SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended January 31, 1997
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission File Number: 0-19508
STEWART ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
LOUISIANA 72-0693290
(State or other jurisdiction (I.R.S. Employer Identification No.)
ofincorporation or organization)
110 Veterans Memorial Boulevard
Metairie, Louisiana 70005
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (504) 837-5880
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes /X/ No
The number of shares of the Registrant's Class A Common Stock, no par
value per share, and Class B Common Stock, no par value per share,
outstanding as of March 12, 1997 was 40,421,126 and 1,777,510,
respectively.
<PAGE>
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
INDEX
Part I. Financial Information Page
Item 1. Financial Statements:
Consolidated Statements of Earnings -
Three Months Ended January 31, 1997 and 1996 3
Consolidated Balance Sheets -
January 31, 1997 and October 31, 1996 4
Consolidated Statements of Cash Flows -
Three Months Ended January 31, 1997 and 1996 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12
Part II. Other Information
Item 1. Legal Proceedings 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
<PAGE>
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended January 31,
_______________________________
1997 1996
_____ _____
Revenues:
Funeral $ 68,906 $ 53,087
Cemetery 53,756 49,670
___________ ____________
122,662 102,757
___________ ____________
Costs and expenses:
Funeral 46,405 36,369
Cemetery 40,387 37,789
___________ ____________
86,792 74,158
___________ ____________
35,870 28,599
Corporate general and administrative expenses 3,855 2,950
___________ ____________
Operating earnings 32,015 25,649
Interest expense (8,962) (6,204)
Investment and other income 785 551
___________ ____________
Earnings before income taxes 23,838 19,996
Income taxes 8,462 7,498
___________ ____________
Net earnings $ 15,376 $ 12,498
=========== ============
Earnings per common share $ .37 $ .30
=========== ============
Weighted average common shares
outstanding (in thousands) 41,853 41,031
=========== ===========
Dividends per common share $ .02 $ .013
=========== ===========
See accompanying notes to consolidated financial statements.
<PAGE>
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
January 31, October 31,
ASSETS 1997 1996
______________ ___________
Current assets:
Cash and cash equivalent investments $ 22,033 $ 24,580
Marketable securities 1,534 2,514
Receivables, net of allowances 117,382 109,129
Inventories 33,151 31,044
Prepaid expenses 5,624 4,275
______________ ____________
Total current assets 179,724 171,542
Receivables due beyond one year, net of allowances 168,985 159,636
Intangible assets 308,115 301,309
Deferred charges 104,137 101,073
Cemetery property, at cost 314,974 314,377
Property and equipment, at cost:
Land 66,233 63,653
Buildings 197,816 197,553
Equipment and other 93,214 80,626
______________ ____________
357,263 341,832
Less accumulated depreciation 72,947 69,088
______________ ____________
Net property and equipment 284,316 272,744
Long-term investments 49,718 48,407
Other assets 3,758 3,500
______________ ____________
$ 1,413,727 $ 1,372,588
============== ============
(continued)
<PAGE>
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except per share amounts)
January 31, October 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996
_____________ ___________
Current liabilities:
Current maturities of long-term debt $ 11,589 $ 4,240
Accounts payable 10,773 11,889
Accrued payroll 9,374 12,612
Accrued insurance 6,683 8,341
Accrued interest 5,021 4,621
Accrued other 14,226 14,479
Estimated costs to complete mausoleums and
lawn crypts, and to deliver merchandise 2,059 3,552
Income taxes payable 16,459 10,154
Deferred income taxes 3,421 3,594
____________ ____________
Total current liabilities 79,605 73,482
Long-term debt, less current maturities 545,655 515,901
Deferred income taxes 69,878 70,388
Deferred revenue 150,018 149,549
Other long-term liabilities 10,694 15,821
____________ ____________
Total liabilities 855,850 825,141
Commitments and contingencies (Notes 3 and 6)
Preferred stock, $1.00 par value, 5,000,000
shares authorized; no shares issued - -
Shareholders' equity:
Common stock, $1.00 stated value:
Class A authorized 150,000,000 shares;
issued and outstanding 40,272,178 and
40,022,483 shares at January 31, 1997
and October 31, 1996, respectively 40,272 40,022
Class B authorized 5,000,000 shares;
issued and outstanding 1,777,510 shares
at January 31, 1997 and October 31, 1996;
10 votes per share; convertible into an
equal number of Class A shares 1,778 1,778
Additional paid-in capital 306,155 306,706
Retained earnings 229,851 215,314
Cumulative foreign translation adjustment (22,380) (19,058)
Unrealized appreciation of investments 2,201 2,685
____________ ____________
Total shareholders' equity 557,877 547,447
____________ ____________
$ 1,413,727 $1,372,588
============ ============
See accompanying notes to consolidated financial statements.
<PAGE>
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended January 31,
_______________________________
1997 1996
__________ __________
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 15,376 $ 12,498
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,824 4,848
Provision for doubtful accounts 5,847 6,223
Net gains on sales of marketable securities (402) (681)
Provision (benefit) for deferred income taxes (526) 179
Changes in assets and liabilities net of effects
from acquisitions:
Increase in prearranged funeral trust
receivables (5,831) (4,508)
Increase in other receivables (16,834) (11,298)
Increase in deferred charges (4,644) (2,298)
Increase in inventories and cemetery property (1,966) (793)
Decrease in accounts payable and accrued expenses (406) (743)
Decrease in estimated costs to complete mausoleums
and lawn crypts, and to deliver merchandise (4,936) (3,438)
Increase in deferred revenue 481 3,688
Decrease in other (1,452) (444)
______________ ______________
Net cash provided by (used in) operating activities (8,469) 3,233
______________ ______________
Cash flows from investing activities:
Proceeds from sale of marketable securities 2,501 2,916
Purchases of marketable securities and
long-term investments (2,335) (4,478)
Purchases of subsidiaries, net of cash,
seller financing and stock issued (17,268) (13,942)
Additions to property and equipment (8,991) (4,207)
Other 294 162
______________ ______________
Net cash used in investing activities (25,799) (19,549)
______________ ______________
(continued)
</TABLE>
<PAGE>
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended January 31,
______________________________
1997 1996
_____________ ___________
<S> <C> <C>
Cash flows from financing activities:
Proceeds from long-term debt 158,000 24,000
Repayments of long-term debt (123,439) (8,282)
Issuance of common stock 3,884 671
Purchase and retirement of common stock (5,526) -
Dividends (839) (547)
______________ ____________
Net cash provided by financing activities 32,080 15,842
______________ ____________
Effect of exchange rates on cash and cash equivalents (359) (578)
______________ _____________
Net decrease in cash (2,547) (1,052)
Cash and cash equivalents, beginning of period 24,580 18,226
______________ _____________
Cash and cash equivalents, end of period $ 22,033 $ 17,174
============== =============
Supplemental cash flow information:
Cash paid during the period for:
Income taxes $ 11,400 $ 800
Interest $ 8,600 $ 8,400
Noncash investing and financing activity:
Subsidiaries acquired with common stock $ 1,342 $ -
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(1) Basis of Presentation
(a) The Company
Stewart Enterprises, Inc. (the "Company") is the third largest
provider of products and services in the death care industry in North
America. Through its subsidiaries, the Company offers a complete line
of funeral merchandise and services, along with cemetery property,
merchandise and services. For the quarter ended January 31, 1997, the
funeral segment contributed approximately 56% of revenue and 63% of
gross profit, while the cemetery segment contributed approximately 44%
and 37% of revenue and gross profit, respectively.
As of January 31, 1997, the Company owned and operated 310 funeral
homes and 120 cemeteries in 23 states within the United States, and in
Puerto Rico, Mexico, Australia, New Zealand and Canada. The Company
commenced its international operations in Mexico in August 1994, and
entered Australia in December 1994, New Zealand in April 1996 and Canada
in September 1996. For the quarter ended January 31, 1997, foreign
operations contributed approximately 14% of total revenue and, as of
January 31, 1997, represented approximately 19% of total assets.
(b) Principles of Consolidation
The accompanying consolidated financial statements include the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated.
(c) Interim Disclosures
The information as of January 31, 1997, and for the three months
ended January 31, 1997 and 1996, is unaudited, but in the opinion of
management, reflects all adjustments, which are of a normal recurring
nature, necessary for a fair presentation of financial position and
results of operations for the interim periods. The accompanying
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the fiscal year ended October
31, 1996.
The results of operations for the three months ended January 31, 1997
are not necessarily indicative of the results to be expected for the
fiscal year ending October 31, 1997.
(d) Foreign Currency Translation
In accordance with Statement of Financial Accounting Standards No.
52, "Foreign Currency Translation," all assets and liabilities of the
Company's foreign subsidiaries are translated into U.S. dollars at the
exchange rate in effect at the end of the period, and revenues and
expenses are translated at average exchange rates prevailing during the
period. The resulting translation adjustments are reflected in a
separate component of shareholders' equity, except for translation
adjustments arising from the Company's operations in highly inflationary
economies.
<PAGE>
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(1) Basis of Presentation--(Continued)
Based on the three-year cumulative inflation rate in Mexico as of
October 31, 1996, the Company was required to change its method of
reporting foreign currency translation adjustments for its Mexican
operations to the method prescribed for highly inflationary economies
during the first quarter of fiscal year 1997. As a result, foreign
currency translation adjustments for the Company's Mexican operations
are reflected in results of operations, instead of in shareholders'
equity. The effect of this change was not material in the first quarter
of fiscal year 1997, and management does not expect this change to have
a material effect on the Company's results of operations for the full
fiscal year.
(e) Per Share Data
Earnings per common share are computed by dividing net earnings by
the weighted average number of common shares outstanding during each
period. All share and per-share data for fiscal year 1996 have been
adjusted for the Company's three-for-two common stock split effective
June 21, 1996.
(f) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(g) Reclassifications
Certain reclassifications have been made to the 1996 consolidated
financial statements to conform to the presentation used in the 1997
consolidated financial statements. These reclassifications had no
effect on net earnings or shareholders' equity.
(2) Acquisition of Subsidiaries
During the three months ended January 31, 1997, the Company purchased
13 funeral homes and one cemetery, compared to five funeral homes and
four cemeteries purchased during the three months ended January 31,
1996.
These acquisitions have been accounted for by the purchase method,
and their results of operations are included in the accompanying
consolidated financial statements from the dates of acquisition. The
purchase price allocations for certain of these acquisitions are based
on preliminary information.
The following table reflects, on an unaudited pro forma basis, the
combined operations of the Company and the businesses acquired during
the three months ended January 31, 1997, as if such acquisitions had
taken place at the beginning of the respective periods presented.
Appropriate adjustments have been made to reflect the accounting basis
used in recording the acquisitions. These pro forma results have been
prepared for comparative purposes only and do not purport to be
indicative of the results of operations that would have resulted had the
combinations been in effect on the dates indicated, that have resulted
since the dates of acquisition, or that may result in the future.
<PAGE>
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(2) Acquisition of Subsidiaries--(Continued)
Three Months Ended January 31,
_____________________________
1997 1996
__________ ___________
(Unaudited)
Revenues $ 123,718 $ 104,383
========== ===========
Net earnings $ 15,251 $ 12,263
========== ===========
Earnings per common share $ .36 $ .30
========== ===========
Weighted average common shares outstanding
(in thousands) 41,882 41,071
========== ==========
The effect of acquisitions at dates of purchase on the consolidated
financial statements was as follows:
Three Months Ended January 31,
______________________________
1997 1996
__________ __________
(Unaudited)
Current assets $ 959 $ 1,190
Receivables due beyond one year 123 501
Cemetery property 450 13,589
Property and equipment 8,328 4,961
Deferred charges and other assets 226 217
Intangible assets 9,675 6,069
Current liabilities (981) (1,386)
Long-term debt (81) (6,492)
Deferred income taxes (89) (4,358)
Deferred revenue and other liabilities - (349)
___________ __________
18,610 13,942
Common stock used for acquisitions 1,342 -
___________ __________
Cash used for acquisitions $ 17,268 $13,942
=========== ==========
(3) Contingencies
The Company was notified in September 1994 that a suit was brought by
a competitor regarding the Company's acquisition of certain corporations
in Mexico. The suit alleges that this acquisition violated the
competitor's previous option to acquire the same corporations. The suit
seeks unspecified damages. The Company believes that the suit is
without merit and intends to defend it vigorously. The Company believes
it is entitled to indemnification from the previous owners of these
corporations should an unfavorable outcome result.
Management does not believe this matter will have a material adverse
effect on the financial position, net earnings or cash flows of the
Company.
<PAGE>
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in thousands, except per share amounts)
(4) Issuance of Public Debt
In October 1996, the Company filed a shelf registration statement
with the Securities and Exchange Commission covering $300,000 of
unsecured, unsubordinated debt securities. In December 1996, the
Company issued $100,000 of those debt securities in the form of 6.70%
Notes due 2003. Net proceeds were approximately $99,400, of which
$96,800 was used to reduce balances outstanding under the Company's
revolving credit facilities, with the remaining $2,600 used for
acquisitions and general corporate purposes.
(5) Recent Accounting Standards
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation," is required to be implemented during the
Company's fiscal year ending October 31, 1997. The effect of this
pronouncement on the Company's consolidated financial condition is not
expected to be material.
(6) Subsequent Events
Subsequent to January 31, 1997, the Company has acquired or committed
to acquire 22 funeral homes and five cemeteries for approximately
$96,880.
<PAGE>
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
For purposes of the following discussion, funeral homes and
cemeteries owned and operated for the entirety of each period being
compared are referred to as "Existing Operations." Correspondingly,
funeral homes and cemeteries acquired or funeral homes opened during
either period being compared are referred to as "Acquired Operations."
Results of Operations
Three Months Ended January 31, 1997 Compared to Three Months Ended
January 31, 1996
Funeral Segment
<TABLE>
<CAPTION>
Three Months Ended
January 31,
_________________ Increase
1997 1996 (Decrease)
_________ _________ _________
(In millions)
Funeral Revenue
________________
<S> <C> <C> <C>
Existing Operations $ 46.9 $ 45.4 $ 1.5
Acquired Operations 13.4 .5 12.9
Revenue from prearranged funeral trust funds and
escrow accounts 8.6 7.2 1.4
__________ _________ ________
$ 68.9 $ 53.1 $ 15.8
========== ========= ========
Funeral Costs
______________
Existing Operations $ 35.4 $ 36.0 $ (.6)
Acquired Operations 11.0 .4 10.6
__________ __________ __________
$ 46.4 $ 36.4 $ 10.0
========== ========== ==========
Funeral Segment Profit $ 22.5 $ 16.7 $ 5.8
========== ========== ==========
</TABLE>
Funeral revenue increased $15.8 million, or 30%, for the three-month
period ended January 31, 1997, compared to the same period in 1996. The
Company experienced a $1.5 million increase in revenue from Existing
Operations as a result of a 3% increase in the average revenue per
domestic funeral service performed (5% total), due principally to price
increases and improved merchandising. Slightly offsetting this increase
in revenue was a 1% decrease in the number of domestic funeral services
performed by Existing Operations (3% total). The Company believes that
the decline in the number of funeral services performed is attributable
to a decline in the number of deaths in certain of the Company's markets
and competition from low-cost funeral service providers in certain
markets.
The $.6 million, or 2%, decrease in funeral costs for Existing
Operations resulted principally from the implementation of certain cost
control measures, including contract negotiations with certain vendors,
a reduction in professional fees, and the decline in funeral services
discussed above. Existing Operations achieved improved profit margins
resulting primarily from the increased cost controls and the increased
average revenue per funeral service mentioned above.
The increase in revenue and costs from Acquired Operations resulted
primarily from the Company's acquisition or construction of funeral
homes from February 1996 through January 1997 which are not reflected in
the 1996 period presented above.
The $1.4 million increase in revenue from prearranged funeral trust
funds and escrow accounts was attributable to a 30% growth in the
average balance in such trust funds and escrow accounts. This growth
resulted primarily from current year customer payments deposited into
the funds, funds added through acquisitions, and a slight increase in
the return on the Company's domestic funds.
Cemetery Segment
<TABLE>
<CAPTION>
Three Months Ended
January 31,
_________________
1997 1996 Increase
_________ _________ _________
(In millions)
Cemetery Revenue
_________________
<S> <C> <C> <C>
Existing Operations $ 46.9 $ 46.5 $ .4
Acquired Operations 2.7 .6 2.1
Revenue from merchandise trust funds and
escrow accounts 4.2 2.6 1.6
__________ _________ _________
$ 53.8 $ 49.7 $ 4.1
========== ========= =========
Cemetery Costs
Existing Operations $ 37.9 $ 37.4 $ .5
Acquired Operations 2.5 .4 2.1
_________ _________ ________
$ 40.4 $ 37.8 $ 2.6
========= ========= ========
Cemetery Segment Profit $ 13.4 $ 11.9 $ 1.5
========= ========= ========
</TABLE>
Cemetery revenue increased $4.1 million, or 8%, for the three-month
period ended January 31, 1997, compared to the same period in 1996, due
principally to revenue from Acquired Operations. Costs increased during
this same period by $2.6 million, of which $2.1 million was attributable
to Acquired Operations. The slight decline in profit margin experienced
by Existing Operations was the result of a decline in the yield on the
Company's perpetual care trust funds and escrow accounts. The increase
in revenue and costs from Acquired Operations resulted primarily from
the Company's acquisition of cemeteries from February 1996 through
January 1997 which are not reflected in the 1996 period presented above.
The $1.6 million increase in revenue from merchandise trust funds and
escrow accounts was attributable principally to a 22% growth in the
average balance in the merchandise trust funds and escrow accounts.
This growth resulted primarily from current year payments deposited into
the funds, funds added through acquisitions, and an increase in the
return on the funds.
Other
Corporate general and administrative expenses increased $.9 million,
to 3.1% of revenues for the quarter ended January 31, 1997, compared to
2.9% of revenues for the comparable 1996 period. The increase in these
expenses is the result of costs incurred in an undertaking to centralize
and standardize certain financial and administrative functions, along
with activities to support the Company's growth.
Interest expense increased $2.8 million during the first quarter of
fiscal year 1997 when compared to the same period in 1996. The increase
resulted from an increase in average borrowings, which was partially
offset by a decrease in average interest rates from 7.2% to 6.5%.
Approximately $316.6 million of the outstanding borrowings at
January 31, 1997 was subject to short-term variable interest rates
averaging approximately 6.2%.
The Company experienced a decline in its effective tax rate from
37.5% in the first quarter of fiscal year 1996 to 35.5% in the same
period in fiscal year 1997, principally as a result of an increase in
foreign source income which has a lower effective tax rate than that
experienced in the United States.
Liquidity and Capital Resources
Cash and marketable securities of the Company were $23.6 million at
January 31, 1997, a decrease of approximately $3.5 million from October
31, 1996. The Company used cash of $8.5 million in its operations for
the three months ended January 31, 1997, compared to providing cash of
$3.2 million for the corresponding period in 1996, due principally to an
increase in the growth of accounts receivable and deferred charges and a
reduction in the growth of deferred revenue, offset by an increase in
net earnings and other working capital changes.
In October 1996, the Company filed a shelf registration statement
with the Securities and Exchange Commission covering $300 million of
unsecured, unsubordinated debt securities. In December 1996, the
Company issued $100 million of those debt securities in the form of
6.70% Notes due 2003. Net proceeds were approximately $99.4 million, of
which $96.8 million was used to reduce balances outstanding under the
Company's revolving credit facilities, with the remaining $2.6 million
used for acquisitions and general corporate purposes.
Long-term debt at January 31, 1997 amounted to $557.2 million,
compared to $520.1 million at October 31, 1996. The Company's long-term
debt consisted of $316.6 million under the Company's revolving credit
facilities, $225.0 million of long-term notes and $15.6 million of term
notes incurred principally in connection with the acquisition of funeral
home and cemetery properties. All of the Company's debt is
uncollateralized, except for approximately $4.3 million of term notes
incurred principally in connection with acquisitions.
The Company currently is in the process of syndicating a new $600
million revolving credit facility, which will replace its existing $262
million, $88 million and $75 million revolving credit facilities.
The Company's credit agreements, including agreements with the
holders of the Company's senior notes, require it to maintain a debt-to-
equity ratio no higher than 1.25 to 1.0. The Company has managed its
capitalization within that limit, with a ratio of total debt to equity
of 1.00 to 1.0 and .95 to 1.0 as of January 31, 1997 and October 31,
1996, respectively. As of January 31, 1997, the Company had $138.4
million of additional borrowing capacity within this parameter, of which
$116.7 million was available under its revolving credit facilities.
The Company's ratio of earnings to fixed charges was 3.55 for the
quarter ended January 31, 1997, and 3.98, 2.72 (including the $17.3
million non-recurring, non-cash performance-based stock option charge),
5.30, 5.15 and 4.57 for the fiscal years ended October 31, 1996, 1995,
1994, 1993 and 1992, respectively. Excluding the stock option charge,
the Company's ratio of earnings to fixed charges for fiscal year 1995
would have been 3.43. For purposes of computing the ratio of earnings
to fixed charges, earnings consist of pretax earnings plus fixed charges
(excluding interest capitalized during the period). Fixed charges
consist of interest expense, capitalized interest, amortization of debt
expense and discount or premium relating to any indebtedness and the
portion of rental expense that management believes to be representative
of the interest component of rental expense.
During the three months ended January 31, 1997, the Company completed
acquisitions of 13 funeral homes and one cemetery for purchase prices
aggregating approximately $18.3 million, including the issuance of
39,600 shares of Class A Common Stock. The cash portion of the purchase
price of these acquisitions was funded with advances under the Company's
revolving credit facilities.
Subsequent to January 31, 1997, the Company completed the acquisition
of 13 funeral homes for approximately $40.7 million. As of March 12,
1997, the Company also had letters of intent or agreements in principle
to acquire nine funeral homes, including one funeral home in Spain, and
five cemeteries for purchase prices aggregating approximately $56.2
million. If these purchases are consummated, the amounts to be paid
will be satisfied by borrowings under the Company's revolving credit
facilities.
Although the Company has no material commitments for capital
expenditures, the Company contemplates capital expenditures, excluding
acquisitions, of approximately $35.0 million for the fiscal year ending
October 31, 1997, including construction of new funeral homes and
refurbishing of funeral homes recently acquired.
Management expects that future capital requirements will be satisfied
through a combination of internally generated cash flow and amounts
available under its revolving credit facilities. Additional debt and
equity financing will be required in connection with future
acquisitions.
Other
Based on the three-year cumulative inflation rate in Mexico as of
October 31, 1996, the Company was required to change its method of
reporting foreign currency translation adjustments for its Mexican
operations to the method prescribed for highly inflationary economies
during the first quarter of fiscal year 1997. As a result, foreign
currency translation adjustments for the Company's Mexican operations
are reflected in results of operations, instead of in shareholders'
equity. The effect of this change was not material in the first quarter
of fiscal year 1997, and management does not expect this change to have
a material effect on the Company's results of operations for the full
fiscal year.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation," is required to be implemented during the
Company's fiscal year ending October 31, 1997. The effect of this
pronouncement on the Company's consolidated financial condition is not
expected to be material.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There has been no change in the status of the Company's material
legal proceedings during the quarter ended January 31, 1997.
Item 5. Other Information
Forward-Looking Statements
Certain statements made herein or elsewhere by, or on behalf of, the
Company that are not historical facts are intended to be forward-looking
statements within the meaning of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995.
The Company's goals for fiscal year 1997 include: (i) revenue growth
of at least 20%; and (ii) earnings per share growth of 20%. The Company
also expects to complete approximately $150-$200 million in
acquisitions, which is consistent with the $179 million, $154 million
and $178 million achieved in fiscal years 1996, 1995 and 1994,
respectively. For fiscal year 1997, the Company anticipates gross margin
improvement of approximately 20 to 40 basis points over its fiscal year
1996 gross margin.
The Company's strategic plan for the future includes the following
goals: (i) achievement of $1 billion in revenue by fiscal year 2001,
with 80% from domestic operations, including Puerto Rico, and 20% from
foreign operations; and (ii) earnings per share growth of 20% annually.
Forward-looking statements are based on assumptions about future
events and are therefore inherently uncertain; actual results may differ
materially from those projected. See "Cautionary Statements," below.
Cautionary Statements
The Company cautions readers that the following important factors,
among others, in some cases have affected, and in the future could
affect, the Company's actual consolidated results and could cause the
Company's actual consolidated results in the future to differ materially
from the projections made in the forward-looking statements above and in
any other forward-looking statements made by, or on behalf of, the
Company.
(1) Achieving projected revenue growth depends upon sustaining the
level of acquisition activity experienced by the Company in the last
three fiscal years. Higher levels of acquisition activity will increase
anticipated revenues, and lower levels of acquisition activity will
decrease anticipated revenues. The level of acquisition activity
depends not only on the number of properties acquired, but also on the
size of the acquisitions; for example, one large acquisition could
increase substantially the level of acquisition activity and,
consequently, revenues. Several important factors, among others, affect
the Company's ability to consummate acquisitions:
(a)The Company may be unable to find a sufficient number of
businesses for sale at prices the Company is willing to pay.
(b)In most of its existing markets and in many new markets,
including foreign markets, that the Company desires to enter,
the Company competes for acquisitions with two other public
companies that are substantially larger than the Company.
These competitors, and others, may be willing to pay higher
prices for businesses than the Company or may cause the Company
to pay more to acquire a business than the Company would
otherwise have to pay in the absence of such competition.
Thus, the aggressiveness of the Company's competitors in
pricing acquisitions affects the Company's ability to complete
acquisitions at prices it finds attractive.
(c)Achieving the Company's projected acquisition activity depends
on the Company's ability to enter new markets, including
foreign markets. Due in part to the Company's lack of
experience operating in new areas and to the presence of
competitors who have been in certain markets longer than the
Company, such entry may be more difficult or expensive than
anticipated by the Company.
(2) The level of revenues also is affected by the volume and prices
of the properties, products and services sold. The annual sales targets
set by the Company are very aggressive, and the inability of the Company
to achieve planned increases in volume or prices could cause the Company
not to meet anticipated levels of revenue. The ability of the Company
to achieve volume or price increases at any location depends on numerous
factors, including the local economy, the local death rate and
competition.
(3) Another important component of revenue is earnings from the
Company's trust funds and escrow accounts, which are determined by the
size of, and returns (which include dividends, interest and realized
capital gains) on, the funds. The performance of the funds is related
primarily to market conditions that are not within the Company's
control. The size of the funds depends on the level of sales, funds
added through acquisitions and the amount of returns that may be
reinvested.
(4) Future revenue also is affected by the level of prearranged sales
in prior periods. The level of prearranged sales may be adversely
affected by numerous factors, including deterioration in the economy,
which causes individuals to have less discretionary income.
(5) The Company cannot predict whether or when a non-cash charge to
earnings may be required in connection with its performance-based stock
options. See "1995 Incentive Compensation Plan" in Note 11 to the
consolidated financial statements included in the Company's Form 10-K
for the year ended October 31, 1996.
(6) The Company first entered foreign markets in the fourth quarter
of fiscal year 1994 and no assurance can be given that the Company will
continue to be successful in expanding in foreign markets or that any
expansion in foreign markets will yield results comparable to those
realized as a result of the Company's expansion in the United States.
(7) In addition to the factors discussed above, earnings per share
may be affected by other important factors, including the following:
(a)The ability of the Company to achieve projected economies of
scale in markets where it has "clusters" or combined
facilities.
(b)Whether acquired businesses perform at pro forma levels used by
management in the valuation process.
(c)The ability of the Company to manage its growth in terms of
implementing internal controls and information gathering
systems and retaining or attracting key personnel, among other
things.
(d)The amount and rate of growth in the Company's corporate
general and administrative expenses.
(e)Changes in interest rates, which can increase or decrease the
amount the Company pays on borrowings with variable rates of
interest.
(f)The Company's debt-to-equity ratio, the number of shares of
common stock outstanding and the portion of the Company's debt
that has fixed or variable interest rates.
(g)The impact on the Company's financial statements of
nonrecurring accounting charges that may result from the
Company's ongoing evaluation of its business strategies, asset
valuations and organizational structures.
(h)Changes in government regulation, including tax rates and
structures.
(i)Unanticipated outcomes of legal proceedings.
(j)Changes in accounting policies and practices adopted
voluntarily or required to be adopted by generally accepted
accounting principles.
The Company also cautions readers that it assumes no obligation to
update or publicly release any revisions to forward-looking statements
made herein or any other forward-looking statements made by, or on
behalf of, the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended and Restated Articles of Incorporation of the Company,
as amended, (incorporated by reference to Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
January 31, 1996)
3.2 By-laws of the Company, as amended (incorporated by reference to
Exhibit 3.2 to the Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1995)
4.1 See Exhibits 3.1 and 3.2 for provisions of the Company's Amended
and Restated Articles of Incorporation, as amended, and By-laws,
as amended, defining the rights of holders of Class A and Class
B Common Stock
4.2 Specimen of Class A Common Stock certificate (incorporated by
reference to Exhibit 4.2 to Amendment No. 3 to the Company's
Registration Statement on Form S-1 (Registration No. 33-42336)
filed with the Commission on October 7, 1991)
Management Contracts and Compensatory Plans or Arrangements
10.1 Employment Agreement dated January 1, 1997 between the Company
and Brent F. Heffron
10.2 Change of Control Agreement dated January 1, 1997 between the
Company and Brent F. Heffron
10.3 Stock Option Agreement dated January 1, 1997 between the Company
and Brent F. Heffron (time-vest)
10.4 Stock Option Agreement dated January 1, 1997 between the Company
and Brent F. Heffron (performance-based)
10.5 Employment Agreement dated January 1, 1997 between the Company
and Raymond C. Knopke, Jr.
10.6 Change of Control Agreement dated January 1, 1997 between the
Company and Raymond C. Knopke, Jr.
10.7 Stock Option Agreement dated January 1, 1997 between the Company
and Raymond C. Knopke, Jr. (time-vest)
10.8 Stock Option Agreement dated January 1, 1997 between the Company
and Raymond C. Knopke, Jr. (performance-based)
12 Calculation of Ratio of Earnings to Fixed Charges
27 Financial data schedule
(b)Reports on Form 8-K
The Company filed a Form 8-K on December 6, 1996 reporting, under
"Item 5. Other Events," a press release announcing the public
offering of a total of $100 million of 6.70% Notes due 2003.
<PAGE>
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
STEWART ENTERPRISES, INC.
March 17, 1997 /s/ RONALD H. PATRON
_______________________
Ronald H. Patron
Chief Financial Officer
President-Corporate Division
March 17, 1997 /s/ KENNETH C. BUDDE
_________________________
Kenneth C. Budde
Senior Vice President-Finance
Secretary and Treasurer
(Principal Accounting Officer)
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") between Stewart
Enterprises, Inc., a Louisiana corporation (the "Company"),
and Brent F. Heffron (the "Employee") is dated as of January
1, 1997 (the "Agreement Date").
W I T N E S S E T H:
WHEREAS, Employee currently is employed by the Company;
WHEREAS, the Company desires to retain the services of
Employee pursuant to the terms of this Agreement, subject to
Employee's acceptance of the conditions stated herein;
WHEREAS, during the course of his employment with the
Company, Employee has or will have received extensive and
unique knowledge, training and education in, and access to
resources involving, the Death Care Business (as defined
below) at a substantial cost to the Company, which Employee
acknowledges has enhanced or substantially will enhance
Employee's skills and knowledge in such business;
WHEREAS, during the course of his employment with the
Company, Employee has had and will continue to have access
to certain valuable oral and written information, knowledge
and data relating to the business and operations of the
Company and its subsidiaries that is non-public,
confidential or proprietary in nature and is particularly
useful in the Death Care Business; and
WHEREAS, in view of the training provided by the
Company to Employee, its cost to the Company, the need for
the Company to be protected against disclosures by Employee
of the Company's and its subsidiaries' trade secrets and
other non-public, confidential or proprietary information,
the Company and Employee desire, among other things, to
prohibit Employee from disclosing or utilizing, outside the
scope and term of his employment, any non-public,
confidential or proprietary information, knowledge and data
relating to the business and operations of the Company or
its subsidiaries received by Employee during the course of
his employment, and to restrict the ability of Employee to
compete with the Company or its subsidiaries for a limited
period of time.
NOW, THEREFORE, for and in consideration of the
continued employment of Employee by the Company and the
payment of wages, salary and other compensation to Employee
by the Company, the parties hereto agree as follows:
ARTICLE I
EMPLOYMENT CAPACITY AND TERM
1. Capacity and Duties of Employee. The Employee is
employed by the Company to render services on behalf of the
Company as Executive Vice President. As the Executive Vice
President, the Employee shall perform such duties as are
assigned to the individual holding such title by the
Company's Bylaws and such other duties, consistent with the
Employee's job title, as may be prescribed from time to time
by the Board of Directors of the Company (the "Board")
and/or the Company's Chief Executive Officer.
2. Employment Term. The term of this Agreement (the
"Employment Term") shall commence on the Agreement Date and
shall continue through October 31, 2000, subject to any
earlier termination of Employee's status as an employee
pursuant to this Agreement.
3. Devotion to Responsibilities.
During the Employment Term, the Employee shall
devote all of his business time to the business of the
Company, shall use his reasonable best efforts to perform
faithfully and efficiently his duties under this Agreement,
and shall not engage in or be employed by any other
business; provided, however, that nothing contained herein
shall prohibit the Employee from (a) serving as a member of
the board of directors, board of trustees or the like of any
for-profit or non-profit entity that does not compete with
the Company, or performing services of any type for any
civic or community entity, whether or not the Employee
receives compensation therefor, (b) investing his assets in
such form or manner as shall require no more than nominal
services on the part of the Employee in the operation of the
business of the entity in which such investment is made, or
(c) serving in various capacities with, and attending
meetings of, industry or trade groups and associations, as
long as the Employee's engaging in any activities permitted
by virtue of clauses (a), (b) and (c) above does not
materially and unreasonably interfere with the ability of
the Employee to perform the services and discharge the
responsibilities required of him under this Agreement.
Notwithstanding clause (b) above, during the Employment
Term, the Employee may not beneficially own more than 2% of
the equity interests of a business organization required to
file periodic reports with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 (the
"Exchange Act") and may not beneficially own more than 2% of
the equity interests of a business organization that
competes with the Company. For purposes of this paragraph,
"beneficially own" shall have the same meaning ascribed to
that term in Rule 13d-3 under the Exchange Act.
ARTICLE II
COMPENSATION AND BENEFITS
During the Employment Term, the Company shall provide
the Employee with the compensation and benefits described
below:
1. Salary. A salary ("Base Salary") at the rate of
$200,000 per fiscal year of the Company ("Fiscal Year"),
payable to the Employee at such intervals as other salaried
employees of the Company are paid.
2. Bonus. For the period beginning November 1, 1996,
the employee shall be eligible to receive a bonus (the
"Bonus") of up to $150,000 per Fiscal Year. Such Bonus
shall be comprised of two elements, the quantitative element
and the qualitative element:
(a) The quantitative element shall be equal to
75% of the maximum Bonus of $150,000 and shall be based on
the attainment of certain goals to be established by the
Company's Compensation Committee and Employee.
(b) The qualitative element shall be 25% of the
maximum Bonus of $150,000 and shall be awarded at the
discretion of the President. The President and Employee
shall establish incentive goals and other criteria for the
award of the qualitative element.
The Bonus shall be paid in cash no later than 30 days
following the filing of the Company's annual report on Form
10-K for the Fiscal Year in which the Bonus has been earned.
3. Benefits. The Company shall provide the Employee
with the following fringe benefits and perquisites:
(a) An automobile allowance of $720 per month.
The Company will reimburse the Employee for all gasoline,
maintenance, repairs and insurance for Employee's personal
car, as if it were a Company-owned vehicle;
(b) Reimbursement for membership dues, including
assessments and similar charges, in one or more clubs deemed
useful for business purposes in an amount not to exceed
$8,000 or such additional amounts as may be approved by the
President;
(c) First class air travel;
(d) Fully-paid insurance benefit package
available to all employees; and
(e) All other benefit programs similar to those
provided other employees of the Company.
4. 1995 Incentive Compensation Plan. The Employee
shall be eligible to receive awards under the Company's 1995
Incentive Compensation Plan (the "1995 Plan").
5. Expenses. The Employee shall be reimbursed for
reasonable out-of-pocket expenses incurred from time to time
on behalf of the Company or any subsidiary in the
performance of his duties under this Agreement, upon the
presentation of such supporting invoices, documents and
forms as the Company reasonably requests.
ARTICLE III
TERMINATION OF EMPLOYMENT
1. Death. The Employee's status as an employee shall
terminate immediately and automatically upon the Employee's
death during the Employment Term.
2. Disability. The Employee's status as an employee
may be terminated for "Disability" as follows:
(a) The Employee's status as an employee shall
terminate if the Employee has a disability that would
entitle him to receive benefits under the Company's long-
term disability insurance policy in effect at the time
either because he is Totally Disabled or Partially Disabled,
as such terms are defined in the Company's policy in effect
as of the Agreement Date or as similar terms are defined in
any successor policy. Any such termination shall become
effective on the first day on which the Employee is eligible
to receive payments under such policy (or on the first day
that he would be so eligible, if he had applied timely for
such payments).
(b) If the Company has no long-term disability
plan in effect, if (i) the Employee is rendered incapable
because of physical or mental illness of satisfactorily
discharging his duties and responsibilities under this
Agreement for a period of 90 consecutive days and (ii) a
duly qualified physician chosen by the Company and
acceptable to the Employee or his legal representatives so
certifies in writing, the Board shall have the power to
determine that the Employee has become disabled. If the
Board makes such a determination, the Company shall have the
continuing right and option, during the period that such
disability continues, and by notice given in the manner
provided in this Agreement, to terminate the status of
Employee as an employee. Any such termination shall become
effective 30 days after such notice of termination is given,
unless within such 30-day period, the Employee becomes
capable of rendering services of the character contemplated
hereby (and a physician chosen by the Company and acceptable
to the Employee or his legal representatives so certifies in
writing) and the Employee in fact resumes such services.
(c) The "Disability Effective Date" shall mean
the date on which termination of employment becomes
effective due to Disability.
3. Cause. The Company may terminate the Employee's
status as an employee for Cause. As used herein,
termination by the Company of the Employee's status as an
employee for "Cause" shall mean termination as a result of
(a) the Employee's breach of this Agreement, or (b) the
willful engaging by the Employee in gross misconduct
injurious to the Company, which in either case is not
remedied within 10 days after the Company provides written
notice to the Employee of such breach or willful misconduct.
4. Good Reason. The Employee may terminate his
status as an employee for Good Reason. As used herein, the
term "Good Reason" shall mean:
(a) The occurrence of any of the following during
the Employment Term:
(i) the assignment by the Board to the
Employee of any duties or responsibilities that are
inconsistent with the Employee's status, title and position
as Executive Vice President;
(ii) any removal of the Employee from, or any
failure to reappoint or reelect the Employee to, the
position of Executive Vice President of the Company, except
in connection with a termination of Employee's status as an
employee as permitted by this Agreement;
(iii) the Company's requiring the Employee to
be based anywhere other than in the Orlando, Florida
metropolitan area, except for required travel in the
ordinary course of the Company's business;
(b) any breach of this Agreement by the Company
that continues for a period of 10 days after written notice
thereof is given by the Employee to the Company;
(c) the failure by the Company to obtain the
assumption of its obligations under this Agreement by any
successor or assign as contemplated in this Agreement; or
(d) any purported termination by the Company of
the Employee's status as an employee for Cause that is not
effected pursuant to a Notice of Termination satisfying the
requirements of this Agreement.
5. Voluntary Termination by the Company. The Company
may terminate the Employee's status as employee for other
than death, Disability or Cause.
6. Voluntary Termination by the Employee. The
Employee may terminate the Employee's status as employee for
other than Good Reason.
7. Notice of Termination. Any termination by the
Company for Disability or Cause, or by the Employee for Good
Reason, shall be communicated by Notice of Termination to
the other party hereto given in accordance with Article VI
Section 2 of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice
that (a) indicates the specific termination provision in
this Agreement relied upon (b) to the extent applicable,
sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employee's
employment under the provisions so indicated and (c) if the
Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination
date (which date shall be not more than 30 days after the
giving of such notice). The failure by the Employee or the
Company to set forth in the Notice of Termination any fact
or circumstance that contributes to a showing of Good
Reason, Disability or Cause shall not negate the effect of
the notice nor waive any right of the Employee or the
Company, respectively, hereunder or preclude the Employee or
the Company, respectively, from asserting such fact or
circumstance in enforcing the Employee's or the Company's
rights hereunder.
8. Date of Termination. "Date of Termination" means
(a) if Employee's employment is terminated by reason of his
death or Disability, the Date of Termination shall be the
date of death of Employee or the Disability Effective Date,
as the case may be, (b) if Employee's employment is
terminated by the Company for Cause, or by Employee for Good
Reason, the date of delivery of the Notice of Termination or
any later date specified therein, (which date shall not be
more than 30 days after the giving of such notice) as the
case may be, (c) if the Employee's employment is terminated
by the Company for reasons other than death, Disability or
Cause, the Date of Termination shall be the date on which
the Company notifies the Employee of such termination, and
(d) if the Employee's employment is terminated by the
Employee for reasons other than Good Reason, the Date of
Termination shall be the date on which the Employee notifies
the Company of such termination.
ARTICLE IV
OBLIGATIONS UPON TERMINATION
1. Death. If the Employee's status as an employee is
terminated by reason of the Employee's death, this Agreement
shall terminate without further obligations to the
Employee's legal representatives under this Agreement, other
than the obligation to make any payments due pursuant to
employee benefit plans maintained by the Company or its
subsidiaries.
2. Disability. If Employee's status as an employee
is terminated by reason of Employee's Disability, this
Agreement shall terminate without further obligation to the
Employee, other than the obligation to make any payments due
pursuant to employee benefit plans maintained by the Company
or its subsidiaries.
3. Termination by Company for Reasons other than
Death, Disability or Cause; Termination by Employee for Good
Reason. If the Company terminates the Employee's status as
an employee for reasons other than death, Disability or
Cause, or the Employee terminates his employment for Good
Reason, then
(a) the Company shall pay to the Employee an
amount equal to two times the amount of Base Salary in
effect at the Date of Termination, payable in equal
installments over a two-year period at such intervals as
other salaried employees of the Company are paid; and
(b) with respect to all performance-based options
granted to the Employee pursuant to the 1995 Plan,
(i) if the performance goals have been met as
of the Date of Termination, then such options
shall become exercisable as of the Date of
Termination (if not already exercisable) and shall
expire on the date that is the later of:
(A) 30 days after the Date of
Termination or
(B) 30 days after the first date on
which the exercise of the options and sale of
the underlying securities will not (1) be
matched with purchases or sales of the
Company's common stock prior to such Date of
Termination such as to cause the Employee to
incur a liability to the Company under
Section 16 of the Exchange Act and (2)
destroy the Section 16 exemption for the
grant of the options.
(ii) if the performance goals have not been
met as of the Date of Termination, then
(A) if the performance goals are not met
by the close of business on the day that is
180 days after the Date of Termination, then
the options shall expire on such day; and
(B) if the performance goals are met by
the close of business on the day that is 180
days after the Date of Termination, then the
options shall become exercisable as of the
date such performance goals are met (the
"Vesting Date") and shall expire on the date
that is the later of:
(1) 30 days after the Vesting Date
or
(2) 30 days after the first date on
which the exercise of the options and
sale of the underlying securities will
not (I) be matched with purchases or
sales of the Company's common stock
prior to such Date of Termination such
as to cause the Employee to incur a
liability to the Company under Section
16 of the Exchange Act and (II) destroy
the Section 16 exemption for the grant
of the options.
4. Cause. If the Employee's status as an employee is
terminated by the Company for Cause, this Agreement shall
terminate without further obligation to the Employee other
than for obligations imposed by law and obligations imposed
pursuant to any employee benefit plan maintained by the
Company or its subsidiaries.
5. Termination by Employee for Reasons other than
Good Reason. If the Employee's status as an employee is
terminated by the Employee for reasons other than Good
Reason, then the Company shall pay to the Employee an amount
equal to a single year's Base Salary in effect at the Date
of Termination, payable in equal installments over a two-
year period at such intervals as other salaried employees of
the Company are paid.
6. Resignation. If Employee is a director of the
Company and his employment is terminated for any reason
other than death, the Employee shall, if requested by the
Company, immediately resign as a director of the Company.
If such resignation is not received when so requested, the
Employee shall forfeit any right to receive any payments
pursuant to this Agreement.
ARTICLE V
NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS
1. Certain Definitions. For purposes of this
Agreement, the following terms shall have the following
meanings:
(a) "Confidential Information" means any
information, knowledge or data of any nature and in any form
(including information that is electronically transmitted or
stored on any form of magnetic or electronic storage media)
relating to the past, current or prospective business or
operations of the Company and its subsidiaries, that at the
time or times concerned is not generally known to persons
engaged in businesses similar to those conducted or
contemplated by the Company and its subsidiaries (other than
information known by such persons through a violation of an
obligation of confidentiality to the Company), whether
produced by the Company and its subsidiaries or any of their
consultants, agents or independent contractors or by
Employee, and whether or not marked confidential, including
without limitation information relating to the Company's or
its subsidiaries' products and services, business plans,
business acquisitions, processes, product or service
research and development methods or techniques, training
methods and other operational methods or techniques, quality
assurance procedures or standards, operating procedures,
files, plans, specifications, proposals, drawings, charts,
graphs, support data, trade secrets, supplier lists,
supplier information, purchasing methods or practices,
distribution and selling activities, consultants' reports,
marketing and engineering or other technical studies,
maintenance records, employment or personnel data, marketing
data, strategies or techniques, financial reports, budgets,
projections, cost analyses, price lists, formulae and
analyses, employee lists, customer records, customer lists,
customer source lists, proprietary computer software, and
internal notes and memoranda relating to any of the
foregoing.
(b) "Death Care Business" means (i) the owning
and operating of funeral homes and cemeteries, including
combined funeral home and cemetery facilities, (ii) the
offering of a complete range of services and products to
meet families' funeral needs, including prearrangement,
family consultation, the sale of caskets and related funeral
and cemetery products and merchandise, the removal,
preparation and transportation of remains, cremation, the
use of funeral home facilities for visitation and worship,
and related transportation services, (iii) the marketing and
sale of funeral services and cemetery property on an at-need
or prearranged basis, (iv) providing, managing and
administering financing arrangements (including trust funds,
escrow accounts, insurance and installment sales contracts)
for prearranged funeral plans and cemetery property and
merchandise, (v) providing interment services, the sale (on
an at-need or prearranged basis) of cemetery property
including lots, lawn crypts, family and community mausoleums
and related cemetery merchandise such as monuments,
memorials and burial vaults, (vi) the maintenance of
cemetery grounds pursuant to perpetual care contracts and
laws or on a voluntary basis, and (vii) offering mausoleum
design, construction and sales services.
2. Nondisclosure of Confidential Information. During
the Employment Term, Employee shall hold in a fiduciary
capacity for the benefit of the Company all Confidential
Information which shall have been obtained by Employee
during Employee's employment (whether prior to or after the
Agreement Date) and shall use such Confidential Information
solely within the scope of his employment with and for the
exclusive benefit of the Company. For a period of five
years after the Employment Term, commencing with the Date of
Termination, Employee agrees (a) not to communicate, divulge
or make available to any person or entity (other than the
Company) any such Confidential Information, except upon the
prior written authorization of the Company or as may be
required by law or legal process, and (b) to deliver
promptly to the Company any Confidential Information in his
possession, including any duplicates thereof and any notes
or other records Employee has prepared with respect thereto.
In the event that the provisions of any applicable law or
the order of any court would require Employee to disclose or
otherwise make available any Confidential Information,
Employee shall give the Company prompt prior written notice
of such required disclosure and an opportunity to contest
the requirement of such disclosure or apply for a protective
order with respect to such Confidential Information by
appropriate proceedings.
3. Limited Covenant Not to Compete. During the
Employment Term and for a period of two years thereafter,
commencing with the Date of Termination, Employee agrees
that, with respect to each State of the United States or
other jurisdiction, or specified portions thereof, in which
the Employee regularly (a) makes contact with customers of
the Company or any of its subsidiaries, (b) conducts the
business of the Company or any of its subsidiaries or (c)
supervises the activities of other employees of the Company
or any of its subsidiaries, as identified in Appendix "A"
attached hereto and forming a part of this Agreement, and in
which the Company or any of its subsidiaries engages in the
Death Care Business on the Date of Termination
(collectively, the "Subject Areas"), Employee will restrict
his activities within the Subject Areas as follows:
(a) Employee will not, directly or indirectly,
for himself or others, own, manage, operate, control, be
employed in an executive, managerial or supervisory capacity
by, or otherwise engage or participate in or allow his
skill, knowledge, experience or reputation to be used in
connection with, the ownership, management, operation or
control of, any company or other business enterprise engaged
in the Death Care Business within any of the Subject Areas;
provided, however, that nothing contained herein shall
prohibit Employee from making passive investments as long as
Employee does not beneficially own more than 2% of the
equity interests of a business enterprise engaged in the
Death Care Business within any of the Subject Areas. For
purposes of this paragraph, "beneficially own" shall have
the same meaning ascribed to that term in Rule 13d-3 under
the Exchange Act.
(b) Employee will not call upon any customer of
the Company or its subsidiaries for the purpose of
soliciting, diverting or enticing away the business of such
person or entity, or otherwise disrupting any previously
established relationship existing between such person or
entity and the Company or its subsidiaries;
(c) Employee will not solicit, induce, influence
or attempt to influence any supplier, lessor, licensor,
potential acquiree or any other person who has a business
relationship with the Company or its subsidiaries, or who on
the Date of Termination is engaged in discussions or
negotiations to enter into a business relationship with the
Company or its subsidiaries, to discontinue or reduce the
extent of such relationship with the Company or its
subsidiaries; and
(d) Employee will not make contact with any of
the employees of the Company or its subsidiaries with whom
he had contact during the course of his employment with the
Company for the purpose of soliciting such employee for
hire, whether as an employee or independent contractor, or
otherwise disrupting such employee's relationship with the
Company or its subsidiaries.
(e) Employee further agrees that, for a period of
one year from and after the Date of Termination, Employee
will not hire, on behalf of himself or any company engaged
in the Death Care Business with which Employee is
associated, any employee of the Company or its subsidiaries
as an employee or independent contractor, whether or not
such engagement is solicited by Employee; provided, however,
that the restriction contained in this subsection (e) shall
not apply to Company employees who reside in, or are hired
by Employee to perform work in, any of the Subject Areas
located within the States of Virginia, Arkansas or Georgia.
Employee agrees that he will from time to time upon the
Company's request promptly execute any supplement,
amendment, restatement or other modification of Appendix "A"
as may be necessary or appropriate to correctly reflect the
jurisdictions which, at the time of such modification,
should be covered by Appendix "A" and this Article V Section
3. Furthermore, Employee agrees that all references to
Appendix "A" in this Agreement shall be deemed to refer to
Appendix "A" as so supplemented, amended, restated or
otherwise modified from time to time.
4. Injunctive Relief; Other Remedies. Employee
acknowledges that a breach by Employee of Section 2 or 3 of
this Article V would cause immediate and irreparable harm to
the Company for which an adequate monetary remedy does not
exist; hence, Employee agrees that, in the event of a breach
or threatened breach by Employee of the provisions of
Section 2 or 3 of this Article V during or after the
Employment Term, the Company shall be entitled to injunctive
relief restraining Employee from such violation without the
necessity of proof of actual damage or the posting of any
bond, except as required by non-waivable, applicable law.
Nothing herein, however, shall be construed as prohibiting
the Company from pursuing any other remedy at law or in
equity to which the Company may be entitled under applicable
law in the event of a breach or threatened breach of this
Agreement by Employee, including without limitation the
recovery of damages and/or costs and expenses, such as
reasonable attorneys' fees, incurred by the Company as a
result of any such breach. In addition to the exercise of
the foregoing remedies, the Company shall have the right
upon the occurrence of any such breach to cancel any unpaid
salary, bonus, commissions or reimbursements otherwise
outstanding at the Date of Termination. In particular,
Employee acknowledges that the payments provided under
Article IV Sections 3 and 5 are conditioned upon Employee
fulfilling any noncompetition and nondisclosure agreements
contained in this Article V. In the event Employee shall at
any time materially breach any noncompetition or
nondisclosure agreements contained in this Article V, the
Company may suspend or eliminate payments under Article IV
during the period of such breach. Employee acknowledges
that any such suspension or elimination of payments would be
an exercise of the Company's right to suspend or terminate
its performance hereunder upon Employee's breach of this
Agreement; such suspension or elimination of payments would
not constitute, and should not be characterized as, the
imposition of liquidated damages.
5. Requests for Waiver in Cases of Undue Hardship.
In the event that Employee should find any of the
limitations of Article V Section 3 (including without
limitation the geographic restrictions of Appendix "A") to
impose a severe hardship on Employee's ability to secure
other employment, Employee may make a request to the Company
for a waiver of the designated limitations before accepting
employment that otherwise would be a breach of Employee's
promises and obligations under this Agreement. Such request
must be in writing and clearly set forth the name and
address of the organization with that employment is sought
and the location, position and duties that Employee will be
performing. The Company will consider the request and, in
its sole discretion, decide whether and on what conditions
to grant such waiver.
6. Governing Law of this Article V; Consent to
Jurisdiction. Any dispute regarding the reasonableness of
the covenants and agreements set forth in this Article V, or
the territorial scope or duration thereof, or the remedies
available to the Company upon any breach of such covenants
and agreements, shall be governed by and interpreted in
accordance with the laws of the State of the United States
or other jurisdiction in which the alleged prohibited
competing activity or disclosure occurs, and, with respect
to each such dispute, the Company and Employee each hereby
irrevocably consent to the exclusive jurisdiction of the
state and federal courts sitting in the relevant State (or,
in the case of any jurisdiction outside the United States,
the relevant courts of such jurisdiction) for resolution of
such dispute, and agree to be irrevocably bound by any
judgment rendered thereby in connection with such dispute,
and further agree that service of process may be made upon
him or it in any legal proceeding relating to this Article V
and/or Appendix "A" by any means allowed under the laws of
such jurisdiction. Each party irrevocably waives any
objection he or it may have as to the venue of any such
suit, action or proceeding brought in such a court or that
such a court is an inconvenient forum.
7. Employee's Understanding of this Article.
Employee hereby represents to the Company that he has read
and understands, and agrees to be bound by, the terms of
this Article. Employee acknowledges that the geographic
scope and duration of the covenants contained in Article V
Section 3 are the result of arm's-length bargaining and are
fair and reasonable in light of (i) the importance of the
functions performed by Employee and the length of time it
would take the Company to find and train a suitable
replacement, (ii) the nature and wide geographic scope of
the operations of the Company and its subsidiaries, (iii)
Employee's level of control over and contact with the
business and operations of the Company and its subsidiaries
in a significant number of jurisdictions where same are
conducted and (iv) the fact that all facets of the Death
Care Business are conducted by the Company and its
subsidiaries throughout the geographic area where
competition is restricted by this Agreement. It is the
desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permitted under
applicable law, whether now or hereafter in effect and,
therefore, to the extent permitted by applicable law, the
parties hereto waive any provision of applicable law that
would render any provision of this Article V invalid or
unenforceable.
ARTICLE VI
MISCELLANEOUS
1. Binding Effect.
(a) This Agreement shall be binding upon and
inure to the benefit of the Company and any of its
successors or assigns.
(b) This Agreement is personal to the Employee
and shall not be assignable by the Employee without the
consent of the Company (there being no obligation to give
such consent) other than such rights or benefits as are
transferred by will or the laws of descent and distribution.
(c) The Company shall require any successor to or
assignee of (whether direct or indirect, by purchase,
merger, consolidation or otherwise) all or substantially all
of the assets or businesses of the Company (i) to assume
unconditionally and expressly this Agreement and (ii) to
agree to perform all of the obligations under this Agreement
in the same manner and to the same extent as would have been
required of the Company had no assignment or succession
occurred, such assumption to be set forth in a writing
reasonably satisfactory to the Employee. In the event of
any such assignment or succession, the term "Company" as
used in this Agreement shall refer also to such successor or
assign.
2. Notices. All notices hereunder must be in writing
and shall be deemed to have given upon receipt of delivery
by: (a) hand (against a receipt therefor), (b) certified or
registered mail, postage prepaid, return receipt requested,
(c) a nationally recognized overnight courier service
(against a receipt therefor) or (d) telecopy transmission
with confirmation of receipt. All such notices must be
addressed as follows:
If to the Company, to:
Stewart Enterprises, Inc.
110 Veterans Memorial Boulevard
Metairie, Louisiana 70005
Attn: Joseph P. Henican, III
If to the Employee, to:
Brent F. Heffron
1090 13th Avenue, N.W.
Hickory, NC 28601
or such other address as to which any party hereto may have
notified the other in writing.
3. Governing Law. This Agreement shall be construed
and enforced in accordance with and governed by the internal
laws of the State of Louisiana without regard to principles
of conflict of laws, except as expressly provided in Article
V Section 6 above with respect to the resolution of disputes
arising under, or the Company's enforcement of, Article V of
this Agreement.
4. Withholding. The Employee agrees that the Company
has the right to withhold, from the amounts payable pursuant
to this Agreement, all amounts required to be withheld under
applicable income and/or employment tax laws, or as
otherwise stated in documents granting rights that are
affected by this Agreement.
5. Severability. If any term or provision of this
Agreement (including without limitation those contained in
Appendix "A"), or the application thereof to any person or
circumstance, shall at any time or to any extent be invalid,
illegal or unenforceable in any respect as written, Employee
and the Company intend for any court construing this
Agreement to modify or limit such provision temporally,
spatially or otherwise so as to render it valid and
enforceable to the fullest extent allowed by law. Any such
provision that is not susceptible of such reformation shall
be ignored so as to not affect any other term or provision
hereof, and the remainder of this Agreement, or the
application of such term or provision to persons or
circumstances other than those as to which it is held
invalid, illegal or unenforceable, shall not be affected
thereby and each term and provision of this Agreement shall
be valid and enforced to the fullest extent permitted by
law.
6. Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach
thereof.
7. Remedies Not Exclusive. No remedy specified
herein shall be deemed to be such party's exclusive remedy,
and accordingly, in addition to all of the rights and
remedies provided for in this Agreement, the parties shall
have all other rights and remedies provided to them by
applicable law, rule or regulation.
8. Company's Reservation of Rights. Employee
acknowledges and understands that the Employee serves at the
pleasure of the Board and that the Company has the right at
any time to terminate Employee's status as an employee of
the Company, or to change or diminish his status during the
Employment Term, subject to the rights of the Employee to
claim the benefits conferred by this Agreement.
9. JURY TRIAL WAIVER. THE PARIES HEREBY WAIVE TRIAL
BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
AGREEMENT.
10. Survival. The rights and obligations of the
Company and Employee contained in Article V of this
Agreement shall survive the termination of the Agreement.
Following the Date of Termination, each party shall have the
right to enforce all rights, and shall be bound by all
obligations, of such party that are continuing rights and
obligations under this Agreement.
11. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to
be an original but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the Company and the Employee have
caused this Agreement to be executed as of the Agreement
Date.
STEWART ENTERPRISES, INC.
By: /s/ James W. McFarland
__________________________
James W. McFarland
Compensation Committee Chairman
EMPLOYEE:
/s/ Brent F. Heffron
____________________________
Brent F. Heffron
<PAGE>
Appendix "A" to Employment Agreement
between Stewart Enterprises, Inc.
and
Brent F. Heffron
Revision No. 0 of Appendix "A",
Effective as of January 1, 1997;
Updated to January 16, 1997
Jurisdictions In Which Competition
Is Restricted As Provided
In Article V Section 3
A. States and Territories of the United States:
1. Florida-- The following counties in the State of Florida:
Seminole, Dade, Hillsborough, Duval, Orange, Pinellas,
Indian River, Palm Beach, Volusia, Lake, Brevard,
Broward, Monroe, Collier, Pasco, Manatee, Polk, Hardee,
Nassau, Baker, Clay, St. Johns, St. Lucie, Osceola,
Ockeechobee, Martin, Hendry
as well as any other counties in the State of Florida
in which the Employee regularly (a) makes contact with
customers of the Company or any of its subsidiaries,
(b) conducts the business of the Company or any of its
subsidiaries or (c) supervises the activities of other
employees of the Company or any of its subsidiaries as
of the Date of Termination.
2. Puerto Rico-- The following towns in the
Commonwealth of Puerto Rico:
Bayamon, San Juan, Cayey, Canovanas, Ponce, Caguas,
Carolina, Humacao, Toa Baja, Toa Alta, Nranjito, Aguas
Buenas, Guaynabo, Comereo, Catano, Vega Alta, Patillas,
San Lorenzo, Guayama, Salinas, Aibonito, Loita, Rio
Grande, Las Marias, Juncos, Juana Diaz, Jajuja, Utuado,
Adjuntas, Puenulas, Trujillo, Alto, Gurabo, Cidra,
Yagucoa, Naguabo, Mayaguez, Anasco, Maricao,
Hromiguero, San German, Cabo Rojo, Loiza, Las Piedras,
Ceiba, Naguabo, Luquillo, San Juan
as well as any other towns in the Commonwealth of
Puerto Rico in which the Employee regularly (a) makes
contact with customers of the Company or any of its
subsidiaries, (b) conducts the business of the Company
or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of
its subsidiaries as of the Date of Termination.
Agreeded to and Accepted:
Stewart Enterprises, Inc. Employee
By: /s/ James W. McFarland /s/ Brent F. Heffron
________________________ ____________________
Its: Compensation Committee Chairman Date: 2/27/97
Date: 2/27/97 _______________
______________________
<PAGE>
B. Other Jurisdictions:
1. Mexico-- The following delegation or municipios in the
Country of Mexico:
Cuernavaca, Benito Juarez, Tlalnepantla, Cuauhtemoc,
Temixco, Miacatlan, Jiutepec, Tepoztlan, Huitzilac,
Tenango, Tenancingo, Miguel Hidalgo, Iztacalco,
Iztapalapa, Coyoacan, Alvaro Obregon, Jilotepec,
Cuautitlan, Lerma, Iztlahuaca, Gustavo A. Madero,
Azcapotzalco, Cuajimalpa de Morelos, Venustiano,
Carranza
as well as any other delegation or municipios in the
Country of Mexico in which the Employee regularly (a)
makes contact with customers of the Company or any of
its subsidiaries, (b) conducts the business of the
Company or any of its subsidiaries or (c) supervises
the activities of other employees of the Company or any
of its subsidiaries as of the Date of Termination.
C. Acknowledgment
The Company and Employee acknowledge that Employee's
voluntary compliance with Article V, Sections 2 and 3
constitutes a significant part of the consideration for
the Company's agreement to make the payments specified
in Article IV. Therefore, the Company and Employee
acknowledge that it is the intent of this Agreement
that if Employee engages in conduct described as
prohibited conduct in Article V Section 2 or 3, the
Company may suspend or eliminate payments under Article
IV, including Sections 3 and 5 of Article IV, during
the period of such conduct, even if the parties'
contractual prohibitions on such conduct are determined
to be invalid, illegal or unenforceable under
applicable law.
Agreed to and Accepted:
Employee
/s/ Brent F. Heffron
______________________
Date: 2/27/97
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement ("Agreement") between
Stewart Enterprises, Inc., a Louisiana corporation (the
"Company"), and Brent F. Heffron (the "Employee") is dated
as of January 1, 1997 (the "Change of Control Agreement
Date").
ARTICLE I
DEFINITIONS
1.1 Employment Agreement. After a Change of Control
(defined below), this Agreement supersedes the Employment
Agreement dated as of January 1, 1997 between Employee and
the Company (the "Employment Agreement") except to the
extent that certain provisions of the Employment Agreement
are expressly incorporated by reference herein. After a
Change of Control (defined below), the definitions in this
Agreement supersede definitions in the Employment Agreement,
but capitalized terms not defined in this Agreement have the
meanings given to them in the Employment Agreement.
1.2 Definition of "Company". As used in this
Agreement, "Company" shall mean the Company as defined above
and any successor to or assignee of (whether direct or
indirect, by purchase, merger, consolidation or otherwise)
all or substantially all of the assets or business of the
Company.
1.3 Change of Control Defined. "Change of Control"
shall mean:
(a) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 30% of the outstanding
shares of the Company's Class A Common Stock, no par
value per share (the "Common Stock"); provided,
however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of
Control:
(i) any acquisition of Common Stock directly
from the Company,
(ii) any acquisition of Common Stock by the
Company,
(iii) any acquisition of Common Stock by any
employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation
controlled by the Company, or
(iv) any acquisition of Common Stock by any
corporation pursuant to a transaction that
complies with clauses (i), (ii) and (iii) of
subsection (c) of this Section 1.3; or
(b) individuals who, as of the Change of Control
Agreement Date, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any
individual becoming a director subsequent to the Change
of Control Agreement Date whose election, or nomination
for election by the Company's shareholders, was
approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be
considered a member of the Incumbent Board, unless such
individual's initial assumption of office occurs as a
result of an actual or threatened election contest with
respect to the election or removal of directors or
other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the
Incumbent Board; or
(c) consummation of a reorganization, merger or
consolidation, or sale or other disposition of all of
substantially all of the assets of the Company (a
"Business Combination"), in each case, unless,
following such Business Combination,
(i) all or substantially all of the
individuals and entities who were the beneficial
owners of the Company's outstanding common stock
and the Company's voting securities entitled to
vote generally in the election of directors
immediately prior to such Business Combination
have direct or indirect beneficial ownership,
respectively, of more than 50% of the then
outstanding shares of common stock, and more than
50% of the combined voting power of the then
outstanding voting securities entitled to vote
generally in the election of directors, of the
corporation resulting from such Business
Combination (which, for purposes of this paragraph
(i) and paragraphs (ii) and (iii), shall include a
corporation which as a result of such transaction
controls the Company or all or substantially all
of the Company's assets either directly or through
one or more subsidiaries), and
(ii) except to the extent that such ownership
existed prior to the Business Combination, no
person (excluding any corporation resulting from
such Business Combination or any employee benefit
plan or related trust of the Company or such
corporation resulting from such Business
Combination) beneficially owns, directly or
indirectly, 20% or more of the then outstanding
shares of common stock of the corporation
resulting from such Business Combination or 20% or
more of the combined voting power of the then
outstanding voting securities of such corporation,
and
(iii) at least a majority of the members of
the board of directors of the corporation
resulting from such Business Combination were
members of the Incumbent Board at the time of the
execution of the initial agreement, or of the
action of the Board, providing for such Business
Combination; or
(d) approval by the shareholders of the Company of
a complete liquidation or dissolution of the Company.
1.4 Affiliate. "Affiliate" or "affiliated companies"
shall mean any company controlled by, controlling, or under
common control with, the Company.
1.5 Cause. "Cause" shall mean:
(a) the willful and continued failure of the
Employee to perform substantially the Employee's
duties with the Company or its affiliates (other
than any such failure resulting from incapacity
due to physical or mental illness), after a
written demand for substantial performance is
delivered to the Employee by the Board of the
Company which specifically identifies the manner
in which the Board believes that the Employee has
not substantially performed the Employee's duties,
or
(b) the willful engaging by the Employee in
illegal conduct or gross misconduct which is
materially and demonstrably injurious to the
Company or its affiliates.
For purposes of this provision, no act or failure to act, on
the part of the Employee, shall be considered "willful"
unless it is done, or omitted to be done, by the Employee in
bad faith or without reasonable belief that the Employee's
action or omission was in the best interests of the Company
or its affiliates. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of a senior officer of the
Company or based upon the advice of counsel for the Company
or its affiliates shall be conclusively presumed to be done,
or omitted to be done, by the Employee in good faith and in
the best interests of the Company or its affiliates. The
cessation of employment of the Employee shall not be deemed
to be for Cause unless and until there shall have been
delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after
reasonable notice is provided to the Employee and the
Employee is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith
opinion of the Board, the Employee is guilty of the conduct
described in subparagraph (a) or (b) above, and specifying
the particulars thereof in detail.
1.6 Good Reason. "Good Reason" shall mean:
(a) Any failure of the Company or its affiliates
to provide the Employee with the position, authority,
duties and responsibilities at least commensurate in
all material respects with the most significant of
those held, exercised and assigned at any time during
the 120-day period immediately preceding the Change of
Control. Employee's position, authority, duties and
responsibilities after a Change of Control shall not be
considered commensurate in all material respects with
Employee's position, authority, duties and
responsibilities prior to a Change of Control unless
after the Change of Control Employee holds (i) an
equivalent position in the Company or, (ii) if the
Company is controlled or will after the transaction be
controlled by another company (directly or indirectly),
an equivalent position in the ultimate parent company.
(b) The assignment to the Employee of any duties
inconsistent in any material respect with Employee's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by Section 2.1(b) of
this Agreement, or any other action that results in a
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not
taken in bad faith that is remedied within 10 days
after receipt of written notice thereof from the
Employee to the Company;
(c) Any failure by the Company or its affiliates
to comply with any of the provisions of this Agreement,
other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith that is remedied
within 10 days after receipt of written notice thereof
from the Employee to the Company;
(d) The Company or its affiliates requiring the
Employee to be based at any office or location other
than as provided in Section 2.1(b)(ii) hereof or
requiring the Employee to travel on business to a
substantially greater extent than required immediately
prior to the Change of Control;
(e) Any purported termination of the Employee's
employment otherwise than as expressly permitted by
this Agreement; or
(f) Any failure by the Company to comply with and
satisfy Sections 3.1(c) and (d) of this Agreement.
For purposes of this Section 1.6, any good faith
determination of "Good Reason" made by the Employee shall be
conclusive. Anything in this Agreement to the contrary
notwithstanding, a termination by the Employee for any
reason during the 30-day period immediately following the
first anniversary of the Change of Control shall be deemed
to be a termination for Good Reason.
ARTICLE II
CHANGE OF CONTROL BENEFIT
2.1 Employment Term and Capacity after Change of
Control. (a) If a Change of Control occurs on or before
October 31, 2000, then the Employee's employment term (the
"Employment Term") shall continue through the later of (a)
the second anniversary of the Change of Control or (b)
October 31, 2000, subject to any earlier termination of
Employee's status as an employee pursuant to this Agreement.
(b) After a Change of Control and during the
Employment Term, (i) the Employee's position (including
status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most
significant of those held, exercised and assigned at any
time during the 120-day period immediately preceding the
Change of Control and (ii) the Employee's service shall be
performed at the location where the Employee was employed
immediately preceding the Change of Control or any office or
location less than 35 miles from such location. Employee's
position, authority, duties and responsibilities after a
Change of Control shall not be considered commensurate in
all material respects with Employee's position, authority,
duties and responsibilities prior to a Change of Control
unless after the Change of Control Employee holds (x) an
equivalent position in the Company or, (y) if the Company is
controlled or will after the transaction be controlled by
another company (directly or indirectly), an equivalent
position in the ultimate parent company. Employee shall
devote himself to his employment responsibilities with the
Company (or, if applicable, the ultimate parent entity) as
provided in Article I Section 3 of the Employment Agreement.
2.2 Compensation and Benefits. During the Employment
Term, Employee shall be entitled to the following
compensation and benefits:
(a) Salary. A salary ("Base Salary") at the rate
of $200,000 per year, payable to the Employee at such
intervals no less frequent than the most frequent
intervals in effect at any time during the 120-day
period immediately preceding the Change of Control or,
if more favorable to the Employee, the intervals in
effect at any time after the Change of Control for
other peer employees of the Company and its affiliated
companies.
(b) Bonus. For the period beginning November 1,
1996, the Employee shall be eligible to receive a bonus
(the "Bonus") of up to $150,000 for each 12-month
period thereafter. Such Bonus shall be comprised of
two elements, the quantitative element and the
qualitative element:
(i) The quantitative element shall be equal
to 75% of the maximum Bonus of $150,000 and shall
be based on the attainment of certain goals to be
established by the Company's compensation
committee, or any similar body, and Employee.
(ii) The qualitative element shall be 25% of
the maximum Bonus of $150,000 and shall be awarded
at the discretion of the Company's Chairman of the
Board. The Chairman of the Board and Employee
shall establish incentive goals and other criteria
for the award of the qualitative element.
The Bonus shall be paid in cash no later than 30 days
following the date on which the information needed to
calculate the Bonus becomes available.
(c) Fringe Benefits. The Employee shall be
entitled to fringe benefits (including, but not limited
to, automobile allowance, reimbursement for membership
dues, and first class air travel) in accordance with
the most favorable agreements, plans, practices,
programs and policies of the Company and its affiliated
companies in effect for the Employee at any time during
the 120-day period immediately preceding the Change of
Control or, if more favorable to the Employee, as in
effect generally at any time thereafter with respect to
other peer employees of the Company and its affiliated
companies.
(d) Expenses. The Employee shall be entitled to
receive prompt reimbursement for all reasonable
expenses incurred by the Employee in accordance with
the most favorable agreements, policies, practices and
procedures of the Company and its affiliated companies
in effect for the Employee at any time during the 120-
day period immediately preceding the Change of Control
or, if more favorable to the Employee, as in effect
generally at any time thereafter with respect to other
peer employees of the Company and its affiliated
companies.
(e) Incentive, Savings and Retirement Plans. The
Employee shall be entitled to participate in all
incentive, savings and retirement plans, practices,
policies and programs applicable generally to other
peer employees of the Company and its affiliated
companies, but in no event shall such plans, practices,
policies and programs provide the Employee with
incentive opportunities (measured with respect to both
regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit
opportunities, in each case, less favorable than the
most favorable of those provided by the Company and its
affiliated companies for the Employee under any
agreements, plans, practices, policies and programs as
in effect at any time during the 120-day period
immediately preceding the Change of Control or, if more
favorable to the Employee, those provided generally at
any time after the Change of Control to other peer
employees of the Company and its affiliated companies.
(f) Welfare Benefit Plans. The Employee and/or
the Employee's family, as the case may be, shall be
eligible for participation in and shall receive all
benefits under welfare benefit plans, practices,
policies and programs provided by the Company and its
affiliated companies (including, without limitation,
medical, prescription, dental, disability, employee
life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable
generally to other peer employees of the Company and
its affiliated companies, but in no event shall such
plans, practices, policies and programs provide the
Employee with benefits, in each case, less favorable
than the most favorable of any agreements, plans,
practices, policies and programs in effect for the
Employee at any time during the 120-day period
immediately preceding the Change of Control or, if more
favorable to the Employee, those provided generally at
any time after the Change of Control to other peer
employees of the Company and its affiliated companies.
(g) Office and Support Staff. The Employee shall
be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive
personal secretarial and other assistance, at least
equal to the most favorable of the foregoing provided
to the Employee by the Company and its affiliated
companies at any time during the 120-day period
immediately preceding the Change of Control or, if more
favorable to the Employee, as provided generally at any
time thereafter with respect to other peer employees of
the Company and its affiliated companies.
(h) Vacation. The Employee shall be entitled to
paid vacation in accordance with the most favorable
agreements, plans, policies, programs and practices of
the Company and its affiliated companies as in effect
for the Employee at any time during the 120-day period
immediately preceding the Change of Control or, if more
favorable to the Employee, as in effect generally at
any time thereafter with respect to other peer
employees of the Company and its affiliated companies.
2.3 Termination of Employment after a Change of
Control. After a Change of Control and during the
Employment Term, the Employee's status as an employee shall
terminate or may be terminated by the Employee, the Company
(or, if applicable, the ultimate parent company), as
provided in Article III of the Employment Agreement
(provided, however, that the definitions of "Cause" and
"Good Reason" in this Agreement shall supersede those
definitions in the Employment Agreement).
2.4 Obligations upon Termination after a Change of
Control.
(a) Termination by Company for Reasons other than
Death, Disability or Cause; by Employee for Good
Reason. If, after a Change of Control and during the
Employment Term, the Company (or, if applicable the
ultimate parent company), terminates the Employee's
employment other than for Cause, death or Disability,
or the Employee terminates employment for Good Reason,
the Company shall pay to the Employee in a lump sum in
cash within 30 days of the Date of Termination an
amount equal to three times the sum of (i) the amount
of Base Salary in effect at the Date of Termination,
plus (ii) the maximum Bonus for which the Employee is
eligible for the 12-month period in which the Date of
Termination occurs.
(b) Death. If, after a Change of Control and
during the Employment Term, the Employee's status as an
employee is terminated by reason of the Employee's
death, this Agreement shall terminate without further
obligation to the Employee's legal representatives
(other than those already accrued to the Employee),
other than the obligation to make any payments due
pursuant to employee benefit plans maintained by the
Company or its affiliated companies.
(c) Disability. If, after a Change of Control and
during the Employment Term, Employee's status as an
employee is terminated by reason of Employee's
Disability (as defined in the Employment Agreement),
this Agreement shall terminate without further
obligation to the Employee (other than those already
accrued to the Employee), other than the obligation to
make any payments due pursuant to employee benefit
plans maintained by the Company or its affiliated
companies.
(d) Cause. If, after a Change of Control and
during the Employment Term, the Employee's status as an
employee is terminated by the Company (or, if
applicable, the ultimate parent entity) for Cause, this
Agreement shall terminate without further obligation to
the Employee other than for obligations imposed by law
and obligations imposed pursuant to any employee
benefit plan maintained by the Company or its
affiliated companies.
(e) Termination by Employee for Reasons other than
Good Reason. If, after a Change of Control and during
the Employment Term, the Employee's status as an
employee is terminated by the Employee for reasons
other than Good Reason, then the Company shall pay to
the Employee an amount equal to a single year's Base
Salary in effect at the Date of Termination, payable in
equal installments over a two-year period at such
intervals as other salaried employees of the Company
are paid.
(f) Nondisclosure, Noncompetition and Proprietary
Rights. The rights and obligations of the Company and
Employee contained in Article V ("Nondisclosure,
Noncompetition and Proprietary Rights") of the
Employment Agreement shall continue to apply after a
Change of Control, except as provided in Section 2.10
of this Agreement.
2.5 Accrued Obligations and Other Benefits. It is the
intent of the Employment Agreement and this Agreement that
upon termination of employment for any reason the Employee
be entitled to receive promptly, and in addition to any
other benefits specifically provided, (a) the Employee's
Base Salary through the Date of Termination to the extent
not theretofore paid, (b) any accrued vacation pay, to the
extent not theretofore paid, and (c) any other amounts or
benefits required to be paid or provided or which the
Employee is entitled to receive under any plan, program,
policy practice or agreement of the Company.
2.6 Stock Options. The foregoing benefits are
intended to be in addition to the value of any options to
acquire Common Stock of the Company the exercisability of
which is accelerated pursuant to the terms of any stock
option, incentive or other similar plan heretofore or
hereafter adopted by the Company.
2.7 Protection of Benefits. To the extent permitted
by applicable law, the Company shall take all reasonable
steps to ensure that the Employee is not, by reason of a
Change of Control, deprived of the economic value (including
any value attributable to the Change of Control transaction)
of (a) any options to acquire Common Stock of the Company or
(b) any Common Stock of the Company beneficially owned by
the Employee.
2.8 Certain Additional Payments. If after a Change of
Control Employee is subjected to an excise tax as a result
of the "excess parachute payment" provisions of section 4999
of the Internal Revenue Code of 1986, as amended, whether by
virtue of the benefits of this Agreement or by virtue of any
other benefits provided to Employee in connection with a
Change of Control pursuant to Company plans, policies or
agreements (including the value of any options to acquire
Common Stock of the Company the exercisability of which is
accelerated pursuant to the terms of any stock option,
incentive or similar plan heretofore or hereafter adopted by
the Company), the Company shall pay to Employee (whether or
not his employment has terminated) such amounts as are
necessary to place Employee in the same position after
payment of federal income and excise taxes as he would have
been if such provisions had not been applicable to him.
2.9 Legal Fees. The Company agrees to pay as
incurred, to the full extent permitted by law, all legal
fees and expenses which the Employee may reasonably incur as
a result of any contest (regardless of the outcome thereof)
by the Company, the Employee or others of the validity or
enforceability of, or liability under, any provision of this
Agreement (including as a result of any contest by the
Employee about the amount or timing of any payment pursuant
to this Agreement.)
2.10 Set-Off; Mitigation. After a Change of Control,
the Company's and its affiliates' obligations to make the
payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by
any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company or its affiliates
may have against the Employee or others. After a Change of
Control, an asserted violation of the provisions of Article
V ("Nondisclosure, Noncompetition and Proprietary Rights")
of the Employment Agreement shall not constitute a basis for
deferring or withholding any amounts otherwise payable to
the Employee; specifically, the third through sixth
sentences of Article V Section 4 shall not apply after a
Change of Control. It is the intent of the Employment
Agreement and this Agreement that in no event shall the
Employee be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to
the Employee under any of the provisions of this Agreement
or the Employment Agreement.
ARTICLE III
MISCELLANEOUS
3.1 Binding Effect; Successors.
(a) This Agreement shall be binding upon and
inure to the benefit of the Company and any of its
successors or assigns.
(b) This Agreement is personal to the Employee
and shall not be assignable by the Employee without the
consent of the Company (there being no obligation to give
such consent) other than such rights or benefits as are
transferred by will or the laws of descent and distribution.
(c) The Company shall require any successor to or
assignee of (whether direct or indirect, by purchase,
merger, consolidation or otherwise) all or substantially all
of the assets or businesses of the Company (i) to assume
unconditionally and expressly this Agreement and (ii) to
agree to perform or to cause to be performed all of the
obligations under this Agreement in the same manner and to
the same extent as would have been required of the Company
had no assignment or succession occurred, such assumption to
be set forth in a writing reasonably satisfactory to the
Employee.
(d) The Company shall also require all entities
that control or that after the transaction will control
(directly or indirectly) the Company or any such successor
or assignee to agree to cause to be performed all of the
obligations under this Agreement, such agreement to be set
forth in a writing reasonably satisfactory to the Employee.
3.2 Notices. All notices hereunder must be in writing
and shall be deemed to have given upon receipt of delivery
by: (a) hand (against a receipt therefor), (b) certified or
registered mail, postage prepaid, return receipt requested,
(c) a nationally recognized overnight courier service
(against a receipt therefor) or (d) telecopy transmission
with confirmation of receipt. All such notices must be
addressed as follows:
If to the Company, to:
Stewart Enterprises, Inc.
110 Veterans Memorial Boulevard
Metairie, Louisiana 70005
Attn: Joseph P. Henican, III
If to the Employee, to:
Brent F. Heffron
1090 13th Avenue, N.W.
Hickory, NC 28601
or such other address as to which any party hereto may have
notified the other in writing.
3.3 Governing Law. This Agreement shall be construed
and enforced in accordance with and governed by the internal
laws of the State of Louisiana without regard to principles
of conflict of laws, except as expressly provided in Article
V Section 6 of the Employment Agreement with respect to the
resolution of disputes arising under, or the Company's
enforcement of, such Article V.
3.4 Withholding. The Employee agrees that the Company
has the right to withhold, from the amounts payable pursuant
to this Agreement, all amounts required to be withheld under
applicable income and/or employment tax laws, or as
otherwise stated in documents granting rights that are
affected by this Agreement.
3.5 Amendment, Waiver. No provision of this Agreement
may be modified, amended or waived except by an instrument
in writing signed by both parties.
3.6 Severability. If any term or provision of this
Agreement, or the application thereof to any person or
circumstance, shall at any time or to any extent be invalid,
illegal or unenforceable in any respect as written, Employee
and the Company intend for any court construing this
Agreement to modify or limit such provision so as to render
it valid and enforceable to the fullest extent allowed by
law. Any such provision that is not susceptible of such
reformation shall be ignored so as to not affect any other
term or provision hereof, and the remainder of this
Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is
held invalid, illegal or unenforceable, shall not be
affected thereby and each term and provision of this
Agreement shall be valid and enforced to the fullest extent
permitted by law.
3.7 Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach
thereof.
3.8 Remedies Not Exclusive. No remedy specified
herein shall be deemed to be such party's exclusive remedy,
and accordingly, in addition to all of the rights and
remedies provided for in this Agreement, the parties shall
have all other rights and remedies provided to them by
applicable law, rule or regulation.
3.9 Company's Reservation of Rights. Employee
acknowledges and understands that the Employee serves at the
pleasure of the Board and that the Company has the right at
any time to terminate Employee's status as an employee of
the Company, or to change or diminish his status during the
Employment Term, subject to the rights of the Employee to
claim the benefits conferred by this Agreement.
3.10 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to
be an original but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the Company and the Employee have
caused this Agreement to be executed as of the Change of
Control Agreement Date.
STEWART ENTERPRISES, INC.
By: /s/ James W. McFarland
___________________________
James W. McFarland
Compensation Committee Chairman
EMPLOYEE:
/s/ Brent F. Heffron
___________________________
Brent F. Heffron
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES
ISSUED PURSUANT TO THE STEWART ENTERPRISES, INC. 1995 INCENTIVE COMPENSATION
PLAN THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
STOCK OPTION AGREEMENT
FOR THE GRANT OF
NON-QUALIFIED STOCK OPTIONS UNDER THE
STEWART ENTERPRISES, INC.
1995 INCENTIVE COMPENSATION PLAN
THIS AGREEMENT is effective as of January 1, 1997 by
and between Stewart Enterprises, Inc., a Louisiana
corporation ("SEI"), and Brent F. Heffron ("Optionee").
WHEREAS Optionee is a key employee of SEI and SEI
considers it desirable and in its best interest that
Optionee be given an inducement to acquire a proprietary
interest in SEI and an added incentive to advance the
interests of SEI by possessing an option to purchase shares
of the Class A common stock of SEI, no par value per share
(the "Common Stock") in accordance with the Stewart
Enterprises, Inc. 1995 Incentive Compensation Plan (the
"Plan"), which was adopted by the Board of Directors on
August 24, 1995 and was approved by the shareholders on
March 7, 1996.
NOW, THEREFORE, in consideration of the premises, it is
agreed by and between the parties as follows:
I.
Grant of Option
SEI hereby grants to Optionee effective January 1, 1997
(the "Date of Grant") the right, privilege and option to
purchase 33,340 shares of Common Stock (the "Option") at an
exercise price of $34.00 per share (the "Exercise Price").
The Option shall be exercisable at the time specified in
Section II below. The Option is a non-qualified stock
option and shall not be treated as an incentive stock option
under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
II.
Time of Exercise
2.1 Subject to the provisions of the Plan and the
other provisions of this Agreement, the Optionee shall be
entitled to exercise his Option as follows:
25% of the total number of shares
covered by the Option
beginning on September 7,
1997, less any shares
previously issued;
50% of the total number of shares
covered by the Option
beginning on September 7,
1998, less any shares
previously issued;
75% of the total number of shares
covered by the Option
beginning on September 7,
1999, less any shares
previously issued;
100% of the total number of shares
covered by the Option
beginning on September 7,
2000, less any shares
previously issued.
The Option shall expire and may not be exercised later than
October 31, 2001.
2.2 If Optionee's employment is terminated, other than
as a result of death, disability or retirement on or after
reaching age 65 or early retirement with the approval of the
Board of Directors, the Option must be exercised, to the
extent exercisable at the time of termination of employment,
within 30 days of the date on which Optionee ceases to be an
employee, except that the Committee may upon request extend
the period after termination of employment during which the
Option may be exercised, but in no event later than October
31, 2001.
2.3 If an Optionee ceases to be an employee because of
disability within the meaning of Section 22(e)(3) of the
Code or retirement, as described in Section 2.2, the Option
must be exercised, to the extent exercisable at the time of
termination of employment, within one year from the date on
which Optionee ceases to be an employee, but in no event
later than October 31, 2001.
2.4 In the event of Optionee's death, the Option must
be exercised by his estate, or by the person to whom such
right evolves from him by reason of his death, to the extent
exercisable at the time of death, within one year from the
date of death, but in no event later than October 31, 2001.
III.
Method of Exercise of Option
Optionee may exercise all or a portion of the Option by
delivering to SEI a signed written notice of his intention
to exercise the Option, specifying therein the number of
shares to be purchased. Upon receiving such notice, and
after SEI has received payment of the Exercise Price as
provided in the Plan, the appropriate officer of SEI shall
cause the transfer of title of the shares purchased to
Optionee on SEI's stock records and cause to be issued to
Optionee a stock certificate for the number of shares being
acquired. Optionee shall not have any rights as a
shareholder until the stock certificate is issued to him.
IV.
Change of Control
4.1 No later than 30 days after the approval by the
Board of a Change of Control of the types described in
Sections 12.12(a)(iii) and (iv) of the Plan, and no later
than 30 days after a Change of Control of the type described
in Sections 12.12(a)(i) and (ii) of the Plan, the Committee
(as the Committee was composed immediately prior to such
Change of Control and notwithstanding any removal or
attempted removal of some or all of the members thereof as
directors or Committee members), acting in its sole
discretion without the consent or approval of any
participant, may act to effect one or more of the
alternatives listed below and such act by the Committee may
not be revoked or rescinded by persons not members of the
Committee immediately prior to the Change of Control:
(a) require that all outstanding options and/or
SARs be exercised on or before a specified date (before
or after such Change of Control) fixed by the
Committee, after which specified date all unexercised
options and SARs shall terminate,
(b) provide for mandatory conversion of some or
all of the outstanding options and SARs held by some or
all participants as of a date, before or after such
Change of Control, specified by the Committee, in which
event such options and SARs shall be deemed
automatically cancelled and Stewart shall pay, or cause
to be paid, to each such participant an amount of cash
per share equal to the excess, if any, of the Change of
Control Value of the shares subject to such option or
SAR, as defined and calculated below, over the exercise
price(s) of such options or SARs, or, in lieu of such
cash payment, the issuance of Common Stock or
securities of an acquiring entity having a Fair Market
Value equal to such excess,
(c) make such equitable adjustments to Incentives
then outstanding as the Committee deems appropriate to
reflect such Change of Control (provided, however, that
the Committee may determine in its sole discretion that
no adjustment is necessary), or
(d) provide that thereafter upon any exercise of
an option or SAR the participant shall be entitled to
purchase under such option or SAR, in lieu of the
number of shares of Common Stock then covered by such
option, the number and class of shares of stock or
other securities or property (including, without
limitation, cash) to which the participant would have
been entitled pursuant to the terms of the agreement
providing for the merger, consolidation, asset sale,
dissolution or other Change of Control of the type
described in Sections 12.12(a)(iii) and (iv) of the
Plan, if, immediately prior to such Change of Control,
the participant had been the holder of record of the
number of shares of Common Stock then covered by such
options or SARs.
4.2 For the purposes of paragraph (b) of Section 4.1
the "Change of Control Value" shall equal the amount
determined by whichever of the following items is
applicable:
(a) the per share price to be paid to shareholders
of Stewart in any such merger, consolidation or other
reorganization,
(b) the price per share offered to shareholders of
Stewart in any tender offer or exchange offer whereby a
Change of Control takes place, or
(c) in all other events, the Fair Market Value per
share of Common Stock into which such options or SARs
being converted are exercisable, as determined by the
Committee as of the date determined by the Committee to
be the date of conversion of such options or SARs.
(d) In the event that the consideration offered to
shareholders of Stewart in any transaction described in
this Section 4.2 consists of anything other than cash,
the Committee shall determine the fair cash equivalent
of the portion of the consideration offered that is
other than cash.
V.
No Contract of Employment Intended
Subject to the terms of any Employment Agreement that
may be in effect from time to time, nothing in this
Agreement shall confer upon Optionee any right to continue
in the employment of SEI or any of its subsidiaries, or to
interfere in any way with the right of SEI or any of its
subsidiaries to terminate Optionee's employment relationship
with SEI or any of its subsidiaries at any time, nor shall
any reference herein to any employment agreement imply that
any such agreement is in effect or that the Optionee is
entitled to enter into any such agreement with SEI.
VI.
Binding Effect
This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs,
executors, administrators and successors.
VII.
Non-Transferability
The Option granted hereby may not be transferred,
assigned, pledged or hypothecated in any manner, by
operation of law or otherwise, other than by will or by the
laws of descent and distribution and shall not be subject to
execution, attachment or similar process.
VIII.
Inconsistent Provisions
The Option granted hereby is subject to the provisions
of the Plan as in effect on the date hereof and as it may be
amended. In the event any provision of this Agreement
conflicts with such a provision of the Plan, the Plan
provision shall control.
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
STEWART ENTERPRISES, INC.
By: /s/ James W. Mc Farland
____________________________
James W. McFarland
Compensation Committee Chairman
/s/ Brent F. Heffron
_____________________________
Brent F. Heffron
Optionee
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES
ISSUED PURSUANT TO THE STEWART ENTERPRISES, INC. 1995 INCENTIVE COMPENSATION
PLAN THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
STOCK OPTION AGREEMENT
FOR THE GRANT OF
NON-QUALIFIED STOCK OPTIONS UNDER THE
STEWART ENTERPRISES, INC.
1995 INCENTIVE COMPENSATION PLAN
THIS AGREEMENT is effective as of January 1, 1997 by
and between Stewart Enterprises, Inc., a Louisiana
corporation ("SEI"), and Brent F. Heffron("Optionee").
WHEREAS Optionee is a key employee of SEI and SEI
considers it desirable and in its best interest that
Optionee be given an inducement to acquire a proprietary
interest in SEI and an added incentive to advance the
interests of SEI by possessing an option to purchase shares
of the Class A common stock of SEI, no par value per share
(the "Common Stock") in accordance with the Stewart
Enterprises, Inc. 1995 Incentive Compensation Plan (the
"Plan"), which was adopted by the Board of Directors on
August 24, 1995 and was approved by the shareholders on
March 7, 1996.
NOW, THEREFORE, in consideration of the premises, it is
agreed by and between the parties as follows:
I.
Grant of Option
SEI hereby grants to Optionee effective January 1, 1997
(the "Date of Grant") the right, privilege and option to
purchase 66,660 shares of Common Stock (the "Option") at an
exercise price of $34.00 per share (the "Exercise Price").
The Option shall be exercisable at the time specified in
Section II. below. The Option is a non-qualified stock
option and shall not be treated as an incentive stock option
under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
II.
Time of Exercise
2.1 Subject to the provisions of the Plan, the other
provisions of this Agreement and the provisions of any
employment agreement between SEI and Optionee (the
"Employment Agreement") with respect to performance based
options granted under the Plan, the Option shall become
exercisable in full on the first day between the Date of
Grant and August 31, 2000 that the average of the "Closing
Sale Prices" of a share of Common Stock for the 20 preceding
consecutive trading days equals or exceeds $52.87. If the
conditions described in this Section 2.1 are not met by
August 31, 2000, the Option may not be exercised and shall
terminate immediately.
2.2 "Closing Sale Price" is the closing sale price on
the applicable date for shares of the Common Stock on an
established stock exchange or any automated quotation system
that provides sale quotations.
2.3 The Option shall expire and may not be exercised
later than October 31, 2001.
2.4 Except as otherwise provided in the Employment
Agreement, if Optionee's employment is terminated, other
than as a result of death, disability or retirement on or
after reaching age 65 or early retirement with the approval
of the Board of Directors, the Option must be exercised, to
the extent exercisable at the time of termination of
employment, within the later of (i) 30 days after the date
on which Optionee ceases to be an employee or (ii) 30 days
after the date on which the exercise of the Option and sale
of the underlying securities will not cause the Optionee to
incur a liability to SEI under Section 16 of the Securities
Exchange Act of 1934, except that the Committee may upon
request extend the period after termination of employment
during which the Option may be exercised, but in no event
later than October 31, 2001.
2.5 If an Optionee ceases to be an employee because of
retirement, as described in Section 2.4, or disability
within the meaning of Section 22(e)(3) of the Code, the
Option must be exercised, to the extent exercisable at the
time of termination of employment, within one year from the
date on which Optionee ceases to be an employee, but in no
event later than October 31, 2001.
2.6 In the event of Optionee's death, the Option must
be exercised by his estate, or by the person to whom such
right evolves from him by reason of his death, to the extent
exercisable at the time of death, within one year from the
date of death, but in no event later than October 31, 2001.
III.
Method of Exercise of Option
Optionee may exercise all or a portion of the Option by
delivering to SEI a signed written notice of his intention
to exercise the Option, specifying therein the number of
shares to be purchased. Upon receiving such notice, and
after SEI has received payment of the Exercise Price as
provided in the Plan, the appropriate officer of SEI shall
cause the transfer of title of the shares purchased to
Optionee on SEI's stock records and cause to be issued to
Optionee a stock certificate for the number of shares being
acquired. Optionee shall not have any rights as a
shareholder until the stock certificate is issued to him.
IV.
Change of Control
4.1 No later than 30 days after the approval by the
Board of a Change of Control of the types described in
Sections 12.12(a)(iii) and (iv) of the Plan, and no later
than 30 days after a Change of Control of the type described
in Sections 12.12(a)(i) and (ii) of the Plan, the Committee
(as the Committee was composed immediately prior to such
Change of Control and notwithstanding any removal or
attempted removal of some or all of the members thereof as
directors or Committee members), acting in its sole
discretion without the consent or approval of any
participant, may act to effect one or more of the
alternatives listed below and such act by the Committee may
not be revoked or rescinded by persons not members of the
Committee immediately prior to the Change of Control:
(a) require that all outstanding options and/or
SARs be exercised on or before a specified date (before
or after such Change of Control) fixed by the
Committee, after which specified date all unexercised
options and SARs shall terminate,
(b) provide for mandatory conversion of some or
all of the outstanding options and SARs held by some or
all participants as of a date, before or after such
Change of Control, specified by the Committee, in which
event such options and SARs shall be deemed
automatically cancelled and SEI shall pay, or cause to
be paid, to each such participant an amount of cash per
share equal to the excess, if any, of the Change of
Control Value of the shares subject to such option or
SAR, as defined and calculated below, over the exercise
price(s) of such options or SARs, or, in lieu of such
cash payment, the issuance of Common Stock or
securities of an acquiring entity having a Fair Market
Value equal to such excess,
(c) make such equitable adjustments to Incentives
then outstanding as the Committee deems appropriate to
reflect such Change of Control (provided, however, that
the Committee may determine in its sole discretion that
no adjustment is necessary), or
(d) provide that thereafter upon any exercise of
an option or SAR the participant shall be entitled to
purchase under such option or SAR, in lieu of the
number of shares of Common Stock then covered by such
option, the number and class of shares of stock or
other securities or property (including, without
limitation, cash) to which the participant would have
been entitled pursuant to the terms of the agreement
providing for the merger, consolidation, asset sale,
dissolution or other Change of Control of the type
described in Sections 12.12(a)(iii) and (iv) of the
Plan, if, immediately prior to such Change of Control,
the participant had been the holder of record of the
number of shares of Common Stock then covered by such
options or SARs.
4.2 For the purposes of paragraph (b) of Section 4.1
"Change of Control Value" shall equal the amount determined
by whichever of the following items is applicable:
(a) the per share price to be paid to shareholders
of SEI in any such merger, consolidation or other
reorganization,
(b) the price per share offered to shareholders of
SEI in any tender offer or exchange offer whereby a
Change of Control takes place, or
(c) in all other events, the Fair Market Value per
share of Common Stock into which such options or SARs
being converted are exercisable, as determined by the
Committee as of the date determined by the Committee to
be the date of conversion of such options or SARs.
(d) In the event that the consideration offered to
shareholders of SEI in any transaction described in
this Section 4.2 consists of anything other than cash,
the Committee shall determine the fair cash equivalent
of the portion of the consideration offered that is
other than cash.
V.
No Contract of Employment Intended
Subject to the terms of any Employment Agreement that
may be in effect from time to time, nothing in this
Agreement shall confer upon Optionee any right to continue
in the employment of SEI or any of its subsidiaries, or to
interfere in any way with the right of SEI or any of its
subsidiaries to terminate Optionee's employment relationship
with SEI or any of its subsidiaries at any time, nor shall
any references herein to any employment agreement imply that
any such agreement is in effect or that the Optionee is
entitled to enter into any such agreement with SEI.
VI.
Binding Effect
This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs,
executors, administrators and successors.
VII.
Non-Transferability
The Option granted hereby may not be transferred,
assigned, pledged or hypothecated in any manner, by
operation of law or otherwise, other than by will or by the
laws of descent and distribution and shall not be subject to
execution, attachment or similar process.
VIII.
Inconsistent Provisions
The Option granted hereby is subject to the provisions
of the Plan as in effect on the date hereof and as it may be
amended. In the event any provision of this Agreement
conflicts with such a provision of the Plan, the Plan
provision shall control. In the event any provision of this
Agreement conflicts with a provision of any Employment
Agreement containing any provision relating to the Option,
the Employment Agreement provision shall control.
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
STEWART ENTERPRISES, INC.
By: /s/ James W. McFarland
_________________________
James W. McFarland
Compensation Committee Chairman
/s/ Brent F. Heffron
________________________
Brent F. Heffron
Optionee
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") between Stewart
Enterprises, Inc., a Louisiana corporation (the "Company"),
and Raymond C. Knopke, Jr. (the "Employee") is dated as of
January 1, 1997 (the "Agreement Date").
W I T N E S S E T H:
WHEREAS, Employee currently is employed by the Company;
WHEREAS, the Company desires to retain the services of
Employee pursuant to the terms of this Agreement, subject to
Employee's acceptance of the conditions stated herein;
WHEREAS, during the course of his employment with the
Company, Employee has or will have received extensive and
unique knowledge, training and education in, and access to
resources involving, the Death Care Business (as defined
below) at a substantial cost to the Company, which Employee
acknowledges has enhanced or substantially will enhance
Employee's skills and knowledge in such business;
WHEREAS, during the course of his employment with the
Company, Employee has had and will continue to have access
to certain valuable oral and written information, knowledge
and data relating to the business and operations of the
Company and its subsidiaries that is non-public,
confidential or proprietary in nature and is particularly
useful in the Death Care Business; and
WHEREAS, in view of the training provided by the
Company to Employee, its cost to the Company, the need for
the Company to be protected against disclosures by Employee
of the Company's and its subsidiaries' trade secrets and
other non-public, confidential or proprietary information,
the Company and Employee desire, among other things, to
prohibit Employee from disclosing or utilizing, outside the
scope and term of his employment, any non-public,
confidential or proprietary information, knowledge and data
relating to the business and operations of the Company or
its subsidiaries received by Employee during the course of
his employment, and to restrict the ability of Employee to
compete with the Company or its subsidiaries for a limited
period of time.
NOW, THEREFORE, for and in consideration of the
continued employment of Employee by the Company and the
payment of wages, salary and other compensation to Employee
by the Company, the parties hereto agree as follows:
ARTICLE I
EMPLOYMENT CAPACITY AND TERM
1. Capacity and Duties of Employee. The Employee is
employed by the Company to render services on behalf of the
Company as Executive Vice President. As the Executive Vice
President, the Employee shall perform such duties as are
assigned to the individual holding such title by the
Company's Bylaws and such other duties, consistent with the
Employee's job title, as may be prescribed from time to time
by the Board of Directors of the Company (the "Board")
and/or the Company's Chief Executive Officer.
2. Employment Term. The term of this Agreement (the
"Employment Term") shall commence on the Agreement Date and
shall continue through October 31, 2000, subject to any
earlier termination of Employee's status as an employee
pursuant to this Agreement.
3. Devotion to Responsibilities.
During the Employment Term, the Employee shall
devote all of his business time to the business of the
Company, shall use his reasonable best efforts to perform
faithfully and efficiently his duties under this Agreement,
and shall not engage in or be employed by any other
business; provided, however, that nothing contained herein
shall prohibit the Employee from (a) serving as a member of
the board of directors, board of trustees or the like of any
for-profit or non-profit entity that does not compete with
the Company, or performing services of any type for any
civic or community entity, whether or not the Employee
receives compensation therefor, (b) investing his assets in
such form or manner as shall require no more than nominal
services on the part of the Employee in the operation of the
business of the entity in which such investment is made, or
(c) serving in various capacities with, and attending
meetings of, industry or trade groups and associations, as
long as the Employee's engaging in any activities permitted
by virtue of clauses (a), (b) and (c) above does not
materially and unreasonably interfere with the ability of
the Employee to perform the services and discharge the
responsibilities required of him under this Agreement.
Notwithstanding clause (b) above, during the Employment
Term, the Employee may not beneficially own more than 2% of
the equity interests of a business organization required to
file periodic reports with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 (the
"Exchange Act") and may not beneficially own more than 2% of
the equity interests of a business organization that
competes with the Company. For purposes of this paragraph,
"beneficially own" shall have the same meaning ascribed to
that term in Rule 13d-3 under the Exchange Act.
ARTICLE II
COMPENSATION AND BENEFITS
During the Employment Term, the Company shall provide
the Employee with the compensation and benefits described
below:
1. Salary. A salary ("Base Salary") at the rate of
$200,000 per fiscal year of the Company ("Fiscal Year"),
payable to the Employee at such intervals as other salaried
employees of the Company are paid.
2. Bonus. For the period beginning November 1, 1996,
the employee shall be eligible to receive a bonus (the
"Bonus") of up to $150,000 per Fiscal Year. Such Bonus
shall be comprised of two elements, the quantitative element
and the qualitative element:
(a) The quantitative element shall be equal to
75% of the maximum Bonus of $150,000 and shall be based on
the attainment of certain goals to be established by the
Company's Compensation Committee and Employee.
(b) The qualitative element shall be 25% of the
maximum Bonus of $150,000 and shall be awarded at the
discretion of the President. The President and Employee
shall establish incentive goals and other criteria for the
award of the qualitative element.
The Bonus shall be paid in cash no later than 30 days
following the filing of the Company's annual report on Form
10-K for the Fiscal Year in which the Bonus has been earned.
3. Benefits. The Company shall provide the Employee
with the following fringe benefits and perquisites:
(a) An automobile allowance of $720 per month.
The Company will reimburse the Employee for all gasoline,
maintenance, repairs and insurance for Employee's personal
car, as if it were a Company-owned vehicle;
(b) Reimbursement for membership dues, including
assessments and similar charges, in one or more clubs deemed
useful for business purposes in an amount not to exceed
$8,000 or such additional amounts as may be approved by the
President;
(c) First class air travel;
(d) Fully-paid insurance benefit package
available to all employees; and
(e) All other benefit programs similar to those
provided other employees of the Company.
4. 1995 Incentive Compensation Plan. The Employee
shall be eligible to receive awards under the Company's 1995
Incentive Compensation Plan (the "1995 Plan").
5. Expenses. The Employee shall be reimbursed for
reasonable out-of-pocket expenses incurred from time to time
on behalf of the Company or any subsidiary in the
performance of his duties under this Agreement, upon the
presentation of such supporting invoices, documents and
forms as the Company reasonably requests.
ARTICLE III
TERMINATION OF EMPLOYMENT
1. Death. The Employee's status as an employee shall
terminate immediately and automatically upon the Employee's
death during the Employment Term.
2. Disability. The Employee's status as an employee
may be terminated for "Disability" as follows:
(a) The Employee's status as an employee shall
terminate if the Employee has a disability that would
entitle him to receive benefits under the Company's long-
term disability insurance policy in effect at the time
either because he is Totally Disabled or Partially Disabled,
as such terms are defined in the Company's policy in effect
as of the Agreement Date or as similar terms are defined in
any successor policy. Any such termination shall become
effective on the first day on which the Employee is eligible
to receive payments under such policy (or on the first day
that he would be so eligible, if he had applied timely for
such payments).
(b) If the Company has no long-term disability
plan in effect, if (i) the Employee is rendered incapable
because of physical or mental illness of satisfactorily
discharging his duties and responsibilities under this
Agreement for a period of 90 consecutive days and (ii) a
duly qualified physician chosen by the Company and
acceptable to the Employee or his legal representatives so
certifies in writing, the Board shall have the power to
determine that the Employee has become disabled. If the
Board makes such a determination, the Company shall have the
continuing right and option, during the period that such
disability continues, and by notice given in the manner
provided in this Agreement, to terminate the status of
Employee as an employee. Any such termination shall become
effective 30 days after such notice of termination is given,
unless within such 30-day period, the Employee becomes
capable of rendering services of the character contemplated
hereby (and a physician chosen by the Company and acceptable
to the Employee or his legal representatives so certifies in
writing) and the Employee in fact resumes such services.
(c) The "Disability Effective Date" shall mean
the date on which termination of employment becomes
effective due to Disability.
3. Cause. The Company may terminate the Employee's
status as an employee for Cause. As used herein,
termination by the Company of the Employee's status as an
employee for "Cause" shall mean termination as a result of
(a) the Employee's breach of this Agreement, or (b) the
willful engaging by the Employee in gross misconduct
injurious to the Company, which in either case is not
remedied within 10 days after the Company provides written
notice to the Employee of such breach or willful misconduct.
4. Good Reason. The Employee may terminate his
status as an employee for Good Reason. As used herein, the
term "Good Reason" shall mean:
(a) The occurrence of any of the following during
the Employment Term:
(i) the assignment by the Board to the
Employee of any duties or responsibilities that are
inconsistent with the Employee's status, title and position
as Executive Vice President;
(ii) any removal of the Employee from, or any
failure to reappoint or reelect the Employee to, the
position of Executive Vice President of the Company, except
in connection with a termination of Employee's status as an
employee as permitted by this Agreement;
(iii) the Company's requiring the Employee to
be based anywhere other than in the San Francisco,
California metropolitan area, except for required travel in
the ordinary course of the Company's business;
(b) any breach of this Agreement by the Company
that continues for a period of 10 days after written notice
thereof is given by the Employee to the Company;
(c) the failure by the Company to obtain the
assumption of its obligations under this Agreement by any
successor or assign as contemplated in this Agreement; or
(d) any purported termination by the Company of
the Employee's status as an employee for Cause that is not
effected pursuant to a Notice of Termination satisfying the
requirements of this Agreement.
5. Voluntary Termination by the Company. The Company
may terminate the Employee's status as employee for other
than death, Disability or Cause.
6. Voluntary Termination by the Employee. The
Employee may terminate the Employee's status as employee for
other than Good Reason.
7. Notice of Termination. Any termination by the
Company for Disability or Cause, or by the Employee for Good
Reason, shall be communicated by Notice of Termination to
the other party hereto given in accordance with Article VI
Section 2 of this Agreement. For purposes of this
Agreement, a "Notice of Termination" means a written notice
that (a) indicates the specific termination provision in
this Agreement relied upon (b) to the extent applicable,
sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Employee's
employment under the provisions so indicated and (c) if the
Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination
date (which date shall be not more than 30 days after the
giving of such notice). The failure by the Employee or the
Company to set forth in the Notice of Termination any fact
or circumstance that contributes to a showing of Good
Reason, Disability or Cause shall not negate the effect of
the notice nor waive any right of the Employee or the
Company, respectively, hereunder or preclude the Employee or
the Company, respectively, from asserting such fact or
circumstance in enforcing the Employee's or the Company's
rights hereunder.
8. Date of Termination. "Date of Termination" means
(a) if Employee's employment is terminated by reason of his
death or Disability, the Date of Termination shall be the
date of death of Employee or the Disability Effective Date,
as the case may be, (b) if Employee's employment is
terminated by the Company for Cause, or by Employee for Good
Reason, the date of delivery of the Notice of Termination or
any later date specified therein, (which date shall not be
more than 30 days after the giving of such notice) as the
case may be, (c) if the Employee's employment is terminated
by the Company for reasons other than death, Disability or
Cause, the Date of Termination shall be the date on which
the Company notifies the Employee of such termination, and
(d) if the Employee's employment is terminated by the
Employee for reasons other than Good Reason, the Date of
Termination shall be the date on which the Employee notifies
the Company of such termination.
ARTICLE IV
OBLIGATIONS UPON TERMINATION
1. Death. If the Employee's status as an employee is
terminated by reason of the Employee's death, this Agreement
shall terminate without further obligations to the
Employee's legal representatives under this Agreement, other
than the obligation to make any payments due pursuant to
employee benefit plans maintained by the Company or its
subsidiaries.
2. Disability. If Employee's status as an employee
is terminated by reason of Employee's Disability, this
Agreement shall terminate without further obligation to the
Employee, other than the obligation to make any payments due
pursuant to employee benefit plans maintained by the Company
or its subsidiaries.
3. Termination by Company for Reasons other than
Death, Disability or Cause; Termination by Employee for Good
Reason. If the Company terminates the Employee's status as
an employee for reasons other than death, Disability or
Cause, or the Employee terminates his employment for Good
Reason, then
(a) the Company shall pay to the Employee an
amount equal to two times the amount of Base Salary in
effect at the Date of Termination, payable in equal
installments over a two-year period at such intervals as
other salaried employees of the Company are paid; and
(b) with respect to all performance-based options
granted to the Employee pursuant to the 1995 Plan,
(i) if the performance goals have been met as
of the Date of Termination, then such options
shall become exercisable as of the Date of
Termination (if not already exercisable) and shall
expire on the date that is the later of:
(A) 30 days after the Date of
Termination or
(B) 30 days after the first date on
which the exercise of the options and sale of
the underlying securities will not (1) be
matched with purchases or sales of the
Company's common stock prior to such Date of
Termination such as to cause the Employee to
incur a liability to the Company under
Section 16 of the Exchange Act and (2)
destroy the Section 16 exemption for the
grant of the options.
(ii) if the performance goals have not been
met as of the Date of Termination, then
(A) if the performance goals are not met
by the close of business on the day that is
180 days after the Date of Termination, then
the options shall expire on such day; and
(B) if the performance goals are met by
the close of business on the day that is 180
days after the Date of Termination, then the
options shall become exercisable as of the
date such performance goals are met (the
"Vesting Date") and shall expire on the date
that is the later of:
(1) 30 days after the Vesting Date
or
(2) 30 days after the first date on
which the exercise of the options and
sale of the underlying securities will
not (I) be matched with purchases or
sales of the Company's common stock
prior to such Date of Termination such
as to cause the Employee to incur a
liability to the Company under Section
16 of the Exchange Act and (II) destroy
the Section 16 exemption for the grant
of the options.
4. Cause. If the Employee's status as an employee is
terminated by the Company for Cause, this Agreement shall
terminate without further obligation to the Employee other
than for obligations imposed by law and obligations imposed
pursuant to any employee benefit plan maintained by the
Company or its subsidiaries.
5. Termination by Employee for Reasons other than
Good Reason. If the Employee's status as an employee is
terminated by the Employee for reasons other than Good
Reason, then the Company shall pay to the Employee an amount
equal to a single year's Base Salary in effect at the Date
of Termination, payable in equal installments over a two-
year period at such intervals as other salaried employees of
the Company are paid.
6. Resignation. If Employee is a director of the
Company and his employment is terminated for any reason
other than death, the Employee shall, if requested by the
Company, immediately resign as a director of the Company.
If such resignation is not received when so requested, the
Employee shall forfeit any right to receive any payments
pursuant to this Agreement.
ARTICLE V
NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS
1. Certain Definitions. For purposes of this
Agreement, the following terms shall have the following
meanings:
(a) "Confidential Information" means any
information, knowledge or data of any nature and in any form
(including information that is electronically transmitted or
stored on any form of magnetic or electronic storage media)
relating to the past, current or prospective business or
operations of the Company and its subsidiaries, that at the
time or times concerned is not generally known to persons
engaged in businesses similar to those conducted or
contemplated by the Company and its subsidiaries (other than
information known by such persons through a violation of an
obligation of confidentiality to the Company), whether
produced by the Company and its subsidiaries or any of their
consultants, agents or independent contractors or by
Employee, and whether or not marked confidential, including
without limitation information relating to the Company's or
its subsidiaries' products and services, business plans,
business acquisitions, processes, product or service
research and development methods or techniques, training
methods and other operational methods or techniques, quality
assurance procedures or standards, operating procedures,
files, plans, specifications, proposals, drawings, charts,
graphs, support data, trade secrets, supplier lists,
supplier information, purchasing methods or practices,
distribution and selling activities, consultants' reports,
marketing and engineering or other technical studies,
maintenance records, employment or personnel data, marketing
data, strategies or techniques, financial reports, budgets,
projections, cost analyses, price lists, formulae and
analyses, employee lists, customer records, customer lists,
customer source lists, proprietary computer software, and
internal notes and memoranda relating to any of the
foregoing.
(b) "Death Care Business" means (i) the owning
and operating of funeral homes and cemeteries, including
combined funeral home and cemetery facilities, (ii) the
offering of a complete range of services and products to
meet families' funeral needs, including prearrangement,
family consultation, the sale of caskets and related funeral
and cemetery products and merchandise, the removal,
preparation and transportation of remains, cremation, the
use of funeral home facilities for visitation and worship,
and related transportation services, (iii) the marketing and
sale of funeral services and cemetery property on an at-need
or prearranged basis, (iv) providing, managing and
administering financing arrangements (including trust funds,
escrow accounts, insurance and installment sales contracts)
for prearranged funeral plans and cemetery property and
merchandise, (v) providing interment services, the sale (on
an at-need or prearranged basis) of cemetery property
including lots, lawn crypts, family and community mausoleums
and related cemetery merchandise such as monuments,
memorials and burial vaults, (vi) the maintenance of
cemetery grounds pursuant to perpetual care contracts and
laws or on a voluntary basis, and (vii) offering mausoleum
design, construction and sales services.
2. Nondisclosure of Confidential Information. During
the Employment Term, Employee shall hold in a fiduciary
capacity for the benefit of the Company all Confidential
Information which shall have been obtained by Employee
during Employee's employment (whether prior to or after the
Agreement Date) and shall use such Confidential Information
solely within the scope of his employment with and for the
exclusive benefit of the Company. For a period of five
years after the Employment Term, commencing with the Date of
Termination, Employee agrees (a) not to communicate, divulge
or make available to any person or entity (other than the
Company) any such Confidential Information, except upon the
prior written authorization of the Company or as may be
required by law or legal process, and (b) to deliver
promptly to the Company any Confidential Information in his
possession, including any duplicates thereof and any notes
or other records Employee has prepared with respect thereto.
In the event that the provisions of any applicable law or
the order of any court would require Employee to disclose or
otherwise make available any Confidential Information,
Employee shall give the Company prompt prior written notice
of such required disclosure and an opportunity to contest
the requirement of such disclosure or apply for a protective
order with respect to such Confidential Information by
appropriate proceedings.
3. Limited Covenant Not to Compete. During the
Employment Term and for a period of two years thereafter,
commencing with the Date of Termination, Employee agrees
that, with respect to each State of the United States or
other jurisdiction, or specified portions thereof, in which
the Employee regularly (a) makes contact with customers of
the Company or any of its subsidiaries, (b) conducts the
business of the Company or any of its subsidiaries or (c)
supervises the activities of other employees of the Company
or any of its subsidiaries, as identified in Appendix "A"
attached hereto and forming a part of this Agreement, and in
which the Company or any of its subsidiaries engages in the
Death Care Business on the Date of Termination
(collectively, the "Subject Areas"), Employee will restrict
his activities within the Subject Areas as follows:
(a) Employee will not, directly or indirectly,
for himself or others, own, manage, operate, control, be
employed in an executive, managerial or supervisory capacity
by, or otherwise engage or participate in or allow his
skill, knowledge, experience or reputation to be used in
connection with, the ownership, management, operation or
control of, any company or other business enterprise engaged
in the Death Care Business within any of the Subject Areas;
provided, however, that nothing contained herein shall
prohibit Employee from making passive investments as long as
Employee does not beneficially own more than 2% of the
equity interests of a business enterprise engaged in the
Death Care Business within any of the Subject Areas. For
purposes of this paragraph, "beneficially own" shall have
the same meaning ascribed to that term in Rule 13d-3 under
the Exchange Act.
(b) Employee will not call upon any customer of
the Company or its subsidiaries for the purpose of
soliciting, diverting or enticing away the business of such
person or entity, or otherwise disrupting any previously
established relationship existing between such person or
entity and the Company or its subsidiaries;
(c) Employee will not solicit, induce, influence
or attempt to influence any supplier, lessor, licensor,
potential acquiree or any other person who has a business
relationship with the Company or its subsidiaries, or who on
the Date of Termination is engaged in discussions or
negotiations to enter into a business relationship with the
Company or its subsidiaries, to discontinue or reduce the
extent of such relationship with the Company or its
subsidiaries; and
(d) Employee will not make contact with any of
the employees of the Company or its subsidiaries with whom
he had contact during the course of his employment with the
Company for the purpose of soliciting such employee for
hire, whether as an employee or independent contractor, or
otherwise disrupting such employee's relationship with the
Company or its subsidiaries.
(e) Employee further agrees that, for a period of
one year from and after the Date of Termination, Employee
will not hire, on behalf of himself or any company engaged
in the Death Care Business with which Employee is
associated, any employee of the Company or its subsidiaries
as an employee or independent contractor, whether or not
such engagement is solicited by Employee; provided, however,
that the restriction contained in this subsection (e) shall
not apply to Company employees who reside in, or are hired
by Employee to perform work in, any of the Subject Areas
located within the States of Virginia, Arkansas or Georgia.
Employee agrees that he will from time to time upon the
Company's request promptly execute any supplement,
amendment, restatement or other modification of Appendix "A"
as may be necessary or appropriate to correctly reflect the
jurisdictions which, at the time of such modification,
should be covered by Appendix "A" and this Article V Section
3. Furthermore, Employee agrees that all references to
Appendix "A" in this Agreement shall be deemed to refer to
Appendix "A" as so supplemented, amended, restated or
otherwise modified from time to time.
4. Injunctive Relief; Other Remedies. Employee
acknowledges that a breach by Employee of Section 2 or 3 of
this Article V would cause immediate and irreparable harm to
the Company for which an adequate monetary remedy does not
exist; hence, Employee agrees that, in the event of a breach
or threatened breach by Employee of the provisions of
Section 2 or 3 of this Article V during or after the
Employment Term, the Company shall be entitled to injunctive
relief restraining Employee from such violation without the
necessity of proof of actual damage or the posting of any
bond, except as required by non-waivable, applicable law.
Nothing herein, however, shall be construed as prohibiting
the Company from pursuing any other remedy at law or in
equity to which the Company may be entitled under applicable
law in the event of a breach or threatened breach of this
Agreement by Employee, including without limitation the
recovery of damages and/or costs and expenses, such as
reasonable attorneys' fees, incurred by the Company as a
result of any such breach. In addition to the exercise of
the foregoing remedies, the Company shall have the right
upon the occurrence of any such breach to cancel any unpaid
salary, bonus, commissions or reimbursements otherwise
outstanding at the Date of Termination. In particular,
Employee acknowledges that the payments provided under
Article IV Sections 3 and 5 are conditioned upon Employee
fulfilling any noncompetition and nondisclosure agreements
contained in this Article V. In the event Employee shall at
any time materially breach any noncompetition or
nondisclosure agreements contained in this Article V, the
Company may suspend or eliminate payments under Article IV
during the period of such breach. Employee acknowledges
that any such suspension or elimination of payments would be
an exercise of the Company's right to suspend or terminate
its performance hereunder upon Employee's breach of this
Agreement; such suspension or elimination of payments would
not constitute, and should not be characterized as, the
imposition of liquidated damages.
5. Requests for Waiver in Cases of Undue Hardship.
In the event that Employee should find any of the
limitations of Article V Section 3 (including without
limitation the geographic restrictions of Appendix "A") to
impose a severe hardship on Employee's ability to secure
other employment, Employee may make a request to the Company
for a waiver of the designated limitations before accepting
employment that otherwise would be a breach of Employee's
promises and obligations under this Agreement. Such request
must be in writing and clearly set forth the name and
address of the organization with that employment is sought
and the location, position and duties that Employee will be
performing. The Company will consider the request and, in
its sole discretion, decide whether and on what conditions
to grant such waiver.
6. Governing Law of this Article V; Consent to
Jurisdiction. Any dispute regarding the reasonableness of
the covenants and agreements set forth in this Article V, or
the territorial scope or duration thereof, or the remedies
available to the Company upon any breach of such covenants
and agreements, shall be governed by and interpreted in
accordance with the laws of the State of the United States
or other jurisdiction in which the alleged prohibited
competing activity or disclosure occurs, and, with respect
to each such dispute, the Company and Employee each hereby
irrevocably consent to the exclusive jurisdiction of the
state and federal courts sitting in the relevant State (or,
in the case of any jurisdiction outside the United States,
the relevant courts of such jurisdiction) for resolution of
such dispute, and agree to be irrevocably bound by any
judgment rendered thereby in connection with such dispute,
and further agree that service of process may be made upon
him or it in any legal proceeding relating to this Article V
and/or Appendix "A" by any means allowed under the laws of
such jurisdiction. Each party irrevocably waives any
objection he or it may have as to the venue of any such
suit, action or proceeding brought in such a court or that
such a court is an inconvenient forum.
7. Employee's Understanding of this Article.
Employee hereby represents to the Company that he has read
and understands, and agrees to be bound by, the terms of
this Article. Employee acknowledges that the geographic
scope and duration of the covenants contained in Article V
Section 3 are the result of arm's-length bargaining and are
fair and reasonable in light of (i) the importance of the
functions performed by Employee and the length of time it
would take the Company to find and train a suitable
replacement, (ii) the nature and wide geographic scope of
the operations of the Company and its subsidiaries, (iii)
Employee's level of control over and contact with the
business and operations of the Company and its subsidiaries
in a significant number of jurisdictions where same are
conducted and (iv) the fact that all facets of the Death
Care Business are conducted by the Company and its
subsidiaries throughout the geographic area where
competition is restricted by this Agreement. It is the
desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permitted under
applicable law, whether now or hereafter in effect and,
therefore, to the extent permitted by applicable law, the
parties hereto waive any provision of applicable law that
would render any provision of this Article V invalid or
unenforceable.
ARTICLE VI
MISCELLANEOUS
1. Binding Effect.
(a) This Agreement shall be binding upon and
inure to the benefit of the Company and any of its
successors or assigns.
(b) This Agreement is personal to the Employee
and shall not be assignable by the Employee without the
consent of the Company (there being no obligation to give
such consent) other than such rights or benefits as are
transferred by will or the laws of descent and distribution.
(c) The Company shall require any successor to or
assignee of (whether direct or indirect, by purchase,
merger, consolidation or otherwise) all or substantially all
of the assets or businesses of the Company (i) to assume
unconditionally and expressly this Agreement and (ii) to
agree to perform all of the obligations under this Agreement
in the same manner and to the same extent as would have been
required of the Company had no assignment or succession
occurred, such assumption to be set forth in a writing
reasonably satisfactory to the Employee. In the event of
any such assignment or succession, the term "Company" as
used in this Agreement shall refer also to such successor or
assign.
2. Notices. All notices hereunder must be in writing
and shall be deemed to have given upon receipt of delivery
by: (a) hand (against a receipt therefor), (b) certified or
registered mail, postage prepaid, return receipt requested,
(c) a nationally recognized overnight courier service
(against a receipt therefor) or (d) telecopy transmission
with confirmation of receipt. All such notices must be
addressed as follows:
If to the Company, to:
Stewart Enterprises, Inc.
110 Veterans Memorial Boulevard
Metairie, Louisiana 70005
Attn: Joseph P. Henican, III
If to the Employee, to:
Raymond C. Knopke, Jr.
2321 Butler Bay Drive North
Windermere, FL 34786
or such other address as to which any party hereto may have
notified the other in writing.
3. Governing Law. This Agreement shall be construed
and enforced in accordance with and governed by the internal
laws of the State of Louisiana without regard to principles
of conflict of laws, except as expressly provided in Article
V Section 6 above with respect to the resolution of disputes
arising under, or the Company's enforcement of, Article V of
this Agreement.
4. Withholding. The Employee agrees that the Company
has the right to withhold, from the amounts payable pursuant
to this Agreement, all amounts required to be withheld under
applicable income and/or employment tax laws, or as
otherwise stated in documents granting rights that are
affected by this Agreement.
5. Severability. If any term or provision of this
Agreement (including without limitation those contained in
Appendix "A"), or the application thereof to any person or
circumstance, shall at any time or to any extent be invalid,
illegal or unenforceable in any respect as written, Employee
and the Company intend for any court construing this
Agreement to modify or limit such provision temporally,
spatially or otherwise so as to render it valid and
enforceable to the fullest extent allowed by law. Any such
provision that is not susceptible of such reformation shall
be ignored so as to not affect any other term or provision
hereof, and the remainder of this Agreement, or the
application of such term or provision to persons or
circumstances other than those as to which it is held
invalid, illegal or unenforceable, shall not be affected
thereby and each term and provision of this Agreement shall
be valid and enforced to the fullest extent permitted by
law.
6. Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach
thereof.
7. Remedies Not Exclusive. No remedy specified
herein shall be deemed to be such party's exclusive remedy,
and accordingly, in addition to all of the rights and
remedies provided for in this Agreement, the parties shall
have all other rights and remedies provided to them by
applicable law, rule or regulation.
8. Company's Reservation of Rights. Employee
acknowledges and understands that the Employee serves at the
pleasure of the Board and that the Company has the right at
any time to terminate Employee's status as an employee of
the Company, or to change or diminish his status during the
Employment Term, subject to the rights of the Employee to
claim the benefits conferred by this Agreement.
9. JURY TRIAL WAIVER. THE PARIES HEREBY WAIVE TRIAL
BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
AGREEMENT.
10. Survival. The rights and obligations of the
Company and Employee contained in Article V of this
Agreement shall survive the termination of the Agreement.
Following the Date of Termination, each party shall have the
right to enforce all rights, and shall be bound by all
obligations, of such party that are continuing rights and
obligations under this Agreement.
11. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to
be an original but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the Company and the Employee have
caused this Agreement to be executed as of the Agreement
Date.
STEWART ENTERPRISES, INC.
By: /s/ James W. McFarland
__________________________
James W. McFarland
Compensation Committee Chairman
EMPLOYEE:
/s/ Raymond C. Knopke Jr.
_________________________
Raymond C. Knopke, Jr.
<PAGE>
Appendix "A" to Employment Agreement
between Stewart Enterprises, Inc.
and
Raymond C. Knopke, Jr.
Revision No. 0 of Appendix "A",
Effective as of August 1, 1995;
Updated to January 16, 1997
Jurisdictions In Which Competition
Is Restricted As Provided
In Article V Section 3
A. States and Territories of the United States:
1. Oregon-- The following counties in the State of Oregon:
Josephine, Deschutes, Washington, Douglas, Washington,
Curry, Jackson, Jefferson, Crook, Harney, Lake,
Klamath, Lane, Linn, Clatsop, Columbia, Multnomah,
Clackamas, Yamhill, Tillamook, Coos
as well as any other counties in the State of Oregon in
which the Employee regularly (a) makes contact with
customers of the Company or any of its subsidiaries,
(b) conducts the business of the Company or any of its
subsidiaries or (c) supervises the activities of other
employees of the Company or any of its subsidiaries as
of the Date of Termination.
2. California-- The following counties in the State of California:
Glenn, Plumas, Sutter, Yuba, Colusa, Tehamma, Sierra,
Fresno, San Mateo, Contra Costa, San Joaquin,
Stanislaus, Santa Clara, Mariposa, Tuolumine, Mono,
Orange, San Brenardino, Kern, Ventura, Inyo, Riverside,
Los Angeles, Monterey, Kings, Santa Barbara, Madera,
Tulane, San Benito, Merced, San Luis Obispo, Nevada,
Del Norte, Siskiyou
as well as any other counties in the State of
California in which the Employee regularly (a) makes
contact with customers of the Company or any of its
subsidiaries, (b) conducts the business of the Company
or any of its subsidiaries or (c) supervises the
activities of other employees of the Company or any of
its subsidiaries as of the Date of Termination.
Agreed to and Accepted:
Stewart Enterprises, Inc. Employee
By: /s/ James W. McFarland /s/ Raymond C. Knopke, Jr.
________________________ ____________________________
Its: Compensation Committee Chairman Date: 2/27/97
Date: 2/27/97 ______________________
_______________________
Employee and the Company agree that, throughout the
Employment Term, Employee shall comply with all of the
requirements and restrictions set forth in Article V of
the Agreement of which this Appendix "A" forms a part;
however, Employee and the Company agree that,
notwithstanding anything to the contrary contained in
Article V, Section 2 or 3 of the Agreement, Employee
shall be required to restrict his post-employment
activities in the State of California only to: (i)
complying with the restrictions set forth in Article V,
Section 2 of the Agreement to the extent that
Confidential Information constitutes a trade secret
under California law and (ii) complying with the
restrictions set forth in Article V, Sections 3(c) and
3(d) of the Agreement. The parties hereby acknowledge
and agree that these modifications to the restrictions
of Article V, Sections 2 and 3 as they relate to post-
employment disclosure and competition in the State of
California are being entered into solely to comply with
the limitations provided in California law on the
extent to which nondisclosure and noncompetition
agreements may be enforced. These modifications do not
reflect the parties' agreement as to the extent of the
limitations upon disclosure and competition necessary
to protect the legitimate interests of the Company;
rather, the provisions of Article V of the Agreement
reflect such agreement.
3. Arizona-- The following counties in the State of Arizona:
Mottave, LaPaz
as well as any other counties in the State of Arizona
in which the Employee regularly (a) makes contact with
customers of the Company or any of its subsidiaries,
(b) conducts the business of the Company or any of its
subsidiaries or (c) supervises the activities of other
employees of the Company or any of its subsidiaries as
of the Date of Termination.
4. Nevada-- The following counties in the State of Nevada:
Clark, Washoe, Douglas
as well as any other counties in the State of Nevada in
which the Employee regularly (a) makes contact with
customers of the Company or any of its subsidiaries,
(b) conducts the business of the Company or any of its
subsidiaries or (c) supervises the activities of other
employees of the Company or any of its subsidiaries as
of the Date of Termination.
B. Other Jurisdictions:
1. Canada-- The following regions in the Country of Canada:
Agreed to and Accepted:
Employee
/s/ Raymond C. Knopke, Jr.
__________________________
Date: 2/27/97
_____________________
Champlain, Roussillon, Vaudeuil-Soulanges, Deux-
Montagnes, Laval, Les Moulins, L'Assomption, La
Jemmerais, Therese de Blainville, C.U. Montreal, Le
Bas-Richelieu, Les Maskoutains, Rouville, Le Haut-
Richelieu, Certier, La Cote-de-Baeupre, L'ile-
D'Orleans, Des-Jardins, Las chutes-de-la-Chaudiere,
Portneuf, Le Haute-Cote-de-Nord, La Fjord-du Saguenay,
Charlevoix, Kamouraska, Riviere du Loup, Las St-Jean
Est, Charlevoix-est, L'islest, Montmagny, Montcalm,
Mirabel, D'autray, La Vallee du Richelieu, Mekinac,
Lotbiniere, Becancour, Nicolet-Yamaska, Maskinange, Le
Centre-de-la Maurice, Argenteuil, Beauharnois-
Salaberry, Le Haut St-Laurent, Prescott, Russell,
Stormont, Dundas, Glengarry, C.U. Quebec, Riviere-du-
Nord
as well as any other regions in the Country of Canada
in which the Employee regularly (a) makes contact with
customers of the Company or any of its subsidiaries,
(b) conducts the business of the Company or any of its
subsidiaries or (c) supervises the activities of other
employees of the Company or any of its subsidiaries as
of the Date of Termination.
C. Acknowledgment
The Company and Employee acknowledge that Employee's
voluntary compliance with Article V, Sections 2 and 3
constitutes a significant part of the consideration for
the Company's agreement to make the payments specified
in Article IV. Therefore, the Company and Employee
acknowledge that it is the intent of this Agreement
that if Employee engages in conduct described as
prohibited conduct in Article V Section 2 or 3, the
Company may suspend or eliminate payments under Article
IV, including Sections 3 and 5 of Article IV, during
the period of such conduct, even if the parties'
contractual prohibitions on such conduct are determined
to be invalid, illegal or unenforceable under
applicable law.
Furthermore, the parties acknowledge that any provision
in this Appendix A that permits Employee to engage,
after the Date of Termination, in a particular
jurisdiction, in conduct otherwise prohibited by
Article V Section 2 or 3 (for example, as in
California) has been agreed to solely in order to
comply with the limitations provided in the law of that
jurisdiction on the extent to which nondisclosure and
noncompetition agreements may be enforced. Therefore,
the parties acknowledge that, although Employee may be
permitted pursuant to this Appendix A to engage, after
the Date of Termination, in certain jurisdictions (such
as California), in conduct otherwise prohibited by
Article V Section 2 or 3, if Employee does engage in
conduct prohibited by the provisions of Article V
Section 2 or 3 (as such provisions appear in the
Agreement without giving effect to any modifications to
such provisions made by this Appendix A), Employee will
forfeit his or her right to payments under Article IV,
including Sections 3 and 5 of Article IV, during the
period of such conduct.
Agreed to and Accepted:
Employee
/s/ Raymond C. Knopke, Jr.
__________________________
Date: 2/27/97
_____________________
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement ("Agreement") between
Stewart Enterprises, Inc., a Louisiana corporation (the
"Company"), and Raymond C. Knopke, Jr. (the "Employee") is
dated as of January 1, 1997 (the "Change of Control
Agreement Date").
ARTICLE I
DEFINITIONS
1.1 Employment Agreement. After a Change of Control
(defined below), this Agreement supersedes the Employment
Agreement dated as of January 1, 1997 between Employee and
the Company (the "Employment Agreement") except to the
extent that certain provisions of the Employment Agreement
are expressly incorporated by reference herein. After a
Change of Control (defined below), the definitions in this
Agreement supersede definitions in the Employment Agreement,
but capitalized terms not defined in this Agreement have the
meanings given to them in the Employment Agreement.
1.2 Definition of "Company". As used in this
Agreement, "Company" shall mean the Company as defined above
and any successor to or assignee of (whether direct or
indirect, by purchase, merger, consolidation or otherwise)
all or substantially all of the assets or business of the
Company.
1.3 Change of Control Defined. "Change of Control"
shall mean:
(a) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 30% of the outstanding
shares of the Company's Class A Common Stock, no par
value per share (the "Common Stock"); provided,
however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of
Control:
(i) any acquisition of Common Stock directly
from the Company,
(ii) any acquisition of Common Stock by the
Company,
(iii) any acquisition of Common Stock by any
employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation
controlled by the Company, or
(iv) any acquisition of Common Stock by any
corporation pursuant to a transaction that
complies with clauses (i), (ii) and (iii) of
subsection (c) of this Section 1.3; or
(b) individuals who, as of the Change of Control
Agreement Date, constitute the Board (the "Incumbent
Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any
individual becoming a director subsequent to the Change
of Control Agreement Date whose election, or nomination
for election by the Company's shareholders, was
approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be
considered a member of the Incumbent Board, unless such
individual's initial assumption of office occurs as a
result of an actual or threatened election contest with
respect to the election or removal of directors or
other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the
Incumbent Board; or
(c) consummation of a reorganization, merger or
consolidation, or sale or other disposition of all of
substantially all of the assets of the Company (a
"Business Combination"), in each case, unless,
following such Business Combination,
(i) all or substantially all of the
individuals and entities who were the beneficial
owners of the Company's outstanding common stock
and the Company's voting securities entitled to
vote generally in the election of directors
immediately prior to such Business Combination
have direct or indirect beneficial ownership,
respectively, of more than 50% of the then
outstanding shares of common stock, and more than
50% of the combined voting power of the then
outstanding voting securities entitled to vote
generally in the election of directors, of the
corporation resulting from such Business
Combination (which, for purposes of this paragraph
(i) and paragraphs (ii) and (iii), shall include a
corporation which as a result of such transaction
controls the Company or all or substantially all
of the Company's assets either directly or through
one or more subsidiaries), and
(ii) except to the extent that such ownership
existed prior to the Business Combination, no
person (excluding any corporation resulting from
such Business Combination or any employee benefit
plan or related trust of the Company or such
corporation resulting from such Business
Combination) beneficially owns, directly or
indirectly, 20% or more of the then outstanding
shares of common stock of the corporation
resulting from such Business Combination or 20% or
more of the combined voting power of the then
outstanding voting securities of such corporation,
and
(iii) at least a majority of the members of
the board of directors of the corporation
resulting from such Business Combination were
members of the Incumbent Board at the time of the
execution of the initial agreement, or of the
action of the Board, providing for such Business
Combination; or
(d) approval by the shareholders of the Company of
a complete liquidation or dissolution of the Company.
1.4 Affiliate. "Affiliate" or "affiliated companies"
shall mean any company controlled by, controlling, or under
common control with, the Company.
1.5 Cause. "Cause" shall mean:
(a) the willful and continued failure of the
Employee to perform substantially the Employee's
duties with the Company or its affiliates (other
than any such failure resulting from incapacity
due to physical or mental illness), after a
written demand for substantial performance is
delivered to the Employee by the Board of the
Company which specifically identifies the manner
in which the Board believes that the Employee has
not substantially performed the Employee's duties,
or
(b) the willful engaging by the Employee in
illegal conduct or gross misconduct which is
materially and demonstrably injurious to the
Company or its affiliates.
For purposes of this provision, no act or failure to act, on
the part of the Employee, shall be considered "willful"
unless it is done, or omitted to be done, by the Employee in
bad faith or without reasonable belief that the Employee's
action or omission was in the best interests of the Company
or its affiliates. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of a senior officer of the
Company or based upon the advice of counsel for the Company
or its affiliates shall be conclusively presumed to be done,
or omitted to be done, by the Employee in good faith and in
the best interests of the Company or its affiliates. The
cessation of employment of the Employee shall not be deemed
to be for Cause unless and until there shall have been
delivered to the Employee a copy of a resolution duly
adopted by the affirmative vote of not less than three-
quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after
reasonable notice is provided to the Employee and the
Employee is given an opportunity, together with counsel, to
be heard before the Board), finding that, in the good faith
opinion of the Board, the Employee is guilty of the conduct
described in subparagraph (a) or (b) above, and specifying
the particulars thereof in detail.
1.6 Good Reason. "Good Reason" shall mean:
(a) Any failure of the Company or its affiliates
to provide the Employee with the position, authority,
duties and responsibilities at least commensurate in
all material respects with the most significant of
those held, exercised and assigned at any time during
the 120-day period immediately preceding the Change of
Control. Employee's position, authority, duties and
responsibilities after a Change of Control shall not be
considered commensurate in all material respects with
Employee's position, authority, duties and
responsibilities prior to a Change of Control unless
after the Change of Control Employee holds (i) an
equivalent position in the Company or, (ii) if the
Company is controlled or will after the transaction be
controlled by another company (directly or indirectly),
an equivalent position in the ultimate parent company.
(b) The assignment to the Employee of any duties
inconsistent in any material respect with Employee's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by Section 2.1(b) of
this Agreement, or any other action that results in a
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not
taken in bad faith that is remedied within 10 days
after receipt of written notice thereof from the
Employee to the Company;
(c) Any failure by the Company or its affiliates
to comply with any of the provisions of this Agreement,
other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith that is remedied
within 10 days after receipt of written notice thereof
from the Employee to the Company;
(d) The Company or its affiliates requiring the
Employee to be based at any office or location other
than as provided in Section 2.1(b)(ii) hereof or
requiring the Employee to travel on business to a
substantially greater extent than required immediately
prior to the Change of Control;
(e) Any purported termination of the Employee's
employment otherwise than as expressly permitted by
this Agreement; or
(f) Any failure by the Company to comply with and
satisfy Sections 3.1(c) and (d) of this Agreement.
For purposes of this Section 1.6, any good faith
determination of "Good Reason" made by the Employee shall be
conclusive. Anything in this Agreement to the contrary
notwithstanding, a termination by the Employee for any
reason during the 30-day period immediately following the
first anniversary of the Change of Control shall be deemed
to be a termination for Good Reason.
ARTICLE II
CHANGE OF CONTROL BENEFIT
2.1 Employment Term and Capacity after Change of
Control. (a) If a Change of Control occurs on or before
October 31, 2000, then the Employee's employment term (the
"Employment Term") shall continue through the later of (a)
the second anniversary of the Change of Control or (b)
October 31, 2000, subject to any earlier termination of
Employee's status as an employee pursuant to this Agreement.
(b) After a Change of Control and during the
Employment Term, (i) the Employee's position (including
status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most
significant of those held, exercised and assigned at any
time during the 120-day period immediately preceding the
Change of Control and (ii) the Employee's service shall be
performed at the location where the Employee was employed
immediately preceding the Change of Control or any office or
location less than 35 miles from such location. Employee's
position, authority, duties and responsibilities after a
Change of Control shall not be considered commensurate in
all material respects with Employee's position, authority,
duties and responsibilities prior to a Change of Control
unless after the Change of Control Employee holds (x) an
equivalent position in the Company or, (y) if the Company is
controlled or will after the transaction be controlled by
another company (directly or indirectly), an equivalent
position in the ultimate parent company. Employee shall
devote himself to his employment responsibilities with the
Company (or, if applicable, the ultimate parent entity) as
provided in Article I Section 3 of the Employment Agreement.
2.2 Compensation and Benefits. During the Employment
Term, Employee shall be entitled to the following
compensation and benefits:
(a) Salary. A salary ("Base Salary") at the rate
of $200,000 per year, payable to the Employee at such
intervals no less frequent than the most frequent
intervals in effect at any time during the 120-day
period immediately preceding the Change of Control or,
if more favorable to the Employee, the intervals in
effect at any time after the Change of Control for
other peer employees of the Company and its affiliated
companies.
(b) Bonus. For the period beginning November 1,
1996, the Employee shall be eligible to receive a bonus
(the "Bonus") of up to $150,000 for each 12-month
period thereafter. Such Bonus shall be comprised of
two elements, the quantitative element and the
qualitative element:
(i) The quantitative element shall be equal
to 75% of the maximum Bonus of $150,000 and shall
be based on the attainment of certain goals to be
established by the Company's compensation
committee, or any similar body, and Employee.
(ii) The qualitative element shall be 25% of
the maximum Bonus of $150,000 and shall be awarded
at the discretion of the Company's Chairman of the
Board. The Chairman of the Board and Employee
shall establish incentive goals and other criteria
for the award of the qualitative element.
The Bonus shall be paid in cash no later than 30 days
following the date on which the information needed to
calculate the Bonus becomes available.
(c) Fringe Benefits. The Employee shall be
entitled to fringe benefits (including, but not limited
to, automobile allowance, reimbursement for membership
dues, and first class air travel) in accordance with
the most favorable agreements, plans, practices,
programs and policies of the Company and its affiliated
companies in effect for the Employee at any time during
the 120-day period immediately preceding the Change of
Control or, if more favorable to the Employee, as in
effect generally at any time thereafter with respect to
other peer employees of the Company and its affiliated
companies.
(d) Expenses. The Employee shall be entitled to
receive prompt reimbursement for all reasonable
expenses incurred by the Employee in accordance with
the most favorable agreements, policies, practices and
procedures of the Company and its affiliated companies
in effect for the Employee at any time during the 120-
day period immediately preceding the Change of Control
or, if more favorable to the Employee, as in effect
generally at any time thereafter with respect to other
peer employees of the Company and its affiliated
companies.
(e) Incentive, Savings and Retirement Plans. The
Employee shall be entitled to participate in all
incentive, savings and retirement plans, practices,
policies and programs applicable generally to other
peer employees of the Company and its affiliated
companies, but in no event shall such plans, practices,
policies and programs provide the Employee with
incentive opportunities (measured with respect to both
regular and special incentive opportunities, to the
extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit
opportunities, in each case, less favorable than the
most favorable of those provided by the Company and its
affiliated companies for the Employee under any
agreements, plans, practices, policies and programs as
in effect at any time during the 120-day period
immediately preceding the Change of Control or, if more
favorable to the Employee, those provided generally at
any time after the Change of Control to other peer
employees of the Company and its affiliated companies.
(f) Welfare Benefit Plans. The Employee and/or
the Employee's family, as the case may be, shall be
eligible for participation in and shall receive all
benefits under welfare benefit plans, practices,
policies and programs provided by the Company and its
affiliated companies (including, without limitation,
medical, prescription, dental, disability, employee
life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable
generally to other peer employees of the Company and
its affiliated companies, but in no event shall such
plans, practices, policies and programs provide the
Employee with benefits, in each case, less favorable
than the most favorable of any agreements, plans,
practices, policies and programs in effect for the
Employee at any time during the 120-day period
immediately preceding the Change of Control or, if more
favorable to the Employee, those provided generally at
any time after the Change of Control to other peer
employees of the Company and its affiliated companies.
(g) Office and Support Staff. The Employee shall
be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive
personal secretarial and other assistance, at least
equal to the most favorable of the foregoing provided
to the Employee by the Company and its affiliated
companies at any time during the 120-day period
immediately preceding the Change of Control or, if more
favorable to the Employee, as provided generally at any
time thereafter with respect to other peer employees of
the Company and its affiliated companies.
(h) Vacation. The Employee shall be entitled to
paid vacation in accordance with the most favorable
agreements, plans, policies, programs and practices of
the Company and its affiliated companies as in effect
for the Employee at any time during the 120-day period
immediately preceding the Change of Control or, if more
favorable to the Employee, as in effect generally at
any time thereafter with respect to other peer
employees of the Company and its affiliated companies.
2.3 Termination of Employment after a Change of
Control. After a Change of Control and during the
Employment Term, the Employee's status as an employee shall
terminate or may be terminated by the Employee, the Company
(or, if applicable, the ultimate parent company), as
provided in Article III of the Employment Agreement
(provided, however, that the definitions of "Cause" and
"Good Reason" in this Agreement shall supersede those
definitions in the Employment Agreement).
2.4 Obligations upon Termination after a Change of
Control.
(a) Termination by Company for Reasons other than
Death, Disability or Cause; by Employee for Good
Reason. If, after a Change of Control and during the
Employment Term, the Company (or, if applicable the
ultimate parent company), terminates the Employee's
employment other than for Cause, death or Disability,
or the Employee terminates employment for Good Reason,
the Company shall pay to the Employee in a lump sum in
cash within 30 days of the Date of Termination an
amount equal to three times the sum of (i) the amount
of Base Salary in effect at the Date of Termination,
plus (ii) the maximum Bonus for which the Employee is
eligible for the 12-month period in which the Date of
Termination occurs.
(b) Death. If, after a Change of Control and
during the Employment Term, the Employee's status as an
employee is terminated by reason of the Employee's
death, this Agreement shall terminate without further
obligation to the Employee's legal representatives
(other than those already accrued to the Employee),
other than the obligation to make any payments due
pursuant to employee benefit plans maintained by the
Company or its affiliated companies.
(c) Disability. If, after a Change of Control and
during the Employment Term, Employee's status as an
employee is terminated by reason of Employee's
Disability (as defined in the Employment Agreement),
this Agreement shall terminate without further
obligation to the Employee (other than those already
accrued to the Employee), other than the obligation to
make any payments due pursuant to employee benefit
plans maintained by the Company or its affiliated
companies.
(d) Cause. If, after a Change of Control and
during the Employment Term, the Employee's status as an
employee is terminated by the Company (or, if
applicable, the ultimate parent entity) for Cause, this
Agreement shall terminate without further obligation to
the Employee other than for obligations imposed by law
and obligations imposed pursuant to any employee
benefit plan maintained by the Company or its
affiliated companies.
(e) Termination by Employee for Reasons other than
Good Reason. If, after a Change of Control and during
the Employment Term, the Employee's status as an
employee is terminated by the Employee for reasons
other than Good Reason, then the Company shall pay to
the Employee an amount equal to a single year's Base
Salary in effect at the Date of Termination, payable in
equal installments over a two-year period at such
intervals as other salaried employees of the Company
are paid.
(f) Nondisclosure, Noncompetition and Proprietary
Rights. The rights and obligations of the Company and
Employee contained in Article V ("Nondisclosure,
Noncompetition and Proprietary Rights") of the
Employment Agreement shall continue to apply after a
Change of Control, except as provided in Section 2.10
of this Agreement.
2.5 Accrued Obligations and Other Benefits. It is the
intent of the Employment Agreement and this Agreement that
upon termination of employment for any reason the Employee
be entitled to receive promptly, and in addition to any
other benefits specifically provided, (a) the Employee's
Base Salary through the Date of Termination to the extent
not theretofore paid, (b) any accrued vacation pay, to the
extent not theretofore paid, and (c) any other amounts or
benefits required to be paid or provided or which the
Employee is entitled to receive under any plan, program,
policy practice or agreement of the Company.
2.6 Stock Options. The foregoing benefits are
intended to be in addition to the value of any options to
acquire Common Stock of the Company the exercisability of
which is accelerated pursuant to the terms of any stock
option, incentive or other similar plan heretofore or
hereafter adopted by the Company.
2.7 Protection of Benefits. To the extent permitted
by applicable law, the Company shall take all reasonable
steps to ensure that the Employee is not, by reason of a
Change of Control, deprived of the economic value (including
any value attributable to the Change of Control transaction)
of (a) any options to acquire Common Stock of the Company or
(b) any Common Stock of the Company beneficially owned by
the Employee.
2.8 Certain Additional Payments. If after a Change of
Control Employee is subjected to an excise tax as a result
of the "excess parachute payment" provisions of section 4999
of the Internal Revenue Code of 1986, as amended, whether by
virtue of the benefits of this Agreement or by virtue of any
other benefits provided to Employee in connection with a
Change of Control pursuant to Company plans, policies or
agreements (including the value of any options to acquire
Common Stock of the Company the exercisability of which is
accelerated pursuant to the terms of any stock option,
incentive or similar plan heretofore or hereafter adopted by
the Company), the Company shall pay to Employee (whether or
not his employment has terminated) such amounts as are
necessary to place Employee in the same position after
payment of federal income and excise taxes as he would have
been if such provisions had not been applicable to him.
2.9 Legal Fees. The Company agrees to pay as
incurred, to the full extent permitted by law, all legal
fees and expenses which the Employee may reasonably incur as
a result of any contest (regardless of the outcome thereof)
by the Company, the Employee or others of the validity or
enforceability of, or liability under, any provision of this
Agreement (including as a result of any contest by the
Employee about the amount or timing of any payment pursuant
to this Agreement.)
2.10 Set-Off; Mitigation. After a Change of Control,
the Company's and its affiliates' obligations to make the
payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by
any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company or its affiliates
may have against the Employee or others. After a Change of
Control, an asserted violation of the provisions of Article
V ("Nondisclosure, Noncompetition and Proprietary Rights")
of the Employment Agreement shall not constitute a basis for
deferring or withholding any amounts otherwise payable to
the Employee; specifically, the third through sixth
sentences of Article V Section 4 shall not apply after a
Change of Control. It is the intent of the Employment
Agreement and this Agreement that in no event shall the
Employee be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to
the Employee under any of the provisions of this Agreement
or the Employment Agreement.
ARTICLE III
MISCELLANEOUS
3.1 Binding Effect; Successors.
(a) This Agreement shall be binding upon and
inure to the benefit of the Company and any of its
successors or assigns.
(b) This Agreement is personal to the Employee
and shall not be assignable by the Employee without the
consent of the Company (there being no obligation to give
such consent) other than such rights or benefits as are
transferred by will or the laws of descent and distribution.
(c) The Company shall require any successor to or
assignee of (whether direct or indirect, by purchase,
merger, consolidation or otherwise) all or substantially all
of the assets or businesses of the Company (i) to assume
unconditionally and expressly this Agreement and (ii) to
agree to perform or to cause to be performed all of the
obligations under this Agreement in the same manner and to
the same extent as would have been required of the Company
had no assignment or succession occurred, such assumption to
be set forth in a writing reasonably satisfactory to the
Employee.
(d) The Company shall also require all entities
that control or that after the transaction will control
(directly or indirectly) the Company or any such successor
or assignee to agree to cause to be performed all of the
obligations under this Agreement, such agreement to be set
forth in a writing reasonably satisfactory to the Employee.
3.2 Notices. All notices hereunder must be in writing
and shall be deemed to have given upon receipt of delivery
by: (a) hand (against a receipt therefor), (b) certified or
registered mail, postage prepaid, return receipt requested,
(c) a nationally recognized overnight courier service
(against a receipt therefor) or (d) telecopy transmission
with confirmation of receipt. All such notices must be
addressed as follows:
If to the Company, to:
Stewart Enterprises, Inc.
110 Veterans Memorial Boulevard
Metairie, Louisiana 70005
Attn: Joseph P. Henican, III
If to the Employee, to:
Raymond C. Knopke, Jr.
2321 Butler Bay Drive North
Windermere, FL 34786
or such other address as to which any party hereto may have
notified the other in writing.
3.3 Governing Law. This Agreement shall be construed
and enforced in accordance with and governed by the internal
laws of the State of Louisiana without regard to principles
of conflict of laws, except as expressly provided in Article
V Section 6 of the Employment Agreement with respect to the
resolution of disputes arising under, or the Company's
enforcement of, such Article V.
3.4 Withholding. The Employee agrees that the Company
has the right to withhold, from the amounts payable pursuant
to this Agreement, all amounts required to be withheld under
applicable income and/or employment tax laws, or as
otherwise stated in documents granting rights that are
affected by this Agreement.
3.5 Amendment, Waiver. No provision of this Agreement
may be modified, amended or waived except by an instrument
in writing signed by both parties.
3.6 Severability. If any term or provision of this
Agreement, or the application thereof to any person or
circumstance, shall at any time or to any extent be invalid,
illegal or unenforceable in any respect as written, Employee
and the Company intend for any court construing this
Agreement to modify or limit such provision so as to render
it valid and enforceable to the fullest extent allowed by
law. Any such provision that is not susceptible of such
reformation shall be ignored so as to not affect any other
term or provision hereof, and the remainder of this
Agreement, or the application of such term or provision to
persons or circumstances other than those as to which it is
held invalid, illegal or unenforceable, shall not be
affected thereby and each term and provision of this
Agreement shall be valid and enforced to the fullest extent
permitted by law.
3.7 Waiver of Breach. The waiver by either party of a
breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach
thereof.
3.8 Remedies Not Exclusive. No remedy specified
herein shall be deemed to be such party's exclusive remedy,
and accordingly, in addition to all of the rights and
remedies provided for in this Agreement, the parties shall
have all other rights and remedies provided to them by
applicable law, rule or regulation.
3.9 Company's Reservation of Rights. Employee
acknowledges and understands that the Employee serves at the
pleasure of the Board and that the Company has the right at
any time to terminate Employee's status as an employee of
the Company, or to change or diminish his status during the
Employment Term, subject to the rights of the Employee to
claim the benefits conferred by this Agreement.
3.10 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to
be an original but all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the Company and the Employee have
caused this Agreement to be executed as of the Change of
Control Agreement Date.
STEWART ENTERPRISES, INC.
By: /s/ James W. McFarland
__________________________
James W. McFarland
Compensation Committee Chairman
EMPLOYEE:
/s/ Raymond C. Knopke Jr.
_________________________
Raymond C. Knopke, Jr.
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES
ISSUED PURSUANT TO THE STEWART ENTERPRISES, INC. 1995 INCENTIVE COMPENSATION
PLAN THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
STOCK OPTION AGREEMENT
FOR THE GRANT OF
NON-QUALIFIED STOCK OPTIONS UNDER THE
STEWART ENTERPRISES, INC.
1995 INCENTIVE COMPENSATION PLAN
THIS AGREEMENT is effective as of January 1, 1997 by
and between Stewart Enterprises, Inc., a Louisiana
corporation ("SEI"), and Raymond C. Knopke, Jr.
("Optionee").
WHEREAS Optionee is a key employee of SEI and SEI
considers it desirable and in its best interest that
Optionee be given an inducement to acquire a proprietary
interest in SEI and an added incentive to advance the
interests of SEI by possessing an option to purchase shares
of the Class A common stock of SEI, no par value per share
(the "Common Stock") in accordance with the Stewart
Enterprises, Inc. 1995 Incentive Compensation Plan (the
"Plan"), which was adopted by the Board of Directors on
August 24, 1995 and was approved by the shareholders on
March 7, 1996.
NOW, THEREFORE, in consideration of the premises, it is
agreed by and between the parties as follows:
I.
Grant of Option
SEI hereby grants to Optionee effective January 1, 1997
(the "Date of Grant") the right, privilege and option to
purchase 33,340 shares of Common Stock (the "Option") at an
exercise price of $34.00 per share (the "Exercise Price").
The Option shall be exercisable at the time specified in
Section II below. The Option is a non-qualified stock
option and shall not be treated as an incentive stock option
under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
II.
Time of Exercise
2.1 Subject to the provisions of the Plan and the
other provisions of this Agreement, the Optionee shall be
entitled to exercise his Option as follows:
25% of the total number of shares
covered by the Option
beginning on September 7,
1997, less any shares
previously issued;
50% of the total number of shares
covered by the Option
beginning on September 7,
1998, less any shares
previously issued;
75% of the total number of shares
covered by the Option
beginning on September 7,
1999, less any shares
previously issued;
100% of the total number of shares
covered by the Option
beginning on September 7,
2000, less any shares
previously issued.
The Option shall expire and may not be exercised later than
October 31, 2001.
2.2 If Optionee's employment is terminated, other than
as a result of death, disability or retirement on or after
reaching age 65 or early retirement with the approval of the
Board of Directors, the Option must be exercised, to the
extent exercisable at the time of termination of employment,
within 30 days of the date on which Optionee ceases to be an
employee, except that the Committee may upon request extend
the period after termination of employment during which the
Option may be exercised, but in no event later than October
31, 2001.
2.3 If an Optionee ceases to be an employee because of
disability within the meaning of Section 22(e)(3) of the
Code or retirement, as described in Section 2.2, the Option
must be exercised, to the extent exercisable at the time of
termination of employment, within one year from the date on
which Optionee ceases to be an employee, but in no event
later than October 31, 2001.
2.4 In the event of Optionee's death, the Option must
be exercised by his estate, or by the person to whom such
right evolves from him by reason of his death, to the extent
exercisable at the time of death, within one year from the
date of death, but in no event later than October 31, 2001.
III.
Method of Exercise of Option
Optionee may exercise all or a portion of the Option by
delivering to SEI a signed written notice of his intention
to exercise the Option, specifying therein the number of
shares to be purchased. Upon receiving such notice, and
after SEI has received payment of the Exercise Price as
provided in the Plan, the appropriate officer of SEI shall
cause the transfer of title of the shares purchased to
Optionee on SEI's stock records and cause to be issued to
Optionee a stock certificate for the number of shares being
acquired. Optionee shall not have any rights as a
shareholder until the stock certificate is issued to him.
IV.
Change of Control
4.1 No later than 30 days after the approval by the
Board of a Change of Control of the types described in
Sections 12.12(a)(iii) and (iv) of the Plan, and no later
than 30 days after a Change of Control of the type described
in Sections 12.12(a)(i) and (ii) of the Plan, the Committee
(as the Committee was composed immediately prior to such
Change of Control and notwithstanding any removal or
attempted removal of some or all of the members thereof as
directors or Committee members), acting in its sole
discretion without the consent or approval of any
participant, may act to effect one or more of the
alternatives listed below and such act by the Committee may
not be revoked or rescinded by persons not members of the
Committee immediately prior to the Change of Control:
(a) require that all outstanding options and/or
SARs be exercised on or before a specified date (before
or after such Change of Control) fixed by the
Committee, after which specified date all unexercised
options and SARs shall terminate,
(b) provide for mandatory conversion of some or
all of the outstanding options and SARs held by some or
all participants as of a date, before or after such
Change of Control, specified by the Committee, in which
event such options and SARs shall be deemed
automatically cancelled and Stewart shall pay, or cause
to be paid, to each such participant an amount of cash
per share equal to the excess, if any, of the Change of
Control Value of the shares subject to such option or
SAR, as defined and calculated below, over the exercise
price(s) of such options or SARs, or, in lieu of such
cash payment, the issuance of Common Stock or
securities of an acquiring entity having a Fair Market
Value equal to such excess,
(c) make such equitable adjustments to Incentives
then outstanding as the Committee deems appropriate to
reflect such Change of Control (provided, however, that
the Committee may determine in its sole discretion that
no adjustment is necessary), or
(d) provide that thereafter upon any exercise of
an option or SAR the participant shall be entitled to
purchase under such option or SAR, in lieu of the
number of shares of Common Stock then covered by such
option, the number and class of shares of stock or
other securities or property (including, without
limitation, cash) to which the participant would have
been entitled pursuant to the terms of the agreement
providing for the merger, consolidation, asset sale,
dissolution or other Change of Control of the type
described in Sections 12.12(a)(iii) and (iv) of the
Plan, if, immediately prior to such Change of Control,
the participant had been the holder of record of the
number of shares of Common Stock then covered by such
options or SARs.
4.2 For the purposes of paragraph (b) of Section 4.1
the "Change of Control Value" shall equal the amount
determined by whichever of the following items is
applicable:
(a) the per share price to be paid to shareholders
of Stewart in any such merger, consolidation or other
reorganization,
(b) the price per share offered to shareholders of
Stewart in any tender offer or exchange offer whereby a
Change of Control takes place, or
(c) in all other events, the Fair Market Value per
share of Common Stock into which such options or SARs
being converted are exercisable, as determined by the
Committee as of the date determined by the Committee to
be the date of conversion of such options or SARs.
(d) In the event that the consideration offered to
shareholders of Stewart in any transaction described in
this Section 4.2 consists of anything other than cash,
the Committee shall determine the fair cash equivalent
of the portion of the consideration offered that is
other than cash.
V.
No Contract of Employment Intended
Subject to the terms of any Employment Agreement that
may be in effect from time to time, nothing in this
Agreement shall confer upon Optionee any right to continue
in the employment of SEI or any of its subsidiaries, or to
interfere in any way with the right of SEI or any of its
subsidiaries to terminate Optionee's employment relationship
with SEI or any of its subsidiaries at any time, nor shall
any reference herein to any employment agreement imply that
any such agreement is in effect or that the Optionee is
entitled to enter into any such agreement with SEI.
VI.
Binding Effect
This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs,
executors, administrators and successors.
VII.
Non-Transferability
The Option granted hereby may not be transferred,
assigned, pledged or hypothecated in any manner, by
operation of law or otherwise, other than by will or by the
laws of descent and distribution and shall not be subject to
execution, attachment or similar process.
VIII.
Inconsistent Provisions
The Option granted hereby is subject to the provisions
of the Plan as in effect on the date hereof and as it may be
amended. In the event any provision of this Agreement
conflicts with such a provision of the Plan, the Plan
provision shall control.
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
STEWART ENTERPRISES, INC.
By: /s/ James W. McFarland
___________________________
James W. McFarland
Compensation Committee Chairman
/s/ Raymond C. Knopke, Jr.
_____________________________
Raymond C. Knopke, Jr.
Optionee
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES
ISSUED PURSUANT TO THE STEWART ENTERPRISES, INC. 1995 INCENTIVE COMPENSATION
PLAN THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
STOCK OPTION AGREEMENT
FOR THE GRANT OF
NON-QUALIFIED STOCK OPTIONS UNDER THE
STEWART ENTERPRISES, INC.
1995 INCENTIVE COMPENSATION PLAN
THIS AGREEMENT is effective as of January 1, 1997, by
and between Stewart Enterprises, Inc., a Louisiana
corporation ("SEI"), and Raymond C. Knopke, Jr.
("Optionee").
WHEREAS Optionee is a key employee of SEI and SEI
considers it desirable and in its best interest that
Optionee be given an inducement to acquire a proprietary
interest in SEI and an added incentive to advance the
interests of SEI by possessing an option to purchase shares
of the Class A common stock of SEI, no par value per share
(the "Common Stock") in accordance with the Stewart
Enterprises, Inc. 1995 Incentive Compensation Plan (the
"Plan"), which was adopted by the Board of Directors on
August 24, 1995 and was approved by the shareholders on
March 7, 1996.
NOW, THEREFORE, in consideration of the premises, it is
agreed by and between the parties as follows:
I.
Grant of Option
SEI hereby grants to Optionee effective January 1, 1997
(the "Date of Grant") the right, privilege and option to
purchase 66,660 shares of Common Stock (the "Option") at an
exercise price of $34.00 per share (the "Exercise Price").
The Option shall be exercisable at the time specified in
Section II. below. The Option is a non-qualified stock
option and shall not be treated as an incentive stock option
under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
II.
Time of Exercise
2.1 Subject to the provisions of the Plan, the other
provisions of this Agreement and the provisions of any
employment agreement between SEI and Optionee (the
"Employment Agreement") with respect to performance based
options granted under the Plan, the Option shall become
exercisable in full on the first day between the Date of
Grant and August 31, 2000 that the average of the "Closing
Sale Prices" of a share of Common Stock for the 20 preceding
consecutive trading days equals or exceeds $52.87. If the
conditions described in this Section 2.1 are not met by
August 31, 2000, the Option may not be exercised and shall
terminate immediately.
2.2 "Closing Sale Price" is the closing sale price on
the applicable date for shares of the Common Stock on an
established stock exchange or any automated quotation system
that provides sale quotations.
2.3 The Option shall expire and may not be exercised
later than October 31, 2001.
2.4 Except as otherwise provided in the Employment
Agreement, if Optionee's employment is terminated, other
than as a result of death, disability or retirement on or
after reaching age 65 or early retirement with the approval
of the Board of Directors, the Option must be exercised, to
the extent exercisable at the time of termination of
employment, within the later of (i) 30 days after the date
on which Optionee ceases to be an employee or (ii) 30 days
after the date on which the exercise of the Option and sale
of the underlying securities will not cause the Optionee to
incur a liability to SEI under Section 16 of the Securities
Exchange Act of 1934, except that the Committee may upon
request extend the period after termination of employment
during which the Option may be exercised, but in no event
later than October 31, 2001.
2.5 If an Optionee ceases to be an employee because of
retirement, as described in Section 2.4, or disability
within the meaning of Section 22(e)(3) of the Code, the
Option must be exercised, to the extent exercisable at the
time of termination of employment, within one year from the
date on which Optionee ceases to be an employee, but in no
event later than October 31, 2001.
2.6 In the event of Optionee's death, the Option must
be exercised by his estate, or by the person to whom such
right evolves from him by reason of his death, to the extent
exercisable at the time of death, within one year from the
date of death, but in no event later than October 31, 2001.
III.
Method of Exercise of Option
Optionee may exercise all or a portion of the Option by
delivering to SEI a signed written notice of his intention
to exercise the Option, specifying therein the number of
shares to be purchased. Upon receiving such notice, and
after SEI has received payment of the Exercise Price as
provided in the Plan, the appropriate officer of SEI shall
cause the transfer of title of the shares purchased to
Optionee on SEI's stock records and cause to be issued to
Optionee a stock certificate for the number of shares being
acquired. Optionee shall not have any rights as a
shareholder until the stock certificate is issued to him.
IV.
Change of Control
4.1 No later than 30 days after the approval by the
Board of a Change of Control of the types described in
Sections 12.12(a)(iii) and (iv) of the Plan, and no later
than 30 days after a Change of Control of the type described
in Sections 12.12(a)(i) and (ii) of the Plan, the Committee
(as the Committee was composed immediately prior to such
Change of Control and notwithstanding any removal or
attempted removal of some or all of the members thereof as
directors or Committee members), acting in its sole
discretion without the consent or approval of any
participant, may act to effect one or more of the
alternatives listed below and such act by the Committee may
not be revoked or rescinded by persons not members of the
Committee immediately prior to the Change of Control:
(a) require that all outstanding options and/or
SARs be exercised on or before a specified date (before
or after such Change of Control) fixed by the
Committee, after which specified date all unexercised
options and SARs shall terminate,
(b) provide for mandatory conversion of some or
all of the outstanding options and SARs held by some or
all participants as of a date, before or after such
Change of Control, specified by the Committee, in which
event such options and SARs shall be deemed
automatically cancelled and SEI shall pay, or cause to
be paid, to each such participant an amount of cash per
share equal to the excess, if any, of the Change of
Control Value of the shares subject to such option or
SAR, as defined and calculated below, over the exercise
price(s) of such options or SARs, or, in lieu of such
cash payment, the issuance of Common Stock or
securities of an acquiring entity having a Fair Market
Value equal to such excess,
(c) make such equitable adjustments to Incentives
then outstanding as the Committee deems appropriate to
reflect such Change of Control (provided, however, that
the Committee may determine in its sole discretion that
no adjustment is necessary), or
(d) provide that thereafter upon any exercise of
an option or SAR the participant shall be entitled to
purchase under such option or SAR, in lieu of the
number of shares of Common Stock then covered by such
option, the number and class of shares of stock or
other securities or property (including, without
limitation, cash) to which the participant would have
been entitled pursuant to the terms of the agreement
providing for the merger, consolidation, asset sale,
dissolution or other Change of Control of the type
described in Sections 12.12(a)(iii) and (iv) of the
Plan, if, immediately prior to such Change of Control,
the participant had been the holder of record of the
number of shares of Common Stock then covered by such
options or SARs.
4.2 For the purposes of paragraph (b) of Section 4.1
"Change of Control Value" shall equal the amount determined
by whichever of the following items is applicable:
(a) the per share price to be paid to shareholders
of SEI in any such merger, consolidation or other
reorganization,
(b) the price per share offered to shareholders of
SEI in any tender offer or exchange offer whereby a
Change of Control takes place, or
(c) in all other events, the Fair Market Value per
share of Common Stock into which such options or SARs
being converted are exercisable, as determined by the
Committee as of the date determined by the Committee to
be the date of conversion of such options or SARs.
(d) In the event that the consideration offered to
shareholders of SEI in any transaction described in
this Section 4.2 consists of anything other than cash,
the Committee shall determine the fair cash equivalent
of the portion of the consideration offered that is
other than cash.
V.
No Contract of Employment Intended
Subject to the terms of any Employment Agreement that
may be in effect from time to time, nothing in this
Agreement shall confer upon Optionee any right to continue
in the employment of SEI or any of its subsidiaries, or to
interfere in any way with the right of SEI or any of its
subsidiaries to terminate Optionee's employment relationship
with SEI or any of its subsidiaries at any time, nor shall
any references herein to any employment agreement imply that
any such agreement is in effect or that the Optionee is
entitled to enter into any such agreement with SEI.
VI.
Binding Effect
This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs,
executors, administrators and successors.
VII.
Non-Transferability
The Option granted hereby may not be transferred,
assigned, pledged or hypothecated in any manner, by
operation of law or otherwise, other than by will or by the
laws of descent and distribution and shall not be subject to
execution, attachment or similar process.
VIII.
Inconsistent Provisions
The Option granted hereby is subject to the provisions
of the Plan as in effect on the date hereof and as it may be
amended. In the event any provision of this Agreement
conflicts with such a provision of the Plan, the Plan
provision shall control. In the event any provision of this
Agreement conflicts with a provision of any Employment
Agreement containing any provision relating to the Option,
the Employment Agreement provision shall control.
IN WITNESS WHEREOF the parties hereto have caused this
Agreement to be executed as of the day and year first above
written.
STEWART ENTERPRISES, INC.
By: /s/ James W. McFarland
____________________________
James W. McFarland
Compensation Committee Chairman
/s/ Richard C. Knopke, Jr.
_____________________________
Richard C. Knopke, Jr.
Optionee
Exhibit 12
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES
Calculation of Ratio of Earnings to Fixed Charges
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Quarter
Year Ended October 31, Ended
________________________________________ January 31,
1992 1993 1994 1995 1996 1997
______ _______ _______ _______ _______ _______
<S> <C> <C> <C> <C> <C> <C>
Net earnings from continuing
operations before income taxes $ 20,942 $ 29,569 $ 42,198 $ 41,500 $ 82,075 $ 23,838
Fixed charges:
Interest expense 5,414 6,540 8,877 22,815 26,051 8,962
Interest portion of lease expense 456 585 935 1,343 1,522 392
_________ _________ ________ ________ ________ __________
Total fixed charges 5,870 7,125 9,812 24,158 27,573 9,354
Net earnings from continuing
operations before income taxes
and fixed charges $ 26,812 $ 36,694 $ 52,010 $ 65,658 $109,648 $ 33,192
========= ======== ======== ======== ======== =========
Ratio of earnings to fixed charges 4.57 5.15 5.30 2.72 3.98 3.55
========= ======== ======== ======== ======== =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM CONSOLIDATED FINANCIAL
STATEMENTS FOR THE QUARTER ENDED JANUARY 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 22,033
<SECURITIES> 1,534
<RECEIVABLES> 117,382
<ALLOWANCES> 0
<INVENTORY> 33,151
<CURRENT-ASSETS> 179,724
<PP&E> 357,263
<DEPRECIATION> (72,947)
<TOTAL-ASSETS> 1,413,727
<CURRENT-LIABILITIES> 79,605
<BONDS> 545,655
0
0
<COMMON> 42,050
<OTHER-SE> 515,827
<TOTAL-LIABILITY-AND-EQUITY> 1,413,727
<SALES> 122,662
<TOTAL-REVENUES> 122,662
<CGS> 86,792
<TOTAL-COSTS> 86,792
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,962
<INCOME-PRETAX> 23,838
<INCOME-TAX> 8,462
<INCOME-CONTINUING> 15,376
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,376
<EPS-PRIMARY> .37
<EPS-DILUTED> 0
</TABLE>
