-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RK8DxmKOu3REOub8c9a3SyCGNTosw4s3X2iF6FEjJSD6cM77nsn3Gd6cJU+1X6kW CrwIcK60T9OtejVJxcWYMg== /in/edgar/work/20000914/0000906280-00-000216/0000906280-00-000216.txt : 20000922 0000906280-00-000216.hdr.sgml : 20000922 ACCESSION NUMBER: 0000906280-00-000216 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 25 CONFORMED PERIOD OF REPORT: 20000731 FILED AS OF DATE: 20000914 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STEWART ENTERPRISES INC CENTRAL INDEX KEY: 0000878522 STANDARD INDUSTRIAL CLASSIFICATION: [7200 ] IRS NUMBER: 720693290 STATE OF INCORPORATION: LA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-15449 FILM NUMBER: 722549 BUSINESS ADDRESS: STREET 1: 110 VETERANS MEMORIAL BLVD CITY: METAIRIE STATE: LA ZIP: 70005 BUSINESS PHONE: 5048375880 MAIL ADDRESS: STREET 1: 110 VETERANS MEMORIAL BLVD CITY: METARIE STATE: LA ZIP: 70005 10-Q 1 0001.txt =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JULY 31, 2000 ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____ TO ____ -------------------- COMMISSION FILE NUMBER: 0-19508 -------------------- STEWART ENTERPRISES, INC. (Exact name of registrant as specified in its charter) LOUISIANA 72-0693290 (State or other jurisdiction (I.R.S. of incorporation or organization) Employer Identification No.) 110 VETERANS MEMORIAL BOULEVARD METAIRIE, LOUISIANA 70005 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (504) 837-5880 -------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ____ The number of shares of the Registrant's Class A Common Stock, no par value per share, and Class B Common Stock, no par value per share, outstanding as of September 8, 2000, was 103,277,329 and 3,555,020, respectively. =============================================================================== STEWART ENTERPRISES, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements Consolidated Statements of Earnings - Three Months Ended July 31, 2000 and 1999 ................ 3 Consolidated Statements of Earnings - Nine Months Ended July 31, 2000 and 1999 ................. 4 Consolidated Balance Sheets - July 31, 2000 and October 31, 1999 ...................... 5 Consolidated Statement of Shareholders' Equity - Nine Months Ended July 31, 2000 .......................... 7 Consolidated Statements of Cash Flows - Nine Months Ended July 31, 2000 and 1999 ................. 8 Notes to Consolidated Financial Statements ................. 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ........ 18 Item 3. Quantitative and Qualitative Disclosures About Market Risk ................................... 27 PART II. OTHER INFORMATION Item 1. Legal Proceedings .................................. 29 Item 5. Other Information .................................. 29 Item 6. Exhibits and Reports on Form 8-K ................... 34 SIGNATURES ................................................. 36 2 STEWART ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED JULY 31, --------------------------- 2000 1999 ------------ ----------- Revenues: Funeral .............................................. $ 108,448 $ 112,099 Cemetery ............................................. 73,375 81,622 ------------ ----------- 181,823 193,721 ------------ ----------- Costs and expenses: Funeral .............................................. 81,024 80,668 Cemetery ............................................. 54,864 59,379 ------------ ----------- 135,888 140,047 ------------ ----------- Gross profit ......................................... 45,935 53,674 Corporate general and administrative expenses ........... 4,796 5,012 ------------ ----------- Operating earnings ................................... 41,139 48,662 Interest expense, net ................................... (14,410) (13,224) Other income ............................................ 1,738 1,328 ------------ ----------- Earnings before income taxes ......................... 28,467 36,766 Income taxes ............................................ 10,390 13,419 ------------ ----------- Net earnings ......................................... $ 18,077 $ 23,347 ============ =========== Net earnings per common share: Basic ................................................ $ .17 $ .21 ============ =========== Diluted .............................................. $ .17 $ .21 ============ =========== Weighted average common shares outstanding (in thousands): Basic ................................................ 106,737 111,752 ============ =========== Diluted .............................................. 106,737 112,196 ============ =========== Dividends declared per common share ..................... $ .02 $ .02 ============ ===========
See accompanying notes to consolidated financial statements. 3 STEWART ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS ENDED JULY 31, -------------------------- 2000 1999 ------------ ---------- Revenues: Funeral ................................................ $ 346,835 $ 332,031 Cemetery ............................................... 216,809 234,159 ------------ ---------- 563,644 566,190 Costs and expenses: Funeral ................................................ 253,873 234,040 Cemetery ............................................... 165,344 166,567 ------------ ---------- 419,217 400,607 ------------ ---------- Gross profit ........................................... 144,427 165,583 Corporate general and administrative expenses ............. 14,939 13,360 ------------ ---------- Operating earnings ..................................... 129,488 152,223 Interest expense, net ..................................... (43,440) (38,718) Other income, net ......................................... 2,534 2,961 ------------ ---------- Earnings before income taxes and cumulative effect of change in accounting principle ............. 88,582 116,466 Income taxes .............................................. 32,332 42,510 ------------ ---------- Earnings before cumulative effect of change in accounting principle ................................. 56,250 73,956 Cumulative effect of change in accounting principle (net of $28,798 income tax benefit)(Note 2) .......... - (50,101) ------------ ---------- Net earnings ........................................... $ 56,250 $ 23,855 ============ ========== Basic earnings per common share: Earnings before cumulative effect of change in accounting principle ................................. $ .53 $ .69 Cumulative effect of change in accounting principle .... - (.47) ------------ ---------- Net earnings ........................................... $ .53 $ .22 ============ ========== Diluted earnings per common share: Earnings before cumulative effect of change in accounting principle ................................. $ .53 $ .69 Cumulative effect of change in accounting principle .... - (.47) ------------ ---------- Net earnings ........................................... $ .53 $ .22 ============ ========== Weighted average common shares outstanding (in thousands): Basic .................................................. 106,522 107,068 ============ ========== Diluted ................................................ 106,540 107,604 ============ ========== Dividends declared per common share ....................... $ .06 $ .06 ============ ==========
See accompanying notes to consolidated financial statements. 4 STEWART ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
JULY 31, OCTOBER 31, ASSETS 2000 1999 ------ ------------ ----------- Current assets: Cash and cash equivalent investments ............. $ 82,686 $ 30,877 Marketable securities ............................ 8,734 46,549 Receivables, net of allowances ................... 174,436 176,215 Inventories ...................................... 59,204 51,431 Prepaid expenses ................................. 6,358 5,997 ------------ ----------- Total current assets ........................... 331,418 311,069 Receivables due beyond one year, net of allowances .. 233,486 237,578 Intangible assets ................................... 673,853 673,361 Deferred charges .................................... 124,238 109,436 Cemetery property, at cost .......................... 440,351 424,032 Property and equipment, at cost: Land ............................................. 81,081 83,237 Buildings ........................................ 347,470 329,721 Equipment and other .............................. 162,194 158,722 ------------ ----------- 590,745 571,680 Less accumulated depreciation .................... 140,544 124,635 ------------ ----------- Net property and equipment ....................... 450,201 447,045 Long-term investments ............................... 4,144 16,812 Merchandise trust, less estimated cost to deliver ... 71,786 58,999 Other assets ........................................ 5,554 5,548 ------------ ----------- $ 2,335,031 $ 2,283,880 ============ ===========
(continued) STEWART ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
JULY 31, OCTOBER 31, LIABILITIES AND SHAREHOLDERS' EQUITY 2000 1999 ------------------------------------ ------------ ----------- Current liabilities: Current maturities of long-term debt ............................ $ 31,126 $ 12,582 Accounts payable ................................................ 16,776 21,802 Accrued payroll ................................................. 20,401 21,784 Accrued insurance ............................................... 13,544 11,535 Accrued interest ................................................ 6,932 16,757 Accrued other ................................................... 22,247 26,328 Income taxes payable ............................................ 7,694 5,495 Deferred income taxes ........................................... 15,899 17,193 ------------ ----------- Total current liabilities ..................................... 134,619 133,476 Long-term debt, less current maturities ............................ 921,757 938,831 Deferred income taxes .............................................. 60,784 81,434 Deferred revenue ................................................... 124,094 64,961 Other long-term liabilities ........................................ 9,019 8,566 ------------ ----------- Total liabilities ............................................. 1,250,273 1,227,268 ------------ ----------- Commitments and contingencies (Note 5) Shareholders' equity: Preferred stock, $1.00 par value, 5,000,000 shares authorized; no shares issued ............................................. - - Common stock, $1.00 stated value: Class A authorized 150,000,000 shares; issued and outstanding 103,277,329 and 102,664,572 shares at July 31, 2000 and October 31, 1999, respectively ......................... 103,277 102,664 Class B authorized 5,000,000 shares; issued and outstanding 3,555,020 shares at July 31, 2000 and October 31, 1999; 10 votes per share; convertible into an equal number of Class A shares ............................................. 3,555 3,555 Additional paid-in capital ...................................... 673,658 671,891 Retained earnings ............................................... 396,854 347,002 Cumulative foreign translation adjustment ....................... (83,825) (65,152) Unrealized depreciation of investments .......................... (8,761) (3,348) ------------ ----------- Total shareholders' equity .................................... 1,084,758 1,056,612 ------------ ----------- $ 2,335,031 $ 2,283,880 ============ ===========
See accompanying notes to consolidated financial statements. 6 STEWART ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
COMMON STOCK CUMMULATIVE UNREALIZED ---------------------------- ADDITIONAL FOREIGN DEPRECIATION TOTAL SHARES - PAID-IN RETAINED TRANSLATION OF SHAREHOLDERS' CLASSES A AND B(1) AMOUNT CAPITAL EARNINGS ADJUSTMENT INVESTMENTS EQUITY ----------------- --------- ---------- ---------- ----------- ------------ ------------- (IN THOUSANDS) Balance October 31, 1999........ 106,219 $ 106,219 $ 671,891 $ 347,002 $ (65,152) $ (3,348) $ 1,056,612 Comprehensive income: Net earnings ................. 56,250 56,250 Other comprehensive income (loss): Foreign translation adjustment ............... (18,673) (18,673) Unrealized depreciation of investments .............. (8,524) (8,524) Deferred income tax benefit on unrealized depreciation of investments ........... 3,111 3,111 ----------------- --------- ---------- ---------- ----------- ------------ ------------- Total other comprehensive income (loss) ............ (18,673) (5,413) (24,086) ----------------- --------- ---------- ---------- ----------- ------------ ------------- Total comprehensive income (loss) .................... 56,250 (18,673) (5,413) 32,164 Issuance of common stock ....... 613 613 1,767 2,380 Dividends ($.06 per share) ..... (6,398) (6,398) ----------------- --------- ---------- ---------- ----------- ------------ ------------- Balance July 31, 2000 .......... 106,832 $ 106,832 $ 673,658 $ 396,854 $ (83,825) $ (8,761) $ 1,084,758 ================= ========= ========== ========== =========== ============ =============
- ------------------------ (1) Includes 3,555 shares (in thousands) of Class B Common Stock. See accompanying notes to consolidated financial statements. 7 STEWART ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS ENDED JULY 31, -------------------------- 2000 1999 ------------ ----------- Cash flows from operating activities: Net earnings ......................................................... $ 56,250 $ 23,855 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Depreciation and amortization ...................................... 40,608 37,325 Provision for doubtful accounts .................................... 26,092 20,096 Cumulative effect of change in accounting principle ................ - 50,101 Net gains on sales of marketable securities ........................ (1,079) (5,005) Benefit for deferred income taxes .................................. (2,386) (8,315) Changes in assets and liabilities net of effects from acquisitions: Increase in other receivables ................................... (21,640) (70,714) Increase in other deferred charges and intangible assets ......... (3,493) (8,270) Increase in inventories and cemetery property .................... (4,597) (4,648) Decrease in accounts payable and accrued expenses ................ (11,652) (4,508) Increase in merchandise trust, less estimated cost to deliver merchandise ......................................... (20,895) (26,720) Decrease in other ................................................ (1,965) (6,101) ------------ ----------- Net cash provided by (used in) operating activities .............. 55,243 (2,904) ------------ ----------- Cash flows from investing activities: Changes in prearranged funeral contracts, net ........................ (3,782) (17,663) Proceeds from sales of marketable securities ......................... 63,088 16,371 Purchases of marketable securities and long-term investments ......... (13,058) (23,914) Purchases of subsidiaries, net of cash, seller financing and stock issued ................................................... - (158,637) Additions to property and equipment .................................. (31,977) (33,525) Other ................................................................ 1,679 581 ------------ ----------- Net cash provided by (used in) investing activities .............. 15,950 (216,787) ------------ -----------
(continued) 8 STEWART ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS ENDED JULY 31, -------------------------- 2000 1999 ------------ ------------ Cash flows from financing activities: Proceeds from long-term debt ............................. $ 8,366 $ 228,465 Repayments of long-term debt ............................. (21,223) (230,696) Issuance of common stock ................................. 2,380 220,556 Dividends ................................................ (6,398) (6,432) ------------ ------------ Net cash provided by (used in) financing activities .... (16,875) 211,893 ------------ ------------ Effect of exchange rates on cash and cash equivalents ....... (2,509) (711) ------------ ------------ Net increase (decrease) in cash ............................. 51,809 (8,509) Cash and cash equivalents, beginning of period .............. 30,877 30,733 ------------ ------------ Cash and cash equivalents, end of period .................... $ 82,686 $ 22,224 =========== ============ Supplemental cash flow information: Cash paid during the period for: Income taxes ........................................... $ 21,600 $ 34,700 Interest ............................................... $ 55,900 $ 46,000 Noncash investing and financing activities: Subsidiaries acquired through seller financing ......... $ 13,900 $ 1,500 Subsidiaries acquired with common stock ................ $ - $ 300
See accompanying notes to consolidated financial statements. 9 STEWART ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (1) BASIS OF PRESENTATION (a) THE COMPANY Stewart Enterprises, Inc. (the "Company") is the third largest provider of products and services in the death care industry in North America. Through its subsidiaries, the Company offers a complete line of funeral merchandise and services, along with cemetery property, merchandise and services. As of July 31, 2000, the Company owned and operated 625 funeral homes and 163 cemeteries in 30 states within the United States, and in Puerto Rico, Mexico, Australia, New Zealand, Canada, Spain, Portugal, the Netherlands, Argentina, France and Belgium. For the nine months ended July 31, 2000, foreign operations contributed approximately 20 percent of total revenue and, as of July 31, 2000, represented approximately 19 percent of total assets. (b) PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements include the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated. (c) INTERIM DISCLOSURES The information as of July 31, 2000, and for the three and nine months ended July 31, 2000 and 1999, is unaudited, but, in the opinion of management, reflects all adjustments, which are of a normal recurring nature, necessary for a fair presentation of financial position and results of operations for the interim periods. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1999. The results of operations for the three and nine months ended July 31, 2000, are not necessarily indicative of the results to be expected for the fiscal year ending October 31, 2000. (d) FOREIGN CURRENCY TRANSLATION All assets and liabilities of the Company's foreign subsidiaries are translated into U.S. dollars at the exchange rate in effect at the end of the period, and revenues and expenses are translated at average exchange rates prevailing during the period. The resulting translation adjustments are reflected in a separate component of shareholders' equity. 10 STEWART ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (1) BASIS OF PRESENTATION--(CONTINUED) (e) USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (f) RECLASSIFICATIONS Certain reclassifications have been made to the 1999 consolidated financial statements to conform to the presentation used in the 2000 consolidated financial statements. These reclassifications had no effect on net earnings or shareholders' equity. (2) CHANGE IN ACCOUNTING PRINCIPLE Effective November 1, 1998, the Company changed its accounting method with respect to earnings realized by its irrevocable prearranged funeral trust funds and escrow accounts. The Company now defers all of the earnings realized by irrevocable prearranged funeral trust funds and escrow accounts until the underlying funeral service is delivered. Previously, the Company recognized a portion of those earnings and deferred the remainder to offset the estimated future effects of inflation. The accounting change was made principally to match revenue recognition more closely with cash receipts and also to improve the comparability of the Company's earnings with those of its principal competitors. For further details, refer to the Company's Annual Report on Form 10-K for the year ended October 31, 1999. (3) ACQUISITIONS During the nine months ended July 31, 2000, the Company purchased 4 cemeteries, compared to 78 funeral homes and 17 cemeteries purchased during the nine months ended July 31, 1999. These acquisitions have been accounted for by the purchase method, and their results of operations are included in the accompanying consolidated financial statements from the dates of acquisition. The purchase price allocations for certain of these acquisitions are based on preliminary information. The following table reflects, on an unaudited pro forma basis, the combined operations of the Company and the businesses acquired during the nine months ended July 31, 2000, as if such acquisitions had taken place at the beginning of the respective periods presented. Appropriate adjustments have been made to reflect the accounting basis used in recording the acquisitions. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations that would have resulted had the combinations been in effect on the dates indicated, that have resulted since the dates of acquisition, or that may result in the future. 11 STEWART ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (3) ACQUISITIONS--(CONTINUED)
NINE MONTHS ENDED JULY 31, -------------------------- 2000 1999 ------------ ------------ Revenues ................................................. $ 563,908 $ 569,478 ============ ============ Operating earnings ....................................... $ 129,528 $ 152,709 ============ ============ Earnings before cumulative effect of change in accounting principle ................................ $ 56,270 $ 74,231 ============ ============ Net earnings $ 56,270 $ 24,130 ============ ============ Basic earnings per common share: Earnings before cumulative effect of change ............ in accounting principle .............................. $ .53 $ .69 ============ ============ Net earnings ........................................... $ .53 $ .23 ============ ============ Diluted earnings per common share: Earnings before cumulative effect of change in accounting principle .............................. $ .53 $ .69 ============ ============ Net earnings ........................................... $ .53 $ .22 ============ ============ Weighted average common shares outstanding (in thousands): Basic .................................................. 106,522 107,068 ============ ============ Diluted ................................................ 106,540 107,604 ============ ============
The effect of acquisitions at dates of purchase on the consolidated financial statements was as follows:
NINE MONTHS ENDED JULY 31, -------------------------- 2000 1999 ------------ ------------ Current assets .......................................... $ - $ 21,762 Receivables due beyond one year ......................... - 70 Cemetery property ....................................... 15,898 54,386 Property and equipment, net ............................. - 25,820 Deferred charges and other assets ....................... 5,569 862 Intangible assets, net .................................. 21,143 91,767 Deferred tax asset ...................................... 16,489 2,177 Current liabilities ..................................... - (12,854) Long-term debt .......................................... (13,898) (12,873) Deferred revenue ........................................ (45,201) (8,439) Other long-term liabilities ............................. - (3,741) ------------ ------------ - 158,937 Common stock used for acquisitions ...................... - 300 ------------ ------------ Cash used for acquisitions .............................. $ - $ 158,637 ============ ============
12 STEWART ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (4) BENEFIT PLANS As of July 31, 2000, the Company had options outstanding under the 1995 Incentive Compensation Plan (1995 Plan) and the 1996 Directors' Plan with respect to 7,372,714 shares. Included in that number are options to purchase a total of 4,018,168 shares of Class A Common Stock under the 1995 Plan and 72,000 shares of Class A Common Stock under the 1996 Directors' Plan, all of which were granted since the end of the last fiscal year. All of the options granted since the end of the last fiscal year under the 1995 Plan vest at the rate of 25 percent per year over four years, have exercise prices of $5.50 or $6.00 per share and must be exercised by January 21, 2005. All of the options granted since the end of the last fiscal year under the 1996 Directors' Plan vested immediately, have an exercise price of $6.00 per share and must be exercised by January 31, 2005. The Board of Directors adopted, and in April 2000 the shareholders approved, the 2000 Incentive Compensation Plan pursuant to which officers and other employees of the Company may be granted stock options, restricted stock or other stock-based awards by the Compensation Committee of the Board of Directors. As of July 31, 2000, the Company had granted options to officers and other employees for the purchase of a total of 1,996,372 shares of Class A Common Stock at exercise prices equal to the fair market value at the grant dates, which ranged from $2.22 to $4.41 per share. The options generally become exercisable in 25 percent annual increments beginning on April 12, 2001. The Compensation Committee may accelerate the exercisability of any option at any time at its discretion, and the options become immediately exercisable in the event of a change of control of the Company, as defined in the plan. All of these options expire on April 12, 2005. The Board of Directors adopted, and in April 2000 the shareholders approved, the 2000 Directors' Stock Option Plan pursuant to which each director of the Company who is not an employee of the Company may be granted an option to purchase 50,000 shares of the Company's Class A Common Stock. As of July 31, 2000, the Company had granted a total of 200,000 options at an exercise price equal to the fair market value at the grant date, which was $4.30 per share. The options generally become exercisable in 25 percent annual increments beginning on April 13, 2001. The Compensation Committee may accelerate the exercisability of any option at any time at its discretion, and the options become immediately exercisable in the event of a change of control of the Company, as defined in the plan. All of these options expire on January 31, 2005. (5) CONTINGENCIES During the fall of 1999, 16 putative securities class action lawsuits were filed against the Company, certain of its directors and officers and the lead underwriters of the Company's January 1999 common stock offering. The suits have been consolidated, and the court has appointed lead plaintiffs as well as lead and liaison counsel for the plaintiffs. The consolidated amended complaint alleges violations of Section 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder on behalf of purchasers of the Company's common stock during the period October 1, 1998 through August 12, 1999. Plaintiffs generally allege that the defendants made false and misleading statements and failed to disclose allegedly material information in the prospectus relating to the January 1999 common stock offering and in 13 STEWART ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (5) CONTINGENCIES--(CONTINUED) certain of the Company's other public filings and announcements. The plaintiffs also allege that these allegedly false and misleading statements and omissions permitted the Chairman of the Company to sell Company common stock during the class period at inflated market prices. The plaintiffs seek remedies including certification of the putative class, unspecified damages, attorneys' fees and costs, rescission to the extent any members of the class still hold the Company's common stock, and such other relief as the court may deem proper. On February 25, 2000, the Company and the other defendants filed motions to dismiss the complaint. The plaintiffs filed briefs in support of their opposition to those motions on April 19, 2000, and the defendants filed reply briefs on May 26, 2000. This litigation is in the earliest stages, and its outcome and the costs of defending it cannot be predicted at this time. The Company believes that the claims are without merit and intends to defend itself vigorously. (6) RECENT ACCOUNTING STANDARDS Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities," establishes accounting and reporting standards for derivative instruments. SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," amends the accounting and reporting standards of SFAS No. 133 for certain derivative instruments and certain hedging activities, and shall be adopted concurrently with SFAS No. 133. SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," defers the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. SFAS No. 133 is required to be implemented in the first quarter of the Company's fiscal year 2001. The Company has begun its analysis of the impact of SFAS Nos. 133 and 138 on its consolidated financial condition and results of operations, and the effect of the pronouncement is not expected to be material. The Company and other industry participants continue to discuss directly with the staff of the Securities and Exchange Commission the application of its recently issued Staff Accounting Bulletin (SAB) No. 101 - "Revenue Recognition in Financial Statements" as it relates to prearranged sales activities. SAB 101, which applies to all companies and was not directed at the death care industry, emphasizes among other matters the importance of physical delivery of a product or service to justify the recognition of revenue. Based on the currently available information, the Company believes that the implementation of SAB 101 will require a deferral of previously recorded revenue associated with prearranged sales that will result in a material, one-time, noncash, cumulative adjustment to earnings, although amounts deferred will be recognized in future years as the products and services that have been bought and paid for ultimately are delivered. Based on the currently available information, the Company believes that final resolution of these discussions will have a material impact on the Company's reported consolidated earnings and financial condition and on the manner in which certain prearranged sales activities are recorded by the Company and the industry. The Company believes that the implementation of SAB 101 will not have a material impact on the Company's consolidated cash flows and, based on what the Company currently knows, will not cause a violation of any financial covenants in its debt agreements. The Commission and the industry have not reached a final resolution of these discussions, but the Company anticipates that they will be finalized by the end of its fourth fiscal quarter of 2000. The Company is not required to implement the new accounting guidance until the fourth fiscal quarter of 2001 but may choose to implement the guidance earlier. 14 STEWART ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (6) RECENT ACCOUNTING STANDARDS--(CONTINUED) Effective November 1, 1999, the Company implemented Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" (SOP 98-5), which requires costs of start-up activities and organization costs to be expensed as incurred. The implementation of SOP 98-5 did not have a material impact on the Company's financial condition or results of operations. (7) RECONCILIATION OF BASIC AND DILUTED PER SHARE DATA
EARNINGS SHARES PER SHARE (NUMERATOR) (DENOMINATOR) DATA ----------- ------------- --------- THREE MONTHS ENDED JULY 31, 2000 -------------------------------- Net earnings ....................................... $ 18,077 =========== Basic earnings per common share: Net earnings available to common shareholders .... $ 18,077 106,737 $ .17 ========= Effect of dilutive securities: Time-vest stock options assumed exercised ........ - - ----------- ------------- Diluted earnings per common share: Net earnings available to common shareholders plus time-vest stock options assumed exercised... $ 18,077 106,737 $ .17 =========== ============= ========= EARNINGS SHARES PER SHARE (NUMERATOR) (DENOMINATOR) DATA ----------- ------------- --------- NINE MONTHS ENDED JULY 31, 2000 ------------------------------- Net earnings ....................................... $ 56,250 =========== Basic earnings per common share: Net earnings available to common shareholders .... $ 56,250 106,522 $ .53 ========= Effect of dilutive securities: Time-vest stock options assumed exercised ........ - 18 ----------- ------------- Diluted earnings per common share: Net earnings available to common shareholders plus time-vest stock options assumed exercised... $ 56,250 106,540 $ .53 =========== ============= =========
15 STEWART ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (7) RECONCILIATION OF BASIC AND DILUTED PER SHARE DATA--(CONTINUED)
EARNINGS SHARES PER SHARE (NUMERATOR) (DENOMINATOR) DATA ----------- ------------- --------- THREE MONTHS ENDED JULY 31, 1999 -------------------------------- Net earnings .......................................... $ 23,347 =========== Basic earnings per common share: Net earnings available to common shareholders ....... $ 23,347 111,752 $ .21 ========= Effect of dilutive securities: Time-vest stock options assumed exercised ........... - 444 ----------- ------------- Diluted earnings per common share: Net earnings available to common shareholders plus time-vest stock options assumed exercised... $ 23,347 112,196 $ .21 =========== ============= ========= EARNINGS SHARES PER SHARE (NUMERATOR) (DENOMINATOR) DATA ----------- ------------- --------- NINE MONTHS ENDED JULY 31, 1999 ------------------------------- Earnings before cumulative effect of change in accounting principle ................................. $ 73,956 =========== Basic earnings per common share: Earnings available to common shareholders ............ $ 73,956 107,068 $ .69 ========= Effect of dilutive securities: Time-vest stock options assumed exercised ............ - 536 ----------- ------------- Diluted earnings per common share: Earnings available to common shareholders plus time-vest stock options assumed exercised..... $ 73,956 107,604 $ .69 =========== ============= =========
Options to purchase 8,667,587 and 5,820,042 shares of common stock at prices ranging from $3.78 to $27.25 per share were outstanding during the three and nine months ended July 31, 2000, but were not included in the computation of diluted earnings per share because the exercise prices of the options were greater than the average market price of the common shares. The options, which expire between January 2, 2001 and April 12, 2005, were still outstanding as of July 31, 2000. Options to purchase 1,738,834 and 1,516,036 shares of common stock at prices ranging from $16.50 to $27.25 per share were outstanding during the three and nine months ended July 31, 1999, but were not included in the computation of diluted earnings per share because the exercise prices of the options were greater than the average market price of the common shares. The options, which expire between January 2, 2001 and July 31, 2004, were still outstanding as of July 31, 1999. 16 STEWART ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (8) SEGMENT DATA The Company's reportable segment information was as follows:
CONSOLIDATED FUNERAL CEMETERY TOTALS --------- ---------- ------------ Revenues from external customers: Three months ended July 31, 2000 ................................... $ 108,448 73,375 $ 181,823 1999 ................................... $ 112,099 81,622 $ 193,721 Nine months ended July 31, 2000 ................................... $ 346,835 216,809 $ 563,644 1999 ................................... $ 332,031 234,159 $ 566,190 Gross profit: Three months ended July 31, 2000 ................................... $ 27,424 18,511 $ 45,935 1999 ................................... $ 31,431 22,243 $ 53,674 Nine months ended July 31, 2000 ................................... $ 92,962 51,465 $ 144,427 1999 ................................... $ 97,991 67,592 $ 165,583
A reconciliation of total segment gross profit to total earnings before income taxes and cumulative effect of change in accounting principle for the three and nine months ended July 31, 2000 and 1999, is as follows:
THREE MONTHS ENDED NINE MONTHS ENDED JULY 31, JULY 31, ------------------ ------------------ 2000 1999 2000 1999 --------- -------- -------- -------- Gross profit for reportable segments .......... $ 45,935 $ 53,674 $144,427 $165,583 Corporate general and administrative expenses... (4,796) (5,012) (14,939) (13,360) Interest expense, net .......................... (14,410) (13,224) (43,440) (38,718) Other income, net .............................. 1,738 1,328 2,534 2,961 --------- -------- -------- -------- Earnings before income taxes and cumulative effect of change in accounting principle ........................ $ 28,467 $ 36,766 $ 88,582 $116,466 ========= ========= ======== ========
17 STEWART ENTERPRISES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INTRODUCTION Effective November 1, 1998, the Company changed its accounting method with respect to earnings realized by its irrevocable prearranged funeral trust funds and escrow accounts. The Company now defers all of the earnings realized by irrevocable prearranged funeral trust funds and escrow accounts until the underlying funeral service is delivered. Previously, the Company recognized a portion of those earnings and deferred the remainder to offset the estimated future effects of inflation. The accounting change was made principally to match revenue recognition more closely with cash receipts and to improve the comparability of the Company's earnings with those of its principal competitors. For further details, refer to the Company's Annual Report on Form 10-K for the year ended October 31, 1999. The Company's funeral and cemetery business includes prearranged sales funded through trust and escrow arrangements, as well as maintenance of cemetery grounds funded through perpetual care funds. The Company's investment strategy for these funds is, among other criteria, partially dependent on the ability to withdraw net realized capital gains from these funds. However, withdrawal of capital gains is not permitted for perpetual care funds in certain jurisdictions in which the Company operates. Accordingly, funds for which net capital gains are permitted to be withdrawn typically are invested in a diversified portfolio consisting principally of U.S. government securities, other interest-bearing securities and preferred stocks rated A or better, "blue chip" publicly- traded common stocks, money market funds and other short-term investments. Income from funds, especially those invested partially in common stock, can be materially affected by prevailing interest rates and the performance of the stock market. In managing its U.S. and Canadian funds, which include investments in common stock, the Company seeks an overall annual rate of return of approximately 8.5 percent to 9.0 percent. In the past three years, such funds have generated overall annual rates of return in that range. However, no assurance can be given that the Company will be successful in achieving any particular rate of return. For purposes of the following discussion, funeral homes and cemeteries owned and operated at the beginning of fiscal year 1999 are referred to as "Existing Operations." Correspondingly, funeral homes and cemeteries acquired or opened during either fiscal year being compared are referred to as "Acquired/Opened Operations." Acquired is defined as those purchased, and opened is defined as those constructed or developed through the implementation of the alternative services firm concept. In order to provide more comparable information on a quarterly basis, during the quarter ended April 30, 2000, the Company changed its methodology for classifying "Existing Operations." Previously, "Existing Operations" consisted of funeral homes and cemeteries owned and operated for the entirety of both periods being compared. Under that methodology, the group of businesses that constituted "Existing Operations" in the three-month period was different from the group of businesses that constituted "Existing Operations" in the six-, nine- or twelve-month periods. In addition, each quarter in the fiscal year had a different group of businesses that comprised "Existing Operations." Under the new methodology, funeral homes and cemeteries will be classified as "Existing Operations" only if the properties were owned at the beginning of the first fiscal year being compared. As a result, the same group of businesses will be considered "Existing Operations" in the three-, six-, nine- and twelve- month periods of both fiscal years, as well as in each quarter of both fiscal years, thus enhancing consistency and comparability. 18 RESULTS OF OPERATIONS THREE MONTHS ENDED JULY 31, 2000 COMPARED TO THREE MONTHS ENDED JULY 31, 1999 FUNERAL SEGMENT
THREE MONTHS ENDED JULY 31, ------------------ INCREASE 2000 1999 (DECREASE) --------- ------- ---------- (IN MILLIONS) FUNERAL REVENUE --------------- Existing Operations ...................... $ 98.4 $ 103.2 $ (4.8) Acquired/Opened Operations ............... 10.0 8.9 1.1 --------- ------- ---------- $ 108.4 $ 112.1 $ (3.7) ========= ======= ========== FUNERAL COSTS ------------- Existing Operations ..................... $ 72.2 $ 74.4 $ (2.2) Acquired/Opened Operations .............. 8.8 6.3 2.5 --------- ------- ---------- $ 81.0 $ 80.7 $ 0.3 ========= ======= ========== Funeral Segment Profit .................. $ 27.4 $ 31.4 $ (4.0) ========= ======= ==========
Funeral revenue decreased $3.7 million, or 3 percent, for the three months ended July 31, 2000, compared to the corresponding period in 1999. The Company experienced a $4.8 million, or 5 percent, decrease in revenue from Existing Operations as a result of several factors. First, the average revenue per domestic funeral service performed by Existing Operations increased 6.0 percent (7.8 percent increase worldwide, excluding the effect of foreign currency translation). The increase in average revenue per funeral service was due in part to improved merchandising, personalization of services and product offerings and enhanced funeral arranger training, implemented in response to the findings of the Company's extensive consumer market study. Offsetting this increase was a 3.9 percent decrease (646 events) in the number of domestic funeral services performed by Existing Operations (5.9 percent decrease (1,845 events) worldwide), a $3.7 million reduction in prearranged funeral merchandise sales and a $1.9 million reduction in revenue from changes in foreign currency exchange rates (principally the Euro). The Company anticipated the reduced prearranged funeral merchandise sales mentioned above as the sales force adapted to adjustments made to the terms and conditions of preneed contracts. These adjustments, which are designed to improve cash flow and the quality of receivables, include increased average finance charges, shortened contract lengths and larger down payment requirements. Further impacting preneed sales is the uncertainty surrounding operational changes being considered in conjunction with the implementation of SAB 101 and how those changes may impact the mix of products and services that the Company sells and promotes. The Company recently developed a new Sales and Marketing Division to enhance its sales effectiveness and to create consistency in its marketing programs, sales and training. The Sales and Marketing Division is transitioning the sales force to perform under the new terms and conditions of sales as well as focusing them on the optimal product mix due to changes anticipated with the implementation of SAB 101. Funeral profit margin from Existing Operations decreased from 27.9 percent in 1999 to 26.6 percent in 2000 primarily due to the reduction in sales of prearranged funeral merchandise as described above and, to a lesser extent, to the effect of changes in foreign currency exchange rates. The increase in revenue and costs from Acquired/Opened Operations resulted primarily from the Company's acquisition and construction of funeral homes from August 1999 through July 2000, which are not reflected in the 1999 period presented above. 19 Historically, one of the Company's goals has been to achieve 5 to 7 percent increases annually in the average revenue per funeral service performed by Existing Operations through a combination of price increases and improvements in merchandising. For the year ended October 31, 1999, the average revenue per funeral service performed by existing funeral homes increased 0.7 percent domestically and 3.1 percent worldwide, excluding the effect of foreign currency translation, which was below this objective. Because of intense and growing competition from low-cost funeral service and merchandise providers in certain key markets, the Company lowered its goals for increases in the average revenue per funeral service performed to 2 to 3 percent annually. For the three months ended July 31, 2000, the average revenue per funeral service performed by existing funeral homes increased 6.0 percent domestically and 7.8 percent worldwide, excluding the effect of foreign currency translation. Although these results exceeded current expectations, the Company still anticipates increases in average revenue per funeral service performed of 2 to 3 percent going forward, as it is too soon to determine if these results are indicative of a trend. See the Company's forward-looking statements in Part II, Item 5. CEMETERY SEGMENT
THREE MONTHS ENDED JULY 31, ------------------ INCREASE 2000 1999 (DECREASE) --------- ------- ---------- (IN MILLIONS) CEMETERY REVENUE ---------------- Existing Operations ...................... $ 64.0 $ 75.1 $ (11.1) Acquired/Opened Operations ............... 9.4 6.5 2.9 --------- ------- ---------- $ 73.4 $ 81.6 $ (8.2) ========= ======= ========== CEMETERY COSTS -------------- Existing Operations ...................... $ 48.4 $ 53.8 $ (5.4) Acquired/Opened Operations ............... 6.5 5.6 0.9 --------- ------- ---------- $ 54.9 $ 59.4 $ (4.5) ========= ======= ========== Cemetery Segment Profit .................. $ 18.5 $ 22.2 $ (3.7) ========= ======= ==========
Cemetery revenue decreased $8.2 million, or 10 percent, for the three months ended July 31, 2000, compared to the corresponding period in 1999. The Company experienced an $11.1 million, or 15 percent, decrease in revenue from Existing Operations, resulting primarily from reduced preneed sales. Slightly offsetting this decrease was an approximate $700,000 or 9 percent increase in revenue from cemetery trust funds and escrow accounts to $8.8 million. This increase was due primarily to an increase in the average yield on the funds. The yield for the quarter was higher than the Company's annual goal of 8.5 percent to 9.0 percent; however, the year-to- date yield was just slightly higher than the Company's goal. The Company anticipated the reduced preneed sales mentioned above as the sales force adapted to adjustments made to the terms and conditions of preneed contracts as described in the discussion of the funeral segment. Additionally, preneed sales were affected by uncertainty surrounding the operational changes being considered in conjunction with the implementation of SAB 101 and how those changes may impact the mix of products and services that the Company sells and promotes. Cemetery profit margin from Existing Operations decreased from 28.4 percent in 1999 to 24.4 percent in 2000. The decline was attributable principally to the reduced preneed sales mentioned above, coupled with the high fixed-cost nature of the cemetery business. The increase in revenue and costs from Acquired/Opened Operations resulted from cemeteries not owned for the entirety of both periods being presented, and the Company's acquisition and construction of cemeteries from August 1999 through July 2000, which are not reflected in the 1999 period presented above. 20 OTHER Net interest expense, which is comprised of gross interest expense of $15.9 million, netted with investment income of $1.5 million, increased $1.2 million during the third quarter of fiscal year 2000 compared to the same period in 1999. This is due principally to an increase in average interest rates from 5.9 percent in 1999 to 6.5 percent in 2000, coupled with an increase in the average outstanding debt resulting from acquisitions that closed in late 1999. The increase in gross interest expense was partially offset by an approximate $800,000 increase in investment income generated from increased cash and cash equivalents. Other income increased approximately $400,000 during the third quarter of fiscal year 2000 compared to the same period in 1999 due principally to capital gains realized from the liquidation of certain of the Company's voluntary escrow funds in the third quarter of fiscal year 2000. NINE MONTHS ENDED JULY 31, 2000 COMPARED TO NINE MONTHS ENDED JULY 31, 1999 FUNERAL SEGMENT
NINE MONTHS ENDED JULY 31, ----------------- INCREASE 2000 1999 (DECREASE) -------- -------- ---------- (IN MILLIONS) FUNERAL REVENUE --------------- Existing Operations ....................... $ 315.0 $ 318.2 $ (3.2) Acquired/Opened Operations ................ 31.8 13.8 18.0 -------- -------- --------- $ 346.8 $ 332.0 $ 14.8 ======== ======== ========= FUNERAL COSTS ------------- Existing Operations ....................... $ 228.0 $ 223.6 $ 4.4 Acquired/Opened Operations ................ 25.9 10.4 15.5 -------- -------- --------- $ 253.9 $ 234.0 $ 19.9 ======== ======== ========= Funeral Segment Profit .................... $ 92.9 $ 98.0 $ (5.1) ======== ======== =========
Funeral revenue increased $14.8 million, or 4 percent, for the nine months ended July 31, 2000, compared to the corresponding period in 1999. The Company experienced a $3.2 million, or 1 percent, decrease in revenue from Existing Operations as a result of several factors. First, the Company experienced a 6.2 percent increase in the average revenue per domestic funeral service performed by Existing Operations (6.7 percent increase worldwide, excluding the effect of foreign currency translation). The increase in average revenue per funeral service was due in part to improved merchandising, personalization of services and product offerings and enhanced funeral arranger training, implemented in response to the findings of the Company's extensive consumer market study. Offsetting this increase was a $7.0 million reduction in prearranged funeral merchandise sales, a $4.0 million reduction in revenue from changes in foreign currency exchange rates (principally the Euro) and a 1.9 percent decrease (1,033 events) in the number of domestic funeral services performed by Existing Operations (3.4 percent decrease (3,315 events) worldwide). During the first nine months of 2000, the Company forfeited 600 low- margin, direct cremation events at several of its West Coast alternative service firms as the Company was not willing to perform these cremations for prices being offered by its competitors. These direct cremations were purely price-sensitive and generally not profitable. As a result, although approximately 600 events were forfeited, the Company lost less than $200,000 in revenue, with a minimal effect on gross profit. However, the forfeiture of these events reduced the number of domestic funeral services performed by Existing Operations. When these 600 events are taken out of the 1,033-event decrease discussed above, the number of domestic funeral services performed by Existing Operations declined less than one percent from the prior year. 21 The Company anticipated the reduced prearranged funeral merchandise sales mentioned above as the sales force adapted to adjustments made to the terms and conditions of preneed contracts as described in the three-month funeral segment discussion. Additionally, preneed sales were affected by uncertainty surrounding operational changes being considered in conjunction with the implementation of SAB 101 and how those changes may impact the mix of products and services the Company sells and promotes. Funeral profit margin from Existing Operations decreased from 29.7 percent in 1999 to 27.6 percent in 2000 due primarily to the reduction in sales of prearranged funeral merchandise as described above and, to a lesser extent, to the effect of changes in foreign currency exchange rates. The increase in revenue and costs from Acquired/Opened Operations resulted primarily from funeral homes not owned for the entirety of both periods being presented, coupled with the Company's acquisition and construction of funeral homes from August 1999 through July 2000 which are not reflected in the 1999 period presented above. Historically, one of the Company's goals has been to achieve 5 to 7 percent increases annually in the average revenue per funeral service performed by Existing Operations through a combination of price increases and improvements in merchandising. For the year ended October 31, 1999, the average revenue per funeral service performed by existing funeral homes increased 0.7 percent domestically and 3.1 percent worldwide, excluding the effect of foreign currency translation, which was below this objective. Because of intense and growing competition from low-cost funeral service and merchandise providers in certain key markets, the Company lowered its goals for increases in the average revenue per funeral service performed to 2 to 3 percent annually. For the nine months ended July 31, 2000, the average revenue per funeral service performed by existing funeral homes increased 6.2 percent domestically and 6.7 percent worldwide, excluding the effect of foreign currency translation. Although these results exceeded current expectations, the Company still anticipates increases in average revenue per funeral service performed of 2 to 3 percent going forward, as it is too soon to determine if these results are indicative of a trend. See the Company's forward-looking statements in Part II, Item 5. CEMETERY SEGMENT
NINE MONTHS ENDED JULY 31, ----------------- INCREASE 2000 1999 (DECREASE) -------- -------- ---------- (IN MILLIONS) CEMETERY REVENUE ---------------- Existing Operations ....................... $ 193.0 $ 223.4 $ (30.4) Acquired/Opened Operations ................ 23.8 10.8 13.0 -------- ------- ---------- $ 216.8 $ 234.2 $ (17.4) ======== ======= ========== CEMETERY COSTS -------------- Existing Operations ....................... $ 146.6 $ 157.9 $ (11.3) Acquired/Opened Operations ................ 18.7 8.7 10.0 -------- ------- ---------- $ 165.3 $ 166.6 $ (1.3) ======== ======= ========== Cemetery Segment Profit ................... $ 51.5 $ 67.6 $ (16.1) ======== ======= ==========
Cemetery revenue decreased $17.4 million, or 7 percent, for the nine months ended July 31, 2000, compared to the corresponding period in 1999. The Company experienced a $30.4 million, or 14 percent, decrease in revenue from Existing Operations resulting primarily from reduced preneed sales. Slightly offsetting this decrease was an approximate $900,000 or 3 percent increase in revenue from cemetery trust funds and escrow accounts to $25.8 million. This increase was due to an increase in the average balance coupled with an increase in the average yield on the funds. The yield for the nine months was slightly higher than the Company's goal of 8.5 percent to 9.0 percent. 22 The Company anticipated the reduced preneed sales mentioned above as the sales force adapted to adjustments made to the terms and conditions of preneed contracts as described in the three-month funeral segment discussion. Additionally, preneed sales were affected by uncertainty surrounding operational changes being considered in conjunction with the implementation of SAB 101 and how those changes may impact the mix of products and services the Company sells and promotes. Cemetery profit margin from Existing Operations decreased from 29.3 percent in 1999 to 24.0 percent in 2000. The decline was attributable principally to the reduced preneed sales mentioned above, coupled with the high fixed-cost nature of the cemetery business. The increase in revenue and costs from Acquired/Opened Operations resulted primarily from cemeteries not owned for the entirety of both periods being presented, coupled with the Company's acquisition and construction of cemeteries from August 1999 through July 2000, which are not reflected in the 1999 period presented above. OTHER Corporate general and administrative expenses increased $1.6 million to 2.6 percent of revenue for the nine months ended July 31, 2000, as compared to 2.3 percent of revenue for the same period in 1999. The increase in these expenses is primarily the result of a $2.0 million increase in consulting fees related to the Company's extensive consumer market research project. Net interest expense, which is comprised of gross interest expense of $46.0 million, netted with investment income of $2.6 million, increased $4.7 million during the first nine months of fiscal year 2000 compared to the same period in 1999. This increase is due principally to an increase in outstanding debt resulting from acquisitions that closed in late April 1999 and an increase in average interest rates from 6.0 percent in 1999 to 6.3 percent in 2000. In December 1998, the Company entered into an interest rate swap agreement on a notional amount of $200 million. Under the terms of the agreement, effective March 4, 1999, the Company pays a fixed rate of 4.915 percent and receives three-month LIBOR. The swap expires on March 4, 2002. As of July 31, 2000, the Company's outstanding borrowings totaled $952.9 million. Of the total amount outstanding, including the portion subject to the interest rate swap agreement, approximately 65 percent was fixed-rate debt, with the remaining 35 percent subject to short-term variable interest rates averaging approximately 7.0 percent. Other income, net, decreased approximately $400,000 during the first nine months of fiscal year 2000 compared to the same period in 1999. This decrease is principally due to approximately $1.0 million of previously capitalized costs that were expensed during the second quarter of fiscal year 2000, offset slightly by capital gains realized from the liquidation of certain of the Company's voluntary escrow funds in the third quarter of fiscal year 2000. LIQUIDITY AND CAPITAL RESOURCES Early in fiscal year 2000, the Company's management resolved to improve cash flow and build cash reserves in order to deleverage the Company's balance sheet. The Company had accumulated $91.4 million in cash and marketable securities as of July 31, 2000, an increase of approximately $14.0 million from October 31, 1999, after reducing debt by $12 million during the quarter. In addition, the Company's operations provided cash of $55.2 million for the nine months ended July 31, 2000, compared to using cash of $2.9 million for the corresponding period in 1999, due principally to a smaller increase in receivables, coupled with other working capital changes. 23 The Company has implemented various initiatives to generate cash and reduce debt. One initiative being considered is the possible sale of certain foreign operations. The Company has engaged an investment banking firm to assist in this process and is in discussions with several interested parties. Also, in addition to the Company's regular communication with the lead bank in its revolving credit facility, the Company recently met with all the lenders party to that facility to discuss plans for deleveraging its balance sheet and to develop a workable plan well in advance of the April 2002 maturity date of the Company's revolving credit facility. Any amendments, renegotiations or extensions of existing agreements are likely to result in higher interest costs to the Company. Furthermore, the sale of certain foreign assets could result in a material charge to earnings but would generate significant cash for debt reduction. Principal payments due on the Company's long-term debt during the remainder of fiscal year 2000 and fiscal year 2001 are $2.3 million and $29.6 million, respectively. In addition to the maturity of the revolving credit facility in fiscal year 2002, the Company also has $28.5 million of other debt due. In fiscal year 2003, $28.6 million of other debt matures, and the Company could be required to redeem $200 million of its public debt (ROARS) if the debt is not remarketed, which will depend primarily upon prevailing interest rates at that time. The remaining $100 million of the Company's public debt matures in fiscal year 2004 in addition to $12.7 million in other debt maturities. Maturities after fiscal year 2004 are $17.3 million. Long-term debt at July 31, 2000 increased to $952.9 million compared to $951.4 million at October 31, 1999, as a result of one seller-financed acquisition which closed in the first quarter of fiscal year 2000, although it had been completed in 1999. This increase was partially offset by a reduction of debt of $12 million in the third quarter of fiscal year 2000. The Company's long-term debt consisted of $529.0 million under the Company's revolving credit facility, $393.4 million of long-term notes and $30.5 million of term notes incurred principally in connection with the acquisition of funeral home and cemetery properties. All of the Company's debt is uncollateralized, except for approximately $14.9 million of term notes incurred principally in connection with acquisitions. The most restrictive of the Company's credit agreements require it to maintain a debt-to-equity ratio no higher than 1.25 to 1.00. The Company has managed its capitalization within that limit and had a ratio of total debt-to-equity of .9 to 1.0 as of July 31, 2000 and October 31, 1999. As of September 8, 2000, the Company had a debt-to-equity ratio of approximately .9 to 1.0 and $403.1 million of additional borrowing capacity within the 1.25 to 1.00 debt-to-equity parameter, $65.4 million of which was available under its revolving credit facility. The Company's ratio of earnings to fixed charges was as follows for the years and period indicated:
NINE MONTHS YEARS ENDED OCTOBER 31, ENDED ---------------------------------------------- JULY 31, 1995 1996 1997 1998 1999 2000 ---- ---- ---- ---- ---- ----------- 2.72(1) 3.98 3.65(2) 2.38(3) 3.43(2) 2.80
- ----------------------- (1) Pretax earnings for fiscal year 1995 include a nonrecurring, noncash charge of $17.3 million in connection with the vesting of performance- based stock options. Excluding the charge, the Company's ratio of earnings to fixed charges for fiscal year 1995 would have been 3.43. (2) Excludes the cumulative effect of change in accounting principles. (3) Pretax earnings for fiscal year 1998 include a nonrecurring, noncash charge of $76.8 million in connection with the vesting of performance- based stock options. Excluding the charge, the Company's ratio of earnings to fixed charges for fiscal year 1998 would have been 4.01. For purposes of computing the ratio of earnings to fixed charges, earnings consist of pretax earnings plus fixed charges(excluding interest capitalized during the period). Fixed charges consist of interest expense, capitalized 24 interest, amortization of debt expense and discount or premium relating to any indebtedness, and the portion of rental expense that management believes to be representative of the interest component of rental expense. Fiscal year 1999 reflects the 1999 change in accounting principle; fiscal years 1998 and 1997 reflect the 1997 change in accounting principles; fiscal years 1996 and 1995 reflect the Company's previous accounting methods which were in effect at that time. As detailed in Note 3 of the Company's consolidated financial statements, during the nine months ended July 31, 2000, the Company completed the acquisition of four cemeteries through seller financing at a net purchase price of $5.3 million. Historically, the Company's growth has been primarily from acquisitions. This trend began to change in late fiscal year 1999. As industry conditions reduced the number of major consolidators participating in the acquisition market, those that remained generally applied significantly tighter pricing criteria, and many potential sellers withdrew their businesses from the market rather than pursuing transactions at lower prices. As a result, the Company's acquisition activity has ceased, and, as of September 8, 2000, the Company has no pending acquisitions. The Company's growth expectations for fiscal year 2000 and beyond include no acquisitions. The Company's current strategy is to grow through internal means, including several initiatives to increase revenues, control costs, and enhance the effectiveness of its operations. One of these initiatives is the improved merchandising, personalization of services and product offerings resulting from the Company's extensive market study of consumer preferences. Another is the enhanced funeral arranger training resulting from the creation of its Sales and Marketing Division to strengthen sales effectiveness and to create consistency in marketing programs, sales and training. Additionally, among other initiatives discussed in the Company's Annual Report on Form 10-K for the year ended October 31, 1999, the Company continues to construct funeral homes on the grounds of unaffiliated cemeteries, which allows the Company to enjoy the benefits of a combined operation without the capital investment of purchasing the cemetery. Although it generally takes several years before a newly constructed funeral home becomes profitable, the Company's experience with combined operations has demonstrated that the combination of a funeral home with a cemetery can significantly increase the market share and profitability of both. During fiscal year 2000, the Company opened three new funeral homes in an operating partnership with the Los Angeles Archdiocese. The fourth Los Angeles Archdiocese funeral home is expected to open during the first fiscal quarter of 2001, and a fifth funeral home is currently under construction. Although the Company has no material commitments for fiscal year 2000 capital expenditures (other than approximately $15 million related to construction of the Archdiocese of Los Angeles funeral homes), the Company contemplates capital expenditures of approximately $43.5 million for the fiscal year ending October 31, 2000, which includes $25 million in internal growth initiatives (including the construction of the Los Angeles funeral homes) and approximately $18.5 million for maintenance capital expenditures. With potential debt maturities of $557.5 million, $228.6 million and $112.7 million in fiscal years 2002, 2003 and 2004, respectively, management of the Company's liquidity and capitalization represents a significant short- and medium-term priority. The Company believes that its ability to meet its future capital requirements will depend primarily upon the successful implementation of its strategies to generate cash from operations, generate cash from other sources such as the sale of certain foreign operations, and its ability to refinance its revolving credit facility and public debt prior to or at their maturities. Any refinancing is likely to be at interest rates substantially higher than those currently in effect, although the rate increases may be moderated if the Company is able to substantially reduce its total debt prior to or in connection with any refinancing. 25 On December 8, 1999, Moody's Investors Service ("Moody's") announced that it had lowered the Company's credit rating to Ba2 and on August 3, 2000, announced that it had lowered the Company's credit rating to Ba3. On February 22, 2000, Standard & Poor's ("S&P") announced that it had lowered the Company's credit rating to BB+ and on July 12, 2000, announced that it had lowered the Company's credit rating to BB. Previously, the Company's credit ratings from Moody's and S&P were Baa3 and BBB, respectively. Interest paid by the Company on its revolving line of credit is based in part on its credit ratings from Moody's and S&P, and is currently at its maximum pricing under the existing agreement. The downgrades are estimated to have an effect of less than $1 million on the Company's annual net earnings. INFLATION Inflation has not had a significant impact on the Company's operations over the past three years, nor is it expected to have a significant impact in the foreseeable future. OTHER RECENT ACCOUNTING STANDARDS SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," establishes accounting and reporting standards for derivative instruments. SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," amends the accounting and reporting standards of SFAS No. 133 for certain derivative instruments and certain hedging activities, and shall be adopted concurrently with SFAS No. 133. SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities - - Deferral of the Effective Date of FASB Statement No. 133," defers the effective date of SFAS No. 133 to fiscal years beginning after June 15, 2000. SFAS No. 133 is required to be implemented in the first quarter of the Company's fiscal year 2001. The Company has begun its analysis of the impact of SFAS Nos. 133 and 138 on its consolidated financial condition and results of operations, and the effect of the pronouncement is not expected to be material. The Company and other industry participants continue to discuss directly with the staff of the Securities and Exchange Commission the application of its recently issued Staff Accounting Bulletin No. 101 - "Revenue Recognition in Financial Statements" as it relates to prearranged sales activities. SAB 101, which applies to all companies and was not directed at the death care industry, emphasizes among other matters the importance of physical delivery of a product or service to justify the recognition of revenue. Based on currently available information, the Company believes that the implementation of SAB 101 will require a deferral of previously recorded revenue associated with prearranged sales that will result in a material, one-time, noncash, cumulative adjustment to earnings, although amounts deferred will be recognized in future years as the products and services that have been bought and paid for ultimately are delivered. Based on the currently available information, the Company believes that final resolution of these discussions will have a material impact on the Company's reported consolidated earnings and financial condition and on the manner in which certain prearranged sales activities are recorded by the Company and the industry. The Company believes that the implementation of SAB 101 will not have a material impact on the Company's consolidated cash flows and, based on what the Company currently knows, will not cause a violation of any financial covenants in its debt agreements. The Commission and the industry have not reached a final resolution of these discussions, but the Company anticipates that they will be finalized by the end of its fourth fiscal quarter of 2000. The Company is not required to implement the new accounting guidance until the fourth fiscal quarter of 2001 but may choose to implement the guidance earlier. Effective November 1, 1999, the Company implemented Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities", which requires costs of start-up activities and organization costs to be expensed as incurred. The implementation of SOP 98-5 did not have a material impact on the Company's financial condition or results of operations. 26 STEWART ENTERPRISES, INC. AND SUBSIDIARIES ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Quantitative and qualitative disclosure about market risk is presented in Item 7A to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1999, filed with the Securities and Exchange Commission on January 27, 2000. The following disclosure discusses only those instances in which the market risk has changed by more than 10 percent from the annual disclosure. The market risk inherent in the Company's market risk sensitive instruments and positions is the potential change arising from increases or decreases in the prices of marketable equity securities, foreign currency exchange rates and interest rates as discussed below. Generally, the Company's market risk sensitive instruments and positions are characterized as "other than trading." The Company's exposure to market risk as discussed below includes "forward-looking statements" and represents an estimate of possible changes in fair value or future earnings that would occur assuming hypothetical future movements in equity markets, foreign currency exchange rates or interest rates. The Company's views on market risk are not necessarily indicative of actual results that may occur and do not represent the maximum possible gains and losses that may occur, since actual gains and losses will differ from those estimated, based on actual fluctuations in equity markets, foreign currency exchange rates, interest rates and the timing of transactions. FOREIGN CURRENCY The Company's foreign subsidiaries receive revenues and pay expenses in a number of foreign currencies. For the nine months ended July 31, 2000 and fiscal year ended October 31, 1999, each 10 percent change in the average exchange rate between such currencies and the U.S. dollar would result in changes of approximately $2.7 million and $3.1 million, respectively, in the Company's pre-tax earnings. The Company does not currently hedge its investments in foreign subsidiaries; however, the Company continually monitors the exchange rates of its foreign currencies to determine whether hedging transactions would be appropriate. INTEREST The Company has entered into various fixed- and variable-rate debt obligations, which are detailed in Note 11 to the Company's consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1999. As of July 31, 2000 and October 31, 1999, the carrying values of the Company's long-term, fixed-rate debt, including accrued interest and the unamortized portion of the ROARS option premium, was approximately $429.7 million and $435.0 million, respectively, compared to fair values of $301.1 million and $372.6 million, respectively. Fair values were determined using quoted market prices, where applicable, or future cash flows discounted at market rates for similar types of borrowing arrangements. Each approximate 10 percent change in the average interest rates applicable to such debt, 245 basis points and 125 basis points for July 31, 2000 and October 31, 1999, respectively, would result in changes of approximately $13.8 million and $12.0 million, respectively, in the fair values of these instruments. If these instruments are held to maturity, no change in fair value will be realized. 27 In order to hedge a portion of the interest rate risk associated with its variable-rate debt, during the first quarter of 1999, the Company entered into a three-year interest rate swap agreement involving a notional amount of $200.0 million. This agreement which became effective March 4, 1999, effectively converted $200.0 million of variable-rate debt bearing interest based on three-month LIBOR to a fixed rate based on the swap rate of 4.915 percent. As of July 31, 2000 and October 31, 1999, the estimated fair value of the interest rate swap based on quoted market prices was $6.8 million and $6.1 million, respectively. A hypothetical 100 basis point increase in the average interest rates applicable to such debt would result in a change of approximately $3.3 million and $4.7 million, respectively, in the fair value of this instrument. As of July 31, 2000, the carrying value of the Company's borrowings outstanding under its revolving credit facility, including accrued interest, was $529.0 million compared to a fair value of $517.5 million. Fair value was determined using future cash flows discounted at market rates for similar types of borrowing arrangements. Of the borrowings outstanding under the revolving credit facility, $329.0 million was not hedged by the interest rate swap and was subject to short-term variable interest rates. Each approximate 10 percent, or 75 basis point, change in the average interest rate applicable to this debt would result in a change of approximately $1.6 million in the Company's annualized pre-tax earnings. As of October 31, 1999, the carrying value, including accrued interest, and fair value of the Company's variable-rate debt was $533.1 million and $524.9 million, respectively. Each approximate 10 percent, or 75 basis point, change in average interest rates applicable to such debt would have resulted in a change of approximately $1.2 million in the Company's pre-tax earnings. The Company monitors its mix of fixed- and variable-rate debt obligations in light of changing market conditions and from time to time may alter that mix by, for example, refinancing balances outstanding under its variable-rate revolving credit facility with fixed-rate debt or by entering into interest rate swaps. 28 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS IN RE STEWART ENTERPRISES, INC. SECURITIES LITIGATION, United States District Court for the Eastern District of Louisiana. During the fall of 1999, 16 putative securities class action lawsuits were filed against the Company, certain of its directors and officers and the lead underwriters of the Company's January 1999 common stock offering. The suits have been consolidated, and the court has appointed lead plaintiffs as well as lead and liaison counsel for the plaintiffs. The consolidated amended complaint alleges violations of Section 11, 12(a)(2) and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder on behalf of purchasers of the Company's common stock during the period October 1, 1998 through August 12, 1999. Plaintiffs generally allege that the defendants made false and misleading statements and failed to disclose allegedly material information in the prospectus relating to the January 1999 common stock offering and in certain of the Company's other public filings and announcements. The plaintiffs also allege that these allegedly false and misleading statements and omissions permitted the Chairman of the Company to sell Company common stock during the class period at inflated market prices. The plaintiffs seek remedies including certification of the putative class, unspecified damages, attorneys' fees and costs, rescission to the extent any members of the class still hold the Company's common stock, and such other relief as the court may deem proper. On February 25, 2000, the Company and the other defendants filed motions to dismiss the complaint. The plaintiffs filed briefs in support of their opposition to those motions on April 19, 2000, and the defendants filed reply briefs on May 26, 2000. This litigation is in the earliest stages, and its outcome and the costs of defending it cannot be predicted at this time. The Company believes that the claims are without merit and intends to defend itself vigorously. ITEM 5. OTHER INFORMATION FORWARD-LOOKING STATEMENTS Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. At the end of fiscal year 1999, the Company stated that fiscal year 2000 would be a year of transition, from a period of rapid growth, fueled primarily by acquisitions, to a period driven primarily by internal growth strategies and a more intense focus on improving the operations and cash flow of its businesses. In this regard, management's revenue goal for fiscal year 2000 is in the range of $725 million to $740 million, while its earnings per share goal is in the range of $.68 to $.72, and with nine months of actual data, the Company has stated its goal is at the lower end of that range (absent the effect of SAB 101 and the pending strategies for deleveraging the Company's balance sheet). Additionally, operating cash flow for fiscal year 2000 is expected to be in the range of $70 million to $75 million, while free cash flow, which is defined as operating cash flow adjusted for changes in prearranged funeral activity and maintenance capital expenditures, is expected to be approximately $40 million for the fiscal year. Fiscal year 2000 goals also include spending $25 million on internal growth initiatives. The current tax rate anticipated for fiscal year 2000 is 36.5 percent, and the Company's weighted average cost of debt as of July 31, 2000, was 6.6 percent. Absent the effect of SAB 101 and the pending strategies for deleveraging the Company's balance sheet, the Company's current goal for annual earnings per share growth after fiscal year 2000 is 10 percent. The Company's goal is to attain that growth primarily by achieving 2 percent to 4 percent growth in revenues, keeping cost increases in the 1 percent to 3 percent range and improving cash flow to reduce debt. The Company's cash flow from 29 operations is expected to improve as cemetery revenue, which is the principal driver for increases in installment receivables, is anticipated to be relatively flat. The Company has implemented various initiatives to generate cash and reduce debt. One initiative being considered is the possible sale of certain foreign operations. Such sales could result in a material charge to earnings but would generate significant cash for debt reduction. Other initiatives include analysis and possible re-deployment of excess cemetery property, under-performing assets and real estate that would be more valuable if converted to another use. The Company has not included acquisitions in its growth expectations for fiscal year 2000 and beyond. Forward-looking statements are based on assumptions about future events and are therefore inherently uncertain; actual results may differ materially from those projected. See "Cautionary Statements" below. CAUTIONARY STATEMENTS The Company cautions readers that the following important factors, among others, in some cases have affected, and in the future could affect, the Company's actual consolidated results and could cause the Company's actual consolidated results in the future to differ materially from the goals and expectations expressed in the forward-looking statements above and in any other forward-looking statements made by or on behalf of the Company. (1) The Company's ability to achieve its revenue goals and the corresponding cash flows from operations are affected by the volume, mix and prices of the properties, products and services sold. The annual sales targets set by the Company are aggressive, and the inability of the Company to achieve planned levels in volume, mix or prices could cause the Company not to meet anticipated revenue goals. The ability of the Company to achieve planned volume, mix or price levels at any location depends on numerous factors, including the local economy, the local death rate, cremation rates, competition and consumer preferences. Furthermore, the Company may experience pricing pressures from low-cost funeral service and merchandise providers, which could result in reduced volume or could result in reducing funeral service and merchandise prices in order to recapture market share where appropriate. See also the discussion of SAB 101 in (14) below. (2) Preneed cemetery sales are a significant component of the Company's cemetery revenue. The Company sets very aggressive preneed sales targets. The inability of the Company to achieve the planned level of sales could cause a shortfall in anticipated levels of revenue. Changes in the sales organization, compensation thereof and sales terms and conditions of the Company's preneed contracts could affect the Company's ability to achieve its preneed sales targets. (3) Morale is a key ingredient in any sales organization, and morale can be adversely affected by numerous factors, including aggressive sales targets that make it difficult for the Company's more than 2,200 commissioned sales counselors to achieve their goals. (4) When acquiring a business, the Company sets pro forma levels at which it expects those businesses to perform based on the mix of traditional services and cremation services the business has historically delivered and how the Company expects that business to perform over the next 12 months. As the Company typically charges a higher price for a traditional service than a cremation service, material changes in the types of services delivered from those assumed in the pro forma could affect the level of anticipated revenue generated by those businesses. Additionally, although a cremation service can yield a higher margin than a traditional service, it generally produces lower revenue and a lower total gross profit. (5) The ability of the Company to increase or sustain current price levels and retain market share is affected by local competition in the Company's markets, including competition from low-cost funeral providers and casket stores, as well as consumer preferences. 30 (6) Another important component of revenue is earnings from the Company's cemetery trust funds and escrow accounts, which are determined by the size of, and returns (which include dividends, interest and realized capital gains) on, the funds. The returns on the Company's prearranged funeral trust funds and escrow accounts affect the Company's future revenue. The performance of the funds depends primarily on market conditions that are not within the Company's control. Additionally, the performance of the funds is affected by the mix of fixed-income and equity securities. The size of the funds depends on the level of sales, funds added through acquisitions, if any, and the amount of returns that are reinvested. (7) Future revenue is also affected by the level of prearranged sales in prior periods. The level of prearranged sales may be adversely affected by numerous factors, including deterioration in the economy, which causes individuals to have less discretionary income. (8) The death care business is a high fixed-cost business. Positive or negative changes in revenue can have a disproportionately large effect on net earnings. (9) In order to address its long-term debt maturities over the next three to four years, the Company is considering selling certain foreign operations. Given the current market environment, no assurance can be given that foreign assets can be sold, and it is likely that sales of operations in certain markets will be at prices below the carrying values of those assets and could result in a material charge to earnings but would generate significant cash for debt reduction. Sales of certain foreign operations would result in a material reduction in revenue, and to a lesser extent, net earnings. (10) The Company's planned cash flow initiatives for 2000 include analysis and possible re-deployment of excess cemetery property, under- performing assets and real estate that would be more valuable if converted to another use. No assurance can be given, however, that any significant portion of the Company's assets can be sold, re-deployed or converted on a profitable basis or that doing so will not result, at least initially, in charges to earnings. (11) Revenue growth goals for fiscal year 2000 and beyond do not include acquisition activity. The actual level of acquisition activity, if any, will depend not only on the number of properties acquired, but also on the size of the acquisitions; for example, one large acquisition could increase substantially the level of acquisition activity and, consequently, revenues. Several important factors, among others, affect the Company's ability to consummate acquisitions: (a)The Company may be unable to find a sufficient number of businesses for sale at prices the Company is willing to pay, particularly in view of the Company's recently adjusted pricing parameters and cash flow criteria. (b)In most of its existing markets and in many new markets, including foreign markets, that the Company may seek to enter, the Company may compete for acquisitions with the other publicly-traded death care firms and regional consolidators. These competitors, and others, may be willing to pay higher prices for businesses than the Company is willing to pay or may cause the Company to pay more to acquire a business than the Company would have to pay in the absence of such competition or may cause potential sellers to reject the Company's lower prices. Thus, the aggressiveness of the Company's competitors in pricing acquisitions may affect the Company's ability to complete acquisitions at prices it finds attractive. (c)Acquisition activity, if any, also will depend on the Company's ability to enter new markets, including foreign markets. Due in part to the Company's lack of experience operating in new areas and to the presence of competitors who have been in certain markets longer than the Company, such entry may be more difficult or expensive than anticipated by the Company. (12) The Company first entered foreign markets in the fourth quarter of fiscal year 1994, and no assurance can be given that the Company will continue to be successful in operating in foreign markets, or that any operations in foreign markets will yield results comparable to those realized through the Company's expansion in the United States. 31 (13) Historically, in order to support its rapid growth, the Company has periodically accessed capital markets including the secondary equity and debt markets, and the Company may need to continue to do so in order to support future growth or to meet existing operating and debt service requirements even in the absence of significant future growth. The Company's ability to access these capital markets successfully in the future will depend on numerous factors, including the Company's financial performance, stock market performance, changes in interest rates, any changes in the Company's credit ratings and perceptions in the capital markets regarding the death care industry and the Company's performance and future prospects. Additionally, any amendments, renegotiations or extensions of existing agreements are likely to result in higher interest costs to the Company. (14) The Company and other industry participants continue to discuss directly with the staff of the Securities and Exchange Commission the application of its recently issued SAB 101 as it relates to prearranged sales activities. Based on the currently available information, the Company believes that the implementation of SAB 101 will require a deferral of previously recorded revenue associated with prearranged sales that will result in a material, one-time, noncash, cumulative adjustment to earnings, although the amounts deferred will be recognized in future years as the products and services that have been bought and paid for ultimately are delivered. The effect of implementation on future earnings is less clear, as several material issues are still under discussion with the SEC, but that effect could also be material. The Company is not required to implement SAB 101 until the fourth fiscal quarter of 2001 but may choose to do so earlier. (15) While the Company does not anticipate that a majority of consumers will make their preneed or at-need purchasing decisions over the Internet, no assurance can be given of the impact of technological changes on the Company's business, nor of the effects of market acceptance of advances in technology by the Company or its primary competitors. (16) In addition to the factors discussed above, earnings per share may be affected by other important factors, including the following: (a)The ability of the Company to achieve projected economies of scale in markets where it has "clusters" or combined facilities. (b)Whether recently acquired businesses perform at pro forma levels used by management in the valuation process and whether, and the rate at which, management is able to increase the profitability of these recently acquired businesses. (c)The ability of the Company to manage its growth in terms of implementing internal controls and information gathering systems, and retaining or attracting key personnel, among other things. (d)The amount and rate of growth in the Company's general and administrative expenses. (e)Changes in interest rates and the Company's credit ratings, which can increase or decrease the interest rates the Company pays on borrowings with variable rates of interest and the rates it will be required to pay on new fixed- or variable-rate debt. (f)The Company's debt-to-equity ratio, the number of shares of common stock outstanding and the portion of the Company's debt that has fixed- or variable-interest rates. (g)The impact on the Company's financial statements of nonrecurring accounting charges that may result from the Company's ongoing evaluation of its business strategies, asset valuations and organizational structures. (h)Changes in government regulation, including tax rates and their effects on corporate structure. 32 (i)Changes in inflation and other general economic conditions both domestically and internationally, affecting financial markets (e.g., marketable security values as well as exchange rate fluctuations). (j)Unanticipated legal proceedings and unanticipated outcomes of legal proceedings. (k)Changes in accounting policies and practices adopted voluntarily or required to be adopted by generally accepted accounting principles. (l) The effects and timing of possible asset sales. The Company also cautions readers that it assumes no obligation to update or publicly release any revisions to forward-looking statements made herein or any other forward-looking statements made by or on behalf of the Company. 33 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1 Amended and Restated Articles of Incorporation of the Company, as amended and restated as of November 5, 1999, (incorporated by reference to Exhibit 3.1 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1999 (the "1999 10-K")) 3.2 By-laws of the Company, as amended and restated as of June 23, 2000 ------------------- Management Contracts and Compensatory Plans or Arrangements 10.1 Amendment No. 2 dated July 25, 2000 to Employment Agreement, between the Company and William E. Rowe 10.2 Amendment No. 2 dated July 25, 2000 to Change of Control Agreement, between the Company and William E. Rowe 10.3 Amendment No. 2 dated July 25, 2000 to Employment Agreement, between the Company and Brian J. Marlowe 10.4 Amendment No. 2 dated July 25, 2000 to Change of Control Agreement, between the Company and Brian J. Marlowe 10.5 Amendment No. 4 dated July 25, 2000 to Employment Agreement, between the Company and Kenneth C. Budde 10.6 Amendment No. 3 dated July 25, 2000 to Change of Control Agreement, between the Company and Kenneth C. Budde 10.7 Amendment No. 3 dated July 25, 2000 to Employment Agreement, between the Company and Ronald H. Patron 10.8 Amendment No. 3 dated July 25, 2000 to Change of Control Agreement, between the Company and Ronald H. Patron 10.9 Amendment No. 4 dated July 25, 2000 to Employment Agreement, between the Company and Brent F. Heffron 10.10 Amendment No. 3 dated July 25, 2000 to Change of Control Agreement, between the Company and Brent F. Heffron 10.11 Employment Agreement dated April 20, 2000, between the Company and Randall L. Stricklin 10.12 Change of Control Agreement dated April 20, 2000, between the Company and Randall L. Stricklin 10.13 Indemnity Agreement dated April 20, 2000, between the Company and Randall L. Stricklin 34 10.14 Employment Agreement dated January 31, 2000, between the Company and G. Kenneth Stephens, Jr. 10.15 Change of Control Agreement dated January 31, 2000, between the Company and G. Kenneth Stephens, Jr. 10.16 Indemnity Agreement dated January 31, 2000, between the Company and G. Kenneth Stephens, Jr. 10.17 Employment Agreement dated January 31, 2000, between the Company and Everett N. Kendrick 10.18 Change of Control Agreement dated January 31 , 2000, between the Company and Everett N. Kendrick 10.19 Indemnity Agreement dated January 31, 2000, between the Company and Everett N. Kendrick 10.20 Amendment No. 4 dated July 25, 2000 to Employment Agreement, between the Company and Lawrence B. Hawkins 10.21 Amendment No. 4 dated July 25, 2000 to Change of Control Agreement, between the Company and Lawrence B. Hawkins ------------------- 12 Calculation of Ratio of Earnings to Fixed Charges 27 Financial Data Schedule (b) Reports on Form 8-K The Company filed a Form 8-K on June 8, 2000, reporting, under "Item 5. Other Events," the earnings release for the quarter ended April 30, 2000. 35 STEWART ENTERPRISES, INC. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. STEWART ENTERPRISES, INC. September 14, 2000 /s/ KENNETH C. BUDDE ------------------------ Kenneth C. Budde Executive Vice President Chief Financial Officer September 14, 2000 /s/ MICHAEL G. HYMEL ------------------------ Michael G. Hymel Vice President Corporate Controller Chief Accounting Officer 36 EX-3.2 2 0002.txt BY-LAWS OF STEWART ENTERPRISES, INC. (as amended and restated as of June 23, 2000) SECTION 1 OFFICES 1.1 PRINCIPAL OFFICE. The principal office of the Corporation shall be located at 110 Veterans Memorial Boulevard, Metairie, Louisiana 70005. 1.2 ADDITIONAL OFFICES. The Corporation may have such offices at such other places as the Board of Directors may from time to time determine or the business of the Corporation may require. SECTION 2 SHAREHOLDERS MEETINGS 2.1 PLACE OF MEETINGS. Unless otherwise required by law or these By-laws, all meetings of the shareholders shall be held at the principal office of the Corporation or at such other place, within or without the State of Louisiana, as may be designated by the Board of Directors. 2.2 ANNUAL MEETINGS; NOTICE THEREOF. An annual meeting of the shareholders shall be held each year on the date and at the time as the Board of Directors shall designate, for the purpose of electing directors and for the transaction of such other business as may be properly brought before the meeting. If no annual shareholders' meeting is held for a period of eighteen months, any shareholder may call such meeting to be held at the registered office of the Corporation as shown on the records of the Secretary of State of the State of Louisiana. 2.3 SPECIAL MEETINGS. Special meetings of the shareholders, for any purpose or purposes, may be called by the Board of Directors, the Chairman of the Board, or the President. At any time, upon the written request of any shareholder or group of shareholders holding in the aggregate at least 25% of the Total Voting Power (as defined in Article III(D) of the Articles of Incorporation), the Secretary shall call a special meeting of shareholders to be held at the registered office of the Corporation at such time as the Secretary may fix, not less than 15 nor more than 60 days after the receipt of such request, and if the Secretary shall neglect or refuse to fix such time or to give notice of the meeting, the shareholder or shareholders making the request may do so. Such request must state the specific purpose or purposes of the proposed special meeting and the business to be conducted thereat shall be limited to such purpose or purposes. 2.4 NOTICE OF MEETINGS. Except as otherwise provided by law, the authorized person or persons calling a shareholders' meeting shall cause written notice of the time, place and purpose of the meeting to be given to all shareholders entitled to vote at such meeting, at least 10 days and not more than 60 days prior to the day fixed for the meeting. Notice of the annual meeting need not state the purpose or purposes thereof, unless action is to be taken at the meeting as to which notice is required by law or the By-laws. Notice of a special meeting shall state the purpose or purposes thereof, and the business conducted at any special meeting shall be limited to the purpose or purposes stated in the notice. 2.5 LIST OF SHAREHOLDERS. At every meeting of shareholders, a list of shareholders entitled to vote, arranged alphabetically and certified by the Secretary or by the agent of the Corporation having charge of transfers of shares, showing the number and class of shares held by each such shareholder on the record date for the meeting and confirming the number of votes per share as to which each such shareholder is entitled, shall be produced on the request of any shareholder. 2.6 QUORUM. At all meetings of shareholders, the holders of a majority of the Total Voting Power (as defined in Article III(D) of the Articles of Incorporation) shall constitute a quorum, provided, however, that this subsection shall not have the effect of reducing the vote required to approve any matter that may be established by law, the Articles of Incorporation or these By-laws. 2.7 VOTING. When a quorum is present at any shareholders' meeting, the vote of the holders of a majority of that portion of the Total Voting Power (as defined in Article III(D) of the Articles of Incorporation) that is present in person or represented by proxy, voting together as a single class, shall decide each question brought before such meeting, unless the resolution of the question requires, by express provision of law, the Articles of Incorporation or these By-laws, a different vote or one or more separate votes by the holders of a class or series of capital stock, in which case such express provision shall apply and control the decision of such question. Directors shall be elected by plurality vote. 2.8 PROXIES. At any meeting of the shareholders, every shareholder having the right to vote shall be entitled to vote in person or by proxy appointed by an instrument in writing executed by such shareholder and bearing a date not more than eleven months prior to the meeting, unless the instrument provides for a longer period, but in no case will an outstanding proxy be valid for longer than three years from the date of its execution, provided, however, that in no event may a proxy be voted at a meeting called pursuant to La. R.S. 12:138 unless it is executed and dated by the shareholder within 30 days of the date of such meeting. The person appointed as proxy need not be a shareholder of the Corporation. 2.9 ADJOURNMENTS. Adjournments of any annual or special meeting of shareholders may be taken without new notice being given unless a new record date is fixed for the adjourned meeting, but any meeting at which directors are to be elected shall be adjourned only from day to day until such directors shall have been elected. 2.10 WITHDRAWAL. If a quorum is present or represented at a duly organized shareholders' meeting, such meeting may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum as fixed in Section 2.6 of these By-laws, or the refusal of any shareholders to vote. 2.11 LACK OF QUORUM. If a meeting cannot be organized because a quorum has not attended, those present may adjourn the meeting to such time and place as they may determine, subject, however, to the provisions of Section 2.9 hereof. In the case of any meeting called for the election of directors, those who attend the second of such adjourned meetings, although less than a quorum as fixed in Section 2.6 hereof, shall nevertheless be deemed to constitute a quorum for the purpose of electing directors. 2.12 PRESIDING OFFICER. The Chairman of the Board or the Chief Executive Officer, or in their absence a chairman designated by the Board of Directors, shall preside at all shareholders' meetings. 2.13 DEFINITION OF SHAREHOLDER. As used in these By-laws, and unless the context otherwise requires, the term shareholder shall mean a person who is (i) the record holder of shares of the Corporation's capital stock or (ii) a registered holder of any bonds, debentures or similar obligations granted voting rights by the Corporation pursuant to La. R.S. 12:75H. 2.14 BUSINESS TO BE CONDUCTED AT ANNUAL AND SPECIAL MEETINGS OF SHAREHOLDERS. (a) At any annual meeting of shareholders, only such business shall be conducted as shall have been brought before the meeting (i) by or at the direction of the Board of Directors, or (ii) by any shareholder of record entitled to vote at such meeting who complies with the procedures set forth in this Section 2.14. (b) At any special meeting of shareholders called at the request of a shareholder, or group of shareholders, of record in accordance with the Corporation's Articles of Incorporation and these By-laws, only such business shall be conducted as shall have been (i) submitted by the shareholder, or group of shareholders of record requesting the meeting, (ii) described in the request for the meeting, and (iii) described in the notice of the meeting. (c) At any special meeting of shareholders called at the request of the Board of Directors, the Chairman of the Board or the President of the Corporation, only such business shall be conducted as shall have been brought before the meeting (i) by or at the direction of the Board of Directors, the Chairman of the Board or the President or (ii) by any shareholder of record entitled to vote at such meeting who complies with the procedures set forth in this Section 2.14. (d) No proposal by a shareholder, or group of shareholders, of record of the Corporation shall be considered at an annual shareholders' meeting unless Sufficient Notice (as described in subparagraph (f) hereof) of the proposal is received by the Secretary of the Corporation not less than 120 calendar days in advance of the date in the current year that corresponds to the date on which proxy materials were first mailed by the Corporation in connection with the previous year's annual meeting. If the date of the annual meeting is changed to a date that is 30 calendar days earlier or later than the date in the current year that corresponds to the date on which the annual meeting was held in the previous year, or if no annual meeting was held in the previous year, Sufficient Notice of the proposal must be received by the Secretary of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event less than 70 days notice or prior public disclosure of the date of the meeting is given or made to shareholders, Sufficient Notice of the proposal must be received by the Secretary of the Corporation 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. (e) No proposal by a shareholder, or group of shareholders, of record of the Corporation shall be considered at a special meeting of shareholders called by the Board of Directors, the Chairman of the Board or the President unless Sufficient Notice (as described in subparagraph (f) hereof) of the proposal is received by the Secretary of the Corporation not less than 60 days nor more than 90 days prior to the meeting; provided, however, that in the event less than 70 days notice or prior public disclosure of the date of the meeting is given or made to shareholders, Sufficient Notice of the proposal must be received by the Secretary of the Corporation 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. (f) Notice of a proposal shall constitute Sufficient Notice only if it contains (i) a complete and accurate description of the proposal; (ii) 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 of the Corporation entitled to vote at the meeting through the meeting date; (iii) the shareholder's name and address and the number of shares of the Corporation's voting securities that the shareholder holds of record and beneficially as of the notice date; and (iv) a complete and accurate description of any material interest of such shareholder in such proposal. (g) Notwithstanding compliance with this Section 2.14, no shareholder proposal shall be deemed to be properly brought before a shareholders' meeting if it is not a proper subject for action by shareholders under Louisiana law or the Articles of Incorporation. (h) Any shareholder proposal failing to comply with this Section 2.14 shall not be considered at the meeting and, if introduced at the meeting, shall be ruled out of order. (i) Nothing in this Section 2.14 is intended to confer any rights to have any proposal included in the notice of any meeting or in proxy materials related to such meeting. (j) Notwithstanding the requirement in this Section 2.14 that a shareholder be a shareholder of record in order to present a shareholder proposal at a shareholders' meeting, a beneficial owner of shares entitled to vote at the meeting shall be entitled to present a proposal at a meeting if such beneficial owner complies with Rule 14a-8 promulgated under the Securities Exchange Act of 1934 and the proposal has been included in the Corporation's proxy statement for the meeting pursuant to Rule 14a-8. SECTION 3 DIRECTORS 3.1 NUMBER. All of the corporate powers shall be vested in, and the business and affairs of the Corporation shall be managed by, a Board of Directors. Except as otherwise fixed by or pursuant to Article III of the Articles of Incorporation (as it may be duly amended from time to time) relating to the rights of the holders of any class or series of stock having a preference over the Class A and Class B Common Stock as to dividends or upon liquidation to elect additional directors by class vote, the Board of Directors shall consist of up to 12 natural persons, the exact number of which shall be fixed each year by resolution of the Board of Directors, provided that, if after proxy materials for any meeting of shareholders at which directors are to be elected are mailed to shareholders any person or persons named therein to be nominated at the direction of the Board of Directors become unable or unwilling to serve, the number of directors fixed by the Board or Directors for such year shall be automatically reduced by a number equal to the number of such persons unless the Board of Directors selects an additional nominee or nominees to replace such persons. No director need be a shareholder. The Secretary shall have the power to certify at any time as to the number of directors authorized and as to the class to which each director has been elected or assigned. No person shall be eligible for nomination, election or appointment to the Board of Directors unless such person will not have achieved his or her 70th birthday on or prior to the date on which his or her election or appointment would otherwise become effective; provided, however, that (i) the foregoing shall not be applied in a manner that would shorten the current term of office of any incumbent director on the date of the adoption of this by-law, (ii) the Board may, by a vote of two-thirds of its members who are not affected by the decision, exempt any Director from the foregoing limitation in order that such Director may serve one additional term of office; and (iii) such limitation shall not apply to Frank B. Stewart, Jr. so long as he is the record and/or beneficial owner of not less than 3.5 million shares of the Company's Class B Common Stock (as such number may be adjusted from time to time to reflect stock dividends, stock splits, a recapitalization or other similar transactions). 3.2 POWERS. The Board may exercise all such powers of the Corporation and do all such lawful acts and things which are not by law, the Articles of Incorporation or these By-laws directed or required to be done by the shareholders. 3.3 CLASSES. The Board of Directors, other than those directors who may be elected by the holders of any class or series of stock having preference over the Class A and Class B Common Stock as to dividends or upon liquidation, shall be divided, with respect to the time during which they shall hold office, into three classes as nearly equal in number as possible, with the initial term of office of Class I directors expiring at the annual meeting of shareholders to be held in 1993, of Class II directors expiring at the next succeeding annual meeting of shareholders and of Class III directors expiring at the second succeeding annual meeting of shareholders, with all such directors to hold office until their successors are elected and qualified. Any increase or decrease in the number of directors shall be apportioned by the Board of Directors so that all classes of directors shall be as nearly equal in number as possible. At each annual meeting of shareholders, directors chosen to succeed those whose terms then expire shall be elected to hold office for a term expiring at the annual meeting of shareholders held in the third year following the year of their election and until their successors are duly elected and qualified. 3.4 GENERAL ELECTION. At each annual meeting of shareholders, directors shall be elected to succeed those directors whose terms then expire. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. 3.5 VACANCIES. Except as otherwise provided in the Articles of Incorporation or these By-laws, (a) the office of a director shall become vacant if he dies, resigns or is duly removed from office and (b) the Board of Directors may declare vacant the office of a director if he (i) is interdicted or adjudicated an incompetent, (ii) is adjudicated a bankrupt, (iii) in the sole opinion of the Board of Directors becomes incapacitated by illness or other infirmity so that he is unable to perform his duties for a period of six months or longer, or (iv) ceases at any time to have the qualifications required by law, the Articles of Incorporation or these By-laws. 3.6 FILLING VACANCIES. Except as otherwise provided in Section 3.8 of these By-laws, any vacancy on the Board (including any vacancy resulting from an increase in the authorized number of directors or from failure of the shareholders to elect the full number of authorized directors) may, notwithstanding any resulting absence of a quorum of directors, be filled by a two-thirds vote of the Board of Directors remaining in office, provided that the shareholders shall have the right, at any special meeting called for such purpose prior to any such action by the Board, to fill the vacancy. A director elected pursuant to this section shall serve until the next shareholders' meeting held for the election of directors of the class to which he shall have been appointed and until his successor is elected and qualified. 3.7 NOTICE OF SHAREHOLDER NOMINEES. Except as otherwise provided in Section 3.8 of these By-laws, only persons who are nominated in accordance with the procedures set forth in this section shall be eligible for election as directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of shareholders by or at the direction of the Board of Directors or by any shareholder of record of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this section. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered or mailed and received at the principal office of the Corporation not less than 45 days nor more than 90 days prior to the meeting, provided, however, that in the event that 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 to be timely must be received 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. Such shareholder's notice shall set forth or include the following: a. as to each person whom the shareholder proposes to nominate for election or re-election as a director (i) the name, age, business address and residential address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of capital stock of the Corporation of which such person is the beneficial owner (as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934), (iv) such person's written consent to being named in the proxy statement as a nominee and to serve as a director if elected and (v) any other information relating to such person that would be required to be disclosed in solicitations of proxies for election of directors, or would be otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934; and b. as to the shareholder of record giving the notice, (i) the name and address of such shareholder and (b) the class and number of shares of capital stock of the Corporation of which such shareholder is the beneficial owner (as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934). If requested in writing by the Secretary the Corporation at least 15 days in advance of the meeting, such shareholder shall disclose to the Secretary, within ten days of such request, whether such person is the sole beneficial owner of the shares held of record by him, 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 such shares. At the request of the Board of Directors, any person nominated by or at the direction of the Board of Directors for election as a director shall furnish to the Secretary of the Corporation that information required to be set forth in a shareholder's notice of nomination which pertains to the nominee. If a shareholder seeks to nominate one or more persons as directors, the Secretary shall appoint two inspectors, who shall not be affiliated with the Corporation, to determine whether the shareholder has complied with this section. If the inspectors shall determine that the shareholder has not complied with this section, the defective nomination shall be disregarded and the inspectors shall direct the Chairman of the meeting to declare at the meeting that such nomination was not made in accordance with the procedures prescribed by the Articles of Incorporation and these By-laws. 3.8 DIRECTORS ELECTED BY PREFERRED SHAREHOLDERS. Notwithstanding anything in these By-laws to the contrary, whenever the holders of any one or more classes or series of stock having a preference over the Class A and Class B Common Stock as to dividends or upon liquidation shall have the right, voting separately as a class, to elect one or more directors of the Corporation, the provisions of the Articles of Incorporation (as they may be duly amended from time to time) fixing the rights and preferences of such preferred stock shall govern with respect to the nomination, election, term, removal, vacancies or other related matters with respect to such directors. 3.9 COMPENSATION OF DIRECTORS. Directors shall receive such compensation for their services, in their capacity as directors, as may be fixed by resolution of the Board of Directors, provided, however, that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. 3.10 VICE CHAIRMAN OF THE BOARD. The Board of Directors may appoint a Vice Chairman of the Board, who shall perform such duties as the Chairman of the Board or the Board of Directors shall prescribe. SECTION 4 MEETINGS OF THE BOARD 4.1 PLACE OF MEETINGS. The meetings of the Board of Directors may be held at such place within or without the State of Louisiana as a majority of the directors may from time to time appoint. 4.2 INITIAL MEETINGS. The first meeting of each newly-elected Board shall be held immediately following the shareholders' meeting at which the Board, or any class thereof, is elected and at the same place as such meeting, and no notice of such first meeting shall be necessary for the newly-elected directors in order legally to constitute the meeting. 4.3 REGULAR MEETINGS; NOTICE. Regular meetings of the Board may be held at such times as the Board may from time to time determine. Notice of regular meetings of the Board of Directors shall be required, but no special form of notice or time of notice shall be necessary. 4.4 SPECIAL MEETINGS; NOTICE. Special meetings of the Board may be called by the Chairman of the Board or the President on reasonable notice given to each director, either personally or by telephone, mail, telex, telecopy or any other comparable form of facsimile communication. Special meetings shall be called by the Secretary in like manner and on like notice on the written request of a majority of the directors and if such officer fails or refuses, or is unable within 24 hours to call a meeting when requested, then the directors making the request may call the meeting on two days' written notice given to each director. The notice of a special meeting of directors need not state its purpose or purposes, but if the notice states a purpose or purposes and does not state a further purpose to consider such other business as may properly come before the meeting, the business to be conducted at the special meeting shall be limited to the purpose or purposes stated in the notice. 4.5 WAIVER OF NOTICE. Directors present at any regular or special meeting shall be deemed to have received due, or to have waived, notice thereof, provided that a director who participates in a meeting by telephone (as permitted by Section 4.9 hereof) shall not be deemed to have received or waived due notice if, at the beginning of the meeting, he objects to the transaction of any business because the meeting is not lawfully called. 4.6 QUORUM. A majority of the Board shall be necessary to constitute a quorum for the transaction of business, and except as otherwise provided by law, the Articles of Incorporation or these By-laws, the acts of a majority of the directors present at a duly-called meeting at which a quorum is present shall be the acts of the Board. If a quorum is not present at any meeting of the Board of Directors, the directors present may adjourn the meeting from time to time without notice other than announcement at the meeting, until a quorum is present. 4.7 WITHDRAWAL. If a quorum is present when the meeting convened, the directors present may continue to do business, taking action by vote of a majority of a quorum as fixed in Section 4.6 hereof, until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum as fixed in Section 4.6 hereof or the refusal of any director present to vote. 4.8 ACTION BY CONSENT. Any action that may be taken at a meeting of the Board, or any committee thereof, may be taken by a consent in writing signed by all of the directors or by all members of the committee, as the case may be, and filed with the records of proceedings of the Board or committee. 4.9 MEETINGS BY TELEPHONE OR SIMILAR COMMUNICATION. Members of the Board may participate at and be present at any meeting of the Board or any committee thereof by means of conference telephone or similar communications equipment if all persons participating in such meeting can hear and communicate with each other. SECTION 5 COMMITTEES OF THE BOARD 5.1 GENERAL. The Board may designate one or more committees, each committee to consist of two or more of the directors of the Corporation (and one or more directors may be named as alternate members to replace any absent or disqualified regular members), which, to the extent provided by resolution of the Board or these By-laws, shall have and may exercise the powers of the Board in the management of the business and affairs of the Corporation, and may have power to authorize the seal of the Corporation to be affixed to documents, but no such committee shall have power or authority to amend the Articles of Incorporation, adopt an agreement of merger, consolidation or share exchange, recommend to the shareholders the sale, lease or exchange of all or substantially all of the Corporation's assets, recommend to the shareholders a dissolution of the Corporation or a revocation of dissolution, remove or indemnify directors, or amend these By-laws; and unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or authorize the issuance of stock. Such committee or committees shall have such name or names as may be stated in these By-laws, or as may be determined, from time to time, by the Board. Any vacancy occurring in any such committee shall be filled by the Board, but the President may designate another director to serve on the committee pending action by the Board. Each such member of a committee shall hold office during the term designated by the Board. 5.2 COMPENSATION COMMITTEE. The Board shall establish and maintain a Compensation Committee consisting of two or more directors, each of whom shall (i) meet the requirements specified in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended, to qualify as a member of a committee of the board of directors able to approve the transactions described therein, (ii) meet the requirements specified in Internal Revenue Code
162(m) and the regulations promulgated thereunder relating to members of compensation committees, and (iii) meet any further requirements designated by the Board. The Compensation Committee shall perform such services as may be designated by the Board. 5.3 AUDIT COMMITTEE. The Board shall establish an Audit Committee consisting of at least three directors, a majority of whom are not officers or employees of the Corporation or any of its affiliates. The Audit Committee shall (i) serve as a focal point for communication between the Corporation's directors, management, independent accountants and internal auditing personnel, as their duties relate to financial accounting, reporting and controls, (ii) assist the Board of Directors in fulfilling its fiduciary responsibilities as to accounting policies and reporting practices of the Corporation and all subsidiaries and the sufficiency of auditing practices with respect thereto, in part, by reviewing the scope of audit coverage, including consideration of the Corporation's accounting practices and procedures and system of internal accounting controls and reporting to the Board with respect thereto, (iii) operate as the Board's principal agent in ensuring the independence of the Corporation's independent accountants, the integrity of management and the adequacy of disclosure to shareholders, and (iv) recommend to the Board the appointment of the Corporation's independent auditors, and (v) perform such other services as may be designated by the Board. 5.4 NOMINATING COMMITTEE. The Board may establish a Nominating Committee consisting of the Chairman of the Board, the Chief Executive Officer and four other directors who are not officers or employees of the Corporation or any of its affiliates. The Nominating Committee is authorized to (i) identify and recommend to the full Board candidates for nomination to the Board of Directors and (ii) establish procedures for the nomination process and criteria for nomination. SECTION 6 REMOVAL OF BOARD MEMBERS Except as may be otherwise provided in Section 3.8 of these By-laws, (i) any director may be removed, with or without cause, by a two-thirds vote of the Board of Directors and (ii) any director or the entire Board of Directors may be removed at any time, with or without cause, by the affirmative vote of the holders of not less than two-thirds of that portion of the Total Voting Power (as defined in Article III(D) of the Articles of Incorporation) that is present or represented at a special shareholders' meeting called for that purpose, voting together as a single class. At the same meeting in which the Board of Directors or the shareholders remove one or more directors, a successor or successors may be elected for the unexpired term of the director or directors removed. Except as provided in the Articles of Incorporation and in this Section 6, directors shall not be subject to removal. SECTION 7 NOTICES 7.1 FORM OF DELIVERY. Whenever under the provisions of law, the Articles of Incorporation or these By-laws notice is required to be given to any shareholder or director, it shall not be construed to mean personal notice unless otherwise specifically provided in the Articles of Incorporation or these By-laws, but such notice may be given by mail, addressed to such shareholder or director at his address as it appears on the records of the Corporation, with postage thereon prepaid, or in such other manner as may be specified in these By-laws. Notices given by mail shall be deemed to have been given at the time they are deposited in the United States mail, and all other notices shall be deemed to have been given upon receipt. 7.2 WAIVER. Whenever any notice is required to be given by law, the Articles of Incorporation or these By-laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent thereto. In addition, notice shall be deemed to have been given to, or waived by, any shareholder or director who attends a meeting of shareholders or directors in person, or is represented at such meeting by proxy, without protesting at the commencement of the meeting the transaction of any business because the meeting is not lawfully called or convened. SECTION 8 OFFICERS 8.1 DESIGNATIONS. The officers of the corporation shall be elected by the directors and shall be the Chairman of the Board, President, Secretary and Treasurer. The Board of Directors may appoint a Chief Executive Officer, one or more Vice Presidents and such other officers as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. More than one office may be held by one person, provided that no person holding more than one office may sign, in more than one capacity, any certificate or other instrument required by law to be signed by two officers. 8.2 TERM OF OFFICE. The officers of the Corporation shall hold office at the pleasure of the Board of Directors. Except as otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until the first meeting of the Board of Directors after the annual meeting of shareholders next succeeding his or her election, and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice to the Board, Chairman of the Board, President or Secretary of the Corporation. Such resignation shall take effect at the time specified therein and acceptance of such resignation shall not be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officers, if any, with the Corporation, but the election of an officer shall not in and of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board at any regular or special meeting. 8.3 THE CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at meetings of the Board of Directors and the shareholders and perform such other duties as may be designated by the Board of Directors or these By-laws. He shall be an EX-OFFICIO member of all committees of the Board of Directors, except that he shall be a full member entitled to all the rights and privileges appertaining thereto with respect to committees on which he is named a full member. 8.4 THE PRESIDENT. The President shall, subject to the powers of the Chairman of the Board, have general and active responsibility for the management of the business of the Corporation, shall, unless otherwise provided by the Board, be the chief executive and chief operating officer of the Corporation, shall supervise the daily operations of the business of the Corporation and shall ensure that all orders, policies and resolutions of the Board are carried out. 8.5 THE VICE PRESIDENTS. The Vice Presidents (if any) shall perform such duties as the President or the Board of Directors shall prescribe. 8.6 THE SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose. He shall give, or cause to be given, notice of all meetings of the shareholders and regular and special meetings of the Board, and shall perform such other duties as may be prescribed by the Board or President. He shall keep in safe custody the seal of the Corporation, if any, and affix such seal to any instrument requiring it. 8.7 THE TREASURER. The Treasurer shall have the custody of the corporate funds and shall keep or cause to be kept full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall keep a proper accounting of all receipts and disbursements and shall disburse the funds of the Corporation only for proper corporate purposes or as may be ordered by the Board and shall render to the President and the Board at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition and results of operations of the Corporation. SECTION 9 STOCK 9.1 CERTIFICATES. Every holder of stock in the Corporation shall be entitled to have a certificate signed by the President or a Vice President and the Secretary or an Assistant Secretary evidencing the number and class (and series, if any) of shares owned by him, containing such information as required by law and bearing the seal of the Corporation. If any stock certificate is manually signed by a transfer agent or registrar other than the Corporation itself or an employee of the Corporation, the signature of any such officer may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be an officer, transfer agent or registrar of the Corporation before such certificate is issued, it may be issued by the Corporation with the same effect as if such person or entity were an officer, transfer agent or registrar of the Corporation on the date of issue. 9.2 MISSING CERTIFICATES. The President or any Vice President may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the Corporation's receipt of an affidavit of that fact from the person claiming the certificate of stock to be lost, stolen or destroyed. As a condition precedent to the issuance of a new certificate or certificates, the officers of the Corporation shall, unless dispensed with by the President, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to (i) give the Corporation a bond or (ii) enter into a written indemnity agreement, in each case in an amount appropriate to indemnify the Corporation against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. 9.3 TRANSFERS. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 10 DETERMINATION OF SHAREHOLDERS 10.1 RECORD DATE. For the purpose of determining shareholders entitled to notice of and to vote at a meeting, or to receive a dividend, or to receive or exercise subscription or other rights, or to participate in a reclassification of stock, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may fix in advance a record date for determination of shareholders for such purpose, such date to be not more than 60 days and, if fixed for the purpose of determining shareholders entitled to notice of and to vote at a meeting, not less than 10 days, prior to the date on which the action requiring the determination of shareholder is to be taken. 10.2 REGISTERED SHAREHOLDERS. Except as otherwise provided by law, the Corporation and its directors, officers and agents may recognize and treat a person registered on its records as the owner of shares as the owner in fact thereof for all purposes, and as the person exclusively entitled to have and to exercise all rights and privileges incident to the ownership of such shares, and the Corporation's rights under this section shall not be affected by any actual or constructive notice that the Corporation, or any of its directors, officers or agents, may have to the contrary. SECTION 11 INDEMNIFICATION 11.1 DEFINITIONS. As used in this section the following terms shall have the meanings set forth below: (a) "Board" - the Board of Directors of the Corporation. (b) "Claim" - any threatened, pending or completed claim, action, suit, or proceeding, whether civil, criminal, administrative or investigative and whether made judicially or extra-judicially, or any separate issue or matter therein, as the context requires. (c) "Determining Body" - (i) those members of the Board who are not named as parties to the Claim for which indemnification is being sought ("Impartial Directors"), if there are at least three Impartial Directors, (ii) a committee of at least three Impartial Directors appointed by the Board (regardless whether the members of the Board of Directors voting on such appointment are Impartial Directors) or (iii) if there are fewer than three Impartial Directors or if the Board of Directors or the committee appointed pursuant to clause (ii) of this paragraph so directs (regardless whether the members thereof are Impartial Directors), independent legal counsel, which may be the regular outside counsel of the Corporation. (d) "Disbursing Officer" - the President of the Corporation or, if the President is a party to the Claim for which indemnification is being sought, any officer not a party to such Claim who is designated by the President to be the Disbursing Officer with respect to indemnification requests related to the Claim, which designation shall be made promptly after receipt of the initial request for indemnification with respect to such Claim. (e) "Expenses" - any expenses or costs (including, without limitation, attorney's fees, judgments, punitive or exemplary damages, fines and amounts paid in settlement). (f) "Indemnitee" - each person who is or was a director or officer of the Corporation. 11.2 INDEMNITY. (a) To the extent such Expenses exceed the amounts reimbursed or paid pursuant to policies of liability insurance maintained by the Corporation, the Corporation shall indemnify each Indemnitee against any Expenses actually and reasonably incurred by him (as they are incurred) in connection with any Claim either against him or as to which he is involved solely as a witness or person required to give evidence, by reason of his position (i) as a director or officer of the Corporation, (ii) as a director or officer of any subsidiary of the Corporation or as a fiduciary with respect to any employee benefit plan of the Corporation, or (iii) as a director, officer, partner, employee or agent of another Corporation, partnership, joint venture, trust or other for-profit or not-for-profit entity or enterprise, if such position is or was held at the request of the Corporation, whether relating to service in such position before or after the effective date of this Section, if he (i) is successful in his defense of the Claim on the merits or otherwise or (ii) has been found by the Determining Body (acting in good faith) to have met the Standard of Conduct (defined below); provided that (A) the amount otherwise payable by the Corporation may be reduced by the Determining Body to such amount as it deems proper if it determines that the Claim involved the receipt of a personal benefit by Indemnitee, and (B) no indemnification shall be made in respect of any Claim as to which Indemnitee shall have been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for willful or intentional misconduct in the performance of his duty to the Corporation or to have obtained an improper personal benefit, unless, and only to the extent that, a court shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such Expenses as the court deems proper. (b) The Standard of Conduct is met when the conduct by an Indemnitee with respect to which a Claim is asserted was conduct that was in good faith and that he reasonably believed to be in, or not opposed to, the best interest of the Corporation, and, in the case of a criminal action or proceeding, that he had no reasonable cause to believe was unlawful. The termination of any Claim by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that Indemnitee did not meet the Standard of Conduct. (c) Promptly upon becoming aware of the existence of any Claim as to which he may be indemnified hereunder, Indemnitee shall notify the President of the Corporation of the Claim and whether he intends to seek indemnification hereunder. If such notice indicates that Indemnitee does so intend, the President shall promptly advise the Board thereof and notify the Board that the establishment of the Determining Body with respect to the Claim will be a matter presented at the next regularly scheduled meeting of the Board. After the Determining Body has been established the President shall inform the Indemnitee thereof and Indemnitee shall immediately provide the Determining Body with all facts relevant to the Claim known to him. Within 60 days of the receipt of such information, together with such additional information as the Determining Body may request of Indemnitee, the Determining Body shall determine, and shall advise Indemnitee of its determination, whether Indemnitee has met the Standard of Conduct. (d) During such 60-day period, Indemnitee shall promptly inform the Determining Body upon his becoming aware of any relevant facts not therefore provided by him to the Determining Body, unless the Determining Body has obtained such facts by other means. (e) In the case of any Claim not involving a proposed, threatened or pending criminal proceeding, (i) if Indemnitee has, in the good faith judgment of the Determining Body, met the Standard of Conduct, the Corporation may, in its sole discretion after notice to Indemnitee, assume all responsibility for the defense of the Claim, and, in any event, the Corporation and the Indemnitee each shall keep the other informed as to the progress of the defense, including prompt disclosure of any proposals for settlement; provided that if the Corporation is a party to the Claim and Indemnitee reasonably determines that there is a conflict between the positions of the Corporation and Indemnitee with respect to the Claim, then Indemnitee shall be entitled to conduct his defense, with counsel of his choice; and provided further that Indemnitee shall in any event be entitled at his expense to employ counsel chosen by him to participate in the defense of the Claim; and (ii) the Corporation shall fairly consider any proposals by Indemnitee for settlement of the Claim. If the Corporation (A) proposes a settlement acceptable to the person asserting the Claim, or (B) believes a settlement proposed by the person asserting the Claim should be accepted, it shall inform Indemnitee of the terms thereof and shall fix a reasonable date by which Indemnitee shall respond. If Indemnitee agrees to such terms, he shall execute such documents as shall be necessary to effect the settlement. If he does not agree he may proceed with the defense of the Claim in any manner he chooses, but if he is not successful on the merits or otherwise, the Corporation's obligation to indemnify him for any Expenses incurred following his disagreement shall be limited to the lesser of (A) the total Expenses incurred by him following his decision not to agree to such proposed settlement or (B) the amount the Corporation would have paid pursuant to the terms of the proposed settlement. If, however, the proposed settlement would impose upon Indemnitee any requirement to act or refrain from acting that would materially interfere with the conduct of his affairs, Indemnitee may refuse such settlement and proceed with the defense of the Claim, if he so desires, at the Corporation's expense without regard to the limitations imposed by the preceding sentence. In no event, however, shall the Corporation be obligated to indemnify Indemnitee for any amount paid in a settlement that the Corporation has not approved. (f) In the case of a Claim involving a proposed, threatened or pending criminal proceeding, Indemnitee shall be entitled to conduct the defense of the Claim, and to make all decisions with respect thereto, with counsel of his choice, provided, however, that the Corporation shall not be obligated to indemnify Indemnitee for an amount paid in settlement that the Corporation has not approved. (g) After notifying the Corporation of the existence of a Claim, Indemnitee may from time to time request the Corporation to pay the Expenses (other than judgments, fines, penalties or amounts paid in settlement) that he incurs in pursuing a defense of the Claim prior to the time that the Determining Body determines whether the Standard of Conduct has been met. If the Disbursing Officer believes the amount requested to be reasonable, he shall pay to Indemnitee the amount requested (regardless of Indemnitee's apparent ability to repay such amount) upon receipt of an undertaking by or on behalf of Indemnitee to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation under the circumstances. If the Disbursing Officer does not believe such amount to be reasonable, the Corporation shall pay the amount deemed by him to be reasonable and Indemnitee may apply directly to the Determining Body for the remainder of the amount requested. (h) After the Determining Body has determined that the Standard of Conduct was met, for so long as and to the extent that the Corporation is required to indemnify Indemnitee under this Agreement, the provisions of Paragraph (g) shall continue to apply with respect to Expenses incurred after such time except that (i) no undertaking shall be required of Indemnitee and (ii) the Disbursing Officer shall pay to Indemnitee such amount of any fines, penalties or judgments against him which have become final as the Corporation is obligated to indemnify him. (i) Any determination by the Corporation with respect to settlements of a Claim shall be made by the Determining Body. (j) The Corporation and Indemnitee shall keep confidential, to the extent permitted by law and their fiduciary obligations, all facts and determinations provided or made pursuant to or arising out of the operation of this Section, and the Corporation and Indemnitee shall instruct its or his agents and employees to do likewise. 11.3 ENFORCEMENT. (a) The rights provided by this Section shall be enforceable by Indemnitee in any court of competent jurisdiction. (b) If Indemnitee seeks a judicial adjudication of his rights under this Section Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all Expenses actually and reasonably incurred by him in connection with such proceeding but only if he prevails therein. If it shall be determined that Indemnitee is entitled to receive part but not all of the relief sought, then the Indemnitee shall be entitled to be reimbursed for all Expenses incurred by him in connection with such judicial adjudication if the amount to which he is determined to be entitled exceeds 50% of the amount of his claim. Otherwise, the Expenses incurred by Indemnitee in connection with such judicial adjudication shall be appropriately prorated. (c) In any judicial proceeding described in this subsection, the Corporation shall bear the burden of proving that Indemnitee is not entitled to any Expenses sought with respect to any Claim. 11.4 SAVING CLAUSE. If any provision of this Section is determined by a court having jurisdiction over the matter to require the Corporation to do or refrain from doing any act that is in violation of applicable law, the court shall be empowered to modify or reform such provision so that, as modified or reformed, such provision provides the maximum indemnification permitted by law, and such provision, as so modified or reformed, and the balance of this Section, shall be applied in accordance with their terms. Without limiting the generality of the foregoing, if any portion of this Section shall be invalidated on any ground, the Corporation shall nevertheless indemnify an Indemnitee to the full extent permitted by any applicable portion of this Section that shall not have been invalidated and to the full extent permitted by law with respect to that portion that has been invalidated. 11.5 NON-EXCLUSIVITY. (a) The indemnification and advancement of Expenses provided by or granted pursuant to this Section shall not be deemed exclusive of any other rights to which Indemnitee is or may become entitled under any statute, article of incorporation, by-law, authorization of shareholders or directors, agreement, or otherwise. (b) It is the intent of the Corporation by this Section to indemnify and hold harmless Indemnitee to the fullest extent permitted by law, so that if applicable law would permit the Corporation to provide broader indemnification rights than are currently permitted, the Corporation shall indemnify and hold harmless Indemnitee to the fullest extent permitted by applicable law notwithstanding that the other terms of this Section would provide for lesser indemnification. 11.6 SUCCESSORS AND ASSIGNS. This Section shall be binding upon the Corporation, its successors and assigns, and shall inure to the benefit of the Indemnitee's heirs, personal representatives, and assigns and to the benefit of the Corporation, its successors and assigns. 11.7 INDEMNIFICATION OF OTHER PERSONS. The Corporation may indemnify any person not covered by Sections 11.1 through 11.6 to the extent provided in a resolution of the Board or a separate section of these By-laws. SECTION 12 AMENDMENTS 12.1 ADOPTION OF BY-LAWS; AMENDMENTS THEREOF. By-laws of the Corporation may be adopted only by a majority vote of the Board of Directors. By-laws may be amended or repealed only by (i) a majority vote of the Board of Directors, except that any amendment to or repeal of Section 6 of these By-laws shall require an affirmative vote of at least three-quarters of the Board, or (ii) the affirmative vote of the holders of at least two-thirds of that portion of the Total Voting Power (as defined in Article III(D) of the Articles of Incorporation), voting together as a single class, that is present in person or by proxy at any regular or special meeting of shareholders, the notice of which expressly states that the proposed amendment or repeal is to be considered at the meeting. 12.2 NEW BY-LAWS; AMENDMENTS. Any purported amendment to these By-laws which would add hereto a matter not covered herein prior to such purported amendment shall be deemed to constitute the adoption of a By-law provision and not an amendment to the By-laws. SECTION 13 MISCELLANEOUS 13.1 DIVIDENDS. Except as otherwise provided by law or the Articles of Incorporation, dividends upon the stock of the Corporation may be declared by the Board of Directors at any regular or special meeting. Dividends may be paid in cash, property, or shares of stock, subject to the limitations specified in the Articles of Incorporation. 13.2 VOTING OF SHARES OWNED BY CORPORATION. Unless otherwise directed by the Board, any shares of capital stock issued by a wholly-owned subsidiary of the Corporation may be voted by the President of the Corporation at any shareholders' meeting of the subsidiary (or in connection with any written consent in lieu thereof). 13.3 CHECKS. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. Signatures of the authorized signatories may be by facsimile. 13.4 FISCAL YEAR. The Board of Directors may adopt for and on behalf of the Corporation a fiscal or a calendar year. 13.5 SEAL. The Board of Directors may adopt a corporate seal, which shall have inscribed thereon the name of the Corporation. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Failure to affix the seal shall not, however, affect the validity of any instrument. 13.6 GENDER. All pronouns and variations thereof used in these By-laws shall be deemed to refer to the masculine, feminine or neuter gender, singular or plural, as the identity of the person, persons, entity or entities referred to may require. 13.7 LOUISIANA'S FAIR PRICE STATUTE. The Company expressly opts into, and accepts the benefits of, La. R.S. 12:132-134, as they may be amended from time to time. 13.8 CONTROL SHARE ACQUISITION STATUTE. The Company expressly waives the benefits of La. R.S. 12:135-140.2, as they may be amended from time to time. EX-10.1 3 0003.txt AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT This Amendment No. 2 to Employment Agreement is made as of the 25th day of July, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and William E. Rowe (the "Employee"). W I T N E S S E T H: WHEREAS, the Company has entered into an Employment Agreement with the Employee dated as of August 1, 1995 as amended by Amendment No. 1 dated as of October 31, 1998 (as amended, the "Employment Agreement"); WHEREAS, the Employee has agreed to serve as the Company's President and Chief Executive Officer; and WHEREAS, the Company and the Employee have agreed to certain changes in the terms of Employee's employment, as set forth herein. NOW THEREFORE, the Company and the Employee agree as follows effective November 16, 1999: SECTION 1. Except as expressly amended herein, all of the terms and provisions of the Employment Agreement shall remain in full force and effect. SECTION 2. The second paragraph of Article I, Section 1 of the Employment Agreement is hereby amended to read in its entirety as follows: CAPACITY AND DUTIES OF EMPLOYEE. The Employee is employed by the Company to render services on behalf of the Company as President and Chief Executive Officer. As the President and Chief Executive Officer, the Employee shall perform such duties as are assigned to the individual holding such title by the Company's Bylaws and such other duties, consistent with the Employee's job title, as may be prescribed from time to time by the Board of Directors of the Company (the "Board"). SECTION 3. Article II, Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: 2. BONUS. (a) For fiscal years beginning November 1, 1999, the Employee shall be eligible to receive an annual incentive bonus (the "Bonus") of up to $500,000 per Fiscal Year. The Bonus will be awarded based upon factors to be established annually and set forth in an annual supplement to this Agreement. (b) The Bonus shall be paid in cash not later than 30 days following the filing of the Company's annual report on Form 10-K for the Fiscal Year in which the Bonus has been earned. SECTION 4. Article II, Section 3, paragraph (b) of the Employment Agreement is hereby amended to read in its entirety as follows: (b) Reimbursement for membership dues, including assessments and similar charges, in one or more clubs deemed useful for business purposes in an amount not to exceed $8,000 or such additional amounts as may be approved by the Chairman of the Board; SECTION 5. Article III, Section 4, paragraph (a), subsections (i) and (ii) of the Employment Agreement are hereby amended to read in their entirety as follows: (i) the assignment by the Board to the Employee of any duties or responsibilities that are inconsistent with the Employee's status, title and position as President and Chief Executive Officer; (ii) any removal of the Employee from, or any failure to reappoint or reelect the Employee to, the position of President and Chief Executive Officer of the Company, except in connection with a termination of Employee's status as an employee as permitted by this Agreement; SECTION 6. Article VI, Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: 2. NOTICES. All notices hereunder must be in writing and shall be deemed to have been given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chairman of the Board If to the Employee, to: William E. Rowe 113 Sycamore Drive Metairie, LA 70005 or such other address as to which any party hereto may have notified the other in writing. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and signed as of the date indicated above. STEWART ENTERPRISES, INC. By: /s/ James W. McFarland -------------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /s/ William E. Rowe ---------------------------------- William E. Rowe EX-10.2 4 0004.txt AMENDMENT NO. 2 TO CHANGE OF CONTROL AGREEMENT This Amendment No. 2 to Change of Control Agreement is made as of the 25th day of July, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and William E. Rowe (the "Employee"). W I T N E S S E T H: WHEREAS, the Company has entered into a Change of Control Agreement with the Employee dated as of December 5, 1995, as amended by Amendment No. 1 to Change of Control Agreement dated November 1, 1998 (as amended, the "Change of Control Agreement"); WHEREAS, the Employee has agreed to serve as the Company's President and Chief Executive Officer; and WHEREAS, the Company and the Employee have agreed to a change in the Employee's bonus, as set forth herein. NOW THEREFORE, the Company and the Employee agree as follows: SECTION 1. Except as expressly amended herein, all of the terms and provisions of the Change of Control Agreement shall remain in full force and effect. SECTION 2. Article I, Section 1.1 of the Change of Control Agreement is hereby amended to read in its entirety as follows: 1.1 EMPLOYMENT AGREEMENT. After a Change of Control (defined below), this Agreement supersedes the Employment Agreement dated as of August 1, 1995, as amended by Amendment No. 1 dated as of October 31, 1998 and Amendment No. 2 dated as of July 25, 2000, between Employee and the Company (as amended, the "Employment Agreement") except to the extent that certain provisions of the Employment Agreement are expressly incorporated by reference herein. After a Change of Control (defined below), the definitions in this Agreement supersede definitions in the Employment Agreement, but capitalized terms not defined in this Agreement have the meanings given to them in the Employment Agreement. SECTION 3. Article III, Section 3.2 of the Change of Control Agreement is hereby amended to read in its entirety as follows: 3.2 NOTICES. All notices hereunder must be in writing and shall be deemed to have given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chairman of the Board If to the Employee, to: William E. Rowe 113 Sycamore Drive Metairie, Louisiana 70005 or such other address as to which any party hereto may have notified the other in writing. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and signed as of the date indicated above. STEWART ENTERPRISES, INC. By: /S/ JAMES W. MCFARLAND ---------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /S/ WILLLIAM E. ROWE ---------------------------- William E. Rowe EX-10.3 5 0005.txt AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT This Amendment No. 2 to Employment Agreement is made as of the 25th day of July, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Brian J. Marlowe (the "Employee"). W I T N E S S E T H: WHEREAS, the Company has entered into an Employment Agreement with the Employee dated as of August 1, 1995 as amended by Amendment No. 1 dated as of October 31, 1998 (as amended, the "Employment Agreement"); WHEREAS, the Employee has agreed to serve as the Company's Executive Vice President and Chief Operating Officer; and WHEREAS, the Company and the Employee have agreed to certain changes in the terms of Employee's employment, as set forth herein. NOW THEREFORE, the Company and the Employee agree as follows effective December 6, 1999: SECTION 1. Except as expressly amended herein, all of the terms and provisions of the Employment Agreement shall remain in full force and effect. SECTION 2. The second paragraph of Article I, Section 1 of the Employment Agreement is hereby amended in its entirety as follows: CAPACITY AND DUTIES OF EMPLOYEE. (a) The Employee is employed by the Company to render services on behalf of the Company as Executive Vice President and Chief Operating Officer. As the Executive Vice President and Chief Operating Officer, the Employee shall perform such duties as are assigned to the individual holding such title by the Company's Bylaws and such other duties, consistent with the Employee's job title, as may be prescribed from time to time by the Board of Directors of the Company (the "Board") and/or the Company's Chief Executive Officer. (b) The Employee shall make himself available to attend meetings of the Board whether or not he is serving as a member of the Board at the time of such meeting. The Company will consider inviting the Employee to serve as a member of the Board after he has completed one year of service as Executive Vice President and Chief Operating Officer, but will not be obligated to do so. SECTION 3. Article 1, Section 3 of the Employment Agreement is hereby amended in its entirety as follows: 3. DEVOTION TO RESPONSIBILITIES. (a) During the Employment Term, the Employee shall devote all of his business time to the business of the Company, shall use his reasonable best efforts to perform faithfully and efficiently his duties under this Agreement, and shall not engage in or be employed by any other business; provided, however, that nothing contained herein shall prohibit the Employee from (a) serving as a member of the board of directors, board of trustees or the like of any for-profit or non- profit entity that does not compete with the Company, or performing services of any type for any civic or community entity, whether or not the Employee receives compensation therefor, (b) investing his assets in such form or manner as shall require no more than nominal services on the part of the Employee in the operation of the business of the entity in which such investment is made, or (c) serving in various capacities with, and attending meetings of, industry or trade groups and associations, as long as the Employee's engaging in any activities permitted by virtue of clauses (a), (b) and (c) above does not materially and unreasonably interfere with the ability of the Employee to perform the services and discharge the responsibilities required of him under this Agreement. Notwithstanding clause (b) above, during the Employment Term, the Employee may not beneficially own more than 2% of the equity interests of a business organization required to file periodic reports with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the "Exchange Act") and may not beneficially own more than 2% of the equity interests of a business organization that competes with the Company. For purposes of this paragraph, "beneficially own" shall have the same meaning ascribed to that term in Rule 13d-3 under the Exchange Act. (b) If, in the good faith judgment of the Chief Executive Officer, the Employee's performance is adversely affected by maintaining his primary residence outside of the New Orleans, Louisiana metropolitan area, Employee will address and correct any such adverse effects within 30 days following receipt of notice thereof from the Chief Executive Officer. If, at the end of the 30- day period, the Chief Executive Officer believes that the corrective measures taken have not sufficiently cured such adverse effects, he may provide notice to the Employee in accordance with Article VI Section 2 of this Agreement that the Employee must establish his primary residence in the New Orleans, Louisiana metropolitan area within 60 days. If the Employee does not comply with such notice, the Company may elect, by written notice to the Employee, to treat the Employee's non-compliance as a voluntary resignation by the Employee pursuant to Article III, Section 6 of this Agreement. SECTION 4. Article II, Section 1 of the Employment Agreement is hereby amended to read in its entirety as follows: 1. SALARY. Effective December 6, 1999, a salary ("Base Salary") at the rate of $355,000 per fiscal year of the Company ("Fiscal Year"), payable to the Employee at such intervals as other salaried employees of the Company are paid. SECTION 5. Article II, Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: 2. BONUS. (a) For fiscal years beginning November 1, 1999, the Employee shall be eligible to receive an annual incentive bonus (the "Bonus") of up to $375,000 per Fiscal Year. The Bonus will be awarded based upon factors to be established annually and set forth in an annual supplement to this Agreement. (b) The Bonus shall be paid in cash not later than 30 days following the filing of the Company's annual report on Form 10-K for the Fiscal Year in which the Bonus has been earned. SECTION 6. Article II, Section 5 of the Employment Agreement is hereby amended to read in its entirety as follows: 5. EXPENSES. (a) The Employee shall be reimbursed for reasonable out-of-pocket expenses incurred from time to time on behalf of the Company or any subsidiary in the performance of his duties under this Agreement, upon the presentation of such supporting invoices, documents and forms as the Company reasonably requests. (b) The Employee shall be reimbursed, up to a maximum of $200,000 in the aggregate, for any loss on the sale of his Virginia residence and moving and similar expenses incurred in connection with the Employee's relocation to New Orleans, upon the presentation of such supporting invoices, documents and forms as the Company reasonably requests. (c) The Company shall have no obligation to reimburse the Employee for any expenses associated with or related to maintaining a second residence. SECTION 7. Article III, Section 3 of the Employment Agreement is hereby amended to read in its entirety as follows: 3. CAUSE. The Company may terminate the Employee's status as an employee for Cause. As used herein, termination by the Company of the Employee's status as an employee for "Cause" shall mean termination as a result of the Employee's breach of this Agreement or the willful engaging by the Employee in gross misconduct injurious to the Company, which in either case is not remedied within 10 days after the Company provides written notice to the Employee of such breach or willful misconduct. SECTION 8. Article III, Section 4, paragraph (a) of the Employment Agreement is hereby amended to read in its entirety as follows: (a) The occurrence of any of the following during the Employment Term: (i) the assignment by the Board to the Employee of any duties or responsibilities that are inconsistent with the Employee's status, title and position as Executive Vice President and Chief Operating Officer; (ii) any removal of the Employee from, or any failure to reappoint or reelect the Employee to, the position of Executive Vice President and Chief Operating Officer of the Company, except in connection with a termination of Employee's status as an employee as permitted by this Agreement; (iii) the Company's requiring the Employee to be based anywhere other than in the New Orleans, Louisiana or Washington, D.C. metropolitan areas, except for required travel in the ordinary course of the Company's business; SECTION 9. Article VI, Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: 2. NOTICES. All notices hereunder must be in writing and shall be deemed to have been given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: Brian J. Marlowe 1015 Basil Road McLean, VA 22101 or such other address as to which any party hereto may have notified the other in writing. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and signed as of the date indicated above. STEWART ENTERPRISES, INC. By:/s/ James W. McFarland ---------------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /s/ Brian J. Marlowe ----------------------------------- Brian J. Marlowe EX-10.4 6 0006.txt AMENDMENT NO. 2 TO CHANGE OF CONTROL AGREEMENT This Amendment No. 2 to Change of Control Agreement is made as of the 25th day of July, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Brian J. Marlowe (the "Employee"). W I T N E S S E T H: WHEREAS, the Company has entered into a Change of Control Agreement with the Employee dated as of December 5, 1995, as amended by Amendment No. 1 to Change of Control Agreement dated as of November 1, 1998 (as amended, the "Change of Control Agreement"); WHEREAS, the Employee has agreed to serve as the Company's Executive Vice President and Chief Operating Officer; and WHEREAS, the Company and the Employee have agreed to a change in the Employee's salary and bonus, as set forth herein. NOW THEREFORE, the Company and the Employee agree as follows: SECTION 1. Except as expressly amended herein, all of the terms and provisions of the Change of Control Agreement shall remain in full force and effect. SECTION 2. Article I, Section 1.1 of the Change of Control Agreement is hereby amended to read in its entirety as follows: 1.1 EMPLOYMENT AGREEMENT. After a Change of Control (defined below), this Agreement supersedes the Employment Agreement dated as of August 1, 1995 as amended by Amendment No. 1 dated as of October 31, 1998, and as amended by Amendment No. 2 dated as of July 25, 2000, between Employee and the Company (as amended, the "Employment Agreement") except to the extent that certain provisions of the Employment Agreement are expressly incorporated by reference herein. After a Change of Control (defined below), the definitions in this Agreement supersede definitions in the Employment Agreement, but capitalized terms not defined in this Agreement have the meanings given to them in the Employment Agreement. SECTION 3. Article II, Section 2.2, paragraphs (a) and (b) of the Change of Control Agreement are hereby amended to read in their entirety as follows: (a) SALARY. A salary ("Base Salary") at the rate of $355,000 per year, payable to the Employee at such intervals no less frequent than the most frequent intervals in effect at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, the intervals in effect at any time after the Change of Control for other peer employees of the Company and its affiliated companies. (b) BONUS. An annual incentive bonus (the "Bonus") of $375,000, to the extent not already received, shall be paid in cash (1) no later than November 30 of each year or (2) if the Employee elects to receive the Bonus in the calendar year following the year in which it was earned, between January 1 and January 15 of such following year. SECTION 4. Article III, Section 3.2 of the Change of Control Agreement is hereby amended to read in its entirety as follows: 3.2 NOTICES. All notices hereunder must be in writing and shall be deemed to have given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: Brian J. Marlowe 1015 Basil Road McLean, Virginia 22101 or such other address as to which any party hereto may have notified the other in writing. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and signed as of the date indicated above. STEWART ENTERPRISES, INC. By: /S/ JAMES W. MCFARLAND -------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /S/ BRIAN J. MARLOWE -------------------------- Brian J. Marlowe EX-10.5 7 0007.txt AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT This Amendment No. 4 to Employment Agreement is made as of the 25th day of July, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Kenneth C. Budde (the "Employee"). W I T N E S S E T H: WHEREAS, the Company has entered into an Employment Agreement with the Employee dated as of August 1, 1995, as amended by Amendment No. 1 dated as of January 1, 1997, Amendment No. 2 dated as of May 1, 1998, and Amendment No. 3 dated as of October 31, 1998 (as amended, the "Employment Agreement"); and WHEREAS, the Company and the Employee have agreed to certain changes in the terms of Employee's employment, as set forth herein. NOW THEREFORE, the Company and the Employee agree as follows effective November 1, 1999: SECTION 1. Except as expressly amended herein, all of the terms and provisions of the Employment Agreement shall remain in full force and effect. SECTION 2. Article II, Section 1 of the Employment Agreement is hereby amended to read in its entirety as follows: 1. SALARY. Effective November 1, 1999, a salary ("Base Salary") at the rate of $300,000 per fiscal year of the Company ("Fiscal Year"), payable to the Employee at such intervals as other salaried employees of the Company are paid. SECTION 3. Article II, Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: 2. BONUS. (a) For fiscal years beginning November 1, 1999, the Employee shall be eligible to receive an annual incentive bonus (the "Bonus") of up to $300,000 per Fiscal Year. The Bonus will be awarded based upon factors to be established annually and set forth in an annual supplement to this Agreement. (b) The Bonus shall be paid in cash not later than 30 days following the filing of the Company's annual report on Form 10-K for the Fiscal Year in which the Bonus has been earned. SECTION 4. Article VI, Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: 2. NOTICES. All notices hereunder must be in writing and shall be deemed to have been given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: Kenneth C. Budde 2526 Metairie Road Metairie, Louisiana 70005 or such other address as to which any party hereto may have notified the other in writing. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and signed as of the date indicated above. STEWART ENTERPRISES, INC. By:/s/ James W. McFarland ---------------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /s/ Kenneth C. Budde ------------------------------------ Kenneth C. Budde EX-10.6 8 0008.txt AMENDMENT NO. 3 TO CHANGE OF CONTROL AGREEMENT This Amendment No. 3 to Change of Control Agreement is made as of the 25th day of July, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Kenneth C. Budde (the "Employee"). W I T N E S S E T H: WHEREAS, the Company has entered into a Change of Control Agreement with the Employee dated as of December 5, 1995, as amended by Amendment No. 1 to Change of Control Agreement dated as of May 1, 1998, and Amendment No. 2 to Change of Control Agreement dated November 1, 1998 (as amended, the "Change of Control Agreement"); and WHEREAS, the Company and the Employee have agreed to a change in the Employee's salary and bonus, as set forth herein. NOW THEREFORE, the Company and the Employee agree as follows: SECTION 1. Except as expressly amended herein, all of the terms and provisions of the Change of Control Agreement shall remain in full force and effect. SECTION 2. Article I, Section 1.1 of the Change of Control Agreement is hereby amended to read in its entirety as follows: 1.1 EMPLOYMENT AGREEMENT. After a Change of Control (defined below), this Agreement supersedes the Employment Agreement dated as of August 1, 1995 as amended by Amendment No. 1 dated as of January 1, 1997, Amendment No. 2 dated as of May 1, 1998, Amendment No. 3 dated as of October 31, 1998, and Amendment No. 4 dated as of July 25, 2000, between Employee and the Company (as amended, the "Employment Agreement") except to the extent that certain provisions of the Employment Agreement are expressly incorporated by reference herein. After a Change of Control (defined below), the definitions in this Agreement supersede definitions in the Employment Agreement, but capitalized terms not defined in this Agreement have the meanings given to them in the Employment Agreement. SECTION 3. Article II, Section 2.2, paragraphs (a) and (b) of the Change of Control Agreement are hereby amended to read in their entirety as follows: (a) SALARY. A salary ("Base Salary") at the rate of $300,000 per year, payable to the Employee at such intervals no less frequent than the most frequent intervals in effect at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, the intervals in effect at any time after the Change of Control for other peer employees of the Company and its affiliated companies. (b) BONUS. An annual incentive bonus (the "Bonus") of $300,000, to the extent not already received, shall be paid in cash (1) no later than November 30 of each year or (2) if the Employee elects to receive the Bonus in the calendar year following the year in which it was earned, between January 1 and January 15 of such following year. SECTION 4. Article III, Section 3.2 of the Change of Control Agreement is hereby amended to read in its entirety as follows: 3.2 NOTICES. All notices hereunder must be in writing and shall be deemed to have given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: Kenneth C. Budde 2526 Metairie Road Metairie, Louisiana 70005 or such other address as to which any party hereto may have notified the other in writing. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and signed as of the date indicated above. STEWART ENTERPRISES, INC. By: /S/ JAMES W. MCFARLAND ---------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /S/ KENNETH C. BUDDE ---------------------------- Kenneth C. Budde EX-10.7 9 0009.txt AMENDMENT NO. 3 TO EMPLOYMENT AGREEMENT This Amendment No. 3 to Employment Agreement is made as of the 25th day of July, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Ronald H. Patron (the "Employee"). W I T N E S S E T H: WHEREAS, the Company has entered into an Employment Agreement with the Employee dated as of August 1, 1995 as amended by Amendment No. 1 dated as of May 1, 1998 and Amendment No. 2 dated as of October 31, 1998 (as amended, the "Employment Agreement"); and WHEREAS, the Company and the Employee have agreed to certain changes in the terms of Employee's employment, as set forth herein. NOW THEREFORE, the Company and the Employee agree as follows effective January 1, 2000: SECTION 1. Except as expressly amended herein, all of the terms and provisions of the Employment Agreement shall remain in full force and effect. SECTION 2. The second paragraph of Article I, Section 1 of the Employment Agreement is hereby amended to read in its entirety as follows: CAPACITY AND DUTIES OF EMPLOYEE. (a) The Employee is employed by the Company to render services on behalf of the Company as Executive Vice President and Chief Administrative Officer. As the Executive Vice President and Chief Administrative Officer, the Employee shall perform such duties as are assigned to the individual holding such title by the Company's Bylaws and such other duties, consistent with the Employee's job title, as may be prescribed from time to time by the Board of Directors of the Company (the "Board") and/or the Company's Chief Executive Officer. (b) Effective January 1, 2000, the Employee shall render the services prescribed in paragraph (a) above for not less than 4 days per week, and not less than 30 weeks per fiscal year of the Company. Upon the request of the Chief Executive Officer, the Employee shall prepare a work schedule to be submitted for approval. SECTION 3. Article II, Section 1 of the Employment Agreement is hereby amended to read in its entirety as follows: 1. SALARY. Effective January 1, 2000, a salary ("Base Salary") at the rate of $150,000 per fiscal year of the Company ("Fiscal Year"), payable to the Employee at such intervals as other salaried employees of the Company are paid. SECTION 4. Article II, Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: 2. BONUS. (a) For fiscal years beginning November 1, 1999, the Employee shall be eligible to receive an annual incentive bonus (the "Bonus") of up to $150,000 per Fiscal Year. The Bonus will be awarded based upon factors to be established annually and set forth in an annual supplement to this Agreement. (b) The Bonus shall be paid in cash not later than 30 days following the filing of the Company's annual report on Form 10-K for the Fiscal Year in which the Bonus has been earned. SECTION 5. Article IV, Section 3, paragraph (a) of the Employment Agreement is hereby amended to read in its entirety as follows: (a) the Company shall pay to the Employee the sum of $400,000, payable in equal installments over a two-year period at such intervals as other salaried employees of the Company are paid; and SECTION 6. Article IV, Section 5 of the Employment Agreement is hereby amended to read in its entirety as follows: 5. TERMINATION BY EMPLOYEE FOR REASONS OTHER THAN GOOD REASON. If the Employee's status as an employee is terminated by the Employee for reasons other than Good Reason, then the Company shall pay to the Employee the sum of $200,000, payable in equal installments over a two-year period at such intervals as other salaried employees of the Company are paid. SECTION 7. Article VI, Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: 2. NOTICES. All notices hereunder must be in writing and shall be deemed to have been given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: Ronald H. Patron 505 Beau Chene Drive Mandeville, LA 70448 or such other address as to which any party hereto may have notified the other in writing. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and signed as of the date indicated above. STEWART ENTERPRISES, INC. By:/s/ James W. McFarland ----------------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /s/ Ronald H. Patron ------------------------------------ Ronald H. Patron EX-10.8 10 0010.txt AMENDMENT NO. 3 TO CHANGE OF CONTROL AGREEMENT This Amendment No. 3 to Change of Control Agreement is made as of the 25th day of July, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Ronald H. Patron (the "Employee"). W I T N E S S E T H: WHEREAS, the Company has entered into a Change of Control Agreement with the Employee dated as of December 5, 1995, as amended by Amendment No. 1 to Change of Control Agreement dated as of May 1, 1998 and Amendment No. 2 to Change of Control Agreement dated November 1, 1998 (as amended, the "Change of Control Agreement"); WHEREAS, the Company and the Employee have agreed to certain changes in the terms of Employee's employment; and WHEREAS, the Company and the Employee have agreed to a change in the Employee's salary and bonus, as set forth herein. NOW THEREFORE, the Company and the Employee agree as follows: SECTION 1. Except as expressly amended herein, all of the terms and provisions of the Change of Control Agreement shall remain in full force and effect. SECTION 2. Article I, Section 1.1 of the Change of Control Agreement is hereby amended to read in its entirety as follows: 1.1 EMPLOYMENT AGREEMENT. After a Change of Control (defined below), this Agreement supersedes the Employment Agreement dated as of August 1, 1995 as amended by Amendment No. 1 dated as of May 1, 1998, Amendment No. 2 dated as of October 31, 1998, and Amendment No. 3 dated as of July 25, 2000, between Employee and the Company (as amended, the "Employment Agreement") except to the extent that certain provisions of the Employment Agreement are expressly incorporated by reference herein. After a Change of Control (defined below), the definitions in this Agreement supersede definitions in the Employment Agreement, but capitalized terms not defined in this Agreement have the meanings given to them in the Employment Agreement. SECTION 3. Article II, Section 2.2, paragraphs (a) and (b) of the Change of Control Agreement are hereby amended to read in their entirety as follows: (a) SALARY. A salary ("Base Salary") at the rate of $150,000 per year, payable to the Employee at such intervals no less frequent than the most frequent intervals in effect at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, the intervals in effect at any time after the Change of Control for other peer employees of the Company and its affiliated companies. (b) BONUS. An annual incentive bonus (the "Bonus") of $150,000, to the extent not already received, shall be paid in cash (1) no later than November 30 of each year or (2) if the Employee elects to receive the Bonus in the calendar year following the year in which it was earned, between January 1 and January 15 of such following year. SECTION 4. Article III, Section 3.2 of the Change of Control Agreement is hereby amended to read in its entirety as follows: 3.2 NOTICES. All notices hereunder must be in writing and shall be deemed to have given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: Ronald H. Patron 505 Beau Chene Drive Mandeville, Louisiana 70448 or such other address as to which any party hereto may have notified the other in writing. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and signed as of the date indicated above. STEWART ENTERPRISES, INC. By:/s/ James W. McFarland --------------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /s/ Ronald H. Patron ----------------------------------- Ronald H. Patron EX-10.9 11 0011.txt AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT This Amendment No. 4 to Employment Agreement is made as of the 25th day of July, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Brent F. Heffron (the "Employee"). W I T N E S S E T H: WHEREAS, the Company has entered into an Employment Agreement with the Employee dated as of January 1, 1997 as amended by Amendment No. 1 to Employment Agreement dated as of January 1, 1997, Amendment No. 2 dated as of November 1, 1997, and Amendment No. 3 dated as of October 31, 1998, (as amended, the "Employment Agreement"); and WHEREAS, the Company and the Employee have agreed to a change in the Employee's bonus, effective November 1, 1999, as set forth herein. NOW THEREFORE, the Company and the Employee agree as follows: SECTION 1. Except as expressly amended herein, all of the terms and provisions of the Employment Agreement shall remain in full force and effect. SECTION 2. Article II, Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: 2. BONUS. (a) For fiscal years beginning November 1, 1999, the Employee shall be eligible to receive an annual incentive bonus (the "Bonus") of up to $300,000 per Fiscal Year. The Bonus will be awarded based upon factors to be established annually and set forth in an annual supplement to this Agreement. (b) The Bonus shall be paid in cash not later than 30 days following the filing of the Company's annual report on Form 10-K for the Fiscal Year in which the Bonus has been earned. SECTION 3. Article VI, Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: 2. NOTICES. All notices hereunder must be in writing and shall be deemed to have been given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: Brent F. Heffron 319 Running Wind Lane Maitland, Florida 32751 or such other address as to which any party hereto may have notified the other in writing. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and signed as of the date indicated above. STEWART ENTERPRISES, INC. By:/s/ James W. McFarland --------------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /s/ Brent F. Heffron --------------------------------- Brent F. Heffron EX-10.10 12 0012.txt AMENDMENT NO. 3 TO CHANGE OF CONTROL AGREEMENT This Amendment No. 3 to Change of Control Agreement is made as of the 25th day of July, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Brent F. Heffron (the "Employee"). W I T N E S S E T H: WHEREAS, the Company has entered into a Change of Control Agreement with the Employee dated as of January 1, 1997 as amended by Amendment No. 1 to Change of Control Agreement dated as of November 1, 1997 and Amendment No. 2 to Change of Control Agreement dated as of November 1, 1998 (as amended, the "Change of Control Agreement"); and WHEREAS, the Company and the Employee have agreed to a change in the Employee's bonus. NOW THEREFORE, the Company and the Employee agree as follows: SECTION 1. Except as expressly amended herein, all of the terms and provisions of the Change of Control Agreement shall remain in full force and effect. SECTION 2. Article I, Section 1.1 of the Change of Control Agreement is hereby amended to read in its entirety as follows: 1.1 EMPLOYMENT AGREEMENT. After a Change of Control (defined below), this Agreement supersedes the Employment Agreement dated as of January 1, 1997 as amended by Amendment No. 1 dated as of January 1, 1997, Amendment No. 2 dated as of November 1, 1997, Amendment No. 3 dated as of October 31, 1998, and Amendment No. 4 dated as of July 25, 2000, between Employee and the Company (as amended, the "Employment Agreement") except to the extent that certain provisions of the Employment Agreement are expressly incorporated by reference herein. After a Change of Control (defined below), the definitions in this Agreement supersede definitions in the Employment Agreement, but capitalized terms not defined in this Agreement have the meanings given to them in the Employment Agreement. SECTION 3. Article II, Section 2.2, paragraph (b) of the Change of Control Agreement is hereby amended to read in its entirety as follows: (b) BONUS. An annual incentive bonus (the "Bonus") of $300,000, to the extent not already received, shall be paid in cash (1) no later than November 30 of each year or (2) if the Employee elects to receive the Bonus in the calendar year following the year in which it was earned, between January 1 and January 15 of such following year. SECTION 4. Article III, Section 3.2 of the Change of Control Agreement is hereby amended to read in its entirety as follows: 3.2 NOTICES. All notices hereunder must be in writing and shall be deemed to have given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: Brent F. Heffron 319 Running Wind Lane Maitland, Florida 32751 or such other address as to which any party hereto may have notified the other in writing. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and signed as of the date indicated above. STEWART ENTERPRISES, INC. By:/s/ James W. McFarland --------------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /s/ Brent F. Heffron ----------------------------------- Brent F. Heffron EX-10.11 13 0013.txt EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Randall L. Stricklin (the "Employee") is dated as of April 20, 2000 (the "Agreement Date"). W I T N E S S E T H: WHEREAS, Employee currently is employed by the Company; WHEREAS, the Company desires to retain the services of Employee pursuant to the terms of this Agreement, subject to Employee's acceptance of the conditions stated herein; WHEREAS, during the course of his employment with the Company, Employee has or will have received extensive and unique knowledge, training and education in, and access to resources involving, the Death Care Business (as defined below) at a substantial cost to the Company, which Employee acknowledges has enhanced or substantially will enhance Employee's skills and knowledge in such business; WHEREAS, during the course of his employment with the Company, Employee has had and will continue to have access to certain valuable oral and written information, knowledge and data relating to the business and operations of the Company and its subsidiaries that is non-public, confidential or proprietary in nature and is particularly useful in the Death Care Business; and WHEREAS, in view of the training provided by the Company to Employee, its cost to the Company, the need for the Company to be protected against disclosures by Employee of the Company's and its subsidiaries' trade secrets and other non-public, confidential or proprietary information, the Company and Employee desire, among other things, to prohibit Employee from disclosing or utilizing, outside the scope and term of his employment, any non-public, confidential or proprietary information, knowledge and data relating to the business and operations of the Company or its subsidiaries received by Employee during the course of his employment, and to restrict the ability of Employee to compete with the Company or its subsidiaries for a limited period of time. NOW, THEREFORE, for and in consideration of the continued employment of Employee by the Company and the payment of wages, salary and other compensation to Employee by the Company, the parties hereto agree as follows: ARTICLE I EMPLOYMENT CAPACITY AND TERM 1. CAPACITY AND DUTIES OF EMPLOYEE. The Employee is employed by the Company to render services on behalf of the Company as Senior Vice President and President - Western Division. As the Senior Vice President and President - Western Division, the Employee shall perform such duties as are assigned to the individual holding such title by the Company's Bylaws and such other duties, consistent with the Employee's job title, as may be prescribed from time to time by the Board of Directors of the Company (the "Board") and/or the Company's Chief Executive Officer. 2. EMPLOYMENT TERM. The term of this Agreement (the "Employment Term") shall commence on the Agreement Date and shall continue through October 31, 2000, subject to any earlier termination of Employee's status as an employee pursuant to this Agreement. 3. DEVOTION TO RESPONSIBILITIES. During the Employment Term, the Employee shall devote all of his business time to the business of the Company, shall use his reasonable best efforts to perform faithfully and efficiently his duties under this Agreement, and shall not engage in or be employed by any other business; provided, however, that nothing contained herein shall prohibit the Employee from (a) serving as a member of the board of directors, board of trustees or the like of any for-profit or non-profit entity that does not compete with the Company, or performing services of any type for any civic or community entity, whether or not the Employee receives compensation therefor, (b) investing his assets in such form or manner as shall require no more than nominal services on the part of the Employee in the operation of the business of the entity in which such investment is made, or (c) serving in various capacities with, and attending meetings of, industry or trade groups and associations, as long as the Employee's engaging in any activities permitted by virtue of clauses (a), (b) and (c) above does not materially and unreasonably interfere with the ability of the Employee to perform the services and discharge the responsibilities required of him under this Agreement. Notwithstanding clause (b) above, during the Employment Term, the Employee may not beneficially own more than 2% of the equity interests of a business organization required to file periodic reports with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the "Exchange Act") and may not beneficially own more than 2% of the equity interests of a business organization that competes with the Company. For purposes of this paragraph, "beneficially own" shall have the same meaning ascribed to that term in Rule 13d-3 under the Exchange Act. ARTICLE II COMPENSATION AND BENEFITS During the Employment Term, the Company shall provide the Employee with the compensation and benefits described below: 1. SALARY. Effective April 20, 2000, a salary ("Base Salary") at the rate of $225,000 per fiscal year of the Company ("Fiscal Year"), payable to the Employee at such intervals as other salaried employees of the Company are paid. 2. BONUS. (a) The Employee shall be eligible to receive an incentive bonus (the "Bonus") of: (i) up to $37,500 for service as the Chief Operating Officer of the Southern Region of the Western Division during the first half of Fiscal Year 2000; and (ii) up to $100,000 for service as the Senior Vice President and President - Western Division for the second half of Fiscal Year 2000. The Bonus shall be awarded based upon factors to be set forth in a supplement to this Agreement. (b) The Bonus shall be paid in cash not later than 30 days following the filing of the Company's annual report on Form 10-K for the Fiscal Year in which the Bonus has been earned. 3. BENEFITS. The Company shall provide the Employee with the following fringe benefits and perquisites: (a) An automobile allowance of $720 per month. The Company will reimburse the Employee for all gasoline, maintenance, repairs and insurance for Employee's personal car, as if it were a Company-owned vehicle; (b) Reimbursement for membership dues, including assessments and similar charges, in one or more clubs deemed useful for business purposes in an amount not to exceed $8,000 or such additional amounts as may be approved by the President; (c) First class air travel; (d) Fully-paid insurance benefit package available to all employees; and (e) All other benefit programs similar to those provided other employees of the Company. 4. EXPENSES. The Employee shall be reimbursed for reasonable out- of-pocket expenses incurred from time to time on behalf of the Company or any subsidiary in the performance of his duties under this Agreement, upon the presentation of such supporting invoices, documents and forms as the Company reasonably requests. ARTICLE III TERMINATION OF EMPLOYMENT 1. DEATH. The Employee's status as an employee shall terminate immediately and automatically upon the Employee's death during the Employment Term. 2. DISABILITY. The Employee's status as an employee may be terminated for "Disability" as follows: (a) The Employee's status as an employee shall terminate if the Employee has a disability that would entitle him to receive benefits under the Company's long-term disability insurance policy in effect at the time either because he is Totally Disabled or Partially Disabled, as such terms are defined in the Company's policy in effect as of the Agreement Date or as similar terms are defined in any successor policy. Any such termination shall become effective on the first day on which the Employee is eligible to receive payments under such policy (or on the first day that he would be so eligible, if he had applied timely for such payments). (b) If the Company has no long-term disability plan in effect, if (i) the Employee is rendered incapable because of physical or mental illness of satisfactorily discharging his duties and responsibilities under this Agreement for a period of 90 consecutive days and (ii) a duly qualified physician chosen by the Company and acceptable to the Employee or his legal representatives so certifies in writing, the Board shall have the power to determine that the Employee has become disabled. If the Board makes such a determination, the Company shall have the continuing right and option, during the period that such disability continues, and by notice given in the manner provided in this Agreement, to terminate the status of Employee as an employee. Any such termination shall become effective 30 days after such notice of termination is given, unless within such 30-day period, the Employee becomes capable of rendering services of the character contemplated hereby (and a physician chosen by the Company and acceptable to the Employee or his legal representatives so certifies in writing) and the Employee in fact resumes such services. (c) The "Disability Effective Date" shall mean the date on which termination of employment becomes effective due to Disability. 3. CAUSE. The Company may terminate the Employee's status as an employee for Cause. As used herein, termination by the Company of the Employee's status as an employee for "Cause" shall mean termination as a result of (a) the Employee's breach of this Agreement, or (b) the willful engaging by the Employee in gross misconduct injurious to the Company, which in either case is not remedied within 10 days after the Company provides written notice to the Employee of such breach or willful misconduct. 4. GOOD REASON. The Employee may terminate his status as an employee for Good Reason. As used herein, the term "Good Reason" shall mean: (a) The occurrence of any of the following during the Employment Term: (i) the assignment by the Board to the Employee of any duties or responsibilities that are inconsistent with the Employee's status, title and position as Senior Vice President; (ii) any removal of the Employee from, or any failure to reappoint or reelect the Employee to, the position of Senior Vice President of the Company, except in connection with a termination of Employee's status as an employee as permitted by this Agreement; (iii) the Company's requiring the Employee to be based anywhere other than in the San Francisco, California metropolitan area, except for required travel in the ordinary course of the Company's business; (b) any breach of this Agreement by the Company that continues for a period of 10 days after written notice thereof is given by the Employee to the Company; (c) the failure by the Company to obtain the assumption of its obligations under this Agreement by any successor or assign as contemplated in this Agreement; or (d) any purported termination by the Company of the Employee's status as an employee for Cause that is not effected pursuant to a Notice of Termination satisfying the requirements of this Agreement. 5. VOLUNTARY TERMINATION BY THE COMPANY. The Company may terminate the Employee's status as employee for other than death, Disability or Cause. 6. VOLUNTARY TERMINATION BY THE EMPLOYEE. The Employee may terminate the Employee's status as employee for other than Good Reason. 7. NOTICE OF TERMINATION. Any termination by the Company for Disability or Cause, or by the Employee for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Article VI Section 2 of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice that (a) indicates the specific termination provision in this Agreement relied upon (b) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee's employment under the provisions so indicated and (c) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Employee or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason, Disability or Cause shall not negate the effect of the notice nor waive any right of the Employee or the Company, respectively, hereunder or preclude the Employee or the Company, respectively, from asserting such fact or circumstance in enforcing the Employee's or the Company's rights hereunder. 8. DATE OF TERMINATION. "Date of Termination" means (a) if Employee's employment is terminated by reason of his death or Disability, the Date of Termination shall be the date of death of Employee or the Disability Effective Date, as the case may be, (b) if Employee's employment is terminated by the Company for Cause, or by Employee for Good Reason, the date of delivery of the Notice of Termination or any later date specified therein, (which date shall not be more than 30 days after the giving of such notice) as the case may be, (c) if the Employee's employment is terminated by the Company for reasons other than death, Disability or Cause, the Date of Termination shall be the date on which the Company notifies the Employee of such termination, and (d) if the Employee's employment is terminated by the Employee for reasons other than Good Reason, the Date of Termination shall be the date on which the Employee notifies the Company of such termination. ARTICLE IV OBLIGATIONS UPON TERMINATION 1. DEATH. If the Employee's status as an employee is terminated by reason of the Employee's death, this Agreement shall terminate without further obligations to the Employee's legal representatives under this Agreement, other than the obligation to make any payments due pursuant to employee benefit plans maintained by the Company or its subsidiaries. 2. DISABILITY. If Employee's status as an employee is terminated by reason of Employee's Disability, this Agreement shall terminate without further obligation to the Employee, other than the obligation to make any payments due pursuant to employee benefit plans maintained by the Company or its subsidiaries. 3. TERMINATION BY COMPANY FOR REASONS OTHER THAN DEATH, DISABILITY OR CAUSE; TERMINATION BY EMPLOYEE FOR GOOD REASON. If the Company terminates the Employee's status as an employee for reasons other than death, Disability or Cause, or the Employee terminates his employment for Good Reason, then (a) the Company shall pay to the Employee an amount equal to two times the amount of Base Salary in effect at the Date of Termination, payable in equal installments over a two-year period at such intervals as other salaried employees of the Company are paid; and (b) with respect to all performance-based options granted to the Employee pursuant to the Company's 1995 Incentive Compensation Plan, (i) if the performance goals have been met as of the Date of Termination, then such options shall become exercisable as of the Date of Termination (if not already exercisable) and shall expire on the date that is the later of: (A) 30 days after the Date of Termination or (B) 30 days after the first date on which the exercise of the options and sale of the underlying securities will not (1) be matched with purchases or sales of the Company's common stock prior to such Date of Termination such as to cause the Employee to incur a liability to the Company under Section 16 of the Exchange Act and (2) destroy the Section 16 exemption for the grant of the options. (ii) if the performance goals have not been met as of the Date of Termination, then (A) if the performance goals are not met by the close of business on the day that is 180 days after the Date of Termination, then the options shall expire on such day; and (B) if the performance goals are met by the close of business on the day that is 180 days after the Date of Termination, then the options shall become exercisable as of the date such performance goals are met (the "Vesting Date") and shall expire on the date that is the later of: (1) 30 days after the Vesting Date or (2) 30 days after the first date on which the exercise of the options and sale of the underlying securities will not (i) be matched with purchases or sales of the Company's common stock prior to such Date of Termination such as to cause the Employee to incur a liability to the Company under Section 16 of the Exchange Act and (ii) destroy the Section 16 exemption for the grant of the options. 4. CAUSE. If the Employee's status as an employee is terminated by the Company for Cause, this Agreement shall terminate without further obligation to the Employee other than for obligations imposed by law and obligations imposed pursuant to any employee benefit plan maintained by the Company or its subsidiaries. 5. TERMINATION BY EMPLOYEE FOR REASONS OTHER THAN GOOD REASON. If the Employee's status as an employee is terminated by the Employee for reasons other than Good Reason, then the Company shall pay to the Employee an amount equal to a single year's Base Salary in effect at the Date of Termination, payable in equal installments over a two-year period at such intervals as other salaried employees of the Company are paid. 6. RESIGNATION. If Employee is a director of the Company and his employment is terminated for any reason other than death, the Employee shall, if requested by the Company, immediately resign as a director of the Company. If such resignation is not received when so requested, the Employee shall forfeit any right to receive any payments pursuant to this Agreement. ARTICLE V NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Confidential Information" means any information, knowledge or data of any nature and in any form (including information that is electronically transmitted or stored on any form of magnetic or electronic storage media) relating to the past, current or prospective business or operations of the Company and its subsidiaries, that at the time or times concerned is not generally known to persons engaged in businesses similar to those conducted or contemplated by the Company and its subsidiaries (other than information known by such persons through a violation of an obligation of confidentiality to the Company), whether produced by the Company and its subsidiaries or any of their consultants, agents or independent contractors or by Employee, and whether or not marked confidential, including without limitation information relating to the Company's or its subsidiaries' products and services, business plans, business acquisitions, processes, product or service research and development methods or techniques, training methods and other operational methods or techniques, quality assurance procedures or standards, operating procedures, files, plans, specifications, proposals, drawings, charts, graphs, support data, trade secrets, supplier lists, supplier information, purchasing methods or practices, distribution and selling activities, consultants' reports, marketing and engineering or other technical studies, maintenance records, employment or personnel data, marketing data, strategies or techniques, financial reports, budgets, projections, cost analyses, price lists, formulae and analyses, employee lists, customer records, customer lists, customer source lists, proprietary computer software, and internal notes and memoranda relating to any of the foregoing. (b) "Death Care Business" means (i) the owning and operating of funeral homes and cemeteries, including combined funeral home and cemetery facilities, (ii) the offering of a complete range of services and products to meet families' funeral needs, including prearrangement, family consultation, the sale of caskets and related funeral and cemetery products and merchandise, the removal, preparation and transportation of remains, cremation, the use of funeral home facilities for visitation and worship, and related transportation services, (iii) the marketing and sale of funeral services and cemetery property on an at-need or prearranged basis, (iv) providing, managing and administering financing arrangements (including trust funds, escrow accounts, insurance and installment sales contracts) for prearranged funeral plans and cemetery property and merchandise, (v) providing interment services, the sale (on an at-need or prearranged basis) of cemetery property including lots, lawn crypts, family and community mausoleums and related cemetery merchandise such as monuments, memorials and burial vaults, (vi) the maintenance of cemetery grounds pursuant to perpetual care contracts and laws or on a voluntary basis, and (vii) offering mausoleum design, construction and sales services. 2. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. During the Employment Term, Employee shall hold in a fiduciary capacity for the benefit of the Company all Confidential Information which shall have been obtained by Employee during Employee's employment (whether prior to or after the Agreement Date) and shall use such Confidential Information solely within the scope of his employment with and for the exclusive benefit of the Company. For a period of five years after the Employment Term, commencing with the Date of Termination, Employee agrees (a) not to communicate, divulge or make available to any person or entity (other than the Company) any such Confidential Information, except upon the prior written authorization of the Company or as may be required by law or legal process, and (b) to deliver promptly to the Company any Confidential Information in his possession, including any duplicates thereof and any notes or other records Employee has prepared with respect thereto. In the event that the provisions of any applicable law or the order of any court would require Employee to disclose or otherwise make available any Confidential Information, Employee shall give the Company prompt prior written notice of such required disclosure and an opportunity to contest the requirement of such disclosure or apply for a protective order with respect to such Confidential Information by appropriate proceedings. 3. LIMITED COVENANT NOT TO COMPETE. During the Employment Term and for a period of two years thereafter, commencing with the Date of Termination, Employee agrees that, with respect to each State of the United States or other jurisdiction, or specified portions thereof, in which the Employee regularly (a) makes contact with customers of the Company or any of its subsidiaries, (b) conducts the business of the Company or any of its subsidiaries or (c) supervises the activities of other employees of the Company or any of its subsidiaries, as identified in Appendix "A" attached hereto and forming a part of this Agreement, and in which the Company or any of its subsidiaries engages in the Death Care Business on the Date of Termination (collectively, the "Subject Areas"), Employee will restrict his activities within the Subject Areas as follows: (a) Employee will not, directly or indirectly, for himself or others, own, manage, operate, control, be employed in an executive, managerial or supervisory capacity by, or otherwise engage or participate in or allow his skill, knowledge, experience or reputation to be used in connection with, the ownership, management, operation or control of, any company or other business enterprise engaged in the Death Care Business within any of the Subject Areas; provided, however, that nothing contained herein shall prohibit Employee from making passive investments as long as Employee does not beneficially own more than 2% of the equity interests of a business enterprise engaged in the Death Care Business within any of the Subject Areas. For purposes of this paragraph, "beneficially own" shall have the same meaning ascribed to that term in Rule 13d-3 under the Exchange Act. (b) Employee will not call upon any customer of the Company or its subsidiaries for the purpose of soliciting, diverting or enticing away the business of such person or entity, or otherwise disrupting any previously established relationship existing between such person or entity and the Company or its subsidiaries; (c) Employee will not solicit, induce, influence or attempt to influence any supplier, lessor, licensor, potential acquiree or any other person who has a business relationship with the Company or its subsidiaries, or who on the Date of Termination is engaged in discussions or negotiations to enter into a business relationship with the Company or its subsidiaries, to discontinue or reduce the extent of such relationship with the Company or its subsidiaries; and (d) Employee will not make contact with any of the employees of the Company or its subsidiaries with whom he had contact during the course of his employment with the Company for the purpose of soliciting such employee for hire, whether as an employee or independent contractor, or otherwise disrupting such employee's relationship with the Company or its subsidiaries. (e) Employee further agrees that, for a period of one year from and after the Date of Termination, Employee will not hire, on behalf of himself or any company engaged in the Death Care Business with which Employee is associated, any employee of the Company or its subsidiaries as an employee or independent contractor, whether or not such engagement is solicited by Employee; provided, however, that the restriction contained in this subsection (e) shall not apply to Company employees who reside in, or are hired by Employee to perform work in, any of the Subject Areas located within the States of Virginia, Arkansas or Georgia. Employee agrees that he will from time to time upon the Company's request promptly execute any supplement, amendment, restatement or other modification of Appendix "A" as may be necessary or appropriate to correctly reflect the jurisdictions which, at the time of such modification, should be covered by Appendix "A" and this Article V Section 3. Furthermore, Employee agrees that all references to Appendix "A" in this Agreement shall be deemed to refer to Appendix "A" as so supplemented, amended, restated or otherwise modified from time to time. 4. INJUNCTIVE RELIEF; OTHER REMEDIES. Employee acknowledges that a breach by Employee of Section 2 or 3 of this Article V would cause immediate and irreparable harm to the Company for which an adequate monetary remedy does not exist; hence, Employee agrees that, in the event of a breach or threatened breach by Employee of the provisions of Section 2 or 3 of this Article V during or after the Employment Term, the Company shall be entitled to injunctive relief restraining Employee from such violation without the necessity of proof of actual damage or the posting of any bond, except as required by non-waivable, applicable law. Nothing herein, however, shall be construed as prohibiting the Company from pursuing any other remedy at law or in equity to which the Company may be entitled under applicable law in the event of a breach or threatened breach of this Agreement by Employee, including without limitation the recovery of damages and/or costs and expenses, such as reasonable attorneys' fees, incurred by the Company as a result of any such breach. In addition to the exercise of the foregoing remedies, the Company shall have the right upon the occurrence of any such breach to cancel any unpaid salary, bonus, commissions or reimbursements otherwise outstanding at the Date of Termination. In particular, Employee acknowledges that the payments provided under Article IV Sections 3 and 5 are conditioned upon Employee fulfilling any noncompetition and nondisclosure agreements contained in this Article V. In the event Employee shall at any time materially breach any noncompetition or nondisclosure agreements contained in this Article V, the Company may suspend or eliminate payments under Article IV during the period of such breach. Employee acknowledges that any such suspension or elimination of payments would be an exercise of the Company's right to suspend or terminate its performance hereunder upon Employee's breach of this Agreement; such suspension or elimination of payments would not constitute, and should not be characterized as, the imposition of liquidated damages. 5. REQUESTS FOR WAIVER IN CASES OF UNDUE HARDSHIP. In the event that Employee should find any of the limitations of Article V Section 3 (including without limitation the geographic restrictions of Appendix "A") to impose a severe hardship on Employee's ability to secure other employment, Employee may make a request to the Company for a waiver of the designated limitations before accepting employment that otherwise would be a breach of Employee's promises and obligations under this Agreement. Such request must be in writing and clearly set forth the name and address of the organization with that employment is sought and the location, position and duties that Employee will be performing. The Company will consider the request and, in its sole discretion, decide whether and on what conditions to grant such waiver. 6. GOVERNING LAW OF THIS ARTICLE V; CONSENT TO JURISDICTION. Any dispute regarding the reasonableness of the covenants and agreements set forth in this Article V, or the territorial scope or duration thereof, or the remedies available to the Company upon any breach of such covenants and agreements, shall be governed by and interpreted in accordance with the laws of the State of the United States or other jurisdiction in which the alleged prohibited competing activity or disclosure occurs, and, with respect to each such dispute, the Company and Employee each hereby irrevocably consent to the exclusive jurisdiction of the state and federal courts sitting in the relevant State (or, in the case of any jurisdiction outside the United States, the relevant courts of such jurisdiction) for resolution of such dispute, and agree to be irrevocably bound by any judgment rendered thereby in connection with such dispute, and further agree that service of process may be made upon him or it in any legal proceeding relating to this Article V and/or Appendix "A" by any means allowed under the laws of such jurisdiction. Each party irrevocably waives any objection he or it may have as to the venue of any such suit, action or proceeding brought in such a court or that such a court is an inconvenient forum. 7. EMPLOYEE'S UNDERSTANDING OF THIS ARTICLE. Employee hereby represents to the Company that he has read and understands, and agrees to be bound by, the terms of this Article. Employee acknowledges that the geographic scope and duration of the covenants contained in Article V Section 3 are the result of arm's-length bargaining and are fair and reasonable in light of (i) the importance of the functions performed by Employee and the length of time it would take the Company to find and train a suitable replacement, (ii) the nature and wide geographic scope of the operations of the Company and its subsidiaries, (iii) Employee's level of control over and contact with the business and operations of the Company and its subsidiaries in a significant number of jurisdictions where same are conducted and (iv) the fact that all facets of the Death Care Business are conducted by the Company and its subsidiaries throughout the geographic area where competition is restricted by this Agreement. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permitted under applicable law, whether now or hereafter in effect and, therefore, to the extent permitted by applicable law, the parties hereto waive any provision of applicable law that would render any provision of this Article V invalid or unenforceable. ARTICLE VI MISCELLANEOUS 1. BINDING EFFECT. (a) This Agreement shall be binding upon and inure to the benefit of the Company and any of its successors or assigns. (b) This Agreement is personal to the Employee and shall not be assignable by the Employee without the consent of the Company (there being no obligation to give such consent) other than such rights or benefits as are transferred by will or the laws of descent and distribution. (c) The Company shall require any successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets or businesses of the Company (i) to assume unconditionally and expressly this Agreement and (ii) to agree to perform all of the obligations under this Agreement in the same manner and to the same extent as would have been required of the Company had no assignment or succession occurred, such assumption to be set forth in a writing reasonably satisfactory to the Employee. In the event of any such assignment or succession, the term "Company" as used in this Agreement shall refer also to such successor or assign. 2. NOTICES. All notices hereunder must be in writing and shall be deemed to have given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: Randall L. Stricklin 19412 Woodlands Lane Huntington Beach, California 92648-5570 or such other address as to which any party hereto may have notified the other in writing. 3. GOVERNING LAW. This Agreement shall be construed and enforced in accordance with and governed by the internal laws of the State of Louisiana without regard to principles of conflict of laws, except as expressly provided in Article V Section 6 above with respect to the resolution of disputes arising under, or the Company's enforcement of, Article V of this Agreement. 4. WITHHOLDING. The Employee agrees that the Company has the right to withhold, from the amounts payable pursuant to this Agreement, all amounts required to be withheld under applicable income and/or employment tax laws, or as otherwise stated in documents granting rights that are affected by this Agreement. 5. SEVERABILITY. If any term or provision of this Agreement (including without limitation those contained in Appendix "A"), or the application thereof to any person or circumstance, shall at any time or to any extent be invalid, illegal or unenforceable in any respect as written, Employee and the Company intend for any court construing this Agreement to modify or limit such provision temporally, spatially or otherwise so as to render it valid and enforceable to the fullest extent allowed by law. Any such provision that is not susceptible of such reformation shall be ignored so as to not affect any other term or provision hereof, and the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid, illegal or unenforceable, shall not be affected thereby and each term and provision of this Agreement shall be valid and enforced to the fullest extent permitted by law. 6. WAIVER OF BREACH. The waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach thereof. 7. REMEDIES NOT EXCLUSIVE. No remedy specified herein shall be deemed to be such party's exclusive remedy, and accordingly, in addition to all of the rights and remedies provided for in this Agreement, the parties shall have all other rights and remedies provided to them by applicable law, rule or regulation. 8. COMPANY'S RESERVATION OF RIGHTS. Employee acknowledges and understands that the Employee serves at the pleasure of the Board and that the Company has the right at any time to terminate Employee's status as an employee of the Company, or to change or diminish his status during the Employment Term, subject to the rights of the Employee to claim the benefits conferred by this Agreement. 9. JURY TRIAL WAIVER. THE PARIES HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT. 10. SURVIVAL. The rights and obligations of the Company and Employee contained in Article V of this Agreement shall survive the termination of the Agreement. Following the Date of Termination, each party shall have the right to enforce all rights, and shall be bound by all obligations, of such party that are continuing rights and obligations under this Agreement. 11. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Company and the Employee have caused this Agreement to be executed as of the Agreement Date. STEWART ENTERPRISES, INC. By: /S/ JAMES W. MCFARLAND ----------------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /S/ RANDALL L. STRICKLIN ----------------------------------- Randall L. Stricklin EX-10.12 14 0014.txt CHANGE OF CONTROL AGREEMENT This Change of Control Agreement ("Agreement") between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Randall L. Stricklin (the "Employee") is dated as of April 20, 2000 (the "Change of Control Agreement Date"). ARTICLE I DEFINITIONS 1.1 EMPLOYMENT AGREEMENT. After a Change of Control (defined below), this Agreement supersedes the Employment Agreement dated as of April 20, 2000 between Employee and the Company (the "Employment Agreement") except to the extent that certain provisions of the Employment Agreement are expressly incorporated by reference herein. After a Change of Control (defined below), the definitions in this Agreement supersede definitions in the Employment Agreement, but capitalized terms not defined in this Agreement have the meanings given to them in the Employment Agreement. 1.2 DEFINITION OF "COMPANY". As used in this Agreement, "Company" shall mean the Company as defined above and any successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets or business of the Company. 1.3 CHANGE OF CONTROL DEFINED. "Change of Control" shall mean: (a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 30% of the outstanding shares of the Company's Class A Common Stock, no par value per share (the "Common Stock"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition of Common Stock directly from the Company, (ii) any acquisition of Common Stock by the Company, (iii) any acquisition of Common Stock by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition of Common Stock by any corporation pursuant to a transaction that complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 1.3; or (b) individuals who, as of the Change of Control Agreement Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Change of Control Agreement Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered a member of the Incumbent Board, unless such individual's initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Incumbent Board; or (c) consummation of a reorganization, merger or consolidation, or sale or other disposition of all of substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners of the Company's outstanding common stock and the Company's voting securities entitled to vote generally in the election of directors immediately prior to such Business Combination have direct or indirect beneficial ownership, respectively, of more than 50% of the then outstanding shares of common stock, and more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, of the corporation resulting from such Business Combination (which, for purposes of this paragraph (i) and paragraphs (ii) and (iii), shall include a corporation which as a result of such transaction controls the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries), and (ii) except to the extent that such ownership existed prior to the Business Combination, no person (excluding any corporation resulting from such Business Combination or any employee benefit plan or related trust of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the then outstanding shares of common stock of the corporation resulting from such Business Combination or 20% or more of the combined voting power of the then outstanding voting securities of such corporation, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 1.4 AFFILIATE. "Affiliate" or "affiliated companies" shall mean any company controlled by, controlling, or under common control with, the Company. 1.5 CAUSE. "Cause" shall mean: (a) the willful and continued failure of the Employee to perform substantially the Employee's duties with the Company or its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Employee by the Board of the Company which specifically identifies the manner in which the Board believes that the Employee has not substantially performed the Employee's duties, or (b) the willful engaging by the Employee in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company or its affiliates. For purposes of this provision, no act or failure to act, on the part of the Employee, shall be considered "willful" unless it is done, or omitted to be done, by the Employee in bad faith or without reasonable belief that the Employee's action or omission was in the best interests of the Company or its affiliates. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of a senior officer of the Company or based upon the advice of counsel for the Company or its affiliates shall be conclusively presumed to be done, or omitted to be done, by the Employee in good faith and in the best interests of the Company or its affiliates. The cessation of employment of the Employee shall not be deemed to be for Cause unless and until there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Employee and the Employee is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Employee is guilty of the conduct described in subparagraph (a) or (b) above, and specifying the particulars thereof in detail. 1.6 GOOD REASON. "Good Reason" shall mean: (a) Any failure of the Company or its affiliates to provide the Employee with the position, authority, duties and responsibilities at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Change of Control. Employee's position, authority, duties and responsibilities after a Change of Control shall not be considered commensurate in all material respects with Employee's position, authority, duties and responsibilities prior to a Change of Control unless after the Change of Control Employee holds (i) an equivalent position in the Company or, (ii) if the Company is controlled or will after the transaction be controlled by another company (directly or indirectly), an equivalent position in the ultimate parent company. (b) The assignment to the Employee of any duties inconsistent in any material respect with Employee's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 2.1(b) of this Agreement, or any other action that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied within 10 days after receipt of written notice thereof from the Employee to the Company; (c) Any failure by the Company or its affiliates to comply with any of the provisions of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith that is remedied within 10 days after receipt of written notice thereof from the Employee to the Company; (d) The Company or its affiliates requiring the Employee to be based at any office or location other than as provided in Section 2.1(b)(ii) hereof or requiring the Employee to travel on business to a substantially greater extent than required immediately prior to the Change of Control; (e) Any purported termination of the Employee's employment otherwise than as expressly permitted by this Agreement; or (f) Any failure by the Company to comply with and satisfy Sections 3.1(c) and (d) of this Agreement. For purposes of this Section 1.6, any good faith determination of "Good Reason" made by the Employee shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Employee for any reason during the 30-day period immediately following the first anniversary of the Change of Control shall be deemed to be a termination for Good Reason. ARTICLE II CHANGE OF CONTROL BENEFIT 2.1 EMPLOYMENT TERM AND CAPACITY AFTER CHANGE OF CONTROL. (a) If a Change of Control occurs on or before October 31, 2000, then the Employee's employment term (the "Employment Term") shall continue through the second anniversary of the Change of Control, subject to any earlier termination of Employee's status as an employee pursuant to this Agreement. (b) After a Change of Control and during the Employment Term, (i) the Employee's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Change of Control and (ii) the Employee's service shall be performed at the location where the Employee was employed immediately preceding the Change of Control or any office or location less than 35 miles from such location. Employee's position, authority, duties and responsibilities after a Change of Control shall not be considered commensurate in all material respects with Employee's position, authority, duties and responsibilities prior to a Change of Control unless after the Change of Control Employee holds (x) an equivalent position in the Company or, (y) if the Company is controlled or will after the transaction be controlled by another company (directly or indirectly), an equivalent position in the ultimate parent company. Employee shall devote himself to his employment responsibilities with the Company (or, if applicable, the ultimate parent entity) as provided in Article I Section 3 of the Employment Agreement. 2.2 COMPENSATION AND BENEFITS. During the Employment Term, Employee shall be entitled to the following compensation and benefits: (a) SALARY. A salary ("Base Salary") at the rate of $225,000 per year, payable to the Employee at such intervals no less frequent than the most frequent intervals in effect at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, the intervals in effect at any time after the Change of Control for other peer employees of the Company and its affiliated companies. (b) BONUS. An annual incentive bonus (the "Bonus") of $200,000 shall be paid in cash (1) no later than November 30, 2000 or (2) if the Employee so elects, between January 1 and January 15 of 2001. (c) FRINGE BENEFITS. The Employee shall be entitled to fringe benefits (including, but not limited to, automobile allowance, reimbursement for membership dues, and first class air travel) in accordance with the most favorable agreements, plans, practices, programs and policies of the Company and its affiliated companies in effect for the Employee at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, as in effect generally at any time thereafter with respect to other peer employees of the Company and its affiliated companies. (d) EXPENSES. The Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Employee in accordance with the most favorable agreements, policies, practices and procedures of the Company and its affiliated companies in effect for the Employee at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, as in effect generally at any time thereafter with respect to other peer employees of the Company and its affiliated companies. (e) INCENTIVE, SAVINGS AND RETIREMENT PLANS. The Employee shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer employees of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Employee with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable than the most favorable of those provided by the Company and its affiliated companies for the Employee under any agreements, plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, those provided generally at any time after the Change of Control to other peer employees of the Company and its affiliated companies. (f) WELFARE BENEFIT PLANS. The Employee and/or the Employee's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer employees of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Employee with benefits, in each case, less favorable than the most favorable of any agreements, plans, practices, policies and programs in effect for the Employee at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, those provided generally at any time after the Change of Control to other peer employees of the Company and its affiliated companies. (g) OFFICE AND SUPPORT STAFF. The Employee shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Employee by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, as provided generally at any time thereafter with respect to other peer employees of the Company and its affiliated companies. (h) VACATION. The Employee shall be entitled to paid vacation in accordance with the most favorable agreements, plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Employee at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, as in effect generally at any time thereafter with respect to other peer employees of the Company and its affiliated companies. 2.3 TERMINATION OF EMPLOYMENT AFTER A CHANGE OF CONTROL. After a Change of Control and during the Employment Term, the Employee's status as an employee shall terminate or may be terminated by the Employee, the Company (or, if applicable, the ultimate parent company), as provided in Article III of the Employment Agreement (provided, however, that the definitions of "Cause" and "Good Reason" in this Agreement shall supersede those definitions in the Employment Agreement). 2.4 OBLIGATIONS UPON TERMINATION AFTER A CHANGE OF CONTROL. (a) TERMINATION BY COMPANY FOR REASONS OTHER THAN DEATH, DISABILITY OR CAUSE; BY EMPLOYEE FOR GOOD REASON. If, after a Change of Control and during the Employment Term, the Company (or, if applicable the ultimate parent company), terminates the Employee's employment other than for Cause, death or Disability, or the Employee terminates employment for Good Reason, the Company shall pay to the Employee in a lump sum in cash within 30 days of the Date of Termination an amount equal to three times the sum of (i) the amount of Base Salary in effect at the Date of Termination, plus (ii) the maximum Bonus for which the Employee is eligible for the 12-month period in which the Date of Termination occurs. (b) DEATH. If, after a Change of Control and during the Employment Term, the Employee's status as an employee is terminated by reason of the Employee's death, this Agreement shall terminate without further obligation to the Employee's legal representatives (other than those already accrued to the Employee), other than the obligation to make any payments due pursuant to employee benefit plans maintained by the Company or its affiliated companies. (c) DISABILITY. If, after a Change of Control and during the Employment Term, Employee's status as an employee is terminated by reason of Employee's Disability (as defined in the Employment Agreement), this Agreement shall terminate without further obligation to the Employee (other than those already accrued to the Employee), other than the obligation to make any payments due pursuant to employee benefit plans maintained by the Company or its affiliated companies. (d) CAUSE. If, after a Change of Control and during the Employment Term, the Employee's status as an employee is terminated by the Company (or, if applicable, the ultimate parent entity) for Cause, this Agreement shall terminate without further obligation to the Employee other than for obligations imposed by law and obligations imposed pursuant to any employee benefit plan maintained by the Company or its affiliated companies. (e) TERMINATION BY EMPLOYEE FOR REASONS OTHER THAN GOOD REASON. If, after a Change of Control and during the Employment Term, the Employee's status as an employee is terminated by the Employee for reasons other than Good Reason, then the Company shall pay to the Employee an amount equal to a single year's Base Salary in effect at the Date of Termination, payable in equal installments over a two-year period at such intervals as other salaried employees of the Company are paid. (f) NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS. The rights and obligations of the Company and Employee contained in Article V ("Nondisclosure, Noncompetition and Proprietary Rights") of the Employment Agreement shall continue to apply after a Change of Control, except as provided in Section 2.10 of this Agreement. 2.5 ACCRUED OBLIGATIONS AND OTHER BENEFITS. It is the intent of the Employment Agreement and this Agreement that upon termination of employment for any reason the Employee be entitled to receive promptly, and in addition to any other benefits specifically provided, (a) the Employee's Base Salary through the Date of Termination to the extent not theretofore paid, (b) any accrued vacation pay, to the extent not theretofore paid, and (c) any other amounts or benefits required to be paid or provided or which the Employee is entitled to receive under any plan, program, policy practice or agreement of the Company. 2.6 STOCK OPTIONS. The foregoing benefits are intended to be in addition to the value of any options to acquire Common Stock of the Company the exercisability of which is accelerated pursuant to the terms of any stock option, incentive or other similar plan heretofore or hereafter adopted by the Company. 2.7 PROTECTION OF BENEFITS. To the extent permitted by applicable law, the Company shall take all reasonable steps to ensure that the Employee is not, by reason of a Change of Control, deprived of the economic value (including any value attributable to the Change of Control transaction) of (a) any options to acquire Common Stock of the Company or (b) any Common Stock of the Company beneficially owned by the Employee. 2.8 CERTAIN ADDITIONAL PAYMENTS. If after a Change of Control Employee is subjected to an excise tax as a result of the "excess parachute payment" provisions of section 4999 of the Internal Revenue Code of 1986, as amended, whether by virtue of the benefits of this Agreement or by virtue of any other benefits provided to Employee in connection with a Change of Control pursuant to Company plans, policies or agreements (including the value of any options to acquire Common Stock of the Company the exercisability of which is accelerated pursuant to the terms of any stock option, incentive or similar plan heretofore or hereafter adopted by the Company), the Company shall pay to Employee (whether or not his employment has terminated) such amounts as are necessary to place Employee in the same position after payment of federal income and excise taxes as he would have been if such provisions had not been applicable to him. 2.9 LEGAL FEES. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Employee may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Employee or others of the validity or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by the Employee about the amount or timing of any payment pursuant to this Agreement.) 2.10 SET-OFF; MITIGATION. After a Change of Control, the Company's and its affiliates' obligations to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company or its affiliates may have against the Employee or others. After a Change of Control, an asserted violation of the provisions of Article V ("Nondisclosure, Noncompetition and Proprietary Rights") of the Employment Agreement shall not constitute a basis for deferring or withholding any amounts otherwise payable to the Employee; specifically, the third through sixth sentences of Article V Section 4 shall not apply after a Change of Control. It is the intent of the Employment Agreement and this Agreement that in no event shall the Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Employee under any of the provisions of this Agreement or the Employment Agreement. ARTICLE III MISCELLANEOUS 3.1 BINDING EFFECT; SUCCESSORS. (a) This Agreement shall be binding upon and inure to the benefit of the Company and any of its successors or assigns. (b) This Agreement is personal to the Employee and shall not be assignable by the Employee without the consent of the Company (there being no obligation to give such consent) other than such rights or benefits as are transferred by will or the laws of descent and distribution. (c) The Company shall require any successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets or businesses of the Company (i) to assume unconditionally and expressly this Agreement and (ii) to agree to perform or to cause to be performed all of the obligations under this Agreement in the same manner and to the same extent as would have been required of the Company had no assignment or succession occurred, such assumption to be set forth in a writing reasonably satisfactory to the Employee. (d) The Company shall also require all entities that control or that after the transaction will control (directly or indirectly) the Company or any such successor or assignee to agree to cause to be performed all of the obligations under this Agreement, such agreement to be set forth in a writing reasonably satisfactory to the Employee. 3.2 NOTICES. All notices hereunder must be in writing and shall be deemed to have given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: Randall L. Stricklin 19412 Woodlands Lane Huntington Beach, California 92648-5570 or such other address as to which any party hereto may have notified the other in writing. 3.3 GOVERNING LAW. This Agreement shall be construed and enforced in accordance with and governed by the internal laws of the State of Louisiana without regard to principles of conflict of laws, except as expressly provided in Article V Section 6 of the Employment Agreement with respect to the resolution of disputes arising under, or the Company's enforcement of, such Article V. 3.4 WITHHOLDING. The Employee agrees that the Company has the right to withhold, from the amounts payable pursuant to this Agreement, all amounts required to be withheld under applicable income and/or employment tax laws, or as otherwise stated in documents granting rights that are affected by this Agreement. 3.5 AMENDMENT, WAIVER. No provision of this Agreement may be modified, amended or waived except by an instrument in writing signed by both parties. 3.6 SEVERABILITY. If any term or provision of this Agreement, or the application thereof to any person or circumstance, shall at any time or to any extent be invalid, illegal or unenforceable in any respect as written, Employee and the Company intend for any court construing this Agreement to modify or limit such provision so as to render it valid and enforceable to the fullest extent allowed by law. Any such provision that is not susceptible of such reformation shall be ignored so as to not affect any other term or provision hereof, and the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid, illegal or unenforceable, shall not be affected thereby and each term and provision of this Agreement shall be valid and enforced to the fullest extent permitted by law. 3.7 WAIVER OF BREACH. The waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach thereof. 3.8 REMEDIES NOT EXCLUSIVE. No remedy specified herein shall be deemed to be such party's exclusive remedy, and accordingly, in addition to all of the rights and remedies provided for in this Agreement, the parties shall have all other rights and remedies provided to them by applicable law, rule or regulation. 3.9 COMPANY'S RESERVATION OF RIGHTS. Employee acknowledges and understands that the Employee serves at the pleasure of the Board and that the Company has the right at any time to terminate Employee's status as an employee of the Company, or to change or diminish his status during the Employment Term, subject to the rights of the Employee to claim the benefits conferred by this Agreement. 3.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Company and the Employee have caused this Agreement to be executed as of the Change of Control Agreement Date. STEWART ENTERPRISES, INC. By: /S/ JAMES W. MCFARLAND ----------------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /S/ RANDALL L. STRICKLIN ----------------------------------- Randall L. Stricklin EX-10.13 15 0015.txt INDEMNITY AGREEMENT This INDEMNITY AGREEMENT is made as of the 20th day of April, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Corporation"), and Randall L. Stricklin ("Indemnitee"). In consideration of Indemnitee's continued service after the date hereof, the Corporation and Indemnitee do hereby agree as follows: 1. AGREEMENT TO SERVE. Indemnitee shall serve or continue to serve as an officer of the Corporation, and as a director or officer of any other corporation, subsidiary, partnership, joint venture, trust or other enterprise of which he is serving at the request of the Corporation, and agrees to serve in such capacities for so long as he is duly elected or appointed and qualified or until such earlier time as he tenders his resignation in writing. 2. DEFINITIONS. As used in this Agreement: (a) The term "Claim" shall mean any threatened, pending or completed claim, action, suit or proceeding, including appeals, whether civil, criminal, administrative or investigative and whether made judicially or extra-judicially, including any action by or in the right of the Corporation, or any separate issue or matter therein, as the context requires. (b) The term "Determining Body" shall mean (i) those members of the Board of Directors who are not named as parties to the Claim for which indemnification is being sought ("Impartial Directors"), if there are at least three Impartial Directors, or (ii) a committee of at least three Impartial Directors appointed by the Board or a duly authorized committee thereof (regardless whether the directors voting on such appointment are Impartial Directors) or (iii) if there are fewer than three Impartial Directors or if the Board of Directors or the committee appointed pursuant to clause (ii) of this paragraph so directs (regardless whether the directors voting on such appointment are Impartial Directors), independent legal counsel, which may be the regular outside counsel of the Corporation, as designated by the Impartial Directors or, if no such directors exist, the full Board of Directors. (c) The term "Disbursing Officer" shall mean the President of the Corporation or, if the President has a direct or indirect interest in the Claim for which indemnification is being sought, any officer who does not have such an interest and who is designated by the President to be the Disbursing Officer with respect to indemnification requests related to the Claim, which designation shall be made promptly after receipt of the initial request for indemnification with respect to such Claim. (d) The term "Expenses" shall mean any expenses or costs including, without limitation, attorney's fees, judgments, punitive or exemplary damages, fines, excise taxes or amounts paid in settlement. (e) The term "Insurance Policy" shall mean the Directors and Officers Liability Policy that the Corporation has obtained from CNA, and the Excess Directors and Officers Liability Policies that the Corporation has obtained from Reliance Insurance Co. and Chubb/Federal Insurance Company, on behalf of its directors and officers for the policy period commencing September 27, 1999 and ending September 27, 2000. 3. LIMITATION OF LIABILITY. To the fullest extent permitted by Article VI of the Articles of Incorporation of the Corporation (as in effect on the date hereof), Indemnitee shall not be liable for any breach of his fiduciary duty. If and to the extent such provisions are amended to permit further limitations of liability, Indemnitee shall not be liable for any breach of his fiduciary duty to the fullest extent permitted after any such amendment. 4. MAINTENANCE OF INSURANCE. (a) The Corporation represents and warrants that it presently maintains in force and effect a directors and officers liability insurance policy with coverage comparable to the coverage provided under the Insurance Policy, and Indemnitee represents and warrants that he has been furnished with a copy of the policy currently in effect and of the Insurance Policy. Subject only to the provisions of Section 4(b) hereof, the Corporation hereby agrees that, so long as Indemnitee shall continue to serve in any capacity referred to in Section 5(a) hereof and thereafter so long as Indemnitee shall be subject to any possible Claim, the Corporation shall use its commercially reasonable best efforts to purchase and maintain in effect for the benefit of Indemnitee one or more valid and enforceable policies of directors and officers liability insurance providing, in all respects, coverage at least comparable to that provided pursuant to the Insurance Policy. (b) The Corporation shall not be required to purchase and maintain the Insurance Policy or any comparable policy if directors and officers liability insurance is not reasonably available or if, in the reasonable business judgment of the then directors of the Corporation, there is insufficient benefit to the Corporation from such insurance. 5. ADDITIONAL INDEMNITY. (a) To the extent any Expenses incurred by Indemnitee are in excess of the amounts reimbursed or indemnified pursuant to the provisions of Section 4 hereof, the Corporation shall indemnify and hold harmless Indemnitee against any Expenses actually and reasonably incurred by Indemnitee (as they are incurred) in connection with any Claim against Indemnitee, or involving Indemnitee solely as a witness or person required to give evidence, by reason of Indemnitee's position as a (i) director or officer of the Corporation, (ii) director or officer of any subsidiary of the Corporation or as a fiduciary with respect to any employee benefit plan of the Corporation, or (iii) director, officer, partner, employee or agent of another corporation, partnership, joint venture, trust or other for- profit or not-for-profit entity or enterprise, if such position is or was held at the request of the Corporation, whether relating to service in such position before or after the effective date of this Agreement, if (A) Indemnitee is successful in his defense of the Claim on the merits or otherwise or (B) Indemnitee has been found by the Determining Body to have met the Standard of Conduct (as hereinafter defined); provided that (1) the amount of Expenses for which the Corporation shall indemnify Indemnitee may be reduced by the Determining Body to such amount as it deems proper if it determines that the Claim involved the receipt of personal benefit by Indemnitee, and (2) no indemnification shall be made in respect of any Claim as to which Indemnitee shall have been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for willful or intentional misconduct in the performance of his duty to the Corporation or to have obtained an improper personal benefit, unless, and only to the extent that, a court shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such Expenses which the court shall deem proper. (b) For purposes of this Agreement, the "Standard of Conduct" is met when conduct by Indemnitee with respect to which a Claim is asserted was conduct performed in good faith which he reasonably believed to be in, or not opposed to, the best interest of the Corporation, and, in the case of a Claim which is a criminal action or proceeding, conduct that Indemnitee had no reasonable cause to believe was unlawful. The termination of any Claim by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that Indemnitee did not meet the Standard of Conduct. (c) Promptly upon becoming aware of the existence of any Claim as to which Indemnitee may be indemnified for Expenses and as to which Indemnitee desires to obtain indemnification, Indemnitee shall notify the President of the Corporation, but the failure to promptly notify the President shall not relieve the Corporation from any obligation hereunder, except and to the extent that such failure has materially and irrevocably harmed the Corporation's ability to defend against such Claim pursuant to Section 5(f) hereof. Upon receipt of such request, the President shall promptly advise the members of the Board of Directors of the request and that the establishment of a Determining Body with respect thereto will be a matter to be considered at the next regularly scheduled meeting of the Board. If a meeting of the Board of Directors is not regularly scheduled within 120 calendar days of the date the President receives notice of the Claim, the President shall cause a special meeting of the Board of Directors to be called within such period in accordance with the provisions of the Corporation's By-laws. After the Determining Body has been established, the President shall inform Indemnitee of the constitution of the Determining Body and Indemnitee shall provide the Determining Body with all facts relevant to the Claim known to him, and deliver to the Determining Body all documents relevant to the Claim in his possession. Before the 60th day (the "Determination Date") after its receipt from Indemnitee of such information, together with such additional information as the Determining Body may reasonably request of Indemnitee prior to such date (the receipt of which shall not begin a new 60-day period), the Determining Body shall determine whether or not Indemnitee has met the Standard of Conduct and shall advise Indemnitee of its determination. If Indemnitee shall have supplied the Determining Body with all relevant information, including all additional information reasonably requested by the Determining Body, any failure of the Determining Body to make a determination by or on the Determination Date as to whether the Standard of Conduct was met shall be deemed to be a determination that the Standard of Conduct was met by Indemnitee. (d) If at any time during the 60-day period ending on the Determination Date, Indemnitee becomes aware of any relevant facts or documents not theretofore provided by him to the Determining Body, Indemnitee shall promptly inform the Determining Body of such facts or documents, unless the Determining Body has obtained such facts or documents from another source. The provision of such facts to the Determining Body shall not begin a new 60-day period. (e) The Determining Body shall have no power to revoke a determination that Indemnitee met the Standard of Conduct unless Indemnitee (i) submits fraudulent information to the Determining Body at any time during the 60 days prior to the Determination Date or (ii) fails to comply with the provisions of Sections 5(c) or 5(d) hereof, including without limitation Indemnitee's obligation to submit information or documents relevant to the Claim reasonably requested by the Determining Body prior to the Determination Date. (f) In the case of any Claim not involving any proposed, threatened or pending criminal proceeding, (i) if Indemnitee has, in the judgment of the Determining Body, met the Standard of Conduct, the Corporation may, except as otherwise provided below, individually or jointly with any other indemnifying party similarly notified, assume the defense thereof with counsel reasonably satisfactory to Indemnitee. If the Corporation assumes the defense of the Claim, it shall keep Indemnitee informed as to the progress of such defense so that Indemnitee may make an informed decision as to the need for separate counsel. After notice from the Corporation that it is assuming the defense of the Claim, it will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ its own counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after such notice from the Corporation of its assumption of the defense shall be at the expense of Indemnitee unless (A) the employment of counsel by Indemnitee has been authorized by the Determining Body, (B) Indemnitee shall have concluded reasonably that there may be a conflict of interest between the Corporation and Indemnitee in the conduct of the defense of such action or (C) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel shall be at the expense of the Corporation. The Corporation shall not be entitled to assume the defense of any action, suit or proceeding brought by or in the right of the Corporation or as to which Indemnitee shall have made the conclusion provided for in (B) above; and (ii) the Corporation shall fairly consider any proposals by Indemnitee for settlement of the Claim. If the Corporation proposes a settlement of the Claim and such settlement is acceptable to the person asserting the Claim, or the Corporation believes a settlement proposed by the person asserting the Claim should be accepted, it shall inform Indemnitee of the terms of such proposed settlement and shall fix a reasonable date by which Indemnitee shall respond. If Indemnitee agrees to such terms, he shall execute such documents as shall be necessary to make final the settlement. If Indemnitee does not agree with such terms, Indemnitee may proceed with the defense of the Claim in any manner he chooses, provided that if Indemnitee is not successful on the merits or otherwise, the Corporation's obligation to indemnify such Indemnitee as to any Expenses incurred following his disagreement with the Corporation shall be limited to the lesser of (A) the total Expenses incurred by Indemnitee following his decision not to agree to such proposed settlement or (B) the amount that the Corporation would have paid pursuant to the terms of the proposed settlement. If, however, the proposed settlement would impose upon Indemnitee any requirement to act or refrain from acting that would materially interfere with the conduct of Indemnitee's affairs, Indemnitee may refuse such settlement and continue his defense of the Claim, if he so desires, at the Corporation's expense in accordance with the terms and conditions of this Agreement without regard to the limitations imposed by the immediately preceding sentence. In any event, the Corporation shall not be obligated to indemnify Indemnitee for any amount paid in a settlement that the Corporation has not approved. (g) In the case of any Claim involving a proposed, threatened or pending criminal proceeding, Indemnitee shall be entitled to conduct the defense of the Claim with counsel of his choice and to make all decisions with respect thereto, provided, however, that the Corporation shall not be obliged to indemnify Indemnitee for any amount paid in settlement of such a Claim unless the Corporation has approved such settlement. (h) After notifying the Corporation of the existence of a Claim, Indemnitee may from time to time request the Corporation to pay the Expenses (other than judgments, fines, penalties or amounts paid in settlement) that he incurs in pursuing a defense of the Claim prior to the time that the Determining Body determines whether the Standard of Conduct has been met. The Disbursing Officer shall pay to Indemnitee the amount requested (regardless of Indemnitee's apparent ability to repay such amount) upon receipt of an undertaking by or on behalf of Indemnitee to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation under the circumstances, provided, however, that if the Disbursing Officer does not believe such amount to be reasonable, he shall advance the amount deemed by him to be reasonable and Indemnitee may apply directly to the Determining Body for the remainder of the amount requested. (i) After the Determining Body has determined that the Standard of Conduct has been met, for so long as and to the extent that the Corporation is required to indemnify Indemnitee under this Agreement, the provisions of Section 5(h) hereof shall continue to apply with respect to Expenses incurred after such time except that (i) no undertaking shall be required of Indemnitee and (ii) the Disbursing Officer shall pay to Indemnitee the amount of any fines, penalties or judgments against him which have become final and for which he is entitled to indemnification hereunder, and any amount of indemnification ordered to be paid to him by a court. (j) Any determination by the Corporation with respect to settlement of a Claim shall be made by the Determining Body. (k) All determinations and judgments made by the Determining Body hereunder shall be made in good faith. 6. ENFORCEMENT. (a) The rights provided by this Agreement shall be enforceable by Indemnitee in any court of competent jurisdiction. (b) If Indemnitee seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all expenses actually and reasonably incurred by him in connection with such proceeding, but only if he prevails therein. If it shall be determined that Indemnitee is entitled to receive part but not all of the relief sought, then Indemnitee shall be entitled to be reimbursed for all expenses incurred by him in connection with such judicial adjudication if the amount to which he is determined to be entitled exceeds 50% of the amount of his claim. Otherwise, the expenses incurred by Indemnitee in connection with such judicial adjudication shall be appropriately prorated. (c) In any judicial proceeding described in this Section 6, the Corporation shall bear the burden of proving that Indemnitee is not entitled to the relief sought. 7. SAVING CLAUSE. If any provision of this Agreement is determined by a court having jurisdiction over the matter to violate or conflict with applicable law, the court shall be empowered to modify or reform such provision so that, as modified or reformed, such provision provides the maximum indemnification permitted by law and such provision, as so modified or reformed, and the balance of this Agreement, shall be applied in accordance with their terms. Without limiting the generality of the foregoing, if any portion of this Agreement shall be invalidated on any ground, the Corporation shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated and to the full extent permitted by law with respect to that portion that has been invalidated. 8. NON-EXCLUSIVITY. (a) The indemnification and advancement of Expenses provided by or granted pursuant to this Agreement shall not be deemed exclusive of any other rights to which Indemnitee is or may become entitled under any statute, articles of incorporation, by-law, authorization of stockholders or directors, agreement, or otherwise. (b) It is the intent of the Corporation by this Agreement to indemnify and hold harmless Indemnitee to the fullest extent permitted by law, so that if applicable law would permit the Corporation to provide broader indemnification rights than are currently permitted, the Corporation shall indemnify and hold harmless Indemnitee to the fullest extent permitted by applicable law notwithstanding that the other terms of this Agreement would provide for lesser indemnification. 9. CONFIDENTIALITY. The Corporation and Indemnitee shall keep confidential to the extent permitted by law and their fiduciary obligations all information and determinations provided pursuant to or arising out of the operations of this Agreement and the Corporation and Indemnitee shall instruct its or his agents and employees to do likewise. 10. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall constitute an original but all of which taken together shall be deemed to constitute a single instrument. 11. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Louisiana. 12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon Indemnitee and upon the Corporation, its successors and assigns, and shall inure to the benefit of Indemnitee's heirs, personal representatives, and assigns and to the benefit of the Corporation, its successors and assigns. 13. AMENDMENT. No amendment, modification, termination or cancellation of this Agreement shall be effective unless made in writing signed by the Corporation and Indemnitee. Notwithstanding any amendment, modification, termination or cancellation of this Agreement or any portion hereof, Indemnitee shall be entitled to indemnification in accordance with the provisions hereof with respect to any acts or omissions of Indemnitee which occur prior to such amendment, modification, termination or cancellation. 14. GENDER. All pronouns and variations thereof used in this Agreement shall be deemed to refer to the masculine, feminine or neuter gender, singular or plural, as the identity of the person, persons, entity or entities referred to may require. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and signed as of the date and year first above written. STEWART ENTERPRISES, INC. By: /S/ JAMES W. MCFARLAND ------------------------------- James W. McFarland Compensation Committee Chairman INDEMNITEE: /S/ RANDALL L. STRICKLIN ------------------------------- Randall L. Stricklin EX-10.14 16 0016.txt EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and G. Kenneth Stephens, Jr. (the "Employee") is dated as of January 31, 2000 (the "Agreement Date"). W I T N E S S E T H: WHEREAS, Employee currently is employed by the Company; WHEREAS, the Company desires to retain the services of Employee pursuant to the terms of this Agreement, subject to Employee's acceptance of the conditions stated herein; WHEREAS, during the course of his employment with the Company, Employee has or will have received extensive and unique knowledge, training and education in, and access to resources involving, the Death Care Business (as defined below) at a substantial cost to the Company, which Employee acknowledges has enhanced or substantially will enhance Employee's skills and knowledge in such business; WHEREAS, during the course of his employment with the Company, Employee has had and will continue to have access to certain valuable oral and written information, knowledge and data relating to the business and operations of the Company and its subsidiaries that is non-public, confidential or proprietary in nature and is particularly useful in the Death Care Business; and WHEREAS, in view of the training provided by the Company to Employee, its cost to the Company, the need for the Company to be protected against disclosures by Employee of the Company's and its subsidiaries' trade secrets and other non-public, confidential or proprietary information, the Company and Employee desire, among other things, to prohibit Employee from disclosing or utilizing, outside the scope and term of his employment, any non-public, confidential or proprietary information, knowledge and data relating to the business and operations of the Company or its subsidiaries received by Employee during the course of his employment, and to restrict the ability of Employee to compete with the Company or its subsidiaries for a limited period of time. NOW, THEREFORE, for and in consideration of the continued employment of Employee by the Company and the payment of wages, salary and other compensation to Employee by the Company, the parties hereto agree as follows: ARTICLE I EMPLOYMENT CAPACITY AND TERM 1. CAPACITY AND DUTIES OF EMPLOYEE. The Employee is employed by the Company to render services on behalf of the Company as Senior Vice President and President - Eastern Division. As the Senior Vice President and President - Eastern Division, the Employee shall perform such duties as are assigned to the individual holding such title by the Company's Bylaws and such other duties, consistent with the Employee's job title, as may be prescribed from time to time by the Board of Directors of the Company (the "Board") and/or the Company's Chief Executive Officer. 2. EMPLOYMENT TERM. The term of this Agreement (the "Employment Term") shall commence on the Agreement Date and shall continue through October 31, 2000, subject to any earlier termination of Employee's status as an employee pursuant to this Agreement. 3. DEVOTION TO RESPONSIBILITIES. During the Employment Term, the Employee shall devote all of his business time to the business of the Company, shall use his reasonable best efforts to perform faithfully and efficiently his duties under this Agreement, and shall not engage in or be employed by any other business; provided, however, that nothing contained herein shall prohibit the Employee from (a) serving as a member of the board of directors, board of trustees or the like of any for-profit or non-profit entity that does not compete with the Company, or performing services of any type for any civic or community entity, whether or not the Employee receives compensation therefor, (b) investing his assets in such form or manner as shall require no more than nominal services on the part of the Employee in the operation of the business of the entity in which such investment is made, or (c) serving in various capacities with, and attending meetings of, industry or trade groups and associations, as long as the Employee's engaging in any activities permitted by virtue of clauses (a), (b) and (c) above does not materially and unreasonably interfere with the ability of the Employee to perform the services and discharge the responsibilities required of him under this Agreement. Notwithstanding clause (b) above, during the Employment Term, the Employee may not beneficially own more than 2% of the equity interests of a business organization required to file periodic reports with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the "Exchange Act") and may not beneficially own more than 2% of the equity interests of a business organization that competes with the Company. For purposes of this paragraph, "beneficially own" shall have the same meaning ascribed to that term in Rule 13d-3 under the Exchange Act. ARTICLE II COMPENSATION AND BENEFITS During the Employment Term, the Company shall provide the Employee with the compensation and benefits described below: 1. SALARY. Effective January 31, 2000, a salary ("Base Salary") at the rate of $225,000 per fiscal year of the Company ("Fiscal Year"), payable to the Employee at such intervals as other salaried employees of the Company are paid. 2. BONUS. (a) For the fiscal year beginning November 1, 1999, the Employee shall be eligible to receive an annual incentive bonus (the "Bonus") of up to $200,000 per Fiscal Year. The Bonus will be awarded based upon factors to be established annually and set forth in an annual supplement to this Agreement. (b) The Bonus shall be paid in cash not later than 30 days following the filing of the Company's annual report on Form 10-K for the Fiscal Year in which the Bonus has been earned. 3. BENEFITS. The Company shall provide the Employee with the following fringe benefits and perquisites: (a) An automobile allowance of $720 per month. The Company will reimburse the Employee for all gasoline, maintenance, repairs and insurance for Employee's personal car, as if it were a Company-owned vehicle; (b) Reimbursement for membership dues, including assessments and similar charges, in one or more clubs deemed useful for business purposes in an amount not to exceed $8,000 or such additional amounts as may be approved by the President; (c) First class air travel; (d) Fully-paid insurance benefit package available to all employees; and (e) All other benefit programs similar to those provided other employees of the Company. 4. 1995 INCENTIVE COMPENSATION PLAN. The Employee shall be eligible to receive awards under the Company's 1995 Incentive Compensation Plan (the "1995 Plan"). 5. EXPENSES. The Employee shall be reimbursed for reasonable out- of-pocket expenses incurred from time to time on behalf of the Company or any subsidiary in the performance of his duties under this Agreement, upon the presentation of such supporting invoices, documents and forms as the Company reasonably requests. ARTICLE III TERMINATION OF EMPLOYMENT 1. DEATH. The Employee's status as an employee shall terminate immediately and automatically upon the Employee's death during the Employment Term. 2. DISABILITY. The Employee's status as an employee may be terminated for "Disability" as follows: (a) The Employee's status as an employee shall terminate if the Employee has a disability that would entitle him to receive benefits under the Company's long-term disability insurance policy in effect at the time either because he is Totally Disabled or Partially Disabled, as such terms are defined in the Company's policy in effect as of the Agreement Date or as similar terms are defined in any successor policy. Any such termination shall become effective on the first day on which the Employee is eligible to receive payments under such policy (or on the first day that he would be so eligible, if he had applied timely for such payments). (b) If the Company has no long-term disability plan in effect, if (i) the Employee is rendered incapable because of physical or mental illness of satisfactorily discharging his duties and responsibilities under this Agreement for a period of 90 consecutive days and (ii) a duly qualified physician chosen by the Company and acceptable to the Employee or his legal representatives so certifies in writing, the Board shall have the power to determine that the Employee has become disabled. If the Board makes such a determination, the Company shall have the continuing right and option, during the period that such disability continues, and by notice given in the manner provided in this Agreement, to terminate the status of Employee as an employee. Any such termination shall become effective 30 days after such notice of termination is given, unless within such 30-day period, the Employee becomes capable of rendering services of the character contemplated hereby (and a physician chosen by the Company and acceptable to the Employee or his legal representatives so certifies in writing) and the Employee in fact resumes such services. (c) The "Disability Effective Date" shall mean the date on which termination of employment becomes effective due to Disability. 3. CAUSE. The Company may terminate the Employee's status as an employee for Cause. As used herein, termination by the Company of the Employee's status as an employee for "Cause" shall mean termination as a result of (a) the Employee's breach of this Agreement, or (b) the willful engaging by the Employee in gross misconduct injurious to the Company, which in either case is not remedied within 10 days after the Company provides written notice to the Employee of such breach or willful misconduct. 4. GOOD REASON. The Employee may terminate his status as an employee for Good Reason. As used herein, the term "Good Reason" shall mean: (a) The occurrence of any of the following during the Employment Term: (i) the assignment by the Board to the Employee of any duties or responsibilities that are inconsistent with the Employee's status, title and position as Senior Vice President; (ii) any removal of the Employee from, or any failure to reappoint or reelect the Employee to, the position of Senior Vice President of the Company, except in connection with a termination of Employee's status as an employee as permitted by this Agreement; (iii) the Company's requiring the Employee to be based anywhere other than in the Washington, D.C. metropolitan area, except for required travel in the ordinary course of the Company's business; (b) any breach of this Agreement by the Company that continues for a period of 10 days after written notice thereof is given by the Employee to the Company; (c) the failure by the Company to obtain the assumption of its obligations under this Agreement by any successor or assign as contemplated in this Agreement; or (d) any purported termination by the Company of the Employee's status as an employee for Cause that is not effected pursuant to a Notice of Termination satisfying the requirements of this Agreement. 5. VOLUNTARY TERMINATION BY THE COMPANY. The Company may terminate the Employee's status as employee for other than death, Disability or Cause. 6. VOLUNTARY TERMINATION BY THE EMPLOYEE. The Employee may terminate the Employee's status as employee for other than Good Reason. 7. NOTICE OF TERMINATION. Any termination by the Company for Disability or Cause, or by the Employee for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Article VI Section 2 of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice that (a) indicates the specific termination provision in this Agreement relied upon (b) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee's employment under the provisions so indicated and (c) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Employee or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason, Disability or Cause shall not negate the effect of the notice nor waive any right of the Employee or the Company, respectively, hereunder or preclude the Employee or the Company, respectively, from asserting such fact or circumstance in enforcing the Employee's or the Company's rights hereunder. 8. DATE OF TERMINATION. "Date of Termination" means (a) if Employee's employment is terminated by reason of his death or Disability, the Date of Termination shall be the date of death of Employee or the Disability Effective Date, as the case may be, (b) if Employee's employment is terminated by the Company for Cause, or by Employee for Good Reason, the date of delivery of the Notice of Termination or any later date specified therein, (which date shall not be more than 30 days after the giving of such notice) as the case may be, (c) if the Employee's employment is terminated by the Company for reasons other than death, Disability or Cause, the Date of Termination shall be the date on which the Company notifies the Employee of such termination, and (d) if the Employee's employment is terminated by the Employee for reasons other than Good Reason, the Date of Termination shall be the date on which the Employee notifies the Company of such termination. ARTICLE IV OBLIGATIONS UPON TERMINATION 1. DEATH. If the Employee's status as an employee is terminated by reason of the Employee's death, this Agreement shall terminate without further obligations to the Employee's legal representatives under this Agreement, other than the obligation to make any payments due pursuant to employee benefit plans maintained by the Company or its subsidiaries. 2. DISABILITY. If Employee's status as an employee is terminated by reason of Employee's Disability, this Agreement shall terminate without further obligation to the Employee, other than the obligation to make any payments due pursuant to employee benefit plans maintained by the Company or its subsidiaries. 3. TERMINATION BY COMPANY FOR REASONS OTHER THAN DEATH, DISABILITY OR CAUSE; TERMINATION BY EMPLOYEE FOR GOOD REASON. If the Company terminates the Employee's status as an employee for reasons other than death, Disability or Cause, or the Employee terminates his employment for Good Reason, then (a) the Company shall pay to the Employee an amount equal to two times the amount of Base Salary in effect at the Date of Termination, payable in equal installments over a two-year period at such intervals as other salaried employees of the Company are paid; and (b) with respect to all performance-based options granted to the Employee pursuant to the 1995 Plan, (i) if the performance goals have been met as of the Date of Termination, then such options shall become exercisable as of the Date of Termination (if not already exercisable) and shall expire on the date that is the later of: (A) 30 days after the Date of Termination or (B) 30 days after the first date on which the exercise of the options and sale of the underlying securities will not (1) be matched with purchases or sales of the Company's common stock prior to such Date of Termination such as to cause the Employee to incur a liability to the Company under Section 16 of the Exchange Act and (2) destroy the Section 16 exemption for the grant of the options. (ii) if the performance goals have not been met as of the Date of Termination, then (A) if the performance goals are not met by the close of business on the day that is 180 days after the Date of Termination, then the options shall expire on such day; and (B) if the performance goals are met by the close of business on the day that is 180 days after the Date of Termination, then the options shall become exercisable as of the date such performance goals are met (the "Vesting Date") and shall expire on the date that is the later of: (1) 30 days after the Vesting Date or (2) 30 days after the first date on which the exercise of the options and sale of the underlying securities will not (I) be matched with purchases or sales of the Company's common stock prior to such Date of Termination such as to cause the Employee to incur a liability to the Company under Section 16 of the Exchange Act and (II) destroy the Section 16 exemption for the grant of the options. 4. CAUSE. If the Employee's status as an employee is terminated by the Company for Cause, this Agreement shall terminate without further obligation to the Employee other than for obligations imposed by law and obligations imposed pursuant to any employee benefit plan maintained by the Company or its subsidiaries. 5. TERMINATION BY EMPLOYEE FOR REASONS OTHER THAN GOOD REASON. If the Employee's status as an employee is terminated by the Employee for reasons other than Good Reason, then the Company shall pay to the Employee an amount equal to a single year's Base Salary in effect at the Date of Termination, payable in equal installments over a two-year period at such intervals as other salaried employees of the Company are paid. 6. RESIGNATION. If Employee is a director of the Company and his employment is terminated for any reason other than death, the Employee shall, if requested by the Company, immediately resign as a director of the Company. If such resignation is not received when so requested, the Employee shall forfeit any right to receive any payments pursuant to this Agreement. ARTICLE V NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Confidential Information" means any information, knowledge or data of any nature and in any form (including information that is electronically transmitted or stored on any form of magnetic or electronic storage media) relating to the past, current or prospective business or operations of the Company and its subsidiaries, that at the time or times concerned is not generally known to persons engaged in businesses similar to those conducted or contemplated by the Company and its subsidiaries (other than information known by such persons through a violation of an obligation of confidentiality to the Company), whether produced by the Company and its subsidiaries or any of their consultants, agents or independent contractors or by Employee, and whether or not marked confidential, including without limitation information relating to the Company's or its subsidiaries' products and services, business plans, business acquisitions, processes, product or service research and development methods or techniques, training methods and other operational methods or techniques, quality assurance procedures or standards, operating procedures, files, plans, specifications, proposals, drawings, charts, graphs, support data, trade secrets, supplier lists, supplier information, purchasing methods or practices, distribution and selling activities, consultants' reports, marketing and engineering or other technical studies, maintenance records, employment or personnel data, marketing data, strategies or techniques, financial reports, budgets, projections, cost analyses, price lists, formulae and analyses, employee lists, customer records, customer lists, customer source lists, proprietary computer software, and internal notes and memoranda relating to any of the foregoing. (b) "Death Care Business" means (i) the owning and operating of funeral homes and cemeteries, including combined funeral home and cemetery facilities, (ii) the offering of a complete range of services and products to meet families' funeral needs, including prearrangement, family consultation, the sale of caskets and related funeral and cemetery products and merchandise, the removal, preparation and transportation of remains, cremation, the use of funeral home facilities for visitation and worship, and related transportation services, (iii) the marketing and sale of funeral services and cemetery property on an at-need or prearranged basis, (iv) providing, managing and administering financing arrangements (including trust funds, escrow accounts, insurance and installment sales contracts) for prearranged funeral plans and cemetery property and merchandise, (v) providing interment services, the sale (on an at-need or prearranged basis) of cemetery property including lots, lawn crypts, family and community mausoleums and related cemetery merchandise such as monuments, memorials and burial vaults, (vi) the maintenance of cemetery grounds pursuant to perpetual care contracts and laws or on a voluntary basis, and (vii) offering mausoleum design, construction and sales services. 2. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. During the Employment Term, Employee shall hold in a fiduciary capacity for the benefit of the Company all Confidential Information which shall have been obtained by Employee during Employee's employment (whether prior to or after the Agreement Date) and shall use such Confidential Information solely within the scope of his employment with and for the exclusive benefit of the Company. For a period of five years after the Employment Term, commencing with the Date of Termination, Employee agrees (a) not to communicate, divulge or make available to any person or entity (other than the Company) any such Confidential Information, except upon the prior written authorization of the Company or as may be required by law or legal process, and (b) to deliver promptly to the Company any Confidential Information in his possession, including any duplicates thereof and any notes or other records Employee has prepared with respect thereto. In the event that the provisions of any applicable law or the order of any court would require Employee to disclose or otherwise make available any Confidential Information, Employee shall give the Company prompt prior written notice of such required disclosure and an opportunity to contest the requirement of such disclosure or apply for a protective order with respect to such Confidential Information by appropriate proceedings. 3. LIMITED COVENANT NOT TO COMPETE. During the Employment Term and for a period of two years thereafter, commencing with the Date of Termination, Employee agrees that, with respect to each State of the United States or other jurisdiction, or specified portions thereof, in which the Employee regularly (a) makes contact with customers of the Company or any of its subsidiaries, (b) conducts the business of the Company or any of its subsidiaries or (c) supervises the activities of other employees of the Company or any of its subsidiaries, as identified in Appendix "A" attached hereto and forming a part of this Agreement, and in which the Company or any of its subsidiaries engages in the Death Care Business on the Date of Termination (collectively, the "Subject Areas"), Employee will restrict his activities within the Subject Areas as follows: (a) Employee will not, directly or indirectly, for himself or others, own, manage, operate, control, be employed in an executive, managerial or supervisory capacity by, or otherwise engage or participate in or allow his skill, knowledge, experience or reputation to be used in connection with, the ownership, management, operation or control of, any company or other business enterprise engaged in the Death Care Business within any of the Subject Areas; provided, however, that nothing contained herein shall prohibit Employee from making passive investments as long as Employee does not beneficially own more than 2% of the equity interests of a business enterprise engaged in the Death Care Business within any of the Subject Areas. For purposes of this paragraph, "beneficially own" shall have the same meaning ascribed to that term in Rule 13d-3 under the Exchange Act. (b) Employee will not call upon any customer of the Company or its subsidiaries for the purpose of soliciting, diverting or enticing away the business of such person or entity, or otherwise disrupting any previously established relationship existing between such person or entity and the Company or its subsidiaries; (c) Employee will not solicit, induce, influence or attempt to influence any supplier, lessor, licensor, potential acquiree or any other person who has a business relationship with the Company or its subsidiaries, or who on the Date of Termination is engaged in discussions or negotiations to enter into a business relationship with the Company or its subsidiaries, to discontinue or reduce the extent of such relationship with the Company or its subsidiaries; and (d) Employee will not make contact with any of the employees of the Company or its subsidiaries with whom he had contact during the course of his employment with the Company for the purpose of soliciting such employee for hire, whether as an employee or independent contractor, or otherwise disrupting such employee's relationship with the Company or its subsidiaries. (e) Employee further agrees that, for a period of one year from and after the Date of Termination, Employee will not hire, on behalf of himself or any company engaged in the Death Care Business with which Employee is associated, any employee of the Company or its subsidiaries as an employee or independent contractor, whether or not such engagement is solicited by Employee; provided, however, that the restriction contained in this subsection (e) shall not apply to Company employees who reside in, or are hired by Employee to perform work in, any of the Subject Areas located within the States of Virginia, Arkansas or Georgia. Employee agrees that he will from time to time upon the Company's request promptly execute any supplement, amendment, restatement or other modification of Appendix "A" as may be necessary or appropriate to correctly reflect the jurisdictions which, at the time of such modification, should be covered by Appendix "A" and this Article V Section 3. Furthermore, Employee agrees that all references to Appendix "A" in this Agreement shall be deemed to refer to Appendix "A" as so supplemented, amended, restated or otherwise modified from time to time. 4. INJUNCTIVE RELIEF; OTHER REMEDIES. Employee acknowledges that a breach by Employee of Section 2 or 3 of this Article V would cause immediate and irreparable harm to the Company for which an adequate monetary remedy does not exist; hence, Employee agrees that, in the event of a breach or threatened breach by Employee of the provisions of Section 2 or 3 of this Article V during or after the Employment Term, the Company shall be entitled to injunctive relief restraining Employee from such violation without the necessity of proof of actual damage or the posting of any bond, except as required by non-waivable, applicable law. Nothing herein, however, shall be construed as prohibiting the Company from pursuing any other remedy at law or in equity to which the Company may be entitled under applicable law in the event of a breach or threatened breach of this Agreement by Employee, including without limitation the recovery of damages and/or costs and expenses, such as reasonable attorneys' fees, incurred by the Company as a result of any such breach. In addition to the exercise of the foregoing remedies, the Company shall have the right upon the occurrence of any such breach to cancel any unpaid salary, bonus, commissions or reimbursements otherwise outstanding at the Date of Termination. In particular, Employee acknowledges that the payments provided under Article IV Sections 3 and 5 are conditioned upon Employee fulfilling any noncompetition and nondisclosure agreements contained in this Article V. In the event Employee shall at any time materially breach any noncompetition or nondisclosure agreements contained in this Article V, the Company may suspend or eliminate payments under Article IV during the period of such breach. Employee acknowledges that any such suspension or elimination of payments would be an exercise of the Company's right to suspend or terminate its performance hereunder upon Employee's breach of this Agreement; such suspension or elimination of payments would not constitute, and should not be characterized as, the imposition of liquidated damages. 5. REQUESTS FOR WAIVER IN CASES OF UNDUE HARDSHIP. In the event that Employee should find any of the limitations of Article V Section 3 (including without limitation the geographic restrictions of Appendix "A") to impose a severe hardship on Employee's ability to secure other employment, Employee may make a request to the Company for a waiver of the designated limitations before accepting employment that otherwise would be a breach of Employee's promises and obligations under this Agreement. Such request must be in writing and clearly set forth the name and address of the organization with that employment is sought and the location, position and duties that Employee will be performing. The Company will consider the request and, in its sole discretion, decide whether and on what conditions to grant such waiver. 6. GOVERNING LAW OF THIS ARTICLE V; CONSENT TO JURISDICTION. Any dispute regarding the reasonableness of the covenants and agreements set forth in this Article V, or the territorial scope or duration thereof, or the remedies available to the Company upon any breach of such covenants and agreements, shall be governed by and interpreted in accordance with the laws of the State of the United States or other jurisdiction in which the alleged prohibited competing activity or disclosure occurs, and, with respect to each such dispute, the Company and Employee each hereby irrevocably consent to the exclusive jurisdiction of the state and federal courts sitting in the relevant State (or, in the case of any jurisdiction outside the United States, the relevant courts of such jurisdiction) for resolution of such dispute, and agree to be irrevocably bound by any judgment rendered thereby in connection with such dispute, and further agree that service of process may be made upon him or it in any legal proceeding relating to this Article V and/or Appendix "A" by any means allowed under the laws of such jurisdiction. Each party irrevocably waives any objection he or it may have as to the venue of any such suit, action or proceeding brought in such a court or that such a court is an inconvenient forum. 7. EMPLOYEE'S UNDERSTANDING OF THIS ARTICLE. Employee hereby represents to the Company that he has read and understands, and agrees to be bound by, the terms of this Article. Employee acknowledges that the geographic scope and duration of the covenants contained in Article V Section 3 are the result of arm's-length bargaining and are fair and reasonable in light of (i) the importance of the functions performed by Employee and the length of time it would take the Company to find and train a suitable replacement, (ii) the nature and wide geographic scope of the operations of the Company and its subsidiaries, (iii) Employee's level of control over and contact with the business and operations of the Company and its subsidiaries in a significant number of jurisdictions where same are conducted and (iv) the fact that all facets of the Death Care Business are conducted by the Company and its subsidiaries throughout the geographic area where competition is restricted by this Agreement. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permitted under applicable law, whether now or hereafter in effect and, therefore, to the extent permitted by applicable law, the parties hereto waive any provision of applicable law that would render any provision of this Article V invalid or unenforceable. ARTICLE VI MISCELLANEOUS 1. BINDING EFFECT. (a) This Agreement shall be binding upon and inure to the benefit of the Company and any of its successors or assigns. (b) This Agreement is personal to the Employee and shall not be assignable by the Employee without the consent of the Company (there being no obligation to give such consent) other than such rights or benefits as are transferred by will or the laws of descent and distribution. (c) The Company shall require any successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets or businesses of the Company (i) to assume unconditionally and expressly this Agreement and (ii) to agree to perform all of the obligations under this Agreement in the same manner and to the same extent as would have been required of the Company had no assignment or succession occurred, such assumption to be set forth in a writing reasonably satisfactory to the Employee. In the event of any such assignment or succession, the term "Company" as used in this Agreement shall refer also to such successor or assign. 2. NOTICES. All notices hereunder must be in writing and shall be deemed to have given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: G. Kenneth Stephens, Jr. 6707 Democracy Blvd, Suite 920 Bethesda, Maryland 20817 or such other address as to which any party hereto may have notified the other in writing. 3. GOVERNING LAW. This Agreement shall be construed and enforced in accordance with and governed by the internal laws of the State of Louisiana without regard to principles of conflict of laws, except as expressly provided in Article V Section 6 above with respect to the resolution of disputes arising under, or the Company's enforcement of, Article V of this Agreement. 4. WITHHOLDING. The Employee agrees that the Company has the right to withhold, from the amounts payable pursuant to this Agreement, all amounts required to be withheld under applicable income and/or employment tax laws, or as otherwise stated in documents granting rights that are affected by this Agreement. 5. SEVERABILITY. If any term or provision of this Agreement (including without limitation those contained in Appendix "A"), or the application thereof to any person or circumstance, shall at any time or to any extent be invalid, illegal or unenforceable in any respect as written, Employee and the Company intend for any court construing this Agreement to modify or limit such provision temporally, spatially or otherwise so as to render it valid and enforceable to the fullest extent allowed by law. Any such provision that is not susceptible of such reformation shall be ignored so as to not affect any other term or provision hereof, and the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid, illegal or unenforceable, shall not be affected thereby and each term and provision of this Agreement shall be valid and enforced to the fullest extent permitted by law. 6. WAIVER OF BREACH. The waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach thereof. 7. REMEDIES NOT EXCLUSIVE. No remedy specified herein shall be deemed to be such party's exclusive remedy, and accordingly, in addition to all of the rights and remedies provided for in this Agreement, the parties shall have all other rights and remedies provided to them by applicable law, rule or regulation. 8. COMPANY'S RESERVATION OF RIGHTS. Employee acknowledges and understands that the Employee serves at the pleasure of the Board and that the Company has the right at any time to terminate Employee's status as an employee of the Company, or to change or diminish his status during the Employment Term, subject to the rights of the Employee to claim the benefits conferred by this Agreement. 9. JURY TRIAL WAIVER. THE PARIES HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT. 10. SURVIVAL. The rights and obligations of the Company and Employee contained in Article V of this Agreement shall survive the termination of the Agreement. Following the Date of Termination, each party shall have the right to enforce all rights, and shall be bound by all obligations, of such party that are continuing rights and obligations under this Agreement. 11. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Company and the Employee have caused this Agreement to be executed as of the Agreement Date. STEWART ENTERPRISES, INC. By:/s/ James W. McFarland ---------------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /s/ G. Kenneth Stephens, Jr. ---------------------------------- G. Kenneth Stephens, Jr. EX-10.15 17 0017.txt CHANGE OF CONTROL AGREEMENT This Change of Control Agreement ("Agreement") between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and G. Kenneth Stephens, Jr. (the "Employee") is dated as of January 31, 2000 (the "Change of Control Agreement Date"). ARTICLE I DEFINITIONS 1.1 EMPLOYMENT AGREEMENT. After a Change of Control (defined below), this Agreement supersedes the Employment Agreement dated as of January 31, 2000 between Employee and the Company (the "Employment Agreement") except to the extent that certain provisions of the Employment Agreement are expressly incorporated by reference herein. After a Change of Control (defined below), the definitions in this Agreement supersede definitions in the Employment Agreement, but capitalized terms not defined in this Agreement have the meanings given to them in the Employment Agreement. 1.2 DEFINITION OF "COMPANY". As used in this Agreement, "Company" shall mean the Company as defined above and any successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets or business of the Company. 1.3 CHANGE OF CONTROL DEFINED. "Change of Control" shall mean: (a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 30% of the outstanding shares of the Company's Class A Common Stock, no par value per share (the "Common Stock"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition of Common Stock directly from the Company, (ii) any acquisition of Common Stock by the Company, (iii) any acquisition of Common Stock by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition of Common Stock by any corporation pursuant to a transaction that complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 1.3; or (b) individuals who, as of the Change of Control Agreement Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Change of Control Agreement Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered a member of the Incumbent Board, unless such individual's initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Incumbent Board; or (c) consummation of a reorganization, merger or consolidation, or sale or other disposition of all of substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners of the Company's outstanding common stock and the Company's voting securities entitled to vote generally in the election of directors immediately prior to such Business Combination have direct or indirect beneficial ownership, respectively, of more than 50% of the then outstanding shares of common stock, and more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, of the corporation resulting from such Business Combination (which, for purposes of this paragraph (i) and paragraphs (ii) and (iii), shall include a corporation which as a result of such transaction controls the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries), and (ii) except to the extent that such ownership existed prior to the Business Combination, no person (excluding any corporation resulting from such Business Combination or any employee benefit plan or related trust of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the then outstanding shares of common stock of the corporation resulting from such Business Combination or 20% or more of the combined voting power of the then outstanding voting securities of such corporation, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 1.4 AFFILIATE. "Affiliate" or "affiliated companies" shall mean any company controlled by, controlling, or under common control with, the Company. 1.5 CAUSE. "Cause" shall mean: (a) the willful and continued failure of the Employee to perform substantially the Employee's duties with the Company or its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Employee by the Board of the Company which specifically identifies the manner in which the Board believes that the Employee has not substantially performed the Employee's duties, or (b) the willful engaging by the Employee in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company or its affiliates. For purposes of this provision, no act or failure to act, on the part of the Employee, shall be considered "willful" unless it is done, or omitted to be done, by the Employee in bad faith or without reasonable belief that the Employee's action or omission was in the best interests of the Company or its affiliates. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of a senior officer of the Company or based upon the advice of counsel for the Company or its affiliates shall be conclusively presumed to be done, or omitted to be done, by the Employee in good faith and in the best interests of the Company or its affiliates. The cessation of employment of the Employee shall not be deemed to be for Cause unless and until there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Employee and the Employee is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Employee is guilty of the conduct described in subparagraph (a) or (b) above, and specifying the particulars thereof in detail. 1.6 GOOD REASON. "Good Reason" shall mean: (a) Any failure of the Company or its affiliates to provide the Employee with the position, authority, duties and responsibilities at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Change of Control. Employee's position, authority, duties and responsibilities after a Change of Control shall not be considered commensurate in all material respects with Employee's position, authority, duties and responsibilities prior to a Change of Control unless after the Change of Control Employee holds (i) an equivalent position in the Company or, (ii) if the Company is controlled or will after the transaction be controlled by another company (directly or indirectly), an equivalent position in the ultimate parent company. (b) The assignment to the Employee of any duties inconsistent in any material respect with Employee's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 2.1(b) of this Agreement, or any other action that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied within 10 days after receipt of written notice thereof from the Employee to the Company; (c) Any failure by the Company or its affiliates to comply with any of the provisions of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith that is remedied within 10 days after receipt of written notice thereof from the Employee to the Company; (d) The Company or its affiliates requiring the Employee to be based at any office or location other than as provided in Section 2.1(b)(ii) hereof or requiring the Employee to travel on business to a substantially greater extent than required immediately prior to the Change of Control; (e) Any purported termination of the Employee's employment otherwise than as expressly permitted by this Agreement; or (f) Any failure by the Company to comply with and satisfy Sections 3.1(c) and (d) of this Agreement. For purposes of this Section 1.6, any good faith determination of "Good Reason" made by the Employee shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Employee for any reason during the 30-day period immediately following the first anniversary of the Change of Control shall be deemed to be a termination for Good Reason. ARTICLE II CHANGE OF CONTROL BENEFIT 2.1 EMPLOYMENT TERM AND CAPACITY AFTER CHANGE OF CONTROL. (a) If a Change of Control occurs on or before October 31, 2000, then the Employee's employment term (the "Employment Term") shall continue through the later of (a) the second anniversary of the Change of Control or (b) October 31, 2000, subject to any earlier termination of Employee's status as an employee pursuant to this Agreement. (b) After a Change of Control and during the Employment Term, (i) the Employee's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Change of Control and (ii) the Employee's service shall be performed at the location where the Employee was employed immediately preceding the Change of Control or any office or location less than 35 miles from such location. Employee's position, authority, duties and responsibilities after a Change of Control shall not be considered commensurate in all material respects with Employee's position, authority, duties and responsibilities prior to a Change of Control unless after the Change of Control Employee holds (x) an equivalent position in the Company or, (y) if the Company is controlled or will after the transaction be controlled by another company (directly or indirectly), an equivalent position in the ultimate parent company. Employee shall devote himself to his employment responsibilities with the Company (or, if applicable, the ultimate parent entity) as provided in Article I Section 3 of the Employment Agreement. 2.2 COMPENSATION AND BENEFITS. During the Employment Term, Employee shall be entitled to the following compensation and benefits: (a) SALARY. A salary ("Base Salary") at the rate of $225,000 per year, payable to the Employee at such intervals no less frequent than the most frequent intervals in effect at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, the intervals in effect at any time after the Change of Control for other peer employees of the Company and its affiliated companies. (b) BONUS. An annual incentive bonus (the "Bonus") of $200,000 shall be paid in cash (1) no later than November 30, 2000 or (2) if the Employee so elects, between January 1 and January 15 of 2001. (c) FRINGE BENEFITS. The Employee shall be entitled to fringe benefits (including, but not limited to, automobile allowance, reimbursement for membership dues, and first class air travel) in accordance with the most favorable agreements, plans, practices, programs and policies of the Company and its affiliated companies in effect for the Employee at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, as in effect generally at any time thereafter with respect to other peer employees of the Company and its affiliated companies. (d) EXPENSES. The Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Employee in accordance with the most favorable agreements, policies, practices and procedures of the Company and its affiliated companies in effect for the Employee at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, as in effect generally at any time thereafter with respect to other peer employees of the Company and its affiliated companies. (e) INCENTIVE, SAVINGS AND RETIREMENT PLANS. The Employee shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer employees of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Employee with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable than the most favorable of those provided by the Company and its affiliated companies for the Employee under any agreements, plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, those provided generally at any time after the Change of Control to other peer employees of the Company and its affiliated companies. (f) WELFARE BENEFIT PLANS. The Employee and/or the Employee's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer employees of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Employee with benefits, in each case, less favorable than the most favorable of any agreements, plans, practices, policies and programs in effect for the Employee at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, those provided generally at any time after the Change of Control to other peer employees of the Company and its affiliated companies. (g) OFFICE AND SUPPORT STAFF. The Employee shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Employee by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, as provided generally at any time thereafter with respect to other peer employees of the Company and its affiliated companies. (h) VACATION. The Employee shall be entitled to paid vacation in accordance with the most favorable agreements, plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Employee at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, as in effect generally at any time thereafter with respect to other peer employees of the Company and its affiliated companies. 2.3 TERMINATION OF EMPLOYMENT AFTER A CHANGE OF CONTROL. After a Change of Control and during the Employment Term, the Employee's status as an employee shall terminate or may be terminated by the Employee, the Company (or, if applicable, the ultimate parent company), as provided in Article III of the Employment Agreement (provided, however, that the definitions of "Cause" and "Good Reason" in this Agreement shall supersede those definitions in the Employment Agreement). 2.4 OBLIGATIONS UPON TERMINATION AFTER A CHANGE OF CONTROL. (a) TERMINATION BY COMPANY FOR REASONS OTHER THAN DEATH, DISABILITY OR CAUSE; BY EMPLOYEE FOR GOOD REASON. If, after a Change of Control and during the Employment Term, the Company (or, if applicable the ultimate parent company), terminates the Employee's employment other than for Cause, death or Disability, or the Employee terminates employment for Good Reason, the Company shall pay to the Employee in a lump sum in cash within 30 days of the Date of Termination an amount equal to three times the sum of (i) the amount of Base Salary in effect at the Date of Termination, plus (ii) the maximum Bonus for which the Employee is eligible for the 12-month period in which the Date of Termination occurs. (b) DEATH. If, after a Change of Control and during the Employment Term, the Employee's status as an employee is terminated by reason of the Employee's death, this Agreement shall terminate without further obligation to the Employee's legal representatives (other than those already accrued to the Employee), other than the obligation to make any payments due pursuant to employee benefit plans maintained by the Company or its affiliated companies. (c) DISABILITY. If, after a Change of Control and during the Employment Term, Employee's status as an employee is terminated by reason of Employee's Disability (as defined in the Employment Agreement), this Agreement shall terminate without further obligation to the Employee (other than those already accrued to the Employee), other than the obligation to make any payments due pursuant to employee benefit plans maintained by the Company or its affiliated companies. (d) CAUSE. If, after a Change of Control and during the Employment Term, the Employee's status as an employee is terminated by the Company (or, if applicable, the ultimate parent entity) for Cause, this Agreement shall terminate without further obligation to the Employee other than for obligations imposed by law and obligations imposed pursuant to any employee benefit plan maintained by the Company or its affiliated companies. (e) TERMINATION BY EMPLOYEE FOR REASONS OTHER THAN GOOD REASON. If, after a Change of Control and during the Employment Term, the Employee's status as an employee is terminated by the Employee for reasons other than Good Reason, then the Company shall pay to the Employee an amount equal to a single year's Base Salary in effect at the Date of Termination, payable in equal installments over a two-year period at such intervals as other salaried employees of the Company are paid. (f) NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS. The rights and obligations of the Company and Employee contained in Article V ("Nondisclosure, Noncompetition and Proprietary Rights") of the Employment Agreement shall continue to apply after a Change of Control, except as provided in Section 2.10 of this Agreement. 2.5 ACCRUED OBLIGATIONS AND OTHER BENEFITS. It is the intent of the Employment Agreement and this Agreement that upon termination of employment for any reason the Employee be entitled to receive promptly, and in addition to any other benefits specifically provided, (a) the Employee's Base Salary through the Date of Termination to the extent not theretofore paid, (b) any accrued vacation pay, to the extent not theretofore paid, and (c) any other amounts or benefits required to be paid or provided or which the Employee is entitled to receive under any plan, program, policy practice or agreement of the Company. 2.6 STOCK OPTIONS. The foregoing benefits are intended to be in addition to the value of any options to acquire Common Stock of the Company the exercisability of which is accelerated pursuant to the terms of any stock option, incentive or other similar plan heretofore or hereafter adopted by the Company. 2.7 PROTECTION OF BENEFITS. To the extent permitted by applicable law, the Company shall take all reasonable steps to ensure that the Employee is not, by reason of a Change of Control, deprived of the economic value (including any value attributable to the Change of Control transaction) of (a) any options to acquire Common Stock of the Company or (b) any Common Stock of the Company beneficially owned by the Employee. 2.8 CERTAIN ADDITIONAL PAYMENTS. If after a Change of Control Employee is subjected to an excise tax as a result of the "excess parachute payment" provisions of section 4999 of the Internal Revenue Code of 1986, as amended, whether by virtue of the benefits of this Agreement or by virtue of any other benefits provided to Employee in connection with a Change of Control pursuant to Company plans, policies or agreements (including the value of any options to acquire Common Stock of the Company the exercisability of which is accelerated pursuant to the terms of any stock option, incentive or similar plan heretofore or hereafter adopted by the Company), the Company shall pay to Employee (whether or not his employment has terminated) such amounts as are necessary to place Employee in the same position after payment of federal income and excise taxes as he would have been if such provisions had not been applicable to him. 2.9 LEGAL FEES. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Employee may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Employee or others of the validity or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by the Employee about the amount or timing of any payment pursuant to this Agreement.) 2.10 SET-OFF; MITIGATION. After a Change of Control, the Company's and its affiliates' obligations to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company or its affiliates may have against the Employee or others. After a Change of Control, an asserted violation of the provisions of Article V ("Nondisclosure, Noncompetition and Proprietary Rights") of the Employment Agreement shall not constitute a basis for deferring or withholding any amounts otherwise payable to the Employee; specifically, the third through sixth sentences of Article V Section 4 shall not apply after a Change of Control. It is the intent of the Employment Agreement and this Agreement that in no event shall the Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Employee under any of the provisions of this Agreement or the Employment Agreement. ARTICLE III MISCELLANEOUS 3.1 BINDING EFFECT; SUCCESSORS. (a) This Agreement shall be binding upon and inure to the benefit of the Company and any of its successors or assigns. (b) This Agreement is personal to the Employee and shall not be assignable by the Employee without the consent of the Company (there being no obligation to give such consent) other than such rights or benefits as are transferred by will or the laws of descent and distribution. (c) The Company shall require any successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets or businesses of the Company (i) to assume unconditionally and expressly this Agreement and (ii) to agree to perform or to cause to be performed all of the obligations under this Agreement in the same manner and to the same extent as would have been required of the Company had no assignment or succession occurred, such assumption to be set forth in a writing reasonably satisfactory to the Employee. (d) The Company shall also require all entities that control or that after the transaction will control (directly or indirectly) the Company or any such successor or assignee to agree to cause to be performed all of the obligations under this Agreement, such agreement to be set forth in a writing reasonably satisfactory to the Employee. 3.2 NOTICES. All notices hereunder must be in writing and shall be deemed to have given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: G. Kenneth Stephens, Jr. 6707 Democracy Blvd, Suite 920 Bethesda, Maryland 20817 or such other address as to which any party hereto may have notified the other in writing. 3.3 GOVERNING LAW. This Agreement shall be construed and enforced in accordance with and governed by the internal laws of the State of Louisiana without regard to principles of conflict of laws, except as expressly provided in Article V Section 6 of the Employment Agreement with respect to the resolution of disputes arising under, or the Company's enforcement of, such Article V. 3.4 WITHHOLDING. The Employee agrees that the Company has the right to withhold, from the amounts payable pursuant to this Agreement, all amounts required to be withheld under applicable income and/or employment tax laws, or as otherwise stated in documents granting rights that are affected by this Agreement. 3.5 AMENDMENT, WAIVER. No provision of this Agreement may be modified, amended or waived except by an instrument in writing signed by both parties. 3.6 SEVERABILITY. If any term or provision of this Agreement, or the application thereof to any person or circumstance, shall at any time or to any extent be invalid, illegal or unenforceable in any respect as written, Employee and the Company intend for any court construing this Agreement to modify or limit such provision so as to render it valid and enforceable to the fullest extent allowed by law. Any such provision that is not susceptible of such reformation shall be ignored so as to not affect any other term or provision hereof, and the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid, illegal or unenforceable, shall not be affected thereby and each term and provision of this Agreement shall be valid and enforced to the fullest extent permitted by law. 3.7 WAIVER OF BREACH. The waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach thereof. 3.8 REMEDIES NOT EXCLUSIVE. No remedy specified herein shall be deemed to be such party's exclusive remedy, and accordingly, in addition to all of the rights and remedies provided for in this Agreement, the parties shall have all other rights and remedies provided to them by applicable law, rule or regulation. 3.9 COMPANY'S RESERVATION OF RIGHTS. Employee acknowledges and understands that the Employee serves at the pleasure of the Board and that the Company has the right at any time to terminate Employee's status as an employee of the Company, or to change or diminish his status during the Employment Term, subject to the rights of the Employee to claim the benefits conferred by this Agreement. 3.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Company and the Employee have caused this Agreement to be executed as of the Change of Control Agreement Date. STEWART ENTERPRISES, INC. By: /S/ JAMES W. MCFARLAND --------------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /S/ G. KENNETH STEPHENS, JR. --------------------------------- G. Kenneth Stephens, Jr. EX-10.16 18 0018.txt INDEMNITY AGREEMENT This INDEMNITY AGREEMENT is made as of January 31, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Corporation"), and G. Kenneth Stephens, Jr. ("Indemnitee"). In consideration of Indemnitee's continued service after the date hereof, the Corporation and Indemnitee do hereby agree as follows: 1. AGREEMENT TO SERVE. Indemnitee shall serve or continue to serve as an officer of the Corporation, and as a director or officer of any other corporation, subsidiary, partnership, joint venture, trust or other enterprise of which he is serving at the request of the Corporation, and agrees to serve in such capacities for so long as he is duly elected or appointed and qualified or until such earlier time as he tenders his resignation in writing. 2. DEFINITIONS. As used in this Agreement: (a) The term "Claim" shall mean any threatened, pending or completed claim, action, suit or proceeding, including appeals, whether civil, criminal, administrative or investigative and whether made judicially or extra-judicially, including any action by or in the right of the Corporation, or any separate issue or matter therein, as the context requires. (b) The term "Determining Body" shall mean (i) those members of the Board of Directors who are not named as parties to the Claim for which indemnification is being sought ("Impartial Directors"), if there are at least three Impartial Directors, or (ii) a committee of at least three Impartial Directors appointed by the Board or a duly authorized committee thereof (regardless whether the directors voting on such appointment are Impartial Directors) or (iii) if there are fewer than three Impartial Directors or if the Board of Directors or the committee appointed pursuant to clause (ii) of this paragraph so directs (regardless whether the directors voting on such appointment are Impartial Directors), independent legal counsel, which may be the regular outside counsel of the Corporation, as designated by the Impartial Directors or, if no such directors exist, the full Board of Directors. (c) The term "Disbursing Officer" shall mean the President of the Corporation or, if the President has a direct or indirect interest in the Claim for which indemnification is being sought, any officer who does not have such an interest and who is designated by the President to be the Disbursing Officer with respect to indemnification requests related to the Claim, which designation shall be made promptly after receipt of the initial request for indemnification with respect to such Claim. (d) The term "Expenses" shall mean any expenses or costs including, without limitation, attorney's fees, judgments, punitive or exemplary damages, fines, excise taxes or amounts paid in settlement. (e) The term "Insurance Policy" shall mean the Directors and Officers Liability Policy that the Corporation has obtained from CNA, and the Excess Directors and Officers Liability Policies that the Corporation has obtained from Reliance Insurance Co. and Chubb/Federal Insurance Company, on behalf of its directors and officers for the policy period commencing September 27, 1999 and ending September 27, 2000. 3. LIMITATION OF LIABILITY. To the fullest extent permitted by Article VII of the Articles of Incorporation of the Corporation (as in effect on the date hereof), Indemnitee shall not be liable for any breach of his fiduciary duty. If and to the extent such provisions are amended to permit further limitations of liability, Indemnitee shall not be liable for any breach of his fiduciary duty to the fullest extent permitted after any such amendment. 4. MAINTENANCE OF INSURANCE. (a) The Corporation represents and warrants that it presently maintains in force and effect a directors and officers liability insurance policy with coverage comparable to the coverage provided under the Insurance Policy, and Indemnitee represents and warrants that he has been furnished with a copy of the policy currently in effect and of the Insurance Policy. Subject only to the provisions of Section 4(b) hereof, the Corporation hereby agrees that, so long as Indemnitee shall continue to serve in any capacity referred to in Section 5(a) hereof and thereafter so long as Indemnitee shall be subject to any possible Claim, the Corporation shall use its commercially reasonable best efforts to purchase and maintain in effect for the benefit of Indemnitee one or more valid and enforceable policies of directors and officers liability insurance providing, in all respects, coverage at least comparable to that provided pursuant to the Insurance Policy. (b) The Corporation shall not be required to purchase and maintain the Insurance Policy or any comparable policy if directors and officers liability insurance is not reasonably available or if, in the reasonable business judgment of the then directors of the Corporation, there is insufficient benefit to the Corporation from such insurance. 5. ADDITIONAL INDEMNITY. (a) To the extent any Expenses incurred by Indemnitee are in excess of the amounts reimbursed or indemnified pursuant to the provisions of Section 4 hereof, the Corporation shall indemnify and hold harmless Indemnitee against any Expenses actually and reasonably incurred by Indemnitee (as they are incurred) in connection with any Claim against Indemnitee, or involving Indemnitee solely as a witness or person required to give evidence, by reason of Indemnitee's position as a (i) director or officer of the Corporation, (ii) director or officer of any subsidiary of the Corporation or as a fiduciary with respect to any employee benefit plan of the Corporation, or (iii) director, officer, partner, employee or agent of another corporation, partnership, joint venture, trust or other for- profit or not-for-profit entity or enterprise, if such position is or was held at the request of the Corporation, whether relating to service in such position before or after the effective date of this Agreement, if (A) Indemnitee is successful in his defense of the Claim on the merits or otherwise or (B) Indemnitee has been found by the Determining Body to have met the Standard of Conduct (as hereinafter defined); provided that (1) the amount of Expenses for which the Corporation shall indemnify Indemnitee may be reduced by the Determining Body to such amount as it deems proper if it determines that the Claim involved the receipt of personal benefit by Indemnitee, and (2) no indemnification shall be made in respect of any Claim as to which Indemnitee shall have been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for willful or intentional misconduct in the performance of his duty to the Corporation or to have obtained an improper personal benefit, unless, and only to the extent that, a court shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such Expenses which the court shall deem proper. (b) For purposes of this Agreement, the "Standard of Conduct" is met when conduct by Indemnitee with respect to which a Claim is asserted was conduct performed in good faith which he reasonably believed to be in, or not opposed to, the best interest of the Corporation, and, in the case of a Claim which is a criminal action or proceeding, conduct that Indemnitee had no reasonable cause to believe was unlawful. The termination of any Claim by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that Indemnitee did not meet the Standard of Conduct. (c) Promptly upon becoming aware of the existence of any Claim as to which Indemnitee may be indemnified for Expenses and as to which Indemnitee desires to obtain indemnification, Indemnitee shall notify the President of the Corporation, but the failure to promptly notify the President shall not relieve the Corporation from any obligation hereunder, except and to the extent that such failure has materially and irrevocably harmed the Corporation's ability to defend against such Claim pursuant to Section 5(f) hereof. Upon receipt of such request, the President shall promptly advise the members of the Board of Directors of the request and that the establishment of a Determining Body with respect thereto will be a matter to be considered at the next regularly scheduled meeting of the Board. If a meeting of the Board of Directors is not regularly scheduled within 120 calendar days of the date the President receives notice of the Claim, the President shall cause a special meeting of the Board of Directors to be called within such period in accordance with the provisions of the Corporation's By-laws. After the Determining Body has been established, the President shall inform Indemnitee of the constitution of the Determining Body and Indemnitee shall provide the Determining Body with all facts relevant to the Claim known to him, and deliver to the Determining Body all documents relevant to the Claim in his possession. Before the 60th day (the "Determination Date") after its receipt from Indemnitee of such information, together with such additional information as the Determining Body may reasonably request of Indemnitee prior to such date (the receipt of which shall not begin a new 60-day period), the Determining Body shall determine whether or not Indemnitee has met the Standard of Conduct and shall advise Indemnitee of its determination. If Indemnitee shall have supplied the Determining Body with all relevant information, including all additional information reasonably requested by the Determining Body, any failure of the Determining Body to make a determination by or on the Determination Date as to whether the Standard of Conduct was met shall be deemed to be a determination that the Standard of Conduct was met by Indemnitee. (d) If at any time during the 60-day period ending on the Determination Date, Indemnitee becomes aware of any relevant facts or documents not theretofore provided by him to the Determining Body, Indemnitee shall promptly inform the Determining Body of such facts or documents, unless the Determining Body has obtained such facts or documents from another source. The provision of such facts to the Determining Body shall not begin a new 60-day period. (e) The Determining Body shall have no power to revoke a determination that Indemnitee met the Standard of Conduct unless Indemnitee (i) submits fraudulent information to the Determining Body at any time during the 60 days prior to the Determination Date or (ii) fails to comply with the provisions of Sections 5(c) or 5(d) hereof, including without limitation Indemnitee's obligation to submit information or documents relevant to the Claim reasonably requested by the Determining Body prior to the Determination Date. (f) In the case of any Claim not involving any proposed, threatened or pending criminal proceeding, (i) if Indemnitee has, in the judgment of the Determining Body, met the Standard of Conduct, the Corporation may, except as otherwise provided below, individually or jointly with any other indemnifying party similarly notified, assume the defense thereof with counsel reasonably satisfactory to Indemnitee. If the Corporation assumes the defense of the Claim, it shall keep Indemnitee informed as to the progress of such defense so that Indemnitee may make an informed decision as to the need for separate counsel. After notice from the Corporation that it is assuming the defense of the Claim, it will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ its own counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after such notice from the Corporation of its assumption of the defense shall be at the expense of Indemnitee unless (A) the employment of counsel by Indemnitee has been authorized by the Determining Body, (B) Indemnitee shall have concluded reasonably that there may be a conflict of interest between the Corporation and Indemnitee in the conduct of the defense of such action or (C) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel shall be at the expense of the Corporation. The Corporation shall not be entitled to assume the defense of any action, suit or proceeding brought by or in the right of the Corporation or as to which Indemnitee shall have made the conclusion provided for in (B) above; and (ii) the Corporation shall fairly consider any proposals by Indemnitee for settlement of the Claim. If the Corporation proposes a settlement of the Claim and such settlement is acceptable to the person asserting the Claim, or the Corporation believes a settlement proposed by the person asserting the Claim should be accepted, it shall inform Indemnitee of the terms of such proposed settlement and shall fix a reasonable date by which Indemnitee shall respond. If Indemnitee agrees to such terms, he shall execute such documents as shall be necessary to make final the settlement. If Indemnitee does not agree with such terms, Indemnitee may proceed with the defense of the Claim in any manner he chooses, provided that if Indemnitee is not successful on the merits or otherwise, the Corporation's obligation to indemnify such Indemnitee as to any Expenses incurred following his disagreement with the Corporation shall be limited to the lesser of (A) the total Expenses incurred by Indemnitee following his decision not to agree to such proposed settlement or (B) the amount that the Corporation would have paid pursuant to the terms of the proposed settlement. If, however, the proposed settlement would impose upon Indemnitee any requirement to act or refrain from acting that would materially interfere with the conduct of Indemnitee's affairs, Indemnitee may refuse such settlement and continue his defense of the Claim, if he so desires, at the Corporation's expense in accordance with the terms and conditions of this Agreement without regard to the limitations imposed by the immediately preceding sentence. In any event, the Corporation shall not be obligated to indemnify Indemnitee for any amount paid in a settlement that the Corporation has not approved. (g) In the case of any Claim involving a proposed, threatened or pending criminal proceeding, Indemnitee shall be entitled to conduct the defense of the Claim with counsel of his choice and to make all decisions with respect thereto, provided, however, that the Corporation shall not be obliged to indemnify Indemnitee for any amount paid in settlement of such a Claim unless the Corporation has approved such settlement. (h) After notifying the Corporation of the existence of a Claim, Indemnitee may from time to time request the Corporation to pay the Expenses (other than judgments, fines, penalties or amounts paid in settlement) that he incurs in pursuing a defense of the Claim prior to the time that the Determining Body determines whether the Standard of Conduct has been met. The Disbursing Officer shall pay to Indemnitee the amount requested (regardless of Indemnitee's apparent ability to repay such amount) upon receipt of an undertaking by or on behalf of Indemnitee to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation under the circumstances, provided, however, that if the Disbursing Officer does not believe such amount to be reasonable, he shall advance the amount deemed by him to be reasonable and Indemnitee may apply directly to the Determining Body for the remainder of the amount requested. (i) After the Determining Body has determined that the Standard of Conduct has been met, for so long as and to the extent that the Corporation is required to indemnify Indemnitee under this Agreement, the provisions of Section 5(h) hereof shall continue to apply with respect to Expenses incurred after such time except that (i) no undertaking shall be required of Indemnitee and (ii) the Disbursing Officer shall pay to Indemnitee the amount of any fines, penalties or judgments against him which have become final and for which he is entitled to indemnification hereunder, and any amount of indemnification ordered to be paid to him by a court. (j) Any determination by the Corporation with respect to settlement of a Claim shall be made by the Determining Body. (k) All determinations and judgments made by the Determining Body hereunder shall be made in good faith. 6. ENFORCEMENT. (a) The rights provided by this Agreement shall be enforceable by Indemnitee in any court of competent jurisdiction. (b) If Indemnitee seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all expenses actually and reasonably incurred by him in connection with such proceeding, but only if he prevails therein. If it shall be determined that Indemnitee is entitled to receive part but not all of the relief sought, then Indemnitee shall be entitled to be reimbursed for all expenses incurred by him in connection with such judicial adjudication if the amount to which he is determined to be entitled exceeds 50% of the amount of his claim. Otherwise, the expenses incurred by Indemnitee in connection with such judicial adjudication shall be appropriately prorated. (c) In any judicial proceeding described in this Section 6, the Corporation shall bear the burden of proving that Indemnitee is not entitled to the relief sought. 7. SAVING CLAUSE. If any provision of this Agreement is determined by a court having jurisdiction over the matter to violate or conflict with applicable law, the court shall be empowered to modify or reform such provision so that, as modified or reformed, such provision provides the maximum indemnification permitted by law and such provision, as so modified or reformed, and the balance of this Agreement, shall be applied in accordance with their terms. Without limiting the generality of the foregoing, if any portion of this Agreement shall be invalidated on any ground, the Corporation shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated and to the full extent permitted by law with respect to that portion that has been invalidated. 8. NON-EXCLUSIVITY. (a) The indemnification and advancement of Expenses provided by or granted pursuant to this Agreement shall not be deemed exclusive of any other rights to which Indemnitee is or may become entitled under any statute, articles of incorporation, by-law, authorization of stockholders or directors, agreement, or otherwise. (b) It is the intent of the Corporation by this Agreement to indemnify and hold harmless Indemnitee to the fullest extent permitted by law, so that if applicable law would permit the Corporation to provide broader indemnification rights than are currently permitted, the Corporation shall indemnify and hold harmless Indemnitee to the fullest extent permitted by applicable law notwithstanding that the other terms of this Agreement would provide for lesser indemnification. 9. CONFIDENTIALITY. The Corporation and Indemnitee shall keep confidential to the extent permitted by law and their fiduciary obligations all information and determinations provided pursuant to or arising out of the operations of this Agreement and the Corporation and Indemnitee shall instruct its or his agents and employees to do likewise. 10. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall constitute an original but all of which taken together shall be deemed to constitute a single instrument. 11. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Louisiana. 12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon Indemnitee and upon the Corporation, its successors and assigns, and shall inure to the benefit of Indemnitee's heirs, personal representatives, and assigns and to the benefit of the Corporation, its successors and assigns. 13. AMENDMENT. No amendment, modification, termination or cancellation of this Agreement shall be effective unless made in writing signed by the Corporation and Indemnitee. Notwithstanding any amendment, modification, termination or cancellation of this Agreement or any portion hereof, Indemnitee shall be entitled to indemnification in accordance with the provisions hereof with respect to any acts or omissions of Indemnitee which occur prior to such amendment, modification, termination or cancellation. 14. GENDER. All pronouns and variations thereof used in this Agreement shall be deemed to refer to the masculine, feminine or neuter gender, singular or plural, as the identity of the person, persons, entity or entities referred to may require. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and signed as of the date and year first above written. STEWART ENTERPRISES, INC. By: /S/ JAMES W. MCFARLAND ------------------------------- James W. McFarland Compensation Committee Chairman INDEMNITEE: /S/ KENNETH STEPHENS, JR. ------------------------------- G. Kenneth Stephens, Jr. EX-10.17 19 0019.txt EMPLOYMENT AGREEMENT This Employment Agreement ("Agreement") between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Everett N. Kendrick (the "Employee") is dated as of January 31, 2000 (the "Agreement Date"). W I T N E S S E T H: WHEREAS, Employee currently is employed by the Company; WHEREAS, the Company desires to retain the services of Employee pursuant to the terms of this Agreement, subject to Employee's acceptance of the conditions stated herein; WHEREAS, during the course of his employment with the Company, Employee has or will have received extensive and unique knowledge, training and education in, and access to resources involving, the Death Care Business (as defined below) at a substantial cost to the Company, which Employee acknowledges has enhanced or substantially will enhance Employee's skills and knowledge in such business; WHEREAS, during the course of his employment with the Company, Employee has had and will continue to have access to certain valuable oral and written information, knowledge and data relating to the business and operations of the Company and its subsidiaries that is non-public, confidential or proprietary in nature and is particularly useful in the Death Care Business; and WHEREAS, in view of the training provided by the Company to Employee, its cost to the Company, the need for the Company to be protected against disclosures by Employee of the Company's and its subsidiaries' trade secrets and other non-public, confidential or proprietary information, the Company and Employee desire, among other things, to prohibit Employee from disclosing or utilizing, outside the scope and term of his employment, any non-public, confidential or proprietary information, knowledge and data relating to the business and operations of the Company or its subsidiaries received by Employee during the course of his employment, and to restrict the ability of Employee to compete with the Company or its subsidiaries for a limited period of time. NOW, THEREFORE, for and in consideration of the continued employment of Employee by the Company and the payment of wages, salary and other compensation to Employee by the Company, the parties hereto agree as follows: ARTICLE I EMPLOYMENT CAPACITY AND TERM 1. CAPACITY AND DUTIES OF EMPLOYEE. The Employee is employed by the Company to render services on behalf of the Company as Senior Vice President and President - Sales and Marketing Division. As the Senior Vice President and President - Sales and Marketing Division, the Employee shall perform such duties as are assigned to the individual holding such title by the Company's Bylaws and such other duties, consistent with the Employee's job title, as may be prescribed from time to time by the Board of Directors of the Company (the "Board") and/or the Company's Chief Executive Officer. 2. EMPLOYMENT TERM. The term of this Agreement (the "Employment Term") shall commence on the Agreement Date and shall continue through October 31, 2000, subject to any earlier termination of Employee's status as an employee pursuant to this Agreement. 3. DEVOTION TO RESPONSIBILITIES. During the Employment Term, the Employee shall devote all of his business time to the business of the Company, shall use his reasonable best efforts to perform faithfully and efficiently his duties under this Agreement, and shall not engage in or be employed by any other business; provided, however, that nothing contained herein shall prohibit the Employee from (a) serving as a member of the board of directors, board of trustees or the like of any for-profit or non-profit entity that does not compete with the Company, or performing services of any type for any civic or community entity, whether or not the Employee receives compensation therefor, (b) investing his assets in such form or manner as shall require no more than nominal services on the part of the Employee in the operation of the business of the entity in which such investment is made, or (c) serving in various capacities with, and attending meetings of, industry or trade groups and associations, as long as the Employee's engaging in any activities permitted by virtue of clauses (a), (b) and (c) above does not materially and unreasonably interfere with the ability of the Employee to perform the services and discharge the responsibilities required of him under this Agreement. Notwithstanding clause (b) above, during the Employment Term, the Employee may not beneficially own more than 2% of the equity interests of a business organization required to file periodic reports with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the "Exchange Act") and may not beneficially own more than 2% of the equity interests of a business organization that competes with the Company. For purposes of this paragraph, "beneficially own" shall have the same meaning ascribed to that term in Rule 13d-3 under the Exchange Act. ARTICLE II COMPENSATION AND BENEFITS During the Employment Term, the Company shall provide the Employee with the compensation and benefits described below: 1. SALARY. Effective January 31, 2000, a salary ("Base Salary") at the rate of $300,000 per fiscal year of the Company ("Fiscal Year"), payable to the Employee at such intervals as other salaried employees of the Company are paid. 2. BONUS. (a) For the fiscal year beginning November 1, 1999, the Employee shall be eligible to receive an annual incentive bonus (the "Bonus") of up to $200,000 per Fiscal Year. The Bonus will be awarded based upon factors to be established annually and set forth in an annual supplement to this Agreement. (b) The Bonus shall be paid in cash not later than 30 days following the filing of the Company's annual report on Form 10-K for the Fiscal Year in which the Bonus has been earned. 3. BENEFITS. The Company shall provide the Employee with the following fringe benefits and perquisites: (a) An automobile allowance of $720 per month. The Company will reimburse the Employee for all gasoline, maintenance, repairs and insurance for Employee's personal car, as if it were a Company-owned vehicle; (b) Reimbursement for membership dues, including assessments and similar charges, in one or more clubs deemed useful for business purposes in an amount not to exceed $8,000 or such additional amounts as may be approved by the President; (c) First class air travel; (d) Fully-paid insurance benefit package available to all employees; and (e) All other benefit programs similar to those provided other employees of the Company. 4. 1995 INCENTIVE COMPENSATION PLAN. The Employee shall be eligible to receive awards under the Company's 1995 Incentive Compensation Plan (the "1995 Plan"). 5. EXPENSES. The Employee shall be reimbursed for reasonable out- of-pocket expenses incurred from time to time on behalf of the Company or any subsidiary in the performance of his duties under this Agreement, upon the presentation of such supporting invoices, documents and forms as the Company reasonably requests. ARTICLE III TERMINATION OF EMPLOYMENT 1. DEATH. The Employee's status as an employee shall terminate immediately and automatically upon the Employee's death during the Employment Term. 2. DISABILITY. The Employee's status as an employee may be terminated for "Disability" as follows: (a) The Employee's status as an employee shall terminate if the Employee has a disability that would entitle him to receive benefits under the Company's long-term disability insurance policy in effect at the time either because he is Totally Disabled or Partially Disabled, as such terms are defined in the Company's policy in effect as of the Agreement Date or as similar terms are defined in any successor policy. Any such termination shall become effective on the first day on which the Employee is eligible to receive payments under such policy (or on the first day that he would be so eligible, if he had applied timely for such payments). (b) If the Company has no long-term disability plan in effect, if (i) the Employee is rendered incapable because of physical or mental illness of satisfactorily discharging his duties and responsibilities under this Agreement for a period of 90 consecutive days and (ii) a duly qualified physician chosen by the Company and acceptable to the Employee or his legal representatives so certifies in writing, the Board shall have the power to determine that the Employee has become disabled. If the Board makes such a determination, the Company shall have the continuing right and option, during the period that such disability continues, and by notice given in the manner provided in this Agreement, to terminate the status of Employee as an employee. Any such termination shall become effective 30 days after such notice of termination is given, unless within such 30-day period, the Employee becomes capable of rendering services of the character contemplated hereby (and a physician chosen by the Company and acceptable to the Employee or his legal representatives so certifies in writing) and the Employee in fact resumes such services. (c) The "Disability Effective Date" shall mean the date on which termination of employment becomes effective due to Disability. 3. CAUSE. The Company may terminate the Employee's status as an employee for Cause. As used herein, termination by the Company of the Employee's status as an employee for "Cause" shall mean termination as a result of (a) the Employee's breach of this Agreement, or (b) the willful engaging by the Employee in gross misconduct injurious to the Company, which in either case is not remedied within 10 days after the Company provides written notice to the Employee of such breach or willful misconduct. 4. GOOD REASON. The Employee may terminate his status as an employee for Good Reason. As used herein, the term "Good Reason" shall mean: (a) The occurrence of any of the following during the Employment Term: (i) the assignment by the Board to the Employee of any duties or responsibilities that are inconsistent with the Employee's status, title and position as Senior Vice President; (ii) any removal of the Employee from, or any failure to reappoint or reelect the Employee to, the position of Senior Vice President of the Company, except in connection with a termination of Employee's status as an employee as permitted by this Agreement; (iii) the Company's requiring the Employee to be based anywhere other than in the New Orleans, Louisiana or Washington, D.C. metropolitan areas, except for required travel in the ordinary course of the Company's business; (b) any breach of this Agreement by the Company that continues for a period of 10 days after written notice thereof is given by the Employee to the Company; (c) the failure by the Company to obtain the assumption of its obligations under this Agreement by any successor or assign as contemplated in this Agreement; or (d) any purported termination by the Company of the Employee's status as an employee for Cause that is not effected pursuant to a Notice of Termination satisfying the requirements of this Agreement. 5. VOLUNTARY TERMINATION BY THE COMPANY. The Company may terminate the Employee's status as employee for other than death, Disability or Cause. 6. VOLUNTARY TERMINATION BY THE EMPLOYEE. The Employee may terminate the Employee's status as employee for other than Good Reason. 7. NOTICE OF TERMINATION. Any termination by the Company for Disability or Cause, or by the Employee for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Article VI Section 2 of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice that (a) indicates the specific termination provision in this Agreement relied upon (b) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee's employment under the provisions so indicated and (c) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 30 days after the giving of such notice). The failure by the Employee or the Company to set forth in the Notice of Termination any fact or circumstance that contributes to a showing of Good Reason, Disability or Cause shall not negate the effect of the notice nor waive any right of the Employee or the Company, respectively, hereunder or preclude the Employee or the Company, respectively, from asserting such fact or circumstance in enforcing the Employee's or the Company's rights hereunder. 8. DATE OF TERMINATION. "Date of Termination" means (a) if Employee's employment is terminated by reason of his death or Disability, the Date of Termination shall be the date of death of Employee or the Disability Effective Date, as the case may be, (b) if Employee's employment is terminated by the Company for Cause, or by Employee for Good Reason, the date of delivery of the Notice of Termination or any later date specified therein, (which date shall not be more than 30 days after the giving of such notice) as the case may be, (c) if the Employee's employment is terminated by the Company for reasons other than death, Disability or Cause, the Date of Termination shall be the date on which the Company notifies the Employee of such termination, and (d) if the Employee's employment is terminated by the Employee for reasons other than Good Reason, the Date of Termination shall be the date on which the Employee notifies the Company of such termination. ARTICLE IV OBLIGATIONS UPON TERMINATION 1. DEATH. If the Employee's status as an employee is terminated by reason of the Employee's death, this Agreement shall terminate without further obligations to the Employee's legal representatives under this Agreement, other than the obligation to make any payments due pursuant to employee benefit plans maintained by the Company or its subsidiaries. 2. DISABILITY. If Employee's status as an employee is terminated by reason of Employee's Disability, this Agreement shall terminate without further obligation to the Employee, other than the obligation to make any payments due pursuant to employee benefit plans maintained by the Company or its subsidiaries. 3. TERMINATION BY COMPANY FOR REASONS OTHER THAN DEATH, DISABILITY OR CAUSE; TERMINATION BY EMPLOYEE FOR GOOD REASON. If the Company terminates the Employee's status as an employee for reasons other than death, Disability or Cause, or the Employee terminates his employment for Good Reason, then (a) the Company shall pay to the Employee an amount equal to two times the amount of Base Salary in effect at the Date of Termination, payable in equal installments over a two-year period at such intervals as other salaried employees of the Company are paid; and (b) with respect to all performance-based options granted to the Employee pursuant to the 1995 Plan, (i) if the performance goals have been met as of the Date of Termination, then such options shall become exercisable as of the Date of Termination (if not already exercisable) and shall expire on the date that is the later of: (A) 30 days after the Date of Termination or (B) 30 days after the first date on which the exercise of the options and sale of the underlying securities will not (1) be matched with purchases or sales of the Company's common stock prior to such Date of Termination such as to cause the Employee to incur a liability to the Company under Section 16 of the Exchange Act and (2) destroy the Section 16 exemption for the grant of the options. (ii) if the performance goals have not been met as of the Date of Termination, then (A) if the performance goals are not met by the close of business on the day that is 180 days after the Date of Termination, then the options shall expire on such day; and (B) if the performance goals are met by the close of business on the day that is 180 days after the Date of Termination, then the options shall become exercisable as of the date such performance goals are met (the "Vesting Date") and shall expire on the date that is the later of: (1) 30 days after the Vesting Date or (2) 30 days after the first date on which the exercise of the options and sale of the underlying securities will not (I) be matched with purchases or sales of the Company's common stock prior to such Date of Termination such as to cause the Employee to incur a liability to the Company under Section 16 of the Exchange Act and (II) destroy the Section 16 exemption for the grant of the options. 4. CAUSE. If the Employee's status as an employee is terminated by the Company for Cause, this Agreement shall terminate without further obligation to the Employee other than for obligations imposed by law and obligations imposed pursuant to any employee benefit plan maintained by the Company or its subsidiaries. 5. TERMINATION BY EMPLOYEE FOR REASONS OTHER THAN GOOD REASON. If the Employee's status as an employee is terminated by the Employee for reasons other than Good Reason, then the Company shall pay to the Employee an amount equal to a single year's Base Salary in effect at the Date of Termination, payable in equal installments over a two-year period at such intervals as other salaried employees of the Company are paid. 6. RESIGNATION. If Employee is a director of the Company and his employment is terminated for any reason other than death, the Employee shall, if requested by the Company, immediately resign as a director of the Company. If such resignation is not received when so requested, the Employee shall forfeit any right to receive any payments pursuant to this Agreement. ARTICLE V NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS 1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following terms shall have the following meanings: (a) "Confidential Information" means any information, knowledge or data of any nature and in any form (including information that is electronically transmitted or stored on any form of magnetic or electronic storage media) relating to the past, current or prospective business or operations of the Company and its subsidiaries, that at the time or times concerned is not generally known to persons engaged in businesses similar to those conducted or contemplated by the Company and its subsidiaries (other than information known by such persons through a violation of an obligation of confidentiality to the Company), whether produced by the Company and its subsidiaries or any of their consultants, agents or independent contractors or by Employee, and whether or not marked confidential, including without limitation information relating to the Company's or its subsidiaries' products and services, business plans, business acquisitions, processes, product or service research and development methods or techniques, training methods and other operational methods or techniques, quality assurance procedures or standards, operating procedures, files, plans, specifications, proposals, drawings, charts, graphs, support data, trade secrets, supplier lists, supplier information, purchasing methods or practices, distribution and selling activities, consultants' reports, marketing and engineering or other technical studies, maintenance records, employment or personnel data, marketing data, strategies or techniques, financial reports, budgets, projections, cost analyses, price lists, formulae and analyses, employee lists, customer records, customer lists, customer source lists, proprietary computer software, and internal notes and memoranda relating to any of the foregoing. (b) "Death Care Business" means (i) the owning and operating of funeral homes and cemeteries, including combined funeral home and cemetery facilities, (ii) the offering of a complete range of services and products to meet families' funeral needs, including prearrangement, family consultation, the sale of caskets and related funeral and cemetery products and merchandise, the removal, preparation and transportation of remains, cremation, the use of funeral home facilities for visitation and worship, and related transportation services, (iii) the marketing and sale of funeral services and cemetery property on an at-need or prearranged basis, (iv) providing, managing and administering financing arrangements (including trust funds, escrow accounts, insurance and installment sales contracts) for prearranged funeral plans and cemetery property and merchandise, (v) providing interment services, the sale (on an at-need or prearranged basis) of cemetery property including lots, lawn crypts, family and community mausoleums and related cemetery merchandise such as monuments, memorials and burial vaults, (vi) the maintenance of cemetery grounds pursuant to perpetual care contracts and laws or on a voluntary basis, and (vii) offering mausoleum design, construction and sales services. 2. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. During the Employment Term, Employee shall hold in a fiduciary capacity for the benefit of the Company all Confidential Information which shall have been obtained by Employee during Employee's employment (whether prior to or after the Agreement Date) and shall use such Confidential Information solely within the scope of his employment with and for the exclusive benefit of the Company. For a period of five years after the Employment Term, commencing with the Date of Termination, Employee agrees (a) not to communicate, divulge or make available to any person or entity (other than the Company) any such Confidential Information, except upon the prior written authorization of the Company or as may be required by law or legal process, and (b) to deliver promptly to the Company any Confidential Information in his possession, including any duplicates thereof and any notes or other records Employee has prepared with respect thereto. In the event that the provisions of any applicable law or the order of any court would require Employee to disclose or otherwise make available any Confidential Information, Employee shall give the Company prompt prior written notice of such required disclosure and an opportunity to contest the requirement of such disclosure or apply for a protective order with respect to such Confidential Information by appropriate proceedings. 3. LIMITED COVENANT NOT TO COMPETE. During the Employment Term and for a period of two years thereafter, commencing with the Date of Termination, Employee agrees that, with respect to each State of the United States or other jurisdiction, or specified portions thereof, in which the Employee regularly (a) makes contact with customers of the Company or any of its subsidiaries, (b) conducts the business of the Company or any of its subsidiaries or (c) supervises the activities of other employees of the Company or any of its subsidiaries, as identified in Appendix "A" attached hereto and forming a part of this Agreement, and in which the Company or any of its subsidiaries engages in the Death Care Business on the Date of Termination (collectively, the "Subject Areas"), Employee will restrict his activities within the Subject Areas as follows: (a) Employee will not, directly or indirectly, for himself or others, own, manage, operate, control, be employed in an executive, managerial or supervisory capacity by, or otherwise engage or participate in or allow his skill, knowledge, experience or reputation to be used in connection with, the ownership, management, operation or control of, any company or other business enterprise engaged in the Death Care Business within any of the Subject Areas; provided, however, that nothing contained herein shall prohibit Employee from making passive investments as long as Employee does not beneficially own more than 2% of the equity interests of a business enterprise engaged in the Death Care Business within any of the Subject Areas. For purposes of this paragraph, "beneficially own" shall have the same meaning ascribed to that term in Rule 13d-3 under the Exchange Act. (b) Employee will not call upon any customer of the Company or its subsidiaries for the purpose of soliciting, diverting or enticing away the business of such person or entity, or otherwise disrupting any previously established relationship existing between such person or entity and the Company or its subsidiaries; (c) Employee will not solicit, induce, influence or attempt to influence any supplier, lessor, licensor, potential acquiree or any other person who has a business relationship with the Company or its subsidiaries, or who on the Date of Termination is engaged in discussions or negotiations to enter into a business relationship with the Company or its subsidiaries, to discontinue or reduce the extent of such relationship with the Company or its subsidiaries; and (d) Employee will not make contact with any of the employees of the Company or its subsidiaries with whom he had contact during the course of his employment with the Company for the purpose of soliciting such employee for hire, whether as an employee or independent contractor, or otherwise disrupting such employee's relationship with the Company or its subsidiaries. (e) Employee further agrees that, for a period of one year from and after the Date of Termination, Employee will not hire, on behalf of himself or any company engaged in the Death Care Business with which Employee is associated, any employee of the Company or its subsidiaries as an employee or independent contractor, whether or not such engagement is solicited by Employee; provided, however, that the restriction contained in this subsection (e) shall not apply to Company employees who reside in, or are hired by Employee to perform work in, any of the Subject Areas located within the States of Virginia, Arkansas or Georgia. Employee agrees that he will from time to time upon the Company's request promptly execute any supplement, amendment, restatement or other modification of Appendix "A" as may be necessary or appropriate to correctly reflect the jurisdictions which, at the time of such modification, should be covered by Appendix "A" and this Article V Section 3. Furthermore, Employee agrees that all references to Appendix "A" in this Agreement shall be deemed to refer to Appendix "A" as so supplemented, amended, restated or otherwise modified from time to time. 4. INJUNCTIVE RELIEF; OTHER REMEDIES. Employee acknowledges that a breach by Employee of Section 2 or 3 of this Article V would cause immediate and irreparable harm to the Company for which an adequate monetary remedy does not exist; hence, Employee agrees that, in the event of a breach or threatened breach by Employee of the provisions of Section 2 or 3 of this Article V during or after the Employment Term, the Company shall be entitled to injunctive relief restraining Employee from such violation without the necessity of proof of actual damage or the posting of any bond, except as required by non-waivable, applicable law. Nothing herein, however, shall be construed as prohibiting the Company from pursuing any other remedy at law or in equity to which the Company may be entitled under applicable law in the event of a breach or threatened breach of this Agreement by Employee, including without limitation the recovery of damages and/or costs and expenses, such as reasonable attorneys' fees, incurred by the Company as a result of any such breach. In addition to the exercise of the foregoing remedies, the Company shall have the right upon the occurrence of any such breach to cancel any unpaid salary, bonus, commissions or reimbursements otherwise outstanding at the Date of Termination. In particular, Employee acknowledges that the payments provided under Article IV Sections 3 and 5 are conditioned upon Employee fulfilling any noncompetition and nondisclosure agreements contained in this Article V. In the event Employee shall at any time materially breach any noncompetition or nondisclosure agreements contained in this Article V, the Company may suspend or eliminate payments under Article IV during the period of such breach. Employee acknowledges that any such suspension or elimination of payments would be an exercise of the Company's right to suspend or terminate its performance hereunder upon Employee's breach of this Agreement; such suspension or elimination of payments would not constitute, and should not be characterized as, the imposition of liquidated damages. 5. REQUESTS FOR WAIVER IN CASES OF UNDUE HARDSHIP. In the event that Employee should find any of the limitations of Article V Section 3 (including without limitation the geographic restrictions of Appendix "A") to impose a severe hardship on Employee's ability to secure other employment, Employee may make a request to the Company for a waiver of the designated limitations before accepting employment that otherwise would be a breach of Employee's promises and obligations under this Agreement. Such request must be in writing and clearly set forth the name and address of the organization with that employment is sought and the location, position and duties that Employee will be performing. The Company will consider the request and, in its sole discretion, decide whether and on what conditions to grant such waiver. 6. GOVERNING LAW OF THIS ARTICLE V; CONSENT TO JURISDICTION. Any dispute regarding the reasonableness of the covenants and agreements set forth in this Article V, or the territorial scope or duration thereof, or the remedies available to the Company upon any breach of such covenants and agreements, shall be governed by and interpreted in accordance with the laws of the State of the United States or other jurisdiction in which the alleged prohibited competing activity or disclosure occurs, and, with respect to each such dispute, the Company and Employee each hereby irrevocably consent to the exclusive jurisdiction of the state and federal courts sitting in the relevant State (or, in the case of any jurisdiction outside the United States, the relevant courts of such jurisdiction) for resolution of such dispute, and agree to be irrevocably bound by any judgment rendered thereby in connection with such dispute, and further agree that service of process may be made upon him or it in any legal proceeding relating to this Article V and/or Appendix "A" by any means allowed under the laws of such jurisdiction. Each party irrevocably waives any objection he or it may have as to the venue of any such suit, action or proceeding brought in such a court or that such a court is an inconvenient forum. 7. EMPLOYEE'S UNDERSTANDING OF THIS ARTICLE. Employee hereby represents to the Company that he has read and understands, and agrees to be bound by, the terms of this Article. Employee acknowledges that the geographic scope and duration of the covenants contained in Article V Section 3 are the result of arm's-length bargaining and are fair and reasonable in light of (i) the importance of the functions performed by Employee and the length of time it would take the Company to find and train a suitable replacement, (ii) the nature and wide geographic scope of the operations of the Company and its subsidiaries, (iii) Employee's level of control over and contact with the business and operations of the Company and its subsidiaries in a significant number of jurisdictions where same are conducted and (iv) the fact that all facets of the Death Care Business are conducted by the Company and its subsidiaries throughout the geographic area where competition is restricted by this Agreement. It is the desire and intent of the parties that the provisions of this Agreement be enforced to the fullest extent permitted under applicable law, whether now or hereafter in effect and, therefore, to the extent permitted by applicable law, the parties hereto waive any provision of applicable law that would render any provision of this Article V invalid or unenforceable. ARTICLE VI MISCELLANEOUS 1. BINDING EFFECT. (a) This Agreement shall be binding upon and inure to the benefit of the Company and any of its successors or assigns. (b) This Agreement is personal to the Employee and shall not be assignable by the Employee without the consent of the Company (there being no obligation to give such consent) other than such rights or benefits as are transferred by will or the laws of descent and distribution. (c) The Company shall require any successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets or businesses of the Company (i) to assume unconditionally and expressly this Agreement and (ii) to agree to perform all of the obligations under this Agreement in the same manner and to the same extent as would have been required of the Company had no assignment or succession occurred, such assumption to be set forth in a writing reasonably satisfactory to the Employee. In the event of any such assignment or succession, the term "Company" as used in this Agreement shall refer also to such successor or assign. 2. NOTICES. All notices hereunder must be in writing and shall be deemed to have given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: Everett N. Kendrick 7031 Winterberry Lane Bethesda, Maryland 20817 or such other address as to which any party hereto may have notified the other in writing. 3. GOVERNING LAW. This Agreement shall be construed and enforced in accordance with and governed by the internal laws of the State of Louisiana without regard to principles of conflict of laws, except as expressly provided in Article V Section 6 above with respect to the resolution of disputes arising under, or the Company's enforcement of, Article V of this Agreement. 4. WITHHOLDING. The Employee agrees that the Company has the right to withhold, from the amounts payable pursuant to this Agreement, all amounts required to be withheld under applicable income and/or employment tax laws, or as otherwise stated in documents granting rights that are affected by this Agreement. 5. SEVERABILITY. If any term or provision of this Agreement (including without limitation those contained in Appendix "A"), or the application thereof to any person or circumstance, shall at any time or to any extent be invalid, illegal or unenforceable in any respect as written, Employee and the Company intend for any court construing this Agreement to modify or limit such provision temporally, spatially or otherwise so as to render it valid and enforceable to the fullest extent allowed by law. Any such provision that is not susceptible of such reformation shall be ignored so as to not affect any other term or provision hereof, and the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid, illegal or unenforceable, shall not be affected thereby and each term and provision of this Agreement shall be valid and enforced to the fullest extent permitted by law. 6. WAIVER OF BREACH. The waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach thereof. 7. REMEDIES NOT EXCLUSIVE. No remedy specified herein shall be deemed to be such party's exclusive remedy, and accordingly, in addition to all of the rights and remedies provided for in this Agreement, the parties shall have all other rights and remedies provided to them by applicable law, rule or regulation. 8. COMPANY'S RESERVATION OF RIGHTS. Employee acknowledges and understands that the Employee serves at the pleasure of the Board and that the Company has the right at any time to terminate Employee's status as an employee of the Company, or to change or diminish his status during the Employment Term, subject to the rights of the Employee to claim the benefits conferred by this Agreement. 9. JURY TRIAL WAIVER. THE PARIES HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO WHICH THEY ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT. 10. SURVIVAL. The rights and obligations of the Company and Employee contained in Article V of this Agreement shall survive the termination of the Agreement. Following the Date of Termination, each party shall have the right to enforce all rights, and shall be bound by all obligations, of such party that are continuing rights and obligations under this Agreement. 11. COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Company and the Employee have caused this Agreement to be executed as of the Agreement Date. STEWART ENTERPRISES, INC. By: /S/ JAMES W. MCFARLAND ----------------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /S/ EVERETT N. KENDRICK ----------------------------------- Everett N. Kendrick EX-10.18 20 0020.txt CHANGE OF CONTROL AGREEMENT This Change of Control Agreement ("Agreement") between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Everett N. Kendrick (the "Employee") is dated as of January 31, 2000 (the "Change of Control Agreement Date"). ARTICLE I DEFINITIONS 1.1 EMPLOYMENT AGREEMENT. After a Change of Control (defined below), this Agreement supersedes the Employment Agreement dated as of January 31, 2000 between Employee and the Company (the "Employment Agreement") except to the extent that certain provisions of the Employment Agreement are expressly incorporated by reference herein. After a Change of Control (defined below), the definitions in this Agreement supersede definitions in the Employment Agreement, but capitalized terms not defined in this Agreement have the meanings given to them in the Employment Agreement. 1.2 DEFINITION OF "COMPANY". As used in this Agreement, "Company" shall mean the Company as defined above and any successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets or business of the Company. 1.3 CHANGE OF CONTROL DEFINED. "Change of Control" shall mean: (a) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 30% of the outstanding shares of the Company's Class A Common Stock, no par value per share (the "Common Stock"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition of Common Stock directly from the Company, (ii) any acquisition of Common Stock by the Company, (iii) any acquisition of Common Stock by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (iv) any acquisition of Common Stock by any corporation pursuant to a transaction that complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 1.3; or (b) individuals who, as of the Change of Control Agreement Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Change of Control Agreement Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered a member of the Incumbent Board, unless such individual's initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Incumbent Board; or (c) consummation of a reorganization, merger or consolidation, or sale or other disposition of all of substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners of the Company's outstanding common stock and the Company's voting securities entitled to vote generally in the election of directors immediately prior to such Business Combination have direct or indirect beneficial ownership, respectively, of more than 50% of the then outstanding shares of common stock, and more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, of the corporation resulting from such Business Combination (which, for purposes of this paragraph (i) and paragraphs (ii) and (iii), shall include a corporation which as a result of such transaction controls the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries), and (ii) except to the extent that such ownership existed prior to the Business Combination, no person (excluding any corporation resulting from such Business Combination or any employee benefit plan or related trust of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the then outstanding shares of common stock of the corporation resulting from such Business Combination or 20% or more of the combined voting power of the then outstanding voting securities of such corporation, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 1.4 AFFILIATE. "Affiliate" or "affiliated companies" shall mean any company controlled by, controlling, or under common control with, the Company. 1.5 CAUSE. "Cause" shall mean: (a) the willful and continued failure of the Employee to perform substantially the Employee's duties with the Company or its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Employee by the Board of the Company which specifically identifies the manner in which the Board believes that the Employee has not substantially performed the Employee's duties, or (b) the willful engaging by the Employee in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company or its affiliates. For purposes of this provision, no act or failure to act, on the part of the Employee, shall be considered "willful" unless it is done, or omitted to be done, by the Employee in bad faith or without reasonable belief that the Employee's action or omission was in the best interests of the Company or its affiliates. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of a senior officer of the Company or based upon the advice of counsel for the Company or its affiliates shall be conclusively presumed to be done, or omitted to be done, by the Employee in good faith and in the best interests of the Company or its affiliates. The cessation of employment of the Employee shall not be deemed to be for Cause unless and until there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Employee and the Employee is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Employee is guilty of the conduct described in subparagraph (a) or (b) above, and specifying the particulars thereof in detail. 1.6 GOOD REASON. "Good Reason" shall mean: (a) Any failure of the Company or its affiliates to provide the Employee with the position, authority, duties and responsibilities at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Change of Control. Employee's position, authority, duties and responsibilities after a Change of Control shall not be considered commensurate in all material respects with Employee's position, authority, duties and responsibilities prior to a Change of Control unless after the Change of Control Employee holds (i) an equivalent position in the Company or, (ii) if the Company is controlled or will after the transaction be controlled by another company (directly or indirectly), an equivalent position in the ultimate parent company. (b) The assignment to the Employee of any duties inconsistent in any material respect with Employee's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 2.1(b) of this Agreement, or any other action that results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith that is remedied within 10 days after receipt of written notice thereof from the Employee to the Company; (c) Any failure by the Company or its affiliates to comply with any of the provisions of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith that is remedied within 10 days after receipt of written notice thereof from the Employee to the Company; (d) The Company or its affiliates requiring the Employee to be based at any office or location other than as provided in Section 2.1(b)(ii) hereof or requiring the Employee to travel on business to a substantially greater extent than required immediately prior to the Change of Control; (e) Any purported termination of the Employee's employment otherwise than as expressly permitted by this Agreement; or (f) Any failure by the Company to comply with and satisfy Sections 3.1(c) and (d) of this Agreement. For purposes of this Section 1.6, any good faith determination of "Good Reason" made by the Employee shall be conclusive. Anything in this Agreement to the contrary notwithstanding, a termination by the Employee for any reason during the 30-day period immediately following the first anniversary of the Change of Control shall be deemed to be a termination for Good Reason. ARTICLE II CHANGE OF CONTROL BENEFIT 2.1 EMPLOYMENT TERM AND CAPACITY AFTER CHANGE OF CONTROL. (a) If a Change of Control occurs on or before October 31, 2000, then the Employee's employment term (the "Employment Term") shall continue through the later of (a) the second anniversary of the Change of Control or (b) October 31, 2000, subject to any earlier termination of Employee's status as an employee pursuant to this Agreement. (b) After a Change of Control and during the Employment Term, (i) the Employee's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Change of Control and (ii) the Employee's service shall be performed at the location where the Employee was employed immediately preceding the Change of Control or any office or location less than 35 miles from such location. Employee's position, authority, duties and responsibilities after a Change of Control shall not be considered commensurate in all material respects with Employee's position, authority, duties and responsibilities prior to a Change of Control unless after the Change of Control Employee holds (x) an equivalent position in the Company or, (y) if the Company is controlled or will after the transaction be controlled by another company (directly or indirectly), an equivalent position in the ultimate parent company. Employee shall devote himself to his employment responsibilities with the Company (or, if applicable, the ultimate parent entity) as provided in Article I Section 3 of the Employment Agreement. 2.2 COMPENSATION AND BENEFITS. During the Employment Term, Employee shall be entitled to the following compensation and benefits: (a) SALARY. A salary ("Base Salary") at the rate of $300,000 per year, payable to the Employee at such intervals no less frequent than the most frequent intervals in effect at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, the intervals in effect at any time after the Change of Control for other peer employees of the Company and its affiliated companies. (b) BONUS. An annual incentive bonus (the "Bonus") of $200,000 shall be paid in cash (1) no later than November 30, 2000 or (2) if the Employee so elects, between January 1 and January 15 of 2001. (c) FRINGE BENEFITS. The Employee shall be entitled to fringe benefits (including, but not limited to, automobile allowance, reimbursement for membership dues, and first class air travel) in accordance with the most favorable agreements, plans, practices, programs and policies of the Company and its affiliated companies in effect for the Employee at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, as in effect generally at any time thereafter with respect to other peer employees of the Company and its affiliated companies. (d) EXPENSES. The Employee shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Employee in accordance with the most favorable agreements, policies, practices and procedures of the Company and its affiliated companies in effect for the Employee at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, as in effect generally at any time thereafter with respect to other peer employees of the Company and its affiliated companies. (e) INCENTIVE, SAVINGS AND RETIREMENT PLANS. The Employee shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer employees of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Employee with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable than the most favorable of those provided by the Company and its affiliated companies for the Employee under any agreements, plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, those provided generally at any time after the Change of Control to other peer employees of the Company and its affiliated companies. (f) WELFARE BENEFIT PLANS. The Employee and/or the Employee's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer employees of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Employee with benefits, in each case, less favorable than the most favorable of any agreements, plans, practices, policies and programs in effect for the Employee at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, those provided generally at any time after the Change of Control to other peer employees of the Company and its affiliated companies. (g) OFFICE AND SUPPORT STAFF. The Employee shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, at least equal to the most favorable of the foregoing provided to the Employee by the Company and its affiliated companies at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, as provided generally at any time thereafter with respect to other peer employees of the Company and its affiliated companies. (h) VACATION. The Employee shall be entitled to paid vacation in accordance with the most favorable agreements, plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Employee at any time during the 120-day period immediately preceding the Change of Control or, if more favorable to the Employee, as in effect generally at any time thereafter with respect to other peer employees of the Company and its affiliated companies. 2.3 TERMINATION OF EMPLOYMENT AFTER A CHANGE OF CONTROL. After a Change of Control and during the Employment Term, the Employee's status as an employee shall terminate or may be terminated by the Employee, the Company (or, if applicable, the ultimate parent company), as provided in Article III of the Employment Agreement (provided, however, that the definitions of "Cause" and "Good Reason" in this Agreement shall supersede those definitions in the Employment Agreement). 2.4 OBLIGATIONS UPON TERMINATION AFTER A CHANGE OF CONTROL. (a) TERMINATION BY COMPANY FOR REASONS OTHER THAN DEATH, DISABILITY OR CAUSE; BY EMPLOYEE FOR GOOD REASON. If, after a Change of Control and during the Employment Term, the Company (or, if applicable the ultimate parent company), terminates the Employee's employment other than for Cause, death or Disability, or the Employee terminates employment for Good Reason, the Company shall pay to the Employee in a lump sum in cash within 30 days of the Date of Termination an amount equal to three times the sum of (i) the amount of Base Salary in effect at the Date of Termination, plus (ii) the maximum Bonus for which the Employee is eligible for the 12-month period in which the Date of Termination occurs. (b) DEATH. If, after a Change of Control and during the Employment Term, the Employee's status as an employee is terminated by reason of the Employee's death, this Agreement shall terminate without further obligation to the Employee's legal representatives (other than those already accrued to the Employee), other than the obligation to make any payments due pursuant to employee benefit plans maintained by the Company or its affiliated companies. (c) DISABILITY. If, after a Change of Control and during the Employment Term, Employee's status as an employee is terminated by reason of Employee's Disability (as defined in the Employment Agreement), this Agreement shall terminate without further obligation to the Employee (other than those already accrued to the Employee), other than the obligation to make any payments due pursuant to employee benefit plans maintained by the Company or its affiliated companies. (d) CAUSE. If, after a Change of Control and during the Employment Term, the Employee's status as an employee is terminated by the Company (or, if applicable, the ultimate parent entity) for Cause, this Agreement shall terminate without further obligation to the Employee other than for obligations imposed by law and obligations imposed pursuant to any employee benefit plan maintained by the Company or its affiliated companies. (e) TERMINATION BY EMPLOYEE FOR REASONS OTHER THAN GOOD REASON. If, after a Change of Control and during the Employment Term, the Employee's status as an employee is terminated by the Employee for reasons other than Good Reason, then the Company shall pay to the Employee an amount equal to a single year's Base Salary in effect at the Date of Termination, payable in equal installments over a two-year period at such intervals as other salaried employees of the Company are paid. (f) NONDISCLOSURE, NONCOMPETITION AND PROPRIETARY RIGHTS. The rights and obligations of the Company and Employee contained in Article V ("Nondisclosure, Noncompetition and Proprietary Rights") of the Employment Agreement shall continue to apply after a Change of Control, except as provided in Section 2.10 of this Agreement. 2.5 ACCRUED OBLIGATIONS AND OTHER BENEFITS. It is the intent of the Employment Agreement and this Agreement that upon termination of employment for any reason the Employee be entitled to receive promptly, and in addition to any other benefits specifically provided, (a) the Employee's Base Salary through the Date of Termination to the extent not theretofore paid, (b) any accrued vacation pay, to the extent not theretofore paid, and (c) any other amounts or benefits required to be paid or provided or which the Employee is entitled to receive under any plan, program, policy practice or agreement of the Company. 2.6 STOCK OPTIONS. The foregoing benefits are intended to be in addition to the value of any options to acquire Common Stock of the Company the exercisability of which is accelerated pursuant to the terms of any stock option, incentive or other similar plan heretofore or hereafter adopted by the Company. 2.7 PROTECTION OF BENEFITS. To the extent permitted by applicable law, the Company shall take all reasonable steps to ensure that the Employee is not, by reason of a Change of Control, deprived of the economic value (including any value attributable to the Change of Control transaction) of (a) any options to acquire Common Stock of the Company or (b) any Common Stock of the Company beneficially owned by the Employee. 2.8 CERTAIN ADDITIONAL PAYMENTS. If after a Change of Control Employee is subjected to an excise tax as a result of the "excess parachute payment" provisions of section 4999 of the Internal Revenue Code of 1986, as amended, whether by virtue of the benefits of this Agreement or by virtue of any other benefits provided to Employee in connection with a Change of Control pursuant to Company plans, policies or agreements (including the value of any options to acquire Common Stock of the Company the exercisability of which is accelerated pursuant to the terms of any stock option, incentive or similar plan heretofore or hereafter adopted by the Company), the Company shall pay to Employee (whether or not his employment has terminated) such amounts as are necessary to place Employee in the same position after payment of federal income and excise taxes as he would have been if such provisions had not been applicable to him. 2.9 LEGAL FEES. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which the Employee may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Employee or others of the validity or enforceability of, or liability under, any provision of this Agreement (including as a result of any contest by the Employee about the amount or timing of any payment pursuant to this Agreement.) 2.10 SET-OFF; MITIGATION. After a Change of Control, the Company's and its affiliates' obligations to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company or its affiliates may have against the Employee or others. After a Change of Control, an asserted violation of the provisions of Article V ("Nondisclosure, Noncompetition and Proprietary Rights") of the Employment Agreement shall not constitute a basis for deferring or withholding any amounts otherwise payable to the Employee; specifically, the third through sixth sentences of Article V Section 4 shall not apply after a Change of Control. It is the intent of the Employment Agreement and this Agreement that in no event shall the Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Employee under any of the provisions of this Agreement or the Employment Agreement. ARTICLE III MISCELLANEOUS 3.1 BINDING EFFECT; SUCCESSORS. (a) This Agreement shall be binding upon and inure to the benefit of the Company and any of its successors or assigns. (b) This Agreement is personal to the Employee and shall not be assignable by the Employee without the consent of the Company (there being no obligation to give such consent) other than such rights or benefits as are transferred by will or the laws of descent and distribution. (c) The Company shall require any successor to or assignee of (whether direct or indirect, by purchase, merger, consolidation or otherwise) all or substantially all of the assets or businesses of the Company (i) to assume unconditionally and expressly this Agreement and (ii) to agree to perform or to cause to be performed all of the obligations under this Agreement in the same manner and to the same extent as would have been required of the Company had no assignment or succession occurred, such assumption to be set forth in a writing reasonably satisfactory to the Employee. (d) The Company shall also require all entities that control or that after the transaction will control (directly or indirectly) the Company or any such successor or assignee to agree to cause to be performed all of the obligations under this Agreement, such agreement to be set forth in a writing reasonably satisfactory to the Employee. 3.2 NOTICES. All notices hereunder must be in writing and shall be deemed to have given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: Everett N. Kendrick 7031 Winterberry Lane Bethesda, Maryland 20817 or such other address as to which any party hereto may have notified the other in writing. 3.3 GOVERNING LAW. This Agreement shall be construed and enforced in accordance with and governed by the internal laws of the State of Louisiana without regard to principles of conflict of laws, except as expressly provided in Article V Section 6 of the Employment Agreement with respect to the resolution of disputes arising under, or the Company's enforcement of, such Article V. 3.4 WITHHOLDING. The Employee agrees that the Company has the right to withhold, from the amounts payable pursuant to this Agreement, all amounts required to be withheld under applicable income and/or employment tax laws, or as otherwise stated in documents granting rights that are affected by this Agreement. 3.5 AMENDMENT, WAIVER. No provision of this Agreement may be modified, amended or waived except by an instrument in writing signed by both parties. 3.6 SEVERABILITY. If any term or provision of this Agreement, or the application thereof to any person or circumstance, shall at any time or to any extent be invalid, illegal or unenforceable in any respect as written, Employee and the Company intend for any court construing this Agreement to modify or limit such provision so as to render it valid and enforceable to the fullest extent allowed by law. Any such provision that is not susceptible of such reformation shall be ignored so as to not affect any other term or provision hereof, and the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid, illegal or unenforceable, shall not be affected thereby and each term and provision of this Agreement shall be valid and enforced to the fullest extent permitted by law. 3.7 WAIVER OF BREACH. The waiver by either party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach thereof. 3.8 REMEDIES NOT EXCLUSIVE. No remedy specified herein shall be deemed to be such party's exclusive remedy, and accordingly, in addition to all of the rights and remedies provided for in this Agreement, the parties shall have all other rights and remedies provided to them by applicable law, rule or regulation. 3.9 COMPANY'S RESERVATION OF RIGHTS. Employee acknowledges and understands that the Employee serves at the pleasure of the Board and that the Company has the right at any time to terminate Employee's status as an employee of the Company, or to change or diminish his status during the Employment Term, subject to the rights of the Employee to claim the benefits conferred by this Agreement. 3.10 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. IN WITNESS WHEREOF, the Company and the Employee have caused this Agreement to be executed as of the Change of Control Agreement Date. STEWART ENTERPRISES, INC. By: /S/ JAMES W. MCFARLAND ---------------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /S/ EVERETT N. KENDRICK ---------------------------------- Everett N. Kendrick EX-10.19 21 0021.txt INDEMNITY AGREEMENT This INDEMNITY AGREEMENT is made as of January 31, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Corporation"), and Everett N. Kendrick ("Indemnitee"). In consideration of Indemnitee's continued service after the date hereof, the Corporation and Indemnitee do hereby agree as follows: 1. AGREEMENT TO SERVE. Indemnitee shall serve or continue to serve as an officer of the Corporation, and as a director or officer of any other corporation, subsidiary, partnership, joint venture, trust or other enterprise of which he is serving at the request of the Corporation, and agrees to serve in such capacities for so long as he is duly elected or appointed and qualified or until such earlier time as he tenders his resignation in writing. 2. DEFINITIONS. As used in this Agreement: (a) The term "Claim" shall mean any threatened, pending or completed claim, action, suit or proceeding, including appeals, whether civil, criminal, administrative or investigative and whether made judicially or extra-judicially, including any action by or in the right of the Corporation, or any separate issue or matter therein, as the context requires. (b) The term "Determining Body" shall mean (i) those members of the Board of Directors who are not named as parties to the Claim for which indemnification is being sought ("Impartial Directors"), if there are at least three Impartial Directors, or (ii) a committee of at least three Impartial Directors appointed by the Board or a duly authorized committee thereof (regardless whether the directors voting on such appointment are Impartial Directors) or (iii) if there are fewer than three Impartial Directors or if the Board of Directors or the committee appointed pursuant to clause (ii) of this paragraph so directs (regardless whether the directors voting on such appointment are Impartial Directors), independent legal counsel, which may be the regular outside counsel of the Corporation, as designated by the Impartial Directors or, if no such directors exist, the full Board of Directors. (c) The term "Disbursing Officer" shall mean the President of the Corporation or, if the President has a direct or indirect interest in the Claim for which indemnification is being sought, any officer who does not have such an interest and who is designated by the President to be the Disbursing Officer with respect to indemnification requests related to the Claim, which designation shall be made promptly after receipt of the initial request for indemnification with respect to such Claim. (d) The term "Expenses" shall mean any expenses or costs including, without limitation, attorney's fees, judgments, punitive or exemplary damages, fines, excise taxes or amounts paid in settlement. (e) The term "Insurance Policy" shall mean the Directors and Officers Liability Policy that the Corporation has obtained from CNA, and the Excess Directors and Officers Liability Policies that the Corporation has obtained from Reliance Insurance Co. and Chubb/Federal Insurance Company, on behalf of its directors and officers for the policy period commencing September 27, 1999 and ending September 27, 2000. 3. LIMITATION OF LIABILITY. To the fullest extent permitted by Article VII of the Articles of Incorporation of the Corporation (as in effect on the date hereof), Indemnitee shall not be liable for any breach of his fiduciary duty. If and to the extent such provisions are amended to permit further limitations of liability, Indemnitee shall not be liable for any breach of his fiduciary duty to the fullest extent permitted after any such amendment. 4. MAINTENANCE OF INSURANCE. (a) The Corporation represents and warrants that it presently maintains in force and effect a directors and officers liability insurance policy with coverage comparable to the coverage provided under the Insurance Policy, and Indemnitee represents and warrants that he has been furnished with a copy of the policy currently in effect and of the Insurance Policy. Subject only to the provisions of Section 4(b) hereof, the Corporation hereby agrees that, so long as Indemnitee shall continue to serve in any capacity referred to in Section 5(a) hereof and thereafter so long as Indemnitee shall be subject to any possible Claim, the Corporation shall use its commercially reasonable best efforts to purchase and maintain in effect for the benefit of Indemnitee one or more valid and enforceable policies of directors and officers liability insurance providing, in all respects, coverage at least comparable to that provided pursuant to the Insurance Policy. (b) The Corporation shall not be required to purchase and maintain the Insurance Policy or any comparable policy if directors and officers liability insurance is not reasonably available or if, in the reasonable business judgment of the then directors of the Corporation, there is insufficient benefit to the Corporation from such insurance. 5. ADDITIONAL INDEMNITY. (a) To the extent any Expenses incurred by Indemnitee are in excess of the amounts reimbursed or indemnified pursuant to the provisions of Section 4 hereof, the Corporation shall indemnify and hold harmless Indemnitee against any Expenses actually and reasonably incurred by Indemnitee (as they are incurred) in connection with any Claim against Indemnitee, or involving Indemnitee solely as a witness or person required to give evidence, by reason of Indemnitee's position as a (i) director or officer of the Corporation, (ii) director or officer of any subsidiary of the Corporation or as a fiduciary with respect to any employee benefit plan of the Corporation, or (iii) director, officer, partner, employee or agent of another corporation, partnership, joint venture, trust or other for- profit or not-for-profit entity or enterprise, if such position is or was held at the request of the Corporation, whether relating to service in such position before or after the effective date of this Agreement, if (A) Indemnitee is successful in his defense of the Claim on the merits or otherwise or (B) Indemnitee has been found by the Determining Body to have met the Standard of Conduct (as hereinafter defined); provided that (1) the amount of Expenses for which the Corporation shall indemnify Indemnitee may be reduced by the Determining Body to such amount as it deems proper if it determines that the Claim involved the receipt of personal benefit by Indemnitee, and (2) no indemnification shall be made in respect of any Claim as to which Indemnitee shall have been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable for willful or intentional misconduct in the performance of his duty to the Corporation or to have obtained an improper personal benefit, unless, and only to the extent that, a court shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such Expenses which the court shall deem proper. (b) For purposes of this Agreement, the "Standard of Conduct" is met when conduct by Indemnitee with respect to which a Claim is asserted was conduct performed in good faith which he reasonably believed to be in, or not opposed to, the best interest of the Corporation, and, in the case of a Claim which is a criminal action or proceeding, conduct that Indemnitee had no reasonable cause to believe was unlawful. The termination of any Claim by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that Indemnitee did not meet the Standard of Conduct. (c) Promptly upon becoming aware of the existence of any Claim as to which Indemnitee may be indemnified for Expenses and as to which Indemnitee desires to obtain indemnification, Indemnitee shall notify the President of the Corporation, but the failure to promptly notify the President shall not relieve the Corporation from any obligation hereunder, except and to the extent that such failure has materially and irrevocably harmed the Corporation's ability to defend against such Claim pursuant to Section 5(f) hereof. Upon receipt of such request, the President shall promptly advise the members of the Board of Directors of the request and that the establishment of a Determining Body with respect thereto will be a matter to be considered at the next regularly scheduled meeting of the Board. If a meeting of the Board of Directors is not regularly scheduled within 120 calendar days of the date the President receives notice of the Claim, the President shall cause a special meeting of the Board of Directors to be called within such period in accordance with the provisions of the Corporation's By-laws. After the Determining Body has been established, the President shall inform Indemnitee of the constitution of the Determining Body and Indemnitee shall provide the Determining Body with all facts relevant to the Claim known to him, and deliver to the Determining Body all documents relevant to the Claim in his possession. Before the 60th day (the "Determination Date") after its receipt from Indemnitee of such information, together with such additional information as the Determining Body may reasonably request of Indemnitee prior to such date (the receipt of which shall not begin a new 60-day period), the Determining Body shall determine whether or not Indemnitee has met the Standard of Conduct and shall advise Indemnitee of its determination. If Indemnitee shall have supplied the Determining Body with all relevant information, including all additional information reasonably requested by the Determining Body, any failure of the Determining Body to make a determination by or on the Determination Date as to whether the Standard of Conduct was met shall be deemed to be a determination that the Standard of Conduct was met by Indemnitee. (d) If at any time during the 60-day period ending on the Determination Date, Indemnitee becomes aware of any relevant facts or documents not theretofore provided by him to the Determining Body, Indemnitee shall promptly inform the Determining Body of such facts or documents, unless the Determining Body has obtained such facts or documents from another source. The provision of such facts to the Determining Body shall not begin a new 60-day period. (e) The Determining Body shall have no power to revoke a determination that Indemnitee met the Standard of Conduct unless Indemnitee (i) submits fraudulent information to the Determining Body at any time during the 60 days prior to the Determination Date or (ii) fails to comply with the provisions of Sections 5(c) or 5(d) hereof, including without limitation Indemnitee's obligation to submit information or documents relevant to the Claim reasonably requested by the Determining Body prior to the Determination Date. (f) In the case of any Claim not involving any proposed, threatened or pending criminal proceeding, (i) if Indemnitee has, in the judgment of the Determining Body, met the Standard of Conduct, the Corporation may, except as otherwise provided below, individually or jointly with any other indemnifying party similarly notified, assume the defense thereof with counsel reasonably satisfactory to Indemnitee. If the Corporation assumes the defense of the Claim, it shall keep Indemnitee informed as to the progress of such defense so that Indemnitee may make an informed decision as to the need for separate counsel. After notice from the Corporation that it is assuming the defense of the Claim, it will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense other than reasonable costs of investigation or as otherwise provided below. Indemnitee shall have the right to employ its own counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after such notice from the Corporation of its assumption of the defense shall be at the expense of Indemnitee unless (A) the employment of counsel by Indemnitee has been authorized by the Determining Body, (B) Indemnitee shall have concluded reasonably that there may be a conflict of interest between the Corporation and Indemnitee in the conduct of the defense of such action or (C) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel shall be at the expense of the Corporation. The Corporation shall not be entitled to assume the defense of any action, suit or proceeding brought by or in the right of the Corporation or as to which Indemnitee shall have made the conclusion provided for in (B) above; and (ii) the Corporation shall fairly consider any proposals by Indemnitee for settlement of the Claim. If the Corporation proposes a settlement of the Claim and such settlement is acceptable to the person asserting the Claim, or the Corporation believes a settlement proposed by the person asserting the Claim should be accepted, it shall inform Indemnitee of the terms of such proposed settlement and shall fix a reasonable date by which Indemnitee shall respond. If Indemnitee agrees to such terms, he shall execute such documents as shall be necessary to make final the settlement. If Indemnitee does not agree with such terms, Indemnitee may proceed with the defense of the Claim in any manner he chooses, provided that if Indemnitee is not successful on the merits or otherwise, the Corporation's obligation to indemnify such Indemnitee as to any Expenses incurred following his disagreement with the Corporation shall be limited to the lesser of (A) the total Expenses incurred by Indemnitee following his decision not to agree to such proposed settlement or (B) the amount that the Corporation would have paid pursuant to the terms of the proposed settlement. If, however, the proposed settlement would impose upon Indemnitee any requirement to act or refrain from acting that would materially interfere with the conduct of Indemnitee's affairs, Indemnitee may refuse such settlement and continue his defense of the Claim, if he so desires, at the Corporation's expense in accordance with the terms and conditions of this Agreement without regard to the limitations imposed by the immediately preceding sentence. In any event, the Corporation shall not be obligated to indemnify Indemnitee for any amount paid in a settlement that the Corporation has not approved. (g) In the case of any Claim involving a proposed, threatened or pending criminal proceeding, Indemnitee shall be entitled to conduct the defense of the Claim with counsel of his choice and to make all decisions with respect thereto, provided, however, that the Corporation shall not be obliged to indemnify Indemnitee for any amount paid in settlement of such a Claim unless the Corporation has approved such settlement. (h) After notifying the Corporation of the existence of a Claim, Indemnitee may from time to time request the Corporation to pay the Expenses (other than judgments, fines, penalties or amounts paid in settlement) that he incurs in pursuing a defense of the Claim prior to the time that the Determining Body determines whether the Standard of Conduct has been met. The Disbursing Officer shall pay to Indemnitee the amount requested (regardless of Indemnitee's apparent ability to repay such amount) upon receipt of an undertaking by or on behalf of Indemnitee to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation under the circumstances, provided, however, that if the Disbursing Officer does not believe such amount to be reasonable, he shall advance the amount deemed by him to be reasonable and Indemnitee may apply directly to the Determining Body for the remainder of the amount requested. (i) After the Determining Body has determined that the Standard of Conduct has been met, for so long as and to the extent that the Corporation is required to indemnify Indemnitee under this Agreement, the provisions of Section 5(h) hereof shall continue to apply with respect to Expenses incurred after such time except that (i) no undertaking shall be required of Indemnitee and (ii) the Disbursing Officer shall pay to Indemnitee the amount of any fines, penalties or judgments against him which have become final and for which he is entitled to indemnification hereunder, and any amount of indemnification ordered to be paid to him by a court. (j) Any determination by the Corporation with respect to settlement of a Claim shall be made by the Determining Body. (k) All determinations and judgments made by the Determining Body hereunder shall be made in good faith. 6. ENFORCEMENT. (a) The rights provided by this Agreement shall be enforceable by Indemnitee in any court of competent jurisdiction. (b) If Indemnitee seeks a judicial adjudication of his rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all expenses actually and reasonably incurred by him in connection with such proceeding, but only if he prevails therein. If it shall be determined that Indemnitee is entitled to receive part but not all of the relief sought, then Indemnitee shall be entitled to be reimbursed for all expenses incurred by him in connection with such judicial adjudication if the amount to which he is determined to be entitled exceeds 50% of the amount of his claim. Otherwise, the expenses incurred by Indemnitee in connection with such judicial adjudication shall be appropriately prorated. (c) In any judicial proceeding described in this Section 6, the Corporation shall bear the burden of proving that Indemnitee is not entitled to the relief sought. 7. SAVING CLAUSE. If any provision of this Agreement is determined by a court having jurisdiction over the matter to violate or conflict with applicable law, the court shall be empowered to modify or reform such provision so that, as modified or reformed, such provision provides the maximum indemnification permitted by law and such provision, as so modified or reformed, and the balance of this Agreement, shall be applied in accordance with their terms. Without limiting the generality of the foregoing, if any portion of this Agreement shall be invalidated on any ground, the Corporation shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated and to the full extent permitted by law with respect to that portion that has been invalidated. 8. NON-EXCLUSIVITY. (a) The indemnification and advancement of Expenses provided by or granted pursuant to this Agreement shall not be deemed exclusive of any other rights to which Indemnitee is or may become entitled under any statute, articles of incorporation, by-law, authorization of stockholders or directors, agreement, or otherwise. (b) It is the intent of the Corporation by this Agreement to indemnify and hold harmless Indemnitee to the fullest extent permitted by law, so that if applicable law would permit the Corporation to provide broader indemnification rights than are currently permitted, the Corporation shall indemnify and hold harmless Indemnitee to the fullest extent permitted by applicable law notwithstanding that the other terms of this Agreement would provide for lesser indemnification. 9. CONFIDENTIALITY. The Corporation and Indemnitee shall keep confidential to the extent permitted by law and their fiduciary obligations all information and determinations provided pursuant to or arising out of the operations of this Agreement and the Corporation and Indemnitee shall instruct its or his agents and employees to do likewise. 10. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall constitute an original but all of which taken together shall be deemed to constitute a single instrument. 11. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Louisiana. 12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon Indemnitee and upon the Corporation, its successors and assigns, and shall inure to the benefit of Indemnitee's heirs, personal representatives, and assigns and to the benefit of the Corporation, its successors and assigns. 13. AMENDMENT. No amendment, modification, termination or cancellation of this Agreement shall be effective unless made in writing signed by the Corporation and Indemnitee. Notwithstanding any amendment, modification, termination or cancellation of this Agreement or any portion hereof, Indemnitee shall be entitled to indemnification in accordance with the provisions hereof with respect to any acts or omissions of Indemnitee which occur prior to such amendment, modification, termination or cancellation. 14. GENDER. All pronouns and variations thereof used in this Agreement shall be deemed to refer to the masculine, feminine or neuter gender, singular or plural, as the identity of the person, persons, entity or entities referred to may require. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and signed as of the date and year first above written. STEWART ENTERPRISES, INC. By: /S/ JAMES W. MCFARLAND ------------------------------- James W. McFarland Compensation Committee Chairman INDEMNITEE: /S/ EVERETT N. KENDRICK ------------------------------- Everett N. Kendrick EX-10.20 22 0022.txt AMENDMENT NO. 4 TO EMPLOYMENT AGREEMENT This Amendment No. 4 to Employment Agreement is made as of the 25th day of July, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Lawrence B. Hawkins (the "Employee"). W I T N E S S E T H: WHEREAS, the Company has entered into an Employment Agreement with the Employee dated as of August 1, 1995 as amended by Amendment No. 1 dated as of January 1, 1997, Amendment No. 2 dated as of October 31, 1998, and Amendment No. 3 dated as of September 21, 1999 (as amended, the "Employment Agreement"); and WHEREAS, the Company and the Employee have agreed to a change in the Employee's bonus, effective November 1, 1999, as set forth herein. NOW THEREFORE, the Company and the Employee agree as follows: SECTION 1. Except as expressly amended herein, all of the terms and provisions of the Employment Agreement shall remain in full force and effect. SECTION 2. Article II, Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: 2. BONUS. (a) For fiscal years beginning November 1, 1999, the Employee shall be eligible to receive an annual incentive bonus (the "Bonus") of up to $265,000 per Fiscal Year. The Bonus will be awarded based upon factors to be established annually and set forth in an annual supplement to this Agreement. (b) The Bonus shall be paid in cash not later than 30 days following the filing of the Company's annual report on Form 10-K for the Fiscal Year in which the Bonus has been earned. SECTION 3. Article VI, Section 2 of the Employment Agreement is hereby amended to read in its entirety as follows: 2. NOTICES. All notices hereunder must be in writing and shall be deemed to have been given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: Lawrence B. Hawkins 4414 Wildwood Dallas, Texas 75209 or such other address as to which any party hereto may have notified the other in writing. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and signed as of the date indicated above. STEWART ENTERPRISES, INC. By:/s/ James W. McFarland --------------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /s/ Lawrence B. Hawkins --------------------------------- Lawrence B. Hawkins EX-10.21 23 0023.txt AMENDMENT NO. 4 TO CHANGE OF CONTROL AGREEMENT This Amendment No. 4 to Change of Control Agreement is made as of the 25th day of July, 2000, by and between Stewart Enterprises, Inc., a Louisiana corporation (the "Company"), and Lawrence B. Hawkins (the "Employee"). W I T N E S S E T H: WHEREAS, the Company has entered into a Change of Control Agreement with the Employee dated as of December 5, 1995 as amended by Amendment No. 1 to Change of Control Agreement dated as of January 1, 1997, Amendment No. 2 to Change of Control Agreement dated as of November 1, 1998, and Amendment No. 3 to Change of Control Agreement dated as of September 21, 1999 (as amended, the "Change of Control Agreement"); and WHEREAS, the Company and the Employee have agreed to a change in the Employee's bonus. NOW THEREFORE, the Company and the Employee agree as follows: SECTION 1. Except as expressly amended herein, all of the terms and provisions of the Change of Control Agreement shall remain in full force and effect. SECTION 2. Article I, Section 1.1 of the Change of Control Agreement is hereby amended to read in its entirety as follows: 1.1 EMPLOYMENT AGREEMENT. After a Change of Control (defined below), this Agreement supersedes the Employment Agreement dated as of August 1, 1995 as amended by Amendment No. 1 dated as of January 1, 1997, Amendment No. 2 dated as of October 31, 1998, Amendment No. 3 dated as of September 21, 1999, and Amendment No. 4 dated as of July 25, 2000, between Employee and the Company (as amended, the "Employment Agreement") except to the extent that certain provisions of the Employment Agreement are expressly incorporated by reference herein. After a Change of Control (defined below), the definitions in this Agreement supersede definitions in the Employment Agreement, but capitalized terms not defined in this Agreement have the meanings given to them in the Employment Agreement. SECTION 3. Article II, Section 2.2, paragraph (b) of the Change of Control Agreement is hereby amended to read in its entirety as follows: (b) BONUS. An annual incentive bonus (the "Bonus") of $265,000, to the extent not already received, shall be paid in cash (1) no later than November 30 of each year or (2) if the Employee elects to receive the Bonus in the calendar year following the year in which it was earned, between January 1 and January 15 of such following year. SECTION 4. Article III, Section 3.2 of the Change of Control Agreement is hereby amended to read in its entirety as follows: 3.2 NOTICES. All notices hereunder must be in writing and shall be deemed to have given upon receipt of delivery by: (a) hand (against a receipt therefor), (b) certified or registered mail, postage prepaid, return receipt requested, (c) a nationally recognized overnight courier service (against a receipt therefor) or (d) telecopy transmission with confirmation of receipt. All such notices must be addressed as follows: If to the Company, to: Stewart Enterprises, Inc. 110 Veterans Memorial Boulevard Metairie, Louisiana 70005 Attn: Chief Executive Officer If to the Employee, to: Lawrence B. Hawkins 4414 Wildwood Dallas, Texas 75209 or such other address as to which any party hereto may have notified the other in writing. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and signed as of the date indicated above. STEWART ENTERPRISES, INC. By:/s/ James W. McFarland --------------------------------- James W. McFarland Compensation Committee Chairman EMPLOYEE: /s/ Lawrence B. Hawkins --------------------------------- Lawrence B. Hawkins EX-12 24 0024.txt STEWART ENTERPRISES, INC. Exhibit 12 AND SUBSIDIARIES CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES (DOLLARS IN THOUSANDS) (UNAUDITED)
NINE MONTHS YEARS ENDED OCTOBER 31, ENDED ------------------------------------------------------ JULY 31, 1995 1996 1997 1998 1999 2000 -------- -------- -------- -------- -------- ----------- Earnings from operations before income taxes ......................... $ 41,500(1) $ 82,075 $106,477(2) $ 64,964(3) $142,551(4) $ 88,582 Fixed charges: Interest charges ....................... 22,815 26,051 38,031 44,107 55,543 46,772 Interest portion of lease expense ...... 1,343 1,522 2,181 2,814 2,859 2,130 -------- -------- -------- -------- -------- ----------- Total fixed charges ........................... 24,158 27,573 40,212 46,921 58,402 48,902 Earnings from operations before income taxes and fixed charges, less capitalized interest .................................... $ 65,658(1) $109,648 $146,689(2) $111,599(3) $200,118(4) $ 136,767 ======== ======== ======== ======== ======== =========== Ratio of earnings to fixed charges ............ 2.72(1) 3.98 3.65(2) 2.38(3) 3.43(4) 2.80 ======== ======== ======== ======== ======== ===========
- --------------------- (1) Includes a nonrecurring, noncash charge of $17,252 recorded in connection with the vesting of the Company's performance-based stock options. (2) Excludes cumulative effect of change in accounting principles of $2,324 (net of $2,230 income tax benefit). (3) Includes a nonrecurring, noncash charge of $76,762 recorded in connection with the vesting of the Company's performance-based stock options. (4) Excludes cumulative effect of change in accounting principle of $50,101 (net of $28,798 income tax benefit). - --------------------- During the periods presented the Company had no preferred stock outstanding. Therefore, the ratio of earnings to combined fixed charges and preference dividends was the same as the ratio of earnings to fixed charges for each of the periods presented. EX-27 25 0025.txt
5 9-MOS OCT-31-2000 JUL-31-2000 82,686 8,734 174,436 0 59,204 331,418 590,745 140,544 2,335,031 134,619 921,757 0 0 106,832 977,926 2,335,031 563,644 563,644 419,217 419,217 0 0 43,440 88,582 32,332 56,250 0 0 0 56,250 .53 .53
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