SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. - )
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Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c)
or Section 240.14a-12
STEWART ENTERPRISES, INC.
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(Name of Registrant as Specified In Its Charter)
----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other
than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total Fee Paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
[LETTERHEAD OF FRANK B. STEWART, JR.]
March 1, 2000
To our shareholders:
You are cordially invited to the annual meeting of shareholders of
Stewart Enterprises, Inc. to be held at 11:00 a.m. on April 12, 2000, in
the Hotel Intercontinental, 444 St. Charles Avenue, New Orleans, Louisiana.
The attached notice of meeting and proxy statement describe in detail
the matters proposed by your board of directors to be considered and voted
upon at the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
ACCORDINGLY, WE ASK THAT YOU READ THE ATTACHED NOTICE OF MEETING AND PROXY
STATEMENT CAREFULLY AND THAT YOU COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
AND RETURN IT PROMPTLY IN THE ACCOMPANYING POSTPAID ENVELOPE. This will
ensure that your vote is counted. Furnishing the enclosed proxy will not
prevent you from voting in person at the meeting if you wish to do so.
Please return the enclosed proxy and save us the cost of having to
contact you again in order to obtain your signed proxy.
Sincerely,
/S/ Frank B. Stewart, Jr.
Frank B. Stewart, Jr.
Chairman of the Board
<PAGE>
STEWART ENTERPRISES, INC.
110 VETERANS MEMORIAL BOULEVARD
METAIRIE, LOUISIANA 70005
---------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------------------------------
TO THE SHAREHOLDERS OF STEWART ENTERPRISES, INC.:
You are cordially invited to the 2000 annual meeting of our
shareholders which will be held in the Hotel Intercontinental, 444 St.
Charles Avenue, New Orleans, Louisiana, on April 12, 2000, at 11:00 a.m.
for the following purposes:
* To elect two directors to serve a three-year term of office
expiring at our 2003 annual meeting
* To approve the adoption of the 2000 Incentive Compensation
Plan for officers and key employees of our company
* To approve the adoption of the 2000 Directors' Stock Option
Plan
* To ratify the retention of PricewaterhouseCoopers LLP,
certified public accountants, as independent auditors for the
fiscal year ending October 31, 2000
* To transact such other business as may properly come before
the meeting or any adjournment thereof
Only shareholders of record at the close of business on February 18,
2000, are entitled to notice of and to vote at our 2000 annual meeting.
If you are unable to attend in person and wish to have your shares
voted, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN
THE ACCOMPANYING POSTPAID ENVELOPE AS PROMPTLY AS POSSIBLE. You may revoke
your proxy by giving notice to our Secretary at any time before it is voted
at the annual meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ Loralice A. Trahan
Loralice A. Trahan
Secretary
Metairie, Louisiana
March 1, 2000
<PAGE>
STEWART ENTERPRISES, INC.
110 VETERANS MEMORIAL BOULEVARD
METAIRIE, LOUISIANA 70005
MARCH 1, 2000
PROXY STATEMENT
We are furnishing this proxy statement to our shareholders in
connection with the solicitation of proxies on behalf of our board of
directors for use at the 2000 annual meeting of our shareholders to be held
on April 12, 2000, at 11:00 a.m. in the Hotel Intercontinental, 444 St.
Charles Avenue, New Orleans, Louisiana.
Only holders of record of our Class A and Class B common stock at the
close of business on February 18, 2000, are entitled to notice of and to
vote at our 2000 annual meeting. On that date, we had outstanding
(A) 102,823,717 shares of our Class A common stock, each of which is
entitled to one vote, and (B) 3,555,020 shares of our Class B common stock,
each of which is entitled to ten votes.
You may revoke your proxy at any time before it is voted at the annual
meeting by filing with our Secretary a written revocation or duly executed
proxy bearing a later date. Your proxy will be deemed revoked if you
attend the annual meeting and vote in person.
We will begin mailing this proxy statement to our shareholders on or
about March 1, 2000, and we will bear the cost of soliciting proxies in the
enclosed form. In addition to the use of the mails, proxies may be
solicited by personal interview, telephone and facsimile. We will ask
banks, brokerage houses and other institutions, nominees and fiduciaries to
forward the soliciting material to their principals and to obtain
authorization for the execution of proxies, and we will reimburse them upon
request for their reasonable expenses in so acting.
<PAGE>
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN BENEFICIAL OWNERS
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth certain information concerning the
beneficial ownership, as of February 18, 2000, of our Class A and Class B
common stock by (1) each director and director nominee, (2) each executive
officer for whom compensation information is disclosed under the caption
"Executive Compensation," and (3) all of our directors and executive
officers as a group, determined in accordance with Rule 13d-3 of the
Securities Exchange Act of 1934. Unless otherwise indicated, all shares
shown as beneficially owned are held with sole voting and investment power.
<TABLE>
<CAPTION>
ACQUIRABLE THROUGH
CURRENTLY
NUMBER OF SHARES EXERCISABLE PERCENT
BENEFICIAL OWNER CLASS BENEFICIALLY OWNED(1) STOCK OPTIONS(2) OF CLASS(2)
---------------- ------- ---------------------- ------------------ ----------
<S> <C> <C> <C> <C>
DIRECTORS AND DIRECTOR NOMINEES
Frank B. Stewart, Jr. .............. Class A 6,931,844(3) 0 6.7%
P.O. Box 19925 Class B 3,555,020(4) 0 100.0%
New Orleans, LA 70179
William E. Rowe .................... Class A 200,200 294,016 *
Kenneth C. Budde ................... Class A 78,400 89,000 *
Darwin C. Fenner ................... Class A 490,248(5) 86,400 *
Dwight A. Holder ................... Class A 80,000(6) 62,400 *
John P. Laborde .................... Class A 52,928(7) 50,400 *
James W. McFarland ................. Class A 16,140 73,348 *
Michael O. Read .................... Class A 43,642(8) 68,400 *
NAMED EXECUTIVE OFFICERS(9)
Joseph P. Henican, III ............. Class A 594,232(10) 0 *
Brian J. Marlowe ................... Class A 139,612(11) 177,008 *
Charles L. Tilis ................... Class A 10,000 51,666 *
All directors and executive
officers as a group (17 persons).. Class A 7,980,229 1,475,000 9.1%(12)
Class B 3,555,020 0 100.0%(12)
</TABLE>
- --------------------
* Less than 1%.
(1) Excludes shares subject to options currently exercisable or exercisable
within 60 days, which shares are set forth separately in the next
column.
(2) Consists of shares subject to options currently exercisable or
exercisable within 60 days. These shares are deemed to be outstanding
for purposes of computing the percentage of outstanding Class A common
stock owned by a person individually and by all directors and executive
officers as a group but are not deemed to be outstanding for the
purpose of computing the individual ownership percentage of any other
person.
<PAGE>
(3) Includes 6,483,844 shares owned as community property with Mr.
Stewart's wife and 448,000 shares owned by the Frank B. Stewart, Jr.
Foundation (a non-profit corporation), with respect to which Mr.
Stewart is a trustee and shares voting and investment power.
(4) Each share of Class B common stock has ten votes per share and, unless
otherwise required by law, the holder of Class B common stock votes
together with the holders of Class A common stock on all matters
brought before the shareholders.
(5) Includes 900 shares owned by Mr. Fenner's wife and 448,000 shares held
by the Frank B. Stewart, Jr. Foundation (a non-profit corporation),
with respect to which Mr. Fenner is a trustee and shares voting and
investment power.
(6) Includes 50,000 shares owned by Mr. Holder's wife.
(7) Includes 428 shares owned by Mr. Laborde's wife.
(8) Includes 10,500 shares held in a trust, with respect to which Mr. Read
is a trustee and shares voting and investment power.
(9) Information regarding Messrs. Stewart and Rowe, the named executive
officers other than Messrs. Henican, Marlowe and Tilis, appears
immediately above under the caption "Directors and Director Nominees."
(10)Includes 10,000 shares owned by Mr. Henican's wife and 1,200 shares
owned by his children. Mr. Henican was the Chief Executive Officer and
a director of our company until November 15, 1999.
(11)Includes 1,800 shares held in Mr. Marlowe's wife's retirement fund.
(12)As of February 18, 2000, all directors and executive officers as a
group beneficially owned shares of Class A and B common stock
representing 32.2 percent of our total voting power.
--------------------
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of February 18, 2000, the persons named below were, to our
knowledge, the only beneficial owners of more than 5 percent of our
outstanding Class A common stock, determined in accordance with Rule 13d-3
of the Securities Exchange Act of 1934, other than Frank B. Stewart, Jr.,
whose beneficial ownership of our Class A common stock is described above.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER CLASS BENEFICIAL OWNERSHIP OF CLASS
------------------ ------- ---------------------- ----------
<S> <C> <C> <C>
Capital Research and Management CLASS A 8,200,000(1) 8.0%
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
- --------------------
(1) Based solely on information contained in a Schedule 13G filed with the
Securities and Exchange Commission ("SEC") on February 11, 2000,
indicating that all shares shown as beneficially owned are held with
sole investment power and no voting power.
ELECTION OF DIRECTORS
GENERAL
Our Amended and Restated Articles of Incorporation (the "Articles")
and By-laws divide the board of directors into three classes serving three-
year staggered terms and, pursuant to our By-laws and a resolution of the
board of directors, the number of directors has been set at seven. The
term of office of our Class I directors expires at our 2000 annual meeting.
The Class II and Class III directors are serving terms that expire at our
2001 and 2002 annual meetings, respectively. Dwight A. Holder, one of our
Class I directors, has chosen not to stand for re-election, and Joseph P.
Henican, III resigned as a Class I director on November 15, 1999. As a
result of the vacancies created by Mr. Holder's and Mr. Henican's
departures, our board would consist of only one Class I director but three
directors in each of Class II and Class III. To re-balance the classes,
Mr. Rowe resigned as a Class III director on January 31, 2000, and was
immediately re-appointed by our board as a Class I director. Accordingly,
William E. Rowe and Michael O. Read, our other Class I director, have been
nominated by the board of directors for re-election at our 2000 annual
meeting for a three-year term of office expiring at our 2003 annual meeting
and until their successors are duly elected and qualified.
Unless authority to vote for the election of directors is withheld,
the proxy holders named on the enclosed proxy will vote all shares
represented thereby in favor of the election of each of the two nominees
listed below. We are informed that each nominee is willing to serve;
however, in accordance with our By-laws, if any of them should decline or
become unable to serve for any reason, votes represented by the enclosed
proxy will be cast instead for a substitute nominee designated by the board
of directors, or, if none is designated, the number of directors will be
reduced automatically by the total number of nominees withdrawn from
consideration. Under our By-laws, directors are elected by plurality vote.
A shareholder of record who wishes to nominate one or more persons for
election to the board of directors must comply with the procedures
established by our Articles and By-laws. Pursuant to those procedures, the
shareholder may nominate one or more persons for election at a meeting of
shareholders only if the shareholder is entitled to vote at the meeting and
provides timely notice in writing to our Secretary at our principal office,
110 Veterans Memorial Boulevard, Metairie, Louisiana 70005. To be timely,
a shareholder's notice must be received at our principal office not less
than 45 days nor more than 90 days prior to the meeting; however, if less
than 55 days notice or prior public disclosure of the date of the meeting
is given or made to shareholders, notice by the shareholder must be
received at our principal office no later than the close of business on the
tenth day following the day on which such notice of the date of the meeting
was mailed or such public disclosure was made. The notice must include the
following information with respect to each person the shareholder proposes
to nominate: (1) the person's name, age, business address and residential
address, (2) the person's principal occupation or employment, (3) the class
and number of shares of our capital stock of which such person is the
beneficial owner (as defined in Rule 13d-3 of the Securities Exchange Act
of 1934), (4) the person's written consent to being named in the proxy
statement as a nominee and to serve as a director if elected, and (5) any
other information relating to such person that would be required to be
disclosed in solicitations of proxies for the election of directors, or
otherwise would be required, in each case pursuant to Regulation 14A of the
Securities Exchange Act of 1934. The notice also must include the
following information with respect to the shareholder giving the notice:
(1) the name and address of the shareholder and (2) the class and number of
shares of our capital stock of which the shareholder is the beneficial
owner (as defined in Rule 13d-3 of the Securities Exchange Act of 1934).
If requested in writing by our Secretary at least 15 days in advance of the
meeting, the shareholder must disclose to our Secretary, within ten days of
the request, whether the person is the sole beneficial owner of the shares
held of record by the shareholder, and, if not, the name and address of
each other person known by the shareholder of record to claim or have a
beneficial interest in the shares.
The following table sets forth certain information regarding the
directors and nominees for election as directors. Unless otherwise
indicated, each director has been engaged in the principal occupation shown
for more than the past five years.
<PAGE>
<TABLE>
<CAPTION>
NOMINATED
NAME, AGE, PRINCIPAL OCCUPATION, DIRECTOR FOR TERM
AND DIRECTORSHIPS IN OTHER PUBLIC COMPANIES SINCE EXPIRING
- ------------------------------------------- ---------- ----------
<S> <C> <C>
NOMINEES FOR ELECTION AS CLASS I DIRECTORS:
William E. Rowe, 53 ............................. 1994 2003
President and
Chief Executive Officer(1)
Michael O. Read, 56 ............................. 1991 2003
Business Development,
Marsh USA, Inc.
(insurance brokerage and consulting)(2)
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED ABOVE.
CONTINUING CLASS II DIRECTORS:
Frank B. Stewart, Jr., 64 ....................... 1970 2001
Chairman of the Board(3)
Darwin C. Fenner, 67 ............................ 1991 2001
Investment Counsel, Chairman
and Chief Executive Officer,
Fenner, Plauche' & Williams Investment
Management Company(4)
John P. Laborde, 76 ............................. 1995 2001
Chairman Emeritus and Director, Tidewater Inc.
(marine transportation)(5)
CONTINUING CLASS III DIRECTORS:
James W. McFarland, 54 .......................... 1995 2002
Dean, A.B. Freeman
School of Business,
Tulane University(6)
Kenneth C. Budde, 52 ............................ 1998 2002
Executive Vice President and
Chief Financial Officer(7)
</TABLE>
- ---------------------
(1) Mr. Rowe became our Chief Executive Officer on November 15, 1999. Mr.
Rowe has served as our President since November 1, 1994. He became
our Senior Executive Vice President and Chief Operating Officer in
April 1994. Prior to that time, he served as Executive Vice President
and President of our former Mid-Atlantic Division.
(2) Prior to January 1994, Mr. Read was a partner of Montgomery, Barnett,
Brown, Read, Hammond & Mintz, Attorneys at Law. Mr. Read is the
chairman of our audit committee and a member of our compensation
committee.
<PAGE>
(3) Mr. Stewart served as our interim Chief Executive Officer from
November 1, 1994, upon the retirement of Lawrence M. Berner as our
President and Chief Executive Officer, until February 1, 1995, when
Mr. Henican became our Chief Executive Officer.
(4) Mr. Fenner is the chairman of our investment committee and is a member
of our compensation committee.
(5) Mr. Laborde was Chairman, President and Chief Executive Officer of
Tidewater Inc. from 1956 to 1994. He is also a director of Stolt
Comex Seaway, S.A. and Stone Energy Corporation. Mr. Laborde is a
member of our audit committee and investment committee.
(6) Dean McFarland is also a director of Petroleum Helicopters, Inc. and
Sizeler Property Investors, Inc. Dean McFarland is the chairman of
our compensation committee and a member of our audit committee.
(7) Mr. Budde has served as our Executive Vice President, Chief Financial
Officer and a director since May 1, 1998. Prior to that time, he
served as our Senior Vice President of Finance, Secretary and
Treasurer. Mr. Budde is a member of our investment committee.
--------------------
During the fiscal year ended October 31, 1999, our board of directors
held 11 meetings. Each director attended 75 percent or more of the
aggregate number of meetings of the board of directors and committees of
which he was a member that were held during the period in which he served.
Our board of directors has an audit committee on which Messrs. Read,
Laborde and McFarland serve. Our board of directors also has a
compensation committee on which Messrs. McFarland, Fenner and Read serve.
Our board of directors does not have a nominating committee.
The audit committee has general responsibility for meeting
periodically with representatives of our independent public accountants to
review the general scope of audit coverage, including consideration of our
accounting practices and procedures and our system of internal accounting
controls, and for reporting to the board of directors with respect thereto.
The audit committee also recommends to the board of directors the
appointment of our independent auditors. The audit committee met eight
times during the fiscal year ended October 31, 1999.
The compensation committee reviews, analyzes and recommends
compensation programs to our board of directors. The compensation
committee also is responsible for the administration of and the grant of
awards under our stock compensation plans. If the 2000 Directors' Stock
Option Plan and 2000 Incentive Compensation Plan are approved by our
shareholders at the annual meeting, the compensation committee will also
administer and grant awards under those plans. The compensation committee
met five times during the fiscal year ended October 31, 1999.
COMPENSATION OF DIRECTORS
Each member of the board of directors who is not a full-time employee
(an "Outside Director") was paid during the last fiscal year (1) a
quarterly retainer of $5,250, (2) $1,500 for each board meeting attended,
and (3) $1,500 for each committee meeting attended.
In 1996, we adopted the Amended and Restated Directors' Stock Option
Plan (the "1996 Directors' Plan"), pursuant to which each Outside Director
received, on January 2, 1996, options to purchase 72,000 shares of our
Class A common stock. The options become exercisable in 25 percent annual
increments beginning one year after grant. Upon joining our board of
directors, Mr. Holder received options to purchase 72,000 shares of our
Class A common stock, which become exercisable in 33-1/3 percent annual
increments beginning on January 2, 1998. The options expire on January 2,
2001.
We granted additional options under the 1996 Directors' Plan to each
Outside Director on January 31, 2000. The Outside Directors were each
granted an option on that date to acquire 14,400 shares of our Class A
common stock. The options are exercisable immediately and expire on
January 31, 2005.
<PAGE>
Exercisability of the options granted under the 1996 Directors' Plan
is automatically accelerated in the event of a change of control, as
defined in the plan, and may be accelerated by the compensation committee
at any time in its discretion. The options must be exercised within one
year from the date of termination of board service, unless otherwise
provided in the stock option agreement with the director. The options
granted to Mr. Holder on January 31, 2000, may be exercised on or prior to
January 31, 2005. The exercise price of the options is the fair market
value of the Class A common stock on the date of grant. There are no
additional options available to be granted under the 1996 Directors' Plan.
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table sets forth information with respect to the
compensation paid to our Chief Executive Officer and to each of our four
most highly compensated other executive officers for services rendered
during the fiscal years ended October 31, 1999, 1998 and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------------- -----------
NAME AND OTHER SECURITIES
PRINCIPAL ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
-------- ------ -------- ------- -------------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Frank B. Stewart, Jr. ............. 1999 $450,000 $ 0 $0 0 $ 17,993(1)
Chairman of the Board 1998 519,229 0 0 0 21,578
1997 600,000 0 0 0 16,106
Joseph P. Henican, III (2) ........ 1999 500,000 35,467 0 0 30,761(1)
Formerly Vice Chairman 1998 500,000 360,734 0 500,000 23,988
of the Board and 1997 500,000 175,000 0 0 15,766
Chief Executive Officer
William E. Rowe (2) ............... 1999 500,000 100,000 0 0 30,574(1)
President and Chief 1998 500,000 360,734 0 500,000 23,988
Executive Officer 1997 500,000 175,000 0 0 21,875
Brian J. Marlowe (2) .............. 1999 300,000 70,000 0 0 16,755(1)
Chief Operating Officer and 1998 300,000 170,000 0 250,000 17,767
Executive Vice President 1997 300,000 190,000 0 0 11,495
Charles L. Tillis(3) .............. 1999 225,000 120,000 0 85,000 15,032(1)
Executive Vice President and 1998 200,000 117,500 0 150,000 0
President - Central Division 1997 0 0 0 0 0
</TABLE>
- --------------------
(1)Consists of our contributions to the accounts of the named executive
officers in our Employees' Retirement Trust (a Profit-Sharing Plan) and
our Supplemental Retirement and Deferred Compensation Plan, respectively:
Mr. Stewart, $5,657 and $11,810; Mr. Henican, $5,872 and $24,889; Mr.
Rowe, $5,685 and $24,889; Mr. Marlowe, $5,603 and $11,152 and Mr. Tilis,
$9,603 and $5,429. Additionally, amounts shown for Mr. Stewart include
life insurance premiums we paid on his behalf in the amount of $526.
(2)Mr. Henican stepped down as Chief Executive Officer and resigned as a
director of our company on November 15, 1999. Mr. Rowe became Chief
Executive Officer on November 15, 1999. Mr. Rowe has served as our
President since November 1, 1994, and was our Chief Operating Officer
from April 1994 until November 15, 1999. Mr. Marlowe was named Chief
Operating Officer on December 6, 1999. Prior to that time, Mr. Marlowe
was Executive Vice President and President of our Eastern Division since
August 1995.
(3)Mr. Tilis has served as Executive Vice President and President of our
Central Division since November 1, 1999. From November 1, 1998, to
October 31, 1999, he served as Senior Vice President and President
of our Central Division. He joined our company on November 1, 1997,
as Chief Operating Officer of the Western Region
<PAGE>
of our Central Division. Prior to that time, he was a partner with Coopers
& Lybrand L.L.P., the predecessor firm of PricewaterhouseCoopers LLP, our
independent accountants.
--------------------
STOCK OPTIONS
The following two tables present information with respect to the
executive officers named in the Summary Compensation Table concerning
grants and exercises of stock options during the last fiscal year, and
unexercised options as of October 31, 1999. For information about grants
made after October 31, 1999, see "Proposal to Approve the 2000 Incentive
Compensation Plan -Terms of the 2000 Incentive Compensation Plan -Shares
Issuable through the Plan."
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION> POTENTIAL REALIZABLE VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR OPTION TERM(4)
UNDERLYING GRANTED TO ---------------------------------------
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED(1) FISCAL YEAR PRICE DATE 5% 10% 15% 20%
- ------ ----------- -------------- -------- ---------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles L. Tillis 28,330(2) 31.48% $23.06 7/31/04 $180,492 $398,840 $660,709 $ 972,304
56,570(3) 62.97% 23.06 7/31/04 0 0 0 1,944,952
</TABLE>
- --------------------
(1)All options become immediately exercisable upon a change of control of
our company, and the compensation committee may accelerate the
exercisability of the options at any time in its discretion.
(2)These options become exercisable in 20 percent annual increments,
beginning on July 17, 1999.
(3)These options become exercisable if the average of the closing sale
prices of a share of Class A common stock for 20 consecutive trading
days equals or exceeds $67.81 by July 17, 2003. That price target is
identical to the target set for similar options awarded to the other
executive officers in fiscal year 1998 and represents 20 percent annual
compounded growth in the price of a share of Class A common stock over
five years from the $27.25 exercise price applicable to the prior
awards.
(4)The appreciation is calculated over the term of the options rounded to
the nearest one-half year, beginning with the fair market value on the
date of grant of the options, which was $23.06. As of February 14,
2000, the price of a share of our Class A common stock was $4.47.
Accordingly, none of the options listed in this table are in-the-money.
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
STOCK OPTIONS AT OPTIONS AT
SHARES OCTOBER 31, 1999(1) OCTOBER 31,1999(2)
ACQUIRED VALUE --------------------------- --------------------------
ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph P. Henican, III(3) 0 $ 0 294,016 531,004 $0 $0
William E. Rowe 0 0 294,016 531,004 0 0
Brian J. Marlowe 0 0 177,008 273,002 0 0
Charles L. Tillis 0 0 51,666 183,334 0 0
</TABLE>
- -----------------
(1)These options consist of 40 percent performance-based and 60 percent
time-vest options. The performance-based options were granted in 1998
to Messrs. Henican, Rowe and Marlowe and in 1998 and 1999 to Mr. Tilis
and will become exercisable only if the average of the closing sale
prices of a share of Class A common stock for 20 consecutive trading
days prior to July 17, 2003 equals or exceeds $67.81, which represents a
five-year, 20 percent compounded annual growth rate in the price of a
share of Class A common stock from the $27.25 exercise price applicable
to the initial awards. Sixty-one percent of the time-vest options were
granted in 1995, 37 percent were granted in 1998, and 2 percent were
granted in 1999. All time-vest options become exercisable at the rate
of 20 percent per year over five years from the time of grant. All
options become immediately exercisable upon a change of control of our
company, and the compensation committee may accelerate the
exercisability of the options at any time in its discretion.
(2)No unexercised stock options outstanding at October 31, 1999, were in-
the-money.
(3)Mr. Henican's options were forfeited on December 15, 1999.
EMPLOYMENT AGREEMENTS
We have entered into employment agreements with Messrs. Henican, Rowe,
Marlowe and Tilis (sometimes referred to as the "Named Executive
Officers"). The agreement with Mr. Henican was terminated in connection
with his resignation in late 1999 and was replaced with a termination
agreement, the principal terms of which are described below. The
agreements provide for employment of the Named Executive Officer through
October 31, 2000, subject to earlier termination under limited, specified
circumstances, at a fixed annual salary. The agreements also provide for
an annual bonus. We are in the process of amending the employment
agreements with Messrs. Rowe, Marlowe and Tilis.
The employment agreement with Mr. Rowe provides for a salary of
$450,000 for fiscal year 1996 and $500,000 per fiscal year thereafter. The
employment agreement also provides for Mr. Rowe to be eligible to receive a
maximum bonus of $500,000 per year. Seventy-five percent of Mr. Rowe's
bonus is based on our company's growth in earnings per share from the
previous fiscal year to the current fiscal year, and 25 percent is based on
subjective criteria established by the chairman of the compensation
committee. The amendment to Mr. Rowe's agreement will not change the terms
of his salary and bonus, except that 75 percent of his bonus will be based
on our company's earnings per share.
The employment agreement with Mr. Marlowe provides for a salary of
$300,000 per fiscal year. The employment agreement also provides for Mr.
Marlowe to be eligible to receive a maximum bonus of $270,000 per year,
with 25 percent of the bonus based on our company's growth in earnings per
share from the previous fiscal year to the current fiscal year, 50 percent
based on business unit earnings and 25 percent based on subjective criteria
established by the person to whom he reports. The amendment to Mr. Marlowe's
agreement will reflect that his salary was increased to $355,000 per year,
effective December 6, 1999, and that his salary may be increased further
<PAGE>
by the compensation committee to $400,000. The amendment to Mr. Marlowe's
agreement will also provide that he will be eligible to receive a maximum
bonus of $375,000, with 75 percent of his bonus based on our company's
earnings per share, and 25 percent based on subjective criteria established
by the Chief Executive Officer.
Mr. Tilis's employment agreement provides for a salary of $225,000 per
year. The employment agreement also provides for Mr. Tilis to be eligible
to receive a maximum bonus of $270,000 per year, with 25 percent of the
bonus based on our company's growth in earnings per share from the previous
fiscal year to the current fiscal year, 50 percent based on business unit
earnings and 25 percent based on subjective criteria established by the
person to whom he reports. In addition, Mr. Tilis's employment agreement
guarantees that he will receive a minimum bonus of $100,000. Mr. Tilis's
employment agreement will be amended to increase his salary to $300,000 per
year and his maximum bonus to $300,000 per year beginning on November 1,
1999. In addition, the amendment will provide that 25 percent of Mr.
Tilis's bonus will be based on our company's earnings per share, and the
remainder of his bonus will be based on the criteria in his previous
agreement. The amendment to the employment agreement will not guarantee a
minimum bonus.
The employment agreements also provide that if we terminate the Named
Executive Officer's employment without "cause" (as defined in the
agreement) or the Named Executive Officer terminates employment for "good
reason" (as defined in the agreement), we must pay the executive two times
his annual salary over a two-year period. In addition, the executive will
be entitled to exercise performance-based options if the performance goals
are met within 180 days after the termination of employment. If the
executive terminates his employment for reasons other than "good reason,"
we must pay the executive one year's salary over a two-year period. Each
executive has agreed that he will not compete with us for a period of two
years after the termination of his employment.
Effective November 15, 1999, we entered into a termination agreement
with Mr. Henican. The agreement provides that he will receive a severance
benefit equal to two times his annual salary at November 15, 1999, payable
over a two-year period, and continue to receive until November 15, 2001,
the insurance benefits that were provided to him and his dependents prior
to his resignation.
CHANGE OF CONTROL AGREEMENTS
We have entered into change of control agreements with the Named
Executive Officers, although Mr. Henican's agreement was terminated at the
time of his resignation. The change of control agreements supersede the
employment agreements after a change of control. The agreements provide
that if a change of control occurs before October 31, 2000, the executive's
employment term will continue through the later of the second anniversary
of the change of control or October 31, 2000, subject to earlier
termination pursuant to the agreement. After a change of control and
during the employment term, the executive is entitled to substantially the
same position in substantially the same location as prior to the change of
control. In addition, the executive is entitled to the salary, maximum
bonus and benefits provided in his employment agreement or, if more
favorable, those provided to peer employees of the acquiror.
If after a change of control, but during the employment term, we
terminate the executive's employment without "cause" (as defined
in the agreement) or the executive terminates employment for "good reason"
(as defined in the agreement), we must pay the executive
<PAGE>
in cash within 30 days of termination an amount equal to three times the
sum of his salary and maximum bonus. "Good reason" includes the failure
of the acquiror to provide the executive with substantially the same position
after the change of control, and the executive's position is not considered
to be substantially the same after a change of control unless he holds an
equivalent position with the ultimate parent company of the entity resulting
from the transaction. In addition, a termination by the executive for any
reason during the 30-day period immediately following the first anniversary
of the change of control is deemed a termination for "good reason." If during
the employment term the executive terminates employment for reasons other than
"good reason," he is entitled to receive a single year's salary over a
two-year period. The non-competition provisions of the executive's employment
agreement continue to apply after a change of control.
If after a change of control the executive is subjected to an excise
tax under Section 4999 of the Internal Revenue Code of 1986, as amended
(whether by virtue of the benefits of the change of control agreement or
otherwise, including by virtue of the acceleration of the exercisability of
stock options), we must pay the executive (whether or not his employment
has terminated) such amounts as are necessary to place him 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. We have agreed, to
the extent permitted by applicable law, to take all reasonable steps to
ensure that the executive is not, by reason of a change of control,
deprived of the economic value (including any value attributable to the
change of control) of (1) any options to acquire our common stock or (2)
any of our common stock beneficially owned by the executive. We have
agreed to pay as incurred, to the full extent permitted by law, all legal
fees and expenses the executive may reasonably incur as a result of any
contest of the validity or enforceability of, or liability under, any
provision of the change of control agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, Darwin C. Fenner, James W. McFarland and
Michael O. Read served on the compensation committee. No member served as
an officer or employee of our company or any of our subsidiaries prior to
or while serving on the compensation committee. None of our executive
officers served during the last fiscal year on the board of directors or on
the compensation committee of another entity, one of whose executive
officers served on our board of directors or on our compensation committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The compensation committee approves all of the policies under which
compensation is paid or awarded to our executive officers. All such
decisions are then recommended to the full board of directors for final
approval, except for decisions to make awards to executive officers under
our stock compensation plans, which are made solely by the compensation
committee for tax law purposes.
Our executive compensation policies are designed to:
* Provide competitive levels of compensation that integrate pay
with our annual and long-term performance goals
* Reward achievements in corporate performance
* Recognize individual initiative and performance
* Assist us in attracting and retaining qualified executives
* Align the interests of executives with the long-term interests of
shareholders through award opportunities that can result in
ownership of Class A common stock
Our executive compensation program is comprised of salaries, annual
cash incentive bonuses and long-term incentives in the form of stock
options.
SALARY
The salary levels of our Named Executive Officers, other than
Mr. Stewart, are set out in employment agreements with the officers and
were determined following consultation with independent consultants and
outside advisors after considering the executive compensation policies
described above. Mr. Stewart's salary is paid in consideration of his
longstanding and continuing contributions and value to us. For fiscal year
1999 his salary was $450,000.
INCENTIVE BONUS
During 1998, the compensation committee retained an independent
consulting firm to review our executive compensation. After considering
the consulting firm's reports and recommendations, the compensation
committee determined that our executive compensation should be at or above
the 75th percentile for companies in a peer group
<PAGE>
consisting of public companies similar in size to us and other public
death care companies. Consistent with this objective, the consulting firm's
recommendations and the executive compensation policies described above, Mr.
Henican's previous agreement and the existing employment agreements with
Messrs. Rowe, Marlowe and Tilis provide for maximum incentive bonuses of
$500,000, $500,000, $270,000 and $270,000, respectively. The annual
incentive bonuses paid to Messrs. Rowe, Marlowe and Tilis for 1999 were based
upon the compensation committee's subjective evaluation of their performance.
Mr. Henican received a bonus of $35,467, calculated according to the formula
provided in his employment agreement, which is related to our annual growth
in earnings per share.
STOCK OPTIONS
The compensation committee's practice with respect to stock options
has been to grant options that vest based on the passage of time together
with options that vest based upon the attainment of our performance goals.
Our company granted options to one executive officer in fiscal 1999, which,
consistent with past practice, consisted of two-thirds performance-based
and one-third time-vest options. The performance-based options will vest
only if the average of the closing sale prices of the Class A common stock
over 20 consecutive trading days equals or exceeds $67.81 by July 17, 2003,
and the time-vest options will vest at the rate of 20 percent per year over
five years. The number of options granted to the executive officer who
received options was based upon the officer's salary level and level of
responsibility.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code of 1986, as amended,
prohibits us from deducting more than $1 million in compensation paid to
certain executive officers in a single year. An exception to the
$1 million limit is provided for "performance-based compensation" that
meets certain requirements, including approval by the shareholders.
Options granted under our incentive compensation plans qualify as
"performance-based compensation" and will be excluded in calculating the
$1 million limit under Section 162(m). We currently intend to keep "non-
performance-based compensation" within the $1 million limit in order that
all executive compensation will be fully deductible.
SUBMITTED BY THE COMPENSATION COMMITTEE.
Darwin C. Fenner James W. McFarland Michael O. Read
<PAGE>
TOTAL RETURN COMPARISON
The graph and corresponding table below provide a comparison of the
cumulative total shareholder return on our Class A common stock, the S&P
500 Index and an industry index made up of the Loewen Group Inc. ("Loewen")
and Service Corporation International ("SCI") for our last five fiscal
years. We believe that we, Loewen and SCI are the only major death care
providers that have been publicly traded in the United States throughout
the entire period covered by the graph. The information in the graph is
based on the assumption of a $100 investment on October 31, 1994, at the
closing price on that date and includes the reinvestment of dividends. The
returns of each issuer in the industry index are weighted according to its
stock market capitalization at the beginning of each period for which a
return is indicated.
[INSERT GRAPH HERE]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL SHAREHOLDER RETURN
---------------------------------------------
Index OCTOBER 31,
---------------------------------------------
1994 1995 1996 1997 1998 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Stewart Enterprises 100.0 140.2 213.9 259.7 289.3 60.1
S & P 500 Index 100.0 123.1 149.3 193.6 232.6 288.5
Industry Index 100.0 155.7 201.2 194.6 204.7 53.7
</TABLE>
<PAGE>
CERTAIN TRANSACTIONS
GENERAL
We lease our corporate offices from a general partnership in which Mr.
Stewart owns a 99.3 percent partnership interest. We paid an aggregate of
$534,410 in rental payments to the partnership during the fiscal year ended
October 31, 1999.
During the fiscal year ended October 31, 1992, Mr. Stewart and two
trusts established by Mr. and Mrs. Stewart entered into an agreement with
us whereby we, with the approval of all of the disinterested members of our
board of directors, agreed to advance the premiums on a split dollar
"second-to-die" life insurance policy purchased by the trusts and insuring
the lives of Mr. and Mrs. Stewart. The premiums are payable over a 12-year
period and the trusts are required to reimburse us currently for that
portion of the premiums we paid that, if not reimbursed, would be treated
as compensation to Mr. Stewart for federal income tax purposes. Interest
accrues on the premium advances at 8 percent per annum from the date each
premium payment is made by us. The advances are collateralized by an
assignment of other insurance policies owned by the trusts and shares of
our Class A common stock that are held by the trusts. The trusts have
agreed that, upon the death of Mr. or Mrs. Stewart, the proceeds of such
other insurance policies will be used to reduce the outstanding balance due
to us. We are entitled to reimbursement of the unpaid balance of all
amounts advanced, together with accrued interest, upon the first to occur
of (1) the surrender of the policy, (2) the deaths of Mr. and Mrs. Stewart,
or (3) the expiration of 60 days following the payment in full of all
premiums on the policy. The outstanding amount advanced to the trusts by
us, including accrued interest, was approximately $1,205,474 at October 31,
1999, including $110,000 advanced to the trusts during the fiscal year
ended October 31, 1999.
In January 1998, we discontinued an insurance policy on the life of
Mr. Stewart unrelated to the policy described in the preceding paragraph.
In order to purchase a replacement policy, The Stewart Family Special Trust
borrowed $685,000 from us pursuant to a promissory note due 180 days after
the death of Mr. Stewart. Interest on the note accrues annually at a rate
equal to our cost of borrowing under our $600 million revolving credit
facility, and is payable when the principal becomes due. The amount of the
loan is equal to the cash value received by us upon the discontinuance of
the prior insurance policy. The loan proceeds were used by the trust to
purchase a single premium policy on the life of Mr. Stewart. Certain of the
beneficiaries of The Stewart Family Special Trust are members of Mr.
Stewart's family. The loan was approved by all of the disinterested
members of the board of directors. The outstanding balance of the loan at
October 31, 1999, including accrued interest, was approximately $765,769.
In fiscal year 1997, in connection with our acquisition of certain
cemeteries from Mr. Holder, Mr. Holder's daughter entered into a non-
competition agreement with one of our subsidiaries providing that she will
be paid $342,500 in 40 equal quarterly installments. During fiscal year
1999, she was paid $34,250 under such agreement.
Dillard Memorial, Inc., a subsidiary acquired by us in 1997 from Mr.
Holder, leases one of its funeral homes from Mr. Holder pursuant to a
twenty-year lease commencing in May 1997 and providing for annual rental
payments equal to the greater of (1) $144,000 or (2) 7 percent of the
previous fiscal year's gross sales for that funeral home. During the
fiscal year ended October 31, 1999, we made rental payments under the lease
of $144,000 to Mr. Holder.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and 10 percent beneficial owners to file with
the SEC reports of ownership and changes in ownership of our equity
securities. During the last fiscal year Frank B. Stewart, Jr. and John P.
Laborde were inadvertently late in filing statements of changes in
beneficial ownership.
<PAGE>
PROPOSAL TO APPROVE THE 2000 INCENTIVE COMPENSATION PLAN
GENERAL
We believe that the growth of our company depends significantly upon
the efforts of its officers and key employees and that these individuals
are best motivated to put forth maximum effort on behalf of our company if
they own an equity interest in our company. In accordance with this
philosophy, our board of directors adopted the 2000 Incentive Compensation
Plan and has directed that it be submitted for approval by our shareholders
at the 2000 annual meeting. The primary features of the 2000 Incentive
Compensation Plan are summarized below. A copy of the 2000 Incentive
Compensation Plan is attached as Exhibit A and should be referred to for a
complete statement of its terms.
Officers and other key employees of our company will be eligible to
receive awards under the plan when designated by the compensation committee
(or subcommittee) of the board of directors. Approximately 166 officers
and key employees of our company and our subsidiaries are expected to
participate in the plan. Incentives under the plan may be granted in any
one or a combination of the following forms:
* incentive and non-qualified stock options;
* restricted stock; and
* other stock-based awards.
PURPOSES OF THE PROPOSAL
We are committed to creating and maintaining a compensation system
based to a significant extent on grants of equity-based incentive awards.
We believe that providing key personnel with a proprietary interest in the
growth and performance of our company is crucial to stimulating individual
performance while at the same time enhancing shareholder value. As only
22,866 shares remain available for grant under our 1995 Incentive
Compensation Plan, we believe that it is important that a new plan be
established to allow us to accomplish our goals.
TERMS OF THE 2000 INCENTIVE COMPENSATION PLAN
SHARES ISSUABLE THROUGH THE PLAN
The total number of shares of our Class A common stock with respect to
which incentives may be granted under the 2000 Incentive Compensation Plan
is limited to 3,000,000 shares, representing approximately 2.8 percent of
our outstanding common stock and approximately 2.5 percent of the total of
our outstanding common stock plus plan shares (which includes all shares
issuable under outstanding option grants and all shares available for
grant). The limit under our proposed 2000 Directors' Stock Option Plan is
350,000 shares, or 0.33 percent of our outstanding common stock and 0.29
percent of our outstanding common stock plus plan shares.
We currently have options outstanding under the 1995 Incentive
Compensation Plan and the 1996 Directors' Plan with respect to 9,020,640
shares, which is 8.5 percent of our outstanding common stock and 7.6
percent of our outstanding common stock plus plan shares. Included in that
number are the following options to purchase a total of 4,018,168 shares of
Class A common stock granted since the end of our last fiscal year under
the 1995 plan: (1) options to purchase 500,000 shares granted to Mr. Rowe,
(2) options to purchase 500,000 shares granted to Mr. Marlowe, (3) options
to purchase 288,000 shares granted to Mr. Tilis, (4) options to purchase
2,764,000 shares granted to all executive officers as a group (including
the executive officers named above), and (5) options to purchase 1,254,168
shares granted to other employees. All of the options granted since the
end of our last fiscal year under the 1995 plan vest at the rate of 25
percent per year over four years, have exercise prices ranging from $5.50
to $6.00, and must be exercised by January 21, 2005.
We also have approved the grant of additional options under the 2000
Incentive Compensation Plan and the 2000 Directors' Stock Option Plan, and
these grants will take effect if the proposed plans are approved by our
<PAGE>
shareholders at the meeting. These grants, which relate to an additional
2,073,732 shares, or 1.9 percent of our outstanding common stock and 1.7
percent of our outstanding common stock plus plan shares, are described in
more detail under "-Awards to be Granted" and "Proposal to Approve the 2000
Directors' Stock Option Plan -Awards to be Granted."
If the proposed plans are approved by our shareholders, we would have
outstanding options to acquire 11,094,372 shares, or 10.4 percent of our
outstanding common stock and 9.3 percent of our outstanding common stock
plus plan shares. We would also have available for future grants 22,866
shares under the 1995 Incentive Compensation Plan, 1,126,268 shares under
the 2000 Incentive Compensation Plan and 150,000 shares under the 2000
Directors' Stock Option Plan. Accordingly, the maximum number of shares
that could be issuable upon exercise of options granted under all plans
would represent 11.7 percent of our outstanding common stock and 10.4
percent of our outstanding common stock plus plan shares.
It has been our general policy that stock options outstanding at any
one time should relate to no more than 10 percent of our common stock.
Going forward we expect to apply this 10 percent limitation to our
outstanding common stock plus plan shares.
We do not believe that adherence to the 10 percent limitation will
limit our ability to use options to attract, motivate and retain management
personnel, as we expect that a large percentage of our currently
outstanding options will expire prior to exercise and prior to our need to
grant a substantial number of additional options. Given the recent decline
in our stock price and our publicly announced expectation of reduced growth
rates, a large number of the currently outstanding options have exercise
prices that we do not expect will be reached during the terms of those
options. Of the options currently outstanding, 31 percent have exercise
prices in excess of $25.80 per share, and 23 percent have exercise prices
ranging from $10.50 to $21.50 per share that must be exercised on or before
October 31, 2001. Also, options to purchase a total of 367,010 shares will
be forfeited in March 2000. We do not intend to make additional grants
under the proposed plans in the short term, except that options may be
granted to newly hired or promoted officers and managers and to new
directors. We expect the options that will expire and terminate in the
relatively near future to provide us with additional shares for future
grants and that these additional shares will make it possible for us to
achieve our incentive compensation goals with the shares available to us
under the 1995 and 2000 plans.
LIMITATIONS AND ADJUSTMENTS TO SHARES ISSUABLE THROUGH THE PLAN
Incentives relating to no more than 1,500,000 shares may be granted
to a single participant in one calendar year. No more than 100,000 shares
of common stock may be issued as restricted stock or other stock-based
awards. If permitted by the compensation committee, any incentive may be
settled in cash rather than common stock.
For purposes of determining the maximum number of shares of common
stock available for delivery under the plan, shares of common stock that
are not delivered because the incentive is forfeited or cancelled and
shares of common stock that are not delivered to a participant because the
incentive is settled in cash or used to satisfy the applicable tax
withholding obligation will not be deemed to have been delivered under the
plan. Also, if the exercise price of any stock option granted under the
plan is satisfied by tendering shares of common stock to our company, only
the number of shares issued net of the shares of common stock tendered will
be deemed delivered for purposes of determining the maximum number of
shares of common stock available for delivery under the plan. However, no
more than 3,000,000 shares may be delivered upon exercise of stock options
intended to qualify as incentive stock options under Section 422 of the
Internal Revenue Code, without crediting against the 3,000,000 share limit,
shares withheld to cover taxes or shares delivered in payment of the
exercise price. In addition, if the delivery of any shares earned under an
incentive is deferred for any reason, any additional shares attributable to
dividends during the deferral period will be disregarded for purposes of
counting the maximum number of shares of common stock that may be issued.
Proportionate adjustments will be made to all of the share limitations
provided in the plan, including shares subject to outstanding incentives,
in the event of any recapitalization, stock dividend, stock split,
combination of shares or other change in the Class A common stock, and the
terms of any incentive will be adjusted to the extent appropriate to
provide participants with the same relative rights before and after the
occurrence of such an event.
<PAGE>
On February 14, 2000, the closing sale price of a share of Class A
common stock, as reported on the Nasdaq National Market, was $4.47.
ADMINISTRATION OF THE PLAN
The compensation committee of our board of directors administers the
plan and has authority to:
* award incentives under the plan;
* interpret the plan;
* establish any rules or regulations relating to the plan that
it determines to be appropriate;
* delegate its authority as appropriate; and
* make any other determinations that it believes necessary or
advisable for the proper administration of the plan.
The compensation committee may delegate its authority under the plan for
grants to non-executive officers.
AMENDMENTS TO THE PLAN
The board of directors may amend or discontinue the plan at any time.
However, shareholder approval of an amendment will be necessary if the
amendment would:
* materially increase the benefits accruing to participants
under the plan;
* materially increase the number of shares of common stock that
may be issued under the plan;
* materially expand the classes of persons eligible to
participate in the plan; or
* amend the plan to permit repricing of options.
No amendment or discontinuance of the plan may change or impair any
previously granted incentive without the consent of the recipient.
TYPES OF INCENTIVES
The compensation committee may grant non-qualified or incentive stock
options, restricted stock, and other stock-based awards, each of which is
described further below.
STOCK OPTIONS. The compensation committee may grant non-qualified
options or incentive options to purchase shares of Class A common stock.
The compensation committee will determine the number of shares covered by
and the exercise price of each option. The option exercise price may not
be less than the fair market value of our Class A common stock on the date
of grant, except in the case of an option granted in substitution for an
award of another company in an acquisition transaction. The term of the
options, and the time or times that the options become exercisable, will
also be determined by the compensation committee; however, the term of an
incentive stock option may not exceed 10 years. The compensation committee
may also approve the purchase by our company of an unexercised stock option
from the optionee by mutual agreement for the difference between the
exercise price and the fair market value of the shares covered by the
option.
The option exercise price may be paid in cash, by check, in shares of
our Class A common stock that (unless otherwise permitted by the
compensation committee) have been held for at least six months or, if
permitted by the compensation committee, through a broker-assisted
"cashless" exercise arrangement.
<PAGE>
Except for adjustments permitted in the plan to protect against
dilution, the exercise price of an outstanding option may not be decreased
after grant, nor may an option be surrendered to our company as
consideration for the grant of a new option with a lower price.
Incentive stock options will be subject to certain additional
requirements necessary in order to qualify for favorable tax treatment
under Section 422 of the Internal Revenue Code.
RESTRICTED STOCK. Shares of Class A common stock may be granted by
the compensation committee to an eligible employee and made subject to
restrictions regarding their sale, pledge or other transfer by the employee
for a specified period. All shares of restricted stock will be subject to
such restrictions as the compensation committee may designate in an
agreement with the employee. The agreement may specify that the shares are
required to be forfeited or resold to our company in the event of
termination of employment or in the event specified performance goals or
targets are not met. A restricted period of at least three years is
generally required, except that if the vesting of the shares of restricted
stock is subject to the attainment of performance goals, the restricted
period may be as short as one year. Unless otherwise provided in the
restricted stock agreement, the compensation committee may at any time
declare the restricted period terminated and permit the sale or transfer of
restricted stock. Subject to the restrictions provided in the restricted
stock agreement and the plan, a participant receiving restricted stock will
have all of the rights of a shareholder.
Restricted stock intended to qualify as performance-based compensation
must meet additional requirements imposed by Section 162(m) of the Internal
Revenue Code. The grant of performance-based restricted stock will be
based upon the achievement of pre-established performance goals. These
performance goals must be any or a combination of the following performance
measures for our company, a division of our company or a subsidiary of our
company:
* earnings per share; * return on equity;
* return on assets; * return on investment;
* an economic value added measure; * cash provided by operating
activities; or
* shareholder return;
* increase in cash flow.
* earnings;
For any performance period, the performance goals may be measured on an
absolute basis or relative to a group of peer companies selected by the
compensation committee, relative to internal goals or relative to levels
attained in prior years.
OTHER STOCK-BASED AWARDS. The compensation committee is authorized to
grant other stock-based awards, the value of which would be based in whole
or in part on the value of shares of our Class A common stock. Other
stock-based awards may be awards of shares of our Class A common stock or
may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on or related to, shares of common stock. The
compensation committee determines the terms and conditions of any such
stock-based awards and may provide that these awards are payable in whole
or in part in cash. Other stock-based awards intended to qualify as
performance-based compensation must be paid based upon the achievement of
pre-established performance goals of the types described under "Restricted
Stock" above.
TERMINATION OF EMPLOYMENT
If a participant ceases to be an employee of our company for any
reason, including death, any incentive may be exercised, shall vest or
shall expire at such time or times as may be determined by the compensation
committee in the incentive agreement with the participant.
<PAGE>
CHANGE OF CONTROL
In the event of a change of control of our company (as defined in the
plan), all outstanding incentives granted under the plan automatically will
become fully exercisable, all restrictions or limitations on any incentives
will lapse and all performance criteria and other conditions relating to
the payment of incentives will be deemed to be achieved or waived.
Within 30 days after a change of control or the approval by our board
of directors of a transaction resulting in a change of control, the members
of the compensation committee who were members immediately prior to the
change of control (even if any of these individuals have been removed as
members of the compensation committee or as directors) may act to:
* require that all outstanding options be exercised on or before
a specified date;
* make adjustments to outstanding incentives to reflect the
change of control;
* provide for mandatory conversion of some or all of the
outstanding options held by participants as of a date specified
by the compensation committee, upon which each participant will
receive a "change of control" payment. A "change of control"
payment is one of the following, whichever is applicable:
* a cash amount per share equal to the price per share to
be paid to our shareholders in any merger, consolidation or
other reorganization, less the exercise price of the option;
* the price per share offered to our shareholders in any
tender offer or exchange offer, less the exercise price of
the option;
* in all other events, the fair market value per share of
common stock for which the options being converted are
exercisable, as determined by the compensation committee as
of the date determined by the compensation committee to be
the date of conversion of the options, less the exercise
price of the option; or
* the issuance of replacement options to acquire the shares
of stock or other property that the shareholders of our
company received in the transaction.
TRANSFERABILITY OF INCENTIVES
The incentives awarded under the plan may not be transferred except:
* by will;
* by the laws of descent and distribution;
* in the case of stock options only, pursuant to a domestic
relations order, if permitted by the compensation committee
and if so provided in the stock option agreement; or
* in the case of stock options only, to immediate family
members or to a partnership, limited liability company or
trust for which the sole owners, members or beneficiaries
are immediate family members, if permitted by the
compensation committee and if so provided in the stock
option agreement.
PAYMENT OF WITHHOLDING TAXES
We may withhold from any payments or stock issuances under the plan,
or collect as a condition of payment, any taxes required by law to be
withheld.
<PAGE>
Any participant may, but is not required to, satisfy his or her
withholding tax obligation by electing to have us withhold, from the shares
the participant would otherwise receive, shares of Class A common stock
having a value equal to the amount required to be withheld. This election
must be made prior to the date on which the amount of tax to be withheld is
determined and is subject to the compensation committee's right of
disapproval.
FEDERAL INCOME TAX CONSEQUENCES OF STOCK OPTIONS
Under existing federal income tax provisions, a participant who
receives stock options under the plan will not recognize any income, nor
will our company be entitled to any tax deduction, in the year the option
is granted.
When a non-qualified stock option is exercised, the employee will
recognize ordinary income in an amount equal to the excess of (1) the
aggregate fair market value of the shares on the exercise date over (2) the
exercise price paid for the shares, and, subject to Section 162(m) of the
Internal Revenue Code, our company will be entitled to a deduction in an
amount equal to the amount includable in the income of the employee in the
taxable year in which the employee is required to recognize the income.
An employee generally will not recognize any income upon the exercise
of an incentive stock option. However, the excess of the fair market value
of the shares at the time of exercise over the option price will be an item
of adjustment that may, depending on particular factors relating to the
employee, subject the employee to the alternative minimum tax imposed by
Section 55 of the Internal Revenue Code. The alternative minimum tax is
imposed to the extent it exceeds the individual's regular federal income
tax, and it is intended to ensure that individual taxpayers who have
economic income do not avoid income tax by taking advantage of exclusions,
deductions and credits. An employee will recognize capital gain or loss in
the amount of the difference between the exercise price and the sale price
on the sale or exchange of stock acquired upon exercise of an incentive
stock option, provided the employee does not dispose of this stock within
either two years from the date of grant or one year from the date of
exercise (the "required holding periods"). An employee disposing of these
shares before the expiration of the required holding period will recognize
ordinary income, generally equal to the difference between the option price
and the fair market value of the stock on the date of exercise. The
remaining gain, if any, will be capital gain. Our company will not be
entitled to a federal income tax deduction in connection with the exercise
of an incentive stock option, except where the employee disposes of the
stock before the expiration of the required holding period.
If the exercise price of a non-qualified option is paid by the
surrender of previously owned shares, the basis and the holding period of
the previously owned shares carries over to the same number of shares
received in exchange for the previously owned shares. The compensation
income recognized on exercise of these options is added to the basis of the
shares received. If the exercised option is an incentive stock option and
the shares surrendered were acquired through the exercise of an incentive
stock option and have not been held for the applicable holding period, the
optionee will recognize income on such exchange, and the basis of the
shares received will be equal to the fair market value of the shares
surrendered. If the applicable holding period has been met on the date of
exercise, there will be no income recognition and the basis and the holding
period of the previously owned shares will carry over to the same number of
shares received in exchange, and the remaining shares will begin a new
holding period and have a zero basis.
When the exercisability of an option granted under the plan is
accelerated upon a change of control, any excess on the date of the change
in control of the fair market value of the shares subject to the option
over the exercise price of such shares may be characterized as "parachute
payments" (within the meaning of Section 280G of the Internal Revenue Code)
if the sum of these amounts and any other contingent payments received by
the employee exceeds an amount equal to three times the "base amount" for
the employee. The base amount generally is the average of the annual
compensation of the employee for the five years preceding the change in
ownership or control. An "excess parachute payment" with respect to any
employee is the excess of the present value of the parachute payments to
the person, in the aggregate, over and above that person's base amount. If
the amounts received by an employee upon a change in control are
characterized as parachute payments, the employee will be subject to a 20
percent excise tax on the excess parachute payments, and we will be denied
any deduction with respect to the excess parachute payments.
<PAGE>
AWARDS TO BE GRANTED
The compensation committee has approved the grant of non-qualified
options to purchase a total of 1,873,732 shares of Class A common stock
under the 2000 plan, to the persons and groups described in the table below
and to take effect on April 12, 2000, if the plan is approved by our
shareholders at our 2000 annual meeting. The per share exercise price of
these options will be equal to the fair market value of a share of Class A
common stock on April 11, 2000.
NEW PLAN BENEFITS UNDER THE
2000 INCENTIVE COMPENSATION PLAN
<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF OPTIONS
- ----------------- -----------------
<S> <C>
William E. Rowe
President and Chief Executive Officer ..................... 500,000
Brian J. Marlowe
Chief Operating Officer and Executive Vice President ...... 200,000
Charles L. Tilis
Executive Vice President and President -
Central Division .......................................... 112,000
All executive officers as a group ............................ 1,386,000
All other employees as a group ............................... 487,732
</TABLE>
VOTE REQUIRED
The affirmative vote of the holders of a majority of the voting power
present or represented at our annual meeting is required for approval of
the 2000 Incentive Compensation Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE PROPOSAL TO APPROVE THE 2000 INCENTIVE COMPENSATION PLAN.
PROPOSAL TO APPROVE THE 2000 DIRECTORS' STOCK OPTION PLAN
GENERAL
The 2000 Directors' Stock Option Plan has been approved by our board,
subject to the approval of the shareholders at our annual meeting. We
believe that the plan promotes the interests of our company and our
shareholders by strengthening our ability to attract, motivate and retain
directors of experience and ability, and by encouraging the highest level
of performance by providing directors with a proprietary interest in our
financial success and growth. If the plan is not approved by our
shareholders at the annual meeting, the options proposed to be granted
under the plan will not be guaranteed. The primary features of the 2000
Directors' Stock Option Plan are summarized below. A copy of the 2000
Directors' Stock Option Plan is attached as Exhibit B and should be
referred to for a complete statement of its terms.
ELIGIBILITY AND GRANTS
Only non-employee directors of our company are eligible to participate
in the plan. We currently have four non-employee directors who will be
participants. If the plan is approved by our shareholders, it provides for
the automatic grant to each participant on April 13, 2000, of an option to
purchase 50,000 shares of our Class A common stock at a price per share equal
to the closing price of our Class A common stock on April 12, 2000. If a
non-employee director is added to our board after our 2000 but before our
2004 annual meeting of shareholders, the director will receive an option to
purchase a pro rata number of shares of Class A common stock based upon the
number of full calendar months between the date of grant and April 30, 2004,
with an exercise price equal to the fair market value of a share of Class A
common stock at the time the director joins our board. Subject to certain
<PAGE>
adjustment provisions described in the plan, the aggregate number of shares
of common stock that may be acquired upon the exercise of options under the
plan is 350,000. Any shares of our Class A common stock subject to an option
that are not issued because the option is forfeited or cancelled may again be
available for grant under the plan.
VESTING AND EXERCISE PERIODS
The options granted to non-employee directors on the day following the
2000 annual meeting of shareholders will become exercisable in 25 percent
annual increments beginning one year after grant, unless accelerated as
described below. Options granted to additional non-employee directors who
join our board before our 2004 annual meeting of shareholders will become
exercisable in a manner that will cause all options to be fully exercisable
on January 31, 2004, or at the time of grant, if later. In addition, the
compensation committee may accelerate the exercisability of any option at
any time at its discretion. If a non-employee director ceases to serve on
our board of directors for any reason, exercisable options granted under
the plan must be exercised within one year from the date of termination of
board service, unless otherwise provided in the stock option agreement with
the director. The options expire and may not be exercised after January
31, 2005.
CHANGE OF CONTROL
In the event of a change of control of our company, all outstanding
options granted under the plan will become immediately exercisable.
Within 30 days after a change of control or the approval by our board
of directors of a transaction resulting in a change of control, the members
of the compensation committee who were members immediately prior to the
change of control (even if any of these individuals have been removed as
members of the compensation committee or as directors) may act to:
* require that all outstanding options be exercised on or before
a specified date;
* make adjustments to outstanding options to reflect the change
of control;
* provide for mandatory conversion of some or all of the
outstanding options held by participants as of a date specified
by the compensation committee, upon which each participant will
receive a "change of control" payment. A "change of control"
payment is one of the following, whichever is applicable:
* a cash amount per share equal to the price per share to
be paid to our shareholders in any merger, consolidation or
other reorganization, less the exercise price of the option;
* the price per share offered to our shareholders in any
tender offer or exchange offer, less the exercise price of
the option;
* in all other events, the fair market value per share of
common stock for which the options being converted are
exercisable, as determined by the compensation committee as
of the date determined by the compensation committee to be
the date of conversion of the options, less the exercise
price of the option; or
* the issuance of replacement options to acquire the shares
of stock or other property that the shareholders of our
company received in the transaction.
EXERCISE PRICE
The exercise price will be the fair market value of a share of our
Class A common stock on the date of grant. Except for adjustments permitted
in the plan to protect against dilution, the exercise price of an outstanding
<PAGE>
option may not be decreased after grant, nor may an option be surrendered
to our company as consideration for the grant of a new option with a lower
price. The exercise price may be paid:
* in cash;
* by check;
* by delivery of shares of our Class A common stock, that
(unless otherwise determined by the compensation committee) must
have been held for at least six months; or
* in such other manner as may be authorized from time to time by
the compensation committee.
The compensation committee may permit participants simultaneously to
exercise options and sell the shares of Class A common stock acquired
pursuant to a brokerage or similar arrangement and use the proceeds from
the sale as payment of the exercise price.
On February 14, 2000, the closing sale price of a share of our Class A
common stock, as reported on the Nasdaq National Market, was $4.47.
TRANSFERABILITY OF OPTIONS
No option under the plan may be transferred, pledged, assigned or
otherwise encumbered except:
* by will;
* by the laws of descent and distribution; or
* if permitted by the compensation committee and so provided in
the stock option agreement, pursuant to a domestic relations
order or to immediate family members or to a partnership, limited
liability company or trust for which the sole owners, members or
beneficiaries are immediate family members.
ADJUSTMENT
In the event of any recapitalization, stock dividend, stock split,
combination of shares or other change in the Class A common stock, the
number of shares of Class A common stock then subject to the plan,
including shares subject to options, will be adjusted in proportion to the
change in outstanding shares of Class A common stock. Participants will
have the same relative rights before and after these adjustments.
AMENDMENTS TO THE PLAN
The Board may amend or discontinue the plan at any time. However,
shareholder approval of an amendment will be necessary if the amendment
would:
* materially increase the benefits accruing to participants
under the plan;
* materially increase the number of shares of common stock that
may be issued under the plan;
* materially expand the classes of persons eligible to
participate in the plan; or
* amend the plan to permit repricing of options.
No amendment or discontinuance of the plan may change or impair any
previously granted incentive without the consent of the recipient.
<PAGE>
FEDERAL TAX CONSEQUENCES
Under existing federal income tax provisions, a director who receives
stock options under the plan will not recognize any income, nor will our
company be entitled to any tax deduction, in the year the option is
granted. When a stock option is exercised, the non-employee director will
recognize ordinary income in an amount equal to the excess of (1) the
aggregate fair market value of the shares on the exercise date over (2) the
exercise price paid for the shares. Our company will be entitled to a
deduction in an amount equal to the amount includable in the income of the
non-employee director, in the taxable year in which the non-employee
director is required to recognize the income.
AWARDS TO BE GRANTED
If our shareholders approve the 2000 Directors' Stock Option Plan at
the annual meeting, non-qualified stock options will be granted under the
plan on April 13, 2000, to the persons named in the table below.
Additional non-employee directors who join our board while the plan is in
effect will also receive options under the plan to the extent that shares
remain available for issuance through the plan.
<TABLE>
<CAPTION>
NAME NUMBER OF OPTIONS
- ---- -----------------
<S> <C>
Darwin C. Fenner ........................ 50,000
John P. Laborde ......................... 50,000
James W. McFarland ...................... 50,000
Michael O. Read ........................ 50,000
All non-officer directors as a group .... 200,000
</TABLE>
VOTE REQUIRED
Approval of the plan by our shareholders requires the affirmative vote
of the holders of a majority of the voting power present or represented at
our annual meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE PROPOSAL TO APPROVE THE 2000 DIRECTORS' STOCK OPTION PLAN.
PROPOSAL TO RATIFY THE RETENTION OF INDEPENDENT AUDITORS
Upon the recommendation of our audit committee, the board of directors
has approved the retention of PricewaterhouseCoopers LLP as our independent
auditors for the fiscal year ending October 31, 2000, which selection will
be submitted to the shareholders for ratification. If the shareholders do
not ratify the selection of PricewaterhouseCoopers LLP by the affirmative
vote of holders of a majority of the voting power present or represented at
our 2000 annual meeting, the selection will be reconsidered by the board.
Representatives of PricewaterhouseCoopers LLP are expected to be
present at the annual meeting and will have an opportunity to make a
statement if they desire to do so. They will also be available to respond
to appropriate questions from shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE PROPOSAL TO RATIFY THE RETENTION OF PRICEWATERHOUSECOOPERS LLP AS
OUR INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING OCTOBER 31, 2000.
<PAGE>
OTHER MATTERS
QUORUM AND VOTING OF PROXIES
The presence, in person or by proxy, of a majority of our company's
total voting power is necessary to constitute a quorum. If a quorum is
present, (1) directors will be elected by plurality vote, and (2) the
approval of the 2000 Incentive Compensation Plan, the approval of the 2000
Directors' Stock Option Plan and the ratification of the retention of
PricewaterhouseCoopers LLP as our independent auditors for the fiscal year
ending October 31, 2000, will each require the affirmative vote of the
holders of a majority of the voting power present or represented at the
annual meeting. With respect to any matter that is properly brought before
the meeting, other than the election of directors, abstentions will have
the effect of a vote against the proposal, and broker non-votes will be
counted as not present with respect to the proposal.
All duly executed proxies received by us in the form enclosed will be
voted as specified and, in the absence of instructions to the contrary,
will be voted for the election of the nominees named above and in favor of
the adoption of the 2000 Incentive Compensation Plan, the adoption of the
2000 Directors' Stock Option Plan and the proposal to ratify the retention
of PricewaterhouseCoopers LLP as our independent auditors for the fiscal
year ending October 31, 2000.
The board of directors does not know of any matters to be presented at
our 2000 annual meeting other than those described herein. However, if any
other matters properly come before the meeting or any adjournment thereof,
it is the intention of the persons named in the enclosed proxy to vote the
shares represented by them in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any shareholder who desires to present a proposal for inclusion in our
proxy materials relating to our 2001 annual meeting must forward the
proposal to our Secretary at the address shown on the first page of this
Proxy Statement in time to arrive at our offices no later than November 1,
2000.
All shareholder proposals must comply with Section 2.14 of our By-laws
in order to be eligible for consideration at a shareholders' meeting. Our
By-laws are filed with the SEC, and shareholders should refer to the By-
laws for a complete description of the requirements. Any shareholder who
wishes to present a proposal at our 2001 annual meeting must give us notice
in advance of the meeting. The notice must be received by our Secretary no
later than November 1, 2000, although this date will change in accordance
with our By-laws if the date of our 2001 annual meeting is 30 calendar days
earlier or later than April 12, 2001. The notice must contain (1) a
complete and accurate description of the proposal; (2) a statement that the
shareholder (or the shareholder's legal representative) intends to attend
the meeting and present the proposal and that the shareholder intends to
hold of record securities entitled to vote at the meeting through the
meeting date; (3) the shareholder's name and address and the number of
shares of our voting securities that the shareholder holds of record and
beneficially as of the notice date; and (4) a complete and accurate
description of any material interest of the shareholder in the proposal.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ Loralice A. Trahan
Loralice A. Trahan
Secretary
Metairie, Louisiana
March 1, 2000
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
STEWART ENTERPRISES, INC.
The undersigned hereby appoints Frank B. Stewart, Jr., William
E. Rowe and Kenneth C. Budde, or any one or more of them, as proxies,
each with the power to appoint his substitute, and hereby authorizes
each of them to represent and to vote, as designated on the reverse
side, all the shares of Class A Common Stock of Stewart Enterprises,
Inc. held of record by the undersigned on February 18, 2000 at the
Annual Meeting of Shareholders to be held on April 12, 2000, or any
adjournment thereof.
(Please See Reverse Side)
- ------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
<PAGE>
Please mark
your votes as
indicated in [ X ]
this example
1. To elect Class 1 Directors
FOR all nominees listed below [ ]
(except as marked to the
contrary below)
WITHHOLD AUTHORITY
to vote for all nominees [ ]
listed below
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
---------------------------------------------------------
strike a line through the nominee's name in the list below:
- -----------------------------------------------------------
William E. Rowe
Michael O. Read
2. Proposal to approve the adoption of the 2000 Incentive Compensation
Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to approve the 2000 Directors' Stock Option Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Proposal to ratify the retention of PriceWaterhouseCoopers LLP certified
public accountants, as independent auditors for the fiscal year ending
October 31, 2000
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. In their discretion to vote upon such other business as may properly come
before the meeting or any adjourment thereof.
The Board of Directors recommends that you vote FOR the nominees and the
proposals listed above. This proxy when properly executed will be voted
in the manner directed herein by the undersigned shareholder. If no
direction is given, this proxy will be voted FOR the nominees and the
proposals.
DATED: , 2000
-----------------------
- --------------------------------
(SIGNATURE OF SHAREHOLDER)
- --------------------------------
(SIGNATURE IF HELD JOINTLY)
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
- ------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
<PAGE>
EXHIBIT A
STEWART ENTERPRISES, INC.
2000 INCENTIVE COMPENSATION PLAN
1. PURPOSE. The purpose of the 2000 Incentive Compensation Plan
(the "Plan") of Stewart Enterprises, Inc. ("Stewart") is to increase
shareholder value and to advance the interests of Stewart and its
subsidiaries (collectively, the "Company") by furnishing a variety of
equity incentives (the "Incentives") designed to attract, retain and
motivate key employees and officers and to strengthen the mutuality of
interests between such employees and officers and Stewart's shareholders.
Incentives may consist of opportunities to purchase or receive shares of
Stewart's Class A common stock, no par value per share (the "Common
Stock"), on terms determined under the Plan. As used in the Plan, the term
"subsidiary" means any corporation of which Stewart owns (directly or
indirectly) within the meaning of Section 425(f) of the Internal Revenue
Code of 1986, as amended (the "Code"), 50 percent or more of the total
combined voting power of all classes of stock. Any Incentives granted
hereunder prior to approval of the Plan by the shareholders of Stewart,
shall be granted subject to such approval.
2. ADMINISTRATION.
2.1 COMPOSITION. The Plan shall be administered by the
compensation committee of the Board of Directors of Stewart, or by a
subcommittee of the compensation committee. The committee or
subcommittee that administers the Plan shall hereinafter be referred
to as the "Committee". The Committee shall consist of not fewer than
two members of the Board of Directors, each of whom shall (a) qualify
as a "non-employee director" under Rule 16b-3 under the Securities
Exchange Act of 1934 (the "1934 Act"), as currently in effect or any
successor rule, and (b) qualify as an "outside director" under Section
162(m) of the Code and the regulations thereunder.
2.2 AUTHORITY. The Committee shall have plenary authority to
award Incentives under the Plan, to interpret the Plan, to establish
any rules or regulations relating to the Plan that it determines to be
appropriate, to enter into agreements with or provide notices to
participants as to the terms of the Incentives (the "Incentive
Agreements") and to make any other determination that it believes
necessary or advisable for the proper administration of the Plan. Its
decisions in matters relating to the Plan shall be final and
conclusive on the Company and participants. The Committee may
delegate its authority hereunder to the extent provided in Section 3
hereof.
3. ELIGIBLE PARTICIPANTS. Key employees and officers of the Company
(including officers who also serve as directors of the Company) shall
become eligible to receive Incentives under the Plan when designated by the
Committee. Employees may be designated individually or by groups or
categories, as the Committee deems appropriate. With respect to
participants not subject to Section 16 of the 1934 Act or Section 162(m) of
the Code, the Committee may delegate to appropriate personnel of the
Company its authority to designate participants, to determine the size and
type of Incentives to be received by those participants and to determine or
modify performance objectives for those participants.
4. SHARES SUBJECT TO THE PLAN. The shares of Common Stock with
respect to which Incentives may be granted under the Plan shall be subject
to the following:
4.1 TYPE OF COMMON STOCK. The shares of Common Stock with
respect to which Incentives may be granted under the Plan shall be
currently authorized but unissued shares or shares currently held or
subsequently acquired by the Company as treasury shares, including
shares purchased in the open market or in private transactions.
4.2 MAXIMUM NUMBER OF SHARES. Subject to the following
provisions of this subsection 4, the maximum number of shares of
Common Stock that may be delivered to Participants and their
beneficiaries under the Plan shall be 3,000,000 shares of Common
Stock.
4.3 SHARE COUNTING. If permitted by the Plan and the Committee,
any Incentive may be settled in cash rather than Common Stock. To the
extent any shares of Common Stock covered by an Incentive are not
delivered to a participant or beneficiary because the Incentive is
forfeited or cancelled, or the shares of Common Stock are not
delivered because the Incentive is settled in cash or used to satisfy
the applicable tax withholding obligation, such shares shall not be
deemed to have been delivered for purposes of determining the maximum
number of shares of Common Stock available for delivery under the
Plan. If the exercise price of any stock option granted under the
Plan is satisfied by tendering shares of Common Stock to the Company
(by either actual delivery or by attestation), only the number of
shares of Common Stock issued net of the shares of Common Stock
tendered shall be deemed delivered for purposes of determining the
maximum number of shares of Common Stock available for delivery under
the Plan.
4.4 LIMITATIONS ON NUMBER OF SHARES. Subject to Section 4.5, the
following additional limitations are imposed under the Plan:
(a) The maximum number of shares of Common Stock that may be
issued upon exercise of stock options intended to qualify as
incentive stock options under Section 422 of the Code shall be
3,000,000 shares. The net share counting provisions of Section
4.3 shall not apply to incentive stock options.
(b) The maximum number of shares of Common Stock that may be
covered by Incentives granted under the Plan to any one
individual during any one calendar-year period shall be
1,500,000.
(c) The maximum number of shares of Common Stock that may be
issued as restricted stock or Other Stock-Based Awards shall be
100,000 shares.
(d) If, after shares have been earned under an Incentive,
the delivery is deferred, any additional shares attributable to
dividends during the deferral period shall be disregarded for
purposes of the limitations of this Section 4.
4.5 ADJUSTMENT. In the event of any recapitalization, stock
dividend, stock split, combination of shares or other change in the
Common Stock, all limitations on numbers of shares of Common Stock
provided in this Section 4 and the number of shares of Common Stock
subject to outstanding Incentives shall be adjusted in proportion to
the change in outstanding shares of Common Stock. In addition, in the
event of any such change in the Common Stock, the Committee shall make
any other adjustment that it determines to be equitable, including
adjustments to the exercise price of any option, the performance
objectives of any Incentive, and the shares of Common Stock issuable
pursuant to any Incentive in order to provide participants with the
same relative rights before and after such adjustment.
5. STOCK OPTIONS. A stock option is a right to purchase shares of
Common Stock from Stewart. Each stock option granted by the Committee
under this Plan shall be subject to the following terms and conditions:
5.1 PRICE. The exercise price per share shall be determined by
the Committee, subject to adjustment under Section 4.5; provided that
in no event shall the exercise price be less than the Fair Market
Value of a share of Common Stock on the date of grant, except in the
case of a stock option granted in assumption of or in substitution for
an outstanding award of a company acquired by the Company or with
which the Company combines.
5.2 NUMBER. The number of shares of Common Stock subject to the
option shall be determined by the Committee, subject to the
limitations and adjustments provided in Section 4 hereof.
5.3 DURATION AND TIME FOR EXERCISE. Subject to earlier
termination as provided in Section 8.4 and 8.12, the term of each
stock option shall be determined by the Committee. Each stock option
shall become exercisable at such time or times during its term as
shall be determined by the Committee. The Committee may accelerate
the exercisability of any stock option at any time.
5.4 REPURCHASE. Upon approval of the Committee, the Company may
repurchase all or a portion of a previously granted stock option from
a participant by mutual agreement before such option has been
exercised by payment to the participant of cash or Common Stock or a
combination thereof with a value equal to the amount per share by
which: (a) the Fair Market Value (as defined in Section 8.11) of the
Common Stock subject to the option on the business day immediately
preceding the date of purchase exceeds (b) the exercise price.
5.5 MANNER OF EXERCISE. A stock option may be exercised, in
whole or in part, by giving written notice to the Company, specifying
the number of shares of Common Stock to be purchased. The exercise
notice shall be accompanied by the full purchase price for such
shares. The option price shall be payable in United States dollars
and may be paid by (a) cash; (b) uncertified or certified check; (c)
delivery of shares of Common Stock, which shares shall be valued for
this purpose at the Fair Market Value on the business day immediately
preceding the date such option is exercised and, unless otherwise
determined by the Committee, shall have been held by the optionee for
at least six months; (d) if permitted by the Committee, delivery of a
properly executed exercise notice together with irrevocable
instructions to a broker approved by the Company (with a copy to the
Company) to deliver promptly to the Company the amount of sale or loan
proceeds to pay the exercise price; or (e) in such other manner as may
be authorized from time to time by the Committee. In the case of
delivery of an uncertified check upon exercise of a stock option, no
shares shall be issued until the check has been paid in full. Prior
to the issuance of shares of Common Stock upon the exercise of a stock
option, a participant shall have no rights as a shareholder.
5.6 REPRICING. Except for adjustments pursuant to Section 4.5,
the exercise price for any outstanding option granted under the Plan
may not be decreased after the date of grant nor may an outstanding
option granted under the Plan be surrendered to the Company as
consideration for the grant of a new option with a lower exercise
price.
5.7 INCENTIVE STOCK OPTIONS. Notwithstanding anything in the
Plan to the contrary, the following additional provisions shall apply
to the grant of stock options that are intended to qualify as
incentive stock options (as such term is defined in Section 422 of the
Code):
(a) Any incentive stock option authorized under the Plan
shall contain such other provisions as the Committee shall deem
advisable, but shall in all events be consistent with and contain
or be deemed to contain all provisions required in order to
qualify the options as incentive stock options;
(b) All incentive stock options must be granted within ten
years from the date on which this Plan was adopted by the Board
of Directors;
(c) Unless sooner exercised, all incentive stock options
shall expire no later than ten years after the date of grant;
(d) No incentive stock option shall be granted to any
participant who, at the time such option is granted, would own
(within the meaning of Section 422 of the Code) stock possessing
more than 10 percent of the total combined voting power of all
classes of stock of the employer corporation or of its parent or
subsidiary corporation; and
(e) The aggregate Fair Market Value (determined with respect
to each incentive stock option as of the time such incentive
stock option is granted) of the Common Stock with respect to
which incentive stock options are exercisable for the first time
by a participant during any calendar year (under the Plan or any
other plan of the Company) shall not exceed $100,000. To the
extent that such limitation is exceeded, such options shall not
be treated, for federal income tax purposes, as incentive stock
options.
6. RESTRICTED STOCK.
6.1 GRANT OF RESTRICTED STOCK. The Committee may award shares of
restricted stock to such key employees as the Committee determines to
be eligible pursuant to the terms of Section 3. An award of
restricted stock may be subject to the attainment of specified
performance goals or targets, restrictions on transfer, forfeitability
provisions and such other terms and conditions as the Committee may
determine, subject to the provisions of the Plan. To the extent
restricted stock is intended to qualify as performance based
compensation under Section 162(m) of the Code, it must meet the
additional requirements imposed thereby.
6.2 THE RESTRICTED PERIOD. At the time an award of restricted
stock is made, the Committee shall establish a period of time during
which the transfer of the shares of restricted stock shall be
restricted (the "Restricted Period"). Each award of restricted stock
may have a different Restricted Period. A Restricted Period of at
least three years is required, except that if vesting of the shares is
subject to the attainment of specified performance goals, a Restricted
Period of one year or more is permitted. Unless otherwise provided in
the Incentive Agreement, the Committee may in its discretion declare
the Restricted Period terminated upon a participant's death,
disability, retirement or involuntary termination and permit the sale
or transfer of the restricted stock. The expiration of the Restricted
Period shall also occur as provided under Section 8.12 upon a Change
of Control of the Company.
6.3 ESCROW. The participant receiving restricted stock shall
enter into an Incentive Agreement with the Company setting forth the
conditions of the grant. Certificates representing shares of
restricted stock shall be registered in the name of the participant
and deposited with the Company, together with a stock power endorsed
in blank by the participant. Each such certificate shall bear a
legend in substantially the following form:
The transferability of this certificate and the shares of
Common Stock represented by it is subject to the terms and
conditions (including conditions of forfeiture) contained in
the Stewart Enterprises, Inc. 2000 Incentive Compensation
Plan (the "Plan") and an agreement entered into between the
registered owner and Stewart Enterprises, Inc. thereunder.
Copies of the Plan and the agreement are on file and
available for inspection at the principal office of the
Company.
6.4 DIVIDENDS ON RESTRICTED STOCK. Any and all cash and stock
dividends paid with respect to the shares of restricted stock shall be
subject to any restrictions on transfer, forfeitability provisions or
reinvestment requirements as the Committee may, in its discretion,
prescribe in the Incentive Agreement.
6.5 FORFEITURE. In the event of the forfeiture of any shares of
restricted stock under the terms provided in the Incentive Agreement
(including any additional shares of restricted stock that may result
from the reinvestment of cash and stock dividends, if so provided in
the Incentive Agreement), such forfeited shares shall be surrendered
and the certificates cancelled. The participants shall have the same
rights and privileges, and be subject to the same forfeiture
provisions, with respect to any additional shares received pursuant to
Section 4.5 due to a recapitalization, stock split or other change in
capitalization.
6.6 EXPIRATION OF RESTRICTED PERIOD. Upon the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee or at such earlier time as
provided for in Section 6.2 and in the Incentive Agreement or an
amendment thereto, the restrictions applicable to the restricted stock
shall lapse and a stock certificate for the number of shares of
restricted stock with respect to which the restrictions have lapsed
shall be delivered, free of all such restrictions and legends other
than those required by law, to the participant or the participant's
estate, as the case may be.
6.7 RIGHTS AS A SHAREHOLDER. Subject to the terms and conditions
of the Plan and subject to any restrictions on the receipt of
dividends that may be imposed in the Incentive Agreement, each
participant receiving restricted stock shall have all the rights of a
shareholder with respect to shares of stock during any period in which
such shares are subject to forfeiture and restrictions on transfer,
including without limitation, the right to vote such shares.
6.8 PERFORMANCE-BASED RESTRICTED STOCK. The Committee shall
determine at the time of grant if a grant of restricted stock is
intended to qualify as "performance-based compensation" as that term
is used in Section 162(m) of the Code. Any such grant shall be
conditioned on the achievement of one or more performance measures.
The performance measures pursuant to which the restricted stock shall
vest shall be any or a combination of the following: earnings per
share, return on assets, an economic value added measure, stockholder
return, earnings, return on equity, return on investment, cash
provided by operating activities or increase in cash flow of the
Company, a division of the Company or a subsidiary. For any
performance period, such performance objectives may be measured on an
absolute basis or relative to a group of peer companies selected by
the Committee, relative to internal goals or relative to levels
attained in prior years. For grants of restricted stock intended to
qualify as "performance-based compensation," the grants of restricted
stock and the establishment of performance measures shall be made
during the period required under Section 162(m).
7. OTHER STOCK-BASED AWARDS.
7.1 GRANT OF OTHER STOCK-BASED AWARDS. The Committee is
authorized to grant "Other Stock-Based Awards," which shall consist of
awards the value of which is based in whole or in part on the value of
shares of Common Stock, that is not an instrument or award specified
in Sections 5 or 6 of the Plan. Other Stock-Based Awards may be
awards of shares of Common Stock or may be denominated or payable in,
valued in whole or in part by reference to, or otherwise based on or
related to, shares of Common Stock (including, without limitation,
securities convertible or exchangeable into or exercisable for shares
of Common Stock ), as deemed by the Committee consistent with the
purposes of the Plan. The Committee shall determine the terms and
conditions of any such Other Stock-Based Award and may provide that
such awards would be payable in whole or in part in cash. An Other
Stock-Based Award may be subject to the attainment of such specified
performance goals or targets as the Committee may determine, subject
to the provisions of the Plan. To the extent that an Other Stock-
Based Award is intended to qualify as "performance-based compensation"
under Section 162(m) of the Code, it must meet the additional
requirements imposed thereby.
7.2 PERFORMANCE-BASED OTHER STOCK-BASED AWARDS. The Committee
shall determine at the time of grant if the grant of an Other Stock-
Based Award is intended to qualify as "performance-based compensation"
as that term is used in Section 162(m) of the Code. Any such grant
shall be conditioned on the achievement of one or more performance
measures. The performance measures pursuant to which the Other Stock-
Based Award shall vest shall be any or a combination of the following:
earnings per share, return on assets, an economic value added measure,
stockholder return, earnings, return on equity, return on investment,
cash provided by operating activities or increase in cash flow of the
Company, a division of the Company or a subsidiary. For any
performance period, such performance objectives may be measured on an
absolute basis or relative to a group of peer companies selected by
the Committee, relative to internal goals or relative to levels
attained in prior years. For grants of Other Stock-Based Awards
intended to qualify as "performance-based compensation," the grants of
Other Stock-Based Awards and the establishment of performance measures
shall be made during the period required under Section 162(m) of the
Code.
8. GENERAL.
8.1 DURATION. Subject to Section 8.10, the Plan shall remain in
effect until all Incentives granted under the Plan have either been
satisfied by the issuance of shares of Common Stock or the payment of
cash or been terminated under the terms of the Plan and all
restrictions imposed on shares of Common Stock in connection with
their issuance under the Plan have lapsed.
8.2 TRANSFERABILITY OF INCENTIVES. No Incentive granted hereunder
may be transferred, pledged, assigned or otherwise encumbered by the
holder thereof except:
(a) by will;
(b) by the laws of descent and distribution;
(c) in the case of stock options only, if permitted by the
Committee and so provided in the Incentive Agreement or an
amendment thereto, (i) pursuant to a domestic relations order, as
defined in the Code, (ii) to Immediate Family Members, (iii) to a
partnership in which Immediate Family Members, or entities in
which Immediate Family Members are the sole owners, members or
beneficiaries, as appropriate, are the only partners, (iv) to a
limited liability company in which Immediate Family Members, or
entities in which Immediate Family Members are the sole owners,
members or beneficiaries, as appropriate, are the only members,
or (v) to a trust for the sole benefit of Immediate Family
Members. "Immediate Family Members" shall be defined as the
spouse and natural or adopted children or grandchildren of the
participant and their spouses. To the extent that an incentive
stock option is permitted to be transferred during the lifetime
of the participant, it shall be treated thereafter as a non-
qualified stock option.
Any attempted assignment, transfer, pledge, hypothecation or other
disposition of an Incentive, or levy of attachment or similar process
upon the Incentive not specifically permitted herein, shall be null
and void and without effect.
8.3 DIVIDEND EQUIVALENTS. In the sole and complete discretion of
the Committee, an Incentive may provide the holder thereof with
dividends or dividend equivalents, payable in cash, shares, other
securities or other property on a current or deferred basis.
8.4 EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH. In the event
that a participant ceases to be an employee of the Company for any
reason, including death, disability, early retirement or normal
retirement, any Incentives may be exercised, shall vest or shall
expire at such times as may be determined by the Committee in the
Incentive Agreement.
8.5 ADDITIONAL CONDITION. Anything in this Plan to the contrary
notwithstanding: (a) the Company may, if it shall determine it
necessary or desirable for any reason, at the time of award of any
Incentive or the issuance of any shares of Common Stock pursuant to
any Incentive, require the recipient of the Incentive, as a condition
to the receipt thereof or to the receipt of shares of Common Stock
issued pursuant thereto, to deliver to the Company a written
representation of present intention to acquire the Incentive or the
shares of Common Stock issued pursuant thereto for his own account for
investment and not for distribution; and (b) if at any time the
Company further determines, in its sole discretion, that the listing,
registration or qualification (or any updating of any such document)
of any Incentive or the shares of Common Stock issuable pursuant
thereto is necessary on any securities exchange or under any federal
or state securities or blue sky law, or that the consent or approval
of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with the award of any Incentive, the
issuance of shares of Common Stock pursuant thereto, or the removal of
any restrictions imposed on such shares, such Incentive shall not be
awarded or such shares of Common Stock shall not be issued or such
restrictions shall not be removed, as the case may be, in whole or in
part, unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions
not acceptable to the Company.
8.6 INCENTIVE AGREEMENTS. The terms of each Incentive shall be
stated in an agreement or notice approved by the Committee.
8.7 WITHHOLDING.
(a) The Company shall have the right to withhold from any
payments or stock issuances under the Plan, or to collect as a
condition of payment, any taxes required by law to be withheld.
(b) Any participant may, but is not required to, satisfy his
or her withholding tax obligation in whole or in part by electing
(the "Election") to have the Company withhold from the shares the
participant otherwise would receive shares of Common Stock having
a value equal to the minimum amount required to be withheld. The
value of the shares to be withheld shall be based on the Fair
Market Value of the Common Stock on the date that the amount of
tax to be withheld shall be determined (the "Tax Date"). Each
Election must be made prior to the Tax Date. The Committee may
disapprove of any Election, may suspend or terminate the right to
make Elections, or may provide with respect to any Incentive that
the right to make Elections shall not apply to such Incentive.
8.8 NO CONTINUED EMPLOYMENT. No participant under the Plan shall
have any right, because of his or her participation, to continue in
the employ of the Company for any period of time or to any right to
continue his or her present or any other rate of compensation.
8.9 DEFERRAL PERMITTED. Payment of cash or distribution of any
shares of Common Stock to which a participant is entitled under any
Incentive shall be made as provided in the Incentive Agreement.
Payment may be deferred at the option of the participant if provided
in the Incentive Agreement.
8.10 AMENDMENT OR DISCONTINUANCE OF THE PLAN. The Board may amend
or discontinue the Plan at any time; provided, however, that no such
amendment may
(a) without the approval of the shareholders, (i) increase,
subject to adjustments permitted herein, the maximum number of
shares of Common Stock that may be issued through the Plan, (ii)
materially increase the benefits accruing to participants under
the Plan (iii) materially expand the classes of persons eligible
to participate in the Plan, or (iv) amend Section 5.6 to permit
repricing of options, or
(b) materially impair, without the consent of the recipient,
an Incentive previously granted, except that the Company retains
all rights under Section 8.12 hereof.
8.11 DEFINITION OF FAIR MARKET VALUE. Whenever "Fair Market
Value" of Common Stock shall be determined for purposes of this Plan,
it shall be determined as follows: (i) if the Common Stock is listed
on an established stock exchange or any automated quotation system
that provides sale quotations, the closing sale price for a share of
the Common Stock on such exchange or quotation system on the day
preceding the date as of which fair market value is to be determined,
(ii) if the Common Stock is not listed on any exchange or quotation
system, but bid and asked prices are quoted and published, the mean
between the quoted bid and asked prices on the day preceding the date
as of which fair market value is to be determined, and if bid and
asked prices are not available on such day, on the next preceding day
on which such prices were available; and (iii) if the Common Stock is
not regularly quoted, the fair market value of a share of Common Stock
on the applicable date as established by the Committee in good faith.
8.12 CHANGE OF CONTROL.
(a) A Change of Control shall mean:
(i) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
1934 Act) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the 1934 Act) of more than 30
percent of the outstanding shares of Stewart's Class A
Common Stock, no par value per share (the "Common Stock");
provided, however, that for purposes of this subsection (i),
the following acquisitions shall not constitute a Change of
Control:
(A) any acquisition of Common Stock directly from
Stewart,
(B) any acquisition of Common Stock by Stewart,
(C) any acquisition of Common Stock by any
employee benefit plan (or related trust) sponsored or
maintained by Stewart or any corporation controlled by
Stewart, or
(D) any acquisition of Common Stock by any
corporation pursuant to a transaction that complies
with clauses (A), (B) and (C) of subsection (iii) of
this Section 8.12(a); or
(ii) individuals who, as of the date this Plan was
adopted by the Board of Directors (the "Approval 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 Approval Date whose election, or
nomination for election by Stewart'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
(iii) consummation of a reorganization, merger or
consolidation (including a merger or consolidation of the
Company or any direct or indirect subsidiary of the
Company), or sale or other disposition of all or
substantially all of the assets of Stewart (a "Business
Combination"), in each case, unless, following such Business
Combination,
(A) all or substantially all of the individuals
and entities who were the beneficial owners of
Stewart's outstanding common stock and Stewart'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 percent of the
then outstanding shares of common stock, and more than
50 percent 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 (A) and
paragraphs (B) and (C), shall include a corporation
which as a result of such transaction owns Stewart or
all or substantially all of Stewart's assets either
directly or through one or more subsidiaries), and
(B) 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 Stewart or such corporation resulting from
such Business Combination) beneficially owns, directly
or indirectly, 20 percent or more of the then
outstanding shares of common stock of the corporation
resulting from such Business Combination or 20 percent
or more of the combined voting power of the then
outstanding voting securities of such corporation, and
(C) 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
(iv) approval by the shareholders of Stewart of a plan
of complete liquidation or dissolution of Stewart.
(b) Upon a Change of Control, or immediately prior to the
closing of a transaction that will result in a Change of Control
if consummated, all outstanding Incentives granted pursuant to
the Plan shall automatically become fully vested and exercisable,
all restrictions or limitations on any Incentives shall lapse and
all performance criteria and other conditions relating to the
payment of Incentives shall be deemed to be achieved or waived by
Stewart without the necessity of action by any person.
(c) No later than 30 days after the approval by the Board of
a Change of Control of the types described in subsections (iii)
or (iv) of Section 8.12(a) and no later than 30 days after a
Change of Control of the type described in subsections (i) and
(ii) of Section 8.12(a), 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:
(i) require that all outstanding options 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 shall terminate,
(ii) 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),
(iii) provide for mandatory conversion of some or all
of the outstanding options 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
shall be deemed automatically cancelled and the Company
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, as defined and calculated below, over the exercise
price(s) of such options 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, or
(iv) provide that thereafter upon any exercise of an
option the participant shall be entitled to purchase under
such option, 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 reorganization, merger, consolidation or asset sale,
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.
(v) For the purposes of paragraph (iii) of this Section
8.12(c) 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 stockholders
of Stewart in any such merger, consolidation or other
reorganization,
(B) the price per share offered to stockholders of
Stewart in any tender offer or exchange offer whereby a
Change of Control takes place,
(C) in all other events, the Fair Market Value per
share of Common Stock into which such options 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
(D) in the event that the consideration offered to
stockholders of Stewart in any transaction described in
this Section 8.12 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.
<PAGE>
EXHIBIT B
STEWART ENTERPRISES, INC.
2000 DIRECTORS' STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
The purpose of the Stewart Enterprises, Inc. 2000 Directors' Stock
Option Plan is to promote the interests of the Company and its shareholders
by strengthening the Company's ability to attract, motivate and retain
Directors of experience and ability, and to encourage the highest level of
Directors' performance by providing Directors with a proprietary interest
in the Company's financial success and growth.
2. DEFINITIONS.
2.1 "Board" means the Board of Directors of the Company.
2.2 "Committee" means the Compensation Committee of the Board or a
subcommittee thereof as shall be appointed by the Board from time to time.
The Committee shall consist of two or more members of the Board none of
whom shall be Employees of the Company.
2.3 "Common Stock" means the Class A common stock of the Company.
2.4 "Company" means Stewart Enterprises, Inc., a Louisiana
corporation.
2.5 "Director" means a member of the Board who is not an Employee.
2.6 "Employee" means any employee of the Company, or any of its
present or future parent or subsidiary corporations.
2.7 "Fair Market Value" means (i) if the Common Stock is listed on an
established stock exchange or any automated quotation system that provides
sale quotations, the closing sale price for a share of the Common Stock on
such exchange or quotation system on the day preceding the date as of which
fair market value is to be determined, or if no sale of the Common Stock
shall have been made on that day, on the next preceding day on which there
was a sale of the Common Stock; (ii) if the Common Stock is not listed on
any exchange or quotation system, but bid and asked prices are quoted and
published, the mean between the quoted bid and asked prices on the day
preceding the date as of which fair market value is to be determined, and
if bid and asked prices are not available on such day, on the next
preceding day on which such prices were available; and (iii) if the Common
Stock is not regularly quoted, the fair market value of a share of Common
Stock on the applicable date as established by the Committee in good faith.
2.8 "Participant" means each Director.
2.9 "Option" means a stock option that does not satisfy the
requirements of Section 422 of the Internal Revenue Code of 1986, as
amended.
2.10 "Plan" means the Stewart Enterprises, Inc. 2000 Directors' Stock
Option Plan as set forth herein and as amended from time to time.
3. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
Subject to the adjustment provisions of Section 7, the aggregate
number of shares of Common Stock that may be issued pursuant to the
exercise of Options under the Plan is 350,000 shares of Common Stock. Such
shares may be either authorized but unissued shares or shares issued and
thereafter acquired by the Company. To the extent any shares of Common
Stock subject to an Option are not issued because the Option is forfeited
or cancelled, such shares shall again be available for grant pursuant to
Options granted under the Plan.
4. ADMINISTRATION OF THE PLAN.
4.1 The Plan shall be administered by the Committee, which shall have
the power to interpret the Plan and, subject to its provisions, to
prescribe, amend and rescind rules and to make all other determinations
necessary for the Plan's administration.
4.2 All action taken by the Committee in the administration and
interpretation of the Plan shall be final and binding upon all parties. No
member of the Committee will be liable for any action or determination made
in good faith by the Committee with respect to the Plan or any Option.
5. GRANT OF OPTIONS.
5.1 Each Director shall automatically be granted an Option to acquire
50,000 shares of Common Stock on the day following the 2000 annual meeting
of shareholders of the Company. Each person who becomes a Director after
the 2000 annual meeting of shareholders, but prior to the 2004 annual
meeting of shareholders, shall be granted an Option to acquire a pro rata
number of shares of Common Stock calculated as follows:
Number of full calendar months between the date
50,000 X the person becomes a Director and April 30, 2004
--------------------------------------------------
48
5.2 In the event shares remain available for issuance under Section 3
hereof, because of cancellation or forfeiture of Options or because all
available shares have not been utilized for grants to new Directors,
Options with respect to the remaining shares may be granted to Directors in
the discretion of the Committee and shall be exercisable and shall
terminate as determined by the Committee.
6. TERMS AND CONDITIONS OF OPTIONS.
6.1 Unless exercisability is accelerated as provided in Sections 6.4
and 8.2 hereof, the Options shall become exercisable in 25 percent annual
increments beginning one year following the date of grant. In the case of
Options granted to persons who become Directors after the 2000 annual
meeting of shareholders, the exercisability terms shall be such that,
subject to Section 6.5 hereof, the Options shall be fully exercisable for a
period of at least one year prior to the termination date provided in
Section 6.2.
6.2 Unless terminated earlier as provided in Section 6.5 or 8.3, the
Options shall expire and terminate on January 31, 2005.
6.3 The exercise price of the Options granted to Directors shall be
equal to the Fair Market Value, as defined herein, of a share of Common
Stock on the date of grant.
6.4 The Committee may accelerate the exercisability of any Option at
any time in its discretion.
6.5 In the event a Director ceases to serve on the Board of Directors
of the Company for any reason, the Options granted hereunder must be
exercised, to the extent otherwise exercisable at the time of termination
of Board service, within one year from the date of termination of Board
service. Options that are not exercisable at the time of termination of
Board service shall be forfeited.
6.6 An Option may be exercised, in whole or in part, by giving
written notice to the Company, specifying the number of shares of Common
Stock to be purchased. The exercise notice shall be accompanied by the
full purchase price for such shares. The option price shall be payable in
United States dollars and may be paid (a) in cash; (b) by uncertified or
certified check; (c) by delivery of shares of Common Stock, which shares
shall be valued for this purpose at their Fair Market Value on the date
such option is exercised, and, unless otherwise determined by the
Committee, shall have been held by the Participant for at least six months;
or (d) in such other manner as may be authorized from time to time by the
Committee. The Committee may also permit Participants, either on a
selective or aggregate basis, simultaneously to exercise options and sell
the shares of Common Stock acquired pursuant to a brokerage or similar
arrangement, approved in advance by the Committee, and use the proceeds
from such sale as payment of the exercise price. In the case of delivery
of an uncertified check upon exercise of a stock option, no shares shall be
issued until the check has been paid in full. Prior to the issuance of
shares of Common Stock upon the exercise of an Option, a Participant shall
have no rights as a shareholder.
6.7 Except for adjustments pursuant to Section 7, the exercise price
for any outstanding Option granted under the Plan may not be decreased
after the date of grant nor may an outstanding Option granted under the
Plan be surrendered to the Company as consideration for the grant of a new
Option with a lower exercise price.
7. ADJUSTMENT PROVISIONS.
In the event of any recapitalization, stock dividend, stock split,
combination of shares or other change in the Common Stock, all limitations
on numbers of shares of Common Stock provided in the Plan, and the number
of shares subject to outstanding Options, shall be adjusted in proportion
to the change in outstanding shares of Common Stock. In the event of any
such adjustments, the purchase price of any Option shall be adjusted as and
to the extent appropriate, in the reasonable discretion of the Committee,
to provide Participants with the same relative rights before and after such
adjustment.
8. CHANGE OF CONTROL.
8.1 A 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 Securities Exchange Act
of 1934 (the "1934 Act") of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the 1934 Act) of more than 30 percent of the
outstanding shares of 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 8.1; or
(b) individuals who, as of the date the Plan was adopted by the
Board of Directors (the "Approval 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 Approval 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
(including a merger or consolidation of the Company or any direct or
indirect subsidiary of the Company), or sale or other disposition of all or
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 percent of the then
outstanding shares of common stock, and more than 50 percent 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 owns 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 percent or more of the then
outstanding shares of common stock of the corporation resulting
from such Business Combination or 20 percent 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 plan of
complete liquidation or dissolution of the Company.
8.2 Upon a Change of Control, or immediately prior to the closing of
a transaction that will result in a Change of Control if consummated, all
outstanding Options granted pursuant to the Plan shall automatically become
fully exercisable.
8.3 No later than 30 days after the approval by the Board of a Change
of Control of the types described in Sections 8.1(c) or (d) and no later
than 30 days after a Change of Control of the types described in Sections
8.1(a) or (b), 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 be exercised on or
before a specified date (before or after such Change of Control) fixed
by the Committee, after which specified date any unexercised portion
of the Option shall terminate,
(b) make such equitable adjustments to the Options 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
(c) provide for mandatory conversion of some or all of the
outstanding Options held by some or all Participants as of a date
before or after such Change of Control, in which event such Options
shall be deemed automatically cancelled and the Company shall pay, or
cause to be paid, to each such participant an amount in cash equal to
the excess, if any, of the Change of Control Value of the shares
subject to such Options, as defined and calculated below, over the
exercise price of such Options, 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,
(d) provide that thereafter, upon any exercise of all or part of
an Option, the Participant shall be entitled to purchase under the
Option, in lieu of the number of shares of Common Stock then covered
by the 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 reorganization, merger, consolidation or
asset sale, 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 the Option.
8.4 For the purposes of paragraph (c) of Section 8.3 "Change of
Control Value" shall be the amount determined by whichever of the following
items is applicable:
(a) the per share price to be paid to stockholders of Stewart in
any such merger, consolidation or other reorganization,
(b) the price per share offered to stockholders 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 being converted are exercisable,
as determined by the Committee as of the date determined by the
Committee to be the date of conversion of the Options.
(d) In the event that the consideration offered to stockholders
of Stewart in any transaction described in this Section 8.4 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.
9. GENERAL PROVISIONS.
9.1 Nothing in the Plan or in any instrument executed pursuant to the
Plan will confer upon any Participant any right to continue as a Director
or affect the right of the Company to terminate the services of any
Participant.
9.2 No shares of Common Stock will be issued or transferred pursuant
to an Option unless and until all then-applicable requirements imposed by
federal and state securities and other laws, rules and regulations and by
any regulatory agencies having jurisdiction, and by any stock exchanges
upon which the Common Stock may be listed, have been fully met. As a
condition precedent to the issuance of shares pursuant to the exercise of
an Option, the Company may require the Participant to take any reasonable
action to meet such requirements.
9.3 No Participant and no beneficiary or other person claiming under
or through such Participant will have any right, title or interest in or to
any shares of Common Stock allocated or reserved under the Plan or subject
to any Option except as to such shares of Common Stock, if any, that have
been issued or transferred to such Participant.
9.4 No Options granted hereunder may be transferred, pledged,
assigned or otherwise encumbered by an optionee except:
(a) by will;
(b) by the laws of descent and distribution; or
(c) if permitted by the Committee and so provided in the Option
or an amendment thereto, (i) pursuant to a domestic relations order,
as defined in the Code, (ii) to Immediate Family Members, (iii) to a
partnership in which Immediate Family Members, or entities in which
Immediate Family Members are the owners, members or beneficiaries, as
appropriate, are the sole partners, (iv) to a limited liability
company in which Immediate Family Members, or entities in which
Immediate Family Members are the owners, members or beneficiaries, as
appropriate, are the sole members, or (v) to a trust for the benefit
solely of Immediate Family Members. "Immediate Family Members" shall
be defined as the spouse and natural or adopted children or
grandchildren of the optionee and their spouses.
Any attempted assignment, transfer, pledge, hypothecation or other
disposition of an Option or levy of attachment, or similar process upon an
Option not specifically permitted herein, shall be null and void and
without effect.
9.5 Each Option shall be evidenced by a written instrument, including
terms and conditions consistent with the Plan, as the Committee may
determine.
10. AMENDMENT OR DISCONTINUANCE OF THE PLAN.
The Board may amend or discontinue the Plan at any time; provided,
however, that no such amendment may
(a) without the approval of the shareholders, (i) increase,
subject to adjustments permitted herein, the maximum number of shares
of Common Stock that may be issued through the Plan, (ii) materially
increase the benefits accruing to participants under the Plan or (iii)
materially expand the classes of persons eligible to participant in
the Plan, or (iv) amend Section 6.7 to permit repricing of Options, or
(b) materially impair, without the consent of the recipient, an
Option previously granted, except that the Company retains all rights
under Section 8. hereof.
11. EFFECTIVE DATE OF PLAN AND DURATION OF PLAN.
This Plan shall become effective upon adoption by the Board, subject
to approval by the holders of a majority of the shares of Common Stock
represented in person or by proxy and entitled to vote on the subject at
the 2000 annual meeting of shareholders of the Company.
