<SUBMISSION>
<ACCESSION-NUMBER>0000950129-06-004063
<TYPE>DEF 14A
<PUBLIC-DOCUMENT-COUNT>3
<PERIOD>20060525
<FILING-DATE>20060418
<DATE-OF-FILING-DATE-CHANGE>20060418
<EFFECTIVENESS-DATE>20060418
<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>06764727
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>3040 POST OAK BOULEVARD
<STREET2>SUITE 300
<CITY>HOUSTON
<STATE>TX
<ZIP>77056
<PHONE>7133328475
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>3040 POST OAK BOULEVARD
<STREET2>SUITE 300
<CITY>HOUSTON
<STATE>TX
<ZIP>77056
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>h35116def14a.htm
<DESCRIPTION>CARRIAGE SERVICES, INC. - 5/25/2006
<TEXT>
<HTML>
<HEAD>
<TITLE>def14a</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<CENTER>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
        <TD width="70%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="13%">&nbsp;</TD>
        <TD width="1%">&nbsp;</TD>
        <TD width="15%">&nbsp;</TD>
</TR>
<TR valign="bottom">
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD colspan="3" nowrap align="center">OMB APPROVAL</TD>
</TR>
<TR valign="bottom">
        <TD>&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD colspan="3" nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
        <TD valign="top">&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="left" valign="top">
OMB Number:
</TD>
        <TD>&nbsp;</TD>
        <TD align="right" valign="top">3235-0059</TD>
</TR>

<TR valign="bottom">
        <TD valign="top">&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD align="left" valign="top">
Expires:
</TD>
        <TD>&nbsp;</TD>

<TD nowrap align="right" valign="top">February&nbsp;28, 2006</TD>
</TR>

<TR valign="bottom">
        <TD valign="top">&nbsp;</TD>
        <TD>&nbsp;</TD>
        <TD colspan="2" nowrap align="left" valign="top">Estimated average burden<br>hours per

response</TD>

        <TD align="right" valign="bottom">12.75</TD>
</TR>

</TABLE>
</CENTER>

<P style="font-size: 10pt" align="center"><B>UNITED STATES<BR>SECURITIES AND EXCHANGE COMMISSION<BR>
Washington, D.C. 20549</B>


<P style="font-size: 10pt" align="center"><B>SCHEDULE 14A</B>



<P style="font-size: 10pt" align="center">Proxy Statement Pursuant to Section 14(a) of the Securities<BR>
Exchange Act of 1934 (Amendment No.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;)


<P>
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>Filed by the Registrant
&nbsp;&nbsp;<FONT face="wingdings">&#254;</FONT></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>Filed by a Party other than the Registrant
&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT></TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>Check the appropriate box:</TD>
</TR>
</TABLE>
<P style="font-size: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD><FONT face="wingdings">&#111;</font>&nbsp;&nbsp; Preliminary Proxy Statement</TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>

<TD><FONT face="wingdings">&#111;</font>&nbsp;&nbsp;
<B>Confidential, for Use of the Commission Only (as permitted by
Rule&nbsp;14a-6(e)(2))</B></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>

<TD><FONT face="wingdings">&#254;</font>&nbsp;&nbsp; Definitive Proxy Statement</TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD><FONT face="wingdings">&#111;</font>&nbsp;&nbsp; Definitive Additional Materials</TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD><FONT face="wingdings">&#111;</font>&nbsp;&nbsp;
Soliciting Material Pursuant to &#167;240.14a-12</TD>
</TR>
</TABLE>


<DIV align="center" style="font-size: 10pt">CARRIAGE SERVICES,
INC.</DIV>
<DIV align="center" style="font-size: 10pt"><HR size="1" noshade><DIV align="center" style="font-size: 10pt">(Name
of Registrant as Specified In Its Charter)</DIV></DIV>
<P align="center" style="font-size: 10pt"><HR size="1" noshade><DIV align="center" style="font-size: 10pt">(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)</DIV>

<P style="font-size: 10pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payment of Filing Fee (Check the appropriate box):


<P style="font-size: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>

<TD><FONT face="wingdings">&#254;</FONT>&nbsp;&nbsp; No fee required.</TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>

<TD><FONT face="wingdings">&#111;</FONT>&nbsp;&nbsp;
Fee computed on table below per Exchange Act Rules&nbsp;14a-6(i)(4) and
0-11.</TD>
</TR>
</TABLE>
<P style="font-size: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1)&nbsp;Title of each class of securities to which transaction applies:</TD>
</TR>
</TABLE>
<HR size="1" noshade>

<P style="font-size: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2)&nbsp;Aggregate number of securities to which transaction applies:</TD>
</TR>
</TABLE>
<HR size="1" noshade>

<P style="font-size: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3)&nbsp;Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule&nbsp;0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):</TD>
</TR>
</TABLE>
<HR size="1" noshade>

<P style="font-size: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4)&nbsp;Proposed maximum aggregate value of transaction:</TD>
</TR>
</TABLE>
<HR size="1" noshade>

<P style="font-size: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5)&nbsp;Total fee paid:</TD>
</TR>
</TABLE>
<HR size="1" noshade>

<P style="font-size: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>&nbsp;&nbsp; Fee paid previously with preliminary materials.</TD>
</TR>
</TABLE>
<HR size="1" noshade>

<P style="font-size: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>&nbsp;&nbsp; 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.</TD>
</TR>
</TABLE>
<P style="font-size: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1)&nbsp;Amount Previously Paid:</TD>
</TR>
</TABLE>
<HR size="1" noshade>


<P style="font-size: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2)&nbsp;Form, Schedule or Registration Statement No.:</TD>
</TR>
</TABLE>
<HR size="1" noshade>

<P style="font-size: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3)&nbsp;Filing Party:</TD>
</TR>
</TABLE>
<HR size="1" noshade>

<P style="font-size: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR>
        <TD width="3%"></TD>
        <TD width="97%"></TD>
</TR>
<TR valign="top">
        <TD>&nbsp;</TD>
        <TD>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4)&nbsp;Date Filed:</TD>
</TR>
</TABLE>
<HR size="1" noshade>

<P style="font-size: 10pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR>
        <TD width="20%"></TD>
        <TD width="80%"></TD>
</TR>
<TR valign="top">
        <TD valign="bottom">SEC 1913 (02-02)</TD>
        <TD><b>Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number.</b></TD>
</TR>
</TABLE>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="h35116h3511600.gif" alt="(Carriage Services logo)">
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CARRIAGE SERVICES, INC.<BR>
3040 Post Oak Boulevard , Suite&nbsp;300<BR>
Houston, Texas 77056</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>April&nbsp;18, 2006</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dear Carriage Stockholder:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;I am pleased to invite you to Carriage&#146;s Annual Meeting of Stockholders. The meeting will be
held at the Lakes on Post Oak Conference Center, 3050 Post Oak Boulevard, 2nd Floor, Houston, Texas
77056 on Thursday, May&nbsp;25, 2006, at 10:00&nbsp;a.m., Central Daylight 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the meeting, you and the other stockholders will elect two directors to Carriage&#146;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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We hope you can join us on May&nbsp;25th. Whether or not you can attend personally, it is
important that your shares are represented at the Meeting. Please <B>mark </B>your votes on the enclosed
proxy card, <B>sign and date </B>the proxy card, and <B>return </B>it to us in the enclosed envelope. Your vote
is important, so please return your proxy promptly.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sincerely,</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">MELVIN C. PAYNE</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><I>Chairman of the Board,</I></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><I>President and Chief Executive Officer</I></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CARRIAGE SERVICES, INC.<BR>
3040 Post Oak Boulevard, Suite&nbsp;300<BR>
Houston, Texas 77056</B>
</DIV>


<DIV align="center">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>NOTICE OF ANNUAL MEETING OF STOCKHOLDERS<BR>
To be held May&nbsp;25, 2006</B>
</DIV>


<DIV align="center">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carriage Services, Inc. will hold its Annual Meeting of Stockholders at the Lakes on Post Oak
Conference Center, 3050 Post Oak Boulevard, 2nd Floor, Houston, Texas, 77056, on Thursday, May&nbsp;25,
2006, at 10:00&nbsp;a.m., Central Daylight Time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are holding this meeting:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To elect two Class&nbsp;I directors, each to serve for a three-year term expiring at
the annual meeting of stockholders in 2009 and until their respective successors are
elected and qualified.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To approve our 2006 Long-Term Incentive Plan.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To ratify the selection of KPMG LLP as the independent public accounting firm
for Carriage for 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To transact such other business as may properly come before the meeting or any
adjournments thereof.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Your Board of Directors has selected March&nbsp;27, 2006, 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, 3040 Post Oak Boulevard, Suite&nbsp;300,
Houston, Texas for ten days before the meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You are cordially invited to attend the meeting. If you are unable to attend the Meeting, you
are requested to sign and date the accompanying proxy card 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Proxy Statement, proxy card and Carriage&#146;s 2005 Annual Report to Stockholders are being
distributed on or about April&nbsp;20, 2006.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="50%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By Order of the Board of Directors</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Joseph Saporito</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><I>Executive Vice President, Chief</I></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><I>Financial Officer and Secretary</I></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Houston, Texas</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">April&nbsp;18, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U>TABLE OF CONTENTS</U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Page</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">No.</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">GENERAL INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">RECORD DATE AND VOTING SECURITIES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103">SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND CERTAIN BENEFICIAL OWNERS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#104">Stock Ownership of Certain Beneficial Owners</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105">PROPOSAL NO. 1 ELECTION OF DIRECTORS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#106">Organization and Committees of the Board</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#107">Corporate Governance Guidelines</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108">SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">CERTAIN TRANSACTIONS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">EXECUTIVE COMPENSATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#111">Summary Compensation Table</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#112">Stock Option Grants in 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#113">2005 Option Exercises and Year End Option Holdings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#114">Equity Compensation Plan Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#115">Compensation of Directors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#116">Employment Agreements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#117">COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#118">Base Salaries</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#119">Bonuses for Named Executive Officers for 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#120">Options and Restricted Stock Grants</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#121">Compensation Policies for the Chief Executive Officer</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#122">COMPARATIVE STOCKHOLDER RETURN</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#123">COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#124">PROPOSAL NO. 2 APPROVE THE COMPANY&#146;S 2006 LONG TERM INCENTIVE PLAN</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#125">Share Availability</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#126">Administration</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#127">Eligibility</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#128">Awards</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#129">Equitable Adjustments</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#130">Transferability</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#131">Amendment; Termination</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#132">PROPOSAL NO. 3 RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTING FIRM</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#133">AUDIT COMMITTEE REPORT</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#134">Review and Discussions</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#135">Audit Fees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#136">Audit Related Fees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#137">Tax Fees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#138">All Other Fees</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#139">Pre Approval Policy for Services of Independent Accounting Firm</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<!-- /TOC -->
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">i<BR>
&nbsp;
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#140">Recommendation to Include Audited Financial Statements in Annual Report</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#141">OTHER BUSINESS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#142">STOCKHOLDER&#146;S PROPOSALS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#143">ADDITIONAL INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#144">Annual Report</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#145">Number of Proxy Statements and Annual Reports</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#146">APPENDIX A</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">A-1</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">ii<BR>
&nbsp;
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>GENERAL INFORMATION</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Q:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Who is soliciting my proxy?</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">We, the Board of Directors of Carriage Services, Inc., are sending you
this Proxy Statement in connection with our solicitation of proxies
for use at Carriage&#146;s 2006 Annual Meeting of Stockholders. Certain
directors, officers and employees of Carriage, American Stock Transfer
&#038; Trust Company (&#147;AST&#148;), and Georgeson Shareholder Communications,
Inc. (&#147;Georgeson&#148;) also may solicit proxies on our behalf by mail,
phone, fax or in person.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Q:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Who is paying for this solicitation?</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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&#146;s transfer agent,
together with AST&#146;s out-of-pocket expenses, will be paid to AST. We
estimate that Georgeson&#146;s fee will total approximately $20,000 for
acting as proxy solicitor in connection with the Meeting.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Q:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>What am I voting on?</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="92%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(1</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The election of Melvin C. Payne and Joe R.
Davis to the Board of Directors as Class&nbsp;I
directors.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(2</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The approval of our 2006 Long-Term Incentive Plan.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(3</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The ratification of the selection of KPMG LLP as the independent public
accounting firm for Carriage for 2006.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Q:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Who can vote?</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stockholders as of the close of business on March&nbsp;27, 2006 are entitled to vote at the Annual Meeting.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Q:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>How do I vote?</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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 card 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 &#150; 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 card but do not mark your voting preference, the individuals named as proxies
will vote your shares <B>FOR </B>the election of the nominees for director and <B>FOR </B>the other proposal described in this Proxy
Statement.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Q:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>How does the Board recommend I vote on the proposals?</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Board recommends a vote <B>FOR </B>each of the director nominees and the other proposals.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Q:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Is my vote confidential?</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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 <I>except</I>: (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 card or elsewhere will be forwarded to management, but your identity will be kept confidential unless you ask
that your name be disclosed.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">1
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Q:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>How many shares can vote?</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">As of the record date, March&nbsp;27, 2006, Carriage had outstanding 18,493,718 shares of Common Stock. Each share of Common
Stock is entitled to one (1)&nbsp;vote.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Q:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>What happens if I withhold my vote for an individual director?</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Q:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Can I vote on other matters?</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Carriage&#146;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.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Q:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>When are stockholder proposals due for the annual stockholders meeting in 2007?</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">To be considered for inclusion in the proxy statement for Carriage&#146;s 2007 annual meeting, a stockholder proposal must be
received at Carriage&#146;s offices no later than December&nbsp;1, 2006. A stockholder proposal submitted outside the processes of
Rule&nbsp;14a-8 of the SEC, if received by Carriage after February&nbsp;15, 2007, will be considered untimely for presentation at
Carriage&#146;s 2007 annual meeting of stockholders.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Q:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>How do I nominate someone to be a Carriage director?</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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 2007, the deadline
will be February&nbsp;24, 2007, based upon this year&#146;s meeting occurring on May&nbsp;25th. 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&#146;s written consent to the nomination
and to serve, if elected.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><B>Q:</B>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>How can I communicate directly with a Carriage director?</B></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">A:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">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, the non-management directors as a group or any
individual director by either name or title, in care of Carriage Services, Inc., 3040 Post Oak Boulevard, Suite&nbsp;300,
Houston, Texas 77056; Attn: Corporate Secretary. In the case of communications addressed to the non-management directors,
the Corporate Secretary will send appropriate stockholder communications to the Lead Director. In the case of
communications addressed to a committee of the Board, the Corporate Secretary will send appropriate stockholder
communications to the Chairman of such committee.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">2
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RECORD DATE AND VOTING SECURITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only holders of record of the Common Stock at the close of business on March&nbsp;27, 2006, the
record date for the Meeting, are entitled to notice of and to vote at the Meeting. On that date,
Carriage had outstanding 18,493,718 shares of Common Stock, each of which is entitled to one vote.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With respect to the election of directors, stockholders may vote (a)&nbsp;in favor of the nominees
or (b)&nbsp;to withhold votes as to the nominees. If a quorum is present at the Meeting, the nominees
for the Class&nbsp;I 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<B>. </B>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 adoption of the 2006 Long-Term Incentive Plan. Abstentions will have the effect of a vote
against any of these proposals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the rules of the New York Stock Exchange (&#147;NYSE&#148;), the proposal to elect the directors
and the ratification of the appointment of KPMG LLP as the independent public accounting firm are
considered &#147;discretionary&#148; items. This means that brokerage firms may vote in their discretion on
these matters on behalf of clients who have not furnished voting instructions at least fifteen days
before the date of the Meeting. In contrast, the proposal to approve the 2006 Long-Term Incentive
Plan is a &#147;non-discretionary&#148; item. This means brokerage firms that have not received voting
instructions from their clients on this matter may not vote on this proposal. These so-called
&#147;broker non-votes&#148; 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 this proposal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To satisfy the NYSE listing requirements, the approval of the 2006 Long-Term Incentive Plan
will require an affirmative vote of a majority of the votes cast on the proposal, provided that the
total number of votes cast on the proposal represents over 50% of the Common Stock entitled to vote
on the proposal.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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&#146;s intention to vote in person notwithstanding the fact that the
stockholder previously delivered a proxy.
</DIV>
<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECURITY OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS<BR>
AND CERTAIN BENEFICIAL OWNERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth, as of March&nbsp;27, 2006, the number of shares beneficially owned
and percent of the Common Stock held by: (i)&nbsp;each director and director nominee of Carriage, (ii)
the Chief Executive Officer, (iii)&nbsp;the other executive officers named in the Summary Compensation
Table set forth under &#147;Executive Compensation&#148; below, and (iv)&nbsp;all current executive officers and
directors of Carriage as a group. Under the rules of the Securities and Exchange Commission
(&#147;SEC&#148;), 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 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.
</DIV>

<P align="center" style="font-size: 10pt">3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Common</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Common</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Options</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></sup></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Beneficially Owned</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Stock</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Melvin C. Payne</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">896,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">360,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,256,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Joe R. Davis</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ronald A Erickson (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vincent D. Foster</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">119,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mark F. Wilson (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">291,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">365,621</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Joseph Saporito</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">154,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">George Klug</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">97,490</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">James J. Benard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">115,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charles D. Sidun</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">All directors and
executive officers
as a group (9
persons)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,586,596</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">687,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,274,220</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">11.9</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Indicates less than one percent.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The ownership of Stock Options 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. All options are currently 100% vested except for Mr.
Foster &#150; 10,000 shares vested (67%) out of 15,000 granted on 11-4-99, and Mr.&nbsp;Sidun &#151; 1,500
shares vested (50%) out of 3,000 granted on 1-29-04.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Erickson&#146;s holdings consist of 7,000 shares of Common Stock held by Mr.&nbsp;Erickson&#146;s adult
son who lives in his household, David S. Erickson.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Wilson&#146;s holdings include 238,417 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.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock Ownership of Certain Beneficial Owners</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of March&nbsp;27, 2006, 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.
</DIV>

<P align="center" style="font-size: 10pt">4
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Beneficially Owned</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Common Stock</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">FMR Corp. (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,783,392</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">82 Devonshire Street<br>
Boston, MA 0209</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Dimensional Fund Advisors, Inc. (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,467,450</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">1299 Ocean Ave., 11th. Floor<BR>
Santa Monica, CA 90401</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">First Wilshire Securities Management, Inc. (3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,414,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.7</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">600 South Lake Street, Suite&nbsp;100<BR>
Pasadena, CA 91106</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Zazove Associates, LLC (4)(6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,307,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.1</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">940 Southwood<BR>
Incline Village, NV 89451</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">The Northwestern Mutual Life Insurance
Company (5)(7)<BR></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">961,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.2</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">720 East Wisconsin Avenue<BR>
Milwaukee, WI 53202</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,152,366</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">32.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Based solely on schedule 13G filed with the SEC on February&nbsp;14, 2006.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Based solely on schedule 13G filed with the SEC on February&nbsp;6, 2006.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Based solely on schedule 13F filed with the SEC on December&nbsp;31, 2005.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Based solely on schedule 13G filed with the SEC on January&nbsp;25, 2006.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Based solely on schedule 13G filed with the SEC on February&nbsp;7, 2006.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes the potential conversion of the TIDES convertible preferred securities of Carriage
Services Capital Trust, which are convertible into 1,267,348 shares of Common Stock.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes the potential conversion of the TIDES convertible preferred securities of Carriage
Services Capital Trust, which are convertible into 561,151 shares of Common Stock.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROPOSAL NO. 1<BR>
ELECTION OF DIRECTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently have five directors on our Board who each serve staggered three-year terms. At
the Meeting, the stockholders will elect two individuals to serve as Class&nbsp;I directors for a new
three-year term expiring on the date of the 2009 annual meeting and until their successors are duly
elected and qualified. Our Corporate Governance Committee has recommended that we nominate Melvin
C. Payne and Joe R. Davis for re-election at the Meeting to serve as the Class&nbsp;I directors for a
new three-year term. Proxies may be voted for the Class&nbsp;I directors. The biography descriptions
for Messrs.&nbsp;Payne and Davis are set forth below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>We recommend that you vote &#147;FOR&#148; the election of the nominees listed in Proposal No.&nbsp;1 as
Class&nbsp;I Directors. The individuals named as proxies will vote the enclosed proxy &#147;FOR&#148; the
election of the nominees unless you direct them to withhold your votes for the nominees.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may not cumulate your votes in the election of directors. You may withhold authority to
vote for the nominees for director. If the nominees become unable to serve as directors before the
Meeting (or decide not to serve), the individuals named as proxies will vote FOR such other
nominees as we may designate as a replacement or substitute for those who become unavailable.
</DIV>

<P align="center" style="font-size: 10pt">5
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the name, age and title of the persons who have been nominated
for election as Class&nbsp;I directors and our other current directors and executive officers.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="56%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Nominees for and Existing Class&nbsp;I Directors<BR>
(Current term expiring at 2006 annual meeting<BR>
and new term expiring at 2009 annual meeting)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Melvin C. Payne</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">63</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board, Chief Executive  Officer, President and Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Joe R. Davis(1)(2)(3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">63</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Continuing Class&nbsp;II Directors<BR>
(Term expiring at 2007 annual meeting)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Vincent D. Foster(1)(2)(3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">49</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Mark F. Wilson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">59</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Continuing Class&nbsp;III Director<BR>
(Term expiring at 2008 annual meeting)</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Ronald A. Erickson(2)(3)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">69</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Executive Officers who are not Directors</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Joseph Saporito</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">52</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Executive Vice President, Chief Financial Officer and Secretary</TD>
</TR>
<TR valign="bottom"><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">George J. Klug</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">61</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President of Information Systems and Chief Information Officer</TD>
</TR>
<TR valign="bottom"><TD>&nbsp;</TD></TR>


<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">James J. Benard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">49</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Senior Vice President of Sales &#038; Cemetery Operations</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Member of Compensation Committee</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Member of Audit Committee</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Member of Corporate Governance Committee</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Messrs.&nbsp;Davis, Foster and Erickson are &#147;independent&#148; within the meaning of NYSE&#146;s Corporate
Governance Guidelines.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Set forth below is a brief description of the business experience of the directors and
executive officers of our company.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Directors </I></B><I>(listed in same order as table set forth above)</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Melvin C. Payne, </I></B>a management founder of Carriage, has been Chairman of the Board and Chief
Executive Officer since December&nbsp;1996. Prior to that date, he was 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Joe R. Davis </I></B>has been a director of Carriage since 2003. He has been the Chief Executive
Officer and Chairman of the Board of Consolidated Graphics Inc. (&#147;CGX&#148;) since he founded it in
1985. Mr.&nbsp;Davis serves on the Executive Committee of CGX&#146;s Board of Directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Vincent D. Foster </I></B>became a director of Carriage in November&nbsp;1999. Mr.&nbsp;Foster is a Senior
Managing Director of Main Street Capital Partners, LLC, which manages two investment funds, Main
Street Mezzanine Fund, LP and Main Street Capital II, LP, each of which is 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. 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. Mr.&nbsp;Foster has served as a director of
the Houston, Texas chapter of the National Association of Corporate Directors, of which he is a
founding member, since
</DIV>

<P align="center" style="font-size: 10pt">6
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">July&nbsp;2002. Mr.&nbsp;Foster is a director of Quanta Services, 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 Team, Inc. and serves on its audit committee, and he serves as a director, nonexecutive
Chairman of the Board and member of the compensation committee of U.S. Concrete, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Mark F. Wilson </I></B>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 &#038; 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
Jim Benard became head of our Cemetery Operations, while Mr.&nbsp;Wilson maintained his role as
President of our California operations. Mr.&nbsp;Wilson left the Board in 2003 (during which time he
maintained Board meeting visitation rights) but was again elected to the Board in 2004. Mr.&nbsp;Wilson
also serves on the Board of Directors of Muir Heritage Land Trust, and is a director and member of
the compensation committee of Mechanics Bank, Richmond, California.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Ronald A. Erickson </I></B>has been a director of Carriage since it went public in August&nbsp;1996. Mr.
Erickson is Chief Executive Officer of Holiday Companies, Minneapolis, Minnesota, a family business
consisting primarily of gasoline/convenience stores. He serves as Chairman of the Board and as a
director of Gander Mountain Company, a publicly traded company engaged in the sporting goods
business. Mr.&nbsp;Erickson is also a director (and member of the board&#146;s compensation and governance
committees) of Andersen Corporation, a privately held manufacturer of windows and patio doors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Executive Officers Who Are Not Directors</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Joseph Saporito </I></B>has been Executive Vice President, Chief Financial Officer and Secretary of
Carriage since December&nbsp;2004, and served as Senior Vice President, Chief Financial Officer and
Secretary 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>George J. Klug </I></B>has been Senior Vice President of Information Systems and Chief Information
Officer of Carriage since May&nbsp;2002. Before joining Carriage as Vice President of Information
Technology in July&nbsp;2001, Mr.&nbsp;Klug served as Vice President of Information Technology at Allright
Corporation from 1997 to 2000. Prior to joining Allright, Mr.&nbsp;Klug served as Vice President of
Information Technology for various retail companies, including Oshmans, Sportstown and Zaks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>James J. Benard </I></B>was Senior Vice President of Sales and Cemetery Operations for Carriage from
November&nbsp;2001 through December&nbsp;2005, at which time he assumed the role of Regional Managing Partner
for our Cemetery/Combination Region. Mr.&nbsp;Benard joined Carriage in 1998 as a Regional Vice
President of Sales. He has over 26&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.
</DIV>
<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Organization and Committees of the Board</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2005, Carriage&#146;s Board met four times and acted by unanimous written consent two times.
Each of the directors attended all of the meetings of the Board. The functions of the Audit,
Compensation and Corporate Governance Committees of the Board, and the number of meetings held
during 2005, are described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee reviews and makes recommendations to the Board concerning the
compensation of Carriage&#146;s executive officers and approves grants to all officers and employees
under our stock incentive plans. The members of the Compensation Committee are Vincent D. Foster,
Chairman and Joe R. Davis. In 2005, the Compensation Committee held two meetings (and both
Committee members were present) and acted by unanimous consent two times. See the report of the
Compensation Committee on page 14 of this Proxy Statement.
</DIV>

<P align="center" style="font-size: 10pt">7
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee evaluates, appoints and engages Carriage&#146;s independent audit firm and
reviews the plan, scope and results of the audit with the auditors and Carriage&#146;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, Joe R. Davis and Ronald A. Erickson. The Audit Committee met five times during 2005.
Each member of the Audit Committee was present at all meetings, except that Mr.&nbsp;Davis did not
attend one special meeting. See the report of the Audit Committee on page 20 of this Proxy
Statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2003, Carriage&#146;s Board adopted a new written charter to be the governing instrument for the
Audit Committee, which was amended in 2004. A copy of the amended charter is available on our
website at <U>http://www.carriageservices.com</U>. 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. See below, under the heading &#147;Corporate
Governance Principles,&#148; for a specific description of independence which we apply to our
independent directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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&#146;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 two small business
investment corporations for which he reviews and analyzes financial statements as part of his daily
functions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Corporate Governance Committee provides oversight with respect to our corporate governance
guidelines, which includes reviewing the structure of the full Board and making 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&#146;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 Joe R. Davis, Chairman, Vincent D.
Foster and Ronald A. Erickson. The Corporate Governance Committee met once in 2005 (and all
Committee members were present) and did not take any action by unanimous consent.
</DIV>
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Corporate Governance Guidelines</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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
adopted regulations of the Securities and Exchange Commission (the &#147;SEC&#148;) 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 2004, following the final release of the NYSE and SEC
rules, we amended the committee charters and corporate governance guidelines, and the corporate
governance guidelines and the charter for the Corporate Governance Committee were again modified in
early 2005. All of 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, Inc., 3040 Post Oak Boulevard, Suite&nbsp;300, Houston, Texas 77056, Attn:
Investor Relations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Independence</I>. Our corporate governance guidelines require that our Board composition comply
with the NYSE rules, including the requirement that a majority of our Board consist of independent
directors. Under the NYSE rules, a director qualifies as &#147;independent&#148; if the Board determines
that he or she has no material relationship with Carriage (either directly or as a shareholder,
partner or officer of an organization that has a relationship with Carriage). Further, under the
NYSE guidelines, a director will not be considered independent if:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director is, or in the past three years has been, an employee of Carriage, or has an
immediate family member who is or in the past three years has been, an executive officer of
Carriage;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">8
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director or an immediate family member (other than an immediate family member who is
a non-executive employee) receives, or in the past three years has received, more than
$100,000 per year in direct compensation from Carriage (other than director fees and
pension or other forms of deferred compensation for prior service that is not contingent in
any way on continued service);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director is, or in the past three years has been, affiliated with or employed by, or
has an immediate family member who is or in the past three years has been, affiliated with
or employed in a professional capacity by a present or former auditor of Carriage;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director is, or in the past three years has been, an executive officer, or has an
immediate family member who is, or in the past three years has been, an executive officer
of another company where any of Carriage&#146;s present executives serves on that company&#146;s
compensation committee; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The director is, or in the past three years has been, an executive officer or an
employee, or has an immediate family member who is, or in the past three years has been, an
executive officer of another company that makes payments to, or receives payments from,
Carriage for property or services in an amount which, in any single fiscal year, exceeds
the greater of $1&nbsp;million or 2% of such other company&#146;s consolidated gross revenues.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Corporate Governance Committee reviewed our Board composition in early 2006, and
determined that three of five of our directors meet the independence standards set forth above. In
addition, all directors serving on our Audit, Compensation and Corporate Governance Committees
satisfy these independence requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Executive Sessions; Lead Director</I>. In accordance with our corporate governance guidelines,
the non-management directors meet in executive session at least quarterly, outside of the presence
of management directors or other members of management, both with the independent auditors and then
without anyone else present. In connection with the 2005 amendments to our corporate governance
guidelines, the Board established the position of Lead Director, who is required to be qualified as
independent and will be appointed by a majority of the non management directors. The Lead
Director&#146;s role is to facilitate the functioning of the Board independently of management and to
enhance the quality of the Board&#146;s governance. The Lead Director is required to be a member of the
Corporate Governance Committee and, among other things, will preside at the executive sessions of
the non-management directors. In May&nbsp;2005, Mr.&nbsp;Foster, Chairman of the Audit Committee, was
appointed Lead Director.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Board Composition</I>. 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&#146;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&#146;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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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
</DIV>

<P align="center" style="font-size: 10pt">9
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">individual&#146;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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Board&#146;s Interaction With Stockholders</I>. 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, Inc., 3040 Post Oak Boulevard, Suite&nbsp;300, Houston, Texas 77056; Attn: Joseph Saporito,
Executive Vice President and Secretary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Board and CEO Evaluation</I>. In 2004, we instituted an annual process for the Board and each
Committee to perform self-evaluations. These are conducted through written questionnaires compiled
on a confidential basis by the Chairman of the Corporate Governance Committee with summary results
presented to the full Board annually. In addition, the Compensation Committee performs an annual
evaluation of the Chief Executive Officer&#146;s performance. As part of the long-range planning, the
Corporate Governance Committee is charged with evaluating Chief Executive Officer succession, both
in the event of emergency and upon retirement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Business Conduct and Ethics</I>. 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 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. You can access our code of business conduct and ethics on our website
at <U>http://www.carriageservices.com</U>.
</DIV>
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;16(a) of the Securities Exchange Act of 1934 requires Carriage&#146;s directors and
executive officers, and persons who own more than 10% of a registered class of Carriage&#146;s equity
securities, to file with the SEC and the NYSE reports of ownership and changes in ownership of
Common Stock and other equity securities of Carriage on Forms 3, 4 and 5. Executive officers,
directors and greater than 10% beneficial owners are required by SEC regulations to furnish
Carriage with copies of all Forms 3, 4 and 5 they file.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based solely on a review of the copies of such reports furnished to Carriage or written
representations, Carriage believes that all filing requirements applicable to its executive
officers, directors and greater than 10% beneficial owners were complied with during 2005, except
as follows: Joe R. Davis, Ronald A. Erickson, Vincent D. Foster and Mark F. Wilson each filed their
respective Form&nbsp;4 on May&nbsp;13, 2005 to report a grant of 6,000 stock options each that occurred
effective May&nbsp;10, 2005; Mark F. Wilson filed his Form&nbsp;5 on February&nbsp;7, 2006 to report sales of 689
shares of common stock that occurred between April&nbsp;6, 2005 and April&nbsp;15, 2005; and Melvin C. Payne
filed his Form&nbsp;4 on January&nbsp;11, 2006 to report a gift of 2,800 shares of common stock that occurred
effective December&nbsp;27, 2005.
</DIV>
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTAIN TRANSACTIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mark Wilson is a prior owner of a business that Carriage acquired in 1997. As an incentive, we
entered into an arrangement with him to pay him 10% of the amount by which the annual field level
cash flow exceeds predetermined targets on certain businesses in his geographic region through
2006, with a final amount payable in 2007 equal to a multiple of six times the average of the last
three years&#146; payments. The business purpose of the arrangement was to incentivize Mr.&nbsp;Wilson 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 Mr.&nbsp;Wilson totaled approximately $276,000 for 2005. The final payment will be determined
at the conclusion of 2006 and is currently estimated to be in the range of $1.0&nbsp;million to $1.3
million.
</DIV>

<P align="center" style="font-size: 10pt">10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXECUTIVE COMPENSATION</B>
</DIV>

<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Summary Compensation Table</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information regarding the compensation for the years ended
December&nbsp;31, 2005, 2004 and 2003, 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
2005 exceeded $100,000 (collectively, the &#147;Named Executive Officers&#148;).
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Long Term</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>Annual Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Awards</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Other</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Restricted</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>All Other</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Annual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Compen-</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Principal Position</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Salary</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Bonus</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Compensation</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Awards</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(2)</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>sation</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(3)</B></SUP></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Melvin C.Payne</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">414,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">112,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">26,069</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Chairman of the Board,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">400,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">300,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">299,400</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23,453</TD>
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Chief Executive Officer and</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">399,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">190,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">21,075</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">President</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>

<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Joseph Saporito</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">269,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">111,000</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top"><B>(4)</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,023</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Executive Vice President,</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">259,615</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">180,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">224,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,152</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">CFO and Secretary</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">239,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">120,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">466,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,153</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>James J.
Benard</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(5)</B></SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD>219,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$&nbsp;</TD>
    <TD align="right">750</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Sales &#038; Cemetery</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">209,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">90,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">149,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,995</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,316</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>George J.
Klug</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">189,808</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">71,000</TD>
    <TD nowrap><SUP style="font-size: 85%; vertical-align: text-top"><B>(4)</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,363</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Senior Vice President</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">179,712</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">90,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">149,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,361</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Chief Information Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">164,885</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">70,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,013</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Departed Officer</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Charles D.
Sidun</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(6)</B></SUP>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">225,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">24,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,227</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Senior Vice President</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">152,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">149,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">448</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">of Funeral Operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">27,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">320</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The amount in this column includes certain housing costs for Mr.&nbsp;Sidun. 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.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>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. All stock
grants for the 2004&nbsp;year were granted effective February&nbsp;3, 2005 when the price was $4.99 per
share, as follows: Mr.&nbsp;Payne &#151; 60,000 shares; Mr.&nbsp;Saporito &#151; 45,000 shares; and Messrs.
Sidun, Benard and Klug &#151; 30,000 shares each. Mr.&nbsp;Saporito&#146;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.
The Common Stock grants vest 25% per year beginning on the first anniversary of the date of
grant.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Each amount in this column reflects contributions by Carriage to its 401(k) Plan for the
executive&#146;s benefit, reimbursement of life insurance premiums where the Company was not named
the beneficiary and reimbursement for personal travel.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes a one-time bonus of $30,000 for Mr.&nbsp;Saporito and $25,000 for Mr.&nbsp;Klug associated
with completing the initial documentation evaluation and reporting on internal controls in
accordance with the Sarbanes-Oxley Act of 2002.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Benard was a Named Executive Officer as of December&nbsp;31, 2005 and remains an officer but
had a change in duties as of January&nbsp;1, 2006.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Sidun resigned as Senior Vice President of Funeral Operations in November&nbsp;2005.</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock Option Grants in 2005</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No named executive officer received a grant of options or exercised options during the year
ending December&nbsp;31, 2005.
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2005 Option Exercises and Year-End Option Holdings</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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, 2005, and the year-end
value of unexercised options:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Number of Unexercised</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Value of Unexercised</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Options Held at</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>In-the-Money Options at</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B><SUP style="font-size: 85%; vertical-align: text-top"><B>(1)</B></SUP></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Unexercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Unexercisable</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Melvin C. Payne</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">360,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,045,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Joseph Saporito</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">James J. Benard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">78,003</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">George J. Klug</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">35,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4,600</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charles D. Sidun</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,850</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,550</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">255</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">765</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>The value of unexercised options is based on the closing price of the stock on the NYSE at
12/31/2005 of $5.00</TD>
</TR>

</TABLE>


<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Equity Compensation Plan Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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, 2005:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of Shares</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Remaining Available for</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>to be Issued Upon</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise Price of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Future Issuance Under</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Equity Compensation</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Outstanding Options,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options, Warrants</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Plans (excluding shares</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Plan Category</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Warrants and Rights</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>and Rights</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Reflected in the First Column)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation plans
approved by security holders
<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,365,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">3.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">439,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation plans not
approved by security holders
<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">TOTAL</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,365,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&nbsp;</TD>
    <TD align="right">3.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">439,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-top: 3px double #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Does not include 945,646 shares which remain available under our 1997 Employee Stock Purchase
Plan.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Does not include fees that directors may elect to receive in common stock in lieu of cash.<BR></TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt">12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compensation of Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We compensate our directors through cash payments, including quarterly retainers and meeting
attendance fees, and through stock-related incentives. Each &#147;outside director&#148; 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;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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
Foster receives 50%, and Mr.&nbsp;Erickson receives no portion of his fees in Common Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also have the ability to issue discretionary options and restricted stock grants under our
existing 1996 Directors&#146; Stock Option Plan, which will expire later this year. We issue 6,000
fully vested options on the day of our annual stockholder meetings to our directors, except to Mr.
Payne, our one director who is an executive officer of Carriage. We expect that Messrs.&nbsp;Foster,
Erickson, Davis and Wilson will each receive a grant of 6,000 fully vested on the day of the 2006
Annual Meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2006, the Board amended its director compensation policy, to become effective upon
the 2006 Annual Meeting and intended to work in tandem with the new 2006 Long Term Incentive Plan.
Under the new policy, among other things the annual retainer has been increased to $30,000, and the
annual grant has been changed from 6,000 options to a grant of 3,000 shares. In addition, the
stock grants, plus all stock issued in lieu of cash director fees, will be registered under the
Securities Act of 1933. The term &#147;outside director&#148; has been expanded to include directors who may
be employees but who are not executive officers of our parent corporation, thus qualifying Mr.
Wilson as &#147;outside.&#148; However, the annual retainer and meeting fees are payable only to independent
directors under the new policy.
</DIV>
<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Employment Agreements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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
$415,000 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.
</DIV>

<P align="center" style="font-size: 10pt">13
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carriage is also a party to separate employment agreements with Joseph Saporito, George J.
Klug and James J. Benard dated effective November&nbsp;14, 2005, March&nbsp;30, 2005 and January&nbsp;1, 2004 ,
respectively, providing for annual base salaries to them that are currently $285,000, $200,000,
$220,000, respectively, plus certain benefits including but not limited to eligibility for a
year-end bonus based on performance, eligibility for equity grants, and other benefits generally
available to employees. Their agreements extend through September&nbsp;30, 2010, December&nbsp;31, 2007 and
December&nbsp;31, 2006, 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 a period of one year. Each such
employee has agreed that for a certain period following the termination of his employment
agreement, he will not compete with Carriage and will not induce any employees of Carriage to leave
Carriage. In addition, if Carriage undergoes a &#147;Corporate Change&#148; (as defined in our current 1996
Stock Option Plan) and either Mr.&nbsp;Saporito or Mr.&nbsp;Klug leaves our employment, then he would be
entitled to receive compensation and benefits for a specified period or until the remainder of his
contract term, whichever is longer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2005, Charles Sidun resigned his position as Senior Vice President of Funeral
Operations. The Company intends to continue paying Mr.&nbsp;Sidun his base salary and benefits through
the first anniversary of his separation, or November&nbsp;2006, in accordance with his employment
agreement.
</DIV>
<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation 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 our stock incentive
plans and administering our Employee Stock Purchase Plan. Each member of the Committee is
independent of Carriage within the meaning of the NYSE corporate governance guidelines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The goal of the Committee is to enhance performance and maximize stockholder value through,
among other things, establishing appropriate compensation levels and incentives for our senior
management team. 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&#146;s annual and long term performance goals and to maximize stockholder value. Our executive
compensation policies are designed to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Allow us to attract and retain qualified executives with the leadership and
other skills needed by Carriage at this stage in its development;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Provide strong incentives to achieve our annual and long term performance goals,
with rewards for both individual and corporate performance; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Solidly align the interests of management with those of the stockholders.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each year, our Committee takes an individualized approach 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;2006 and authorized salary increases and cash bonuses to the senior management
team, all as further described below.
</DIV>
<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Base Salaries</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<P align="center" style="font-size: 10pt">14
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At the beginning of 2005, our Committee approved base salary increases for the senior
management team averaging 3.5%. After carefully considered Carriage&#146;s performance in 2005, the
performance of the senior management team as a whole and that of each officer, the duties and
responsibilities of the team, and our understanding of annual adjustments in executive compensation
among peer groups, we maintained the same salary levels for two members of the team and implemented
increases for two others so that the overall increase for the team as a whole at the beginning of
2006 was about 2.3%. This excludes the effect of Charles Sidun, who resigned in November&nbsp;2005.
</DIV>
<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Bonuses for Named Executive Officers for 2005</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In analyzing 2005 performance, the Committee began to take a more structured approach,
reviewing actual results achieved against goals set at the beginning of the year. Of the goals,
67% are weighted against objective quantitative goals and 33% against subjective qualitative goals.
Carriage started 2005 on a positive note by refinancing its senior debt on favorable terms,
repositioning the company for growth and enjoying strong first quarter operating results. The
goals for 2005 were set based upon an optimism that Carriage would experience significantly
improved operating results in 2005 compared to 2004. While Carriage finished the year strong from a
liquidity and cash flow prospective, financial results for the full year were only marginally
better than in 2004. The Committee&#146;s consensus was that across the senior management team, the
qualitative goals were mostly met but that the quantitative goals mostly did not meet the high
expectations set at the beginning of the year, and this consensus was reflected in the bonuses
awarded for 2005 performance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash bonuses for the senior management team&#146;s 2005 performance totaled $334,000, averaging 30%
of the executives&#146; 2005 base salary levels, as reflected in the Summary Compensation Table. This
compares against cash bonuses in the previous year for these individuals totaling $510,000, or 47%
of 2004 base salary, excluding $150,000 in transaction bonuses awarded to two executives for their
efforts in successfully completing Carriage&#146;s offering of its $130&nbsp;million in aggregate principal
amount of 7.875% Senior Notes due 2015. These figures exclude Mr.&nbsp;Sidun, who resigned in November
2005 and who consequently did not receive a bonus.
</DIV>
<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Options and Restricted Stock Grants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Committee has not authorized the issuance of any stock options to any of our executive
officers since 2002, reflecting the Committee&#146;s current view that as a general rule, restricted
stock grants provide better incentives in aligning management with long-term enhancement of
stockholder value. The practice since 2003 has been to award restricted stock grants every other
year, which occurred in 2003 for 2002 performance and in 2005 for 2003-04 performance. No
restricted stock was awarded to any member of the senior management team in 2006 for 2005
performance.
</DIV>
<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compensation Policies for the Chief Executive Officer</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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. Mr.&nbsp;Payne has also led our funeral
operations from the third quarter of 2003 until the present, other than for the first eleven months
of 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our charter, the Committee recommends compensation for the Chief Executive Officer for
approval by the full Board. In 2005, the Committee recommended an increase of 3.75% in Mr.&nbsp;Payne&#146;s
salary level to $415,000 per year. For 2006, the Committee adopted Mr.&nbsp;Payne&#146;s own recommendation
that his salary level remain unchanged. The Committee also reviewed Mr.&nbsp;Payne&#146;s performance in
2005, applying the same quantitative and qualitative criteria described above according to the
specific goals that had been set for him at the beginning of the year, and based upon the actual
results achieved, the Committee awarded Mr.&nbsp;Payne a cash performance bonus of $112,000, or 27% of
his base salary level. At the same time, the Committee re-set goals for 2006 in accordance with
the same structure and will evaluate Mr.&nbsp;Payne&#146;s performance in 2007 according to achievement of
these goals.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><U>Compensation Committee</U></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vincent D. Foster, Chairman</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stuart W. Stedman</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Joe R. Davis</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>COMPARATIVE STOCKHOLDER RETURN</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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 Russell 2000 Index,
and (iii)&nbsp;a peer group index of four companies in the death care industry (Service Corporation
International, Stewart Enterprises, Inc., Stonemor Group LP and Alderwoods Group, Inc.). Stonemor
Group LP became a public company in September&nbsp;2004. Alderwoods Group, Inc. emerged from
bankruptcy in January&nbsp;2002. This graph assumes that the value of an investment in our Common Stock
and in each index was $100 on December&nbsp;31, 2000. The returns for each company in each Peer Group
are weighted according to its stock market capitalization for which a return is indicated.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="h35116h3511601.gif" alt="(LINE GRAPH)">
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Comparison of Stockholder Returns</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>12/00</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>12/01</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>12/02</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>12/03</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>12/04</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>12/05</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Carriage Services, Inc.</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>100.00</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>337.28</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>254.72</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>236.80</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>316.16</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>320.00</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Russell 2000 Index</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>100.00</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>102.49</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>81.49</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>120.00</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>142.00</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>148.46</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
<TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Peer Group</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>100.00</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>293.58</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>218.72</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>319.83</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>422.78</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>$</B></TD>
    <TD align="right"><B>456.58</B></TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">16
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>COMPENSATION COMMITTEE INTERLOCKS<BR>
AND INSIDER PARTICIPATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At December&nbsp;31, 2005, the members of the Compensation Committee were Vincent D. Foster,
Chairman, and Joe R. Davis. No member of the Compensation Committee was an officer or employee of
Carriage at any time during 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2005, 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, 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.
</DIV>
<DIV align="left">
<A name="124"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROPOSAL NO. 2<BR>
APPROVE THE COMPANY&#146;S 2006 LONG-TERM INCENTIVE PLAN</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carriage has maintained four stock incentive plans since going public in 1996. Our 1995 Stock
Incentive Plan expired in 2005, leaving our 1996 Stock Incentive Plan and 1996 Directors&#146; Stock
Option Plan, both of which are set to expire in June&nbsp;2006, and our 1998 Stock Option Plan for
Consultants, which we do not expect to use for additional grants. In anticipation of stockholder
approval of our new 2006 Plan, the Board elected to terminate early both 1996 Plans and the 1998
Plan, effective when the new 2006 Plan goes into effect. Termination of the existing plans would
not affect options and awards made prior to termination. No further awards under any of these
existing plans are anticipated, except for the options granted to eligible directors under the
Directors&#146; Plan as described in &#147;Compensation of Directors&#148; under &#147;Executive Compensation&#148; above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;With the goal of replacing these plans, the Board of Directors has adopted, subject to
stockholder approval, the Carriage Services Inc. 2006 Incentive Plan (the &#147;2006 Plan&#148;). The Board
of Directors believes that approval of the 2006 Plan will advance the interests of the Company by
providing eligible participants the opportunity to receive a broad variety of equity-based and
other incentives awards (&#147;Awards&#148;), thereby effectively aligning employee and stockholder interests
by motivating and rewarding performance that will enhance stockholder value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A copy of the 2006 Plan is attached as Appendix&nbsp;A.
</DIV>
<DIV align="left">
<A name="125"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Share Availability</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A total of 1,350,000 shares of Common Stock will be available for grant of Awards under the
2006 Plan, subject to adjustment as provided in the 2006 Plan. The maximum number of shares of
Common Stock that may be subject to incentive stock options granted under the 2006 Plan would also
be 1,350,000.
</DIV>
<DIV align="left">
<A name="126"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Administration</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 2006 Plan will be administered by our Compensation Committee, which consists solely of
persons who qualify as &#147;independent&#148; under New York Stock Exchange guidelines, as &#147;outside
directors&#148; (within the meaning of Section 162(m) of the Internal Revenue Code (the &#147;Code&#148;)) and
&#147;non-employee directors&#148; (within the meaning of Rule&nbsp;16b-3 promulgated under the Securities
Exchange Act of 1934). Subject to the terms of the 2006 Plan, the Compensation Committee shall
have total and exclusive responsibility to control, operate, manage and administer the 2006 Plan in
accordance with its terms. The Compensation Committee shall have all the authority that may be
necessary or helpful to enable it to discharge its responsibilities with respect to the 2006 Plan.
</DIV>
<DIV align="left">
<A name="127"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Eligibility</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee shall select participants from those employees and
outside directors (together &#147;Participants&#148;) who, in the opinion of the Compensation Committee, are
in a position to make a significant contribution to the success of Carriage. Once a Participant
has been selected for an Award by the Compensation Committee, the Compensation Committee shall
determine the type and size of Award to be granted to the participant
</DIV>

<P align="center" style="font-size: 10pt">17
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and shall establish in the related Award Agreement the terms, conditions, restrictions and
limitations applicable to the Award, in addition to those set forth in the 2006 Plan and the
administrative guidelines and regulations, if any, established by the Compensation Committee. The
maximum number of shares of Common Stock that may be granted under the 2006 Plan to any one
Participant (i)&nbsp;during the fiscal year of Carriage in which the Participant is first hired by the
Carriage is 100,000 shares and (ii)&nbsp;during each subsequent fiscal year is 100,000 shares, in each
case subject to adjustment as provided in the 2006 Plan.
</DIV>
<DIV align="left">
<A name="128"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Awards</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The 2006 Plan allows the Compensation Committee to award (i)&nbsp;options to purchase Common Stock,
(ii)&nbsp;restricted stock, (iii)&nbsp;stock appreciation rights (&#147;SARs&#148;), (iv)&nbsp;performance awards
(&#147;Performance Award&#148;), (v)&nbsp;cash bonuses, (vi)&nbsp;stock awards, or (vii)&nbsp;any combination of the
foregoing, in such amounts and at such times as established by the Compensation Committee subject
to the terms of the 2006 Plan. After the Compensation Committee grants an Award under the 2006
Plan to a Participant, Carriage and the Participant will enter into an Award Agreement setting
forth the terms, conditions, restrictions and limitations applicable to the Award. All Award
Agreements shall be subject to the provisions of the 2006 Plan, and in the event of any conflict
between the two, the terms of the 2006 Plan shall govern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Stock Options: </I>Options may be granted by the Compensation Committee in the form of incentive
stock options or nonqualified stock options, or a combination of both; provided, however, that
incentive stock options may only be provided to employees. Stock Options are subject to the terms
and conditions, including vesting conditions, set by the Compensation Committee and incentive stock
options are subject to further statutory restrictions that are set forth in the 2006 Plan. No
option shall be exercisable later than ten years after the grant date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Restricted Stock: </I>Restricted stock awards are subject to such terms, conditions and
restrictions on Common Stock as the Compensation Committee may deem advisable, including without
limitation providing for vesting upon the achievement of specified performance goals pursuant to a
Performance Award and restrictions under applicable Federal or state securities laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Stock Appreciation Rights: </I>The Compensation Committee may grant Awards in the form of SARs in
such numbers and at such times as it shall determine. SARs shall vest and be exercisable in whole
or in such installments and at such times as may be determined by the Compensation Committee. The
price at which SARs may be exercised shall be determined by the Compensation Committee but shall
not be less than 100% of the Fair Market Value per share of Common Stock on the grant date unless
the SARs were granted through the assumption of, or in substitution for, outstanding awards
previously granted to individuals who became Employees as a result of a merger, consolidation,
acquisition, or other corporate transaction involving the Company and comply with Code Section
409A. The term of each SAR shall be as specified by the Compensation Committee; provided, however,
that no SARs shall be exercisable later than ten years after the grant date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Performance Awards: </I>Performance Awards may be payable in the form of cash, shares of Common
Stock, or a combination of both. Performance Awards shall be conditioned upon the level of
achievement of one or more stated performance goals over a specified performance period that shall
not be shorter than one year. Performance Awards may be combined with other Awards to impose
performance criteria as part of the terms of such other Awards. Each Award Agreement embodying a
Performance Award shall set forth (a)&nbsp;the amount, including a target and maximum amount if
applicable, a Participant may earn in the form of cash or shares of Common Stock or a formula for
determining such amount, (b)&nbsp;the performance criteria and level of achievement versus such criteria
that shall determine the amount payable or number of shares of Common Stock to be granted, issued,
retained and/or vested, (c)&nbsp;the performance period over which performance is to be measured, (d)
the timing of any payments to be made, (e)&nbsp;restrictions on the transferability of the Award, and
(f)&nbsp;such other terms and conditions as the Compensation Committee may determine that are not
inconsistent with the 2006 Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Performance Goals: </I>The performance measure(s) to be used for purposes of Performance Awards
under the 2006 Plan may consist of one or more or any combination of the following criteria: (a)
earnings or earnings per share (whether on a pre-tax, after-tax, operational or other basis), (b)
return on equity, (c)&nbsp;return on assets or net assets, (d)&nbsp;return on capital or invested capital and
other related financial measures, (e)&nbsp;cash flow, (f)&nbsp;revenues, (g)&nbsp;income or operating income, (h)
expenses or expense levels, (i)&nbsp;one or more operating ratios, (j)&nbsp;stock price, (k)&nbsp;total
stockholder return, (l)&nbsp;market share, (m)&nbsp;operating profit, (n)&nbsp;profit margin, (o)&nbsp;capital
expenditures, (p)&nbsp;net
</DIV>

<P align="center" style="font-size: 10pt">18
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">borrowing, debt leverage levels, credit quality or debt ratings, (q)&nbsp;the accomplishment of mergers,
acquisitions, dispositions, public offerings or similar extraordinary business transactions, (r)
net asset value per share, (s)&nbsp;economic value added, and (t)&nbsp;individual business objectives. The
performance goals based on these performance measures may be made relative to the performance of
other business entities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Deductibility: </I>The Compensation Committee shall determine in its sole discretion whether all
or any portion of a Performance Award shall be intended to satisfy the requirements for
&#147;performance based&#148; compensation under Section 162(m) of the Code (&#147;162(m) Requirements&#148;). The
performance criteria for any Performance Award that is intended to satisfy such requirements shall
be established in writing by the Compensation Committee based on the performance goals set forth in
the 2006 Plan not later than 90&nbsp;days after the commencement of the performance period with respect
to such Award. The maximum amount that may be paid in cash pursuant to Performance Awards granted
to a Participant with respect to any Carriage fiscal year that is intended to satisfy the 162(m)
Requirements is $1,000,000. At the time of the grant of a Performance Award and to the extent
permitted under Section 162(m) and regulations thereunder for a Performance Award intended to
satisfy the 162(m) Requirements, the Compensation Committee may provide for the manner in which the
performance goals will be measured in light of specified corporate transactions, extraordinary
events, accounting changes and other similar occurrences.
</DIV>
<DIV align="left">
<A name="129"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Equitable Adjustments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If there is any change in the number or kind of shares of Common Stock outstanding, by reason
of a stock dividend, spin-off, recapitalization, stock split, combination, exchange of shares,
merger, reorganization, consolidation, reclassification, or other change in Carriage&#146;s capital
structure, the Compensation Committee will make appropriate adjustments to reflect any increase or
decrease in the number of, or change in the kind or value of, issued shares of Common Stock to
preclude, to the extent practicable, the enlargement or dilution of rights under such Awards. The
Compensation Committee shall also have the sole discretion to determine the manner in which shares
of Common Stock available for grant of Awards under the 2006 Plan are counted.
</DIV>
<DIV align="left">
<A name="130"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Transferability</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as the Compensation Committee otherwise provides, no Award shall be subject to
execution, attachment or similar process, and no Award may be sold, transferred, pledged or
otherwise disposed of, other by will or pursuant to the applicable laws of descent and
distribution. In the event of legal incapacity or death, an Award may be exercised by the
incapacitated Participant&#146;s guardian or legal representative, or the person so entitled to succeed
to receive the deceased Participant&#146;s rights under the Award, respectively.
</DIV>
<DIV align="left">
<A name="131"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Amendment; Termination</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board may at any time terminate or amend the 2006 Plan, in whole or in part; provided,
however, under certain circumstances described more fully in the 2006 Plan, no amendment or
modification of the 2006 Plan shall become effective without the approval by the holders of at
least a majority of the shares of Common Stock. An amendment to the 2006 Plan shall not require
stockholder approval if it curtails rather than expands the scope of the 2006 Plan, nor if it is
made to conform the 2006 Plan to new statutory or regulatory requirements that arise after
submission of the 2006 Plan to stockholders for their approval. Upon termination of the 2006 Plan,
the terms and provisions of the 2006 Plan will continue to apply to Awards granted prior to such
termination. Subject to the terms of the 2006 Plan, no suspension, termination, amendment or
modification of the 2006 Plan shall adversely affect in any material way any Award previously
granted under the 2006 Plan, without the consent of the Participant holding such Award.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>We recommend that you vote &#147;FOR&#148; this Proposal No.&nbsp;2 to approve to 2006 Long-Term Incentive Plan.</B>
</DIV>

<DIV align="left">
<A name="132"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROPOSAL NO. 3<BR>
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTING FIRM</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee has selected KPMG LLP as Carriage&#146;s independent public accountants for the
year ending December&nbsp;31, 2006, and have further directed that management submit the selection of
the independent
</DIV>

<P align="center" style="font-size: 10pt">19
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;accountants for your ratification at the Meeting. KPMG LLP has audited Carriage&#146;s financial
statements since 2002. 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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholder ratification of the selection of KPMG LLP as Carriage&#146;s independent public
accountants is not required by Delaware law or our By-laws. If Carriage&#146;s stockholders fail to
ratify the selection, we will reconsider whether to retain that firm. Even if the selection is
ratified, the Board, in its discretion may direct the appointment of a different independent
accounting firm at any time during the year if we feel that such a change would be in the best
interests of Carriage and its stockholders. The affirmative vote of the holders 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 ratify the selection of KPMG LLP.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>We recommend that you vote &#147;FOR&#148; this Proposal No.&nbsp;3 to ratify the selection of KPMG LLP.</B>
</DIV>

<DIV align="left">
<A name="133"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>AUDIT COMMITTEE REPORT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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&#146;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 in 2004. A copy of the amended charter was included as
Appendix&nbsp;A to the proxy statement for the 2004 annual meeting.
</DIV>
<DIV align="left">
<A name="134"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Review and Discussions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee has reviewed and discussed Carriage&#146;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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In an effort to maintain the auditor&#146;s independence, the Audit Committee considers whether
KPMG LLP&#146;s rendering of non-audit services is compatible with maintaining its independence. No
non-audit services were approved or rendered during 2005.
</DIV>
<DIV align="left">
<A name="135"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Audit Fees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fees billed for services by KPMG LLP during 2005 related to the audits of the annual
consolidated financial statements and internal controls over financial reporting and reviews of
quarterly financial statements filed in the reports on Form 10-Q totaled $630,000.
</DIV>
<DIV align="left">
<A name="136"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Audit-Related Fees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KPMG LLP billed Carriage $121,100 for audit-related services during 2005.
</DIV>
<DIV align="left">
<A name="137"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Tax Fees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were no fees billed to Carriage by KPMG LLP for tax services during 2005.
</DIV>
<DIV align="left">
<A name="138"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>All Other Fees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There were no fees billed to Carriage by KPMG LLP for any other professional services.
</DIV>
<DIV align="left">
<A name="139"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Pre-Approval Policy for Services of Independent Accounting Firm</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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 audit firm in order to assure that the provision of such
services does not impair the audit firm&#146;s independence. If a type of service to be provided by the
independent audit firm has not received pre-
</DIV>


<P align="center" style="font-size: 10pt">20
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">approval during this annual process, it will require specific pre-approval by the Audit Committee.
The Audit Committee does not delegate to management its responsibilities to pre-approve services
performed by the independent auditors.
</DIV>

<DIV align="left">
<A name="140"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Recommendation to Include Audited Financial Statements in Annual Report</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on the Audit Committee&#146;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&#146;s Annual Report on Form 10-K for the year
ended December&nbsp;31, 2005, with the SEC.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><u>Audit Committee</u></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vincent D. Foster, Chairman</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ronald A. Erickson</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Joe R. Davis</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="141"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>OTHER BUSINESS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>
<DIV align="left">
<A name="142"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STOCKHOLDER&#146;S PROPOSALS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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, 2006, to be included in Carriage&#146;s proxy material and form of
proxy relating to that meeting. A stockholder proposal not intended to be included in Carriage&#146;s
proxy statement but intended to be presented at Carriage&#146;s next annual meeting of stockholders will
be considered untimely and not considered at that meeting if received by us after February&nbsp;15,
2007.
</DIV>
<DIV align="left">
<A name="143"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADDITIONAL INFORMATION</B>
</DIV>

<DIV align="left">
<A name="144"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Annual Report</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Annual Report to Stockholders for the year ended December&nbsp;31, 2005 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&#146;s Annual Report on Form 10-K for the
year ended December&nbsp;31, 2005, 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, Executive Vice President and Secretary, Carriage Services, Inc.,
3040 Post Oak Boulevard, Suite&nbsp;300, Houston, Texas 77056.
</DIV>
<DIV align="left">
<A name="145"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Number of Proxy Statements and Annual Reports</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&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.
</DIV>

<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<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>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By Order of the Board of Directors</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Joseph Saporito</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><I>Executive Vice President, Chief</I></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><I>Financial Officer and Secretary</I></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Houston, Texas<BR>
April&nbsp;18, 2006

</DIV>

<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="146"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>APPENDIX A</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>CARRIAGE SERVICES INC.<BR>
2006 LONG-TERM INCENTIVE PLAN</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ARTICLE I ESTABLISHMENT AND PURPOSE</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.1 Establishment and Purpose. </B>Carriage Services Inc. (&#147;Carriage&#148;) hereby establishes the
Carriage Services Inc. 2006 Long-Term Incentive Plan, as set forth in this document. The purposes
of the Plan are to attract and retain highly qualified individuals to perform services for Carriage
and its Affiliates and to serve on Carriage&#146;s Board of Directors, to further align the interests of
those individuals with those of the stockholders of Carriage, and closely link compensation with
Company performance. Carriage is committed to creating long-term stockholder value. Carriage&#146;s
compensation philosophy is based on a belief that Carriage can best create stockholder value if
employees and directors act and are rewarded as business owners. Carriage believes that an equity
stake through equity compensation programs effectively aligns employee and stockholder interests by
motivating and rewarding performance that will enhance stockholder value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.2 Effectiveness and Term. </B>This Plan shall become effective as of May&nbsp;25, 2006 (the
&#147;Effective Date&#148;), provided that on or prior to the Effective Date the Plan is duly approved by the
holders of at least a majority of the shares of Common Stock present or represented and entitled to
vote at a meeting of the stockholders of Carriage duly held in accordance with applicable law.
Unless terminated earlier by the Board pursuant to Section&nbsp;13.1, this Plan shall terminate on the
day prior to the tenth anniversary of the Effective Date.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE II DEFINITIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.1 </B>&#147;<B>Affiliate</B>&#148; means (a)&nbsp;with respect to Incentive Stock Options, a &#147;parent corporation&#148; or a
&#147;subsidiary corporation&#148; of Carriage, as those terms are defined in Sections 424(e) and (f)&nbsp;of the
Code, respectively, and (b)&nbsp;with respect to other Awards, (i)&nbsp;a &#147;parent corporation&#148; or a
subsidiary corporation&#148; of Carriage as defined in (a)&nbsp;above, or (ii)&nbsp;any other person with whom
Carriage would be considered a single employer under Section 414(b) of the Code (controlled group
of corporations) or Section 414(c) of the Code (partnerships, proprietorships, etc., under common
control), provided that in applying Code Sections&nbsp;1563(a)(1), (2)&nbsp;and (3)&nbsp;for purposes of
determining a controlled group of corporations under Section 414(b) of the Code, the language &#147;at
least 50&nbsp;percent&#148; shall be used instead of &#147;at least 80&nbsp;percent&#148; each place it appears in Code
Sections&nbsp;1563(a)(1), (2)&nbsp;and (3), and in applying Treasury Regulation&nbsp;Section&nbsp;1.414(c)-2 for
purposes of determining trades or businesses (whether or not incorporated) that are under common
control for purposes of Section 414(c) of the Code, the language &#147;at least 50&nbsp;percent&#148; shall be
used instead of &#147;at least 80&nbsp;percent&#148; each place it appears in Treasury Regulation&nbsp;Section
1.414(c)-2.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.2 </B>&#147;<B>Award</B>&#148; means an award granted to a Participant in the form of Options, SARs, Restricted
Stock, Performance Awards, Stock Awards or Other Incentive Awards, whether granted singly or in
combination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.3 </B>&#147;<B>Award Agreement</B>&#148; means a written agreement between Carriage and a Participant that sets
forth the terms, conditions, restrictions and limitations applicable to an Award.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.4 </B>&#147;<B>Board</B>&#148; means the Board of Directors of Carriage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.5 </B>&#147;<B>Carriage</B>&#148; means Carriage Services Inc., a Delaware corporation, or any successor thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.6 </B>&#147;<B>Cause</B>&#148; means a finding by the Committee of acts or omissions constituting, in the
Committee&#146;s reasonable judgment, (a)&nbsp;a breach of duty by the Participant in the course of his
employment involving fraud, acts of dishonesty (other than inadvertent acts or omissions),
disloyalty to the Company, or moral turpitude constituting criminal felony; (b)&nbsp;conduct by the
Participant that is materially detrimental to the Company, monetarily or otherwise, or reflects
unfavorably on the Company or the Participant to such an extent that the Company&#146;s best interests
reasonably require the termination of the Participant&#146;s employment; (c)&nbsp;acts or omissions of the
Participant materially in violation of his obligations under any written employment or other
agreement between the Participant
</DIV>

<P align="center" style="font-size: 10pt">A-1
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and the Company or at law; (d)&nbsp;the Participant&#146;s failure to comply with or enforce Company
policies concerning equal employment opportunity, including engaging in sexually or otherwise
harassing conduct; (e)&nbsp;the Participant&#146;s repeated insubordination; (f)&nbsp;the Participant&#146;s failure to
comply with or enforce, in any material respect, all other personnel policies of the Company; (g)
the Participant&#146;s failure to devote his full (or other required) working time and best efforts to
the performance of his responsibilities to the Company; or (h)&nbsp;the Participant&#146;s conviction of, or
entry of a plea agreement or consent decree or similar arrangement with respect to a felony or any
violation of federal or state securities laws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.7 </B>&#147;<B>Code</B>&#148; means the Internal Revenue Code of 1986, as amended from time to time, including
regulations thereunder and successor provisions and regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.8 </B>&#147;<B>Committee</B>&#148; means the Compensation Committee of the Board or such other committee of the
Board as may be designated by the Board to administer the Plan, which committee shall consist of
two or more members of the Board; provided, however, that with respect to the application of the
Plan to Awards made to Outside Directors, the &#147;Committee&#148; shall be the Board. During such time as
the Common Stock is registered under Section&nbsp;12 of the Exchange Act, each member of the Committee
shall be an Independent Director. To the extent that no Committee exists that has the authority to
administer the Plan, the functions of the Committee shall be exercised by the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.9 </B>&#147;<B>Common Stock</B>&#148; means the common stock of Carriage, $.01 par value per share, or any stock
or other securities of hereafter issued or issuable in substitution or exchange for the Common
Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.10 </B>&#147;<B>Company</B>&#148; means Carriage and any Affiliate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.11 </B>&#147;<B>Corporate Change</B>&#148; means (a)&nbsp;the dissolution or liquidation of Carriage; (b)&nbsp;a
reorganization, merger or consolidation of Carriage with one or more corporations (other than a
merger or consolidation effecting a reincorporation of Carriage in another state or any other
merger or consolidation in which the stockholders of the surviving corporation and their
proportionate interests therein immediately after the merger or consolidation are substantially
identical to the stockholders of Carriage and their proportionate interests therein immediately
prior to the merger or consolidation) (collectively, a &#147;Corporate Change Merger&#148;); (c)&nbsp;the sale of
all or substantially all of the assets of the Company; or (d)&nbsp;the occurrence of a Change in
Control. A &#147;Change in Control&#148; shall be deemed to have occurred if (a)&nbsp;individuals who were
directors of Carriage immediately prior to a Control Transaction shall cease, within two years of
such Control Transaction to constitute a majority of the Board (or of the Board of Directors of any
successor to Carriage or to a company which has acquired all or substantially all its assets) other
than by reason of an increase in the size of the membership of the applicable Board that is
approved by at least a majority of the individuals who were directors of Carriage immediately prior
to such Control Transaction or (b)&nbsp;any entity, person or Group acquires shares of Carriage in a
transaction or series of transactions that result in such entity, person or Group directly or
indirectly owning beneficially 50% or more of the outstanding shares of Common Stock. As used
herein, &#147;Control Transaction&#148; means (a)&nbsp;any tender offer for or acquisition of capital stock of
Carriage pursuant to which any person, entity, or Group directly or indirectly acquires beneficial
ownership of 20% or more of the outstanding shares of Common Stock; (b)&nbsp;any Corporate Change Merger
of Carriage; (c)&nbsp;any contested election of directors of Carriage; or (d)&nbsp;any combination of the
foregoing, any one of which results in a change in voting power sufficient to elect a majority of
the Board. As used herein, &#147;Group&#148; means persons who act &#147;in concert&#148; as described in Sections
13(d)(3) and/or 14(d)(2) of the Exchange Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.12 </B>&#147;<B>Effective Date</B>&#148; means the date this Plan becomes effective as provided in Section&nbsp;1.2.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.13 </B>&#147;<B>Employee</B>&#148; means an employee of the Company; provided, however, that the term &#147;Employee&#148;
does not include an Outside Director.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.14 </B>&#147;<B>Exchange Act</B>&#148; means the Securities Exchange Act of 1934, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.15 </B>&#147;<B>Fair Market Value</B>&#148; means (a)&nbsp;for so long as the Common Stock is listed on the New York
Stock Exchange or any other national stock exchange, the average of the highest and lowest selling
prices for such stock as quoted on such exchange for the date the Award is granted (or if there are
no sales for such date of grant, then for the last preceding business day on which there were
sales), (b)&nbsp;if the Common Stock is traded in the over-
</DIV>

<P align="center" style="font-size: 10pt">A-2
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the-counter market, the average of the representative closing bid and asked prices as reported
by NASDAQ for the date the Award is granted (or if there was no quoted price for such date of
grant, then for the last preceding business day on which there was a quoted price), or (c)&nbsp;if the
Common Stock is traded in the NASDAQ National Market System, the average of the highest and lowest
selling prices for such stock as quoted on the NASDAQ National Market System for the date the Award
is granted (or if there are no sales for such date of grant, then for the last preceding business
day on which there were sales), or (d)&nbsp;if the Common Stock is not reported or quoted by any such
organization, fair market value of the Common Stock as determined in good faith by the Committee
using a &#147;reasonable application of a reasonable valuation method&#148; within the meaning Section&nbsp;409A
of the Code and the regulations thereunder. Notwithstanding the foregoing, &#147;Fair Market Value&#148;
with respect to an Incentive Stock Option shall mean fair market value as determined in good faith
by the Committee within the meaning of Section&nbsp;422 of the Code.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.16 </B>&#147;<B>Good Reason</B>&#148; means any of the following actions if taken without the Participant&#146;s prior
written consent: (a)&nbsp;any material failure by the Company to comply with its obligations under the
terms of a written employment agreement; (b)&nbsp;any demotion of the Participant as evidenced by a
material reduction in the Participant&#146;s responsibilities, duties, compensation, or benefits; or (c)
any permanent relocation of the Participant&#146;s place of business to a location 50 miles or more from
the then-current location. Neither a transfer of employment among Carriage and any of its
Affiliates, a change in any co-employment relationship, nor a mere change in job title or reporting
structure constitutes &#147;Good Reason.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.17 </B>&#147;<B>Grant Date</B>&#148; means the date an Award is determined to be effective by the Committee upon
the grant of such Award.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.18 </B>&#147;<B>Inability to Perform</B>&#148; means and shall be deemed to have occurred if the Participant has
been determined under the Company&#146;s or any co-employer&#146;s long-term disability plan to be eligible
for long-term disability benefits. In the absence of the Participant&#146;s participation in,
application for benefits under, or existence of such a plan, &#147;Inability to Perform&#148; means a finding
by the Committee in its sole judgment that the Participant is, despite any reasonable accommodation
required by law, unable to perform the essential functions of his position because of an illness or
injury for (a)&nbsp;60% or more of the normal working days during six consecutive calendar months or (b)
40% or more of the normal working days during twelve consecutive calendar months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.19 </B>&#147;<B>Incentive Stock Option</B>&#148; means an Option that is intended to meet the requirements of
Section 422(b) of the Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.20 </B>&#147;<B>Independent Director</B>&#148; means a member of the Board who: (a)&nbsp;meets the independence
requirements of the New York Stock Exchange (or such other exchange or quotation system upon which
the shares of Common Stock are listed or quoted), (b)&nbsp;from and after the date on which the
remuneration paid pursuant to the Plan becomes subject to the deduction limitation under Section
162(m) of the Code, qualifies as an &#147;outside director&#148; under Section 162(m) of the Code, (c)
qualifies as a &#147;non-employee director&#148; of Carriage under Rule&nbsp;16b-3, and (d)&nbsp;satisfies independence
criteria under any other applicable laws or regulations relating to the issuance of shares of
Common Stock to Employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.21 </B>&#147;<B>NASDAQ</B>&#148; means The NASDAQ Stock Market, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.22 </B>&#147;<B>Nonqualified Stock Option</B>&#148; means an Option that is not an Incentive Stock Option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.23 </B>&#147;<B>Option</B>&#148; means an option to purchase shares of Common Stock granted to a Participant
pursuant to Article&nbsp;VII. An Option may be either an Incentive Stock Option or a Nonqualified Stock
Option, as determined by the Committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.24 </B>&#147;<B>Other Incentive Award</B>&#148; means an incentive award granted to a Participant pursuant to
Article&nbsp;XI.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.25 </B>&#147;<B>Outside Director</B>&#148; means a member of the Board who is either: (a)&nbsp;an Independent
Director, or (b)&nbsp;another member of the Board who may be an Employee but who is not an executive
officer of Carriage.
</DIV>

<P align="center" style="font-size: 10pt">A-3
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.26 </B>&#147;<B>Participant</B>&#148; means an Employee or Outside Director who has been granted an Award;
provided, however, that no Award that may be settled in Common Stock may be issued to a Participant
that is not a natural person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.27 </B>&#147;<B>Performance Award</B>&#148; means an Award granted to a Participant pursuant to Article&nbsp;X to
receive cash or Common Stock conditioned in whole or in part upon the satisfaction of specified
performance criteria.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.28 </B>&#147;<B>Permitted Transferee</B>&#148; shall have the meaning given such term in Section&nbsp;14.4.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.29 </B>&#147;<B>Plan</B>&#148; means the Carriage Services Inc. 2006 Long-Term Incentive Plan, as in effect from
time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.30 </B>&#147;<B>Restricted Period</B>&#148; means the period established by the Committee with respect to an
Award of Restricted Stock during which the Award remains subject to forfeiture.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.31 </B>&#147;<B>Restricted Stock</B>&#148; means a share of Common Stock granted to a Participant pursuant to
Article&nbsp;IX that is subject to such terms, conditions, and restrictions as may be determined by the
Committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.32 </B>&#147;<B>Rule&nbsp;16b-3</B>&#148; means Rule&nbsp;16b-3 promulgated by the SEC under the Exchange Act, or any
successor rule or regulation that may be in effect from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.33 </B>&#147;<B>SEC</B>&#148; means the United States Securities and Exchange Commission, or any successor agency
or organization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.34 </B>&#147;<B>Securities Act</B>&#148; means the Securities Act of 1933, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.35 </B>&#147;<B>Stock Appreciation Right</B>&#148; or &#147;<B>SAR</B>&#148; means a right granted to a Participant pursuant to
Article&nbsp;VIII with respect to a share of Common Stock to receive upon exercise cash, Common Stock or
a combination of cash and Common Stock, equal to the appreciation in value of a share of Common
Stock.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE III PLAN ADMINISTRATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.1 Plan Administrator and Discretionary Authority. </B>The Plan shall be administered by the
Committee. The Committee shall have total and exclusive responsibility to control, operate, manage
and administer the Plan in accordance with its terms. The Committee shall have all the authority
that may be necessary or helpful to enable it to discharge its responsibilities with respect to the
Plan. Without limiting the generality of the preceding sentence, the Committee shall have the
exclusive right to: (a)&nbsp;interpret the Plan and the Award Agreements executed hereunder; (b)&nbsp;decide
all questions concerning eligibility for, and the amount of, Awards granted under the Plan; (c)
construe any ambiguous provision of the Plan or any Award Agreement; (d)&nbsp;prescribe the form of
Award Agreements; (v)&nbsp;correct any defect, supply any omission or reconcile any inconsistency in the
Plan or any Award Agreement; (e)&nbsp;issue administrative guidelines as an aid to administering the
Plan and make changes in such guidelines as the Committee from time to time deems proper; (f)&nbsp;make
regulations for carrying out the Plan and make changes in such regulations as the Committee from
time to time deems proper; (g)&nbsp;determine whether Awards should be granted singly or in combination;
(h)&nbsp;to the extent permitted under the Plan, grant waivers of Plan terms, conditions, restrictions
and limitations; (i)&nbsp;accelerate the exercise, vesting or payment of an Award when such action or
actions would be in the best interests of the Company; (j)&nbsp;require Participants to hold a stated
number or percentage of shares of Common Stock acquired pursuant to an Award for a stated period;
and (k)&nbsp;take any and all other actions the Committee deems necessary or advisable for the proper
operation or administration of the Plan. The Committee shall have authority in its sole discretion
with respect to all matters related to the discharge of its responsibilities and the exercise of
its authority under the Plan, including without limitation its construction of the terms of the
Plan and its determination of eligibility for participation in, and the terms of Awards granted
under, the Plan. The decisions of the Committee and its actions with respect to the Plan shall be
final, conclusive and binding on all persons having or claiming to have any right or interest in or
under the Plan, including without limitation Participants and their respective Permitted
Transferees, estates, beneficiaries and legal representatives.
</DIV>

<P align="center" style="font-size: 10pt">A-4
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.2 Liability; Indemnification. </B>No member of the Committee, nor any person to whom it has
delegated authority, shall be personally liable for any action, interpretation or determination
made in good faith with respect to the Plan or Awards granted hereunder, and each member of the
Committee (or delegatee of the Committee) shall be fully indemnified and protected by Carriage with
respect to any liability he may incur with respect to any such action, interpretation or
determination, to the maximum extent permitted by applicable law.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IVSHARES SUBJECT TO THE PLAN</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.1 Available Shares</B>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to adjustment as provided in Section&nbsp;4.2, the maximum number of shares of
Common Stock that shall be available for grant of Awards under the Plan shall be 1,350,000
shares of Common Stock.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The maximum number of shares of Common Stock that may be subject to Incentive Stock
Options granted under the Plan is 1,350,000. The maximum number of shares of Common Stock
that may be subject to all Awards granted under the Plan to any one Participant (i)&nbsp;during
the fiscal year of Carriage in which the Participant is first hired by the Company is
100,000 shares and (ii)&nbsp;during each subsequent fiscal year is 100,000 shares. The
limitations provided in this Section&nbsp;4.1(b) shall be subject to adjustment as provided in
Section&nbsp;4.2.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Shares of Common Stock issued pursuant to the Plan may be original issue or
treasury shares or a combination of the foregoing, as the Committee, in its sole discretion,
shall from time to time determine. During the term of this Plan, Carriage will at all times
reserve and keep available such number of shares of Common Stock as shall be sufficient to
satisfy the requirements of the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.2 Adjustments for Recapitalizations and Reorganizations. </B>Subject to Article&nbsp;XII, if there
is any change in the number or kind of shares of Common Stock outstanding (a)&nbsp;by reason of a stock
dividend, spin-off, recapitalization, stock split, or combination or exchange of shares, (b)&nbsp;by
reason of a merger, reorganization, or consolidation, (c)&nbsp;by reason of a reclassification or change
in par value, or (d)&nbsp;by reason of any other extraordinary or unusual event affecting the
outstanding Common Stock as a class without Carriage&#146;s receipt of consideration, or if the value of
outstanding shares of Common Stock is reduced as a result of a spin-off or Carriage&#146;s payment of an
extraordinary cash dividend, or distribution or dividend or distribution consisting of any assets
of Carriage other than cash, the maximum number and kind of shares of Common Stock available for
issuance under the Plan, the maximum number and kind of shares of Common Stock for which any
individual may receive Awards in any fiscal year or under the Plan, the number and kind of shares
of Common Stock covered by outstanding Awards, and the price per share or the applicable market
value or performance target of such Awards may be appropriately adjusted by the Committee to
reflect any increase or decrease in the number of, or change in the kind or value of, issued shares
of Common Stock to preclude, to the extent practicable, the enlargement or dilution of rights under
such Awards; provided, however, that any fractional shares resulting from such adjustment shall be
eliminated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.3 Adjustments for Awards. </B>The Committee shall have sole discretion to determine the manner
in which shares of Common Stock available for grant of Awards under the Plan are counted. Without
limiting the discretion of the Committee under this Section&nbsp;4.3, unless otherwise determined by the
Committee, the following rules shall apply for the purpose of determining the number of shares of
Common Stock available for grant of Awards under the Plan:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <B>Options, Restricted Stock and Stock Awards. </B>The grant of Options, Restricted Stock
or Stock Awards shall reduce the number of shares of Common Stock available for grant of
Awards under the Plan by the number of shares of Common Stock subject to such an Award.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <B>SARs. </B>The grant of SARs that may be paid or settled (i)&nbsp;only in Common Stock or
(ii)&nbsp;in either cash or Common Stock shall reduce the number of shares available for grant of
Awards under the Plan by the number of shares subject to such an Award; provided, however,
that upon the exercise of SARs, the excess of the number of shares of Common Stock with
respect to which the Award is exercised over the
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">number of shares of Common Stock issued upon exercise of the Award shall again be
available for grant of Awards under the Plan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <B>Performance Awards and Other Incentive Awards. </B>The grant of a Performance Award or
Other Incentive Award in the form of Common Stock or that may be paid or settled (i)&nbsp;only in
Common Stock or (ii)&nbsp;in either Common Stock or cash shall reduce the number of shares
available for grant of Awards under the Plan by the number of shares subject to such an
Award; provided, however, that upon settlement of the Award, the excess, if any, of the
number of shares of Common Stock that had been subject to such Award over the number of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares of Common Stock issued upon its settlement shall again be available for grant of
Awards under the Plan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <B>Cancellation, Forfeiture and Termination. </B>If any Award referred to in Sections
4.3(a), (b), or (c) (other than an Award that may be paid or settled only for cash) is
canceled or forfeited, or terminates, expires or lapses, for any reason, the shares then
subject to such Award shall again be available for grant of Awards under the Plan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <B>Payment of Exercise Price and Withholding Taxes. </B>If previously acquired shares of
Common Stock are used to pay the exercise price of an Award, the number of shares available
for grant of Awards under the Plan shall be increased by the number of shares delivered as
payment of such exercise price. If previously acquired shares of Common Stock are used to
pay withholding taxes payable upon exercise, vesting or payment of an Award, or shares of
Common Stock that would be acquired upon exercise, vesting or payment of an Award are
withheld to pay withholding taxes payable upon exercise, vesting or payment of such Award,
the number of shares available for grant of Awards under the Plan shall be increased by the
number of shares delivered or withheld as payment of such withholding taxes.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE V ELIGIBILITY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Committee shall select Participants from those Employees and Outside Directors who, in the
opinion of the Committee, are in a position to make a significant contribution to the success of
the Company. Once a Participant has been selected for an Award by the Committee, the Committee
shall determine the type and size of Award to be granted to the Participant and shall establish in
the related Award Agreement the terms, conditions, restrictions and limitations applicable to the
Award, in addition to those set forth in the Plan and the administrative guidelines and
regulations, if any, established by the Committee.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VI FORM OF AWARDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.1 Form of Awards. </B>Awards may be granted under the Plan, in the Committee&#146;s sole discretion,
in the form of Options pursuant to Article&nbsp;VII, SARs pursuant to Article&nbsp;VIII, Restricted Stock
pursuant to Article&nbsp;IX, Performance Awards pursuant to Article&nbsp;X, and Stock Awards and Other
Incentive Awards pursuant to Article&nbsp;XI, or a combination thereof. All Awards shall be subject to
the terms, conditions, restrictions and limitations of the Plan. The Committee may, in its sole
discretion, subject any Award to such other terms, conditions, restrictions and/or limitations
(including without limitation the time and conditions of exercise, vesting or payment of an Award
and restrictions on transferability of any shares of Common Stock issued or delivered pursuant to
an Award), provided they are not inconsistent with the terms of the Plan. The Committee may, but
is not required to, subject an Award to such conditions as it determines are necessary or
appropriate to ensure than an Award constitutes &#147;qualified performance based compensation&#148; within
the meaning of Section 162(m) of the Code and the regulations thereunder. Awards under a
particular Article of the Plan need not be uniform, and Awards under more than one Article of the
Plan may be combined in a single Award Agreement. Any combination of Awards may be granted at one
time and on more than one occasion to the same Participant. Subject to compliance with applicable
tax law, an Award Agreement may provide that a Participant may elect to defer receipt of income
attributable to the exercise or vesting of an Award.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.2 No Repricing or Reload Rights. </B>Except for adjustments made pursuant to Section&nbsp;4.2, no
Award may be <B>repriced</B>, replaced, regranted through cancellation or otherwise modified without
stockholder approval, if the effect would be to reduce the exercise price for the shares underlying
such Award. The Committee may not
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">cancel an outstanding Option that is under water for the purpose of granting a replacement
Award of a different type.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.3 Loans. </B>The Committee may, in its sole discretion, approve the extension of a loan by the
Company to a Participant who is an Employee to assist the Participant in paying the exercise price
or purchase price of an Award; provided, however, that no loan shall be permitted if the extension
of such loan would violate any provision of applicable law (including but not limited to Section
402 of the Sarbanes-Oxley Act of 2002). Any loan will be made upon such terms and conditions as
the Committee shall determine.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VII OPTIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.1 General. </B>Awards may be granted in the form of Options that may be Incentive Stock Options
or Nonqualified Stock Options, or a combination of both; provided, however, that Incentive Stock
Options may be granted only to Employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.2 Terms and Conditions of Options. </B>An Option shall be exercisable in whole or in such
installments and at such times as may be determined by the Committee. The price at which a share
of Common Stock may be purchased upon exercise of an Option shall be determined by the Committee,
but such exercise price shall not be less than 100% of the Fair Market Value per share of Common
Stock on the Grant Date unless the Option was granted through the assumption of, or in substitution
for, outstanding awards previously granted to individuals who became Employees as a result of a
merger, consolidation, acquisition, or other corporate transaction involving the Company and
complies with Section&nbsp;409A of the Code. Except as otherwise provided in Section&nbsp;7.3, the term of
each Option shall be as specified by the Committee; provided, however, that no Options shall be
exercisable later than ten years after the Grant Date. Options may be granted with respect to
Restricted Stock or shares of Common Stock that are not Restricted Stock, as determined by the
Committee in its sole discretion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.3 Restrictions Relating to Incentive Stock Options.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Options granted in the form of Incentive Stock Options shall, in addition to being
subject to the terms and conditions of Section&nbsp;7.2, comply with Section 422(b) of the Code.
To the extent the aggregate Fair Market Value (determined as of the times the respective
Incentive Stock Options are granted) of Common 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 exceeds $100,000, such excess Incentive
Stock Options shall be treated as options that do not constitute Incentive Stock Options.
The Committee shall determine, in accordance with the applicable provisions of the Code and
based on information available to it, which of a Participant&#146;s Incentive Stock Options will
not constitute Incentive Stock Options because of such limitation and will notify the
Participant of such determination as soon as practicable after such determination (but
without liability for any failure or delay in providing such notification). The price at
which a share of Common Stock may be purchased upon exercise of an Incentive Stock Option
shall be determined by the Committee, but such exercise price shall not be less than 100% of
the Fair Market Value of a share of Common Stock on the Grant Date. No Incentive Stock
Option shall be granted to an Employee under the Plan if, at the time such Option is
granted, such Employee owns stock possessing more than 10% of the total combined voting
power of all classes of stock of Carriage or an Affiliate, within the meaning of Section
422(b)(6) of the Code, unless (i)&nbsp;on the Grant Date of such Option, the exercise price of
such Option is at least 110% of the Fair Market Value of the Common Stock subject to the
Option and (ii)&nbsp;such Option by its terms is not exercisable after the expiration of five
years from the Grant Date of the Option.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Each Participant awarded an Incentive Stock Option shall notify Carriage in writing
immediately after the date he or she makes a disqualifying disposition of any shares of
Common Stock acquired pursuant to the exercise of such Incentive Stock Option. A
disqualifying disposition is any disposition (including any sale) of such Common Stock
before the later of (i)&nbsp;two years after the Grant Date of the Incentive Stock Option or (ii)
one year after the date of exercise of the Incentive Stock Option.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.4 Exercise of Options.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to the terms and conditions of the Plan, Options shall be exercised by the
delivery of a written notice of exercise to Carriage, setting forth the number of whole
shares of Common Stock with respect to which the Option is to be exercised, accompanied by
full payment for such shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Upon exercise of an Option, the exercise price of the Option shall be payable to
Carriage in full either: (i)&nbsp;in cash or an equivalent acceptable to the Committee, or (ii)
in the sole discretion of the Committee and in accordance with any applicable administrative
guidelines established by the Committee, by tendering one or more previously acquired
nonforfeitable, unrestricted shares of Common Stock that have been held by the Participant
for at least six months having an aggregate Fair Market Value at the time of exercise equal
to the total exercise price, or (iii)&nbsp;in a combination of the forms of payment specified in
clauses (i)&nbsp;and (ii)&nbsp;above.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) During such time as the Common Stock is registered under Section&nbsp;12 of the Exchange
Act, to the extent permissible under applicable law, payment of the exercise price of an
Option may also be made, in the absolute discretion of the Committee<B>, </B>by delivery to
Carriage or its designated agent of an executed irrevocable option exercise form together
with irrevocable instructions to a broker-dealer to sell or margin a sufficient portion of
the shares with respect to which the Option is exercised and deliver the sale or margin loan
proceeds directly to Carriage to pay the exercise price and any required withholding taxes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) As soon as reasonably practicable after receipt of written notification of exercise
of an Option and full payment of the exercise price and any required withholding taxes,
Carriage shall (i)&nbsp;deliver to the Participant, in the Participant&#146;s name or the name of the
Participant&#146;s designee, a stock certificate or certificates in an appropriate aggregate
amount based upon the number of shares of Common Stock purchased under the Option, or (ii)
cause to be issued in the Participant&#146;s name or the name of the Participant&#146;s designee, in
book-entry form, an appropriate number of shares of Common Stock based upon the number of
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares purchased under the Option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.5 Termination of Employment. </B>Each Award Agreement embodying the Award of an Option shall
set forth the extent to which the Participant shall have the right to exercise the Option following
termination of the Participant&#146;s employment with the Company. Such provisions shall be determined
by the Committee in its absolute discretion, need not be uniform among all Options granted under
the Plan and may reflect distinctions based on the reasons for termination of employment. In the
event a Participant&#146;s Award Agreement embodying the award of an Option does not set forth such
termination provisions, the following termination provisions shall apply with respect to such
Award:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <B>Termination Other Than For Cause. </B>If the employment of a Participant shall
terminate for any reason other than Cause, each outstanding Option held by the Participant
may be exercised, to the extent then vested, until the earlier of (i)&nbsp;the expiration of one
year from the date of such termination of employment or (ii)&nbsp;the expiration of the term of
such Option.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <B>Termination for Cause. </B>Notwithstanding paragraph (a)&nbsp;above, if the employment of a
Participant shall terminate for Cause, each outstanding Option held by the Participant may
be exercised, to the extent then vested, until the earlier of (i)&nbsp;the expiration of 30&nbsp;days
from the date of such termination of employment or (ii)&nbsp;the expiration of the terms of such
Option.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Notwithstanding the foregoing, an Option will not be treated as an Incentive Stock Option unless at
all times beginning on the Grant Date and ending on the day three months (one year in the case of a
Participant who is &#147;disabled&#148; within the meaning of Section&nbsp;22(e)(3) of the Code) before the date
of exercise of the Option, the Participant is an employee of Carriage or an Affiliate (or a
corporation or a parent or subsidiary corporation of such corporation issuing or assuming an option
in a transaction to which Section 424(a) of the Code applies).
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VIII STOCK APPRECIATION RIGHTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.1 General. </B>The Committee may grant Awards in the form of SARs in such numbers and at such
times as it shall determine. SARs shall vest and be exercisable in whole or in such installments
and at such times as may be determined by the Committee. The price at which SARs may be exercised
shall be determined by the Committee but shall not be less than 100% of the Fair Market Value per
share of Common Stock on the Grant Date unless the SARs were granted through the assumption of, or
in substitution for, outstanding awards previously granted to individuals who became Employees as a
result of a merger, consolidation, acquisition, or other corporate transaction involving the
Company and comply with Section&nbsp;409A of the Code. The term of each SAR shall be as specified by
the Committee; provided, however, that no SARs shall be exercisable later than ten years after the
Grant Date. At the time of an Award of SARs, the Committee may, in its sole discretion, prescribe
additional terms, conditions, restrictions and limitations applicable to the SARs, including
without limitation rules pertaining to the termination of employment (by reason of death, permanent
and total disability, or otherwise) of a Participant prior to exercise of the SARs, as it
determines are necessary or appropriate, provided they are not inconsistent with the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.2 Exercise of SARs. </B>SARs shall be exercised by the delivery of a written notice of exercise
to Carriage, setting forth the number of whole shares of Common Stock with respect to which the
Award is being exercised. Upon the exercise of SARs, the Participant shall be entitled to receive
an amount equal to the excess of the aggregate Fair Market Value of the shares of Common Stock with
respect to which the Award is exercised (determined as of the date of such exercise) over the
aggregate exercise price of such shares. Such amount shall be payable to the Participant in cash
or in shares of Common Stock, as provided in the Award Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IX RESTRICTED STOCK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.1 General. </B>Awards may be granted in the form of Restricted Stock in such numbers and at
such times as the Committee shall determine. The Committee shall impose such terms, conditions and
restrictions on Restricted Stock as it may deem advisable, including without limitation providing
for vesting upon the achievement of specified performance goals pursuant to a Performance Award and
restrictions under applicable Federal or state securities laws. A Participant shall not be
required to make any payment for Restricted Stock unless required by the Committee pursuant to
Section&nbsp;9.2.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.2 Purchased Restricted Stock. </B>The Committee may in its sole discretion require a
Participant to pay a stipulated purchase price for each share of Restricted Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.3 Restricted Period. </B>At the time an Award of Restricted Stock is granted, the Committee
shall establish a Restricted Period applicable to such Restricted Stock. Each Award of Restricted
Stock may have a different Restricted Period in the sole discretion of the Committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.4 Other Terms and Conditions. </B>Restricted Stock shall constitute issued and outstanding
shares of Common Stock for all corporate purposes. Restricted Stock awarded to a Participant under
the Plan shall be registered in the name of the Participant or, at the option of Carriage, in the
name of a nominee of Carriage, and shall be issued in book-entry form or represented by a stock
certificate. Subject to the terms and conditions of the Award Agreement, a Participant to whom
Restricted Stock has been awarded shall have the right to receive dividends thereon during the
Restricted Period, to vote the Restricted Stock and to enjoy all other stockholder rights with
respect thereto, except that (a)&nbsp;Carriage shall retain custody of any certificates evidencing the
Restricted Stock during the Restricted Period, and (b)&nbsp;the Participant may not sell, transfer,
pledge, exchange, hypothecate or otherwise dispose of the Restricted Stock during the Restricted
Period. A breach of the terms and conditions established by the Committee pursuant to the Award of
the Restricted Stock may result in a forfeiture of the Restricted Stock. At the time of an Award
of Restricted Stock, the Committee may, in its sole discretion, prescribe additional terms,
conditions, restrictions and limitations applicable to the Restricted Stock, including without
limitation rules pertaining to the termination of employment (by reason of death, permanent and
total disability, retirement, cause or otherwise) of a Participant prior to expiration of the
Restricted Period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.5 Miscellaneous. </B>Nothing in this Article shall prohibit the exchange of shares of
Restricted Stock pursuant to a plan of merger or reorganization for stock or other securities of
Carriage or another corporation that is a party to the reorganization, provided that the stock or
securities so received in exchange for shares of Restricted
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Stock shall, except as provided in Article&nbsp;XII, become subject to the restrictions applicable
to such Restricted Stock. Any shares of Common Stock received as a result of a stock split or
stock dividend with respect to shares of Restricted Stock shall also become subject to the
restrictions applicable to such Restricted Stock.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE X PERFORMANCE AWARDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.1 General. </B>Awards may be granted in the form of Performance Awards that may be payable in
the form of cash, shares of Common Stock, or a combination of both, in such amounts and at such
times as the Committee shall determine. Performance Awards shall be conditioned upon the level of
achievement of one or more stated performance goals over a specified performance period that shall
not be shorter than one year. Performance Awards may be combined with other Awards to impose
performance criteria as part of the terms of such other Awards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.2 Terms and Conditions. </B>Each Award Agreement embodying a Performance Award shall set forth
(a)&nbsp;the amount, including a target and maximum amount if applicable, a Participant may earn in the
form of cash or shares of Common Stock or a formula for determining such amount, (b)&nbsp;the
performance criteria and level of achievement versus such criteria that shall determine the amount
payable or number of shares of Common Stock to be granted, issued, retained and/or vested, (c)&nbsp;the
performance period over which performance is to be measured, (d)&nbsp;the timing of any payments to be
made, (e)&nbsp;restrictions on the transferability of the Award, and (f)&nbsp;such other terms and conditions
as the Committee may determine that are not inconsistent with the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.3 Code </B><B>Section 162(m)</B><B> Requirements. </B>From and after the date on which remuneration paid
pursuant to the Plan becomes subject to the deduction limitation of Section 162(m) of the Code, the
Committee shall determine in its sole discretion whether all or any portion of a Performance Award
shall be intended to satisfy the requirements for &#147;performance-based compensation&#148; under Section
162(m) of the Code (the &#147;162(m) Requirements&#148;). The performance criteria for any Performance Award
that is intended to satisfy the 162(m) Requirements shall be established in writing by the
Committee based on one or more performance goals as set forth in Section&nbsp;10.4 not later than 90
days after commencement of the performance period with respect to such Award, provided that the
outcome of the performance in respect of the goals remains substantially uncertain as of such time.
The maximum amount that may be paid in cash pursuant to Performance Awards granted to a
Participant with respect to a Carriage&#146;s fiscal year that are intended to satisfy the 162(m)
Requirements is $1,000,000; provided, however, that such maximum amount with respect to a
Performance Award that provides for a performance period longer than one fiscal year shall be the
foregoing limit multiplied by the number of full fiscal years in the performance period. At the
time of the grant of a Performance Award and to the extent permitted under Code Section 162(m) and
regulations thereunder for a Performance Award intended to satisfy the 162(m) Requirements, the
Committee may provide for the manner in which the performance goals will be measured in light of
specified corporate transactions, extraordinary events, accounting changes and other similar
occurrences.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.4 Performance Goals. </B>The performance measure(s) to be used for purposes of Performance
Awards may be described in terms of objectives that are related to the individual Participant or
objectives that are Company-wide or related to a subsidiary, division, department, region, function
or business unit of the Company in which the Participant is employed, and may consist of one or
more or any combination of the following criteria: (a)&nbsp;earnings or earnings per share (whether on
a pre-tax, after-tax, operational or other basis), (b)&nbsp;return on equity, (c)&nbsp;return on assets or
net assets, (d)&nbsp;return on capital or invested capital and other related financial measures, (e)
cash flow, (f)&nbsp;revenues, (g)&nbsp;income or operating income, (h)&nbsp;expenses or expense levels, (i)&nbsp;one or
more operating ratios, (j)&nbsp;stock price, (k)&nbsp;total stockholder return, (l)&nbsp;market share, (m)
operating profit, (n)&nbsp;profit margin, (o)&nbsp;capital expenditures, (p)&nbsp;net borrowing, debt leverage
levels, credit quality or debt ratings, (q)&nbsp;the accomplishment of mergers, acquisitions,
dispositions, public offerings or similar extraordinary business transactions, (r)&nbsp;net asset value
per share, (s)&nbsp;economic value added, and (t)&nbsp;individual business objectives. The performance goals
based on these performance measures may be made relative to the performance of other business
entities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.5 Certification and Negative Discretion. </B>Prior to the payment of any compensation pursuant
to a Performance Award that is intended to satisfy the 162(m) Requirements, the Committee shall
certify the extent to which the performance goals and other material terms of the Award have been
achieved or satisfied. The Committee in its sole discretion shall have the authority to reduce,
but not to increase, the amount payable and the number of shares to be granted, issued, retained or
vested pursuant to a Performance Award.
</DIV>


<P align="center" style="font-size: 10pt">A-10
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE XI STOCK AWARDS AND OTHER INCENTIVE AWARDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.1 Stock Awards. </B>Stock Awards may be granted to Participants upon such terms and conditions
as the Committee may determine. Shares of Common Stock issued pursuant to Stock Awards may be
issued for cash consideration or for no cash consideration. The Committee shall determine the
number of shares of Common Stock to be issued pursuant to a Stock Award.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.2 Other Incentive Awards. </B>Other Incentive Awards may be granted in such amounts, upon such
terms and at such times as the Committee shall determine. Other Incentive Awards may be granted
based upon, payable in or otherwise related to, in whole or in part, shares of Common Stock if the
Committee, in its sole discretion, determines that such Other Incentive Awards are consistent with
the purposes of the Plan. Each grant of an Other Incentive Award shall be evidenced by an Award
Agreement that shall specify the amount of the Other Incentive Award and the terms, conditions,
restrictions and limitations applicable to such Award. Payment of Other Incentive Awards shall be
made at such times and in such form, which may be cash, shares of Common Stock or other property
(or a combination thereof), as established by the Committee, subject to the terms of the Plan.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE XII CORPORATE CHANGE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.1 Vesting of Awards. </B>Except as provided otherwise below in this Article or in an Award
Agreement at the time an Award is granted, notwithstanding anything to the contrary in this Plan,
if a Participant&#146;s employment with the Company is terminated for any reason other than death, Cause
or Inability to Perform or if a Participant voluntarily terminates employment for Good Reason, in
either case within the one-year period following a Corporate Change of Carriage, any time periods,
conditions or contingencies relating to the exercise or realization of, or lapse of restrictions
under, any Award shall be automatically accelerated or waived so that:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) if no exercise of the Award is required, the Award may be realized in full at the
time of the occurrence of the Participant&#146;s termination of employment; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) if exercise of the Award is required, the Award may be exercised in full commencing
on the date of the Participant&#146;s termination of employment;
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">provided, however, that with respect to an Award that consists of deferred compensation under
Section&nbsp;409A of the Code, in the event of a Corporate Change that does not satisfy the requirements
for a change in the ownership or effective control of Carriage or a change in the ownership of a
substantial portion of the assets of Carriage within the meaning of Section&nbsp;409A of the Code and
Treasury guidance and regulations related to Section&nbsp;409A of the Code, including but not limited to
Notice 2005-1 and such other Treasury guidance or regulations issued after the Effective Date, then
delivery of payment with respect to such Award as provided above shall be delayed until payment may
be made to the Participant without negative tax consequences to the Participant under Section&nbsp;409A
of the Code.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.2 Replacement Awards. </B>In the event all outstanding Awards are replaced in connection with
a Corporate Change by comparable types of awards of at least substantially equivalent value, as
determined by the Committee in its sole discretion, such replacement awards shall provide for
automatic acceleration or waiver as provided in Section&nbsp;12.1 in the event of a Participant&#146;s
involuntary termination of employment with the Company other than for Cause or voluntary
termination of employment for Good Reason, as applicable, within the one-year period following the
Corporate Change of Carriage.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>12.3 Cancellation of Awards. </B>Notwithstanding the foregoing, on or prior to the date of a
Corporate Change, the Committee may take any of the following actions with respect to all
outstanding Awards, without the consent of any Participant: (a)&nbsp;the Committee may require that
Participants surrender their outstanding Options and SARs in exchange for payment by the Company,
in cash, Common Stock, the securities of another company, or a combination thereof, as determined
by the Committee, in an amount equal to the amount, if any, by which the then Fair Market Value of
the shares of Common Stock subject to the Participant&#146;s unexercised Options and SARs exceeds the
exercise price or grant price, and (b)&nbsp;with respect to Participants holding Restricted Stock,
Performance Awards or Other Incentive Awards, the Committee may determine that such Participants
shall receive payment in
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">settlement of such Awards (and dividend rights), in an amount equivalent to the value of such
Awards (and dividend rights) at the time of such settlement.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE XIII AMENDMENT AND TERMINATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>13.1 Plan Amendment and Termination. </B>The Board may at any time suspend, terminate, amend or
modify the Plan, in whole or in part; provided, however, that no amendment or modification of the
Plan shall become effective without the approval of such amendment or modification by the holders
of at least a majority of the shares of Common Stock if (a)&nbsp;such amendment or modification
increases the maximum number of shares subject to the Plan (except as provided in Article&nbsp;IV) or
changes the designation or class of persons eligible to receive Awards under the Plan, or (b)
counsel for Carriage determines that such approval is otherwise required by or necessary to comply
with applicable law or the listing requirements of the New York Stock Exchange or such other
exchange or association on which the Common Stock is then listed or quoted. An amendment to the
Plan shall not require stockholder approval if it curtails rather than expands the scope of the
Plan, nor if it is made to conform the Plan to new statutory or regulatory requirements that arise
after submission of the Plan to stockholders for their approval, such as, without limitation,
changes to Code Section&nbsp;409A, or regulations issued thereunder. Upon termination of the Plan, the
terms and provisions of the Plan shall, notwithstanding such termination, continue to apply to
Awards granted prior to such termination. Except as otherwise provided herein, no suspension,
termination, amendment or modification of the Plan shall adversely affect in any material way any
Award previously granted under the Plan, without the consent of the Participant (or the Permitted
Transferee) holding such Award. Notwithstanding the foregoing, Carriage may amend any Award
Agreement to be exempt from Code Section&nbsp;409A or to comply with the requirements of Code Section
409A or to modify any provision that causes an Award that is intended to be classified as an
&#147;equity instrument&#148; under FAS 123R to be classified as a liability on Carriage&#146;s financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>13.2 Award Amendment and Cancellation. </B>The Committee may amend the terms of any outstanding
Award granted pursuant to the Plan, but except as otherwise provided herein, no such amendment
shall adversely affect in any material way the Participant&#146;s (or a Permitted Transferee&#146;s) rights
under an outstanding Award without the consent of the Participant (or the Permitted Transferee)
holding such Award.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE XIV MISCELLANEOUS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.1 Award Agreements. </B>After the Committee grants an Award under the Plan to a Participant,
Carriage and the Participant shall enter into an Award Agreement setting forth the terms,
conditions, restrictions and limitations applicable to the Award and such other matters as the
Committee may determine to be appropriate. The Committee may permit or require a Participant to
defer receipt of the payment of cash or the delivery of shares of Common Stock that would otherwise
be due to the Participant in connection with any Award. Awards that are not paid currently shall
be recorded as payable on Carriage&#146;s records for the Plan. The terms and provisions of the
respective Award Agreements need not be identical. All Award Agreements shall be subject to the
provisions of the Plan, and in the event of any conflict between an Award Agreement and the Plan,
the terms of the Plan shall govern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>14.2 Listing; Suspension.</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) As long as the Common Stock is listed on a national securities exchange or system
sponsored by a national securities association, the issuance of any shares of Common Stock
pursuant to an Award shall be conditioned upon such shares being listed on such exchange or
system. Carriage shall have no obligation to issue such shares unless and until such shares
are so listed, and the right to exercise any Option or other Award with respect to such
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares shall be suspended until such listing has been effected.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If at any time counsel to Carriage or its Affiliates shall be of the opinion that
any sale or delivery of shares of Common Stock pursuant to an Award is or may in the
circumstances be unlawful or result in the imposition of excise taxes on Carriage or its
Affiliates under the laws of any applicable jurisdiction, Carriage or its Affiliates shall
have no obligation to make such sale or delivery, or to make any application or to effect or
to maintain any qualification or registration under the Securities Act, or otherwise, with
respect to shares of Common Stock or Awards, and the right to exercise any Option or
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">other Award shall be suspended until, in the opinion of such counsel, such sale or
delivery shall be lawful or will not result in the imposition of excise taxes on Carriage or
its Affiliates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Upon termination of any period of suspension under this Section, any Award affected
by such suspension that shall not then have expired or terminated shall be reinstated as to
all shares available before such suspension and as to shares that would otherwise have
become available during the period of such suspension, but no such suspension shall extend
the term of any Award unless otherwise determined by the Committee in its sole discretion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.3 Additional Conditions. </B>Notwithstanding anything in the Plan to the contrary: (a)&nbsp;the
Committee may, if it shall determine it necessary or desirable in its sole discretion, at the time
of grant of any Award or the issuance of any shares of Common Stock pursuant to any Award, require
the recipient of the Award or such shares of Common Stock, as a condition to the receipt thereof,
to deliver to Carriage a written representation of present intention to acquire the Award or such
shares of Common Stock for his own account for investment and not for distribution, (b)&nbsp;the
certificate for shares of Common Stock issued to a Participant may include any legend that the
Committee deems appropriate to reflect any restrictions on transfer, and (c)&nbsp;all certificates for
shares of Common Stock delivered under the Plan shall be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the rules, regulations and other
requirements of the SEC, any stock exchange or association upon which the Common Stock is then
listed or quoted, any applicable federal or state securities law, and any applicable corporate law,
and the Committee may cause a legend or legends to be placed on any such certificates to make
appropriate reference to such restrictions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>14.4 Transferability.</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All Awards granted to a Participant shall be exercisable during his lifetime only
by such Participant, or if applicable, a Permitted Transferee as provided in subsection (c)
of this Section; provided, however, that in the event of a Participant&#146;s legal incapacity,
an Award may be exercised by his guardian or legal representative. When a Participant dies,
the personal representative, beneficiary, or other person entitled to succeed to the rights
of the Participant may acquire the rights under an Award. Any such successor must furnish
proof satisfactory to Carriage of the successor&#146;s entitlement to receive the rights under an
Award under the Participant&#146;s will or under the applicable laws of descent and distribution.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Except as otherwise provided in this Section, no Award shall be subject to
execution, attachment or similar process, and no Award may be sold, transferred, pledged,
exchanged, hypothecated or otherwise disposed of, other than by will or pursuant to the
applicable laws of descent and distribution. Any attempted sale, transfer, pledge,
exchange, hypothecation or other disposition of an Award not specifically permitted by the
Plan or the Award Agreement shall be null and void and without effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If provided in the Award Agreement, Nonqualified Stock Options may be transferred
by a Participant to a Permitted Transferee. For purposes of the Plan, &#147;Permitted
Transferee&#148; means (i)&nbsp;a member of a Participant&#146;s immediate family, (ii)&nbsp;any person sharing
the Participant&#146;s household (other than a tenant or employee of the Participant), (iii)
trusts in which a person listed in (i)&nbsp;or (ii)&nbsp;above has more than 50% of the beneficial
interest, (iv)&nbsp;a foundation in which the Participant or a person listed in (i)&nbsp;or (ii)&nbsp;above
controls the management of assets, (v)&nbsp;any other entity in which the Participant or a person
listed in (i)&nbsp;or (ii)&nbsp;above owns more than 50% of the voting interests, provided that in the
case of the preceding clauses (i)&nbsp;through (v), no consideration is provided for the
transfer, and (vi)&nbsp;any transferee permitted under applicable securities and tax laws as
determined by counsel to Carriage. In determining whether a person is a &#147;Permitted
Transferee,&#148; immediate family members shall include a Participant&#146;s child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
including adoptive relationships.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Incident to a Participant&#146;s divorce, the Participant may request that Carriage
agree to observe the terms of a domestic relations order which may or may not be part of a
qualified domestic relations order (as defined in Code Section&nbsp;414(p)) with respect to all
or a part of one or more Awards made to the Participant under the Plan. Carriage&#146;s decision
regarding such a request shall be made by the
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Committee, in its sole and absolute discretion, based upon the best interests of
Carriage. The Committee&#146;s decision need not be uniform among Participants. As a condition
of participation, a Participant agrees to hold Carriage harmless from any claim that may
arise out of Carriage&#146;s observance of the terms of any such domestic relations order.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.5 Withholding Taxes. </B>The Company shall be entitled to deduct from any payment made under
the Plan, regardless of the form of such payment, the amount of all applicable income and
employment taxes required by law to be withheld with respect to such payment, may require the
Participant to pay to the Company such withholding taxes prior to and as a condition of the making
of any payment or the issuance or delivery of any shares of Common Stock under the Plan, and shall
be entitled to deduct from any other compensation payable to the Participant any withholding
obligations with respect to Awards. In accordance with any applicable administrative guidelines it
establishes, the Committee may allow a Participant to pay the amount of taxes required by law to be
withheld from or with respect to an Award by (i)&nbsp;withholding shares of Common Stock from any
payment of Common Stock due as a result of such Award, or (ii)&nbsp;permitting the Participant to
deliver to the Company previously acquired shares of Common Stock, in each case having an aggregate
Fair Market Value equal to the amount of such required withholding taxes. No payment shall be made
and no shares of Common Stock shall be issued pursuant to any Award unless and until the applicable
tax withholding obligations have been satisfied.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.6 No Fractional Shares. </B>No fractional shares of Common Stock shall be issued or delivered
pursuant to the Plan or any Award granted hereunder, provided that the Committee in its sole
discretion may round fractional shares down to the nearest whole share or settle fractional shares
in cash.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.7 Notices. </B>All notices required or permitted to be given or made under the Plan or
pursuant to any Award Agreement (unless provided otherwise in such Award Agreement) shall be in
writing and shall be deemed to have been duly given or made if (a)&nbsp;delivered personally, (b)
transmitted by first class registered or certified United States mail, postage prepaid, return
receipt requested, (c)&nbsp;sent by prepaid overnight courier service, or (d)&nbsp;sent by telecopy or
facsimile transmission, with confirmation receipt, to the person who is to receive it at the
address that such person has theretofore specified by written notice delivered in accordance
herewith. Such notices shall be effective (a)&nbsp;if delivered personally or sent by courier service,
upon actual receipt by the intended recipient, (b)&nbsp;if mailed, upon the earlier of five days after
deposit in the mail or the date of delivery as shown by the return receipt therefor, or (c)&nbsp;if sent
by telecopy or facsimile transmission, when the answer back is received. Carriage or a Participant
may change, at any time and from time to time, by written notice to the other, the address that it
or such Participant had theretofore specified for receiving notices. Until such address is changed
in accordance herewith, notices hereunder or under an Award Agreement shall be delivered or sent
(a)&nbsp;to a Participant at his address as set forth in the records of the Company or (b)&nbsp;to Carriage
at the principal executive offices of Carriage clearly marked &#147;Attention: Chief Financial
Officer.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.8 Compliance with Law and Stock Exchange or Association Requirements. </B>In addition, it is
the intent of Carriage that Options designated Incentive Stock Options comply with the applicable
provisions of Section&nbsp;422 of the Code, and that Awards intended to constitute &#147;qualified
performance-based awards&#148; comply with the applicable provisions of Section 162(m) of the Code and
that any deferral of the receipt of the payment of cash or the delivery of shares of Common Stock
that the Committee may permit or require, and all Awards either be exempt from Code section 409A
or, if not exempt, comply with the requirements of Section&nbsp;409A of the Code. To the extent that any
legal requirement of Section&nbsp;16 of the Exchange Act or Sections&nbsp;422, 162(m) or 409A of the Code as
set forth in the Plan ceases to be required under Section&nbsp;16 of the Exchange Act or Sections&nbsp;422,
162(m) or 409A of the Code, that Plan provision shall cease to apply. Any provision of this Plan
to the contrary notwithstanding, the Committee may revoke any Award if it is contrary to law,
governmental regulation, or stock exchange or association requirements or modify an Award to bring
it into compliance with any government regulation or stock exchange or association requirements.
The Committee may agree to limit its authority under this Section.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.9 California Blue Sky Laws. </B>Prior to the effective registration of the Common Stock under
Section&nbsp;12 of the Exchange Act, (a)&nbsp;Carriage shall deliver a balance sheet and an income statement
at least annually to each Participant who performs services in the State of California, unless such
Participant is a key employee whose duties in connection with the Company assure such Participant
access to equivalent information, (b)&nbsp;the Committee may not impose upon any Award grant made to a
Participant who performs services in the State of California a vesting schedule that is more
restrictive than 20&nbsp;percent per year vesting, with the initial vesting to occur not later
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">than one year after the Award&#146;s grant date; provided, however, that such vesting limitation
shall not be applicable to any Award grants made to individuals who are officers of Carriage, and
(c)&nbsp;with respect to California Participants (including any individual whose Award is based in whole
or in part on services performed in California), the Plan shall otherwise be administered in
accordance with California Corporations Code Section 25102(o) and California Code of Regulations,
Title 10, Sections&nbsp;260.140.41, 260.140.42, 260.140.45, and 260.140.46.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.10 Binding Effect. </B>The obligations of Carriage under the Plan shall be binding upon any
successor corporation or organization resulting from the merger, consolidation or other
reorganization of Carriage, or upon any successor corporation or organization succeeding to all or
substantially all of the assets and business of Carriage. The terms and conditions of the Plan
shall be binding upon each Participant and his Permitted Transferees, heirs, legatees, distributees
and legal representatives.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.11 Severability. </B>If any provision of the Plan or any Award Agreement is held to be illegal
or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions
of the Plan or such agreement, as the case may be, but such provision shall be fully severable and
the Plan or such agreement, as the case may be, shall be construed and enforced as if the illegal
or invalid provision had never been included herein or therein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.12 No Restriction of Corporate Action. </B>Nothing contained in the Plan shall be construed to
prevent Carriage or any Affiliate from taking any corporate action (including any corporate action
to suspend, terminate, amend or modify the Plan) that is deemed by Carriage or such Affiliate to be
appropriate or in its best interest, whether or not such action would have an adverse effect on the
Plan or any Awards made or to be made under the Plan. No Participant or other person shall have
any claim against Carriage or any Affiliate as a result of such action.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.13 Governing Law. </B>The Plan shall be governed by and construed in accordance with the
internal laws (and not the principles relating to conflicts of laws) of the State of Texas except
as superseded by applicable federal law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.14 No Right, Title or Interest in Company Assets. </B>No Participant shall have any rights as
a stockholder of Carriage as a result of participation in the Plan until the date of issuance of
Common Stock in his name and, in the case of Restricted Stock, unless and until such rights are
granted to the Participant pursuant to the Plan. To the extent any person acquires a right to
receive payments from the Company under the Plan, such rights shall be no greater than the rights
of an unsecured general creditor of the Company, and such person shall not have any rights in or
against any specific assets of the Company. All Awards shall be unfunded.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.15 Risk of Participation. </B>Nothing contained in the Plan shall be construed either as a
guarantee by Carriage or the Affiliates, or their respective stockholders, directors, officers or
employees, of the value of any assets of the Plan or as an agreement by Carriage or the Affiliates,
or their respective stockholders, directors, officers or employees, to indemnify anyone for any
losses, damages, costs or expenses resulting from participation in the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.16 No Guarantee of Tax Consequences. </B>No person connected with the Plan in any capacity,
including without limitation Carriage and the Affiliates and their respective directors, officers,
agents and employees, makes any representation, commitment or guarantee that any tax treatment,
including without limitation federal, state and local income, estate and gift tax treatment, will
be applicable with respect to any Awards or payments thereunder made to or for the benefit of a
Participant under the Plan or that such tax treatment will apply to or be available to a
Participant on account of participation in the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.17 Continued Employment. </B>Nothing contained in the Plan or in any Award Agreement shall
confer upon any Participant the right to continue in the employ of the Company, or interfere in any
way with the rights of the Company to terminate a Participant&#146;s employment at any time, with or
without cause. The loss of existing or potential profit in Awards will not constitute an element
of damages in the event of termination of employment for any reason, even if the termination is in
violation of an obligation of Carriage or an Affiliate to the Participant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>14.18 Miscellaneous. </B>Headings are given to the articles and sections of the Plan solely as a
convenience to facilitate reference. Such headings shall not be deemed in any way material or
relevant to the construction of the Plan or any provisions hereof. The use of the masculine gender
shall also include within its meaning the feminine.
</DIV>

<P align="center" style="font-size: 10pt">A - 15
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Wherever the context of the Plan dictates, the use of the singular shall also include within
its meaning the plural, and vice versa.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, this Plan has been executed on March&nbsp;7, 2006 and shall become effective
for all purposes as of the Effective Date.
</DIV>
<DIV align="left">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="90%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="46%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">CARRIAGE SERVICES INC.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Melvin C. Payne</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">MELVIN C. PAYNE, Chairman and<BR>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Chief Executive Officer</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">A - 16
</DIV>


<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: Helvetica,Arial,sans-serif">


<DIV align="center" style="font-size: 10pt; margin-top: 225pt">
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="50%"></TD>
    <TD width="2%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD align="right" valign="bottom">0&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="right" valign="top" style="border-bottom: 14px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>CARRIAGE SERVICES, INC.     </B></DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Proxy Solicited on Behalf of the Board of Directors of<br>
the Company for the Annual Meeting of Stockholders on May&nbsp;25, 2006</B>
</DIV>



<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&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 25, 2006 and at any adjournment(s) thereof, on all matters coming before said meeting.
</DIV>


<DIV align="justify" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

<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>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>(Continued and to be signed on the reverse side.)</B>
</DIV><br><br><br>







<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%"></TD>
    <TD width="96%"></TD>
    <TD width="2%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top" style="border-bottom: 14px solid #000000">&nbsp;</TD>
    <TD align="right" valign="bottom">14475&nbsp;&nbsp;&nbsp;&nbsp;</TD>
    <TD align="left" valign="top" style="border-bottom: 14px solid #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<P align="center" style="font-size: 10pt">&nbsp;
</DIV>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: Helvetica,Arial,sans-serif">



<DIV align="center" style="font-size: 12pt; margin-top: 18pt"><B>ANNUAL MEETING OF STOCKHOLDERS OF</B>
</DIV>


<DIV align="center" style="font-size: 24pt; margin-top: 18pt"><B>CARRIAGE SERVICES, INC.</B>
</DIV>



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="6%"></TD>
    <TD width="15%"></TD>
    <TD width="16%"></TD>
    <TD width="5%"></TD>
    <TD width="16%"></TD>
    <TD width="5%"></TD>
    <TD width="16%"></TD>
    <TD width="5%"></TD>
    <TD width="16%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top" nowrap style="font-size: 12pt">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>May&nbsp;25, 2006</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 38pt">
   Please date, sign and mail <BR>your proxy card in the <BR>envelope provided as soon <BR>as possible.
</DIV>


<DIV align="center" style="font-size: 8pt; margin-top: 28pt"><FONT face="Wingdings">&#234;</FONT>&nbsp;&nbsp;
Please detach along perforated line and mail in the envelope provided.
&nbsp;&nbsp; <FONT face="Wingdings">&#234;</FONT>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: 6pt; margin-left: 0pt"><FONT face="Wingdings" style="font-size: 15pt">&#110;</FONT>
</DIV>


<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 1pt">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="17%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="8%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="middle" style="font-size: 7pt">
    <TD valign="middle" align="center" colspan="21" style="border-right: 2px solid #000000; border-left: 2px solid #000000; border-bottom: 2px solid #000000; border-top: 1px solid #000000"><DIV style="margin-left:0px; text-indent:-0px">
<BR><B>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE &#147;FOR&#148; THE ELECTION OF THE 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
<FONT face="Wingdings">&#253;</FONT></B>
<BR></DIV></TD>
</TR>


<TR style="font-size: 3pt"><TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>

<TD style="border-right: 1px solid #000000">&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>
<TD>&nbsp;</TD>

<TD>&nbsp;</TD>

</TR>


<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;1.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" rowspan="2" colspan="7">
<DIV align="justify">ELECTION OF TWO CLASS I DIRECTORS for a three-year term ending
at the 2009 Annual Meeting of Stockholders.
</DIV></TD>

    <TD  style="border-right: 1px solid #000000" >&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="font-size: 8pt">FOR
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="font-size: 8pt">AGAINST
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="font-size: 8pt">ABSTAIN</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" align="left">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD  style="border-right: 1px solid #000000" >&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD align="left" valign="top" colspan="2" rowspan="4"><DIV align="Justify">
Approve the 2006 Long-Term Incentive Plan.

</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings" style="font-size: 16pt">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings" style="font-size: 16pt">&#111;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT face="Wingdings" style="font-size: 16pt">&#111;</FONT></TD>
</TR>
<TR valign="bottom" style="font size: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="middle" rowspan="3"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;<FONT face="Wingdings" style="font-size: 18pt">&#111;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" colspan="3" style="font-size: 8pt"><B>NOMINEE:</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD style="border-right: 1px solid #000000" align="left" valign="top">&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 8pt">
    <TD>&nbsp;</TD>
    <TD valign="top" align="left" rowspan="2" nowrap><B>FOR ALL NOMINEES</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="Wingdings">&#161;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Melvin C. Payne
</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top" nowrap style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>




    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="font-size: 8pt">
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><FONT face="Wingdings">&#161;</FONT></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Joe R. Davis
</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font-size: 8pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;<FONT face="Wingdings" style="font-size: 18pt">&#111;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap><b>WITHHOLD AUTHORITY<BR>FOR ALL NOMINEES</B><BR><BR>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;
</TD>

    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD align="left" valign="top" colspan="2" rowspan="3"><DIV align="Justify">
Ratify the selection of KPMG LLP as the independent accounting firm for 2006.</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" rowspan="2"><FONT face="Wingdings" style="font-size: 16pt">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" rowspan="2"><FONT face="Wingdings" style="font-size: 16pt">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" rowspan="2"><FONT face="Wingdings" style="font-size: 16pt">&#111;</FONT></TD>
</TR>



<TR valign="bottom" style="font-size: 8pt">
    <TD>&nbsp;&nbsp;&nbsp;<FONT face="Wingdings" style="font-size: 18pt">&#111;</FONT></TD>
    <TD>&nbsp;</TD>

    <TD align="left" valign="top"><B>FOR ALL EXCEPT</B><BR>(See instructions below)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;
</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>

    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;
</TD>

    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD align="left" valign="top" colspan="8"><DIV align="Justify">
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.

</DIV>
</TD>
</TR>


<TR valign="bottom" style="font size: 6px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;</TD>

    <TD nowrap align="right" valign="top" colspan="11">&nbsp;</TD>
</TR>

<TR valign="bottom" style="font size: 20pt">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;
</DIV></TD>

    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" valign="top" align="left"><DIV align="justify">&nbsp;</DIV></TD>

</TR>

<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top" colspan="11">&nbsp;</TD>
</TR>
<TR valign="bottom">
<TD colspan="9" valign="bottom" align="left" style="border-right: 0px solid #000000; border-bottom: 2px solid #000000"><DIV style="border-bottom: 0px solid #000000; border-right: 0px solid #000000; margin-left: 78px; text-indent: -78px" align="justify"><B><U>INSTRUCTION:</U></B> To withhold authority to vote for any individual nominee(s),
mark <B>&#147;FOR ALL EXCEPT&#148;</B> and fill in the circle next to
each nominee you wish to
withhold, as shown here: <FONT face="Webdings" size="2">&#61;</FONT></DIV></TD>
    <TD style="border-right: 1px solid #000000; border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" valign="top" align="left">&nbsp;</TD>
</TR>

<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;</TD>
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<TD colspan="9" valign="top" align="left" style="border-right: 1px solid #000000">&nbsp;</TD>

    <TD>&nbsp;</TD>
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</TR>

<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;</TD>


    <TD colspan="11" nowrap valign="top" align="center">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" colspan="7" style="border-right: 0px solid #000000; border-top: 2px solid #000000; border-bottom: 2px solid #000000"><DIV align="justify">
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.<BR>&nbsp;</DIV></TD>
    <TD style="border-right: 0px solid #000000; border-top: 2px solid #000000; border-bottom: 2px solid #000000">&nbsp;</TD>

<TD align="center" valign="middle" style="border-top: 2px solid #000000; border-top: 2px solid #000000; border-bottom: 2px solid #000000"><FONT face="Wingdings" style="font-size: 16pt">&#111;</FONT></TD>

<TD align="center" valign="middle" style="border-right: 1px solid #000000; border-top: 2px solid #000000; border-bottom: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
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<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 1pt">
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    <TD width="4%">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="1">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD nowrap><DIV style="margin-left:0px; text-indent:-0px">Signature
of Stockholder&nbsp;
</DIV></TD>

<TD align="left" valign="top" colspan="3" style="font-size: 12pt"><DIV style="border-top: 1px solid #000000; border-left: 1px solid #000000; border-right: 1px solid #000000; border-bottom: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD align="left">&nbsp;Date:&nbsp;
</TD>

<TD align="left" valign="top" colspan="2" style="font-size: 12pt"><DIV style="border-top: 1px solid #000000; border-left: 1px solid #000000; border-right: 1px solid #000000; border-bottom: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD align="left" nowrap colspan="3">&nbsp;Signature
of Stockholder&nbsp;
</TD>
    <TD align="left" valign="top" colspan="2" style="font-size: 12pt"><DIV style="border: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD align="left">&nbsp;Date:&nbsp;
</TD>

<TD align="left" valign="top" colspan="2" style="font-size: 12pt"><DIV style="border-top: 1px solid #000000; border-left: 1px solid #000000; border-right: 1px solid #000000; border-bottom: 1px solid #000000">&nbsp;</DIV></TD>
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<DIV align="left">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt; background: transparent; color: #000000">
<TR>
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</TR>
<TR valign="top">
    <TD nowrap align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Note:</B></TD>
    <TD>&nbsp;</TD>
    <TD>
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.
</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 12pt; margin-top: -13pt"><FONT face="Wingdings" style="font-size: 15pt">&#110;</FONT>
</DIV>

<DIV align="right" style="font-size: 12pt; margin-top: -13pt"><FONT face="Wingdings" style="font-size: 15pt">&#110;</FONT>
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