W. Stedman<BR>
Ronald A. Erickson </FONT></P>

</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1198_other_business"> </A>
<A NAME="toc_dg1198_6"> </A>
<BR></FONT><FONT SIZE=2><B>OTHER BUSINESS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management does not intend to bring any other business before the Meeting and has not been informed that any other matters are to be presented at the meeting by
others. If other matters properly come before the Meeting or any adjournment thereof, the persons named in the accompanying proxy and acting thereunder will vote in accordance with their best
judgment. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>25</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1198_stockholder_s_proposals"> </A>
<A NAME="toc_dg1198_7"> </A>
<BR></FONT><FONT SIZE=2><B>STOCKHOLDER'S PROPOSALS    <BR>    </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proposals of stockholders intended to be presented at the next annual meeting of stockholders and included in our proxy statement for that meeting, and which are
otherwise eligible, must be received by the Secretary of Carriage (at the address indicated on the first page of this Proxy Statement) no later than December&nbsp;1, 2004, to be included in
Carriage's proxy material and form of proxy relating to that meeting. A stockholder proposal not intended to be included in Carriage's proxy statement but intended to be presented at Carriage's next
annual meeting of stockholders will be considered untimely and not considered at that meeting if received by us after February&nbsp;15, 2004. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="dg1198_additional_information"> </A>
<A NAME="toc_dg1198_8"> </A>
<BR></FONT><FONT SIZE=2><B>ADDITIONAL INFORMATION    <BR>    </B></FONT></P>

<P><FONT SIZE=2><B>Annual Report  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Annual Report to Stockholders for the year ended December&nbsp;31, 2003 is being mailed to all stockholders entitled to vote at the Meeting. The Annual
Report to Stockholders does not form any part of the proxy soliciting materials. Copies of the Company's Annual Report on Form&nbsp;10-K for the year ended December&nbsp;31, 2003, as
filed with the SEC, are available without charge to stockholders through the Investor Relations Section of our website at <U>http://www.carriageservices.com</U> or upon request
to Joseph Saporito, Senior Vice President and Secretary, Carriage Services,&nbsp;Inc., 1900 St. James Place, 4th Floor, Houston, Texas 77056. </FONT></P>

<P><FONT SIZE=2><B>Number of Proxy Statements and Annual Reports  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only one copy of this Proxy Statement and the Annual Report accompanying this Proxy Statement will be mailed to stockholders who have the same address unless we
receive a request that the stockholders with the same address are to receive separate Proxy Statements and Annual Reports. These additional copies will be supplied at no additional cost to the
requesting stockholder. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>REGARDLESS OF THE NUMBER OF SHARES YOU OWN, IT IS IMPORTANT THAT THEY BE REPRESENTED AT THE MEETING, AND YOU ARE RESPECTFULLY REQUESTED TO SIGN, DATE AND RETURN
YOUR PROXY CARD IN THE ENVELOPE PROVIDED AS SOON AS POSSIBLE.</B></FONT></P>

<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>
<UL>

<P><FONT SIZE=2>By
Order of the Board of Directors </FONT></P>

<P><FONT SIZE=2><B>
<IMG SRC="g275675.jpg" ALT="LOGO" WIDTH="216" HEIGHT="100">
  </B></FONT></P>

<P><FONT SIZE=2>Joseph
Saporito<BR></FONT> <FONT SIZE=2><I>Senior Vice President, Chief<BR>
Financial Officer and Secretary  </I></FONT></P>

</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>
</UL>

<P><FONT SIZE=2>Houston,
Texas<BR>
April 20, 2004 </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>26</FONT></P>

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<!-- THIS IS THE END OF A COMPOSITION COMPONENT -->
<P ALIGN="RIGHT"><FONT SIZE=2><A
NAME="page_ea1198_1_1"> </A> </FONT> <FONT SIZE=2><B>APPENDIX A  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>CARRIAGE SERVICES,&nbsp;INC.<BR>
(the "Company")<BR>
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS<BR>
CHARTER<BR>
(Revised February&nbsp;17, 2004)  </B></FONT></P>

<P><FONT SIZE=2><B>I.&nbsp;&nbsp;&nbsp;&nbsp;PURPOSE  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee is appointed by the Board to assist the Board in monitoring: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(1)</FONT></DT><DD><FONT SIZE=2>the
integrity of the financial statements of the Company,
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(2)</FONT></DT><DD><FONT SIZE=2>the
independent auditor's qualifications and independence,
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(3)</FONT></DT><DD><FONT SIZE=2>the
performance of the Company's internal audit function and independent auditors, and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(4)</FONT></DT><DD><FONT SIZE=2>the
compliance by the Company with legal and regulatory requirements. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Audit Committee shall prepare the report required by the rules of the Securities and Exchange Commission to be included in the Company's annual proxy statement. </FONT></P>

<P><FONT SIZE=2><B>II.&nbsp;&nbsp;&nbsp;&nbsp;COMMITTEE MEMBERSHIP  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee shall consist of no fewer than three members. The members of the Audit Committee shall meet the independence and experience requirements of
the New York Stock Exchange. The members of the Audit Committee shall be appointed by the Board on the recommendation of the Corporate Governance Committee. Audit Committee members may be replaced by
the Board. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
members of the Audit Committee shall be appointed by the Board at the annual meeting of the Board following the annual meeting of stockholders and shall serve until their successors
are duly elected and qualified. Unless a Chair is elected by the full Board, the members of the Audit Committee may designate a Chair by majority vote of the full Audit Committee membership. </FONT></P>


<P><FONT SIZE=2><B>III.&nbsp;&nbsp;&nbsp;&nbsp;COMMITTEE AUTHORITY AND RESPONSIBILITIES  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee shall have the sole authority to appoint or replace the independent auditor (subject, if applicable, to stockholder ratification), and shall
approve all audit engagement fees and terms and all significant non-audit engagements with the independent auditors. The Audit Committee shall consult with management but shall not
delegate these responsibilities. The Audit Committee shall meet as often as it determines, but not less frequently than quarterly. The Audit Committee may form and delegate authority to subcommittees
when appropriate. The Audit Committee shall have the authority, to the extent it deems necessary or appropriate, to retain special legal, accounting or other consultants to advise the Committee. The
Audit Committee may request any officer or employee of the Company or the Company's outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or
consultants to, the Committee. The Audit Committee shall meet with management, any internal auditor and the independent auditor in separate executive sessions at least quarterly. Such executive
sessions may (but need not) be combined with any executive sessions of the non-management members of the Board. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Audit Committee shall make regular reports to the Board. The Audit Committee shall review and reassess the adequacy of this Charter annually and recommend any proposed changes to the
Board </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-1</FONT></P>

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<BR>

<P><FONT SIZE=2>for
approval. The Audit Committee shall annually review the Audit Committee's own performance. The Audit Committee, to the extent it deems necessary or appropriate to perform its duties, shall: </FONT></P>

<UL>

<P><FONT SIZE=2><B> A.&nbsp;&nbsp;&nbsp;&nbsp;FINANCIAL STATEMENT AND DISCLOSURE MATTERS  </B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Review
and discuss with management and the independent auditor the annual audited financial statements and disclosures made in management's discussion and analysis, and
recommend to the Board whether the audited financial statements should be included in the Company's Form&nbsp;10-K. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Review
and discuss with management and the independent auditor the Company's quarterly financial statements prior to the filing of its Form&nbsp;10-Q,
including the results of the independent auditors' reviews of the quarterly financial statements. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discuss
with management and the independent auditor and establish a separate system of reporting significant financial reporting issues and judgments made in connection
with the preparation of the Company's financial statements, including </FONT><FONT SIZE=2><I>Matters to be Communicated to the Audit Committee</I></FONT><FONT SIZE=2>, any significant changes in the
Company's selection or application of accounting principles, any major issues as to the adequacy of the Company's internal controls and security, the development, selection and disclosure of critical
accounting estimates, and analyses of the effect of alternative assumptions, estimates or GAAP methods on the Company's financial statements. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discuss
with management the Company's earnings press releases, including the use of "pro forma" or "adjusted" non-GAAP information, as well as financial
information and earnings guidance provided to analysts and rating agencies. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discuss
with management and the independent auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the
Company's financial statements. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discuss
with management the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, including the Company's
risk assessment and risk management policies. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discuss
with the independent auditor the matters required to be discussed by Statement on Auditing Standards No.&nbsp;61 relating to the conduct of the audit. In
particular, discuss: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>The
adoption of, or changes to, the Company's significant auditing and accounting principles and practices as suggested by the independent auditor, internal auditors or management.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD><FONT SIZE=2>The
management letter provided by the independent auditor and the Company's response to that letter.
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(c)</FONT></DT><DD><FONT SIZE=2>Any
difficulties encountered in the course of the audit work, including any restrictions on the scope of activities or access to requested information, and any significant
disagreements with management. </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Review
with the independent auditor and management the extent to which any changes or improvements in financial or accounting practices, recommended by the Audit
Committee, have been implemented. (This review should be conducted at an appropriate time subsequent to implementation of changes or improvements, as decided by the Audit Committee.) </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><B>B.&nbsp;&nbsp;&nbsp;&nbsp;OVERSIGHT OF THE COMPANY'S RELATIONSHIP WITH THE INDEPENDENT AUDITOR</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Review
the experience and qualifications of the senior members of the independent auditor team. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-2</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Obtain
and review a report from the independent auditor at least annually regarding: </FONT></P>

<UL>
<DL compact>
<DT style='margin-bottom:-11pt;'><FONT SIZE=2>(a)</FONT></DT><DD><FONT SIZE=2>the
auditor's internal quality-control procedures,
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(b)</FONT></DT><DD><FONT SIZE=2>any
material issues raised by the most recent quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities
within the preceding five years respecting one or more independent audits carried out by the firm,
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(c)</FONT></DT><DD><FONT SIZE=2>any
steps taken to deal with any such issues, and
<BR><BR></FONT></DD><DT style='margin-bottom:-11pt;'><FONT SIZE=2>(d)</FONT></DT><DD><FONT SIZE=2>all
relationships between the independent auditor and the Company </FONT></DD></DL>
</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Evaluate
the qualifications, performance and independence of the independent auditor, including considering whether the auditor's quality controls are adequate and the
provision of non-audit services is compatible with maintaining the auditor's independence, and taking into account the opinions of management and the internal auditor. The Audit Committee
shall present its conclusions to the Board and, if so determined by the Audit Committee, recommend that the Board take additional action to satisfy itself of the qualifications, performance and
independence of the auditor. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While
not required, consider whether, in order to assure continuing auditor independence, it is appropriate to adopt a policy of rotating the independent auditing firm on
a regular basis. Also, consult with the auditor concerning rotation of its lead audit partner on a periodic basis. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recommend
to the Board policies for the Company's hiring of employees or former employees of the independent auditor who were engaged on the Company's account. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discuss
with the national office of, the independent auditor issues on which they were consulted by the Company's audit team and matters of audit, quality and
consistency. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Meet
with the independent auditor prior to the audit to discuss the planning and staffing of the audit. </FONT></P>

<UL>

<P><FONT SIZE=2><B> C.&nbsp;&nbsp;&nbsp;&nbsp;OVERSIGHT OF THE COMPANY'S INTERNAL AUDIT FUNCTION  </B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Review
the appointment and replacement of the senior internal auditing executive. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Review
the significant reports to management prepared by the internal auditing department and management's responses. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discuss
with the independent auditor the internal audit department responsibilities, budget and staffing and any recommended changes in the planned scope of the internal
audit. </FONT></P>

<UL>

<P><FONT SIZE=2><B> D.&nbsp;&nbsp;&nbsp;&nbsp;COMPLIANCE OVERSIGHT RESPONSIBILITIES  </B></FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Obtain
from the independent auditor assurance that Section&nbsp;10A(b) of the Securities Exchange Act of 1934 has not been implicated. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Obtain
reports from management, the Company's senior internal auditing executive and the independent auditor that the Company and its subsidiary/foreign affiliated
entities are in conformity with applicable legal requirements and the Company's Code of Business Conduct and Ethics. Review reports and disclosures of insider and affiliated party transactions. Advise
the Board with respect to the Company's policies and procedures regarding compliance with applicable laws and regulations and with the Company's Code of Business Conduct and Ethics. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discuss
with management and the independent auditor any correspondence with regulators or governmental agencies and any employee complaints or published reports which
raise material issues regarding the Company's financial statements or accounting policies. Review of employee complaints </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-3</FONT></P>

<HR NOSHADE>
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<P><FONT SIZE=2>shall
be conducted on a confidential basis and in a manner that preserves the anonymity of employee complaints submitted on an anonymous basis. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Discuss
with the Company's general or regular counsel such legal matters that may have a material impact on the financial statements or the Company's compliance policies
and corporate securities trading policies. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Perform
any other activity consistent with this Charter, the Company's By-laws and governing law, as the Audit Committee or the Board deems necessary or
appropriate. </FONT></P>

<P><FONT SIZE=2><B>IV.&nbsp;&nbsp;&nbsp;&nbsp;LIMITATION OF AUDIT COMMITTEE'S ROLE  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to
determine that the Company's financial statements and disclosures are complete and accurate and are in accordance with generally accepted accounting principles and applicable rules and regulations.
These are the responsibilities of management and the independent auditor. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>A-4</FONT></P>

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NAME="page_eb1198_1_1"> </A> </FONT></P>

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<P ALIGN="RIGHT"><FONT SIZE=2><B>APPENDIX B  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>CARRIAGE SERVICES,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="eb1198_amendment_no._1_to_1997_employ__ame02458"> </A>
<A NAME="toc_eb1198_1"> </A></FONT> <FONT SIZE=2><B>Amendment No.&nbsp;1<BR>  </B></FONT><FONT SIZE=2><B><I>to 1997 Employee Stock Purchase Plan<BR>  </I></B></FONT><FONT SIZE=2><B>(Effective February&nbsp;17, 2004)</B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;THIS
AMENDMENT NO. 1 (this "Amendment") to the 1997 Employee Stock Purchase Plan (the "Plan"), of CARRIAGE SERVICES,&nbsp;INC., a Delaware corporation (the "Company"), adopted
effective February&nbsp;17, 2004; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
the Company originally adopted the Plan effective December&nbsp;31, 1997; and </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;WHEREAS,
the Board of Directors of the Company has proposed that the Plan be amended to increase the number of shares subject thereto, as hereafter described; </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOW,
THEREFORE, the Plan shall be amended as follows: </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Defined
Terms. Capitalized terms used but not defined herein shall have the meanings given such terms in the Plan. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amendment.
The first sentence of Section&nbsp;12(a) of the Plan is hereby amended in its entirety so that, as amended, the first sentence of said Section&nbsp;12(a)
shall read as follows: </FONT></P>

<UL>

<P><FONT SIZE=2>"The
maximum number of shares of the Company's Common Stock which shall be made available for sale under the Plan shall be Two Million (2,000,000) shares, subject to adjustment upon changes in
capitalization of the Company as provided in Section&nbsp;18." </FONT></P>

</UL>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Effectiveness of Amendment</I></FONT><FONT SIZE=2>. The amendment to the Plan evidenced by this Amendment shall be effective as of
February&nbsp;17, 2004, provided that such amendment is approved by the stockholders of the Company on or before September&nbsp;30, 2004. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=2><I>Ratification</I></FONT><FONT SIZE=2>. As amended hereby, the Plan in hereby ratified and confirmed. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>B-1</FONT></P>

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<P ALIGN="RIGHT"><FONT SIZE=2><B>APPENDIX C  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>CARRIAGE SERVICES,&nbsp;INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><A
NAME="ec1198_second_amended_and_restated_19__sec02789"> </A>
<A NAME="toc_ec1198_1"> </A></FONT> <FONT SIZE=2><B><I>Second Amended and Restated<BR>  1996 Stock Incentive Plan<BR>  </I></B></FONT><FONT SIZE=2><B>(Effective as of February&nbsp;17, 2004)</B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>I. Purpose of the Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT SIZE=2><B>The CARRIAGE SERVICES,&nbsp;INC. SECOND AMENDED AND RESTATED 1996 STOCK INCENTIVE PLAN</B></FONT><FONT SIZE=2> (the "Plan") is intended
to provide a means whereby certain employees of </FONT><FONT SIZE=2><B>CARRIAGE SERVICES, INC</B></FONT><FONT SIZE=2>., a Delaware corporation (the "Company"), and its subsidiaries may develop a
sense of proprietorship and personal involvement in the development and financial success of the Company, and to encourage them to remain with and devote their best efforts to the business of the
Company, thereby advancing the interests of the Company and its stockholders. Accordingly, the Company may grant to certain employees ("Participants") certain awards ("Awards") involving shares of the
common stock of the Company ("Stock"), as hereinafter set forth. Awards granted under the Plan may be either (i)&nbsp;incentive stock options, within the meaning of section&nbsp;422(b) of the
Internal Revenue Code of 1986, as amended (the "Code"), ("Incentive Stock Options") or options which do not constitute Incentive Stock Options (in either case, "Options"), or (ii)&nbsp;Restricted
Stock Awards described in Paragraph&nbsp;IX. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
Plan was originally adopted effective August&nbsp;13, 1996. It was amended and restated effective January&nbsp;7, 1997, amended on February&nbsp;4, 1998 and further amended
effective January&nbsp;27, 1999. The Plan as set forth herein constitutes a second amendment and restatement, effective as of the date of the adoption of this amendment and restatement (the
"Restatement Effective Date") by the Board of
Directors of the Company (the "Board"), of the Plan as previously adopted by the Company, and shall supersede and replace in its entirety such prior plan. Among other things, the name of the Plan is
hereby being changed from "1996 Stock Option Plan" to "1996 Stock Incentive Plan." </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>II. Administration  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Plan shall be administered by a committee (the "Committee") of, and appointed by, the Board, which shall be composed solely of two or more "outside directors"
within the meaning of section&nbsp;162(m) of the Code and applicable interpretive authority thereunder. The Committee shall have sole authority to select the Participants from among those
individuals eligible hereunder and to establish the number of shares which may be issued under each Award; provided, however, that, not withstanding any provision in the Plan to the contrary, the
maximum number of shares that may be subject to Awards granted under the Plan to an individual Participant during any calendar year may not exceed 200,000 (subject to adjustment in the same manner as
provided in Paragraph&nbsp;VIII hereof with respect to shares of Stock subject to Awards then outstanding). The limitation set forth in the preceding sentence shall be applied in a manner which will
permit compensation generated under the Plan to constitute "performance-based" compensation for purposes of section&nbsp;162(m) of the Code, including, without limitation, counting against such
maximum number of shares, to the extent required under section&nbsp;162(m) of the Code and applicable interpretive authority thereunder, any shares subject to Awards that are canceled or repriced.
In selecting the Participants from among individuals eligible hereunder and in establishing the number of shares that may be issued under each Award, the Committee may take into account the nature of
the services rendered by such individuals, their present and potential contributions to the Company's success and such other factors as the Committee in its discretion shall deem relevant. The
Committee is authorized to interpret the Plan and may from time to time adopt such rules and regulations, consistent with the provisions of the Plan, as it may deem advisable to carry out the Plan.
All decisions made by the Committee in selecting the Participants, in </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-1</FONT></P>

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<P><FONT SIZE=2>establishing
the number of shares which may be issued under each Award and in construing the provisions of the Plan shall be final. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>III. Option Agreements  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;Each
Option shall be evidenced by a written agreement between the Company and the Participant ("Option Agreement") which shall contain such terms and conditions as may
be approved by the Committee. The terms and conditions of the respective Option Agreements need not be identical. Specifically, an Option Agreement may provide for the surrender of the right to
purchase shares under the Option in return for a payment in cash or shares of Stock or a combination of cash and shares of Stock equal in value to the excess of the fair market value of the shares
with respect to which the right to purchase is surrendered over the option price therefor ("Stock Appreciation Rights"), on such terms and conditions as the Committee in its sole discretion may
prescribe; provided, that, except as provided in Subparagraph VIII(c) hereof, the Committee shall retain final authority (i)&nbsp;to determine whether an Participant shall be permitted, or
(ii)&nbsp;to approve an election by an Participant, to receive cash in full or partial settlement of Stock Appreciation Rights. Moreover, an Option Agreement may provide or the payment of the option
price, in whole or in part, by the delivery of a number of shares of Stock (plus ash if necessary) having a fair market value equal to such option price. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;For
all purposes under the Plan, the fair market value of a share of Stock on a particular date shall be equal to the mean of the high and low sales prices of the Stock
(i)&nbsp;reported by the National Market System of NASDAQ on that date or (ii)&nbsp;if the Stock is listed on a national stock exchange, reported on the stock exchange composite tape on that date;
or, in either case, if no prices are reported on that date, on the last preceding date on which such prices of the Stock are so reported. If the Stock is traded over the counter at the time a
determination of its fair market value is required to be made hereunder, its fair market value shall be deemed to be equal to the average between the reported high and low or closing bid and asked
prices of Stock on the most recent date on which Stock was publicly traded. In the event Stock is not publicly traded at the time a determination of its value is required to be made hereunder, the
determination of its fair market value shall be made by the Committee in such manner as it deems appropriate. Notwithstanding the foregoing, the fair market value of a share of Stock on the date of an
initial public offering of Stock shall be the offering price under such initial public offering. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Each
Incentive Stock Option and all rights granted thereunder shall not be transferable other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), as amended, or the rules thereunder, and shall be
exercisable during the Participant's lifetime only by the Participant or the Participant's guardian or legal representative. Each Option that does not constitute an Incentive Stock Option and all
rights granted thereunder shall not be transferable otherwise than (i)&nbsp;by will or the laws of descent and distribution, (ii)&nbsp;pursuant to a qualified domestic relations order as defined
by the Code or Title I of ERISA or (iii)&nbsp;with the consent of the Committee. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>IV. Eligibility of Participant  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Awards may be granted only to individuals who are employees (including officers and directors who are also employees) of the Company or any parent or subsidiary
corporation (as defined in section&nbsp;424 of the Code) of the Company at the time the Award is granted. Awards may be granted to the same individual on more than one occasion. No Incentive Stock
Option shall be granted to an individual if, at the time the Option is granted, such individual owns stock possessing more than 10% of the total combined voting power of all classes of stock of the
Company or of its parent or subs diary corporation, within the meaning of section&nbsp;422(b)(6) of the Code, unless (i)&nbsp;at the time such Option is </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-2</FONT></P>

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<P><FONT SIZE=2>granted
the option price is at least 110% of the fair market value of the Stock subject to the Option and (ii)&nbsp;such Option by its terms is not exercisable after the expiration of five years
from the date of grant. To the extent that the aggregate fair market value (determined at the time the respective Incentive Stock Option is granted) of stock with respect to which Incentive Stock
Options are exercisable for the first time by an individual during any calendar year under all incentive stock option plans of the Company and its parent and subsidiary corporations exceeds $100,000,
such excess Incentive Stock Options shall be treated as Options which do not constitute Incentive Stock Options. The Committee shall determine, in accordance with applicable provisions of the Code,
Treasury Regulations and other administrative pronouncements, which of an Participant's Incentive Stock Options will not constitute Incentive Stock Options because of such limitation and shall notify
the Participant of such determination as soon as practicable after such determination. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>V. Shares Subject to the Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate number of shares which may be issued under Awards granted under the Plan shall not exceed 1,300,000 shares of Stock. Such shares may consist of
authorized but unissued shares of Stock or previously issued shares of Stock reacquired by the Company. Any of such shares which remain unissued and which are not subject to outstanding Awards at the
termination of the Plan shall cease to be subject to the Plan, but, until termination of the Plan, the Company shall at all times make available a sufficient number of shares to meet the requirements
of the Plan. Should any Option hereunder expire or terminate prior to its exercise in full, the shares theretofore subject to such Option may again be subject to an Option granted under the Plan to
the extent permitted under Rule&nbsp;16b-3, as defined in Paragraph&nbsp;XI(b) below. The aggregate number of shares which may be issued under the Plan shall be subject to adjustment
in the same manner as provided in Paragraph&nbsp;VIII hereof with respect to shares of Stock subject to Awards then outstanding. Exercise of an Option in any manner, including an exercise involving
a Stock Appreciation Right, shall result in a decrease in the number of shares of Stock which may thereafter be available, both for purposes of the Plan and for sale to any one individual, by the
number of shares as to which the Option is exercised. Separate stock certificates shall be issued by the Company for those shares acquired pursuant to the exercise of an Incentive Stock Option and for
those shares acquired pursuant to the exercise of any Option which does not constitute an Incentive Stock Option. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>VI. Option Price  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purchase price of Stock issued under each Option shall be determined by the Committee, but such purchase price shall not be less than the fair market value of
Stock subject to the Option on the date the Option is granted. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>VI. Term of Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Plan originally became effective on July&nbsp;18, 1996. This second amendment and restatement of the Plan shall become effective upon the Restatement
Effective Date, provided that this second amendment and restatement of the plan shall be effective upon the date of its adoption by the Board, provided the Plan is approved by the stockholders of the
Company within twelve months thereafter. Except with respect to Options then outstanding, if not sooner terminated under the provisions Paragraph&nbsp;X, the Plan shall terminate upon and no further
Awards shall be granted after July&nbsp;18, 2006. Notwithstanding any provision herein to the contrary, if this second amendment and restatement of the Plan is not approved by the stockholders of
the Company within twelve months after the Restatement Effective Date, then any Restricted Stock Awards granted under Paragraph&nbsp;IX on or after the Restatement Effective Date shall be void and
canceled in their entirety. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-3</FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>VIII. Recapitalization or Reorganization  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
existence of the Plan and the Awards granted hereunder shall not affect in any way the right or power of the Board or the stockholders of the Company to make or
authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company, any issue of debt or equity
securities, the dissolution or liquidation of the Company or any sale, lease, exchange or other disposition of all or any part of its assets or business or any other corporate act or proceeding. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
shares with respect to which Options may be granted are shares of Stock as presently constituted, but if, and whenever, prior to the expiration of an Option
theretofore granted, the Company shall effect a subdivision or consolidation of shares of Stock or the payment of a stock dividend on Stock without receipt of consideration by the Company, the number
of shares of Stock with respect to which such Option may thereafter be exercised (i)&nbsp;in the event of an increase in the number of outstanding shares shall be proportionately increased, and the
purchase price per share shall proportionately reduced, and (ii)&nbsp;in the event of a reduction in the number of outstanding shares shall be proportionately reduced, and the purchase price per
share shall be proportionately increased. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;If
the Company recapitalizes, reclassifies its capital stock, or otherwise changes its capital structure (a "recapitalization"), the number and class of shares of Stock
covered by an Option theretofore granted shall be adjusted so that such Option shall thereafter cover the number and class of shares of stock and securities to which the Participant would have been
entitled pursuant to the terms of the recapitalization if, immediately prior to the recapitalization, the Participant had been the holder of record of the number of shares of Stock then covered by
such Option. If (i)&nbsp;the Company shall not be the surviving entity in any merger, consolidation or other reorganization (or survives only as a subsidiary of an entity), (ii)&nbsp;the Company
sells, leases or exchanges, or agrees to sell, lease or exchange, all or substantially all of its assets to any other person or entity, (iii)&nbsp;the Company is to be dissolved and liquidated,
(iv)&nbsp;any person or entity, including a "group" as contemplated by Section&nbsp;13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934 Act"), acquires or gains ownership or
control (including, without limitation, power to vote) of more than 50% of the outstanding shares of the Company's voting stock (based upon voting power), or (v)&nbsp;as a result of or in connection
with a contested election of directors, the persons who were directors of the Company before such election shall cease to constitute a majority of the Board (each such event is referred to herein as a
"Corporate Change"), no later than (a)&nbsp;ten days after the approval by the stockholders of the Company of such merger, consolidation, reorganization, sale, lease or exchange of assets or
dissolution or such election of directors or (b)&nbsp;thirty days after a change of control of the type described in Clause&nbsp;(iv), the Committee, acting in its sole discretion without the
consent or approval of any Participant, shall act to effect one or more of the following alternatives, which may vary among individual Participants and which may vary among Options held by any
individual Participant: (1)&nbsp;accelerate the time at which Options then outstanding may be exercised so that such Option; may be exercised in full for a limited period of time on or before a
specified date (before or after such Corporate Change) fixed by the Committee, after which specified date all unexercised Options and all rights of Participants thereunder shall terminate,
(2)&nbsp;require the mandatory surrender to the Company by selected Participants of some or all of the outstanding Options held by such Participants (irrespective of whether such Options are then
exercisable under the provisions of the Plan) as of a date, before or after such Corporate Change, specified by the Committee, in which event the Committee shall thereupon cancel such Options and the
Company shall pay to each Participant an amount of cash per share equal to the excess if any, of the amount calculated in Subparagraph (d)&nbsp;below (the "Change of Control Value") of the shares
subject to such Option over the exercise price(s) under such Options for such shares, (3)&nbsp;make such adjustments to Options then outstanding as the Committee deems appropriate to reflect such
Corporate Change (provided, however, that the Committee may determine in its sole discretion that no adjustment is necessary to Options then </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-4</FONT></P>

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<BR>

<P><FONT SIZE=2>outstanding)
or (4)&nbsp;provide that the number and class of shares of Stock covered by an Option theretofore granted shall be adjusted so that such Option shall thereafter cover the number and
class of shares of stock or other securities or property (including, without limitation, cash) to which the Participant would have been entitled pursuant to the terms of the agreement of merger,
consolidation for sale of assets and dissolution if, immediately prior to such merger, consolidation or sale of assets and dissolution, the Participant had been the holder of record of the number of
shares of Stock then covered by such Option. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;For
the purposes of clause&nbsp;(2) in Subparagraph (c)&nbsp;above, the "Change of Control Value" shall equal the amount determined in clause&nbsp;(i),
(ii)&nbsp;or (iii), whichever is applicable, as follows: (i)&nbsp;the per share price offered to stockholders of the Company in any such merger, consolidation, reorganization, sale of assets or
dissolution transaction, (ii)&nbsp;the price per share offered to stockholders of the Company in any tender offer or exchange offer whereby a Corporate Change takes place, or (iii)&nbsp;if such
Corporate Change occurs other than pursuant to a tender or exchange offer, the fair market value per share of the shares into which such Options being surrendered are exercisable, as determined by the
Committee as of the date determined by the Committee to be the date of cancellation and surrender of such Options. In the event that the consideration offered to stockholders of the Company in any
transaction described in this Subparagraph (d)&nbsp;or Subparagraph (c)&nbsp;above consists of anything other than cash, the Committee shall determine the fair cash equivalent of the portion of
the consideration offered which is other than cash. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;Any
adjustment provided for in Subparagraphs (b)&nbsp;or (c)&nbsp;above shall be subject to any required stockholder action. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;Except
as hereinbefore expressly provided, the issuance by the Company of shares of stock of any class or securities convertible into shares of stock of any class, for
cash, property, labor or services, upon direct sale, upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such
shares or other securities, and in any case whether or not for fair value, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of shares of Stock subject to
Options theretofore granted or the purchase price per share. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>IX. Restricted Stock Awards  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
Committee may from time to time, and subject to the provisions of this Plan and such other terms and conditions as the Committee may prescribe, grant to any
Participant shares of Stock ("Restricted Stock Award") for no cash consideration or for such minimum consideration as may be required by applicable law, either alone or in addition to other Awards
granted under the Plan. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;The
grant of a Restricted Stock Award shall be evidenced by a written Restricted Stock Agreement ("Award Agreement"), executed by the Company and the recipient of a
Restricted Stock Award, in such form as the Committee may from time to time determine, providing for the terms of such grant, including time-based restrictions on vesting; restrictions on
the transfer of such Stock; restrictions based upon the achievement of specific performance goals; a requirement that Participants pay a stipulated purchase price for each share; restrictions under
applicable Federal and state securities laws; or other matters. Specifically, the Committee may provide that the restrictions on the transfer of such Stock shall lapse upon (i)&nbsp;the attainment
of targets established by the Committee that are based on (1)&nbsp;the price of a share of Stock, (2)&nbsp;the Company's earnings per share, (3)&nbsp;the Company's revenue, (4)&nbsp;the
revenue of a business unit of the Company designated by the Committee, (5)&nbsp;the return on stockholders' equity achieved by the Company, or (6)&nbsp;the Company's pre-tax cash flow
from operations, (ii)&nbsp;the Participant's continued employment with the Company for a specified period of time, or (iii)&nbsp;a combination of any two or more of the factors listed in clauses
(i)&nbsp;and (ii)&nbsp;above. The Committee may designate whether an Restricted Stock Award is intended to be "performance-based compensation" as </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-5</FONT></P>

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<BR>

<P><FONT SIZE=2>that
term is used in section&nbsp;162(m) of the Code. Any such Restricted Stock Award designated to be "performance-based compensation" shall be conditioned on the achievement of one or more
performance goals to the extent required by Section&nbsp;162(m). The Restrictions of Restricted Stock Awards need not be the same with respect to each Participant. </FONT></P>


<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;Any
Award Agreement providing for the issuance of a Restricted Stock Award to any person who, at the time of grant, is a person described in Section&nbsp;16(a) under
the Securities Exchange Act of 1934 shall provide that such Stock cannot be resold for a period of six months following the grant of such Award. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;During
the period (the "Restriction Period") during which any restrictions imposed by the Committee on a Restricted Stock Award remain in place, Stock may not be sold,
assigned, transferred, or otherwise disposed of, or mortgaged, pledged, or otherwise encumbered. In order to enforce the limitations imposed upon Restricted Stock Awards, the Committee may
(i)&nbsp;cause a legend or legends to be placed on any certificate relating to such Award and/or (ii)&nbsp;issue stop transfer instructions, as it deems necessary or appropriate. Unless otherwise
determined by the Committee, whether in an Award Agreement or otherwise, if a Participant leaves the employment of the Company prior to the end of the Restriction Period, any portion of the Restricted
Stock Award still subject to restriction shall terminate and be forfeited by the Participant and shall be returned immediately to the Company. Upon any forfeiture, all rights of the Participant with
respect to the forfeited shares of Stock subject to the Restricted Stock Award shall cease and terminate, without any further obligation on the part of the Company except to repay any purchase price
per share paid by the Participant for the shares forfeited. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;The
Committee shall, in its discretion, at the time of the grant of the Restricted Stock Award, provide that any dividends declared on the Stock during the Restriction
period shall either be (i)&nbsp;paid to the Participant or (ii)&nbsp;accumulate for the benefit of the Participant and paid to the Participant only after expiration of the Restriction Period.
Unless otherwise determined by the Committee, Participants who hold Restricted Stock Awards shall have the right to vote such shares as the record owner thereof. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp;The
Committee may require a Participant to enter into an escrow agreement providing that the certificates representing the Restricted Stock Award will remain in the
physical custody of an escrow holder until all restrictions are removed or expire. At the end of the Restriction Period, a certificate representing the number of shares to which the Participant is
entitled shall be delivered to the Participant free and clear of restrictions. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>X. Amendment or Termination of the Plan  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board in its discretion may terminate the Plan at any time with respect to any shares for which Awards have not theretofore been granted. The Board shall have
the right to alter or amend the Plan or any part thereof from time to time; provided, that no change in any Award theretofore granted may be made which would impair the rights of the Participant
without the consent of such Participant; and provided, further, that the Board may not make any alteration or amendment which would increase the aggregate number of shares which may be issued pursuant
to the provisions of the Plan or change the class of individuals eligible to receive Awards under the Plan without the approval of the stockholders of the Company. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>XI. Securities Laws  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;The
Company shall not be obligated to issue any Stock pursuant to any Award granted under the Plan at any time when the offering of the shares covered by such Award have
not been registered under the Securities Act of 1933 and such other state and federal laws, rules or regulations as the Company or the Committee deems applicable and, in the opinion of legal counsel
for the Company, there is no exemption from the registration requirements of such laws, rules or regulations available for the offering and sale of such shares. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-6</FONT></P>

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<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;It
is intended that the Plan and any grant of an Award made to a person subject to Section&nbsp;16 of 1934 Act meet all of the requirements of
Rule&nbsp;16b-3 promulgated under the 1934 Act, as currently in effect or as hereinafter modified or amended ("Rule&nbsp;16b-3"). If any provision of the Plan or any such
Award would disqualify the Plan or such Award under, or would otherwise not comply with, Rule&nbsp;16b-3, such provision or Award shall be construed or deemed amended to conform to
Rule&nbsp;16b-3. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>C-7</FONT></P>

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<P style='page-break-before:always'></p>
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<P ALIGN="CENTER"><FONT SIZE=4><B>CARRIAGE SERVICES, INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>Proxy Solicited on Behalf of the Board of Directors of<BR>
the Company for the Annual Meeting of Stockholders on May 18, 2004  </B></FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned, hereby revoking all prior proxies, hereby appoints Melvin C. Payne and Joseph Saporito, and each of them, his true and lawful proxies, with full
and several power of substitution, to vote all the shares of Common Stock of CARRIAGE SERVICES, INC. standing in the name of the undersigned, at the Annual Meeting of Stockholders of CARRIAGE
SERVICES, INC. to be held on May 18, 2004 and at any adjournment(s) thereof, on all matters coming before said meeting. </FONT></P>

<P><FONT SIZE=2>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT><FONT
SIZE=3><B>The Board of Directors recommends a vote FOR each of the proposals as stated on the reverse side of this proxy card and,
unless a contrary choice is specified, this proxy will be voted FOR each of such proposals.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2>(Continued and to be signed on the reverse side) </FONT></P>

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<P ALIGN="CENTER"><FONT SIZE=2><B>ANNUAL MEETING OF STOCKHOLDERS OF  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4><B>CARRIAGE SERVICES, INC.  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=2><B>May 18, 2004  </B></FONT></P>

<P ALIGN="CENTER"><FONT SIZE=4>Please date, sign and mail<BR>
your proxy card in the<BR>
envelope provided as soon<BR>
as possible. </FONT></P>

<P ALIGN="CENTER"><FONT SIZE=1>\*/&nbsp;&nbsp;&nbsp;&nbsp;Please detach along perforated line and mail in the envelope provided.&nbsp;&nbsp;&nbsp;&nbsp;\*/<BR>
----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------</FONT></P>

<P ALIGN="CENTER"><FONT SIZE=1><B>THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND "FOR" PROPOSALS 2 AND 3.<BR>
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE&nbsp;&nbsp;&nbsp;&nbsp;<FONT FACE="WINGDINGS">&#253;</FONT></B></FONT></P>

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<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER" VALIGN="BOTTOM"><FONT SIZE=1>FOR</FONT></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER" VALIGN="BOTTOM"><FONT SIZE=1>AGAINST</FONT></TD>
<TD WIDTH="1%" VALIGN="BOTTOM"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER" VALIGN="BOTTOM"><FONT SIZE=1>ABSTAIN</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="CENTER"><FONT SIZE=1>1.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=5><FONT SIZE=1>ELECTION OF TWO CLASS II DIRECTORS for a three-year term ending at the 2007 Annual Meeting of Stockholders.</FONT></TD>
<TD WIDTH="1%" ALIGN="RIGHT"><FONT SIZE=1>2.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1>Amend 1997 Employee Stock Purchase Plan to increase shares available to 2,000,000.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=5><B><FONT FACE="WINGDINGS">&#111;</FONT></B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=5><B><FONT FACE="WINGDINGS">&#111;</FONT></B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=5><B><FONT FACE="WINGDINGS">&#111;</FONT></B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="CENTER"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD COLSPAN=3><FONT SIZE=5><B>&nbsp;&nbsp;</B></FONT><FONT SIZE=1><B>NOMINEES</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="CENTER"><FONT SIZE=4><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=1>FOR ALL NOMINEES</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="CENTER"><FONT SIZE=3><B>O</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1>Vincent&nbsp;D.&nbsp;Foster</FONT></TD>
<TD WIDTH="1%" ALIGN="RIGHT"><FONT SIZE=1>3.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1>Amend 1996 Stock Option Plan to authorize restricted stock grants.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=5><B><FONT FACE="WINGDINGS">&#111;</FONT></B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=5><B><FONT FACE="WINGDINGS">&#111;</FONT></B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD WIDTH="9%" ALIGN="CENTER"><FONT SIZE=5><B><FONT FACE="WINGDINGS">&#111;</FONT></B></FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="CENTER"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD WIDTH="20%"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=5>&nbsp;</FONT></TD>
<TD WIDTH="4%" ALIGN="CENTER"><FONT SIZE=3><B>O</B></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1>Mark&nbsp;F.&nbsp;Wilson</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="CENTER"><FONT SIZE=4><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=5><FONT SIZE=1>WITHHOLD AUTHORITY<BR>
FOR ALL NOMINEES</FONT></TD>
<TD WIDTH="1%" ALIGN="RIGHT"><FONT SIZE=1>4.</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD COLSPAN=7><FONT SIZE=1>In their discretion, the Proxies are authorized to vote upon any other business as may properly come before the meeting or any adjournment(s) thereof.</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="8%" ALIGN="CENTER"><BR><FONT SIZE=4><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD COLSPAN=5><FONT SIZE=1><BR>
FOR ALL EXCEPT<BR>
(See instructions below)<BR></FONT>
</TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="16%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
<TD WIDTH="1%"><FONT SIZE=1><BR>&nbsp;</FONT></TD>
<TD WIDTH="9%"><FONT SIZE=1><BR>
&nbsp;</FONT></TD>
</TR>
</TABLE>
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<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=1><B><I>&nbsp;&nbsp;&nbsp;&nbsp;</I></B></FONT></TD>
<TD WIDTH="42%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="15%" ALIGN="RIGHT"><FONT SIZE=1><B><I>INSTRUCTION:</I></B></FONT><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=1>To withhold authority to vote for any individual nominee(s), mark "FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to withhold, as shown here:&nbsp;&nbsp;</FONT><FONT SIZE=4><B>&#149;</B></FONT></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=2 ALIGN="RIGHT"><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
</TABLE>
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<TR VALIGN="BOTTOM">
<TD WIDTH="42%" VALIGN="TOP"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="42%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="42%" VALIGN="TOP"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="42%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="42%" VALIGN="TOP"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="42%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="42%" VALIGN="TOP"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="42%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=1>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="BOTTOM">
<TD WIDTH="42%" VALIGN="TOP"><FONT SIZE=1>To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be
submitted via this method.</FONT></TD>
<TD WIDTH="2%" VALIGN="TOP"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="12%" ALIGN="CENTER" VALIGN="TOP"><FONT SIZE=4><FONT FACE="WINGDINGS">&#111;</FONT></FONT></TD>
<TD WIDTH="1%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%" VALIGN="TOP"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
<TR VALIGN="TOP">
<TD COLSPAN=3><HR NOSHADE></TD>
<TD WIDTH="1%"><FONT SIZE=2>&nbsp;</FONT></TD>
<TD WIDTH="42%"><FONT SIZE=2>&nbsp;</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<!-- User-specified TAGGED TABLE -->
<TABLE WIDTH="100%" BORDER=0 CELLSPACING=0 CELLPADDING=0>
<TR VALIGN="TOP">
<TD WIDTH="13%"><FONT SIZE=1>Signature of Stockholder</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>Date:</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="13%"><FONT SIZE=1>Signature of Stockholder</FONT></TD>
<TD WIDTH="18%"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
<TD WIDTH="2%"><FONT SIZE=1>&nbsp;</FONT></TD>
<TD WIDTH="5%"><FONT SIZE=1>Date:</FONT></TD>
<TD WIDTH="12%"><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;</FONT><HR NOSHADE></TD>
</TR>
<TR VALIGN="TOP">
<TD WIDTH="13%" ALIGN="RIGHT"><FONT SIZE=1><B>Note:</B></FONT><FONT SIZE=1>&nbsp;&nbsp;&nbsp;&nbsp;</FONT></TD>
<TD COLSPAN=10><FONT SIZE=1>Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such.
If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.</FONT></TD>
</TR>
</TABLE>
<!-- end of user-specified TAGGED TABLE -->

<HR NOSHADE>
<!-- ZEQ.=2,SEQ=44,EFW="2133939",CP="CARRIAGE SERVICES, INC.",DN="1",CHK=70895,FOLIO='blank',FILE='DISK014:[04HOU9.04HOU1199]PC1199A.;6',USER='LRUBY',CD='16-APR-2004;19:58' -->
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<BR>
<P><br><A NAME="04HOU1198_1">QuickLinks</A><br></P><!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_bg1198_1">TABLE OF CONTENTS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_da1198_1">GENERAL INFORMATION</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dc1198_1">RECORD DATE AND VOTING SECURITIES</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dc1198_2">SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dc1198_3">PROPOSAL NO. 1 ELECTION OF DIRECTORS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dc1198_4">SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dc1198_5">CERTAIN TRANSACTIONS</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_de1198_1">EXECUTIVE COMPENSATION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1198_2">Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_de1198_3">COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION</A></FONT><BR>

<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_dg1198_1">COMPARATIVE STOCKHOLDER RETURN</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1198_2">COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1198_3">PROPOSAL NO. 2 AMENDMENT OF THE 1997 EMPLOYEE STOCK PURCHASE PLAN</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1198_4">PROPOSAL NO. 3 AMENDMENT OF THE 1996 STOCK OPTION PLAN</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1198_5">AUDIT COMMITTEE REPORT</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1198_6">OTHER BUSINESS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1198_7">STOCKHOLDER'S PROPOSALS</A></FONT><BR>
<FONT SIZE=2><A HREF="#toc_dg1198_8">ADDITIONAL INFORMATION</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_eb1198_1">Amendment No. 1 to 1997 Employee Stock Purchase Plan (Effective February 17, 2004)</A></FONT><BR>
<!-- TOC_BEGIN -->
<FONT SIZE=2><A HREF="#toc_ec1198_1">Second Amended and Restated 1996 Stock Incentive Plan (Effective as of February 17, 2004)</A></FONT><BR>

<!-- SEQ=,FILE='QUICKLINK',USER=MTRAN,SEQ=,EFW="2133939",CP="CARRIAGE SERVICES, INC.",DN="1" -->
<!-- TOCEXISTFLAG -->
</BODY>
</HTML>

</TEXT>
</DOCUMENT>
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<SEQUENCE>3
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`
end

</TEXT>
</DOCUMENT>
</SUBMISSION>
