SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. - )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
STEWART ENTERPRISES, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
______________________________________________________________
2) Aggregate number of securities to which transaction applies:
______________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
______________________________________________________________
4) Proposed maximum aggregate value of transaction:
______________________________________________________________
5) Total Fee Paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
________________________
2) Form, Schedule or Registration Statement No.:
________________________
3) Filing Party:
________________________
4) Date Filed:
________________________
[LETTERHEAD OF FRANK B. STEWART, JR.]
February 26, 1999
To our shareholders:
You are cordially invited to the annual meeting of shareholders of
Stewart Enterprises, Inc. to be held at 11:00 a.m. on April 9, 1999 in the
Azalea Room I of the Westin Canal Place, 100 Rue Iberville, New Orleans,
Louisiana.
The attached notice of meeting and proxy statement describe in detail
the matters proposed by your board of directors to be considered and voted
upon at the meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING.
ACCORDINGLY, WE ASK THAT YOU READ THE ATTACHED NOTICE OF MEETING AND PROXY
STATEMENT CAREFULLY AND THAT YOU COMPLETE, DATE AND SIGN THE ENCLOSED PROXY
AND RETURN IT PROMPTLY IN THE ACCOMPANYING POSTPAID ENVELOPE. This will
ensure that your vote is counted. Furnishing the enclosed proxy will not
prevent you from voting in person at the meeting if you wish to do so.
Please return the enclosed proxy and save us the cost of having to
contact you again in order to obtain your signed proxy.
Sincerely,
/s/ Frank B. Stewart, Jr.
----------------------------
Frank B. Stewart, Jr.
Chairman of the Board
STEWART ENTERPRISES, INC.
110 VETERANS MEMORIAL BOULEVARD
METAIRIE, LOUISIANA 70005
___________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
___________________________________________
TO THE SHAREHOLDERS OF STEWART ENTERPRISES, INC.:
You are cordially invited to the 1999 annual meeting of our shareholders
which will be held in the Azalea Room I of the Westin Canal Place, 100 Rue
Iberville, New Orleans, Louisiana, on April 9, 1999 at 11:00 a.m. for the
following purposes:
* To elect three directors to serve a three-year term of office expiring
at our 2002 annual meeting
* To ratify the appointment of PricewaterhouseCoopers LLP, certified
public accountants, as independent auditors for the fiscal year ending
October 31, 1999
* To transact such other business as may properly come before the meeting
or any adjournment thereof
Only shareholders of record at the close of business on February 15, 1999
are entitled to notice of and to vote at our 1999 annual meeting.
If you are unable to attend in person and wish to have your shares voted,
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE
ACCOMPANYING POSTPAID ENVELOPE AS PROMPTLY AS POSSIBLE. You may revoke your
proxy by giving notice to our Secretary at any time before it is voted at the
annual meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Loralice A. Trahan
-----------------------------------
Loralice A. Trahan
Secretary
Metairie, Louisiana
February 26, 1999
STEWART ENTERPRISES, INC.
110 VETERANS MEMORIAL BOULEVARD
METAIRIE, LOUISIANA 70005
FEBRUARY 26, 1999
PROXY STATEMENT
We are furnishing this proxy statement to our shareholders in connection
with the solicitation of proxies on behalf of our board of directors for use at
the 1999 annual meeting of our shareholders to be held on April 9, 1999 at
11:00 a.m. in the Azalea Room I of the Westin Canal Place, 100 Rue Iberville,
New Orleans, Louisiana.
Only shareholders of record of our Class A and Class B Common Stock at
the close of business on February 15, 1999 are entitled to notice of and to
vote at our 1999 annual meeting. On that date, we had outstanding (A)
108,150,239 shares of our Class A Common Stock, each of which is entitled to
one vote, and (B) 3,555,020 shares of our Class B Common Stock, each of which
is entitled to ten votes.
You may revoke your proxy at any time before it is voted at the annual
meeting by filing with our Secretary a written revocation or duly executed
proxy bearing a later date. Your proxy will be deemed revoked if you are
present at the annual meeting and vote in person.
We will begin mailing this proxy statement to our shareholders on or
about February 26, 1999, and we will bear the cost of soliciting proxies in the
enclosed form. In addition to the use of the mails, proxies may be solicited
by personal interview, telephone and facsimile. We will ask banks, brokerage
houses and other institutions, nominees and fiduciaries to forward the
soliciting material to their principals and to obtain authorization for the
execution of proxies, and we will, upon request, reimburse them for their
reasonable expenses in so acting.
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND CERTAIN BENEFICIAL OWNERS
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The table below sets forth certain information concerning the beneficial
ownership, as of February 15, 1999, of our Class A and Class B Common Stock by
(1) each director and director nominee, (2) each executive officer for whom
compensation information is disclosed under the caption "Executive
Compensation," and (3) all of our directors and executive officers as a group,
determined in accordance with Rule 13d-3 of the Securities and Exchange
Commission (the "SEC"). Unless otherwise indicated, all shares shown as
beneficially owned are held with sole voting and investment power. Throughout
this proxy statement, we have adjusted all share and per share amounts to
reflect the three-for-two stock split effective June 21, 1996 and the two-for-
one stock split effective April 24, 1998, as appropriate.
ACQUIRABLE THROUGH
CURRENTLY
NUMBER OF SHARES EXERCISABLE PERCENT
BENEFICIAL OWNER CLASS BENEFICIALLY OWNED (1) STOCK OPTIONS (2) OF CLASS (2)
---------------- ----- ----------------------- ------------------ -------------
DIRECTORS AND DIRECTOR NOMINEES
Frank B. Stewart, Jr. Class A 6,996,434 (3) -- 6.5%
P. O. Box 19925 Class B 3,555,020 (4) -- 100.0%
New Orleans, LA 70179
Joseph P. Henican, III Class A 2,197,282 (5) 195,012 2.2%
William E. Rowe Class A 154,076 195,012 *
Kenneth C. Budde Class A 53,400 54,000 *
Darwin C. Fenner Class A 497,248 (6) 54,000 *
Dwight A. Holder Class A 118,000 (7) 24,000 *
John P. Laborde Class A 52,500 18,000 *
James W. McFarland Class A 16,140 40,948 *
Michael O. Read Class A 43,642 (8) 36,000 *
NAMED EXECUTIVE OFFICERS (9)
Richard O. Baldwin, Jr. Class A 201,316 120,006 *
Brian J. Marlowe Class A 106,612 (10) 120,006 *
All directors and executive
officers as a group (17 persons) Class A 10,318,666 1,169,016 10.5% (11)
Class B 3,555,020 -- 100.0% (11)
______________________
* Less than 1%.
(1) Excludes shares subject to options currently exercisable or exercisable
within 60 days, which shares are set forth separately in the next column.
(2) Consists of shares subject to options currently exercisable or exercisable
within 60 days. These shares are deemed to be outstanding for purposes of
computing the percentage of outstanding Class A Common Stock owned by a
person individually and by all directors and executive officers as a group
but are not deemed to be outstanding for the purpose of computing the
individual ownership percentage of any other person.
(3) Includes 6,542,934 shares owned as community property with Mr. Stewart's
wife and 453,500 shares owned by the Frank B. Stewart, Jr. Foundation (a
non-profit corporation), with respect to which Mr. Stewart is a trustee
and shares voting and investment power.
(4) Each share of Class B Common Stock has ten votes per share and, unless
otherwise required by law, the holder of Class B Common Stock votes
together with the holders of Class A Common Stock on all matters brought
before the shareholders.
(5) Includes 450 shares owned by Mr. Henican's wife, 1,200 shares owned by his
children and 1,629,100 shares held by trusts for family members of Frank
B. Stewart, Jr., with respect to which Mr. Henican is a co-trustee and
shares voting and investment power.
(6) Includes 900 shares owned by Mr. Fenner's wife and 453,500 shares held by
the Frank B. Stewart, Jr. Foundation (a non-profit corporation), with
respect to which Mr. Fenner is a trustee and shares voting and investment
power.
(7) Includes 70,000 shares owned by Mr. Holder's wife.
(8) Includes 10,500 shares held in a trust, with respect to which Mr. Read is
a trustee and shares voting and investment power.
(9) Information regarding Messrs. Stewart, Henican and Rowe, the named
executive officers other than Messrs. Baldwin and Marlowe, appears under
the caption "Directors and Director Nominees."
(10) Includes 1,800 shares held in Mr. Marlowe's wife's retirement fund.
(11) As of February 15, 1999, all directors and executive officers as a group
beneficially owned shares of Class A and B Common Stock representing 32.5%
of our total voting power.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of February 15, 1999, the persons named below were, to our knowledge,
the only beneficial owners of more than 5% of our outstanding Class A Common
Stock, determined in accordance with Rule 13d-3 of the SEC, other than Frank B.
Stewart, Jr., whose beneficial ownership of our Class A Common Stock is
described above.
AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER CLASS BENEFICIAL OWNERSHIP OF CLASS
---------------- ----- -------------------- --------
Marsh & McLennan Companies, Inc. Class A 11,892,814 (1) 11.0%
1166 Avenue of the Americas
New York, New York 10036
AMVESCAP PLC Class A 7,400,100 (2) 6.8%
11 Devonshire Square
London EC2M 4YR
England
____________________
(1) Based solely on a Schedule 13G filed with the SEC on February 11, 1999.
According to the Schedule 13G, Marsh & McLennan Companies, Inc.'s wholly
owned subsidiary Putnam Investments, Inc. wholly owns two registered
investment advisers: (A) Putnam Investment Management, Inc., which is the
investment adviser to the Putnam family of mutual funds, and (B) The
Putnam Advisory Company, Inc., which is the investment adviser to
Putnam's institutional clients. Putnam Investment Management, Inc. has
shared investment power over 11,169,314 shares. Each of Putnam
Investment Management, Inc.'s mutual fund client's trustees has voting
power over the shares held by each fund. Additionally, Putnam New
Opportunities Fund has shared investment power over 7,345,100 of the
11,169,314 shares. The Putnam Advisory Company, Inc. has shared
investment power over 723,500 shares, and shares voting power over
272,200 of such shares with its institutional clients.
(2) Based solely on a Schedule 13G with the SEC on February 11, 1999.
According to the Schedule 13G, all shares shown as beneficially owned by
AMVESCAP PLC, AVZ, Inc., AIM Management Group Inc., AMVESCAP Group
Services, Inc., INVESCO, Inc., INVESCO North American Holdings, Inc.,
INVESCO Capital Management, Inc., INVESCO Funds Group, Inc., INVESCO
Management & Research, Inc., INVESCO Realty Advisers, Inc. and INVESCO
(NY) Asset Management, Inc. are held with shared investment and voting
power.
ELECTION OF DIRECTORS
GENERAL
Our Amended and Restated Articles of Incorporation (the "Articles") and
By-laws divide the board of directors into three classes serving three-year
staggered terms and, pursuant to our By-laws and a resolution of the board of
directors, the number of directors has been set at nine. The term of office of
the three Class III directors expires at our 1999 annual meeting. The Class I
and Class II directors are serving terms that expire at our 2000 and 2001
annual meetings, respectively. Accordingly, proxies cannot be voted for more
than three persons. William E. Rowe, James W. McFarland and Kenneth C. Budde,
the Class III directors whose terms are expiring, have been nominated by the
board of directors for re-election at our 1999 annual meeting for a three-year
term of office expiring at our 2002 annual meeting and until their successors
are duly elected and qualified.
Unless authority to vote for the election of directors is withheld, the
proxy holders named on the enclosed proxy will vote all shares represented
thereby in favor of the election of each of the three nominees listed below.
We are informed that each nominee is willing to serve; however, in accordance
with our By-laws, if any of them should decline or become unable to serve for
any reason, votes represented by the enclosed proxy will be cast instead for a
substitute nominee designated by the board of directors, or, if none is
designated, the number of directors automatically shall be reduced by the total
number of nominees withdrawn from consideration. Under our By-laws, directors
are elected by plurality vote.
A shareholder of record who wishes to nominate one or more persons for
election to the board of directors must comply with the procedures established
by our Articles and By-laws. Pursuant to those procedures, the shareholder may
nominate one or more persons for election at a meeting of shareholders only if
the shareholder is entitled to vote at the meeting and provides timely notice
in writing to our Secretary at our principal office, 110 Veterans Memorial
Boulevard, Metairie, Louisiana 70005. To be timely, a shareholder's notice
must be received at our principal office not less than 45 days nor more than 90
days prior to the meeting; however, if less than 55 days notice or prior public
disclosure of the date of the meeting is given or made to shareholders, notice
by the shareholder to be timely must be received at our principal office no
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. The notice must include the following information with respect to each
person the shareholder proposes to nominate: (1) such person's name, age,
business address and residential address, (2) such person's principal
occupation or employment, (3) the class and number of shares of our capital
stock of which such person is the beneficial owner (as defined in Rule 13d-3 of
the SEC), (4) such person's written consent to being named in the proxy
statement as a nominee and to serve as a director if elected, and (5) any other
information relating to such person that would be required to be disclosed in
solicitations of proxies for the election of directors, or otherwise would be
required, in each case pursuant to Regulation 14A of the SEC. The notice also
must include the following information with respect to the shareholder giving
the notice: (1) the name and address of such shareholder and (2) the class and
number of shares of our capital stock of which such shareholder is the
beneficial owner (as defined in Rule 13d-3 of the SEC). If requested in
writing by our Secretary at least 15 days in advance of the meeting, such
shareholder must disclose to our Secretary, within ten days of such request,
whether such person is the sole beneficial owner of the shares held of record
by such shareholder, and, if not, the name and address of each other person
known by the shareholder of record to claim or have a beneficial interest in
such shares.
The following table sets forth certain information regarding the
directors and nominees for election as directors. Unless otherwise indicated,
each director has been engaged in the principal occupation shown for more than
the past five years.
NOMINATED
NAME, AGE, PRINCIPAL OCCUPATION, DIRECTOR FOR TERM
AND DIRECTORSHIPS IN OTHER PUBLIC COMPANIES SINCE EXPIRING
- ------------------------------------------- ----- --------
NOMINEES FOR ELECTION AS CLASS III DIRECTORS:
William E. Rowe, 52. . . . . . . . . . . 1994 2002
President and Chief Operating
Officer (1)
James W. McFarland, 53 . . . . . . . . 1995 2002
Dean, A.B. Freeman
School of Business,
Tulane University (2)
Kenneth C. Budde, 51 . . . . . . . . . . 1998 2002
Executive Vice President, President -
Corporate Division and Chief Financial
Officer (3)
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED ABOVE.
DIRECTOR TERM
SINCE EXPIRES
----- -------
CONTINUING CLASS I DIRECTORS:
Joseph P. Henican, III, 50 . . . . . . . . . 1984 2000
Vice Chairman of the Board and
Chief Executive Officer (4)
Michael O. Read, 55 . . . . . . . . . . . . . 1991 2000
Business Development,
J&H Marsh & McLennan of
Louisiana, Inc. (insurance
brokerage and consulting) (5)
Dwight A. Holder, 76 . . . . . . . . . . . . . 1997 2000
President, Holder Investment Company (6)
CONTINUING CLASS II DIRECTORS:
Frank B. Stewart, Jr., 63 . . . . . . . . . . 1970 2001
Chairman of the Board (7)
Darwin C. Fenner, 66 . . . . . . . . . . . . 1991 2001
Investment Counsel, Chairman
and Chief Executive Officer,
Fenner, Plauche' & Williams Investment
Management Company (8)
John P. Laborde, 75 . . . . . . . . . . . . 1995 2001
Chairman Emeritus and Director, Tidewater Inc.
(marine transportation) (9)
(1) Mr. Rowe became our President on November 1, 1994. He became our Senior
Executive Vice President and Chief Operating Officer in April 1994. Prior
to that time, he served as Executive Vice President and President of our
former Mid-Atlantic Division.
(2) Mr. McFarland is also a director of American Indemnity Financial
Corporation, Petroleum Helicopters, Inc. and Sizeler Property Investors,
Inc. Mr. McFarland is the chairman of our compensation committee and a
member of our audit committee.
(3) Mr. Budde became our Executive Vice President, President-Corporate
Division and Chief Financial Officer on May 1, 1998. Prior to that time,
he served as our Senior Vice President of Finance, Secretary and
Treasurer. Mr. Budde is a member of our investment committee.
(4) Mr. Henican became our Chief Executive Officer on February 1, 1995. Until
January 31, 1995, he was a partner in the law firm of Henican, James &
Cleveland, L.L.P., and served as our general counsel for more than 13
years.
(5) Prior to January 1994, Mr. Read was a partner of Montgomery, Barnett,
Brown, Read, Hammond & Mintz, Attorneys at Law. Mr. Read is the chairman
of our audit committee and a member of our compensation committee.
(6) Prior to July 9, 1997, Mr. Holder served as Chairman of the Board of
Carolina Financial Corporation of Pickens, Inc., which became one of our
subsidiaries on that date. Mr. Holder is a member of our audit committee
and investment committee.
(7) Mr. Stewart served as our interim Chief Executive Officer from November 1,
1994, upon the retirement of Lawrence M. Berner as our President and Chief
Executive Officer, until February 1, 1995, when Mr. Henican assumed the
office of our Chief Executive Officer.
(8) Mr. Fenner is the Chairman of our investment committee and is a member of
our compensation committee.
(9) Mr. Laborde was Chairman, President and Chief Executive Officer of
Tidewater Inc. from 1956 to 1994. He is also a director of Stolt Comex
Seaway, S.A. and Stone Energy Corporation. Mr. Laborde is a member of our
audit committee and investment committee.
________________
During the fiscal year ended October 31, 1998, our board of directors held
five meetings. Each director attended 75% or more of the aggregate number of
meetings of the board of directors and committees of which he was a member that
were held during the period in which he served.
Our board of directors has an audit committee on which Messrs. Read,
Laborde, McFarland and Holder serve. Our board of directors also has a
compensation committee on which Messrs. Fenner, Read and McFarland serve. Our
board of directors does not have a nominating committee.
The audit committee has general responsibility for meeting periodically
with representatives of our independent public accountants to review the
general scope of audit coverage, including consideration of our accounting
practices and procedures and our system of internal accounting controls, and
for reporting to the board of directors with respect thereto. The audit
committee also recommends to the board of directors the appointment of our
independent auditors. The audit committee met three times during the fiscal
year ended October 31, 1998.
The compensation committee reviews, analyzes and recommends compensation
programs to our board of directors. The compensation committee also is
responsible for the administration of and the grant of awards under the Amended
and Restated 1995 Incentive Compensation Plan and the Amended and Restated
Directors' Stock Option Plan. The compensation committee met eight times
during the fiscal year ended October 31, 1998.
COMPENSATION OF DIRECTORS
Each member of the board of directors who is not a full-time employee (an
"Outside Director") was paid during the first three quarters of the last fiscal
year (1) a quarterly retainer of $3,750, (2) $1,000 for each board meeting
attended, and (3) $700 for each committee meeting attended. Beginning with the
fourth quarter of the last fiscal year, each Outside Director receives (1) a
quarterly retainer of $5,250, (2) $1,500 for each board meeting attended and
(3) $1,500 for each committee meeting attended.
In 1996, we adopted the Amended and Restated Directors' Stock Option
Plan, pursuant to which each Outside Director received, on January 2, 1996,
options to purchase 72,000 shares of our Class A Common Stock. The options
become exercisable in 25% annual increments beginning one year after grant.
Upon joining our board of directors, Mr. Holder received options to purchase
72,000 shares of our Class A Common Stock, which become exercisable in 33-1/3%
annual increments beginning on January 2, 1998. Exercisability of the options
is automatically accelerated in the event of a change of control, as defined in
the plan, and may be accelerated by the compensation committee at any time in
its discretion. The options must be exercised within one year from the date of
termination of board service and expire on January 2, 2001. The exercise price
of the options is the fair market value of the Class A Common Stock on the date
of grant.
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table sets forth information with respect to the
compensation paid to our Chief Executive Officer and to each of our four most
highly compensated other executive officers for services rendered during the
fiscal years ended October 31, 1998, 1997 and 1996.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------- ----------
Name and Other Securities
Principal Annual Underlying All Other
Position YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
-------- ---- ------ ----- ------------ ---------- ------------
Frank B. Stewart, Jr........... 1998 $519,229 -- -- -- $21,578 (1)
Chairman of the Board 1997 600,000 -- -- -- 16,106
1996 600,000 -- -- -- 16,293
Joseph P. Henican, III......... 1998 500,000 $360,734 -- 500,000 23,988 (1)
Vice Chairman of the Board 1997 500,000 175,000 -- -- 15,766
and Chief Executive Officer 1996 450,000 175,500 -- 131,624 13,005
William E. Rowe................ 1998 500,000 360,734 -- 500,000 23,988 (1)
President and Chief 1997 500,000 175,000 -- -- 21,875
Operating Officer 1996 450,000 175,500 -- 131,624 22,244
Richard O. Baldwin, Jr......... 1998 300,000 175,000 -- 250,000 16,935 (1)
Executive Vice President 1997 300,000 175,000 -- -- 11,588
and President - Corporate 1996 300,000 136,875 -- 81,000 9,915
Development Division
Brian J. Marlowe............... 1998 300,000 170,000 -- 250,000 17,767 (1)
Executive Vice President and 1997 300,000 190,000 -- -- 11,495
President - Eastern Division 1996 300,000 135,000 -- 81,000 10,930
___________________
(1)Consists of our contributions to the accounts of the named executive
officers in our Employees' Retirement Trust (a Profit-Sharing Plan) and our
Supplemental Retirement and Deferred Compensation Plan, respectively: Mr.
Stewart, $5,606 and $15,446; Mr. Henican, $5,606 and $18,382; Mr. Rowe,
$5,606 and $18,382; Mr. Baldwin, $5,606 and $11,329; and Mr. Marlowe, $5,606
and $12,161. Additionally, amounts shown for Mr. Stewart include life
insurance premiums we paid on his behalf in the amount of $526.
STOCK OPTIONS
The following two tables present information with respect to the executive
officers named in the Summary Compensation Table concerning grants and
exercises of stock options during the last fiscal year, and unexercised options
as of October 31, 1998.
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF % OF TOTAL
SECURITIES OPTIONS POTENTIAL REALIZABLE VALUE AT ASSUMED
UNDERLYING GRANTED ANNUAL RATES OF STOCK PRICE
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION APPRECIATION FOR OPTION TERM (4)
-----------------------------------------------
NAME GRANTED (1) IN FISCAL YEAR PRICE DATE 5% 10% 15% 20%
- ---------------------- ----------- -------------- -------- ---------- ---------- ---------- ---------- -----------
Joseph P. Henican, III 170,000 (2) 3.98% $27.25 7/31/04 $1,575,493 $3,574,256 $6,082,754 $ 9,200,071
330,000 (3) 7.73% 27.25 7/31/04 0 0 0 17,858,961
William E. Rowe 170,000 (2) 3.98% 27.25 7/31/04 1,575,493 3,574,256 6,082,754 9,200,071
330,000 (3) 7.73% 27.25 7/31/04 0 0 0 17,858,961
Richard O. Baldwin, Jr. 85,000 (2) 1.99% 27.25 7/31/04 787,747 1,787,128 3,041,377 4,600,035
165,000 (3) 3.87% 27.25 7/31/04 0 0 0 8,929,481
Brian J. Marlowe 85,000 (2) 1.99% 27.25 7/31/04 787,747 1,787,128 3,041,377 4,600,035
165,000 (3) 3.87% 27.25 7/31/04 0 0 0 8,929,481
________________
(1) All options become immediately exercisable upon a change of control of our
company, and the compensation committee may accelerate the exercisability
of the options at any time in its discretion.
(2) These options become exercisable in 20% annual increments, beginning on
July 17, 1999.
(3) These options become exercisable if the average of the closing sale prices
of a share of Class A Common Stock for 20 consecutive trading days equals
or exceeds $67.81 by July 17, 2003, which represents a 20% annual
compounded growth in the price of a share of Class A Common Stock over five
years.
(4) The appreciation is calculated over the term of the options rounded to the
nearest one-half year, beginning with the fair market value on the date of
grant of the options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES STOCK OPTIONS AT OPTIONS AT
ACQUIRED VALUE OCTOBER 31, 1998 (2) OCTOBER 31, 1998 (3)
---------------------------- ----------------------------
ON EXERCISE (1) REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------------- ------------- ----------- ------------- ----------- -------------
Joseph P. Henican, III 649,980 $10,850,789 195,012 630,008 $2,449,936 $1,633,291
William E. Rowe 649,980 10,850,789 195,012 630,008 2,449,936 1,633,291
Richard O. Baldwin, Jr. 399,990 6,677,447 120,006 330,004 1,507,635 1,005,090
Brian J. Marlowe 399,990 6,677,447 120,006 330,004 1,507,635 1,005,090
_________________
(1)We offered to repurchase performance-based options covering the number of
shares indicated when the performance goal was met in April 1998. We paid
each named executive officer (A) the difference between (1) the closing
price of our Class A Common Stock on the date the options vested and (2) the
exercise price, multiplied by (B) the number of shares covered by the
options repurchased. Mr. Henican elected to exercise options covering
102,310 shares of Class A Common Stock.
(2)These options consist of 39% performance-based and 61% time-vest options.
The performance-based options were granted in 1998 and will become
exercisable only if the average of the closing sale prices of a share of
Class A Common Stock for 20 consecutive trading days prior to July 17, 2003
equals or exceeds $67.81, which represents a 20% compounded annual growth
rate in the price of a share of Class A Common Stock over five years.
Sixty-seven percent of the time-vest options were granted in 1995 and 33%
were granted in 1998. All time-vest options become exercisable at the rate
of 20% per year over five years from the time of grant. All options become
immediately exercisable upon a change of control of our company, and the
compensation committee may accelerate the exercisability of the options at
any time in its discretion.
(3)The value reflected in this table is equal to the difference between the
stock price at October 31, 1998 and the exercise price multiplied by the
number of exercisable and unexercisable in-the-money options, respectively.
EMPLOYMENT AGREEMENTS
Effective August 1, 1995, we entered into employment agreements with
Messrs. Henican, Rowe, Baldwin and Marlowe (the "Named Executive Officers").
The agreements provide for employment of the Named Executive Officer in his
current position through October 31, 2000, subject to earlier termination under
limited, specified circumstances, at a fixed annual salary. The agreements
with Messrs. Henican and Rowe provide for a salary of $450,000 for fiscal year
1996 and $500,000 per fiscal year thereafter. The agreements with Messrs.
Baldwin and Marlowe provide for a salary of $300,000 per fiscal year. The
agreements also provide for an annual bonus, the terms of which were amended
commencing fiscal year 1998. For Messrs. Henican, Rowe and Baldwin, 75% of the
bonus is based on the growth in earnings per share from the previous fiscal
year to the current fiscal year, and 25% is based on subjective criteria
established by the person to whom each reports or, for Mr. Henican, the
chairman of the compensation committee. For Mr. Marlowe, 25% of the bonus is
based on earnings per share from the previous fiscal year to the current fiscal
year, 50% is based on business unit earnings and 25% is based on subjective
criteria established by the person to whom he reports. The agreements provide
for Messrs. Henican, Rowe, Baldwin and Marlowe to be eligible to receive
maximum bonuses of $500,000, $500,000, $270,000 and $270,000, respectively,
subject to the above criteria. For fiscal years 1996 and 1997, 75% of the
annual bonus was based upon the attainment of certain quantitative goals
established by the compensation committee and the executive, and 25% was
awarded at the discretion of the person to whom the executive reported, or for
Mr. Henican, the chairman of the compensation committee. For fiscal years 1996
and 1997 the maximum bonus for which each Named Executive Officer was eligible
was $200,000.
The employment agreements also provide that if we terminate the Named
Executive Officer's employment without "cause" (as defined in the agreement) or
the Named Executive Officer terminates employment for "good reason" (as defined
in the agreement), we must pay the executive two times his annual salary over a
two-year period. In addition, the executive will be entitled to exercise
performance-based options if the performance goals are met within 180 days
after the termination of employment. If the executive terminates his
employment for reasons other than "good reason," we must pay the executive one
year's salary over a two-year period. Each executive has agreed that he will
not compete with us for a period of two years after the termination of his
employment.
CHANGE OF CONTROL AGREEMENTS
Effective December 5, 1995, we entered into change of control agreements
with the Named Executive Officers which supersede the employment agreements
after a change of control. The agreements provide that if a change of control
occurs before October 31, 2000, the executive's employment term will continue
through the later of the second anniversary of the change of control or October
31, 2000, subject to earlier termination pursuant to the agreement. After a
change of control and during the employment term, the executive is entitled to
substantially the same position in substantially the same location as prior to
the change of control. In addition, the executive is entitled to the salary,
bonus and benefits provided in his employment agreement or, if more favorable,
those provided to peer employees of the acquiror.
If after a change of control, but during the employment term, we
terminate the executive's employment without "cause" (as defined in the
agreement) or the executive terminates employment for "good reason" (as defined
in the agreement), we must pay the executive in cash within 30 days of
termination an amount equal to three times the sum of his salary and maximum
bonus. "Good reason" includes the failure of the acquiror to provide the
executive with substantially the same position after the change of control, and
the executive's position is not considered to be substantially the same after a
change of control unless he holds an equivalent position with the ultimate
parent company of the entity resulting from the transaction. In addition, a
termination by the executive for any reason during the 30-day period
immediately following the first anniversary of the change of control is deemed
a termination for "good reason." If during the employment term the executive
terminates employment for reasons other than "good reason," he is entitled to
receive a single year's salary over a two-year period. The noncompetition
provisions of the executive's employment agreement continue to apply after a
change of control.
If after a change of control the executive is subjected to an excise tax
under Section 4999 of the Internal Revenue Code of 1986, as amended (whether by
virtue of the benefits of the change of control agreement or otherwise,
including by virtue of the acceleration of the exercisability of stock
options), we must pay the executive (whether or not his employment has
terminated) such amounts as are necessary to place him in the same position
after payment of federal income and excise taxes as he would have been if such
provisions had not been applicable to him. We have agreed, to the extent
permitted by applicable law, to take all reasonable steps to ensure that the
executive is not, by reason of a change of control, deprived of the economic
value (including any value attributable to the change of control) of (1) any
options to acquire our common stock or (2) any of our common stock beneficially
owned by the executive. We have agreed to pay as incurred, to the full extent
permitted by law, all legal fees and expenses the executive may reasonably
incur as a result of any contest of the validity or enforceability of, or
liability under, any provision of the change of control agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, Darwin C. Fenner, James W. McFarland and
Michael O. Read served on the compensation committee. No member served as an
officer or employee of our company or any of our subsidiaries prior to or while
serving on the compensation committee. None of our executive officers served
during the last fiscal year on the board of directors or on the compensation
committee of another entity, one of whose executive officers served on our
board of directors or on our compensation committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The compensation committee approves all of the policies under which
compensation is paid or awarded to our executive officers. All such decisions
are then recommended to the full board of directors for final approval, except
for decisions to make awards to executive officers under the Amended and
Restated 1995 Incentive Compensation Plan, which are made solely by the
compensation committee for tax law purposes.
Our executive compensation policies are designed to:
* Provide competitive levels of compensation that integrate pay with
our annual and long-term performance goals
* Reward achievements in corporate performance
* Recognize individual initiative and performance
* Assist us in attracting and retaining qualified executives
* Align the interests of executives with the long-term interests of
shareholders through award opportunities that can result in
ownership of Class A Common Stock
Our executive compensation program is comprised of salaries, annual cash
incentive bonuses and long-term incentives in the form of stock options.
SALARY
The salary levels of Mr. Henican and of the other Named Executive
Officers, other than Mr. Stewart, are set out in employment agreements with the
officers and were determined following consultation with independent
consultants and outside advisors after considering the executive compensation
policies described above. Mr. Stewart's salary is paid in consideration of his
contributions and value to us. For fiscal year 1997 his salary was $600,000.
Mr. Stewart offered to reduce his salary to $450,000 effective April 1998.
INCENTIVE BONUS
During 1998, the compensation committee retained an independent
consulting firm to review our executive compensation. After considering the
consulting firm's reports and recommendations, the compensation committee
determined that our executive compensation should be at or above the 75th
percentile for companies in a peer group consisting of public companies similar
in size to us and other public death care companies. Consistent with this
objective, the consulting firm's recommendations, and the executive
compensation policies described above, the compensation committee modified our
annual executive bonus program, generally, to increase maximum bonuses for
which executive officers are eligible and to align the bonus criteria more
closely with our current objectives and the officer's area of responsibility.
The employment agreements of the executive officers were amended to reflect the
annual bonus program effective for fiscal year 1998.
Under their employment agreements, during the last fiscal year Messrs.
Henican, Rowe, Baldwin and Marlowe could earn annual incentive bonuses of up to
$500,000, $500,000, $270,000 and $270,000, respectively. For Messrs. Henican,
Rowe and Baldwin 75% of the bonus is based on the growth in earnings per share
from the previous fiscal year to the current fiscal year and 25% is based on
subjective criteria established by the person to whom each reports or, for Mr.
Henican, the chairman of the compensation committee. For Mr. Marlowe, 25% of
the bonus is based on our earnings per share from the previous fiscal year to
the current fiscal year, 50% is based on business unit earnings and 25% is
based on subjective criteria established by the person to whom he reports.
During the last fiscal year, Mr. Henican received a bonus equal to
$360,734, or 72% of his annual salary. The bonuses paid to the other Named
Executive Officers ranged from approximately 57% to 72% of annual salary.
STOCK OPTIONS
The compensation committee's practice with respect to stock options has
been to grant options that vest based on the passage of time together with
options that vest based upon the attainment of our performance goals. The
compensation committee continues to believe that the combination of these two
types of options serves as a valuable incentive. Accordingly, the most recent
grants to executive officers in July 1998 consisted of two-thirds performance-
based and one-third time-vest options. The performance-based options will vest
only if the average of the closing sale prices of the Class A Common Stock over
20 consecutive trading days equals or exceeds $67.81 by July 17, 2003, and the
time-vest options will vest at the rate of 20% per year over five years. The
number of options granted to each executive officer who received options was
based upon the officer's salary level and level of responsibility.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
Section 162(m) of the Internal Revenue Code of 1986, as amended,
prohibits us from deducting more than $1 million in compensation paid to
certain executive officers in a single year. An exception to the $1 million
limit is provided for "performance-based compensation" that meets certain
requirements, including approval by the shareholders. Options granted under
our incentive compensation plans qualify as "performance-based compensation"
and will be excluded in calculating the $1 million limit under Section 162(m).
We currently intend to keep "non-performance-based compensation" within the
$1 million limit in order that all executive compensation will be fully
deductible.
SUBMITTED BY THE COMPENSATION COMMITTEE.
Darwin C. Fenner James W. McFarland Michael O. Read
TOTAL RETURN COMPARISON
The graph and corresponding table below provide a comparison of the
cumulative total shareholder return on our Class A Common Stock, the S&P 500
Index and an industry index made up of the Loewen Group Inc. ("Loewen") and
Service Corporation International ("SCI") for our last five fiscal years. We
believe that we, Loewen and SCI are the only major death care providers that
have been publicly traded in the United States throughout the entire period
covered by the graph. The information in the graph is based on the assumption
of a $100 investment on October 31, 1993 at the closing price on that date and
includes the reinvestment of dividends. The returns of each issuer in the
industry index are weighted according to its stock market capitalization at the
beginning of each period for which a return is indicated.
[GRAPH APPEARS HERE]
CUMULATIVE TOTAL SHAREHOLDER RETURN
----------------------------------------------
Index OCTOBER 31,
----------------------------------------------
1993 1994 1995 1996 1997 1998
----- ------ ------ ------ ------ ------
Stewart Enterprises, Inc. 100.0 90.6 127.0 193.7 235.2 262.1
S & P 500 Index 100.0 101.1 124.4 150.9 195.7 235.1
Industry Index 100.0 103.7 161.3 209.3 203.4 215.0
CERTAIN TRANSACTIONS
GENERAL
We lease our corporate offices from a general partnership in which Mr.
Stewart owns a 99.3% partnership interest. We paid an aggregate of $635,581 in
rental payments to the partnership during the fiscal year ended October 31,
1998.
During the fiscal year ended October 31, 1992, Mr. Stewart and two trusts
established by Mr. and Mrs. Stewart, of which Mr. Henican serves as co-trustee,
entered into an agreement with us whereby we, with the approval of all of the
disinterested members of our board of directors, agreed to advance the premiums
on a split dollar "second-to-die" life insurance policy purchased by the trusts
and insuring the lives of Mr. and Mrs. Stewart. The premiums are payable over
a 12-year period and the trusts are required to reimburse us currently for that
portion of the premiums we paid that, if not reimbursed, would be treated as
compensation to Mr. Stewart for federal income tax purposes. Interest accrues
on the premium advances at 8% per annum from the date each premium payment is
made by us. The advances are collateralized by an assignment of other
insurance policies owned by the trusts and our Class A Common Stock held by the
trusts. The trusts have agreed that, upon the death of Mr. or Mrs. Stewart,
the proceeds of such other insurance policies will be used to reduce the
outstanding balance due to us. We are entitled to reimbursement of the unpaid
balance of all amounts advanced, together with accrued interest, upon the first
to occur of (1) the surrender of the policy, (2) the deaths of Mr. and Mrs.
Stewart, or (3) the expiration of 60 days following the payment in full of all
premiums on the policy. The outstanding amount advanced to the trusts by us,
including accrued interest, was approximately $1,013,678 at October 31, 1998,
including $110,000 advanced to the trusts during the fiscal year ended October
31, 1998.
In January 1998, we discontinued an insurance policy on the life of Mr.
Stewart unrelated to the policy described in the preceding paragraph. In order
to purchase a replacement policy, The Stewart Family Special Trust borrowed
$685,000 from us pursuant to a promissory note due 180 days after the death of
Mr. Stewart. Interest on the note accrues annually at a rate equal to our cost
of borrowing under our $600 million revolving credit facility, and is payable
when the principal becomes due. The amount of the loan is equal to the cash
value received by us upon the discontinuance of the prior insurance policy.
The loan proceeds were used by the trust to purchase a single premium policy on
the life of Mr. Stewart. Certain of the beneficiaries of The Stewart Family
Special Trust are members of Mr. Stewart's family. The loan was approved by
all of the disinterested members of the board of directors. The outstanding
balance of the loan at October 31, 1998, including accrued interest, was
approximately $724,321.
During fiscal year 1993, one of our subsidiaries acquired all of the
stock of Parklawn Memorial Park, Inc. and Richmond Memorial Parks, Inc. from
Brian J. Marlowe, one of our executive officers, and his father. A portion of
the purchase price was paid by delivery of a promissory note in the principal
amount of $4,000,000 due January 31, 2003 and bearing interest at 8% per annum
through December 31, 1993. On January 1, 1994, we refinanced the note by
delivering a new promissory note in the principal amount of $3,797,331 due
October 31, 1998 and bearing interest at 6.15% per annum. We made principal
and interest payments of $887,985 to Mr. Marlowe on the note during the fiscal
year ended October 31, 1998, including payment in full on October 19, 1998.
In February 1992, one of our subsidiaries acquired all of the stock of
Catawba Memorial Park and Funeral Home from Brent F. Heffron, one of our
executive officers. A portion of the purchase price was paid by delivery of a
promissory note in the principal amount of $646,870 due April 30, 2007 and
bearing interest at 7% per annum through December 31, 1993. On January 1,
1994, we refinanced the note by delivering a new promissory note in principal
amount of $304,065 due October 31, 1998 and bearing interest at a rate of 6.15%
per annum. We made principal and interest payments of $70,035 to Mr. Heffron
on the note during the fiscal year ended October 31, 1998, including payment in
full on March 31, 1998.
In mid-1997, one of our subsidiaries acquired Dillard Memorial, Inc. and
Carolina Financial Corporation of Pickens, Inc. from Dwight A. Holder, members
of his family and another individual. Mr. Holder became a member of our board
of directors in September 1997. Pursuant to the acquisition agreements,
portions of the purchase prices (an aggregate of $155,778 and 26,038 shares of
our Class A Common Stock) were placed in escrow accounts to secure the sellers'
representations and warranties. In accordance with the acquisition agreements,
the funds in the accounts were released to the sellers in fiscal year 1998 on
the first anniversary of the date of the agreements.
In fiscal year 1997, in connection with our acquisition of certain
cemeteries from Mr. Holder, Mr. Holder's daughter entered into a non-
competition agreement with one of our subsidiaries providing that she will be
paid $342,500 in forty equal quarterly installments. During fiscal year 1998,
she was paid $34,250 under such agreement.
Dillard Memorial, Inc., a subsidiary acquired by us in 1997 from Mr.
Holder, leases one of its funeral homes from Mr. Holder pursuant to a twenty-
year lease commencing in May 1997 and providing for annual rental payments
equal to the greater of (1) $144,000 or (2) 7% of the previous fiscal year's
gross sales for that funeral home. During the fiscal year ended October 31,
1998, we made rental payments under the lease of $144,000 to Mr. Holder.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and 10% beneficial owners to file with the SEC
reports of ownership and changes in ownership of our equity securities. During
the last fiscal year Michael G. Hymel was inadvertently late in filing an
initial statement of beneficial ownership.
PROPOSAL TO RATIFY THE SELECTION OF INDEPENDENT AUDITORS
Upon the recommendation of the audit committee, the board of directors
has approved the retention of PricewaterhouseCoopers LLP as our independent
auditors for the fiscal year ending October 31, 1999, which selection will be
submitted to the shareholders for ratification. If the shareholders do not
ratify the board of directors' selection of PricewaterhouseCoopers LLP by the
affirmative vote of holders of a majority of the voting power present or
represented at our 1999 annual meeting, the selection of independent auditors
will be reconsidered by the board.
Representatives of PricewaterhouseCoopers LLP are expected to be present
at our 1999 annual meeting and will have an opportunity to make a statement if
they desire to do so. They will also be available to respond to appropriate
questions from shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE PROPOSAL TO RATIFY THE RETENTION OF PRICEWATERHOUSECOOPERS LLP AS OUR
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING OCTOBER 31, 1999.
OTHER MATTERS
QUORUM AND VOTING OF PROXIES
The presence, in person or by proxy, of a majority of the total voting
power is necessary to constitute a quorum. If a quorum is present, (1)
directors will be elected by plurality vote and (2) the ratification of the
retention of PricewaterhouseCoopers LLP as our independent auditors for the
fiscal year ending October 31, 1999 will require the affirmative vote of the
holders of a majority of the voting power present or represented at our 1999
annual meeting. With respect to any matter that is properly brought before our
1999 annual meeting other than the election of directors, abstentions will have
the effect of a vote against the proposal, and broker non-votes will be counted
as not present with respect to the proposal.
All duly executed proxies in the form enclosed received by us will be
voted as specified and, in the absence of instructions to the contrary, will be
voted for the election of the nominees named above and in favor of the proposal
to ratify the retention of PricewaterhouseCoopers LLP as our independent
auditors for the fiscal year ending October 31, 1999.
The board of directors does not know of any matters to be presented at
our 1999 annual meeting other than those described herein. However, if any
other matters properly come before our 1999 annual meeting or any adjournment
thereof, it is the intention of the persons named in the enclosed proxy to vote
the shares represented by them in accordance with their best judgment.
SHAREHOLDER PROPOSALS
Any shareholder who desires to present a proposal qualified for inclusion
in our proxy materials relating to our 2000 annual meeting must forward the
proposal to our Secretary at the address shown on the first page of this Proxy
Statement in time to arrive at our offices no later than October 29, 1999.
All shareholder proposals must comply with Section 2.14 of our By-laws in
order to be eligible for consideration at a shareholders' meeting. Our By-laws
are filed with the SEC, and shareholders should refer to the By-laws for a
complete description of the requirements. Any shareholder who wishes to
present a proposal at our 2000 annual meeting must give us notice in advance of
the meeting. The notice must be received by our Secretary no later than
October 29, 1999, although this date will change in accordance with our By-laws
if the date of our 2000 annual meeting is 30 calendar days earlier or later
than April 9, 2000. The notice must contain (1) a complete and accurate
description of the proposal; (2) a statement that the shareholder (or the
shareholder's legal representative) intends to attend the meeting and present
the proposal and that the shareholder intends to hold of record securities
entitled to vote at the meeting through the meeting date; (3) the shareholder's
name and address and the number of shares of our voting securities that the
shareholder holds of record and beneficially as of the notice date; and (4) a
complete and accurate description of any material interest of such shareholder
in such proposal.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Loralice A. Trahan
------------------------------------
Loralice A. Trahan
Secretary
Metairie, Louisiana
February 26, 1999