AS FILED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION ON AUGUST 14,
2001.

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
STEWART ENTERPRISES, INC.
(Exact name of each registrant as specified in its charter)

<Table>

LOUISIANA 7200 72-0693290
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</Table>

110 VETERANS MEMORIAL BOULEVARD
METAIRIE, LOUISIANA 70005
(504) 837-5880
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
---------------------

<Table>

COPY TO:
KENNETH C. BUDDE DIONNE M. ROUSSEAU
CHIEF FINANCIAL OFFICER JONES, WALKER, WAECHTER,
STEWART ENTERPRISES, INC. POITEVENT, CARRERE & DENEGRE, L.L.P.
110 VETERANS MEMORIAL BOULEVARD 201 ST. CHARLES AVENUE, 51ST FLOOR
METAIRIE, LOUISIANA 70005 NEW ORLEANS, LOUISIANA 70170
(504) 837-5880 (504) 582-8000
(Name, address, including zip code, and
telephone
number, including area code, of agent for
service)
</Table>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
---------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

CALCULATION OF REGISTRATION FEE

<Table>
<Caption>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED UNIT PRICE(1) REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------------

10 3/4% Senior Subordinated Notes
due 2008......................... $300,000,000 100% $300,000,000 $75,000
Guarantees of 10 3/4% Senior
Subordinated Notes due 2008...... $300,000,000 100% $300,000,000 (2)
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</Table>

(1) Determined solely for the purpose of calculating the registration fee in
accordance with Rule 457(f) of the Securities Act of 1933.

(2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee
for the guarantees is payable.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), MAY DETERMINE.
---------------------
2

TABLE OF ADDITIONAL REGISTRANTS

Each of the following subsidiaries of Stewart Enterprises, Inc., and each
other subsidiary that is or becomes a guarantor of the securities registered
hereby, is hereby deemed to be a registrant.

<Table>
<Caption>
STATE OF I.R.S. EMPLOYER
INCORPORATION OR IDENTIFICATION
EXACT NAME OF ADDITIONAL REGISTRANTS* FORMATION NUMBER

S.E. OF TUCSON, ARIZONA, INC. ARIZONA 86-0905540
GRIFFIN-LEGGETT, INC. ARKANSAS 71-0078620
FOREST HILLS CEMETERY, INC. ARKANSAS 71-0249636
GRIFFIN LEGGETT HEALEY & ROTH, INC. ARKANSAS 71-0455597
GRIFFIN-LEGGETT INSURANCE AGENCY, INC. ARKANSAS 72-1420663
GROSS FUNERAL HOME, INC. ARKANSAS 71-0311354
REST HILLS MEMORIAL PARK, INC. ARKANSAS 71-0350100
GRIFFIN LEGGETT - CONWAY, INC. ARKANSAS 71-0675698
DILDAY BROTHERS HUNTINGTON VALLEY MORTUARY CALIFORNIA 95-2556142
HOPSON MORTUARY, INC. CALIFORNIA 95-2803488
LASSILA FUNERAL CHAPELS, INC. CALIFORNIA 94-2756152
SANTA BARBARA FUNERAL SERVICES, INC. CALIFORNIA 95-2485442
S.E. ACQUISITION OF CALIFORNIA, INC. CALIFORNIA 72-1307437
ALL SOULS MORTUARY, INC. CALIFORNIA 94-3274423
ASHES TO ASHES, INC. CALIFORNIA 95-3983428
ASSUMPTION MORTUARY, INC. CALIFORNIA 77-0498846
BARSTOW FUNERAL HOMES, INC. CALIFORNIA 33-0638122
BUCHHEIM FAMILY, INC. CALIFORNIA 94-2746770
CALVARY MORTUARY OF LOS ANGELES, CALIFORNIA, INC. CALIFORNIA 94-3281559
CATHOLIC MORTUARY SERVICES, INC. CALIFORNIA 68-6186018
DeYOUNG MEMORIAL CHAPEL, INC. CALIFORNIA 94-2564101
HOLY CROSS MORTUARY OF CULVER CITY, CALIFORNIA, INC. CALIFORNIA 94-3281560
HOLY CROSS MORTUARY OF POMONA, CALIFORNIA, INC. CALIFORNIA 94-3281562
LOMBARD & CO. CALIFORNIA 94-1495254
N.D. DAVIS & ASSOCIATES, INC. CALIFORNIA 94-2303150
QUEEN OF HEAVEN MORTUARY, INC. CALIFORNIA 94-3281558
RESURRECTION MORTUARY, INC. CALIFORNIA 94-3281561
RICHARD PIERCE FUNERAL SERVICE CALIFORNIA 94-1726912
RIVER CITIES FUNERAL CHAPEL, INC. CALIFORNIA 68-0361610
S.E. ACQUISITION OF DELANO, CALIFORNIA, INC. CALIFORNIA 94-3289240
S.E. ACQUISITION OF GLENDALE, CALIFORNIA, INC. CALIFORNIA 72-1318639
S.E. ACQUISITION OF LANCASTER, CALIFORNIA, INC. CALIFORNIA 72-1313799
S.E. ACQUISITION OF LOS OSOS MORTUARY AND MEMORIAL
PARK, INC. CALIFORNIA 72-1312297
S.E. ACQUISITION OF OAKHURST, CALIFORNIA, INC. CALIFORNIA 94-3269965
S.E. ACQUISITION OF OROVILLE, CALIFORNIA, INC. CALIFORNIA 91-1751841
S.E. ACQUISITION OF SAN DIEGO, CALIFORNIA, INC. CALIFORNIA 94-3293688
SAN FERNANDO MISSION MORTUARY, INC. CALIFORNIA 94-3281557
SANTA CLARA MORTUARY, INC. CALIFORNIA 77-0498848
SCOVERN MORTUARY, A CALIFORNIA CORPORATION CALIFORNIA 95-3780939
SDCA HOLDINGS, INC. CALIFORNIA 95-6062503
SAN DIEGO CEMETERY ASSOCIATION CALIFORNIA 95-2131281
SIMPLICITY PLAN OF CALIFORNIA, INC. CALIFORNIA 68-0404445
STEWART PRE-NEED SERVICES, INC. CALIFORNIA 68-0404446
STRICKLIN/SNIVELY MORTUARY CALIFORNIA 95-2426875
CATALINA CHANNEL CREMATION SOCIETY CALIFORNIA 33-0422532
WALLACE E. WHITE & HOWARD J. CALLANAN, INC. CALIFORNIA 95-1370180
</Table>
3

<Table>
<Caption>
STATE OF I.R.S. EMPLOYER
INCORPORATION OR IDENTIFICATION
EXACT NAME OF ADDITIONAL REGISTRANTS* FORMATION NUMBER

WOODSIDE CHAPEL OF CRIPPEN & FLYNN CALIFORNIA 94-1494933
SENTINEL CREMATION SOCIETIES, INC. DELAWARE 94-3085260
S.E. ACQUISITION OF MURIETTA, CALIFORNIA, INC. CALIFORNIA 68-0420934
S.E. ACQUISITION OF SANTA MARIA, CALIFORNIA, INC. CALIFORNIA 68-0420935
VICTOR V. DESROSIER, INC. CALIFORNIA 95-1535997
CEMETERY MANAGEMENT, INC. FLORIDA 59-2200905
ARLINGTON MEMORIAL PARK CEMETERY AND FUNERAL HOME,
INC. FLORIDA 59-1008713
BALDWIN-FAIRCHILD FUNERAL HOMES, INC. FLORIDA 59-2050710
ALL FAITHS MEMORIAL PARK, INC. FLORIDA 59-1825207
ORLANDO FUNERAL HOME, INCORPORATED FLORIDA 59-0385477
THE SIMPLICITY PLAN, INC. FLORIDA 59-3506520
BAY AREA CREMATORY, INC. FLORIDA 59-1706261
BRUCE OCALA FUNERAL HOME, INC. FLORIDA 59-2256460
BETH DAVID FUNERAL CHAPEL TAMPA, INC. FLORIDA 59-3278592
BETH DAVID MEMORIAL CHAPEL, INC. FLORIDA 59-3054190
CHAPEL HILL CEMETERY, INC. FLORIDA 59-1036850
GLEN HAVEN MEMORIAL PARK, INC. FLORIDA 59-1280092
HIGHLAND MEMORY GARDENS, INC. (FL) FLORIDA 59-1311244
SEMORAN FUNERAL HOME, INC. FLORIDA 59-2174496
FLORIDA HILLS MEMORIAL GARDENS, INC. FLORIDA 59-1472326
GARDEN OF MEMORIES, INC. FLORIDA 59-0259432
A.P. BOZA FUNERAL HOME, INC. FLORIDA 59-1237218
CURRY & SON FUNERAL HOME, INC. FLORIDA 59-2232961
WOODLAWN MEMORY GARDENS, INC. (ST. PETE) FLORIDA 59-0586203
GOOD SHEPHERD MEMORIAL GARDENS, INC. FLORIDA 59-1157844
DAVID C. GROSS FUNERAL HOME, INC. FLORIDA 59-3061484
HUBBELL FUNERAL HOME AND CREMATORY, INC. FLORIDA 59-2031206
KENT R. PALMER, INC. FLORIDA 59-2786934
KICLITER FUNERAL HOME, INC. FLORIDA 65-0327962
MADCEM OF FLORIDA, INC. FLORIDA 59-2815682
MEMORIAL PARK CEMETERY, INC. FLORIDA 59-2977889
OAKLAWN PARK CEMETERY AND FUNERAL HOME, INC. FLORIDA 59-2872325
ROBERTS FUNERAL HOME, INC. FLORIDA 59-3483106
ROYAL PALM MEMORIAL GARDENS, INC. FLORIDA 59-2741049
SYLVAN ABBEY MEMORIAL PARK, INC. FLORIDA 59-0600575
TRINITY MEMORIAL GARDENS OF LAKELAND, INC. FLORIDA 59-3325358
TURNER CREMATORY, INC. FLORIDA 59-2992267
TURNER FUNERAL HOMES, INC. FLORIDA 59-2109540
WALSH & WOOD FUNERAL HOME, INC. FLORIDA 59-0614284
WOODLAWN PARK CEMETERY COMPANY (MIAMI) FLORIDA 59-0516280
MEMORIAL SUNSET PARK, INC. FLORIDA 65-0103104
NATIONAL MONUMENT CO., INC. FLORIDA 59-0941038
SOUTH DADE-PALMS MEMORIAL PARK, INC. FLORIDA 59-0778117
SIMPLE TRIBUTE OF FLORIDA, INC. FLORIDA 62-1856388
CHEATHAM HILL MEMORIAL PARK, INC. GEORGIA 58-1354650
EMPRESAS STEWART - CEMENTERIOS, INC. LOUISIANA 72-1244353
EMPRESAS STEWART - FUNERARIAS, INC. LOUISIANA 72-1246744
SIMPLE TRIBUTE, INC. LOUISIANA 72-1505419
EASTLAWN CORPORATION GEORGIA 58-6017469
HOLLY HILL MEMORIAL PARK, INC. GEORGIA 58-1392485
ROSE HAVEN FUNERAL HOME & CEMETERY, INC. GEORGIA 59-3295367
ACME MAUSOLEUM CORPORATION LOUISIANA 72-1149943
INTERNATIONAL STONE & ERECTORS, INC. LOUISIANA 72-0699525
LAKE LAWN METAIRIE FUNERAL HOME, INC. LOUISIANA 72-1114514
</Table>
4

<Table>
<Caption>
STATE OF I.R.S. EMPLOYER
INCORPORATION OR IDENTIFICATION
EXACT NAME OF ADDITIONAL REGISTRANTS* FORMATION NUMBER

LAKE LAWN METAIRIE FUNERAL HOME (JOINT VENTURE) LOUISIANA 72-0851803
LAKE LAWN PARK, INC. LOUISIANA 72-0398541
METAIRIE CEMETERY ASSOCIATION LOUISIANA 72-0684451
PINE CREST CEMETERY, INC. ALABAMA 72-1206115
ALL FAITHS FUNERAL HOME, INC. LOUISIANA 72-1240228
MOUNT OLIVET CEMETERY, INC. LOUISIANA 72-0266567
S.E. AUSTRALIA, INC. LOUISIANA 72-1283266
S.E. SOUTH-CENTRAL, INC. LOUISIANA 72-1239618
ELLISON FUNERAL HOME, INC. ALABAMA 63-1061611
KILGORE-GREEN FUNERAL HOME, INC. ALABAMA 63-0569262
LATHAN FUNERAL HOME, INC. ALABAMA 63-0591928
PINE CREST FUNERAL HOME, INC. ALABAMA 63-1168352
FAITH MEMORIAL PARK & MAUSOLEUM COMPANY, INC. ALABAMA 63-0742168
VALHALLA MEMORY GARDENS AND FUNERAL HOME, INC. ALABAMA 63-0568093
ROCKCO AND SON FUNERAL HOME, INC. ALABAMA 63-0515943
ROCKCO'S FUNERAL HOMES, INC. ALABAMA 63-0944886
S.E. ACQUISITION OF LITHONIA, GEORGIA, INC. GEORGIA 58-2212760
ANDREW J. McGANN & SON FUNERAL HOME, INC. ILLINOIS 36-3199562
S.E. ACQUISITION OF BLUE ISLAND, ILLINOIS, INC. ILLINOIS 36-4234016
S.E. ACQUISITION OF OAK LAWN AND ORLAND PARK, ILLINOIS,
INC. ILLINOIS 36-4262912
S.E. CEMETERY MANAGEMENT OF ILLINOIS, INC. ILLINOIS 36-4287051
THEIS-GORSKI FUNERAL HOME, INC. ILLINOIS 36-2377875
KNUTSON FUNERAL HOMES, INC. IOWA 42-0951378
PAULEY FUNERAL HOME, INC. IOWA 42-1029161
RUNYAN MANGOLD, INC. KANSAS 48-0922874
PROFESSIONAL FUNERAL SERVICES, INC. LOUISIANA 72-0969989
D.W. NEWCOMER'S SONS, INC. MISSOURI 43-1843891
DWN PROPERTIES, INC. MISSOURI 43-1450708
FUNERAL SECURITY PLANS, INC. MISSOURI 44-0664950
S.E. ACQUISITION OF BOONVILLE, MISSOURI, INC. MISSOURI 43-1840692
WYUKA FUNERAL HOME, INC. NEBRASKA 47-0814740
WYUKA SIMPLICITY PLAN, INC. NEBRASKA 47-0814533
S.E. ACQUISITION OF ALBUQUERQUE, NEW MEXICO, INC. NEW MEXICO 62-1669343
S.E. ACQUISITION OF SANTA FE, NEW MEXICO, INC. NEW MEXICO 62-1688895
S.E. ACQUISITION OF MUSKOGEE, OKLAHOMA, INC. OKLAHOMA 74-2807790
MT. JULIET FUNERAL HOME, INC. TENNESSEE 62-0946762
MT. JULIET MEMORIAL GARDENS, INC. TENNESSEE 62-0816875
NAVE FUNERAL HOME OF LEBANON, INC. TENNESSEE 72-1411524
SIMPLE TRIBUTE OF TENNESSEE, INC. TENNESSEE 62-1857416
CEMETERY SERVICES, INC. WISCONSIN 39-1147526
S.E. CEMETERY MANAGEMENT OF WISCONSIN, INC. WISCONSIN 39-1940681
WISCONSIN MEMORIAL PARK COMPANY, INC. WISCONSIN 39-1260321
TIME-LOCK INSURANCE AGENCY, INC. WISCONSIN 39-1639947
ST. BERNARD MEMORIAL GARDENS, INC. LOUISIANA 72-0604551
ST. BERNARD MEMORIAL FUNERAL HOME, INC. LOUISIANA 72-0938467
ST. VINCENT de PAUL CEMETERY ASSOCIATION LOUISIANA 72-0308250
STEWART ENTERPRISES (EUROPE), INC. LOUISIANA 72-1358384
STEWART RESOURCE CENTER, INC. LOUISIANA 72-0114030
STEWART SERVICES, INC. LOUISIANA 72-1346587
S.E. MID-ATLANTIC, INC. MARYLAND 52-1602273
</Table>
5

<Table>
<Caption>
STATE OF I.R.S. EMPLOYER
INCORPORATION OR IDENTIFICATION
EXACT NAME OF ADDITIONAL REGISTRANTS* FORMATION NUMBER

GARNER FAMILY FUNERAL HOME, INC. GEORGIA 58-2064086
HAISTEN FUNERAL HOMES, INC. GEORGIA 58-1421290
HAISTEN FUNERAL HOME OF HENRY COUNTY, INC. GEORGIA 58-2022340
HIGGINS AND SON FUNERAL HOME, INC. GEORGIA 58-2425644
S.E. ACQUISITION OF PIKEVILLE, KENTUCKY, INC. KENTUCKY 72-1403502
BOUNDS FUNERAL HOME, INC. MARYLAND 52-1630262
CEDAR HILL CEMETERY COMPANY, INC. MARYLAND 52-1602271
CREST LAWN MEMORIAL GARDENS, INC. MARYLAND 52-1602272
FORT LINCOLN CEMETERY, INC. MARYLAND 52-1376288
FORT LINCOLN FUNERAL HOME, INC. MARYLAND 52-0703419
GALLERY GRANITE CORPORATION MARYLAND 52-1988923
HILLCREST MEMORIAL CEMETERY, INC. MARYLAND 52-0625906
HINES-RINALDI FUNERAL HOME, INC. MARYLAND 52-0959564
JOHN M. TAYLOR FUNERAL HOME, INC. MARYLAND 52-0744522
LOUDON PARK CEMETERY COMPANY MARYLAND 52-0395020
DRUID RIDGE CEMETERY COMPANY MARYLAND 52-0297170
LOUDON PARK FUNERAL HOME, INC. MARYLAND 52-0559766
NALLEY'S FUNERAL HOME, INC. MARYLAND 52-0581481
NATIONAL HARMONY MEMORIAL PARK, INC. MARYLAND 53-0260676
PARKLAWN, INC. MARYLAND 52-0702108
THE PARKWOOD CEMETERY COMPANY MARYLAND 52-0439130
PARKWOOD MANAGEMENT COMPANY MARYLAND 52-1512350
WILLIAM W. CHAMBERS, INC. MARYLAND 53-0239999
SIMPLE TRIBUTE OF MARYLAND, INC. MARYLAND 52-2323145
GORNY & GORNY PATERSON-CLIFTON MORTUARY NEW JERSEY 22-1851465
S.E. ACQUISITION OF CLIFTON, NEW JERSEY, INC. NEW JERSEY 22-3620444
C.J. APPLEGATE AND SONS, INC. NEW YORK 15-0611808
GARDINIER COLLETTI MEMORIAL HOME, INC. NEW YORK 16-1083308
MATTLE GRAY NULTON FUNERAL HOME, INC. NEW YORK 16-1188100
MURPHY FUNERAL SERVICE, INC. NEW YORK 16-1154577
NULTON FUNERAL HOME, INC. NEW YORK 16-1380326
OTTO REDANZ FUNERAL HOME, INC. NEW YORK 16-0843505
CORNELL & DAGGETT, INC. NEW YORK 16-0393170
S.E. ACQUISITION OF FREDONIA, NEW YORK, INC. NEW YORK 52-2073694
BROWN MEMORIALS, INC. NORTH CAROLINA 56-1401127
CATAWBA MEMORIAL PARK, INC. NORTH CAROLINA 56-1186602
CENTRAL STONE WORKS, INCORPORATED NORTH CAROLINA 56-0172230
HAROLD C. DAVIS, INC. NORTH CAROLINA 56-0558688
EVANS FUNERAL HOME, INC. NORTH CAROLINA 56-1766627
EVERGREEN MEMORIAL GARDENS, INC. NORTH CAROLINA 56-0564225
GARRETT - HILLCREST, INC. NORTH CAROLINA 56-0497389
HIGHLAND MEMORY GARDENS OF FRANKLIN COUNTY, INC. NORTH CAROLINA 56-0766494
JOHNSON FUNERAL HOME, INC. NORTH CAROLINA 56-1415185
LANCASTER FUNERAL HOMES, INC. NORTH CAROLINA 56-0790520
MCLAURIN'S FUNERAL HOME, INC. NORTH CAROLINA 56-0774793
MILLER-LEE, INC. NORTH CAROLINA 56-1666506
PARKLAWN MEMORIAL GARDENS, INC. NORTH CAROLINA 56-1002833
POLLOCK WELLS FUNERAL SERVICE, INC. NORTH CAROLINA 56-1076994
STEPHENS SERVICES, INC. NORTH CAROLINA 56-1782322
THOMAS-YELVERTON COMPANY NORTH CAROLINA 56-0428110
1730 INVESTMENT CO., INC. NORTH CAROLINA 56-1220783
MEMORIAL PARKS, INCORPORATED NORTH CAROLINA 56-0320583
BENJAMIN FRANKLIN P. M., INC. PENNSYLVANIA 36-3410961
GEORGE WASHINGTON MEMORIAL PARK, INC. PENNSYLVANIA 23-1196097
</Table>
6

<Table>
<Caption>
STATE OF I.R.S. EMPLOYER
INCORPORATION OR IDENTIFICATION
EXACT NAME OF ADDITIONAL REGISTRANTS* FORMATION NUMBER

KIRK & NICE SUBURBAN CHAPEL, INC. PENNSYLVANIA 23-1322135
KIRK & NICE, INC. PENNSYLVANIA 23-1543090
S.E. ACQUISITION OF PENNSYLVANIA, INC. PENNSYLVANIA 23-2774157
S.E. CEMETERY MANAGEMENT OF PENNSYLVANIA, INC. PENNSYLVANIA 23-2999841
SUNSET MEMORIAL PARK COMPANY PENNSYLVANIA 23-1137620
PET HAVEN, INC. PENNSYLVANIA 23-1954580
DUNBAR FUNERAL HOME, INC. SOUTH CAROLINA 57-0283484
THE MACKEY MORTUARY, INC. SOUTH CAROLINA 57-0509513
CANNON FUNERAL HOME, INC. SOUTH CAROLINA 57-0446751
OCONEE MEMORIAL FUNERAL HOME, INC. SOUTH CAROLINA 57-1025046
PINEVIEW, INC. SOUTH CAROLINA 57-1015766
S.E. ACQUISITION OF NORTH AUGUSTA, SOUTH CAROLINA,
INC. SOUTH CAROLINA 57-0966654
S.E. ACQUISITION OF CHARLESTON, INC. SOUTH CAROLINA 57-0994297
S.E. ACQUISITION OF LIBERTY, SOUTH CAROLINA, INC. SOUTH CAROLINA 58-2448833
S.E. ACQUISITION OF SOUTH CAROLINA, INC. SOUTH CAROLINA 57-0982608
MONTE VISTA BURIAL PARK, INC. TENNESSEE 62-0298090
BLUE RIDGE MEMORIAL GARDENS, INC. (VA) VIRGINIA 54-0627484
CLINCH VALLEY MEMORIAL CEMETERY, INC. VIRGINIA 54-1406409
EVERLY COMMUNITY FUNERAL CARE, INC. VIRGINIA 54-1917599
EVERLY FUNERAL HOMES, INCORPORATED VIRGINIA 54-0611646
EVERLY PFP, INC. VIRGINIA 54-1425591
SIMPLICITY PLANS OF ALABAMA, INC. ALABAMA 72-1492844
FAIRFAX FUNERAL HOME, INC. VIRGINIA 54-0718777
JOSEPH W. TEAGUE FUNERAL HOME, INC. VIRGINIA 54-0787590
RICHMOND MEMORIAL PARKS, INC. VIRGINIA 54-0801902
WASHINGTON MEMORIAL CEMETERY, INCORPORATED VIRGINIA 54-0490257
WISE CORPORATION VIRGINIA 54-0832763
BARTLETT-BURDETTE-COX FUNERAL HOME, INC. WEST VIRGINIA 55-0568150
CALFEE FUNERAL SERVICE OF PINEVILLE, INC. WEST VIRGINIA 55-0266450
CASDORPH & CURRY FUNERAL HOME, INC. WEST VIRGINIA 55-0721178
DODD-PAYNE-HESS FUNERAL HOME, INC. WEST VIRGINIA 55-0523311
EVANS FUNERAL HOME, INC. (WEST VIRGINIA) WEST VIRGINIA 55-0526285
GRACELAND MAUSOLEUM, INC. WEST VIRGINIA 55-0645205
KIMES FUNERAL HOME, INC. WEST VIRGINIA 55-0485749
KLINGEL-CARPENTER MORTUARY, INC. WEST VIRGINIA 55-0460584
S.E. ACQUISITION OF MALDEN, WEST VIRGINIA, INC. WEST VIRGINIA 55-0764400
WILSON FUNERAL HOME, INC. WEST VIRGINIA 55-0329572
LAKEWOOD MEMORIAL PARK, INC. MISSISSIPPI 64-0188145
MEMORIAL SERVICES OF COLUMBIA, INC. MISSOURI 43-1171239
MEMORIAL FUNERAL HOME, INC. MISSOURI 43-0683654
LINCOLN MEMORIAL MORTUARY, INC. NEBRASKA 47-0637566
S.E. ACQUISITION OF NEVADA, INC. NEVADA 88-0397289
DESERT MEMORIAL, INC. NEVADA 88-0360543
NEPTUNE SOCIETY OF NEVADA, INC. NEVADA 88-0285085
RENO MEMORIAL, INC. NEVADA 88-0405570
S.E. ACQUISITION OF RENO, NEVADA, INC. NEVADA 88-0405123
STRONG & BURNS FUNERAL HOME, INC. NEW YORK 16-1449371
MONTLAWN MEMORIAL PARK, INC. NORTH CAROLINA 56-1338130
ROCKY MOUNT MEMORIAL PARK, INC. NORTH CAROLINA 56-1014862
S.E. ACQUISITION OF OREGON, INC. OREGON 93-1187545
AMLING/SCHROEDER FUNERAL SERVICE, INC. OREGON 93-1181655
CASCADE CREMATORY, INC. OREGON 93-1179976
CHAPEL OF THE ROSES, INC. OREGON 93-0474022
CHAPEL OF THE VALLEY FUNERAL HOME, INC. OREGON 93-1162684
</Table>
7

<Table>
<Caption>
STATE OF I.R.S. EMPLOYER
INCORPORATION OR IDENTIFICATION
EXACT NAME OF ADDITIONAL REGISTRANTS* FORMATION NUMBER

DUTTON, INC. OREGON 93-1064740
J.P. FINLEY AND SON MORTUARY, INC. OREGON 93-1066620
SUNSET HILLS MEMORIAL PARK OREGON 93-0395535
GREENWOOD CEMETERY, INC. OREGON 93-0179035
NISWONGER & REYNOLDS, INC. OREGON 93-0497426
S.E. ACQUISITION OF MYRTLE CREEK, OREGON, INC. OREGON 93-1204595
S.E. ACQUISITION OF REEDSPORT, OREGON, INC. OREGON 91-1852408
TABOR'S DESERT HILLS MORTUARY, INC. OREGON 93-1136418
CAROLINA FINANCIAL CORPORATION OF PICKENS SOUTH CAROLINA 57-0792449
HILL-CREST MEMORIAL PARK SOUTH CAROLINA 57-0310741
OCONEE MEMORIAL GARDENS, INC. SOUTH CAROLINA 57-1019419
DILLARD MEMORIAL, INC. SOUTH CAROLINA 57-0142493
COLE & GARRETT FUNERAL HOMES, INC. TENNESSEE 62-1269993
HIGHLAND MEMORIAL CEMETERY, INC. TENNESSEE 62-1515308
HOLLY HILLS, INC. TENNESSEE 62-1516351
KINGSPORT CEMETERY CORPORATION TENNESSEE 62-0453134
THE NASHVILLE HISTORIC CEMETERY ASSOCIATION, INC. TENNESSEE 62-1455239
PASADENA FUNERAL HOME, INC. TEXAS 75-2640884
RESTLAND FUNERAL HOME, INC. TEXAS 75-0948243
ANDERSON-CLAYTON BROS. FUNERAL HOMES, INC. TEXAS 75-0113340
LITTLE BETHEL MEMORIAL PARK, INC. TEXAS 75-2047789
ROSELAWN MEMORIAL GARDENS, INC. TEXAS 75-1853478
BELEW FUNERAL HOME, INC. TEXAS 75-2579187
BEXAR COUNTY MORTUARY SERVICES, INC. TEXAS 74-2174694
BLUEBONNET HILLS MEMORIAL PARK, INC. TEXAS 75-0940778
BLUEBONNET HILLS FUNERAL HOME, INC. TEXAS 75-1887053
BRIGHT-HOLLAND FUNERAL HOME, INC. TEXAS 75-2555413
CRESPO & SONS, INCORPORATED TEXAS 74-1663926
DALTON & SON FUNERAL HOME, INC. TEXAS 75-1420288
EMERALD HILLS FUNERAL CORPORATION TEXAS 75-2153941
J. E. FOUST & SON FUNERAL DIRECTORS, INC. TEXAS 75-2546901
GUARDIAN CREMATION SOCIETY, INC. TEXAS 75-2783157
GUARDIAN FUNERAL HOME, INC. TEXAS 75-0308465
HILLTOP MEMORIAL PARK TEXAS 75-0845982
LAUREL LAND MEMORIAL PARK, INC. TEXAS 75-0387310
LAUREL LAND FUNERAL HOME, INC. TEXAS 75-1179873
SINGING HILLS FUNERAL HOME, INC. TEXAS 75-1452354
LAUREL LAND OF FORT WORTH, INC. TEXAS 75-2163741
LAUREL LAND FUNERAL HOME OF FORT WORTH, INC. TEXAS 75-2163737
LYONS FUNERAL HOME, INC. TEXAS 75-2552395
METROCREST FUNERAL HOME, INC. TEXAS 75-2186675
RESTLAND OF DALLAS, INC. TEXAS 75-1506921
ABBEY PLAN OF TEXAS, INC. TEXAS 74-2869205
HIGHLAND MEMORIAL GARDENS, INC. TEXAS 75-1641443
SIMPLICITY PLAN OF TEXAS, INC. TEXAS 75-2317933
SOUTHPARK FUNERAL HOME, INC. TEXAS 74-1457971
SOUTH MEMORIAL PARK, INC. TEXAS 74-1404087
S.E. ACQUISITION OF WASHINGTON, INC. WASHINGTON 91-1869762
E.R. BUTTERWORTH & SONS WASHINGTON 91-0161720
CREMATION SOCIETY NORTHWEST, INC. WASHINGTON 91-1689873
EVERGREEN STAPLES FUNERAL CHAPEL, INC. WASHINGTON 91-1435155
CUNNINGHAM MEMORIAL PARK, INC. WEST VIRGINIA 55-0675890
LEGACY ONE, INC. WEST VIRGINIA 55-0451101
FINDLAY CEMETERY, INC. OHIO 55-0600689
</Table>
8

<Table>
<Caption>
STATE OF I.R.S. EMPLOYER
INCORPORATION OR IDENTIFICATION
EXACT NAME OF ADDITIONAL REGISTRANTS* FORMATION NUMBER

EASTLAWN MEMORIAL GARDENS, INCORPORATED VIRGINIA 54-0630640
GRANDVIEW MEMORY GARDENS, INCORPORATED VIRGINIA 55-0418106
GREENHILLS MEMORY GARDENS, INC. VIRGINIA 55-0453246
HIGHLAND MEMORY GARDENS, INCORPORATED (VA) VIRGINIA 55-0398489
HOLLY MEMORIAL GARDENS, INC. VIRGINIA 54-0679281
MONTICELLO MEMORY GARDENS, INC. VIRGINIA 55-0590890
SUNSET MEMORY GARDENS, INC. VIRGINIA 55-0588991
BLUE RIDGE FUNERAL HOME, INC. WEST VIRGINIA 55-0479644
BLUE RIDGE MEMORIAL GARDENS, INC. (WVA) WEST VIRGINIA 55-0385960
C.G.R., INC. WEST VIRGINIA 55-0542566
EASTERN CEMETERY ASSOCIATES, INC. WEST VIRGINIA 55-0548764
ETERNAL LIGHT FUNERALS, INC. WEST VIRGINIA 55-0493366
KANAWHA PLAZA PARTNERSHIP WEST VIRGINIA 55-0540511
LEGACY ONE SERVICE CORPORATION WEST VIRGINIA 55-0658005
LOI CHARLESTON, INC. WEST VIRGINIA 55-0722745
MOUNTAIN VIEW MEMORY GARDENS, INC. WEST VIRGINIA 55-0416346
NATIONAL EXCHANGE TRUST, LTD WEST VIRGINIA 55-0579178
NATIONAL FUNERAL SERVICES, INCORPORATED WEST VIRGINIA 55-0604593
PLEASANT VIEW MEMORY GARDENS, INC. WEST VIRGINIA 55-0418939
WILLIAMS-BLUE RIDGE FUNERAL HOME, INC. WEST VIRGINIA 55-0534313
</Table>

- ---------------

* The address for each of the additional Registrants is 110 Veterans Memorial
Boulevard, Metairie, LA 70005, telephone (504) 837-5880. The primary standard
industrial classification code number for each of the additional Registrants
is 7200.
9

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED AUGUST 14, 2001

PROSPECTUS

(STEWART LOGO)

STEWART ENTERPRISES, INC.

OFFER TO EXCHANGE
UP TO $300,000,000 REGISTERED 10 3/4% SENIOR SUBORDINATED NOTES DUE 2008
FOR
ANY AND ALL OUTSTANDING UNREGISTERED 10 3/4% SENIOR SUBORDINATED NOTES DUE 2008
---------------------

We are offering to exchange 10 3/4% senior subordinated notes due 2008 that
we have registered under the Securities Act of 1933 (the exchange notes) for all
outstanding 10 3/4% senior subordinated notes due 2008 (the outstanding notes).
In this prospectus we refer to the exchange notes and the outstanding notes
collectively as the notes.

THE EXCHANGE OFFER

- We hereby offer to exchange all outstanding notes that are validly
tendered and not withdrawn for an equal principal amount of exchange
notes which are registered under the Securities Act of 1933.

- The exchange offer will expire at 5:00 p.m. New York City time, on
, 2001, unless extended.

- You may withdraw tenders of your outstanding notes at any time before the
exchange offer expires.

- The exchange notes are substantially identical to the outstanding notes,
except that the transfer restrictions and registration rights relating to
the outstanding notes will not apply to the exchange notes.

- We believe that the exchange of outstanding notes will not be a taxable
event for federal income tax purposes, but you should read "Certain U.S.
Federal Income Tax Considerations" beginning on page 113 for more
information.

- We will not receive any proceeds from the exchange offer.

- No public market currently exists for the exchange notes. We do not
intend to apply for listing of the exchange notes on any securities
exchange or to arrange for them to be quoted on any quotation system.

INVESTING IN THE EXCHANGE NOTES INVOLVES RISKS THAT WE DESCRIBE IN THE
"RISK FACTORS" SECTION BEGINNING ON PAGE 20.

---------------------

Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act of 1933. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for outstanding notes where
such outstanding notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. We have agreed that, for a
period of 180 days after the date of this prospectus, we will make this
prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
---------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE EXCHANGE NOTES OR PASSED ON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS AND ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

THE DATE OF THIS PROSPECTUS IS AUGUST 14, 2001.
10

WE HAVE NOT AUTHORIZED ANYONE TO GIVE ANY INFORMATION OR REPRESENT ANYTHING
TO YOU OTHER THAN THE INFORMATION IN THIS PROSPECTUS. YOU MUST NOT RELY ON ANY
UNAUTHORIZED INFORMATION OR REPRESENTATIONS. WE ARE NOT MAKING AN OFFER TO SELL
THE EXCHANGE NOTES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

---------------------

TABLE OF CONTENTS

<Table>
<Caption>
PAGE
----

Forward-Looking Statements.................................. iii
Prospectus Summary.......................................... 1
Risk Factors................................................ 20
Exchange Offer.............................................. 28
Use of Proceeds............................................. 35
Capitalization.............................................. 36
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 37
Business.................................................... 57
Management.................................................. 66
Principal Stockholders...................................... 68
Certain Relationships and Related Transactions.............. 70
Description of Certain Indebtedness and the Tender Offer.... 71
Description of Notes........................................ 76
Certain United States Federal Tax Considerations............ 113
Plan of Distribution........................................ 117
Legal Matters............................................... 117
Experts..................................................... 118
Available Information and Incorporation by Reference........ 118
Index to Historical Consolidated Financial Statements....... F-1
Unaudited Pro Forma Financial Information................... P-1
</Table>

THIS DOCUMENT INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT US
THAT IS NOT PRINTED IN THIS DOCUMENT BUT IS CONTAINED IN DOCUMENTS FILED WITH
THE SEC. THIS INFORMATION IS AVAILABLE AT THE INTERNET WEB SITE THE SEC
MAINTAINS AT HTTP://WWW.SEC.GOV, AS WELL AS FROM OTHER SOURCES. SEE "AVAILABLE
INFORMATION AND INCORPORATION BY REFERENCE" ON PAGE 118.

YOU ALSO MAY REQUEST COPIES OF THESE DOCUMENTS FROM US, WITHOUT CHARGE,
UPON WRITTEN OR ORAL REQUEST BY CONTACTING US AT: STEWART ENTERPRISES, INC., 110
VETERANS MEMORIAL BOULEVARD, METAIRIE, LOUISIANA 70005, ATTN: MARTIN R. DE
LAUREAL, (504) 837-5880. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE AT LEAST FIVE BUSINESS DAYS PRIOR TO THE DATE ON
WHICH AN INVESTMENT DECISION IS TO BE MADE WITH RESPECT TO THE EXCHANGE NOTES
OFFERED HEREBY AND IN ANY EVENT NO LATER THAN , 2001, WHICH IS FIVE
BUSINESS DAYS PRIOR TO THE INITIAL EXPIRATION DATE OF THE EXCHANGE OFFER.

---------------------

ii
11

TERMS USED IN THIS PROSPECTUS

"SAB 101" refers to the Securities and Exchange Commission's Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements,"
which we implemented in the first quarter of fiscal year 2001.

In this prospectus, "Stewart," the "Company," "we," "our" and "us" refer to
Stewart Enterprises, Inc. and its subsidiaries.

The term "EBITDA" used in this prospectus means earnings before the
cumulative effect of changes in accounting principles and before net interest
expense, taxes, depreciation and amortization.

---------------------

FORWARD-LOOKING STATEMENTS

This prospectus contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, both as amended. All statements other than statements of
historical fact are "forward-looking statements" for purposes of federal and
state securities laws, including any projections of earnings, revenues or other
financial items; any statements of the plans, strategies and objectives of
management for future operations; any statements concerning proposed new
products, services or developments; any statements regarding future economic
conditions or performance; any statements of belief; and any statements of
assumptions underlying any of the foregoing. Forward-looking statements may
include the words "may," "will," "estimate," "intend," "continue," "believe,"
"expect," "plan" or "anticipate" and other similar words. Such forward-looking
statements may be contained in the sections "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," among other places.

Although we believe that the expectations reflected in our forward-looking
statements are reasonable, actual results could differ materially from those
projected or assumed in our forward-looking statements. Our future financial
condition and results of operations, as well as any forward-looking statements,
are subject to change and are subject to inherent risks and uncertainties, such
as those disclosed in this prospectus. We do not intend, and we undertake no
obligation, to update any forward-looking statement. Currently known risk
factors include, but are not limited to, the factors described in this
prospectus in the section "Risk Factors." We urge you to review carefully the
section "Risk Factors" in this prospectus for a more complete discussion of the
risks of an investment in the notes.

iii
12

PROSPECTUS SUMMARY

This summary highlights the information contained elsewhere in this
prospectus. Because this is only a summary, it does not contain all of the
information that may be important to you. For a more complete understanding of
the exchange offer, we encourage you to read this entire prospectus and the
documents to which we refer you. You should read the following summary together
with the more detailed information and consolidated financial statements and the
notes to those statements included elsewhere in this prospectus. We report our
financial results on a fiscal year rather than a calendar year basis. When we
refer to a particular fiscal year in this prospectus, we mean the twelve months
ended October 31 of that year.

COMPANY OVERVIEW

Founded in 1910, we are the third largest provider of funeral and cemetery
products and services in the death care industry in the United States. Through
our subsidiaries, we provide a complete range of funeral merchandise and
services, along with cemetery property, merchandise and services, both at-need
and prior to the time of need. As of April 30, 2001, our domestic operations
included 321 funeral homes and 151 cemeteries in 30 states within the United
States and in Puerto Rico, and our foreign operations included 291 funeral homes
and 10 cemeteries in 10 foreign countries. For the twelve months ended April 30,
2001 (pro forma for SAB 101), we had revenues of $690.3 million and EBITDA of
$219.6 million. We are currently pursuing the sale of our foreign operations,
which for fiscal year 2000 (pro forma for SAB 101) contributed approximately
$139.8 million, or 20 percent, of total revenues and approximately $36.4
million, or 16 percent, of total EBITDA.

For fiscal year 2000 (pro forma for SAB 101), funeral operations accounted
for approximately 60 percent of our total revenues and cemetery operations
accounted for the remaining 40 percent. Our funeral homes offer a wide range of
services and products including funeral services, cremation, transportation
services, removal and preparation of remains, caskets and flowers. Our cemetery
operations sell cemetery property, merchandise and services. Cemetery property
includes lots, lawn crypts and family and community mausoleums. Cemetery
merchandise includes vaults, monuments and markers. Cemetery services include
burial site openings and closings and inscriptions.

We believe that we operate one or more of the premier death care facilities
in each of our principal markets. Our funeral homes and cemeteries in the United
States are located primarily in the Southern, Western, Mid-Atlantic, and
Mid-Western states, generally in large metropolitan areas such as Miami,
Orlando, Tampa and St. Petersburg, Florida; Dallas, Fort Worth and Houston,
Texas; Los Angeles, San Diego and San Francisco, California; New Orleans,
Louisiana; Baltimore, Maryland and the District of Columbia. According to the
United States Bureau of the Census, many of these areas have a large population
over age 65, which represents a principal target market for our preneed sales
program as well as at-need sales. We believe that we are an industry leader in
marketing preneed cemetery property and preneed funeral and cemetery merchandise
and services, and we consider preneed sales to be an integral part of our
long-term business strategy.

Cemetery operations account for a significantly larger percentage of our
total revenues than those of our three largest competitors. We emphasize
cemetery operations because we believe cemeteries provide the best foundation
for securing long-term market share in our industry. The sale of cemetery
property to a family creates a relationship that builds heritage over time, as
family members are buried in the plot or mausoleum and as other family members
purchase additional cemetery property in order to be buried in the same
cemetery. Our relationships with our cemetery property customers allow us to
more easily offer related products and services, such as cemetery merchandise or
a funeral service at one of our funeral homes located on the cemetery grounds or
nearby.

1
13

Approximately 47 percent of our cemeteries have a funeral home onsite that we
operate in conjunction with the cemetery. In addition to our combination
operations, another approximately 39 percent of our cemeteries are located
within the same market as, and operated in conjunction with, one of our funeral
homes. We frequently organize our operating units in "clusters," which are
integrated groups of funeral homes and cemeteries that allow us to
cost-effectively pool assets, personnel and services and to generate higher
margins.

INDUSTRY OVERVIEW

Highly fragmented industry. Death care businesses in the United States
have traditionally been relatively small, family-owned enterprises that have
passed through successive generations within the family. The last decade
witnessed a trend of family-owned firms consolidating with larger organizations
such as ours. However, this trend slowed in 1999, and the industry continues to
be characterized by a large number of locally-owned, independent operations.
More than 85 percent of the approximately 22,000 funeral homes and 10,500
cemeteries in the United States are independently owned.

Continuing need for products and services; increasing number of
deaths. There is an inevitable need for the products and services our industry
offers. In addition, the number of deaths in the United States is expected to
increase at a steady, moderate pace. According to the United States Bureau of
the Census, the number of deaths in the United States is expected to increase by
approximately 1 percent per year, from 2.4 million in 2000 to 2.6 million in
2010. Furthermore, the average age of the population in the United States is
increasing. According to the United States Bureau of the Census, the United
States population over 50 years of age is expected to increase by approximately
2 percent per year, from 76.1 million in 2000 to 97.1 million in 2010. We
believe the aging of the population is particularly important because it expands
our target market for preneed sales, as older persons, especially those over 50,
are most likely to make preneed funeral and cemetery arrangements.

Importance of tradition; barriers to entry. We believe it is difficult for
new competitors to enter existing markets successfully by opening new cemeteries
and funeral homes. Entry into the cemetery market can be difficult due to
several factors. Families tend to return to the same cemetery for generations to
bury their family members, making it difficult for new cemeteries to attract
families. Additionally, mature markets, including many of the metropolitan areas
where our cemeteries are located, are often already served by an adequate number
of cemeteries, and land for new cemetery development is scarce. Regulatory
complexities and zoning restrictions also make entry into the cemetery market
difficult. Finally, development of a new cemetery requires a significant capital
investment that usually takes several years to produce a return. Entry into the
funeral home market can be difficult for many of the same reasons. Families tend
to choose a funeral home because it previously served their family, and because
of the funeral home's reputation, which must be developed over time, although
they are often willing to move from a stand-alone funeral home to a newer one
developed on the grounds of their preferred cemetery.

Growing demand for cremation. Consumer preferences in our industry tend to
change slowly. One significant trend in the United States is an increase in the
preference for cremation. Industry research indicates that the percentage of
cremations has steadily increased and that cremation will represent
approximately 36 percent of the United States market by the year 2010, compared
to 25 percent in 1999. Although the percentage represented by cremations is
expected to grow, we believe this growth will come primarily from the expected
growth in the number of deaths over time, and that the number of traditional
funerals performed each year should remain relatively constant. Because
cremations have typically included few, if any, additional products or services
for the family beyond the cremation itself, the trend towards cremation has been
a concern to traditional funeral home and cemetery operators. However, industry
research has shown that the consumer chooses cremation frequently for reasons
other than cost, and we believe this increasing consumer interest in cremation
will provide us an opportunity to better serve families by offering an array of
additional products and services.

2
14

COMPETITIVE STRENGTHS

Leading market positions. We are the third largest provider of funeral and
cemetery products and services in the United States and have been in business
for more than 90 years. In addition, we believe that we operate one or more of
the premier death care facilities in each of our principal markets, which are
primarily in larger metropolitan areas in the Southern, Western, Mid-Atlantic
and Mid-Western states. In our view, a "premier" facility is one that is among
the most highly regarded facilities in its market area in terms of a variety of
factors such as tradition, heritage, reputation, physical size, volume of
business, available inventory, name recognition, aesthetics and/or potential for
development or expansion. For example, while funeral homes and cemeteries in the
United States perform an average of approximately 100 funerals and 165 burials
per year, ours perform an average of approximately 250 funerals and 375 burials
per year. In addition, more than 40 percent of our domestic properties are
located in California, Florida and Texas, which are three of the four states
with the highest population over age 65, an age group that represents a large
portion of our target market.

Strong cemetery operations. Our cemetery operations account for
approximately 40 percent of our total revenues, which is a significantly larger
percentage than any of our three largest competitors. We believe this is a
competitive advantage because families generally return to the same cemetery for
generations to bury their family members. Cemetery property often becomes an
important part of a family's heritage, and family members who move away will
often return to their home cemetery to be buried. We build on our relationships
with our cemetery customers by offering additional cemetery property to related
family members and by offering related products and services such as cemetery
merchandise or a funeral service at one of our funeral homes located on the
cemetery grounds or nearby. Approximately 42 percent of our total cemetery
acreage is available for future development.

Emphasis on combination operations. Approximately 47 percent of our
cemeteries have a funeral home onsite that is operated in conjunction with the
cemetery, which we refer to as a combination operation. This is a significantly
higher percentage of combination operations than any of our three largest
competitors. We believe combination operations are a competitive advantage
because they offer families the convenience of complete death care services at a
single location. Our experience demonstrates that a family planning a burial in
our cemetery often views our onsite funeral home as a more desirable location
for a funeral service than an unaffiliated offsite funeral home. Thus, the
funeral home's call volume benefits from the heritage of the cemetery, and, over
time, the cemetery's activity increases as well. In addition, combination
operations enhance our purchasing power, enable us to employ more sophisticated
management systems and allow us to share facilities, equipment, personnel and a
preneed sales force, resulting in lower average operating costs and expanded
marketing and sales opportunities. As a result, our combination operations
usually generate higher operating margins for us compared to our stand-alone
funeral homes and cemeteries. In addition to our combination operations,
approximately 39 percent of our cemeteries are located within the same market
as, and operated in conjunction with, one or more of our funeral homes.

Expertise in preneed sales; strong backlog. We believe that we are
distinguished from our competitors by our strong emphasis on, and more than
60-year history of experience with, preneed sales. Preneed plans enable families
to specify in advance and prepay for cemetery property and funeral and cemetery
services and products. We market these properties, services and products
domestically through our full-time staff of approximately 1,200 sales
counselors. Our expertise in preneed sales has historically developed out of,
and now complements, our strong cemetery operations. This is because cemetery
property, such as a burial plot, is usually the first purchase a family will
make when considering preneed arrangements. We build on our relationships with
our preneed cemetery property customers by offering them additional preneed
products and services such as cemetery merchandise or funeral services. Our
focus on preneed cemetery property sales is also important because these sales
generate current revenues and higher current cash flow than other types of
preneed sales. We estimate that as of April 30, 2001, the future value of our
preneed backlog (including earnings on funds held in trust and build-up in the
face value of third-party insurance contracts, in each case at assumed rates)
represented approximately $2.5 billion of revenue to be recognized in the future
as these prepaid products and services are delivered.

3
15

Experienced management. We have an experienced management team, many of
whom owned and operated their own funeral homes and cemeteries and joined our
company when we acquired their businesses. Our 11 top executives have an average
of 29 years of experience in the death care industry and have been with our
company for an average of 16 years.

BUSINESS STRATEGY

Our business strategy is to improve and expand our operations internally
and to strengthen our financial performance by improving cash flow and
profitability and deleveraging our balance sheet. Key elements of our business
strategy are as follows:

Maintain backlog through preneed marketing. We consider maintaining our
backlog through preneed marketing to be an integral part of our long-term
business strategy. Our primary objective is to moderate preneed sales levels to
balance our cash investment while maintaining a sustainable and predictable
level of growth in our backlog. The aging of the population represents a
significant opportunity for us to expand our customer base through preneed
marketing, as older customers, especially those over 50 years old, are most
likely to make these purchases.

Develop additional combination operations. We create combination
operations by (1) building funeral homes on cemetery properties that we own, and
(2) entering into operating partnerships with third parties in which we
construct, own and operate a funeral home and/or mausoleum on the grounds of a
cemetery owned by the third party. Partnerships allow us to enjoy the benefits
of operating a funeral home in a combination operation, without the capital
investment of purchasing the cemetery. Our partner benefits from being better
able to compete with other cemeteries or combination operations in its market,
increase cemetery revenues, and provide a better service to its parishioners or
other constituencies. In 1997, we entered into an operating partnership with the
Archdiocese of Los Angeles to construct and operate funeral homes at the site of
nine cemeteries owned and operated by the Archdiocese. Four of these funeral
homes have been completed, and the fifth is under construction. Over the last 50
years, through our mausoleum construction business, we have developed
relationships with the Catholic Church in approximately 70 dioceses in 39
states. We plan to pursue more of these partnerships with the Catholic Church,
other faith-based organizations and non-profit entities.

Increase enhanced cremation products and services. The cremation rate in
the United States has been increasing and by the year 2010 cremations are
expected to represent 36 percent of the United States burial market, according
to industry estimates. We have been addressing this trend by providing enhanced
cremation products and services at all of our funeral homes. An enhanced
cremation may include a memorial service, an urn and a niche in a mausoleum or
columbarium in which to place the remains. We are also responding to the growing
preference for cremations with our alternative service firm strategy. We
currently operate 25 alternative service locations, which primarily offer
value-priced cremation services and are located principally in California and
Nevada, states with among the highest cremation rates in the United States.
Although these locations do not offer the lowest-cost basic cremations in their
markets, the costs to the family for death care arrangements at these locations
are typically less than at a traditional funeral home. These locations are
generally leased, have lower overhead than traditional funeral homes and
generate higher operating margins than traditional funeral homes, although the
average revenue per service is lower. Additionally, we have found that families
value personalized services and products such as a personalized memorial service
designed to reflect the special interests or hobbies of the consumer. We are
training our funeral arrangers to offer and arrange these new personalized
options.

Reduce debt through asset sales. As of April 30, 2001, we operated a total
of 291 funeral homes and 10 cemeteries in Argentina, Australia, Belgium, Canada,
France, Mexico, the Netherlands, New Zealand, Portugal and Spain. In order to
reduce debt and focus on core domestic operations, we are currently pursuing the
sale of our foreign operations. We have engaged an investment banking firm to
assist in evaluating and executing these sales. For fiscal year 2000 (pro forma
for SAB 101), our revenues from foreign operations were $139.8 million, or 20
percent of our total revenues, and our EBITDA from foreign operations was $36.4
million, or 16 percent of our total EBITDA. If consummated, these sales will
enable us to reduce debt
4
16

significantly. Additionally, we are evaluating opportunities to rezone and sell
excess cemetery property and certain other assets. See "Recent Developments."

Focus on improving cash flow. We plan to continue to improve our cash flow
through a number of revenue enhancements and cost controls, and continued
moderation in our preneed sales activities. In fiscal year 2000, we restructured
our preneed sales program to focus on increasing cash flow. For example, we
increased finance charges, required larger down payments and shortened
installment payment terms, and we decreased the overall level of preneed sales
activities. We are also increasing cash flow and reducing our credit risk by
encouraging families purchasing at-need merchandise and services to pay at the
time of delivery or to use a third-party financing program we developed. In the
past, we typically financed credit sales internally on a short-term basis. We
also plan to continue our suspension of acquisition activity and of our
dividend, and to limit capital expenditures. We plan to continue to seek to
reduce our costs by, among other things, obtaining volume discounts from
suppliers, leveraging our operating costs through clustering and combination
operations, and identifying facilities with overlapping market share and
consolidating them as appropriate. As part of these efforts, we are
incentivizing local managers to decrease costs by tying their compensation more
closely to the profitability of the locations they manage. This strategy
contributed to our increased cemetery margins for the first six months of fiscal
year 2001.

RECENT DEVELOPMENTS

SAB 101

We implemented the Securities and Exchange Commission's Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101") in
the first quarter of fiscal year 2001, which resulted in changes to our methods
of accounting for some of our preneed sales activities. SAB 101 has the effect
of standardizing accounting for preneed sales for the death care industry and,
we believe, better matches revenue recognition and cash receipts. See the
section "Management's Discussion and Analysis of Financial Condition and Results
of Operations" under the heading "Implementation of SAB 101" for a detailed
description of the effects of our implementation of SAB 101 on our methods of
accounting for preneed sales activities.

Foreign asset sales and related noncash charge

We are currently pursuing the sale of our foreign operations. Our financial
advisors have completed their evaluation of those operations, and, except for
Argentina, have submitted financial and other information to prospective buyers
and have received one or more indications of interest and/or formal proposals
for the purchase of each of these foreign operations. We are now in various
stages of negotiations with prospective buyers and believe that we will be able
to dispose of those operations at acceptable prices.

As a result of our decision to proceed with the sale of our foreign
operations, we will be writing down the assets associated with our foreign
operations, with an aggregate carrying value of approximately $580.0 million, to
their estimated fair value. As a result, we estimate that we will incur an
aggregate pre-tax noncash charge to earnings of $230.0 million to $250.0 million
($175.0 million to $195.0 million, after tax) in the quarter ending July 31,
2001. We estimate that the total charge to our shareholders' equity will be
$115.0 million to $135.0 million after tax in the quarter ending July 31, 2001,
because we have already reduced equity for the cumulative foreign translation
adjustment incurred in each period we have owned these businesses.

Definitive agreement to sell Mexican operations

On June 4, 2001, we announced that we entered into a definitive agreement
with Jardines del Tiempo, S.A. de C.V. and Jardine de la Esperanza, S.A. de C.V.
for the sale of our Mexican operations, which include five funeral homes. The
agreement, which resulted from arms-length negotiations, provides that the
purchase price shall be 461,561,801 Mexican pesos, less (i) an amount the buyers
shall advance to us to pay in full promissory notes in the original principal
amounts of US$30,150,000 and US$5,200,000,
5
17

respectively, provided that this amount shall not be greater than 461,561,801
Mexican pesos, plus (ii) a net liquid asset amount to be calculated in
accordance with the terms of the purchase agreement. The net proceeds from the
sale will be approximately US$70 million, before taxes. The net proceeds of
approximately US$70 million, before taxes will be used to repay debt in
accordance with our deleveraging strategy. We expect to recognize a small gain
or loss on the sale, although the exact amount will depend on the exchange rate
of the Mexican peso and the U.S. dollar at the time of closing. The transaction
is scheduled to close in August 2001 and is subject to customary closing
conditions. For pro forma financial information giving effect to the sale of our
Mexican operations, see "Unaudited Pro Forma Financial Information" beginning on
page P-1 of this prospectus.

Other noncash charges

We have identified certain assets, primarily excess cemetery property and
funeral home real estate, that we expect to sell, which have an aggregate net
asset value of approximately $20.0 million. In addition, we have reviewed
noncompetition agreements that we entered into with sellers, key employees and
others in connection with our previous acquisitions. We are considering
relieving some of these individuals from the obligation not to compete, although
we would continue to make the payments in accordance with the contract terms.
This obligation, which we previously recorded, will be classified as "Other
long-term liabilities" on the balance sheet. As a result of the foregoing, we
estimate that we would incur an aggregate pre-tax noncash charge to earnings of
$15.0 million to $30.0 million ($9.0 million to $18.0 million, after tax) in the
third quarter of fiscal year 2001.

Accounting for goodwill

On June 29, 2001, the Financial Accounting Standards Board approved its
proposed Statement of Financial Accounting Standards ("SFAS") 142, "Goodwill and
Other Intangible Assets." SFAS 142 will require that goodwill no longer be
amortized, but does require that goodwill be tested for impairment using a fair
value approach on an annual basis and between annual tests in certain
circumstances. Companies will be allowed six months from the date of adoption to
complete a transitional goodwill impairment test. The provisions of SFAS 142
will be effective for fiscal years beginning after December 15, 2001. However,
early adoption of SFAS 142 will be permitted for companies with a fiscal year
beginning after March 15, 2001, provided their first quarter financial
statements have not been previously issued. In all cases, SFAS 142 must be
adopted at the beginning of a fiscal year. Therefore, we can elect to early
adopt the provisions of SFAS 142 in the first quarter of fiscal year 2002 or
adopt the provisions in the first quarter of fiscal year 2003. We have not
completed our review and analysis; however, based upon our initial
interpretation of SFAS 142 and if it were effective as of April 30, 2001, our
preliminary estimate is that we would incur a pre-tax noncash impairment charge
of between $100.0 million and $300.0 million for our domestic operations. Our
foreign operations will not be affected as they will have been previously marked
to fair value. However, we will no longer be required to amortize goodwill,
which amounted to $19.6 million ($14.4 million related to domestic operations)
in fiscal year 2000. Changes in the fair value of our relevant businesses could
change our estimated impairment charge materially. See the section "Management's
Discussion and Analysis of Financial Condition and Results of Operations" under
the heading "Recent Accounting Standards."

REFINANCING TRANSACTIONS

Concurrently with the sale of the outstanding notes on June 29, 2001, we
entered into a credit agreement that provides up to a maximum of $550.0 million
of senior secured credit facilities. The new senior secured credit facilities
consist of:

- $175.0 million four-year revolving credit facility,

- $75.0 million 18-month asset sale term loan, and

- $300.0 million five-year term loan B.

6
18

We used the funds from the sale of the outstanding notes and the senior
secured credit facilities, along with a portion of our cash and cash
equivalents, to:

- refinance our revolving credit facility,

- retire our privately held senior notes,

- complete an offer to purchase approximately $200.0 million in principal
amount of our $300.0 million publicly held senior notes, and

- pay related tender premiums, prepayment penalties, fees and expenses.

The table below summarizes our sources and uses of funds from these
transactions, which we refer to in this prospectus as the "refinancing
transactions," as of June 29, 2001:

<Table>
<Caption>
AMOUNT
--------------
(IN THOUSANDS)

SOURCES OF FUNDS
Cash and cash equivalents................................... $ 12,162
New senior secured credit facilities:
Revolving credit facility................................. 50,000
Asset sale term loan...................................... 75,000
Term loan B............................................... 300,000
10 3/4% senior subordinated notes due 2008.................. 300,000
--------
Total sources..................................... $737,162
========
USES OF FUNDS
Repayment of revolving credit facility...................... $442,000
Tender for a portion of the 6.40% ROARS due 2013
(remarketing date 2003)(1)................................ 100,103
Tender for the 6.70% Notes due 2003(1)...................... 99,900
Redemption of privately held senior notes................... 64,762
Tender premiums, prepayment penalties, fees and
expenses(2)............................................... 30,397
--------
Total uses........................................ $737,162
========
</Table>

- ---------------

(1) On May 15, 2001, we commenced an offer to purchase approximately $200.0
million in principal amount of our $300.0 million publicly held senior
notes, which consisted of $100.0 million 6.70% Notes and $200.0 million
6.40% ROARS. On June 29, 2001, we repurchased $99.9 million of the 6.70%
Notes and approximately $100.1 million of the 6.40% ROARS. The remaining
6.70% Notes and 6.40% ROARS are secured equally and ratably with the new
senior secured credit facilities. See the section "Description of Certain
Indebtedness and the Tender Offer."

(2) Includes $7.6 million for tender offer premiums, prepayment penalties on the
privately held senior notes and a payment relating to the 6.40% ROARS
purchased in the tender offer.

In connection with the refinancing transactions, we estimate that we will
incur net charges of approximately $28.9 million, which represents tender
premiums, prepayment penalties and fees and expenses totaling $30.4 million and
a write-off of fees relating to existing debt of $.7 million, reduced by a $2.3
million write-off of 50 percent of the remaining unamortized 6.40% ROARS
remarketing option premium. Of the $28.9 million total, approximately $13.5
million (approximately $8.5 million after taxes) will be recorded during the
period the refinancing transactions are completed, and the remaining $15.4
million will be amortized over the term of the related debt instruments, which
ranges from four to seven years.

We entered into these transactions primarily to improve our liquidity by
(1) retiring our existing $600.0 million revolving credit facility, which was
scheduled to mature on April 30, 2002, and replacing it with a new revolving
credit facility with a four-year term, and (2) generally extending the
maturities on the

7
19

remaining long-term debt in our capital structure (except with respect to the
18-month asset sale term loan). The asset sale term loan will provide us with
shorter-term financing as we pursue the sale of our foreign operations, excess
cemetery property and certain other assets. We project that if we do not sell
any assets, our cash from operations and cash and cash equivalents, along with
amounts available under the new revolving credit facility, will be sufficient to
allow us to pay the asset sale term loan when it becomes due.

For additional information, see "Capitalization" and "Description of
Certain Indebtedness and the Tender Offer."

---------------------

Our principal executive offices are located at 110 Veterans Memorial
Boulevard, Metairie, Louisiana 70005, and our telephone number is (504)
837-5880.

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20

SUMMARY OF THE EXCHANGE OFFER

The Initial Offering of
Outstanding Notes.......... We sold the outstanding notes on June 29, 2001 to
Banc of America Securities LLC, Deutsche Banc Alex.
Brown Inc., Credit Lyonnais Securities (USA) Inc.
and SunTrust Equitable Securities Corporation. We
collectively refer to those parties in this
prospectus as the "Initial Purchasers." The Initial
Purchasers subsequently resold the outstanding
notes to qualified institutional buyers pursuant to
Rule 144A under the Securities Act of 1933, as
amended and to non-U.S. Persons within the meaning
of Regulation S under the Securities Act.

Registration Rights
Agreement.................. Simultaneously with the initial sale of the
outstanding notes, we entered into a registration
rights agreement for the exchange offer. In the
registration rights agreement, we agreed, among
other things, to use our reasonable best efforts to
complete a registered exchange offer for the
outstanding notes or cause to become effective a
shelf registration statement for resales of the
outstanding notes. The exchange offer is intended
to satisfy your rights under the registration
rights agreement. After the exchange offer is
complete, you will no longer be entitled to any
exchange or registration rights with respect to
your outstanding notes.

The Exchange Offer......... We are offering to exchange the exchange notes
which have been registered under the Securities Act
for your outstanding notes. In order to be
exchanged, an outstanding note must be properly
tendered and accepted. All outstanding notes that
are validly tendered and not validly withdrawn will
be exchanged. We will issue exchange notes promptly
after the expiration of the exchange offer.

Resales.................... We believe that the exchange notes issued in the
exchange offer may be offered for resale, resold
and otherwise transferred by you without compliance
with the registration and prospectus delivery
provisions of the Securities Act provided that:

- the exchange notes are being acquired in the
ordinary course of your business;

- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate, in
the distribution of the exchange notes issued to
you in the exchange offer; and

- you are not an affiliate of ours.

If any of these conditions are not satisfied and
you transfer any exchange notes issued to you in
the exchange offer without delivering a prospectus
meeting the requirements of the Securities Act or
without an exemption from registration of your
exchange notes from these requirements, you may
incur liability under the Securities Act. We will
not assume, nor will we indemnify you against, any
such liability.

Each broker-dealer that is issued exchange notes in
the exchange offer for its own account in exchange
for outstanding notes that were acquired by that
broker-dealer as a result of market-making or other
trading activities, must acknowledge that it will
deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of
the

9
21

exchange notes. A broker-dealer may use this
prospectus for an offer to resell, resale or other
retransfer of the exchange notes issued to it in
the exchange offer.

Expiration Date............ The exchange offer will expire at 5:00 p.m., New
York City time, , 2001,
unless we decide to extend the expiration date.

Conditions to the Exchange
Offer...................... The exchange offer is subject to customary
conditions, including that it does not violate
applicable law or any applicable interpretation of
the staff of the SEC.

Procedures for Tendering
Outstanding Notes.......... If you wish to tender your outstanding notes for
exchange in this exchange offer, you must transmit
to the exchange agent on or before the expiration
date either:

- An original or a facsimile of a properly
completed and duly executed copy of the letter of
transmittal, which accompanies this prospectus,
together with your outstanding notes and any
other documentation required by the letter of
transmittal, at the address provided on the cover
page of the letter of transmittal; or

- If the outstanding notes you own are held of
record by The Depository Trust Company, or "DTC,"
in book-entry form and you are making delivery by
book-entry transfer, a computer-generated message
transmitted by means of the Automated Tender
Offer Program System of DTC, or "ATOP," in which
you acknowledge and agree to be bound by the
terms of the letter of transmittal and which,
when received by the exchange agent, forms a part
of a confirmation of book-entry transfer. As part
of the book-entry transfer, DTC will facilitate
the exchange of your outstanding notes and update
your account to reflect the issuance of the
exchange notes to you. ATOP allows you to
electronically transmit your acceptance of the
exchange offer to DTC instead of physically
completing and delivering a letter of transmittal
to the exchange agent.

In addition, you must deliver to the exchange agent
on or before the expiration date:

- If you are effecting delivery by book-entry
transfer, a timely confirmation of book-entry
transfer of your outstanding notes into the
account of the exchange agent at DTC; or

- If necessary, the documents required for
compliance with the guaranteed delivery
procedures.

Special Procedures for
Beneficial Owners.......... If you are the beneficial owner of book-entry
interests and your name does not appear on a
security position listing of DTC as the holder of
the book-entry interests or if you are a beneficial
owner of outstanding notes that are registered in
the name of a broker, dealer, commercial bank,
trust company or other nominee and you wish to
tender the book-entry interest or outstanding notes
in the exchange offer, you should contact the
person in whose name your book-entry interests or

10
22

outstanding notes are registered promptly and
instruct that person to tender on your behalf.

Withdrawal Rights.......... You may withdraw the tender of your outstanding
notes at any time prior to 5:00 p.m., New York City
time on , 2001.

Federal Income Tax
Considerations............. We believe that the exchange of outstanding notes
will not be a taxable event for U.S. federal income
tax purposes.

Use of Proceeds............ We will not receive any proceeds from the issuance
of exchange notes pursuant to the exchange offer.
We will pay all of our expenses incident to the
exchange offer.

Exchange Agent............. Firstar Bank, N.A. is serving as the exchange agent
in connection with the exchange offer.

11
23

SUMMARY OF TERMS OF THE EXCHANGE NOTES

The form and terms of the exchange notes are the same as the form and terms
of the outstanding notes, except that the exchange notes will be registered
under the Securities Act. As a result, the exchange notes will not bear legends
restricting their transfer and will not contain the registration rights and
liquidated damages provisions contained in the outstanding notes. The exchange
notes represent the same debt as the outstanding notes. Both the outstanding
notes and the exchange notes are governed by the same indenture. Unless
otherwise required by the context, we use the term "notes" in this prospectus to
refer collectively to the outstanding notes and the exchange notes.

Issuer..................... Stewart Enterprises, Inc., a Louisiana corporation.

Securities................. $300.0 million in principal amount of 10 3/4%
senior subordinated notes due 2008.

Maturity................... July 1, 2008.

Interest................... Annual rate: 10 3/4%.
Payment frequency: every six months on January 1
and July 1.
First payment: January 1, 2002.

Guarantees................. All of our existing and future direct and indirect
domestic subsidiaries, except for specified
subsidiaries, will be guarantors of the exchange
notes on a senior subordinated basis.

Ranking.................... The exchange notes and the guarantees of the
exchange notes will be general unsecured senior
subordinated obligations of Stewart and each
guarantor, respectively, and will rank junior to
all existing and future senior debt and equal to or
senior to all other existing or future debt of
Stewart and each guarantor, respectively. In
addition, the exchange notes will rank structurally
behind the liabilities of any of our subsidiaries
that are not guarantors.

Immediately after completing the initial offering
of the outstanding notes and the related
refinancing transactions on June 29, 2001, the
outstanding notes were subordinated to
approximately $539.2 million of our senior debt and
the subsidiary guarantees were subordinated to
approximately $551.5 million of senior debt of the
subsidiary guarantors, $431.5 million of which
represented guarantees of our senior debt. We are
required to maintain a bond ($41.1 million as of
April 30, 2001) to guarantee our obligations
relating to funds we withdrew from our preneed
funeral trusts in Florida. This amount would become
senior debt if we were to borrow funds under the
revolving credit facility to extinguish the bond
obligation by returning to the trusts the amounts
we previously withdrew that relate to the remaining
preneed contracts.

Optional Redemption........ On or after July 1, 2005, we may redeem some or all
of the notes at any time at the redemption prices
described in the section "Description of
Notes -- Optional Redemption."

Prior to July 1, 2004, we may redeem up to 35
percent of the notes with the net cash proceeds
from specified equity offerings at the redemption
price listed in the section "Description of Notes"
under the heading "Optional Redemption." We may,
however, only make such redemptions if at least 65
percent of the aggregate principal amount of notes
originally issued remains outstanding after such
redemptions.

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Mandatory Offer to
Repurchase................. If we experience specific kinds of changes in
control, we must offer to purchase the notes at 101
percent of their face amount, plus accrued
interest.

Certain Covenants.......... The indenture under which the outstanding notes
were issued will govern the exchange notes. This
indenture contains covenants that limit our ability
and the ability of our restricted subsidiaries to:

- borrow money;
- create liens;
- pay dividends on or redeem or repurchase stock;
- make investments;
- sell stock in our restricted subsidiaries;
- restrict dividends or other payments from
subsidiaries;
- enter into transactions with affiliates; and
- sell assets or merge with other companies.

For more details, see the section "Description of
Notes."

You should refer to the section "Risk Factors" for an explanation of some
risks of participating in the exchange offer.

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25

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table sets forth our selected historical consolidated
financial and operating data as of and for the five fiscal years ended October
31, 1996, 1997, 1998, 1999 and 2000, which have been derived from our audited
consolidated financial statements, and as of and for the six months ended April
30, 2000 and 2001, which have been derived from our unaudited consolidated
financial statements. Financial data for the five fiscal years 1996, 1997, 1998,
1999 and 2000 and the six months ended April 30, 2000 do not reflect our
implementation of SAB 101. Financial data for the six months ended April 30,
2001 reflect our implementation of SAB 101 in the first quarter of fiscal year
2001. The results of operations for the six months ended April 30, 2001 are not
necessarily indicative of the results for the full year.

<Table>
<Caption>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31,(1) APRIL 30,
----------------------------------------------------------------- -----------------------
1996 1997 1998 1999 2000 2000(1) 2001(2)
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)

STATEMENT OF EARNINGS DATA:
Revenues:
Funeral...................... $ 225,461 $ 291,649 $ 379,095 $ 445,877 $ 451,852 $ 238,387 $ 215,307
Cemetery..................... 207,926 240,937 269,270 310,231 282,949 143,434 132,322
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues............... 433,387 532,586 648,365 756,108 734,801 381,821 347,629
Gross profit:
Funeral...................... 72,239 89,235 118,426 126,875 116,689 65,538 50,335
Cemetery..................... 45,879 67,937 77,558 83,526 62,351 32,954 33,965
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total gross profit........... 118,118 157,172 195,984 210,401 179,040 98,492 84,300
Corporate general and
administrative expenses...... (14,096) (15,402) (16,621) (19,161) (19,763) (10,143) (9,066)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating earnings before
performance-based stock
options...................... 104,022 141,770 179,363 191,240 159,277 88,349 75,234
Performance-based stock
options...................... -- -- (76,762)(3) -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating earnings............ 104,022 141,770 102,601(3) 191,240 159,277 88,349 75,234
Interest expense, net......... (24,435) (36,425) (41,792) (52,174) (56,284) (29,030) (25,783)
Other income, net............. 2,488 1,132 4,155 3,485 2,194 796 3,184
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before income taxes
and cumulative effect of
change in accounting
principles................... 82,075 106,477 64,964(3) 142,551 105,187 60,115 52,635
Income taxes.................. (30,778) (36,735) (23,062) (52,031) (38,393) (21,942) (19,212)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Earnings before cumulative
effect of change in
accounting principles........ 51,297 69,742 41,902(3) 90,520 66,794 38,173 33,423
Cumulative effect of change in
accounting principles........ -- (2,324)(1) -- (50,101)(1) -- -- (250,004)(2)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss)........... $ 51,297 $ 67,418 $ 41,902(3) $ 40,419 $ 66,794 $ 38,173 $ (216,581)
========== ========== ========== ========== ========== ========== ==========
Earnings per share before
cumulative effect (basic).... $ 0.62 $ 0.79 $ 0.43 $ 0.84 $ 0.63 $ 0.36 $ 0.31
Earnings (loss) per share
(basic)...................... 0.62 0.76 0.43 0.37 0.63 0.36 (2.02)
Earnings per share before
cumulative effect
(diluted).................... 0.61 0.78 0.43 0.84 0.63 0.36 0.31
Earnings (loss) per share
(diluted).................... 0.61 0.75 0.43 0.37 0.63 0.36 (2.02)
Pro forma amounts assuming
2001 change in accounting
principles was applied
retroactively:
Net earnings(4)............ $ 7,167 $ 65,329 $ 57,449 $ 33,180
========== ========== ========== ==========
Basic earnings per common
share(4)................. $ 0.07 $ 0.61 $ 0.54 $ 0.31
Diluted earnings per common
share(4)................. 0.07 0.61 0.54 0.31
</Table>

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26

OTHER FINANCIAL DATA:
EBITDA(5)..................... $ 129,911 $ 172,951 $ 145,498 $ 245,345 $ 215,738 $ 117,852 $ 117,561
Depreciation and
amortization................. 23,401 30,049 38,742 50,620 54,267 28,707 39,143
Capital expenditures.......... 26,332 44,405 44,805 54,883 36,017 23,627 11,246
Ratio of earnings to fixed
charges(6)................... 4.0x 3.6x 2.4x 3.4x 2.6x 2.9x 2.7x
Pro forma ratio of earnings to
fixed charges(7)............. 2.1x 2.2x
BALANCE SHEET DATA:
Cash and cash equivalents..... $ 24,580 $ 31,640 $ 30,733 $ 30,877 $ 91,595 $ 74,174 $ 103,721
Total assets.................. 1,360,913 1,637,238 2,048,938 2,283,880 2,337,008 2,341,407 3,678,046
Total debt.................... 520,141 558,324 924,434 951,413 950,527 963,653 866,373
Shareholders' equity.......... 547,447 819,570 839,290 1,056,612 1,074,657 1,070,978 872,930
CONSOLIDATED OPERATING DATA:
Funeral homes in operation at
end of period................ 298 401 558 635 627 628 612
At-need funerals performed.... 38,351 61,682 87,653 111,250 111,136 58,496 54,380
Preneed funerals performed.... 15,422 18,970 23,563 26,490 27,042 14,100 14,274
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total funerals performed..... 53,773 80,652 111,216 137,740 138,178 72,596 68,654
Preneed funerals sold......... 37,545 48,676 59,112 58,430 48,844 25,057 18,457
Backlog of preneed funerals at
end of period................ 294,829 350,031 391,226 436,499 446,158 440,909 440,628
Cemeteries in operation at end
of period.................... 120 129 140 157 163 162 161
Interments performed.......... 43,129 46,782 50,201 57,759 61,196 31,879 31,162
Estimated future value of
backlog(8)................... $1,024,661 $1,185,256 $1,222,752 $1,430,319 $1,476,341 $1,474,264 $2,521,948
</Table>

- ---------------

(1) Effective November 1, 1998, we changed our method of accounting for earnings
realized on our irrevocable preneed funeral merchandise and services trust
funds and escrow accounts. For further details, see Note 3 to our
consolidated financial statements for fiscal years 2000, 1999 and 1998. The
cumulative effect of that change in accounting principle was a $50.1 million
reduction in net earnings, net of a $28.8 million income tax benefit.
Effective November 1, 1996, we changed our method of accounting for our
irrevocable preneed funeral merchandise and services trust funds and escrow
accounts and cemetery sales. The cumulative effect of that change in
accounting principle was a $2.3 million reduction in net earnings, net of a
$2.2 million income tax benefit. Information presented for fiscal year 1999,
fiscal year 2000 and the six months ended April 30, 2000 reflects the fiscal
year 1999 change in accounting principle. Information presented for fiscal
years 1998 and 1997 reflects the fiscal year 1997 change in accounting
principle. Information presented for fiscal year 1996 reflects results as
originally reported under the accounting methods then in effect.

(2) Reflects our implementation of SAB 101 in the first quarter of fiscal year
2001. See "Implementation of SAB 101" in the section "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
and Note 2 to our unaudited consolidated financial statements for the six
months ended April 30, 2001 and 2000. The cumulative effect of that change
in accounting principles was a $250.0 million reduction in net earnings, net
of a $166.7 million income tax benefit.

(3) Includes a nonrecurring, noncash charge of $76.8 million ($50.3 million or
$.51 per share, after tax) recorded during the second quarter of fiscal year
1998 in connection with the vesting of our performance-based stock options.
Excluding that charge, operating earnings, earnings before income taxes and
net earnings for fiscal year 1998 were $179.4 million, $141.7 million, and
$92.2 million, respectively.

(4) The selected data presented for fiscal years 1998, 1999 and 2000 and for the
six months ended April 30, 2000 are reported on a pro forma basis as if the
implementation of SAB 101 had occurred at the beginning of each respective
period. The selected data for fiscal years 1996 and 1997 are not presented
on a pro forma basis as it was impractical for us to obtain the amounts on a
pro forma basis for these years.

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(5) "EBITDA" means earnings before the cumulative effect of changes in
accounting principles and before net interest expense, taxes, depreciation
and amortization. EBITDA for fiscal year 1998 includes the effect of a
nonrecurring, noncash charge of $76.8 million recorded in connection with
the vesting of our performance-based stock options; excluding the charge,
EBITDA was $222.3 million. EBITDA is frequently used by security analysts
and is presented here to provide additional information about our
operations. EBITDA should not be considered as an alternative to net
earnings, as an indicator of our operating performance or as an alternative
to cash flows as a better measure of our liquidity. EBITDA is a non-GAAP
measure and as calculated by us may not be comparable to EBITDA as
calculated by other companies. EBITDA as shown in this table is different
from our historical presentation of EBITDA. Historically, we have included
in EBITDA earnings before gross interest expense, instead of net interest
expense. Gross interest expense for fiscal years 1996, 1997, 1998, 1999 and
2000 was $26.1 million, $38.0 million, $43.8 million, $54.7 million and
$61.4 million, respectively. Gross interest expense for the six months ended
April 30, 2000 and 2001 was $30.0 million and $29.5 million, respectively.

(6) 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 gross interest
expense, capitalized interest, amortization of debt expense and discount or
premium relating to any indebtedness, and the portion of rental expense that
we believe to be representative of the interest component of rental expense.
1997, 1999 and 2001 exclude the cumulative effect of changes in accounting
principles. 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, our ratio of earnings
to fixed charges for fiscal year 1998 would have been 4.0x.

(7) For purposes of computing the pro forma ratio of earnings to fixed charges,
the $291.8 million of proceeds from the outstanding notes were applied pro
rata to the debt which was refinanced on June 29, 2001 as shown in
"Refinancing Transactions."

(8) The estimated future value of the backlog represents the face value of the
backlog plus the earnings that are projected on the funds held in trust,
assuming an average yield of 8.6 percent and a build-up in the face value of
insurance contracts. It assumes no future sales and assumes maturities of
the existing contracts over a weighted average life of about ten years,
which is consistent with our experience. While the investment yield over the
past five years has been in this range, there is no guarantee that future
yields will be at this level. See "Risk Factors -- Earnings from and
principal of our trust funds and escrow accounts could be reduced by changes
in stock and bond prices and interest and dividend rates or by declines in
the size of the funds." For the fiscal years ending 1996, 1997, 1998, 1999
and 2000 and the six months ending April 30, 2000 and 2001, the value of the
preneed backlog, excluding any future earnings on the funds held in trust
and any build-up in the face value of insurance contracts, but including
earnings realized to date on the funds held in trust, was $.8 billion, $.9
billion, $1.0 billion, $1.1 billion, $1.2 billion, $1.2 billion and $1.9
billion, respectively. The estimated future value of our backlog is
primarily related to our domestic operations. Of the $2.5 billion estimated
future value of our backlog at April 30, 2001, $2.3 billion was related to
our domestic operations.

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28

SUMMARY SUPPLEMENTAL PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table sets forth our summary supplemental pro forma
consolidated financial and operating data. Financial and operating data for
fiscal years 1998, 1999 and 2000 and for the six months ended April 30, 2000 are
presented on a pro forma basis to reflect the implementation of SAB 101, as if
it had been in effect during all periods presented. Financial and operating data
for the six months ended April 30, 2001 are derived from our unaudited
historical consolidated financial statements and reflect the implementation of
SAB 101. Financial data with respect to the last twelve months ended April 30,
2001 are presented on a pro forma basis to reflect the implementation of SAB 101
and are adjusted to give effect to the offering of the notes and the other
refinancing transactions set forth in "Use of Proceeds." This summary
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Selected Historical
Consolidated Financial and Operating Data" and our consolidated financial
statements and related notes contained elsewhere in this prospectus.

<Table>
<Caption>
ADJUSTED
SIX MONTHS ENDED TWELVE MONTHS ENDED
YEAR ENDED OCTOBER 31, APRIL 30, APRIL 30,
---------------------------------------- ----------------------- -------------------
1998 1999 2000 2000 2001 2001(1)(2)
---------- ---------- ---------- ---------- ---------- -------------------
(UNAUDITED, DOLLARS IN THOUSANDS)

STATEMENT OF EARNINGS DATA:
Revenues:
Funeral........................ $ 332,871 $ 405,353 $ 425,556 $ 223,709 $ 215,307 $ 417,154
Cemetery....................... 242,492 289,633 287,791 146,986 132,322 273,127
---------- ---------- ---------- ---------- ---------- ----------
Total revenues................. 575,363 694,986 713,347 370,695 347,629 690,281
Gross profit:
Funeral........................ 86,269 106,149 102,496 57,724 50,335 95,107
Cemetery....................... 55,863 64,581 61,829 32,906 33,965 62,888
---------- ---------- ---------- ---------- ---------- ----------
Total gross profit............. 142,132 170,730 164,325 90,630 84,300 157,995
Corporate general and
administrative expenses........ (16,621) (19,161) (19,763) (10,143) (9,066) (18,686)
---------- ---------- ---------- ---------- ---------- ----------
Operating earnings before
performance-based stock
options........................ 125,511 151,569 144,562 80,487 75,234 139,309
Performance-based stock
options........................ (76,762)(3) -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Operating earnings............... 48,749(3) 151,569 144,562 80,487 75,234 139,309
Interest expense, net............ (41,792) (52,174) (56,284) (29,030) (25,783) (74,861)
Other income, net................ 4,155 3,485 2,194 796 3,184 4,582
---------- ---------- ---------- ---------- ---------- ----------
Earnings before income taxes and
cumulative effect of change in
accounting principles.......... 11,112(3) 102,880 90,472 52,253 52,635 69,030
Earnings before cumulative effect
of change in accounting
principles..................... 7,167(3) 65,329 57,449 33,180 33,423 43,834
Cumulative effect of change in
accounting principles.......... -- --(4) -- -- (250,004)(5) --
---------- ---------- ---------- ---------- ---------- ----------
Net earnings (loss).............. $ 7,167(3) $ 65,329 $ 57,449 $ 33,180 $ (216,581) $ 43,834
========== ========== ========== ========== ========== ==========
OTHER FINANCIAL DATA:
EBITDA(6)........................ $ 113,320 $ 228,496 $ 224,267 $ 122,240 $ 117,561 $ 219,588
Depreciation and amortization.... 60,416 73,442 77,511 40,957 39,143 75,697
Capital expenditures............. 44,805 54,883 36,017 23,627 11,246 23,636
Ratio of total debt to EBITDA.... 3.9x
Ratio of EBITDA to interest
expense, net................... 2.9x
BALANCE SHEET DATA:
Total assets..................... $3,678,046 $3,680,575
Total debt....................... 866,373 852,281
Shareholders' equity............. 872,930 864,392
CONSOLIDATED OPERATING DATA:
Funeral homes in operation at end
of period...................... 558 635 627 628 612 612
</Table>

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29

At-need funerals performed....... 87,653 111,250 111,136 58,496 54,380 107,020
Preneed funerals performed....... 23,563 26,490 27,042 14,100 14,274 27,216
---------- ---------- ---------- ---------- ---------- ----------
Total funerals
performed.............. 111,216 137,740 138,178 72,596 68,654 134,236
Preneed funerals sold............ 59,112 58,430 48,844 25,057 18,457 42,244
Backlog of preneed funerals at
end of period.................. 391,226 436,499 446,158 440,909 440,628 440,628
Cemeteries in operation at end of
period......................... 140 157 163 162 161 161
Interments performed............. 50,201 57,759 61,196 31,879 31,162 60,479
Estimated future value of
backlog(7)..................... $2,227,308 $2,477,358 $2,564,427 $2,541,618 $2,521,948(8) $2,521,948
DOMESTIC OPERATING DATA:
Funeral homes in operation at end
of period...................... 292 330 325 326 321 321
At-need funerals performed....... 45,471 52,307 52,854 28,355 27,645 52,144
Preneed funerals performed....... 19,373 22,205 23,169 12,143 12,159 23,185
---------- ---------- ---------- ---------- ---------- ----------
Total funerals
performed.............. 64,844 74,512 76,023 40,498 39,804 75,329
Preneed funerals sold............ 48,253 45,413 37,987 19,771 13,640 31,856
Backlog of preneed funerals at
end of period.................. 313,615 352,652 358,984 355,617 354,059 354,059
Cemeteries in operation at end of
period......................... 131 147 153 152 151 151
Interments performed............. 46,492 51,916 56,272 29,405 28,796 55,663
</Table>

- ---------------

(1) Adjustments consist of (1) pro forma interest expense, net of interest
income, as if the refinancing transactions had occurred on May 1, 2000,
including amortization of deferred financing fees, (2) adjusted pro forma
total long-term debt as if the refinancing transactions had occurred on
April 30, 2001, and (3) pro forma shareholders' equity as if the refinancing
transactions had occurred on April 30, 2001, reflecting a reduction of
approximately $8.5 million for the after-tax effect of charges to be
recorded in the period the refinancing transactions are completed. The ratio
of total debt to EBITDA is based on adjusted pro forma total long-term debt
as if the refinancing transactions had occurred on April 30, 2001.

(2) As a result of the definitive agreement for the sale of our Mexican
operations, which was announced subsequent to April 30, 2001, we expect to
receive net proceeds of approximately US$70 million, before taxes. The net
proceeds of approximately US$70 million, before taxes will be used to repay
debt in accordance with our deleveraging strategy. See "Recent
Developments -- Definitive agreement to sell Mexican operations." Our
operations in Mexico include five funeral homes. Had this transaction
occurred on May 1, 2000 our adjusted pro forma results for the twelve months
ended April 30, 2001 would have been as follows:

<Table>
<Caption>
ADJUSTED
TWELVE MONTHS
ENDED
APRIL 30,
-------------
2001
-------------

Revenues:
Funeral................................................... $396,139
Cemetery.................................................. 272,013
--------
Total revenues.............................................. 668,152
EBITDA...................................................... 208,505
Total debt.................................................. 782,281
Interest expense, net....................................... (71,254)
Ratio of total debt to EBITDA............................... 3.8x
Ratio of EBITDA to interest expense, net.................... 2.9x
</Table>

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30

See "Unaudited Pro Forma Financial Information" beginning on page P-1 for
other pro forma financial information giving effect to the sale of the
Mexican operations.

(3) Includes a nonrecurring, noncash charge of $76.8 million ($50.3 million,
after tax) recorded during the second quarter of fiscal year 1998 in
connection with the vesting of our performance-based stock options.
Excluding that charge, operating earnings, earnings before income taxes and
net earnings for fiscal year 1998 were $125.5 million, $87.9 million, and
$57.5 million, respectively.

(4) The change in accounting for earnings realized on our irrevocable preneed
funeral merchandise and services trust funds and escrow accounts made in
fiscal year 1999 would have been required by SAB 101. As such, when
presenting the information for 1999, on a pro forma basis, the cumulative
effect of the 1999 accounting change is not presented.

(5) Although all periods in this table, except the six months ended April 30,
2001, are presented on a pro forma basis to reflect the implementation of
SAB 101, SAB 101 was actually implemented in the first quarter of fiscal
year 2001. This amount represents the cumulative effect of its adoption, net
of a $166.7 million income tax benefit, as reported.

(6) "EBITDA" means earnings before the cumulative effect of changes in
accounting principles and before net interest expense, taxes, depreciation
and amortization. EBITDA for fiscal year 1998 includes the effect of a
nonrecurring, noncash charge of $76.8 million recorded in connection with
the vesting of our performance-based stock options; excluding the charge,
EBITDA (pro forma for SAB 101) was $190.1 million. EBITDA is frequently used
by security analysts and is presented here to provide additional information
about our operations. EBITDA should not be considered as an alternative to
net earnings, as an indicator of our operating performance or as an
alternative to cash flows as a better measure of our liquidity. EBITDA is a
non-GAAP measure and as calculated by us may not be comparable to EBITDA as
calculated by other companies. EBITDA as shown in this table is different
from our historical presentation of EBITDA. Historically, we have included
in EBITDA earnings before gross interest expense, instead of net interest
expense. Gross interest expense for fiscal years 1998, 1999 and 2000 was
$43.8 million, $54.7 million and $61.4 million, respectively. Gross interest
expense for the six months ended April 30, 2000 and 2001 was $30.0 million
and $29.5 million, respectively.

(7) The estimated future value of the backlog represents the face value of the
backlog plus the earnings that are projected on the funds held in trust,
assuming an average yield of 8.6 percent and a build-up in the face value of
insurance contracts. It assumes no future sales and assumes maturities of
the existing contracts over a weighted average life of approximately ten
years, which is consistent with our experience. While the investment yield
over the past five years has been in this range, there is no guarantee that
future yields will be at this level. See "Risk Factors -- Earnings from and
principal of our trust funds and escrow accounts could be reduced by changes
in stock and bond prices and interest and dividend rates or by declines in
the size of the funds." For fiscal years 1998, 1999 and 2000, and the six
months ended April 30, 2000 and 2001, the value of the preneed backlog,
excluding any future earnings on the funds held in trust and any build-up in
the face value of insurance contracts, but including earnings realized to
date on the funds held in trust, was $1.7 billion, $1.8 billion, $1.9
billion, $1.8 billion and $1.9 billion, respectively. The estimated future
value of our backlog is primarily related to our domestic operations. Of the
$2.5 billion estimated future value of our backlog at April 30, 2001, $2.3
billion was related to our domestic operations.

(8) The estimated future value of the backlog declined primarily due to the fact
that in the first quarter of 2001, we removed $40.0 million from our trust
funds in Florida and substituted a bond to guarantee performance under the
related contracts. As such, the calculation for the six months ended April
30, 2001 assumes we will not realize any trust earnings on the $40.0 million
we withdrew from the trust but continues to include the $40.0 million in
principal to be recognized upon delivery.

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31

RISK FACTORS

Before you decide to participate in the exchange offer, you should
carefully consider the following factors in addition to the other information
contained in this prospectus and the documents incorporated by reference in this
prospectus.

RISKS RELATED TO THE EXCHANGE OFFER

BECAUSE THERE IS NO PUBLIC MARKET FOR THE EXCHANGE NOTES, YOU MAY NOT BE ABLE TO
RESELL YOUR EXCHANGE NOTES.

The exchange notes will be registered under the Securities Act, but will
constitute a new issue of securities with no established trading market, and
there can be no assurance as to:

- the liquidity of any trading market that may develop;

- the ability of holders to sell their exchange notes; or

- the price at which the holders would be able to sell their exchange
notes.

If a trading market were to develop, the exchange notes might trade at
higher or lower prices than their principal amount or purchase price, depending
on many factors, including prevailing interest rates, the market for similar
securities and our financial performance, as well as by declines in the prices
of securities, or the financial performance or prospects of, similar death care
companies.

We understand that the Initial Purchasers presently intend to make a market
in the notes. However, they are not obligated to do so, and any market-making
activity with respect to the notes may be discontinued at any time without
notice. In addition, any market-making activity will be subject to the limits
imposed by the Securities Act and the Exchange Act, and may be limited during
the exchange offer or the pendency of an applicable shelf registration
statement. There can be no assurance that an active trading market will exist
for the notes or that any trading market that does develop will be liquid.

In addition, any outstanding note holder who tenders in the exchange offer
for the purpose of participating in a distribution of the exchange notes may be
deemed to have received restricted securities, and if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. For a description of
these requirements, see "Exchange Offer."

YOUR NOTES WILL NOT BE ACCEPTED FOR EXCHANGE IF YOU FAIL TO FOLLOW THE EXCHANGE
OFFER PROCEDURES AND, AS A RESULT, YOUR NOTES WILL CONTINUE TO BE SUBJECT TO
EXISTING TRANSFER RESTRICTIONS AND YOU MAY NOT BE ABLE TO SELL YOUR NOTES.

We will not accept your outstanding notes for exchange if you do not follow
the exchange offer procedures. We will issue exchange notes as part of this
exchange offer only after a timely receipt of your outstanding notes, a properly
completed and duly executed letter of transmittal and all other required
documents. Therefore, if you want to tender your outstanding notes, please allow
sufficient time to ensure timely delivery. If we do not receive your outstanding
notes, letter of transmittal and other required documents by the expiration date
of the exchange offer, we will not accept your outstanding notes for exchange.
If there are defects or irregularities with respect to your tender of
outstanding notes, we will not accept such notes for exchange. We are under no
duty to give notification of defects or irregularities with respect to the
tenders of outstanding notes for exchange.

IF YOU DO NOT EXCHANGE YOUR NOTES, YOUR NOTES WILL CONTINUE TO BE SUBJECT TO THE
EXISTING TRANSFER RESTRICTIONS AND YOU MAY NOT BE ABLE TO SELL YOUR NOTES.

We did not register the outstanding notes, nor do we intend to do so
following the exchange offer. Outstanding notes that are not tendered will
therefore continue to be subject to the existing transfer restrictions and may
be transferred only in limited circumstances under the securities laws. If you
do not exchange your outstanding notes, you will lose your right to have such
notes registered under the federal
20
32

securities laws. As a result, if you hold outstanding notes after the exchange
offer, you may not be able to sell your outstanding notes.

THE REOFFERING AND RESALE OF THE OUTSTANDING NOTES IS SUBJECT TO SIGNIFICANT
LEGAL RESTRICTIONS.

The outstanding notes have not been registered under the Securities Act of
1933, as amended, or any state securities laws. As a result, holders of
outstanding notes may reoffer or resell outstanding notes only if:

- there is an applicable exemption from the registration requirement of the
Securities Act of 1933 and applicable state laws that applies to the
circumstances of the offer and sale, or

- we file a registration statement and it becomes effective.

RISKS RELATED TO THE NOTES

WE HAVE A SIGNIFICANT AMOUNT OF DEBT, AND WE MAY INCUR ADDITIONAL DEBT.

As of April 30, 2001, after giving effect to the refinancing transactions,
our total consolidated long-term debt would have been $852.3 million and our
total consolidated shareholders' equity would have been $864.4 million. See the
section "Capitalization."

Our significant debt could have important consequences for the holders of
the notes, including:

- requiring a substantial portion of our cash flow from operations for the
payment of interest on our debt;

- limiting our ability to use our cash flow, or to obtain additional
financing, to fund future working capital, capital expenditures,
acquisitions and other general corporate purposes;

- limiting our flexibility to plan for and react to changes in our business
and industry;

- increasing our vulnerability to adverse economic and industry conditions;
and

- placing us at a competitive disadvantage to less leveraged competitors.

In addition, we may incur additional debt. Subject to specified
limitations, the indenture permits us and our subsidiaries to incur substantial
additional debt, and our new senior secured credit facilities permit additional
borrowings.

THE $75.0 MILLION ASSET SALE TERM LOAN IS DUE IN 18 MONTHS, AND WE MAY NOT
GENERATE SUFFICIENT CASH OR HAVE SUFFICIENT AVAILABILITY UNDER OUR REVOLVING
CREDIT FACILITY TO PAY THE LOAN WHEN IT BECOMES DUE.

Our ability to pay the asset sale term loan when it becomes due depends
primarily on our ability to obtain cash from a combination of three main
sources: (1) the sale of our foreign operations, (2) cash generated from
operations, and (3) availability under our new revolving credit facility. We
project that if we do not sell any assets, our cash from operations, along with
amounts available under the new revolving credit facility, should be sufficient
to allow us to pay the loan when it becomes due. However, if we do not sell
significant assets or generate significant cash flow from operations, it is
unlikely that we would be able to draw sufficient funds under the new revolving
credit facility to pay the loan when it becomes due. If we do not pay the asset
sale term loan when it becomes due, there will be an event of default under the
loan, which would cause cross-defaults under the documents governing
substantially all of our senior debt and under the indenture relating to the
notes.

YOUR RIGHT TO RECEIVE PAYMENT ON THE NOTES AND THE GUARANTEES IS JUNIOR TO ALL
OF STEWART ENTERPRISES, INC.'S AND THE SUBSIDIARY GUARANTORS' SENIOR DEBT.

The notes and the guarantees are general unsecured obligations, junior in
right of payment to all existing and future senior debt of Stewart Enterprises,
Inc. and that of each subsidiary guarantor, respectively, including obligations
under our new senior secured credit facilities, our remaining publicly held
senior notes
21
33

and approximately $25.0 million in other long-term debt. Immediately after
completing the initial offering of the outstanding notes and the related
refinancing transactions on June 29, 2001, Stewart Enterprises, Inc. had $539.2
million of senior debt and the subsidiary guarantors had $551.5 million of
senior debt, $431.5 million of which represented guarantees of our senior debt.
We are required by the State of Florida to maintain a bond ($41.1 million as of
April 30, 2001) to guarantee our obligations relating to funds we withdrew from
our preneed funeral trusts in Florida. This amount would become senior debt if
we were to borrow funds under the revolving credit facility to extinguish the
bond obligation by returning to the trusts the amounts we previously withdrew
that relate to the remaining preneed contracts.

In addition, the indenture and our new senior secured credit facilities
permit, subject to specified limitations, the incurrence of additional debt,
some or all of which may be senior debt. See the section "Description of Notes"
under the heading "Certain Covenants" and the section "Description of Certain
Indebtedness and the Tender Offer." The notes are not secured by any of Stewart
Enterprises, Inc.'s or the subsidiary guarantors' assets, and as such are
effectively subordinated to any secured debt that Stewart Enterprises, Inc. or
the subsidiary guarantors may have now or may incur in the future to the extent
of the value of the assets securing that debt.

In the event that Stewart Enterprises, Inc. or a subsidiary guarantor is
declared bankrupt, becomes insolvent or is liquidated or reorganized, any debt
that ranks ahead of the notes and the guarantees will be entitled to be paid in
full from our assets or the assets of the guarantor, as applicable, before any
payment may be made with respect to the notes or the affected guarantees. In any
of the foregoing events, we may not have sufficient assets to pay amounts due on
the notes. The subordination provisions of the indenture will also provide that
we can make no payment to you during the continuance of payment defaults on our
senior debt, and payments to you may be suspended for a period of up to 180 days
if a nonpayment default exists under our senior debt. See the section
"Description of Notes" under the heading "Subordination."

In addition, the notes will be structurally subordinated to all of the
liabilities of any of our subsidiaries that do not guarantee the notes. As of
April 30, 2001, assuming the refinancing transactions had been completed at that
time, non-guarantor subsidiaries had total liabilities of approximately $282.6
million, excluding intercompany payables. In the event of a bankruptcy,
liquidation or reorganization of any of the non-guarantor subsidiaries, holders
of their debt and their trade creditors will generally be entitled to payment of
their claims from the assets of those subsidiaries before any assets are made
available for distribution to Stewart Enterprises, Inc. The non-guarantor
subsidiaries generated 27 percent of our revenues and 6 percent of our net
earnings for fiscal year 2000.

As of April 30, 2001, our balance sheet included approximately $1.4 billion
in assets (in the category prearranged receivables) reflecting funds held in our
preneed funeral merchandise and services and preneed cemetery merchandise and
services trust funds, funds due from our customers and funds due from insurance
companies. We believe that, pursuant to state laws that require the
establishment of these funds, most of these funds legally are not likely to be
available to satisfy the claims of our or our subsidiary guarantors' creditors.

STEWART ENTERPRISES, INC. IS A HOLDING COMPANY.

Stewart Enterprises, Inc. is a holding company, and it conducts
substantially all of its operations through its subsidiaries. Consequently it
does not have any income from operations and does not expect to generate any
significant income from operations in the future. Although the notes are
guaranteed by all of our existing and future domestic subsidiaries, except for
specified subsidiaries, as a result of this holding company structure, Stewart
Enterprises, Inc.'s ability to meet its debt service obligations, including its
obligations under the notes, substantially depends upon its subsidiaries' cash
flow and payment of funds to it by its subsidiaries as dividends, loans,
advances or other payments. Stewart Enterprises, Inc.'s subsidiaries' payment of
dividends or making of loans, advances or other payments may be subject to
regulatory or contractual restrictions.

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34

SINCE THE NOTES ARE UNSECURED, YOUR RIGHT TO ENFORCE REMEDIES IS LIMITED BY THE
RIGHTS OF HOLDERS OF SECURED DEBT.

In addition to being contractually subordinated to all existing and future
senior debt, our and the subsidiary guarantors' obligations under the notes are
unsecured. In contrast, obligations under the senior secured credit facilities
and under our publicly held senior notes remaining outstanding after the tender
offer are secured by a significant portion of our assets and those of the
subsidiary guarantors. In addition, $12.1 million of subsidiary guarantor senior
debt assumed or incurred in connection with acquisitions is secured by liens on
the assets or stock of the related subsidiaries. In the future we and our
subsidiary guarantors may have other debt which will be secured by our or our
subsidiaries' assets. If we become insolvent or are liquidated, or if payment
under any of our secured debt is accelerated, the lenders will be entitled to
exercise the remedies available to secured lenders under applicable law. These
lenders will have a claim on all assets securing the debt before the holders of
unsecured debt, including the notes. See "Description of Certain Indebtedness
and the Tender Offer."

SERVICING OUR DEBT WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH, AND OUR ABILITY TO
GENERATE SUFFICIENT CASH DEPENDS ON MANY FACTORS, SOME OF WHICH ARE BEYOND OUR
CONTROL.

Our ability to make payments on and to refinance our debt depends on our
ability to generate cash flow. This, to a significant extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond our control. In addition, our ability to borrow funds in
the future to make payments on our debt will depend on our meeting the financial
covenants in our new senior secured credit facilities and other debt agreements
we may have in the future. Our business may not generate cash flow from
operations, and future borrowings may not be available to us under our new
senior secured credit facilities or otherwise in an amount sufficient to enable
us to pay our debt or to fund other liquidity needs. As a result, we may need to
refinance all or a portion of our debt on or before maturity. We may not be able
to refinance any of our debt on favorable terms, or at all. Any inability to
generate sufficient cash flow or refinance our debt on favorable terms could
have a material adverse effect on our financial condition.

COVENANT RESTRICTIONS UNDER OUR NEW SENIOR SECURED CREDIT FACILITIES AND THE
INDENTURE MAY LIMIT OUR ABILITY TO OPERATE OUR BUSINESS.

Our new senior secured credit facilities and the indenture governing the
notes contain, among other things, covenants that restrict our and the
subsidiary guarantors' ability to finance future operations or capital needs or
to engage in other business activities. Our new senior secured credit facilities
and the indenture limit, among other things, our and the subsidiary guarantors'
ability to: borrow money; pay dividends or distributions; purchase or redeem
stock; make investments; engage in transactions with affiliates; engage in sale
leaseback transactions; consummate specified asset sales; effect a consolidation
or merger or sell, transfer, lease, or otherwise dispose of all or substantially
all of our assets; and create liens on our assets. In addition, our new senior
secured credit facilities contain specific limits on capital expenditures as
well as a requirement that we maintain a liquidity reserve that increases over
time as long as any of the 6.70% Notes or 6.40% ROARS are outstanding.
Furthermore, our new senior secured credit facilities require us to maintain
specified financial ratios and satisfy financial condition tests.

These covenants may require that we take action to reduce our debt or to
act in a manner contrary to our business objectives. In addition, events beyond
our control, including changes in general economic and business conditions, may
affect our ability to satisfy these covenants. We might not meet those
covenants, and the lenders might not waive any failure to meet those covenants.
A breach of any of those covenants could result in a default under our new
senior secured credit facilities and the indenture. If an event of default under
our new senior secured credit facilities occurs, the lenders could elect to
declare all amounts outstanding thereunder, together with accrued interest, to
be immediately due and payable. See the sections "Description of Certain
Indebtedness and the Tender Offer" and "Description of Notes."

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35

WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
OF CONTROL OFFER REQUIRED BY THE INDENTURE.

Upon a change of control, we are required to offer to repurchase all
outstanding notes at 101 percent of their principal amount, plus accrued and
unpaid interest, if any, to the date of repurchase. The source of funds for any
such purchase of notes will be our available cash or cash generated from our
subsidiaries' operations or other sources, including borrowings, sales of
assets, sales of equity or funds provided by a new controlling person.
Sufficient funds may not be available at the time of any change of control to
make any required repurchases of notes tendered. In addition, the terms of our
new senior secured credit facilities limit our ability to purchase your notes in
those circumstances. Any of our future debt agreements may contain similar
restrictions and provisions. If the holders of the notes exercise their right to
require us to repurchase all of the notes upon a change of control, the
financial effect of this repurchase could cause a default under our other debt,
even if the change in control itself would not cause a default. Accordingly, it
is possible that we will not have sufficient funds at the time of the change of
control to make the required repurchase of notes or that restrictions in our new
senior secured credit facilities or other debt that may be incurred in the
future will not allow the repurchases. See the section "Description of Notes"
under the heading "Repurchase at the Option of Holders -- Change of Control" and
the section "Description of Certain Indebtedness and the Tender Offer."

THE NOTES AND GUARANTEES MAY NOT BE ENFORCEABLE BECAUSE OF FRAUDULENT CONVEYANCE
LAWS.

Our incurrence of debt, such as the notes, as well as our subsidiaries'
guarantees, may be subject to review under U.S. federal bankruptcy law or
relevant state fraudulent conveyance laws if a bankruptcy case or lawsuit is
commenced by or on behalf of our or the guarantors' unpaid creditors. Under
these laws, if in such a case or lawsuit a court were to find that, at the time
we or a guarantor incurred debt (including debt represented by the notes or the
guarantee):

- we, or a guarantor, incurred this debt with the intent of hindering,
delaying or defrauding current or future creditors; or

- we, or a guarantor, received less than reasonably equivalent value or
fair consideration for incurring this debt and we or a guarantor, as the
case may be:

- were insolvent or were rendered insolvent by reason of the related
financing transactions;

- were engaged, or about to engage, in a business or transaction for which
its remaining assets constituted unreasonably small capital to carry on
its business; or

- intended to incur, or believed that it would incur, debts beyond its
ability to pay these debts as they matured (as all of the foregoing terms
are defined in or interpreted under the relevant fraudulent transfer or
conveyance statutes);

then the court could avoid the notes or the guarantee or subordinate the amounts
owing under the notes or the guarantee to our or the guarantor's presently
existing or future debt or take other actions detrimental to you.

In addition, the subsidiary guarantors may be subject to the allegation
that since they incurred their guarantees for the benefit of Stewart
Enterprises, Inc., they incurred the obligations under the guarantees for less
than reasonably equivalent value or fair consideration.

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The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law of the jurisdiction that is being applied in any
such proceeding. Generally, a company would be considered insolvent if, at the
time it incurred the debt or issued the guarantee:

- it could not pay its debts or contingent liabilities as they become due;

- the sum of its debts (including contingent liabilities) is greater than
its assets, at fair valuation; or

- the present fair saleable value of its assets is less than the amount
required to pay the probable liability on its total existing debts and
liabilities (including contingent liabilities) as they become absolute
and matured.

If a note or guarantee is avoided as a fraudulent conveyance or found to be
unenforceable for any other reason, you will not have a claim against that
obligor and will only be a creditor of Stewart Enterprises, Inc. or any
subsidiary guarantor whose obligation was not set aside or found to be
unenforceable.

We believe that, at the time Stewart Enterprises, Inc. and the subsidiary
guarantors initially incurred the debt represented by the notes and the
guarantees, Stewart Enterprises, Inc. and the subsidiary guarantors were not
insolvent or rendered insolvent by the incurrence, were not lacking sufficient
capital to run their businesses effectively, or unable to pay obligations on the
notes and the guarantees as they mature or become due.

In reaching the foregoing conclusions, we have relied upon our analyses of
internal cash flow projections and estimated values of assets and liabilities of
Stewart Enterprises, Inc. and the subsidiary guarantors. In addition, we have
relied on a limitation contained in the subsidiary guarantors' guarantees that
limits the guarantee as necessary to prevent it from constituting a fraudulent
conveyance under applicable law. However, a court passing on the same questions
might not reach the same conclusions.

RISKS RELATED TO OUR BUSINESS

WE MAY EXPERIENCE DECLINES IN PRENEED SALES DUE TO NUMEROUS FACTORS INCLUDING
CHANGES WE MAKE TO CONTRACT TERMS AND SALES FORCE COMPENSATION, OR A WEAKENING
ECONOMY. DECLINES IN PRENEED SALES WOULD REDUCE OUR BACKLOG AND REVENUE, AND
COULD REDUCE OUR FUTURE MARKET SHARE.

In an effort to increase our cash flow, we modified our preneed sales
strategies early in fiscal year 2000 by increasing finance charges, requiring
larger down payments and shortening installment payment terms. Later in fiscal
year 2000, we changed the compensation structure for our preneed sales force.
These changes, and the accompanying sales force attrition and adverse impact on
sales force morale, caused our preneed sales to decline. Although we do not
anticipate making further significant changes in these areas, we may decide that
further adjustments are advisable, which could cause additional declines in
preneed sales. In addition, a weakening economy that causes customers to have
less discretionary income could cause a decline in preneed sales. Declines in
preneed cemetery property sales would reduce current revenue, and declines in
other preneed sales would reduce our backlog and future revenue, and could
reduce our future market share.

PRENEED SALES MAY HAVE A NEGATIVE IMPACT ON CASH FLOW.

Preneed sales of cemetery property and funeral and cemetery products and
services are generally cash flow negative initially, primarily due to the
commissions we pay on the sale, the portion of the sales proceeds we are
required to place in trust, and the terms of the particular contract (such as
the size of the downpayment required and the length of the contract). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- General." In fiscal year 2000, we changed the terms and conditions
of our preneed sales contracts and commissions, and moderated our preneed sales
effort, in order to reduce the initial negative impact on our cash flow. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Fiscal Year 2000 Compared to Fiscal Year 1999." Nevertheless, we
will continue to invest a significant portion of our cash flow in preneed
acquisition costs,

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which reduces cash flow available for other activities, and, to the extent we
increase preneed activities, our cash flow will be further reduced and our
ability to service debt could be adversely affected.

PRICE COMPETITION COULD REDUCE OUR MARKET SHARE OR CAUSE US TO REDUCE PRICES TO
RETAIN OR RECAPTURE MARKET SHARE, WHICH COULD REDUCE OUR REVENUES AND MARGINS.

Our funeral home and cemetery operations generally face intense competition
in local markets that typically are served by numerous funeral homes and
cemetery firms. We have historically experienced price competition primarily
from independent funeral home and cemetery operators, and from monument dealers,
casket retailers, low-cost funeral providers, and other non-traditional
providers of services or products. In the past, this price competition has
resulted in our losing market share in some markets. In other markets, we have
had to reduce prices and thereby our profit margins in order to retain or
recapture market share. In addition, because of competition from these types of
competitors in some of our key markets, in fiscal year 1999 we lowered our goals
for increases in average revenue per funeral service performed in the future.
Increased price competition in the future could further reduce revenues, profit
margins and backlog.

INCREASED ADVERTISING OR BETTER MARKETING BY OUR COMPETITORS, OR INCREASED
SERVICES FROM INTERNET PROVIDERS, COULD CAUSE US TO LOSE MARKET SHARE AND
REVENUES, OR CAUSE US TO INCUR INCREASED COSTS IN ORDER TO RETAIN OR RECAPTURE
OUR MARKET SHARE.

In recent years, marketing through television, radio and print advertising,
direct mailings and personal sales calls has increased with respect to the sales
of preneed funeral services. Extensive advertising or effective marketing by
competitors in our local markets could cause us to lose market share and
revenues, or cause us to increase our own marketing costs. In addition,
competitors may change the types or mix of products or services offered. These
changes may attract customers, causing us to lose market share and revenue or to
incur costs to vary our own types or mix of products or services in response.
Also, increased use of the Internet by customers to research and/or purchase
products and services could cause us to lose market share to competitors
offering to sell products or services over the Internet. We do not currently
sell products or services over the Internet.

EARNINGS FROM AND PRINCIPAL OF OUR TRUST FUNDS AND ESCROW ACCOUNTS COULD BE
REDUCED BY CHANGES IN STOCK AND BOND PRICES AND INTEREST AND DIVIDEND RATES OR
BY DECLINES IN THE SIZE OF THE FUNDS.

Earnings and investment gains and losses on our trust funds and escrow
accounts are affected by financial market conditions that are not within our
control. Earnings are also affected by the mix of fixed-income and equity
securities that we choose to maintain in the funds, and we may not choose the
optimal mix for any particular market condition. The size of the funds depends
upon the level of preneed sales, the amount of investment gains or losses, and
funds added through acquisitions, if any. Declines in earnings from our
perpetual care trust funds would cause a decline in current revenues, while
declines in earnings from our other trust funds and escrow accounts could cause
a decline in future revenues. In addition, any significant or sustained
investment losses could result in there being insufficient funds in the trusts
to cover our cost of delivering services and merchandise, or maintaining our
cemeteries, in the future. Any such deficiency would have to be covered by our
cash flow, which could have a material adverse effect on our financial
condition.

OUR FOREIGN OPERATIONS ARE SUBJECT TO POLITICAL, ECONOMIC, CURRENCY AND OTHER
RISKS THAT COULD ADVERSELY IMPACT OUR FINANCIAL CONDITION, OPERATING RESULTS OR
CASH FLOW.

Our foreign operations are subject to risks inherent in doing business in
foreign countries. For fiscal year 2000 (pro forma for SAB 101), approximately
20 percent of our total revenues and 16 percent of our total EBITDA were
attributable to foreign operations. Risks associated with operating
internationally include political, social and economic instability, increased
operating costs, expropriation and complex and changing government regulations,
all of which are beyond our control. To the extent we make investments in
foreign assets or receive revenues in currencies other than U.S. dollars, the
value of our assets and our income could be, and have in the past been,
adversely affected by fluctuations in the value of local currencies.

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RISKS RELATED TO OUR INDUSTRY

DECLINES IN THE NUMBER OF DEATHS IN OUR MARKETS CAN CAUSE A DECREASE IN OUR
REVENUES. CHANGES IN THE NUMBER OF DEATHS ARE NOT PREDICTABLE FROM MARKET TO
MARKET OR OVER THE SHORT TERM.

Declines in the number of deaths could cause at-need sales of funeral and
cemetery services, property and merchandise to decline, which could decrease
revenues. Although the United States Bureau of the Census estimates that the
number of deaths in the United States will increase by approximately 1 percent
per year from 2000 to 2010, longer lifespans could reduce the rate of deaths. In
addition, changes in the number of deaths can vary among local markets and from
quarter to quarter, and variations in the number of deaths in different markets
or from quarter to quarter are not predictable. These variations can cause our
revenues to fluctuate.

THE INCREASING NUMBER OF CREMATIONS IN THE UNITED STATES COULD CAUSE OUR
REVENUES TO DECLINE BECAUSE WE COULD LOSE MARKET SHARE TO FIRMS SPECIALIZING IN
CREMATIONS. IN ADDITION, BASIC CREMATIONS PRODUCE NO REVENUES FOR CEMETERY
OPERATIONS AND LOWER REVENUES AND, IN CERTAIN CASES, PROFIT MARGINS THAN
TRADITIONAL FUNERALS.

Traditional cemetery and funeral service operators like us face competition
from the increasing number of cremations in the United States. Industry studies
indicate that the percentage of cremations has steadily increased and that
cremation will represent approximately 36 percent of the United States burial
market by the year 2010, compared to 25 percent in 1999. The trend toward
cremation could cause our cemeteries and traditional funeral homes to lose
market share and revenues to firms specializing in cremations. In addition,
basic cremations (without a funeral service, casket or urn, niche in a mausoleum
or columbarium or burial) produce no revenues for cemetery operations and lower
revenues than traditional funerals and, when delivered at a traditional funeral
home, produce lower profit margins as well.

IF WE DO NOT RESPOND EFFECTIVELY TO CHANGING CONSUMER PREFERENCES, OUR MARKET
SHARE, REVENUES AND PROFITABILITY COULD DECREASE.

Our future market share, revenues and profits will depend in part on our
ability to anticipate, identify and respond to changing consumer preferences.
During fiscal year 2000, we began to implement strategies based on a
proprietary, extensive study of consumer preferences we commissioned in 1999.
However, we may not correctly anticipate or identify trends in consumer
preferences, or we may identify them later than our competitors do. In addition,
any strategies we may implement to address these trends may prove incorrect or
ineffective.

BECAUSE THE FUNERAL AND CEMETERY BUSINESSES ARE HIGH FIXED-COST BUSINESSES,
POSITIVE OR NEGATIVE CHANGES IN REVENUE CAN HAVE A DISPROPORTIONATELY LARGE
EFFECT ON CASH FLOW AND PROFITS.

Companies in the funeral home and cemetery businesses must incur many of
the costs of operating and maintaining facilities, land and equipment regardless
of the level of sales in any given period. For example, we must pay salaries,
utilities, property taxes and maintenance costs on our funeral homes and
maintain the grounds of our cemeteries regardless of the number of funeral
services or interments we perform. Because we cannot decrease these costs
significantly or rapidly when we experience declines in sales, declines in sales
can cause our margins, profits and cash flow to decline at a greater rate than
the decline in our revenues.

CHANGES OR INCREASES IN, OR FAILURE TO COMPLY WITH, REGULATIONS APPLICABLE TO
OUR BUSINESS COULD INCREASE OUR COSTS.

Our industry is subject to extensive regulation and licensing requirements
under federal, state and local laws and the laws of foreign jurisdictions where
we operate. For example, the funeral home industry is regulated by the Federal
Trade Commission, which requires funeral homes to take actions designed to
protect consumers. State laws impose licensing requirements and regulate preneed
sales. Our embalming facilities are subject to stringent environmental and
health regulations. Compliance with these regulations is burdensome on us and we
are always at risk of not complying with the regulations. In addition, from time
to time, governments and agencies propose to amend or add regulations, which
could increase our costs.
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EXCHANGE OFFER

PURPOSE AND EFFECT OF THE EXCHANGE OFFER

We and the subsidiary guarantors entered into a registration rights
agreement with the Initial Purchasers in connection with the issuance of the
outstanding notes. The registration rights agreement provides that we will take
the following actions, at our expense, for the benefit of the holders of the
outstanding notes:

- Within 90 days after June 29, 2001, the date of the registration rights
agreement, we will file the exchange offer registration statement, of
which this prospectus is a part, relating to the exchange offer. The
exchange notes will have terms substantially identical in all material
respects to the outstanding notes except that the exchange notes will not
contain transfer restrictions.

- We will use our reasonable best efforts to cause the exchange offer
registration statement to be declared effective under the Securities Act
within 120 days after the date of the registration rights agreement.

- We will keep the exchange offer open for a period of not less than the
minimum period required under applicable federal and state securities
laws to consummate the exchange offer; provided, however, that in no
event shall such period be less than 20 days after the date notice of the
exchange offer is mailed to the holders.

We will be required to file a shelf registration statement covering resales
of the outstanding notes if:

- because of any change in law or in currently prevailing interpretations
of the staff of the SEC, we are not permitted to effect an exchange
offer,

- for any reason the exchange offer is not consummated within 30 days after
the Effectiveness Target Date, as defined in the registration rights
agreement,

- any holder of outstanding notes notifies us within 20 business days after
June 29, 2001 that it (i) is prohibited by law or SEC policy from
participating in the exchange offer, (ii) may not resell the exchange
notes acquired by it in the exchange offer to the public without
delivering a prospectus and the prospectus contained in this registration
statement is not appropriate or available for such resales, or (iii) is a
broker-dealer and holds outstanding notes acquired directly from us or
one of our affiliates.

Following the consummation of the exchange offer, holders of the
outstanding notes who were eligible to participate in the exchange offer, but
who did not tender their outstanding notes, will not have any further
registration rights and the outstanding notes will continue to be subject to
certain restrictions on transfer. Accordingly, the liquidity of the market for
the outstanding notes could be adversely affected.

TERMS OF THE EXCHANGE OFFER

Upon the terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal, we will accept any and all outstanding notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the expiration date of the exchange offer. We will issue $1,000 principal amount
of exchange notes in exchange for each $1,000 principal amount of outstanding
notes accepted in the exchange offer. Any holder may tender some or all of its
outstanding notes pursuant to the exchange offer. However, outstanding notes may
be tendered only in integral multiples of $1,000.

The form and terms of the exchange notes are the same as the form and terms
of the outstanding notes except that:

(1) the exchange notes bear a different CUSIP Number from the
outstanding notes;

(2) the exchange notes have been registered under the Securities Act
and hence will not bear legends restricting the transfer thereof;
and

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(3) the holders of the exchange notes will not be entitled to certain
rights under the registration rights agreement, including the
provisions providing for liquidated damages in certain
circumstances relating to the timing of the exchange offer, all of
which rights will terminate when the exchange offer is terminated.

The exchange notes will evidence the same debt as the outstanding notes and will
be entitled to the benefits of the indenture.

As of the date of this prospectus, $300,000,000 aggregate principal amount
of the outstanding notes were outstanding. We intend to conduct the exchange
offer in accordance with the applicable requirements of the Exchange Act and the
rules and regulations of the SEC thereunder.

We will be deemed to have accepted validly tendered outstanding notes when,
as and if we have given oral or written notice thereof to Firstar Bank, N.A.
(the "exchange agent"). The exchange agent will act as agent for the tendering
holders for the purpose of receiving the exchange notes from us.

If any tendered outstanding notes are not accepted for exchange because of
an invalid tender, the occurrence of specified other events set forth in this
prospectus or otherwise, the certificates for any unaccepted outstanding notes
will be returned, without expense, to the tendering holder thereof as promptly
as practicable after the expiration date of the exchange offer.

Holders who tender outstanding notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
outstanding notes pursuant to the exchange offer. We will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the exchange offer. See "-- Fees and Expenses."

EXPIRATION DATE; EXTENSIONS; AMENDMENTS

The term "expiration date" means 5:00 p.m., New York City time, on ,
2001, unless we, in our sole discretion, extend the exchange offer, in which
case the term "expiration date" will mean the latest date and time to which the
exchange offer is extended. We reserve the right to extend the exchange offer at
any time and from time to time prior to the expiration date by giving written
notice to the exchange agent and by timely public announcement communicated,
unless otherwise required by applicable law or regulation, by making a press
release. During any extension of the exchange offer, all outstanding notes
previously tendered pursuant to the exchange offer will remain subject to the
exchange offer.

We reserve the right, in our sole discretion, (1) to delay accepting any
outstanding notes, to extend the exchange offer or to terminate the exchange
offer if any of the conditions set forth below under "-- Conditions" have not
been satisfied, or (2) to amend the terms of the exchange offer in any manner.
If any such termination or amendment occurs, we will notify the exchange agent
in writing and will either issue a press release or give written notice to the
holders of the outstanding notes as promptly as practicable.

INTEREST ON THE EXCHANGE NOTES

The exchange notes will bear interest from their date of issuance. Holders
of outstanding notes that are accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the date of issuance of the
exchange notes. Such interest will be paid with the first interest payment on
the exchange notes on January 1, 2002. Interest on the outstanding notes
accepted for exchange will cease to accrue upon issuance of the exchange notes.
Interest on the exchange notes is payable semi-annually on each January 1 and
July 1, commencing on January 1, 2002.

PROCEDURES FOR TENDERING

Only a holder of outstanding notes may tender outstanding notes in the
exchange offer. To tender in the exchange offer, a holder must complete, sign
and date the letter of transmittal, or a facsimile thereof, have the signatures
thereon guaranteed if required by the letter of transmittal or transmit an
agent's message in

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connection with a book-entry transfer, and mail or otherwise deliver the letter
of transmittal or the facsimile, together with the outstanding notes and any
other required documents, to the exchange agent prior to 5:00 p.m., New York
City time, on the expiration date. To be tendered effectively, the outstanding
notes, letter of transmittal or an agent's message and other required documents
must be completed and received by the exchange agent at the address set forth
below under "Exchange Agent" prior to 5:00 p.m., New York City time, on the
expiration date. Delivery of the outstanding notes may be made by book-entry
transfer in accordance with the procedures described below. Confirmation of the
book-entry transfer must be received by the exchange agent prior to the
expiration date.

The term "agent's message" means a message, transmitted by a book-entry
transfer facility to, and received by, the exchange agent forming a part of a
confirmation of a book-entry, which states that the book-entry transfer facility
has received an express acknowledgment from the participant in the book-entry
transfer facility tendering the outstanding notes that the participant has
received and agrees: (1) to participate in ATOP; (2) to be bound by the terms of
the letter of transmittal; and (3) that we may enforce the agreement against the
participant.

To participate in the exchange offer, each holder will be required to
furnish to us a written representation to the effect that:

- it is not an affiliate of ours,

- it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the exchange notes to be issued in the exchange offer,
and

- it is acquiring the exchange notes in its ordinary course of business.

The tender by a holder and our acceptance thereof will constitute agreement
between the holder and us in accordance with the terms and subject to the
conditions set forth in this prospectus and in the letter of transmittal or
agent's message.

THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF TRANSMITTAL
OR AGENT'S MESSAGE AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT
THE ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL,
HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OUTSTANDING NOTES SHOULD
BE SENT TO US. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR THEM.

Any beneficial owner whose outstanding notes are registered in the name of
a broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct the
registered holder to tender on the beneficial owner's behalf.

Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by a member of the Medallion System unless the
outstanding notes tendered pursuant to the letter of transmittal are tendered
(1) by a registered holder who has not completed the box entitled "Special
Registration Instructions" or "Special Delivery Instructions" on the letter of
transmittal or (2) for the account of a member firm of the Medallion System. In
the event that signatures on a letter of transmittal or a notice of withdrawal,
as the case may be, are required to be guaranteed, the guarantee must be by a
member firm of the Medallion System.

If the letter of transmittal is signed by a person other than the
registered holder of any outstanding notes listed in this prospectus, the
outstanding notes must be endorsed or accompanied by a properly completed bond
power, signed by the registered holder as the registered holder's name appears
on the outstanding notes with the signature thereon guaranteed by a member firm
of the Medallion System.

If the letter of transmittal or any outstanding notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or

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representative capacity, the person signing should so indicate when signing, and
evidence satisfactory to us of its authority to so act must be submitted with
the letter of transmittal.

We understand that the exchange agent will make a request promptly after
the date of this prospectus to establish accounts with respect to the
outstanding notes at DTC for the purpose of facilitating the exchange offer, and
subject to the establishment thereof, any financial institution that is a
participant in DTC's system may make book-entry delivery of outstanding notes by
causing DTC to transfer the outstanding notes into the exchange agent's account
with respect to the outstanding notes in accordance with DTC's procedures for
the transfer. Although delivery of the outstanding notes may be effected through
book-entry transfer into the exchange agent's account at DTC, unless an agent's
message is received by the exchange agent in compliance with ATOP, an
appropriate letter of transmittal properly completed and duly executed with any
required signature guarantee and all other required documents must in each case
be transmitted to and received or confirmed by the exchange agent at its address
set forth below on or prior to the expiration date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under the procedures. Delivery of documents to DTC does not constitute
delivery to the exchange agent.

All questions as to the validity, form, eligibility, including time of
receipt, acceptance of tendered outstanding notes and withdrawal of tendered
outstanding notes will be determined by us in our sole discretion, which
determination will be final and binding. We reserve the absolute right to reject
any and all outstanding notes not properly tendered or any outstanding notes our
acceptance of which would, in the opinion of our counsel, be unlawful. We also
reserve the right in our sole discretion to waive any defects, irregularities or
conditions of tender as to particular outstanding notes. Our interpretation of
the terms and conditions of the exchange offer, including the instructions in
the letter of transmittal, will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of outstanding
notes must be cured within the time we determine. Although we intend to notify
holders of defects or irregularities with respect to tenders of outstanding
notes, neither we, the exchange agent nor any other person will incur any
liability for failure to give the notification. Tenders of outstanding notes
will not be deemed to have been made until the defects or irregularities have
been cured or waived. Any outstanding notes received by the exchange agent that
are not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned by the exchange agent to the tendering
holders, unless otherwise provided in the letter of transmittal, as soon as
practicable following the expiration date.

GUARANTEED DELIVERY PROCEDURES

Holders who wish to tender their outstanding notes and (1) whose
outstanding notes are not immediately available, (2) who cannot deliver their
outstanding notes, the letter of transmittal or any other required documents to
the exchange agent or (3) who cannot complete the procedures for book-entry
transfer, prior to the expiration date, may effect a tender if:

(A) the tender is made through a member firm of the Medallion System;

(B) prior to the expiration date, the exchange agent receives from a
member firm of the Medallion System a properly completed and duly
executed Notice of Guaranteed Delivery by facsimile transmission,
mail or hand delivery setting forth the name and address of the
holder, the certificate number(s) of the outstanding notes and the
principal amount of outstanding notes tendered, stating that the
tender is being made thereby and guaranteeing that, within three
New York Stock Exchange trading days after the expiration date,
the letter of transmittal or facsimile thereof together with the
certificate(s) representing the outstanding notes or a
confirmation of book-entry transfer of the outstanding notes into
the exchange agent's account at DTC, and any other documents
required by the letter of transmittal will be deposited by the
member firm of the Medallion System with the exchange agent; and

(C) the properly completed and executed letter of transmittal or
facsimile thereof, as well as the certificate(s) representing all
tendered outstanding notes in proper form for transfer or a
confirmation of book-entry transfer of the outstanding notes into
the exchange agent's account

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at DTC, and all other documents required by the letter of transmittal
are received by the exchange agent within five New York Stock Exchange
trading days after the expiration date.

Upon request to the exchange agent, a Notice of Guaranteed Delivery will be sent
to holders who wish to tender their outstanding notes according to the
guaranteed delivery procedures set forth above.

WITHDRAWAL OF TENDERS

Except as otherwise provided in this prospectus, tenders of outstanding
notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on
the expiration date.

To withdraw a tender of outstanding notes in the exchange offer, a
telegram, telex, letter or facsimile transmission notice of withdrawal must be
received by the exchange agent at its address set forth in this prospectus prior
to 5:00 p.m., New York City time, on the expiration date of the exchange offer.
Any notice of withdrawal must:

(1) specify the name of the person having deposited the outstanding
notes to be withdrawn;

(2) identify the outstanding notes to be withdrawn, including the
certificate number(s) and principal amount of the outstanding
notes, or, in the case of outstanding notes transferred by
book-entry transfer, the name and number of the account at DTC to
be credited;

(3) be signed by the holder in the same manner as the original
signature on the letter of transmittal by which the outstanding
notes were tendered, including any required signature guarantees,
or be accompanied by documents of transfer sufficient to have the
trustee with respect to the outstanding notes register the
transfer of the outstanding notes into the name of the person
withdrawing the tender; and

(4) specify the name in which any outstanding notes are to be
registered, if different from that of the person depositing the
outstanding notes to be withdrawn.

All questions as to the validity, form and eligibility, including time of
receipt, of the notices of withdrawal will be determined by us. Our
determination will be final and binding on all parties. Any outstanding notes so
withdrawn will be deemed not to have been validly tendered for purposes of the
exchange offer and no exchange notes will be issued with respect thereto unless
the outstanding notes so withdrawn are validly retendered. Any outstanding notes
which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to the holder as soon as practicable
after withdrawal, rejection of tender or termination of the exchange offer.
Properly withdrawn outstanding notes may be retendered by following one of the
procedures described above under "-- Procedures for Tendering" at any time prior
to the expiration date.

CONDITIONS

Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or exchange notes for, any outstanding notes,
and may terminate or amend the exchange offer as provided in this prospectus
before the acceptance of the outstanding notes, if:

(1) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the
exchange offer which, in our sole judgment, might materially
impair our ability to proceed with the exchange offer or any
material adverse development has occurred in any existing action
or proceeding with respect to us or any of our subsidiaries; or

(2) any law, statute, rule, regulation or interpretation by the staff
of the SEC is proposed, adopted or enacted, which, in our sole
judgment, might materially impair our ability to proceed with the
exchange offer or materially impair the contemplated benefits of
the exchange offer to us; or

32
44

(3) any governmental approval has not been obtained, which approval
we, in our sole discretion, deem necessary for the consummation of
the exchange offer as contemplated by this prospectus.

If we determine in our sole discretion that any of the conditions are not
satisfied, we may (1) refuse to accept any outstanding notes and return all
tendered outstanding notes to the tendering holders, (2) extend the exchange
offer and retain all outstanding notes tendered prior to the expiration of the
exchange offer, subject, however, to the rights of holders to withdraw the
outstanding notes (see "-- Withdrawal of Tenders") or (3) waive the unsatisfied
conditions with respect to the exchange offer and accept all properly tendered
outstanding notes which have not been withdrawn.

EXCHANGE AGENT

Firstar Bank, N.A. has been appointed as exchange agent for the exchange
offer. Questions and requests for assistance, requests for additional copies of
this prospectus or of the letter of transmittal and requests for Notice of
Guaranteed Delivery should be directed to the exchange agent addressed as
follows:

BY OVERNIGHT COURIER OR REGISTERED/CERTIFIED MAIL:
Firstar Bank, N.A.
101 East 5th Street
St. Paul, MN 55101
Attn: Frank Leslie

FACSIMILE TRANSMISSION:
(651) 229-6415

FOR INFORMATION TELEPHONE:
(651) 229-2600

DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A VALID
DELIVERY.

FEES AND EXPENSES

We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses incurred in connection with these services.

We will pay the cash expenses to be incurred in connection with the
exchange offer. Such expenses include fees and expenses of the exchange agent
and trustee, accounting and legal fees and printing costs, among others.

ACCOUNTING TREATMENT

The exchange notes will be recorded at the same carrying value as the
outstanding notes, which is face value, as reflected in our accounting records
on the date of exchange. Accordingly, we will not recognize any gain or loss for
accounting purposes as a result of the exchange offer. The expenses of the
exchange offer will be deferred and charged to expense over the term of the
exchange notes.

CONSEQUENCES OF FAILURE TO EXCHANGE

The outstanding notes that are not exchanged for exchange notes pursuant to
the exchange offer will remain restricted securities. Accordingly, the
outstanding notes may be resold only:

(1) to us upon redemption thereof or otherwise;

(2) so long as the outstanding notes are eligible for resale pursuant
to Rule 144A, to a person inside the United States whom the seller
reasonably believes is a qualified institutional buyer within the
meaning of Rule 144A under the Securities Act in a transaction
meeting the

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45

requirements of Rule 144A, or pursuant to another exemption from the
registration requirements of the Securities Act, which other exemption
is based upon an opinion of counsel reasonably acceptable to us;

(3) outside the United States to a non-U.S. person in a transaction
meeting the requirements of Rule 904 under the Securities Act; or

(4) pursuant to an effective registration statement under the
Securities Act, in each case in accordance with any applicable
securities laws of any state of the United States.

RESALE OF THE EXCHANGE NOTES

With respect to resales of exchange notes, based on interpretations by the
staff of the SEC set forth in no-action letters issued to third parties, we
believe that a holder or other person who receives exchange notes, whether or
not the person is the holder, other than a person that is our affiliate within
the meaning of Rule 405 under the Securities Act, in exchange for outstanding
notes in the ordinary course of business and who is not participating, does not
intend to participate, and has no arrangement or understanding with any person
to participate, in the distribution of the exchange notes, will be allowed to
resell the exchange notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the exchange notes a
prospectus that satisfies the requirements of Section 10 of the Securities Act.
However, if any holder acquires exchange notes in the exchange offer for the
purpose of distributing or participating in a distribution of the exchange
notes, the holder cannot rely on the position of the staff of the SEC expressed
in the no-action letters or any similar interpretive letters, and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction, unless an exemption from registration
is otherwise available. Further, each broker-dealer that receives exchange notes
for its own account in exchange for outstanding notes, where the outstanding
notes were acquired by the broker-dealer as a result of market-making activities
or other trading activities, must acknowledge that it will deliver a prospectus
in connection with any resale of the exchange notes.

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46

USE OF PROCEEDS

This exchange offer is intended to satisfy some of our obligations under
the registration rights agreement. We will not receive any cash proceeds from
the issuance of the exchange notes. In consideration for issuing the exchange
notes contemplated in this prospectus, we will receive outstanding notes in like
principal amount, the form and terms of which are the same as the form and terms
of the exchange notes, except as otherwise described in this prospectus.

We used the proceeds from the issuance of the outstanding notes of
approximately $291.8 million, net of discount, together with funds from our new
senior secured credit facilities and a portion of our cash and cash equivalents,
to refinance our revolving credit facility, retire our privately held senior
notes, complete an offer to purchase approximately $200.0 million in principal
amount of our $300.0 million publicly held senior notes, and pay related tender
premiums, prepayment penalties, fees and expenses. For additional information,
see "Prospectus Summary -- Refinancing Transactions."

35
47

CAPITALIZATION

The following table sets forth our unaudited cash and cash equivalent
investments and our unaudited consolidated capitalization as of April 30, 2001
on an actual basis and on an as adjusted basis giving effect to the offering of
the outstanding notes and the other refinancing transactions. This table should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Selected Historical Consolidated
Financial and Operating Data" and our consolidated financial statements and
related notes contained elsewhere in this prospectus.

<Table>
<Caption>
AS OF APRIL 30, 2001
------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)

Cash and cash equivalents(1)................................ $ 103,721 $ 91,559
========== ==========
Long-term debt (including current maturities):
Current revolving credit facility(1)(2)................... $ 472,000 $ --
New senior secured credit facilities:
Revolving credit facility(1)........................... -- 50,000
Asset sale term loan................................... -- 75,000
Term loan B............................................ -- 300,000
6.40% ROARS due 2013 (remarketing date 2003)(3)........... 204,590 102,160
6.70% notes due 2003(3)................................... 100,000 100
Privately held senior notes............................... 64,762 --
10 3/4% senior subordinated notes due 2008................ -- 300,000
Other(4).................................................. 25,021 25,021
---------- ----------
Total long-term debt(5)........................... 866,373 852,281
Shareholders' equity(6)..................................... 872,930 864,392
---------- ----------
Total capitalization.............................. $1,739,303 $1,716,673
========== ==========
</Table>

- ---------------

(1) Subsequent to April 30, 2001, we used $30.0 million of our cash and cash
equivalents to reduce the balance outstanding on our revolving credit
facility to $442.0 million. As of April 30, 2001, we had outstanding letters
of credit under our credit facility totaling $5.5 million.

(2) Our $600.0 million revolving credit facility, which was scheduled to mature
on April 30, 2002, became a current liability as of April 30, 2001.

(3) On May 15, 2001, we commenced an offer to purchase approximately $200.0
million in principal amount of our $300.0 million publicly held senior
notes, which consisted of $100.0 million 6.70% Notes and $200.0 million
6.40% ROARS. On June 29, 2001, we repurchased $99.9 million of the 6.70%
Notes and approximately $100.1 million of the 6.40% ROARS. The remaining
6.70% Notes and 6.40% ROARS are secured equally and ratably with the new
senior secured credit facilities. See the section "Description of Certain
Indebtedness and the Tender Offer."

(4) Represents debt of our subsidiaries incurred or assumed in connection with
acquisitions, approximately $12.1 million of which is secured by the stock
or assets of the related subsidiaries.

(5) We are required to maintain a bond ($41.1 million as of April 30, 2001) to
guarantee our obligations relating to funds we withdrew from our preneed
funeral trusts in Florida. This amount would become senior debt if we were
to borrow funds under the revolving credit facility to extinguish the bond
obligation by returning to the trusts the amounts we previously withdrew
that relate to the remaining preneed contracts.

(6) Adjusted shareholders' equity reflects a reduction of approximately $8.5
million for the after-tax effect of charges to be recorded in the period the
refinancing transactions are completed.

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48

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the section "Selected Historical Consolidated Financial and Operating Data" and
the consolidated financial statements and related notes included elsewhere in
this prospectus.

GENERAL

We sell cemetery property and funeral and cemetery products and services
both on an at-need and preneed basis. Preneed property, products and services
are typically sold on an installment basis with terms of approximately three to
five years. In fiscal year 2000, we changed the terms and conditions of our
preneed sales contracts and commissions and moderated our preneed sales
activities in order to enhance our cash flow. These changes are described in
more detail under the heading "Fiscal Year 2000 Compared to Fiscal Year 1999"
below.

With respect to the sale of cemetery property, whether preneed or at-need,
we are generally required by state law to place into a perpetual care trust a
portion, usually 10 percent, of the proceeds we receive, in order to fund
maintenance of the cemetery grounds. As we receive payments, we generally fund
the perpetual care trust in the same proportion as the payment bears to the
contract amount; for example, if we receive 20 percent of the contract price, we
place in trust 20 percent of the total amount to be placed in trust for that
contract. We withdraw realized earnings in these funds to use towards the
maintenance of our cemeteries, but principal, including net realized capital
gains in some jurisdictions, must generally be held in the trust in perpetuity.

With respect to the preneed sale of cemetery and funeral products and
services, state laws generally require us to either (1) place a portion of the
installment payments we receive into a trust fund, or (2) use an insurance
policy underwritten by an insurance company to provide funds to cover the costs
of delivering funeral products and services in the future. With respect to the
preneed sale of cemetery merchandise, we are generally required to place in
trust 30 to 50 percent of each installment we receive. With respect to the
preneed sale of funeral and cemetery services, we are generally required to
place in trust 70 to 90 percent of each installment we receive. The sale of
caskets is treated in some jurisdictions in the same manner as the sale of
cemetery merchandise and in some jurisdictions in the same manner as the sale of
funeral services for these purposes. When insurance is used, we apply customer
payments to pay premiums on the insurance policies. We typically act as agent
for the insurance company and earn a commission. Generally, we can withdraw the
principal of and earnings on the funds placed in trust only at the time we
deliver the related products and services.

If a preneed funeral product or service contract is cancelled, we generally
return to the customer the related principal that was placed in trust and retain
the portion not placed in trust. In many jurisdictions, we can withdraw and
retain all related earnings in the trust, but in other jurisdictions these
earnings must be returned to the customer. If a preneed cemetery property,
product or service contract is cancelled, we generally are not required to
return any funds to the customer.

The impact of preneed sales on our near-term cash flow depends primarily on
the commissions we pay on the sale, the portion of the sale we are required to
place in trust, and the terms of the particular contract (such as the size of
the downpayment required and the length of the contract). We generally pay
commissions to our preneed sales counselors based on a percentage of the total
preneed contract price, but only to the extent cash is paid by the customer.
However, because we are required to place a portion of each cash installment
paid by the customer into trust, we may be required to use our own cash to cover
a portion of the commission due on the installment from the customer. If the
initial cash installment paid by the customer is not sufficient to cover the
entire commission, the remaining commission is paid from subsequent customer
installments. Accordingly, preneed sales are generally cash flow negative
initially, but become cash flow positive at varying times over the life of the
contract, depending upon the trusting requirements and the terms of the
particular contract.

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Cash expended for preneed funeral sales, principally sales commissions, are
capitalized in deferred charges on the balance sheet and amortized as the
funeral contracts are delivered. Such amortization is included in our
amortization and depreciation.

TRUST AND ESCROW INVESTMENTS

Generally, our wholly-owned subsidiary, Investors Trust, Inc. ("ITI"), a
Texas corporation with trust powers, serves as investment adviser on our trust
funds and escrow accounts and on our investment portfolio. ITI provides
investment advisory services exclusively to us. ITI is registered with the
Securities and Exchange Commission under the Investment Advisers Act of 1940.

As of April 30, 2001, ITI had approximately $1.1 billion in assets under
management, approximately $100.0 million of which relate to foreign assets, some
or all of which we may sell. Lawrence B. Hawkins, one of our executive officers
and a professional investment manager, serves as President of ITI. ITI operates
with the assistance of third-party professional financial consultants pursuant
to a formal investment policy established by the Investment Committee of our
Board of Directors. The policy emphasizes conservation, diversification and
preservation of principal while seeking appropriate levels of current income and
capital appreciation.

Our investment strategy for our trust funds and escrow accounts is, among
other criteria, partially dependent on the ability to withdraw net realized
capital gains from these funds. Withdrawal of capital gains is not permitted for
perpetual care funds in some jurisdictions in which we operate. 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 our North American funds (including those in Puerto
Rico but excluding those in Mexico) that have investments in common stock, we
seek an overall annual yield of approximately 8.5 percent to 9 percent, which is
well in excess of our expectation for inflation over the short term. However, we
may not be successful in achieving any particular yield.

RESULTS OF OPERATIONS

We provide below a comparison of the three and six months ended April 30,
2001, as reported after the implementation of SAB 101, with the three and six
months ended April 30, 2000, as reported which does not reflect the
implementation of SAB 101. Our discussion of results for fiscal years 2000, 1999
and 1998 are presented on a historical basis, which does not reflect the
implementation of SAB 101. We then provide a discussion of the pro forma impact
of SAB 101 on fiscal years 2000 and 1999, followed by a comparison of the three
and six months ended April 30, 2001, as reported after the implementation of SAB
101, with the pro forma impact of SAB 101 on the three and six months ended
April 30, 2000.

For purposes of the following discussion, funeral homes and cemeteries
owned and operated at the beginning of the earliest year presented in each
comparison are referred to as "Existing Operations." Correspondingly, funeral
homes and cemeteries acquired or opened during either period being compared are
referred to as "Acquired/Opened Operations." Acquired operations include
businesses we purchased through our earlier acquisition strategies, and opened
operations include businesses we constructed or those we developed through the
implementation of our alternative service firm strategy.

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50

THREE MONTHS ENDED APRIL 30, 2001 COMPARED TO THREE MONTHS ENDED APRIL 30, 2000

The following discussion compares our financial results for the three
months ended April 30, 2001 and 2000, both as reported. Results for the three
months ended April 30, 2001 reflect the implementation of SAB 101, whereas
results for the corresponding period in 2000 do not. Therefore, the results from
these two periods are not comparable.

Funeral Segment

<Table>
<Caption>
THREE MONTHS ENDED
APRIL 30,
----------------------
2001 2000 (DECREASE)
------ ------------- ----------
(AS REPORTED)
(IN MILLIONS)

Funeral Revenue...................................... $108.0 $115.7 $(7.7)
Funeral Costs........................................ 82.4 84.9 (2.5)
------ ------ -----
Funeral Segment Profit............................... $ 25.6 $ 30.8 $(5.2)
====== ====== =====
</Table>

Funeral revenue decreased $7.7 million, or 7 percent, for the three months
ended April 30, 2001, compared to the corresponding period in 2000. We
experienced a $6.7 million, or 6 percent, decrease due to the effect of
implementing SAB 101. We experienced a reduction in revenue from changes in
foreign currency exchange rates (due in part to the Euro). We also experienced a
2.9 percent decrease (995 events) in the number of funeral services performed by
Existing Operations worldwide. The number of domestic funeral services for
Existing Operations remained flat. This was partially offset by an increase in
the average revenue per funeral service performed by Existing Operations. 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 our
extensive consumer market study.

Cemetery Segment

<Table>
<Caption>
THREE MONTHS ENDED
APRIL 30,
---------------------
2001 2000 (DECREASE)
----- ------------- ----------
(AS REPORTED)
(IN MILLIONS)

Cemetery Revenue...................................... $63.0 $73.1 $(10.1)
Cemetery Costs........................................ 47.4 54.1 (6.7)
----- ----- ------
Cemetery Segment Profit............................... $15.6 $19.0 $ (3.4)
===== ===== ======
</Table>

Cemetery revenue decreased $10.1 million, or 14 percent, for the three
months ended April 30, 2001, compared to the corresponding period in 2000. We
experienced a decrease in cemetery merchandise deliveries and reduced preneed
cemetery property sales. Reduced preneed sales resulted from changes we made to
our preneed strategies in fiscal year 2000. Partially offsetting this decrease
was a $0.8 million, or 1 percent, increase due to the effect of implementing SAB
101.

Other

Net interest expense, which is comprised of gross interest expense of $14.1
million, netted with investment income of $1.6 million, decreased $1.9 million
during the second quarter of fiscal year 2001 compared to the same period in
2000. This is due principally to a $97.3 million decrease in the average
outstanding debt balance coupled with a $0.9 million increase in investment
income from increased cash and cash equivalents, which earned an average rate of
7.4 percent, including funds in foreign jurisdictions that earned 10.6 percent.

Other income, net, increased approximately $2.4 million during the second
quarter of fiscal year 2001 compared to the same period in 2000 due principally
to a net gain on the sale of excess cemetery property.
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51

SIX MONTHS ENDED APRIL 30, 2001 COMPARED TO SIX MONTHS ENDED APRIL 30, 2000

The following discussion compares our financial results for the six months
ended April 30, 2001 and 2000, both as reported. Results for the six months
ended April 30, 2001 reflect the implementation of SAB 101, whereas results for
the corresponding period in 2000 do not. Therefore, the results from these two
periods are not comparable

Funeral Segment

<Table>
<Caption>
SIX MONTHS ENDED
APRIL 30,
----------------------
2001 2000 (DECREASE)
------ ------------- ----------
(AS REPORTED)
(IN MILLIONS)

Funeral Revenue...................................... $215.3 $238.4 $(23.1)
Funeral Costs........................................ 165.0 172.8 (7.8)
------ ------ ------
Funeral Segment Profit............................... $ 50.3 $ 65.6 $(15.3)
====== ====== ======
</Table>

Funeral revenue decreased $23.1 million, or 10 percent, for the six months
ended April 30, 2001, compared to the corresponding period in 2000. We
experienced a $14.7 million, or 7 percent, decrease due to the effect of
implementing SAB 101. We also experienced a reduction in revenue from changes in
foreign currency exchange rates (due in part to the Euro) and a 6.1 percent
decrease (4,339 events) in the number of funeral services performed by Existing
Operations worldwide (2.9 percent decrease (1,132 events) domestically).

Partially offsetting this decrease was an increase in the average revenue
per funeral service performed by Existing Operations. 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 our extensive consumer
market study.

Cemetery Segment

<Table>
<Caption>
SIX MONTHS ENDED
APRIL 30,
---------------------- INCREASE
2001 2000 (DECREASE)
------ ------------- ----------
(AS REPORTED)
(IN MILLIONS)

Cemetery Revenue..................................... $132.3 $143.4 $(11.1)
Cemetery Costs....................................... 98.4 110.5 (12.1)
------ ------ ------
Cemetery Segment Profit.............................. $ 33.9 $ 32.9 $ 1.0
====== ====== ======
</Table>

Cemetery revenue decreased $11.1 million, or 8 percent, for the six months
ended April 30, 2001, compared to the corresponding period in 2000 primarily
from reduced cemetery merchandise deliveries and reduced preneed cemetery
property sales. The reduction in preneed sales is due to the changes made to our
preneed sales program in fiscal year 2000. Partially offsetting this decrease,
we experienced a $3.6 million, or 3 percent, increase due to the effect of
implementing SAB 101.

Other

Net interest expense, which is comprised of gross interest expense of $29.5
million, netted with investment income of $3.7 million, decreased $3.2 million
during the first six months of fiscal year 2001 compared to the same period in
2000. This is due principally to a decrease in gross interest expense and a $2.7
million increase in investment income from increased cash and cash equivalents,
which earned an average rate of 7.8 percent, including funds in foreign
jurisdictions that earned 11.1 percent. The decrease in gross interest expense
was due to a $73.8 million decrease in average outstanding debt, partially
offset by an increase in average interest rates from 6.2 percent in 2000 to 6.5
percent in 2001.
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52

Other income, net, increased approximately $2.4 million during the first
six months of fiscal year 2001 compared to the same period in 2000. This
increase is principally due to a net gain on the sale of excess cemetery
property during the second quarter of fiscal year 2001.

As of April 30, 2001, our outstanding borrowings totaled $866.4 million. Of
the total amount outstanding, including the portion subject to the interest rate
swap agreement, approximately 69 percent was fixed-rate debt, with the remaining
31 percent subject to short-term variable interest rates averaging approximately
6.3 percent.

FISCAL YEAR 2000 COMPARED TO FISCAL YEAR 1999

The following discussion compares our financial results for fiscal year
2000 and fiscal year 1999, both as reported. These results do not reflect the
implementation of SAB 101. The accounting methods used in both periods were the
same and therefore the results for these two periods are comparable.

Funeral Segment

<Table>
<Caption>
YEAR ENDED OCTOBER 31,
---------------------- INCREASE
2000 1999 (DECREASE)
------ ------------- ----------
(AS REPORTED)
(IN MILLIONS)

FUNERAL REVENUE
Existing Operations.................................. $409.8 $422.4 $(12.6)
Acquired/Opened Operations........................... 42.1 23.5 (18.6)
------ ------ ------
$451.9 $445.9 $ 6.0
====== ====== ======
FUNERAL COSTS
Existing Operations.................................. $300.8 $300.7 $ 0.1
Acquired/Opened Operations........................... 34.4 18.3 16.1
------ ------ ------
$335.2 $319.0 $ 16.2
====== ====== ======
Funeral Segment Profit............................... $116.7 $126.9 $(10.2)
====== ====== ======
</Table>

Funeral revenue increased $6.0 million, or 1 percent, for fiscal year 2000,
compared to fiscal year 1999. We experienced a $12.6 million, or 3 percent,
decrease in revenue from Existing Operations as a result of several factors.
First, we experienced a 6.2 percent increase in the average revenue per domestic
funeral service performed by Existing Operations (6.8 percent increase
worldwide, excluding the effect of foreign currency translation). The increase
in average revenue per funeral service was due in part to enhanced funeral
arranger training, improved merchandising and personalization of services and
product offerings based on findings of our extensive consumer market study.

Offsetting the increase in average revenue per funeral service was a $15.0
million reduction in preneed funeral merchandise sales, a $6.6 million reduction
in revenue from changes in foreign currency exchange rates (principally the
Euro) and a 1.8 percent decrease (1,300 events) in the number of domestic
funeral services performed by Existing Operations (3.5 percent decrease (4,548
events) worldwide). However, included in the 1,300 events were more than 600
low-end direct cremation events that we elected not to sell at prices our
competitors were charging. Additionally, discount services provided in the
ordinary course of business in the industry on behalf of other funeral homes or
institutions declined by approximately 400 events as a result of our decision to
decrease our level of discounted services. When these low-end and discounted
events are taken out of the calculation, the number of domestic funeral services
performed by Existing Operations decreased by approximately 250 events, which
translates to less than one event per domestic core funeral home. These low-end
and discounted events were price-sensitive and generally not profitable.

Changes in our preneed sales strategies during fiscal year 2000 had the
effect of increasing our cash flow, but considerably reducing all preneed sales.
We modified our preneed payment plans early in fiscal year 2000 by increasing
finance charges, requiring larger down payments and shortening installment
payment

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53

terms. Effective the first day of the fourth quarter of fiscal year 2000, we
also substantially reduced the commissions paid on sales of preneed cemetery
services and preneed funeral and cemetery merchandise, which we believe had the
largest impact on our preneed sales. The change in commission structure provides
an incentive to our preneed sales counselors to focus on selling preneed
cemetery property and preneed funeral services. We believe that these are the
sales that build and maintain market share. In addition, the change better
aligns our operations with changes in accounting necessitated by the adoption of
SAB 101 because, after the implementation of SAB 101, preneed cemetery property
sales are the only preneed sales that we recognize on a current basis (after we
collect 10 percent of the sales price). We also believe that these changes have
improved the quality of our preneed sales and receivables. Although we reduced
or eliminated commissions available to our preneed sales counselors on certain
sales, we now provide a minimum compensation guarantee. These changes in our
preneed sales strategies contributed to a decline in our full-time domestic
preneed sales force from approximately 2,200 counselors during the first quarter
of fiscal year 2000 to approximately 1,200 counselors by the end of the first
quarter of fiscal year 2001. We do not expect any significant further decline in
the size of our preneed sales force.

Funeral profit margin from Existing Operations decreased from 28.8 percent
in 1999 to 26.6 percent in 2000 due primarily to the reduction in sales of
preneed funeral merchandise as described above.

The increase in revenue and costs from Acquired/Opened Operations resulted
primarily from our acquisition and construction of funeral homes from November
1998 through October 2000 which were not owned for the entirety of both periods
being presented.

Historically, one of our 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 fiscal year 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 some key markets in fiscal
year 1999, we lowered our goals for increases in the average revenue per funeral
service performed to 2 to 3 percent annually. For fiscal year 2000, the average
revenue per funeral service performed by existing funeral homes increased 6.2
percent domestically and 6.8 percent worldwide, excluding the effect of foreign
currency translation. Although these results exceeded our goals, our operating
budget projects increases in average revenue per funeral service performed of 2
to 3 percent going forward.

Cemetery Segment

<Table>
<Caption>
YEAR ENDED OCTOBER 31,
---------------------- INCREASE
2000 1999 (DECREASE)
------ ------------- ----------
(AS REPORTED)
(IN MILLIONS)

CEMETERY REVENUE
Existing Operations.................................. $252.5 $292.4 $(39.9)
Acquired/Opened Operations........................... 30.4 17.8 12.6
------ ------ ------
$282.9 $310.2 $(27.3)
====== ====== ======
CEMETERY COSTS
Existing Operations.................................. $195.8 $212.7 $(16.9)
Acquired/Opened Operations........................... 24.8 14.0 10.8
------ ------ ------
$220.6 $226.7 $ (6.1)
====== ====== ======
Cemetery Segment Profit.............................. $ 62.3 $ 83.5 $(21.2)
====== ====== ======
</Table>

Cemetery revenue decreased $27.3 million, or 9 percent, for fiscal year
2000, compared to fiscal year 1999. We experienced a $39.9 million, or 14
percent, decrease in revenue from Existing Operations resulting primarily from
reduced preneed sales. Slightly offsetting this decrease was an approximate $4.0
million, or

42
54

13 percent, increase in revenue from preneed cemetery merchandise and services
trust funds and escrow accounts to $34.7 million. This increase was due to an
increase in the average yield on the funds coupled with an increase in the
average balance. The yield for the year was slightly higher than our goal of 8.5
percent to 9.0 percent.

Changes in our preneed sales strategies during fiscal year 2000, which are
detailed in the funeral segment discussion above, had the effect of considerably
reducing preneed cemetery sales.

Cemetery profit margin from Existing Operations decreased from 27.3 percent
in 1999 to 22.5 percent in 2000. The decline was attributable principally to
reduced preneed sales as described 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 our acquisition and construction of cemeteries from November 1998
through October 2000 which were not owned for the entirety of both periods being
presented.

Other

Corporate general and administrative expenses increased approximately
$600,000 to 2.7 percent of revenue in fiscal year 2000, as compared to 2.5
percent in fiscal year 1999. The increase was primarily the result of a $2.3
million increase in consulting fees related to our extensive consumer market
research project, partially offset by a reduction in corporate development
costs, travel costs and executive bonus accruals.

Net interest expense, which is comprised of gross interest expense of $61.4
million, netted with investment income of $5.1 million, increased $4.1 million
during fiscal year 2000 compared to fiscal year 1999. This was due principally
to an increase in average interest rates from 6.0 percent in 1999 to 6.4 percent
in 2000, coupled with an increase in the average outstanding debt resulting from
acquisitions that closed late in 1999. The increase in gross interest expense
was partially offset by an approximate $2.6 million increase in investment
income generated from increased cash and cash equivalents earning an average
rate of 6.9 percent, including funds in foreign jurisdictions earning 8.8
percent.

In December 1998, we entered into an interest rate swap agreement on a
notional amount of $200.0 million. Under the terms of the agreement, effective
March 4, 1999, we pay a fixed rate of 4.915 percent and receive three-month
LIBOR. The swap expires on March 4, 2002.

As of October 31, 2000, our outstanding borrowings totaled $950.5 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 7.2 percent.

FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998

The following discussion compares our financial results for fiscal year
1999 and fiscal year 1998, both as reported. These results do not reflect the
implementation of SAB 101. Effective fiscal year 1999, we changed our method of
accounting for earnings realized by those preneed funeral merchandise and
services trust funds and escrow accounts where we are allowed to retain earnings
on the funds if the contract is cancelled. After the change, we defer all of the
earnings realized by these trust funds and escrow accounts until the merchandise
and services are delivered. Previously, we recognized a portion of those
earnings and deferred the remainder to offset the estimated future effects of
inflation. Accordingly, fiscal year 1999 and 1998, as reported, are not
comparable with respect to the accounting for these earnings.

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55

Funeral Segment

<Table>
<Caption>
YEAR ENDED OCTOBER 31,
-------------------------
1999 1998 INCREASE
------ ------------- --------
(AS REPORTED)
(IN MILLIONS)

Funeral Revenue.............................. $445.9 $379.1 $66.8
Funeral Costs................................ 319.0 260.7 58.3
------ ------ -----
Funeral Segment Profit....................... $126.9 $118.4 $ 8.5
====== ====== =====
</Table>

Funeral revenue increased $66.8 million, or 18 percent, for fiscal year
1999, compared to fiscal year 1998 primarily due to an increase in revenue from
Acquired/Opened Operations resulting from our acquisition and construction of
funeral homes from November 1997 through October 1999 which were not owned for
the entirety of both periods being presented. Additionally, we experienced an
increase in revenue as a result of an increase in sales of certain preneed
funeral merchandise, coupled with an increase in the average revenue per funeral
service performed by Existing Operations, primarily due to price increases and
improved merchandising. Partially offsetting this increase was a 2.2 percent
(1,306 events) decrease in the number of domestic funeral services performed by
Existing Operations (2.5 percent (2,358 events) decrease worldwide) and a $13.5
million decrease due to the effect of the implementation of the 1999 change in
accounting principle.

We believe that at-need funeral revenues in some key markets were
negatively affected in fiscal year 1999 by (1) intense and growing price
competition from low-cost funeral providers and casket stores in some markets,
(2) the continuing and accelerating trend toward cremation, and (3) a shift by
customers to lower-priced services and merchandise.

Cemetery Segment

<Table>
<Caption>
YEAR ENDED OCTOBER 31,
-------------------------
1999 1998 INCREASE
------ ------------- --------
(AS REPORTED)
(IN MILLIONS)

Cemetery Revenue............................. $310.2 $269.3 $40.9
Cemetery Costs............................... 226.7 191.7 35.0
------ ------ -----
Cemetery Segment Profit...................... $ 83.5 $ 77.6 $ 5.9
====== ====== =====
</Table>

Cemetery revenue increased $40.9 million, or 15 percent, for fiscal year
1999, compared to fiscal year 1998 primarily due to an increase in revenue from
Acquired/Opened Operations resulting from our acquisition and construction of
cemeteries from November 1997 through October 1999 which were not owned for the
entirety of both periods being presented. Additionally, there was an increase in
preneed cemetery sales, due to price increases and improved merchandising,
coupled with an increase in the revenue realized from our preneed cemetery
merchandise and services trust funds and escrow accounts. The revenue from these
trust funds and escrow accounts increased $3.6 million, or 14 percent, to $29.4
million due to a 20 percent growth in the average balance in the funds,
resulting from current year customer payments deposited into the funds and funds
added through acquisitions, coupled with an increase in the average yield on the
funds. The yield was in line with our goal of 8.5 percent to 9.0 percent.

Other

In April 1998, we achieved the performance goal for the performance-based
stock options granted under our 1995 Incentive Compensation Plan. As a result,
we were required to record a nonrecurring, noncash charge to earnings of
approximately $76.8 million (approximately $50.3 million, or $.51 per share,
after tax) in April 1998. Our repurchase of options and the exercise of the
remaining options resulted in a net cash outlay of approximately $69.4 million.

44
56

Corporate general and administrative expenses declined to 2.5 percent of
revenue in fiscal year 1999, as compared to 2.6 percent in fiscal year 1998,
despite an aggregate increase of $2.5 million for fiscal year 1999. The increase
in these expenses was primarily the result of increasing activities to support
our growth, including a $900,000 increase in professional and consulting fees.

Net interest expense increased $10.4 million during fiscal year 1999
compared to fiscal year 1998, resulting from an increase in average borrowings
due principally to acquisition expenditures. This increase was partially offset
by a decrease in average interest rates from 6.4 percent in 1998 to 6.0 percent
in 1999 and an increase in the investment earnings on excess cash for fiscal
year 1999 as compared to 1998.

As of October 31, 1999, our outstanding borrowings totaled $951.4 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 5.9 percent.

We experienced an increase in our effective tax rate from 35.5 percent in
fiscal year 1998 to 36.5 percent in fiscal year 1999 due to an increase in
income from jurisdictions with higher effective tax rates.

IMPLEMENTATION OF SAB 101

Effective fiscal year 2001, we implemented the Securities and Exchange
Commission's Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements" ("SAB 101"), which resulted in changing our methods of
accounting for some of our preneed sales activities. In the following sections,
we provide (1) a summary of the changes in our accounting resulting from the
implementation of SAB 101, (2) a summary of our current accounting (after
implementation of SAB 101) for preneed sales and for trust and escrow account
earnings, and (3) a discussion of the pro forma impact of SAB 101 on our results
for fiscal years 2000 and 1999.

Summary of Accounting Changes. The implementation of SAB 101 changed our
accounting for preneed sales activities as follows:

- For preneed sales of interment rights (which we also refer to as cemetery
property), the associated revenue and all costs to acquire the sale will
be recognized in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 66, "Accounting for Sales of Real Estate." Under
SFAS 66, recognition of revenue and costs must be deferred until 10
percent of the property sale price has been collected. Previously, the
revenue and costs were recognized when the contract was executed with the
customer.

- For preneed sales of cemetery merchandise, primarily vaults and markers,
and preneed sales of cemetery services, primarily openings and closings
of burial sites and installations of markers, the associated revenue and
all costs to acquire the sale will be deferred until the merchandise is
delivered or the service is performed. Previously, the revenue and costs
were recognized when the contract was executed with the customer.

- Preneed cemetery merchandise and services trust earnings will be deferred
until the underlying merchandise or service is delivered. Previously, the
earnings were recognized as earned in the trust.

- Accounting for preneed funeral service sales and earnings on preneed
funeral merchandise and services trust funds was not affected, as those
revenues were recognized upon delivery of the merchandise and services
under the prior accounting policy.

- Preneed funeral merchandise sales (primarily caskets) and associated
direct selling costs (primarily commissions and direct marketing costs)
will be deferred until the merchandise is delivered, at which

45
57

time they will be reflected in funeral revenue and funeral cost of sales,
respectively. Previously, these sales and associated direct selling costs
were recognized as funeral revenue and funeral cost of sales,
respectively, when the contract was executed with the customer.

- Our method of accounting for our perpetual care trusts was not affected.
Earnings on those trusts will continue to be recognized as they are
earned in the trusts.

The implementation of SAB 101 resulted in several changes to our balance
sheet, including the addition of two new categories: prearranged receivables and
prearranged deferred revenue. Prearranged receivables are related to preneed
sales of funeral and cemetery merchandise and services, or in other words, all
of our preneed sales except for preneed sales of cemetery property. Prearranged
receivables represent the funds owed to us (1) from preneed funeral merchandise
and services trusts and from preneed cemetery merchandise and services trusts,
which represent amounts already paid by customers and realized earnings on those
amounts, (2) from customers and (3) from insurance companies. Prearranged
deferred revenue represents the revenue we will recognize upon delivery of the
preneed funeral and cemetery merchandise and services at the time of need. The
net change in prearranged receivables and prearranged deferred revenue will be
recognized in our cash flow statement in the operating section as a change in
prearranged activity.

Prior to our adoption of SAB 101, neither the funeral trust assets nor the
receivables related to preneed funerals were included on our balance sheet.
Receivables due from customers related to preneed cemetery merchandise and
services were previously included with other receivables on the balance sheet.
The preneed cemetery merchandise and services trust asset was previously
presented net of the liability for the estimated cost to deliver.

All direct costs to acquire preneed funeral and cemetery merchandise and
cemetery services sales will now be included in deferred charges (asset).
Previously, these costs were expensed as incurred. Also included in deferred
charges are the costs to acquire preneed funeral service sales, which is
consistent with our historical accounting methods. The cost to acquire all
preneed merchandise and service sales will be included in the operating section
of our cash flow statement as prearranged acquisition costs.

We have filed a Form 8-K dated March 14, 2001, which describes in detail
our new accounting methods as compared to our previous accounting methods.

The cumulative effect of these changes on prior years resulted in a
decrease in net earnings for the three and six months ended April 30, 2001 of
$250.0 million (net of a $166.7 million income tax benefit), or $2.33 per share.
The effect of the change in accounting principles for the three and six months
ended April 30, 2001 was an increase in net earnings of $3.1 million and $6.9
million, or $.03 per share and $.06 per share, respectively.

Summary of Current Accounting for Preneed Sales. A description of our
current accounting for preneed sales under SAB 101 follows.

Revenue from preneed sales of funeral services and funeral merchandise is
deferred until the period in which the funeral is performed and the merchandise
is delivered. On the balance sheet, the full contract amount is included in the
prearranged deferred revenue line item (liability). The corresponding receivable
due from the customer is reflected in prearranged receivables (asset), and the
corresponding cash received from the customer is reflected part in prearranged
receivables (for the portion placed in trust) and part in cash (for the portion
we are allowed to retain). The costs to acquire the sales (primarily commissions
and direct marketing costs) are reflected on the balance sheet as deferred
charges (asset) and are charged to expense as the funeral services are performed
and products delivered. Indirect costs of marketing preneed funeral services and
merchandise are expensed in the period in which incurred.

As the customer makes payments on the preneed contract, the portion of
prearranged receivables representing the receivable due from the customer
declines, and the portion representing the receivable from the trust increases.
We record cash for the amount of cash received that is not required to be placed
in trust. Realized earnings on the amounts held in trust are included in
prearranged receivables and prearranged

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58

deferred revenue on the balance sheet and are not recognized as revenue until
delivery of the service or merchandise.

When the funeral service or merchandise is delivered, we recognize as
revenue the full contract amount plus all trust earnings associated with that
contract, and record a corresponding reduction in prearranged deferred revenue
(liability). We debit cash with the amount held in trust that is attributable to
the contract (consisting of the customer's payments and related realized
earnings, all of which we withdraw at that time), and we record a corresponding
reduction in prearranged receivables (asset). Associated deferred charges
(asset) are charged to expense, and we recognize the actual expenses incurred in
delivering the services and merchandise.

Preneed sales of cemetery merchandise, primarily vaults and markers, and
preneed sales of cemetery services, primarily openings and closings of burial
sites and installations of markers, are accounted for in essentially the same
manner as preneed sales of funeral services and merchandise.

For preneed sales of interment rights (which we also refer to as cemetery
property), the associated revenue and all costs to acquire the sale are
recognized in accordance with SFAS 66, "Accounting for Sales of Real Estate."
Under SFAS 66, recognition of revenue and costs must be deferred until 10
percent of the property sales price has been collected. A portion, generally 10
percent, of the proceeds are placed into perpetual care trust funds. We withdraw
and recognize realized earnings from these funds monthly to apply towards the
maintenance of cemetery grounds. The perpetual care trust funds are not
reflected on our financial statements, because principal must remain in the
trust in perpetuity.

Summary of Current Accounting for Trust and Escrow Account Earnings. We
have three types of trust funds and escrow accounts: (1) preneed funeral
merchandise and services, (2) preneed cemetery merchandise and services, and (3)
perpetual care. As described below, earnings on preneed funeral and cemetery
merchandise and services trust funds and escrow accounts are now accounted for
in the same manner. Our accounting for earnings on perpetual care trust funds is
different from the other two types of trust funds due to the different nature of
the trusts, as described below.

Preneed funeral merchandise and services trust funds and escrow
accounts. Effective fiscal year 1999, we changed our method of accounting
for earnings realized by those preneed funeral merchandise and services
trust funds and escrow accounts where we are allowed to retain earnings on
the funds if the contract is cancelled. We now defer recognition of all
earnings realized by these trust funds and escrow accounts until the
underlying funeral service or merchandise is delivered. (For those trust
funds and escrow accounts where we must return earnings on the funds if the
contract is cancelled, we have always deferred recognition of realized
earnings until the underlying funeral service or merchandise is delivered.)
These accounting methods were not affected by our implementation of SAB
101. We generally do not withdraw cash (principal and earnings) from these
trust funds and escrow accounts until the merchandise or service is
delivered. Principal and realized earnings in these funds and escrow
accounts are reflected as prearranged receivables (asset) on our balance
sheet. The full contract amount and realized earnings in these funds and
escrow accounts are reflected as prearranged deferred revenue (liability)
on our balance sheet. Unrealized gains and losses are not reflected on our
balance sheet or income statement, but are included in the footnotes to our
annual financial statements.

Preneed cemetery merchandise and services trust funds and escrow
accounts. As discussed above, effective fiscal year 2001, we implemented
SAB 101 and changed our method of accounting for earnings realized by
preneed cemetery merchandise and services trust funds and escrow accounts.
We now defer all earnings from these funds until the underlying merchandise
or service is delivered. We generally do not withdraw cash (principal and
earnings) from these trust funds and escrow accounts until the merchandise
or service is delivered. Principal and realized earnings in these funds and
escrow accounts are reflected as prearranged receivables (asset) on our
balance sheet. The full contract amount and realized earnings in these
funds and escrow accounts are reflected as prearranged deferred revenue
(liability) on our balance sheet. Unrealized gains and losses are not
reflected on our balance sheet or income statement, but are included in the
footnotes to our annual financial statements.

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59

Perpetual care trust funds. We recognize the earnings on our
perpetual care trust funds as they are realized in the trust. This
accounting method was not affected by our implementation of SAB 101. We
generally withdraw the earnings on a monthly basis to offset the cost of
maintaining our cemeteries. Principal and earnings in these funds are not
reflected on our balance sheet, because the principal must remain in the
trust in perpetuity.

Comparative Actual and Pro Forma Results of Operations for Fiscal Year
2000. The following table presents our results of operations for fiscal year
2000 as reported, in comparison to the pro forma results assuming implementation
of SAB 101:

<Table>
<Caption>
YEAR ENDED
OCTOBER 31, 2000
--------------------------- EFFECT OF
AS REPORTED PRO FORMA SAB 101
----------- ------------- ---------
(IN MILLIONS)

Revenues:
Funeral........................................... $451.9 $425.5 $(26.4)
Cemetery.......................................... 282.9 287.9 5.0
------ ------ ------
734.8 713.4 (21.4)
------ ------ ------
Costs and expenses:
Funeral........................................... 335.2 323.1 (12.1)
Cemetery.......................................... 220.6 226.0 5.4
------ ------ ------
555.8 549.1 (6.7)
------ ------ ------
Gross profit...................................... 179.0 164.3 (14.7)
Corporate general and administrative expenses....... 19.7 19.7 --
------ ------ ------
Operating earnings................................ 159.3 144.6 (14.7)
Interest expense, net............................... (56.3) (56.3) --
Other income, net................................... 2.2 2.2 --
------ ------ ------
Earnings before income taxes and cumulative effect
of change in accounting principles............. 105.2 90.5 (14.7)
Income taxes........................................ 38.4 33.0 (5.4)
------ ------ ------
Earnings before cumulative effect of change in
accounting principles.......................... $ 66.8 $ 57.5 $ (9.3)
====== ====== ======
</Table>

Funeral revenue decreased $26.4 million, or 6 percent, due to the pro forma
effect of implementing SAB 101. On a pro forma basis, we experienced a decrease
of $44.0 million in funeral revenue due to the deferral of preneed funeral
merchandise sales, primarily caskets, occurring in fiscal year 2000. This was
partially offset by the recognition of $17.6 million of funeral revenue
representing preneed funeral merchandise sales, primarily caskets, that were
made in prior years but delivered in fiscal year 2000. The decrease in funeral
revenue resulting from SAB 101 reflects the fact that we sold more preneed
funeral merchandise in fiscal year 2000 than we delivered.

The decrease in funeral costs of $12.1 million, or 4 percent, was due to
the deferral of $20.2 million of costs associated with preneed funeral
merchandise sales, primarily caskets, entered into in fiscal year 2000. This was
partially offset by the recognition of $8.1 million in costs relating to these
types of contracts that were entered into in prior years but delivered in fiscal
year 2000.

Cemetery revenue increased $5.0 million, or 2 percent, due to the pro forma
effects of implementing SAB 101. On a pro forma basis, we experienced an
increase of $99.7 million in cemetery revenue due to the delivery in fiscal year
2000 of cemetery merchandise and services (openings and closings) relating to
contracts entered into prior to fiscal year 2000. This was partially offset by
the deferral of $88.8 million of cemetery revenue relating to preneed sales of
cemetery merchandise and services (openings and closings) entered into in fiscal
year 2000. The increase in cemetery revenue resulting from SAB 101 reflects the
fact that we delivered more preneed cemetery merchandise and services in fiscal
year 2000 than we sold. In

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60

addition, on a pro forma basis we deferred $21.0 million of preneed cemetery
merchandise and services trust earnings realized in the trust during fiscal year
2000. We recognized $5.6 million of preneed cemetery merchandise and services
trust earnings realized in the trusts prior to fiscal year 2000, because the
associated merchandise and services were delivered in fiscal year 2000. We also
experienced an increase due to an adjustment related to SFAS 66 for $9.5
million.

The increase in cemetery costs of $5.4 million, or 2 percent, was due to
the recognition of $35.3 million in costs relating to preneed cemetery
merchandise and services (openings and closings) contracts entered into in prior
fiscal years but delivered in fiscal year 2000. This was partially offset by the
deferral of $34.1 million of costs related to the same type of contracts entered
into in fiscal year 2000. We also experienced an increase due to an adjustment
related to SFAS 66 for $4.2 million.

Comparative Actual and Pro Forma Results of Operations for Fiscal Year
1999. The following table presents our results of operations for fiscal year
1999 as reported, in comparison to the pro forma results assuming implementation
of SAB 101:

<Table>
<Caption>
YEAR ENDED
OCTOBER 31, 1999
--------------------------- EFFECT OF
AS REPORTED PRO FORMA SAB 101
----------- ------------- ---------
(IN MILLIONS)

Revenues:
Funeral........................................... $445.9 $405.4 $(40.5)
Cemetery.......................................... 310.2 289.6 (20.6)
------ ------ ------
756.1 695.0 (61.1)
------ ------ ------
Costs and expenses:
Funeral........................................... 319.0 299.2 (19.8)
Cemetery.......................................... 226.7 225.1 (1.6)
------ ------ ------
545.7 524.3 (21.4)
------ ------ ------
Gross profit...................................... 210.4 170.7 (39.7)
Corporate general and administrative expenses....... 19.2 19.2 --
------ ------ ------
Operating earnings................................ 191.2 151.5 (39.7)
Interest expense, net............................... (52.2) (52.2) --
Other income, net................................... 3.5 3.5 --
------ ------ ------
Earnings before income taxes and cumulative effect
of change in accounting principles............. 142.5 102.8 (39.7)
Income taxes........................................ 52.0 37.6 (14.4)
------ ------ ------
Earnings before cumulative effect of change in
accounting principles.......................... $ 90.5 $ 65.2 $(25.3)
====== ====== ======
</Table>

Funeral revenue decreased $40.5 million, or 9 percent, due to the pro forma
effect of implementing SAB 101. On a pro forma basis, we experienced a decrease
of $58.4 million in funeral revenue due to the deferral of preneed funeral
merchandise sales, primarily caskets, occurring in fiscal year 1999. This was
partially offset by the recognition of $17.9 million of funeral revenue
representing preneed funeral merchandise sales, primarily caskets, that were
made in prior years but delivered in fiscal year 1999. The decrease in funeral
revenue resulting from SAB 101 reflects the fact that we sold more preneed
funeral merchandise in fiscal year 1999 than we delivered.

The decrease in funeral costs of $19.8 million, or 6 percent, was due to
the deferral of $29.8 million of costs associated with preneed funeral
merchandise sales, primarily caskets, entered into in fiscal year 1999. This was
partially offset by the recognition of $10.0 million in costs relating to these
types of contracts that were entered into in prior years but delivered in fiscal
year 1999.

Cemetery revenue decreased $20.6 million, or 7 percent, due to the pro
forma effects of implementing SAB 101. On a pro forma basis, we experienced an
increase of $89.8 million in cemetery revenue due to the delivery in fiscal year
1999 of cemetery merchandise and services (openings and closings) relating to

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61

contracts entered into prior to fiscal year 1999. This was offset by the
deferral of $97.4 million of cemetery revenue relating to preneed sales of
cemetery merchandise and services (openings and closings) entered into in fiscal
year 1999. The decrease in cemetery revenue resulting from SAB 101 reflects the
fact that we sold more preneed cemetery merchandise and services in fiscal year
1999 than we delivered. In addition, on a pro forma basis we deferred $17.3
million of preneed cemetery merchandise and services trust earnings realized in
the trust during fiscal year 1999. We recognized $4.3 million of preneed
cemetery merchandise and services trust earnings realized in the trusts prior to
fiscal year 1999 because the associated merchandise and services were delivered
in fiscal year 1999.

The decrease in cemetery costs of $1.6 million, or 1 percent, was due to
the recognition of $35.9 million in costs relating to preneed cemetery
merchandise and services (openings and closings) contracts entered into in prior
fiscal years but delivered in fiscal year 1999. This was offset by the deferral
of $37.5 million of costs related to the same type of contracts entered into in
fiscal year 1999.

THREE MONTHS ENDED APRIL 30, 2001 COMPARED TO PRO FORMA THREE MONTHS ENDED APRIL
30, 2000

Information for the three months ended April 30, 2001 is presented as
reported, which reflects the implementation of SAB 101. Information for the
three months ended April 30, 2000 is presented as if the change in accounting
principles due to the implementation of SAB 101 had occurred November 1, 1999.

Funeral Segment

<Table>
<Caption>
THREE MONTHS ENDED
APRIL 30,
----------------------------- INCREASE
2001 2000 (DECREASE)
------------- ------------- ----------
(PRO FORMA)
(AS REPORTED) (IN MILLIONS)

FUNERAL REVENUE
Existing Operations............................... $105.8 $108.5 $(2.7)
Opened Operations................................. 2.2 0.5 1.7
------ ------ -----
$108.0 $109.0 $(1.0)
====== ====== =====
FUNERAL COSTS
Existing Operations............................... $ 80.1 $ 81.2 $(1.1)
Opened Operations................................. 2.3 0.5 1.8
------ ------ -----
$ 82.4 $ 81.7 $ 0.7
====== ====== =====
Funeral Segment Profit............................ $ 25.6 $ 27.3 $(1.7)
====== ====== =====
</Table>

Funeral revenue decreased $1.0 million, or 1 percent, for the three months
ended April 30, 2001, compared to the corresponding period in 2000. We
experienced a $2.7 million, or 2 percent, decrease in funeral revenue from
Existing Operations as a result of several factors. We experienced a 2.9 percent
decrease (995 events) in the number of funeral services performed by Existing
Operations worldwide (the number of domestic funeral services performed remained
flat) and a $1.8 million reduction in revenue from changes in foreign currency
exchange rates, a portion of which was due to the Euro.

Offsetting this decrease was an increase in the average revenue per funeral
service performed by Existing Operations of 2.2 percent worldwide, excluding the
effect of foreign currency translation. The average revenue per domestic funeral
service performed by Existing Operations increased 0.6 percent. 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 our extensive consumer
market study.

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Funeral profit margin from Existing Operations decreased from 25.2 percent
in 2000 to 24.3 percent in 2001 primarily due to the decline in the number of
funeral services performed by Existing Operations mentioned above, coupled with
the high fixed-cost nature of the funeral business.

The increase in revenue from Opened Operations resulted primarily from our
construction or opening of funeral homes from May 2000 through April 2001, which
were not open for the entirety of both periods presented. There were no
acquisitions during the periods presented.

Cemetery Segment

<Table>
<Caption>
THREE MONTHS ENDED
APRIL 30,
-----------------------------
2001 2000 DECREASE
------------- ------------- --------
(PRO FORMA)
(AS REPORTED) (IN MILLIONS)

CEMETERY REVENUE
Existing Operations................................ $61.4 $72.2 $(10.8)
Acquired/Opened Operations......................... 1.6 1.7 (0.1)
----- ----- ------
$63.0 $73.9 $(10.9)
===== ===== ======
CEMETERY COSTS
Existing Operations................................ $46.2 $54.1 $ (7.9)
Acquired/Opened Operations......................... 1.2 1.8 (0.6)
----- ----- ------
$47.4 $55.9 $ (8.5)
===== ===== ======
Cemetery Segment Profit............................ $15.6 $18.0 $ (2.4)
===== ===== ======
</Table>

Cemetery revenue decreased $10.9 million, or 15 percent, for the three
months ended April 30, 2001, compared to the corresponding period in 2000. We
experienced a $10.8 million, or 15 percent, decrease in revenue from Existing
Operations, resulting primarily from a decrease in cemetery merchandise
deliveries during the quarter and reduced preneed cemetery property sales. The
reduction in preneed sales is due to the changes made to our preneed sales
program in fiscal year 2000.

Cemetery profit margin from Existing Operations decreased from 25.1 percent
in 2000 to 24.8 percent in 2001. The decline was principally due to the reduced
cemetery merchandise deliveries and reduced preneed property sales mentioned
above, coupled with the high fixed-cost nature of the cemetery business.

SIX MONTHS ENDED APRIL 30, 2001 COMPARED TO PRO FORMA SIX MONTHS ENDED APRIL 30,
2000

Information for the six months ended April 30, 2001 is presented as
reported, which reflects the implementation of SAB 101. Information for the six
months ended April 30, 2000 is presented as if the change in accounting
principles due to the implementation of SAB 101 had occurred November 1, 1999.

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Funeral Segment

<Table>
<Caption>
SIX MONTHS ENDED
APRIL 30,
----------------------------- INCREASE
2001 2000 (DECREASE)
------------- ------------- ----------
(PRO FORMA)
(AS REPORTED) (IN MILLIONS)

FUNERAL REVENUE
Existing Operations............................... $211.3 $223.1 $(11.8)
Opened Operations................................. 4.0 0.6 3.4
------ ------ ------
$215.3 $223.7 $ (8.4)
====== ====== ======
FUNERAL COSTS
Existing Operations............................... $160.7 $165.3 $ (4.6)
Opened Operations................................. 4.3 0.7 3.6
------ ------ ------
$165.0 $166.0 $ (1.0)
====== ====== ======
Funeral Segment Profit............................ $ 50.3 $ 57.7 $ (7.4)
====== ====== ======
</Table>

Funeral revenue decreased $8.4 million, or 4 percent, for the six months
ended April 30, 2001, compared to the corresponding period in 2000. We
experienced an $11.8 million, or 5 percent, decrease in revenue from Existing
Operations as a result of several factors. We experienced a $4.4 million
reduction in revenue from changes in foreign currency exchange rates (about half
of which is due to the Euro) and a 6.1 percent decrease (4,339 events) in the
number of funeral services performed by Existing Operations worldwide (2.9
percent decrease (1,132 events) domestically). We believe that the decline in
funeral services performed by Existing Operations was the result of a decrease
in the number of deaths during the period. The timing of deaths does not occur
evenly throughout the year, and there can be significant variances from month to
month.

Partially offsetting this decrease was a 3.0 percent increase in the
average revenue per funeral service performed by Existing Operations worldwide,
excluding the effect of foreign currency translation. The average revenue per
domestic funeral service performed by Existing Operations increased 0.9 percent.
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 our
extensive consumer market study.

Funeral profit margin from Existing Operations decreased from 25.9 percent
in 2000 to 23.9 percent in 2001 due to the decline in the number of funeral
services performed by Existing Operations mentioned above, coupled with the high
fixed-cost nature of the funeral business.

The increase in revenue and costs from Opened Operations resulted primarily
from the construction or opening of funeral homes from May 2000 through April
2001, which were not open for the entirety of both periods presented. There were
no acquisitions during the periods presented.

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Cemetery Segment

<Table>
<Caption>
SIX MONTHS ENDED
APRIL 30,
----------------------------- INCREASE
2001 2000 (DECREASE)
------------- ------------- ----------
(PRO FORMA)
(AS REPORTED) (IN MILLIONS)

CEMETERY REVENUE
Existing Operations....................................... $129.2 $144.2 $(15.0)
Acquired/Opened Operations................................ 3.1 2.8 0.3
------ ------ ------
$132.3 $147.0 $(14.7)
====== ====== ======
CEMETERY COSTS
Existing Operations....................................... $ 95.8 $111.0 $(15.2)
Acquired/Opened Operations................................ 2.6 3.1 (0.5)
------ ------ ------
$ 98.4 $114.1 $(15.7)
====== ====== ======
Cemetery Segment Profit................................... $ 33.9 $ 32.9 $ 1.0
====== ====== ======
</Table>

Cemetery revenue decreased $14.7 million, or 10 percent, for the six months
ended April 30, 2001, compared to the corresponding period in 2000. We
experienced a $15.0 million, or 10 percent, decrease in revenue from Existing
Operations resulting primarily from reduced cemetery merchandise deliveries as a
result of a decrease in the number of deaths during the period and reduced
preneed property sales. Reduced preneed property sales resulted from the changes
made to our preneed sales program in fiscal year 2000. Slightly offsetting this
decrease was a $3.2 million increase in revenue from perpetual care trust funds
and escrow accounts to $8.9 million. This increase was due to an increase in the
average yield on the funds coupled with an increase in the average balance. The
yield was in line with our goal of 8.5 to 9.0 percent.

Cemetery profit margin from Existing Operations increased from 23.0 percent
in 2000 to 25.9 percent in 2001. The increase was attributable principally to
cost savings achieved in the first quarter of 2001 resulting from the changes we
made in our preneed sales organization in fiscal year 2000 and additional cost
savings at our cemeteries arising from increased scrutiny of expenses primarily
by local managers. We have provided incentives to local managers to decrease
costs by tying their compensation more closely to the profitability of the
locations they manage.

The increase in revenue from Acquired/Opened Operations resulted primarily
from our acquisition and construction of cemeteries from May 2000 through April
2001, which were not open for the entirety of both periods presented.

LIQUIDITY AND CAPITAL RESOURCES

Early in fiscal year 2000, we resolved to improve cash flow and build cash
reserves in order to deleverage our balance sheet. We had accumulated $106.8
million in cash and marketable securities as of April 30, 2001 after reducing
debt by approximately $84 million during the first six months of fiscal 2001.
Our operations provided cash of $57.3 million for the six months ended April 30,
2001, compared to $38.4 million for the corresponding period in 2000, due
principally to a smaller increase in other receivables coupled with other
working capital changes. Our operations provided cash of $69.6 million for
fiscal year 2000, compared to $5.6 million for fiscal year 1999, due principally
to a smaller increase in receivables coupled with other working capital changes.
The smaller increase in receivables resulted from increased cash collections
combined with the moderation of our preneed sales activities, both attributable
to modifications made to our preneed sales strategies for increased cash
retention.

Our investing activities resulted in a cash outflow of $3.2 million for the
six months ended April 30, 2001, compared to a cash inflow of $10.5 million for
the comparable period in 2000. The cash inflow from investing activities in the
first six months of 2000 was a result of converting some voluntary escrow funds
to

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cash for general operating purposes. Our investing activities resulted in a cash
inflow of $15.8 million for fiscal year 2000 compared to an outflow of $197.7
million for fiscal year 1999. The reduction in cash used by investing activities
was primarily due to our cessation of acquisition activity in early 2000 and, to
a smaller extent, an increase in proceeds from the sale of marketable securities
and reductions in capital expenditures.

Our financing activities resulted in a cash outflow of $42.9 million for
the six months ended April 30, 2001, compared to $3.5 million for the comparable
period in 2000 due principally to debt repayments during 2001. Partially
offsetting this was $40 million we withdrew from our trust funds in Florida
during the first quarter of fiscal year 2001. We substituted a bond to guarantee
performance under the related preneed contracts and agreed to maintain unused
credit facilities in an amount that will equal or exceed the bond amount. We
believe that cash flow from operations will be sufficient to cover our estimated
cost of providing the related preneed services and products in the future. Our
financing activities resulted in a cash outflow of $18.8 million for fiscal year
2000, due principally to debt repayments, compared to a cash inflow of $193.9
million for fiscal year 1999. The level of cash provided by financing activities
in 1999 resulted from our common stock offering completed in the second quarter
of 1999, which was slightly offset by our repurchase of shares of our common
stock in the second half of 1999. In February 1999, we completed the sale of
13.6 million shares of Class A common stock. This resulted in approximately
$219.0 million in net proceeds, which were used principally to repay balances
outstanding under our revolving credit facility.

In the fourth quarter of fiscal year 2000, we paid $2.3 million to current
and former employees as a result of a self audit of pay procedures we conducted
in partnership with the Department of Labor ("DOL"). We have revised our pay
procedures and are in compliance with DOL payroll regulations. During fiscal
year 2000, we expensed $1.8 million and will expense the remaining $500,000 as
preneed funeral services are delivered in future periods.

In September 2000, we received regulatory approval in Florida and in
November 2000, we withdrew approximately $40 million from our funeral trust
funds and obtained a bond to guarantee performance under the related contracts
in lieu of trusting requirements (the "Florida Bond Obligation"). We agreed to
maintain unused credit facilities that will equal or exceed the required bond
amount related to these contracts. We believe that cash flow from operations
will be sufficient to cover our estimated cost of providing the related preneed
services and products in the future.

We completed the refinancing transactions described in this prospectus in
order to address our long-term debt maturities. The new financing replaces (1)
our $600.0 million revolving credit facility, which was scheduled to mature on
April 30, 2002 and which was a current liability, (2) $99.9 million of our 6.70%
Notes which mature in 2003, (3) approximately $100.1 million of our 6.40% ROARS
which will mature or be remarketed in 2003 subject to market conditions, and (4)
our privately held senior notes, which had varying maturities from fiscal years
2002 through 2007. This constituted all of our long-term debt, except for the
approximately $100.0 million in publicly held senior notes that remain
outstanding and $25.0 million of debt incurred or assumed in connection with
acquisitions.

The new financing consists of $550.0 million of senior secured credit
facilities and $300.0 million of the notes. The senior secured credit facilities
consist of (1) a $175.0 million four-year revolving credit facility (on which we
drew approximately $50.0 million at the closing of the refinancing
transactions), (2) a $75.0 million 18-month asset sale term loan and (3) a
$300.0 million five-year term loan B. The remaining 6.70% Notes and the
remaining 6.40% ROARS are secured equally and ratably with the new senior
secured credit facilities. These refinancing transactions and the terms of the
senior secured credit facilities and the notes are described in the sections
"Description of Certain Indebtedness and the Tender Offer" and "Description of
Notes."

In addition, upon completion of the refinancing transactions, we had
letters of credit outstanding under the revolving credit facility of
approximately $6.5 million, which constitute senior debt under the indenture for
the notes. Finally, we have agreed to maintain unused availability under the
revolving credit facility in an amount that will equal or exceed the Florida
Bond Obligation described above, which as of April 30, 2001 was $41.1 million.
This amount would also be considered senior debt if we were to borrow funds
under the
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revolving credit facility to extinguish the Florida Bond Obligation by returning
to the related trust funds the amounts we previously withdrew that relate to the
remaining preneed contracts.

The new financing has resulted in significantly higher interest costs, and
the covenants contained in the new credit agreement are significantly more
restrictive than the covenants in our current credit agreements. For a
discussion of risks associated with the 18-month asset sale term loan, see the
section "Risk Factors."

We have implemented various initiatives to generate cash and reduce debt.
For example, we have suspended our acquisition activity, restructured and
moderated our preneed sales activities, limited spending on internal growth
initiatives and suspended the payment of quarterly dividends on Class A and
Class B common stock. Additionally, we continue to (1) pursue the sale of our
foreign operations, (2) control capital expenditures at the corporate level, (3)
analyze and re-deploy or sell certain funeral home real estate and excess
cemetery property, and (4) utilize third party at-need financing. Our plans to
sell our foreign assets and other assets will cause us to record material
noncash charges to earnings in the quarter ending July 31, 2001. However, these
plans could generate significant cash for debt reduction. See "Summary -- Recent
Developments" and "Business -- Operations -- Foreign Operations."

Long-term debt at April 30, 2001 decreased to $866.4 million compared to
$950.5 million at October 31, 2000, as a result of debt repayments of
approximately $84 million during the six month period. Long-term debt at October
31, 2000 decreased to $950.5 million compared to $951.4 million at October 31,
1999, as a result of a reduction of debt of $13.3 million in fiscal year 2000,
offset by one seller-financed acquisition that closed in the first quarter of
fiscal year 2000, although it had been completed in 1999. Subsequent to April
30, 2001, we used $30.0 million of our cash on hand to reduce the balance
outstanding on our revolving credit facility to $442.0 million.

During fiscal year 2000 and the six months ended April 30, 2001, we opened
four new funeral homes in an operating partnership with the Los Angeles
Archdiocese. A fifth funeral home is currently under construction. The operating
partnerships will enable us to build a total of nine funeral homes on cemetery
land owned by the Archdiocese. The number of families served by the Archdiocese
funeral homes thus far has exceeded our expectations.

Although we have no material commitments for fiscal year 2001 capital
expenditures (other than approximately $7.0 million related to construction of
the Archdiocese of Los Angeles funeral homes), we contemplate capital
expenditures of approximately $28.0 million for fiscal year 2001, which includes
$10.0 million in new growth initiatives (including the construction of the
Archdiocese of Los Angeles funeral homes) and approximately $18.0 million for
maintenance capital expenditures.

We believe that cash flow from operations and available cash, together with
available borrowings under our new senior secured credit facilities, will be
adequate to meet our anticipated future requirements for working capital,
budgeted capital expenditures and scheduled payments of principal and interest
on our indebtedness, including the notes, for the foreseeable future.

INFLATION

Inflation has not had a significant impact on our operations over the past
three years, nor is it expected to have a significant impact in the foreseeable
future.

RECENT ACCOUNTING STANDARDS

SFAS 140

In 2000, the Financial Accounting Standards Board ("FASB" or the "Board")
issued SFAS 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities -- a replacement of FASB Statement No. 125." SFAS
140 is effective for transfers occurring after March 31, 2001 and for
disclosures relating to securitization transactions and collateral for fiscal
years ending after December 15, 2000. The implementation of SFAS 140 did not
have an impact on our results of operations or financial condition for the three
and six months ended April 30, 2001.

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SFAS 141 and 142

On June 29, 2001, the Financial Accounting Standards Board approved its
proposed SFAS 141, "Business Combinations" and SFAS 142, "Goodwill and Other
Intangible Assets." SFAS 141 amends APB Opinion No. 16, "Business Combinations,"
to prohibit use of the pooling-of-interest (pooling) method of accounting for
business combinations initiated after the issuance date of the final Statement.
SFAS 142 amends APB Opinion No. 17, "Intangible Assets," by stating that
goodwill will no longer be amortized, but will be tested for impairment in a
manner different from how other assets are tested for impairment. SFAS 142
establishes a new method of testing goodwill for impairment by requiring that
goodwill be separately tested for impairment using a fair value approach rather
than an undiscounted cash flow approach. Goodwill will be tested for impairment
at a level referred to as a reporting unit, generally a level lower than that of
the total entity. SFAS 142 requires entities to perform the first goodwill
impairment test, by comparing the fair value with the book value of a reporting
unit, on all reporting units within six months of adopting the Statement. If the
fair value of a reporting unit is less than its book value, an impairment loss
will be recognized and treated as a change in accounting principle. That change
in accounting principle must be recognized by fiscal year-end. Impairment losses
recognized as a result of an impairment test occurring subsequent to the first
six months after adoption will be included in operating income. The unamortized
balance of any existing negative goodwill will be written off upon adoption of
SFAS 142 and treated as a change in accounting principle. Goodwill of a
reporting unit must be tested for impairment after the initial adoption of the
Statement on an annual basis and between annual tests if an event occurs or
circumstances change that would more likely than not reduce the fair value of a
reporting unit below its carrying amount.

The provisions of SFAS 141 and SFAS 142 will be effective for fiscal years
beginning after December 15, 2001. However, early adoption of SFAS 142 will be
permitted for companies with a fiscal year beginning after March 15, 2001,
provided their first quarter financial statements have not been previously
issued. In all cases, SFAS 142 must be adopted at the beginning of a fiscal
year. Therefore, we can elect to early adopt the provisions of SFAS 142 in the
first quarter of fiscal year 2002 or adopt the provisions in the first quarter
of fiscal year 2003. We have not completed our review and analysis; however,
based upon our initial interpretation of SFAS 142 and if it were effective as of
April 30. 2001, our preliminary estimate is that we would incur a pre-tax
noncash impairment charge of between $100.0 million and $300.0 million for our
domestic operations. Our foreign operations will not be affected as they will
have been previously marked to fair value. However, we will no longer be
required to amortize goodwill, which amounted to $19.6 million ($14.4 million
related to domestic operations) in fiscal year 2000. Changes in the fair value
of our relevant businesses could change the above noted estimates materially.

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BUSINESS

GENERAL

We have been focused on creating combination operations by building new
funeral homes on existing cemetery property and operating the facilities
together. Combination operations help to increase market share by allowing us to
offer families the convenience of complete funeral home and cemetery planning
and services from a single location at a competitive price at the time of need
or on a preneed basis. Approximately 47 percent of our cemeteries have a funeral
home onsite that we operate in conjunction with the cemetery. In addition to our
combination operations, another approximately 39 percent of our cemeteries are
located within the same market as, and operated in conjunction with, one of our
funeral homes. We frequently organize our operating units in "clusters," which
are integrated groups of funeral homes and cemeteries that allow us to
cost-effectively pool assets, personnel and services and to generate higher
margins.

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THE DEATH CARE INDUSTRY

COMPETITIVE STRENGTHS

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funeral homes and cemeteries in the United States perform an average of
approximately 100 funerals and 165 burials per year, ours perform an average of
approximately 250 funerals and 375 burials per year. In addition, more than 40
percent of our domestic properties are located in California, Florida and Texas,
which are three of the four states with the highest population over age 65, an
age group that represents a large portion of our target market.

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BUSINESS STRATEGY

increased finance charges, required larger down payments and shortened
installment payment terms, and we decreased the overall level of preneed sales
activities. We are also increasing cash flow and reducing our credit risk by
encouraging families purchasing at-need merchandise and services to pay at the
time of delivery or to use a third-party financing program we developed. In the
past, we typically financed credit sales internally on a short-term basis. We
also plan to continue our suspension of acquisition activity and of our
dividend, and to limit capital expenditures. We plan to continue to seek to
reduce our costs by, among other things, obtaining volume discounts from
suppliers, leveraging our operating costs through clustering and combination
operations, and identifying facilities with overlapping market share and
consolidating them as appropriate. As part of these efforts, we are
incentivizing local managers to decrease costs by tying their compensation more
closely to the profitability of the locations they manage. This strategy
contributed to our increased cemetery margins for the first six months of fiscal
year 2001.

OPERATIONS

General. We believe that we operate one or more of the premier death care
facilities in each of our principal markets. In our view, a "premier" facility
is one that is among the most highly regarded facilities in its market area in
terms of a variety of factors such as tradition, heritage, reputation, physical
size, volume of business, available inventory, name recognition, aesthetics
and/or potential for development or expansion.

We operate most of our funeral homes and cemeteries in "clusters." Clusters
are groups of funeral homes and cemeteries located close enough to one another
that their operations can be integrated to achieve economies of scale. For
example, clustered facilities can share vehicles, embalming services,
inventories of caskets and other merchandise and, most significantly, personnel,
including our prearrangement sales force; thus, we are able to decrease our
costs and expand our marketing and sales efforts at each location. By virtue of
their proximity to one another, clustered facilities also create opportunities
for more integrated and sophisticated management of their operations.

Funeral Operations. Funeral operations accounted for approximately 60
percent of our revenues for fiscal year 2000 (pro forma for SAB 101). Our
funeral homes offer a complete range of funeral services and products both at
the time of need and on a preneed basis. Our services and products include
family consultation, removal and preparation of remains, the use of funeral home
facilities for visitation, worship and funeral services, transportation
services, flowers and caskets. In addition to traditional funeral services, all
of our funeral homes offer cremation products and services. Most of our funeral
homes have a non-denominational chapel on the premises, which allows family
visitation and religious services to take place at the same location. As of
April 30, 2001, we operated 612 funeral homes.

Cemetery Operations. Cemetery operations accounted for approximately 40
percent of our revenues for fiscal year 2000 (pro forma for SAB 101). Our
cemetery operations involve the sale of cemetery property and related
merchandise, including lots, lawn crypts, family and community mausoleums,
monuments, markers and burial vaults, along with the sale of burial site
openings and closings and inscriptions. Cemetery property and merchandise sales
are made both at the time of need and on a preneed basis. We also maintain
cemetery grounds under perpetual care contracts and local laws. As of April 30,
2001, we owned and operated 161 cemeteries.

Combination Funeral Home and Cemetery Operations. Approximately 47 percent
of our cemeteries have a funeral home onsite that is operated in conjunction
with the cemetery, which is a higher percentage of combination operations than
any of our three largest competitors. Many of these facilities are in our key
markets, including New Orleans, Louisiana; Dallas, Fort Worth and Houston,
Texas; Miami, Orlando, Tampa and St. Petersburg, Florida; and Los Angeles and
San Diego, California.

Combination operations help to increase market share by allowing us to
offer families the convenience of complete funeral home and cemetery planning
and services from a single location at a competitive price at the time of need
or on a preneed basis. Our experience demonstrates that a family planning a
burial in our cemetery often views our associated funeral home as a more
desirable location for a funeral service than an unaffiliated offsite funeral
home. Thus the funeral home's sales benefit from the heritage of the cemetery,
and, over time, the cemetery's activity increases as well. In addition,
combination operations enhance our
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purchasing power, enable us to employ more sophisticated management systems and
allow us to share facilities, equipment, personnel and a preneed sales force,
resulting in lower average operating costs and expanded marketing and sales
opportunities. Although it generally takes several years before a newly
constructed funeral home becomes profitable, our experience with combination
operations has demonstrated that the combination of a funeral home with a
cemetery can significantly increase the market share and profitability of both.

We have developed two primary internal growth strategies that employ the
use of combination operations. One strategy is to create combination operations
by constructing funeral homes on the grounds of our cemeteries. Another strategy
is to enter into operating partnerships in which we construct funeral homes on
the grounds of unaffiliated cemeteries, which allows us to enjoy many of the
benefits of a combination operation without the capital investment of purchasing
the cemetery. Our partner benefits by being better able to compete with other
cemeteries or combination operations in its market, by increased cemetery
revenues, and by providing a better service to its parishioners or other
constituencies.

Through an operating partnership with the Catholic Archdiocese of New
Orleans, we constructed a mausoleum for the Catholic Church on the grounds of
our combination operation in New Orleans in fiscal year 1987. We own the
mausoleum and manage the sales relating to the mausoleum for the Church.
Additionally, through an operating partnership with the Firemen's Charitable and
Benevolent Association, a non-profit organization, in fiscal year 1994 we
constructed a funeral home and mausoleum on the grounds of a cemetery owned by a
third party in New Orleans. We own and operate the funeral home in combination
with the cemetery and manage sales for the mausoleum. In 1997, we entered into
an agreement with the Archdiocese of Los Angeles to construct and operate
funeral homes on land we lease from the Archdiocese at the site of nine
cemeteries owned and operated by the Archdiocese. Four of these funeral homes
have been completed, and the fifth is under construction.

Over the last 50 years, through our mausoleum construction business, we
have developed relationships with the Catholic Church in approximately 70
dioceses in 39 states. We plan to pursue more of these partnerships with the
Catholic Church, other faith-based organizations and non-profit entities. We
also plan to develop additional combination operations on our own cemetery
properties.

Cremation. In fiscal year 2000, 36 percent of the funeral services we
performed in the United States and Puerto Rico were cremations. Cremation rates
at our foreign funeral homes are higher on average than those at our domestic
funeral homes, although they vary substantially from country to country. For
fiscal year 2000, the cremation rates at our foreign funeral homes varied from 7
percent in Spain to 65 percent in New Zealand.

The cremation rate in the United States has been increasing, and by the
year 2010 cremations are expected to represent 36 percent of the United States
burial market, according to industry estimates. We have been addressing this
trend by providing enhanced cremation products and services at all of our
funeral homes, including funeral services and memorialization for families
choosing cremation. An enhanced cremation may include a memorial service, an urn
and a niche in a mausoleum or columbarium in which to place the remains.

We are also addressing this trend through our alternative services firm
strategy. Our alternative services locations offer an alternative to customers
who are not interested in making arrangements at a traditional funeral home.
These locations primarily offer value-priced cremation services and are located
principally in California and Nevada, states with among the highest cremation
rates in the United States. Although these locations do not offer the
lowest-cost basic cremations in their markets, the costs to the family for death
care arrangements at these locations are typically less than at a traditional
funeral home. These locations are generally leased, have lower overhead than
traditional funeral homes and generate higher operating margins than traditional
funeral homes, although the average revenue per service is lower.

During fiscal year 1997, we acquired Sentinel Cremation Societies, Inc. of
California ("Sentinel") which operated thirteen service centers offering
cremations and related products and services. Members in the cremation society
pay a small membership fee and indicate their wish to be cremated. During fiscal
year

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1998, we acquired Desert Memorial Cremation and Burial Society in Las Vegas,
Nevada. During fiscal year 2000, we opened two additional alternative service
firms in the western United States. We currently operate 25 alternative service
locations.

Preneed arrangements. We market death care products and services
domestically on a preneed basis through a full-time staff of approximately 1,200
commissioned sales counselors. Preneed plans enable families to specify in
advance and prepay for funeral and cemetery arrangements. The cost of products
and services is set at prices prevailing at the time the agreement is signed,
rather than when the products and services are delivered. Preneed plans also
spare families the emotional strain of making death care decisions at the time
of need.

We estimate that as of April 30, 2001, the future value of our preneed
backlog (including earnings on funds held in trust and build-up in the face
value of insurance contracts, in each case at assumed rates) represented
approximately $2.5 billion of revenue to be recognized in the future as these
prepaid products and services are delivered. In fiscal year 2000, we changed the
terms and conditions of our preneed sales contracts and commissions in order to
enhance our cash flow. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" under the heading "Fiscal Year 2000
Compared to Fiscal Year 2001."

Trust Funds and Escrow Accounts. We maintain three types of trust funds
and escrow accounts: (1) preneed funeral merchandise and services, (2) preneed
cemetery merchandise and services, and (3) perpetual care. For further
discussion of these trust funds and escrow accounts, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations." As of
April 30, 2001, our preneed funeral merchandise and services trust funds and
escrow accounts totaled approximately $591.6 million, our preneed cemetery
merchandise and services trust funds and escrow accounts totaled approximately
$206.4 million, and our perpetual care trust funds totaled approximately $206.6
million.

We believe that balances in our trust funds and escrow accounts, along with
insurance proceeds and installment payments due under contracts, will be
sufficient to cover our estimated cost of providing the related preneed services
and products in the future.

Management. We have an experienced management team, many of whom joined us
through acquisitions. Our management structure is designed to allow local
funeral home directors and cemetery managers substantial flexibility in deciding
how their firms will be managed and how their products and services will be
priced and merchandised. At the same time, financial and strategic goals are
established by management at the corporate level. We provide business support
services primarily through our Shared Services Center, which opened in 1997 and
provides centralized and standardized accounting, management reporting, payroll,
contract processing, accounts receivable collection and other services for all
of our domestic facilities, including those in Puerto Rico.

Currently, we are divided into four operating divisions in North America,
each of which is managed by a division president and chief financial officer.
These divisions are further divided into regions, each of which is managed by a
regional chief operating officer. Our operations in Europe, Latin America and
Australia are not considered separate operating divisions but are managed by
local or regional executives who report to some of our executive officers. In
fiscal year 1998, in order to meet the needs of our growing European operations,
we established our European headquarters in Amsterdam, the Netherlands. We also
have a Corporate Division, which manages our corporate services, accounting and
financial operations and strategic planning. Early in fiscal year 2000, we
formed a Sales and Marketing Division to centralize responsibility for sales
teams and to allow for more comprehensive training and sharing of information.
From time to time, we may increase, reduce or realign our divisions and regions.

Foreign Operations. We first entered foreign markets in fiscal year 1994
and as of April 30, 2001, we owned and operated a total of 291 funeral homes and
10 cemeteries in Argentina, Australia, Belgium, Canada, France, Mexico, the
Netherlands, New Zealand, Portugal, and Spain. For fiscal year 2000 (pro forma
for SAB 101), our revenues from foreign operations were $139.8 million, or 20
percent of our total revenues; our assets related to foreign operations were
$554.9 million, or 15 percent of our total assets; our gross profit

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from foreign operations was $22.7 million, or 14 percent of our total gross
profit; and our EBITDA from foreign operations was $36.4 million, or 16 percent
of our total EBITDA. We are currently pursuing the sale of our foreign
operations. Additional information can be found in the section
"Summary -- Recent Developments."

Financial Information about Industry and Geographic Segments. For
financial information about our industry and geographic segments, see Note 17 to
our consolidated financial statements for fiscal years 2000, 1999 and 1998.

COMPETITION

Our funeral home and cemetery operations generally face intense competition
in local markets that typically are served by numerous funeral home and cemetery
firms. We also compete with monument dealers, casket retailers, low-cost funeral
providers and other non-traditional providers of limited services or products.
Market share is largely a function of goodwill and tradition, although
competitive pricing, professional service and attractive, well-maintained and
conveniently located facilities are also important. Because of the significant
role of goodwill and tradition, market share increases are usually gained over a
long period of time. Extensive marketing through media advertising, direct
mailings and personal sales calls has increased in recent years, especially with
respect to the sales of preneed funeral services. Traditional cemetery and
funeral service operators face competition from the increasing number of
cremations in the United States. For additional information about the trend
towards cremation and our strategies to address it, see "The Death Care
Industry," "Risk Factors -- Risks Relating to Our Industry" and "Business
Strategy."

REGULATION

Our funeral home operations are regulated by the Federal Trade Commission
(the "FTC") under the FTC's Trade Regulation Rule on Funeral Industry Practices,
16 CFR Part 453 (the "Funeral Rule"), which went into effect on April 30, 1984,
and was revised effective July 19, 1994. The FTC is reviewing the Funeral Rule
and has conducted hearings to receive input from industry and consumer groups.
At this time, the FTC has not issued any proposed changes to the regulation.

The Funeral Rule defines certain acts or practices as unfair or deceptive
and contains certain requirements to prevent these acts or practices. The
preventive measures require a funeral provider to give consumers accurate,
itemized price information and various other disclosures about funeral goods and
services and prohibit a funeral provider from: (1) misrepresenting legal,
crematory and cemetery requirements; (2) embalming for a fee without permission;
(3) requiring the purchase of a casket for direct cremation; and (4) requiring
consumers to buy certain funeral goods or services as a condition for furnishing
other funeral goods or services.

Our operations are also subject to extensive regulation, supervision and
licensing under numerous federal, state and local laws and regulations. For
example, state laws impose licensing requirements for funeral homes and funeral
directors and regulate preneed sales. Our embalming facilities are subject to
stringent environmental and health regulations. We have a department that
monitors compliance and believe that we are in substantial compliance with the
Funeral Rule and all such laws and regulations. Federal, state and local
legislative bodies and regulatory agencies frequently propose new laws and
regulations, some of which could have a material effect on our operations and on
the death care industry in general. We cannot predict the outcome of any
proposed legislation or regulation or the effect that any such legislation or
regulation might have on us.

EMPLOYEES

We and our subsidiaries employ approximately 9,000 persons, and we believe
that we maintain a good relationship with our employees. Approximately 100 of
our employees who are employed by our domestic operations and 755 of our
employees who are employed by our foreign operations are represented by labor
unions or collective bargaining units.

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PROPERTIES

As of April 30, 2001, approximately 64 percent of our 612 funeral home
locations were owned by our subsidiaries, and approximately 36 percent of
funeral home premises were held under operating leases. The leased properties
have terms ranging from 1 to 23 years, except for nine leases that expire
between 2032 and 2072. Generally, we have a right of first refusal and an option
to purchase the leased premises. An aggregate of $12.1 million of our term notes
are secured by mortgages on some of our funeral homes; these notes were either
assumed by us upon our acquisition of the property or represent seller financing
for the acquired property.

As of April 30, 2001, we owned 161 cemeteries covering a total of
approximately 11,000 acres. Approximately 42 percent of the total acreage is
available for future development.

Our corporate headquarters occupy approximately 21,500 square feet of
office space in a building in suburban New Orleans that we leased from an
affiliate through July of 2000. We now lease this office space from a
non-affiliate. In addition, we own a 97,300 square foot building in suburban New
Orleans that we use for our Shared Services Center, Human Resources,
Communications, Internal Audit and Information Systems Departments.

We are currently evaluating and analyzing certain of our businesses for
consolidation and may potentially sell excess cemetery property and
underperforming assets. We are also currently pursuing the sale of some or all
of our foreign operations. See the section "Summary -- Business Strategy" and
"-- Recent Developments."

LEGAL PROCEEDINGS

We and some of our subsidiaries are parties to a number of legal
proceedings that have arisen in the ordinary course of business. While the
outcome of these proceedings cannot be predicted with certainty, we do not
expect these matters to have a material adverse effect on our consolidated
financial position, results of operations or cash flows.

We carry insurance with coverages and coverage limits that we believe to be
adequate. Although we give no assurance that this insurance is sufficient to
protect us against all contingencies, we believe that our insurance protection
is reasonable in view of the nature and scope of our operations.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

<Table>
<Caption>
NAME AGE POSITION
- ---- --- --------

Frank B. Stewart, Jr. ....... 65 Chairman of the Board
William E. Rowe.............. 54 President, Chief Executive Officer and Director
Brian J. Marlowe............. 54 Executive Vice President and Chief Operating Officer
Kenneth C. Budde............. 53 Executive Vice President, President-Corporate Division,
Chief Financial Officer and Director
Brent F. Heffron............. 51 Executive Vice President and President-Southern
Division
Lawrence B. Hawkins.......... 52 Executive Vice President and President-Investors Trust,
Inc.
G. Kenneth Stephens, Jr. .... 43 Senior Vice President and President-Eastern Division
Randall L. Stricklin......... 56 Senior Vice President and President-Western Division
Michael K. Crane, Sr. ....... 57 Senior Vice President and President-Central Division
Everett N. Kendrick.......... 59 Senior Vice President and President-Sales and Marketing
Division
Darwin C. Fenner............. 69 Director
John P. Laborde.............. 77 Director
James W. McFarland........... 55 Director
Michael O. Read.............. 57 Director
</Table>

Frank B. Stewart, Jr. has served as Chairman of the Board since 1984 and
as a director since 1970. He has been with our company for 42 years.

William E. Rowe has served as Chief Executive Officer since November 15,
1999, as President since November 1, 1994 and as a director since 1994. He was
Chief Operating Officer from April 1994 until November 15, 1999. He has been
with our company for 15 years.

Brian J. Marlowe became Chief Operating Officer on December 10, 1999. Prior
to that time, he served as Executive Vice President and President of our Eastern
Division since August 1, 1995. He has been with our company for nine years.

Kenneth C. Budde has served as President of our Corporate Division and
Chief Financial Officer since May 1998 and as a director since June 1998. From
August 1989 to May 1998, he served as Senior Vice President of Finance,
Secretary and Treasurer. He has been with our company for 17 years.

Brent F. Heffron has served as Executive Vice President and President of
our Southern Division since November 1, 1998. From January 1, 1997 to October
31, 1998, he served as Senior Vice President and President of our Southern
Division. From November 1992 to December 1996, he served as President and Chief
Operating Officer of the Central Region of our Eastern Division and Vice
President of our former Mid-Atlantic Division. He has been with our company for
nine years.

Lawrence B. Hawkins has served as Executive Vice President since December
2000 and as President-Investors Trust, Inc. since 1993. Prior to December 2000,
Mr. Hawkins served as Senior Vice President since 1993. He has been with our
company for 12 years.

G. Kenneth Stephens, Jr. has served as Senior Vice President and President
of our Eastern Division since January 31, 2000. From January 1, 1997 to January
30, 2000, he served as Chief Operating Officer of the Southern Region of our
Eastern Division. From October 21, 1993 to December 31, 1996, he served as the
Vice President of Cemetery Operations for the Southern Region of our Eastern
Division. He has been with our company for eight years.

Randall L. Stricklin has served as Senior Vice President and President of
our Western Division since April 20, 2000. From August 10, 1999 to April 19,
2000, he served as Chief Operating Officer of the Southern Region of our Western
Division. From November 1, 1998 to August 9, 1999, he served as Chief Operating
Officer of the Catholic Mortuaries. From February 5, 1997 to October 31, 1998,
he served as Vice

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President of Management Support and Training. Prior to that time, he served as
President of his three Stricklin/Snively Mortuaries and Cremation Society of
America, which we acquired in February 1997. He has been with our company for
four years.

Michael K. Crane, Sr. has served as President of our Central Division since
May 11, 2000. Prior to that time, he served as Chief Operating Officer of the
Southern Region of our Central Division since June 15, 1995. He has been with
our company for 37 years.

Everett N. Kendrick has served as Senior Vice President and President of
our Sales and Marketing Division since January 31, 2000. From December 1, 1996
to January 30, 2000, he served as Chief Operating Officer of the Northern Region
of our Eastern Division. Prior to that time, he served as Vice President of
Sales and Marketing for the Northern Region of our Eastern Division since
January 1993. He has been with our company for eight years.

Darwin C. Fenner has served as a director since 1991. Mr. Fenner has
served as Investment Counsel, Chairman and Chief Executive Officer of Fenner,
Plauche & Williams Investment Management Company since 1972.

John P. Laborde has served as a director since 1995. Mr. Laborde has
served as Chairman Emeritus of Tidewater Inc. since 1995 and Chairman of Laborde
Marine Lifts, Inc. since 1996. Mr. Laborde is also a director of Stolt Offshore,
S.A. and Stone Energy Corporation.

James W. McFarland has served as a director since 1995. Mr. McFarland has
served as Dean of A.B. Freeman School of Business, Tulane University since 1988.
Mr. McFarland is also a director of Petroleum Helicopters, Inc. and Sizeler
Property Investors, Inc.

Michael O. Read has served as a director since 1991. Mr. Read has served
as Senior Vice President of Hibernia National Bank since January 2001. Prior to
January 2001, Mr. Read was a Vice President at Marsh USA, Inc., an insurance
brokerage and consulting firm.

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PRINCIPAL STOCKHOLDERS

STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS

The table below sets forth certain information concerning the beneficial
ownership, as of July 24, 2001, of our Class A and Class B common stock by (1)
each director, (2) each executive officer named in the Summary Compensation
Table of our definitive proxy statement filed with the SEC on February 23, 2001
(the "Named Executive Officers"), and (3) all of our directors and executive
officers as a group, determined in accordance with Rule 13d-3 of the Securities
Exchange Act of 1934. The Class A and Class B common stock are substantially
identical, except that holders of Class A common stock are entitled to one vote
per share and holders of Class B common stock are entitled to ten votes per
share. Each share of Class B common stock is automatically converted into one
share of Class A common stock upon transfer to persons other than certain
affiliates of Frank B. Stewart, Jr. As of July 24, 2001, Frank B. Stewart, Jr.
was the record holder of all of the shares of Class B common stock. As a result
of his ownership of Class A and Class B common stock, Frank B. Stewart, Jr.
owned shares of capital stock of Stewart Enterprises Inc. entitling him to 30.5
percent of the voting power of all shares of our voting stock. Unless otherwise
indicated, all shares shown as beneficially owned are held with sole voting and
investment power.

<Table>
<Caption>
ACQUIRABLE
THROUGH
NUMBER OF SHARES CURRENTLY
BENEFICIALLY EXERCISABLE PERCENT OF
BENEFICIAL OWNER CLASS OWNED(1)(2) STOCK OPTIONS(3) CLASS(3)
- -------------------------------------------- ------- ---------------- ---------------- ----------

DIRECTORS
Frank B. Stewart, Jr. ...................... Class A 6,942,561(4) -- 6.7%
P.O. Box 19925 Class B 3,555,020(5) -- 100.0%
New Orleans, Louisiana 70179
William E. Rowe............................. Class A 224,359(6) 677,020 *
Kenneth C. Budde............................ Class A 109,539(7) 266,000 *
Darwin C. Fenner............................ Class A 490,248(8) 26,900 *
John P. Laborde............................. Class A 52,928(9) 26,900 *
James W. McFarland.......................... Class A 16,140 26,900 *
Michael O. Read............................. Class A 43,642(10) 26,900 *
NAMED EXECUTIVE OFFICERS(11)
Brian J. Marlowe............................ Class A 170,409(12) 426,010 *
Brent F. Heffron............................ Class A 66,665(13) 284,346 *
Joseph P. Henican, III...................... Class A 595,933(14) -- *
All directors and executive officers as a
group (15 persons)........................ Class A 7,866,718(15) 2,306,825 9.6%(16)
Class B 3,555,020 -- 100.0%(16)
</Table>

- ---------------

* Less than 1 percent.

(1) Excludes shares subject to options currently exercisable or exercisable
within 60 days, which shares are set forth separately in the next column.

(2) Includes shares held indirectly through the Stewart Enterprises Employees'
Retirement Trust ("SEERT"). Individuals participating in the SEERT have
sole investment power, but no voting power, over the shares. Participants
in the SEERT may choose to direct personal contributions, as well as
matching contributions from our company, into the Stewart Enterprises
Company Stock Fund (the "Fund"). The Fund is a blend of Stewart
Enterprises, Inc. Class A common stock and cash. Participants do not have
direct ownership of Stewart Enterprises, Inc. stock, but rather have
ownership of units in the Fund. As of March 31, 2001, one unit in the Fund
was equivalent to 0.790028 of a share of stock.

(3) 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

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deemed to be outstanding for the purpose of computing the individual
ownership percentage of any other person.

(4) Includes 6,483,844 shares owned as community property with Mr. Stewart's
wife, 448,000 shares owned by the Frank B. Stewart, Jr. Foundation (a
non-profit corporation), with respect to which Mr. Stewart is a trustee and
shares voting and investment power, and 10,717 shares held indirectly by
Mr. Stewart through the SEERT.

(5) 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.

(6) Includes 3,029 shares held indirectly by Mr. Rowe through the SEERT.

(7) Includes 2,791 shares held indirectly by Mr. Budde through the SEERT.

(8) Includes 900 shares owned by Mr. Fenner's wife and 448,000 shares held by
the Frank B. Stewart, Jr. Foundation (a non-profit corporation), with
respect to which Mr. Fenner is a trustee and shares voting and investment
power.

(9) Includes 428 shares owned by Mr. Laborde's wife.

(10) Includes 10,500 shares held in a trust, with respect to which Mr. Read is a
trustee and shares voting and investment power.

(11) Information regarding Messrs. Stewart, Rowe and Budde, the Named Executive
Officers other than Messrs. Marlowe, Heffron and Henican, appears
immediately above under the caption "Directors."

(12) Includes 2,482 shares held indirectly by Mr. Marlowe through the SEERT and
1,800 shares held in Mr. Marlowe's wife's retirement fund.

(13) Includes 1,473 shares held indirectly by Mr. Heffron through the SEERT.

(14) Includes 10,000 shares owned by Mr. Henican's wife, 1,200 shares owned by
his children, and 1,701 shares held indirectly by Mr. Henican through the
SEERT. Mr. Henican was the Chief Executive Officer and a director of our
company until November 15, 1999.

(15) Includes 38,753 shares held through the SEERT.

(16) As of July 24, 2001 all directors and executive officers as a group
beneficially owned shares of Class A and B common stock representing 32.2
percent of our total voting power.

STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

As of July 24, 2001, the person named below was, to our knowledge, the only
beneficial owner of more than 5 percent of our outstanding Class A common stock,
determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934,
other than Frank B. Stewart, Jr., whose beneficial ownership of our Class A and
Class B common stock is described above.

<Table>
<Caption>
AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER CLASS BENEFICIAL OWNERSHIP OF CLASS
---------------- ------- -------------------- --------

Dimensional Fund Advisors
1299 Ocean Avenue Santa Monica,
California 90401..................................... Class A 8,524,100(1) 8.2%
</Table>

- ---------------

(1) Based solely on information contained in a Schedule 13F filed with the
Securities and Exchange Commission as of March 31, 2001, indicating that all
shares shown as beneficially owned are held with sole voting and investment
power.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Through July 2000, we leased our corporate offices from a general
partnership in which Frank B. Stewart, Jr. owned a 99.3 percent partnership
interest. We now lease the corporate offices from a non-affiliated company. We
paid an aggregate of $478,694 in rental payments to the partnership during
fiscal year 2000.

During fiscal year 1992, Mr. Stewart and two trusts established by Mr. and
Mrs. Stewart entered into an agreement with us whereby we, with the approval of
all of the disinterested members of our board of directors, agreed to advance
the premiums on a split dollar "second-to-die" life insurance policy purchased
by the trusts and insuring the lives of Mr. and Mrs. Stewart. The premiums are
payable over a 12-year period and the trusts are required to reimburse us
currently for that portion of the premiums we paid that, if not reimbursed,
would be treated as compensation to Mr. Stewart for federal income tax purposes.
Interest accrues on the premium advances at 8 percent per annum from the date we
make each premium payment. The advances are collateralized by an assignment of
other insurance policies owned by the trusts and shares of our Class A common
stock that are held by the trusts. The trusts have agreed that, upon the death
of Mr. or Mrs. Stewart, the proceeds of such other insurance policies will be
used to reduce the outstanding balance due to us. We are entitled to
reimbursement of the unpaid balance of all amounts advanced, together with
accrued interest, upon the first to occur of (1) the surrender of the policy,
(2) the deaths of Mr. and Mrs. Stewart, or (3) the expiration of 60 days
following the payment in full of all premiums on the policy. The outstanding
amount advanced to the trusts by us, including accrued interest, was
approximately $1,570,008 as of April 30, 2001, including $110,000 advanced to
the trusts during the current fiscal year.

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, we, with the approval of all of the
disinterested members of the board of directors, agreed to lend The Stewart
Family Special Trust $685,000 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 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. Some of the beneficiaries of The Stewart Family Special Trust
are members of Mr. Stewart's family. The outstanding balance of the loan as of
April 30, 2001, including accrued interest, was approximately $832,952.

In fiscal year 1997, in connection with our acquisition of certain
cemeteries from Dwight A. Holder, a former director, Mr. Holder's daughter
entered into a non-competition agreement with one of our subsidiaries providing
that she will be paid $342,500 in 40 equal quarterly installments. During fiscal
year 2000, she was paid $34,250 under the agreement. During fiscal year 2001
(through April 30, 2001), she was paid $17,125 under the agreement.

Dillard Memorial, Inc., a subsidiary we acquired in 1997 from Mr. Holder,
leases one of its funeral homes from Mr. Holder pursuant to a 20-year lease
which commenced in May 1997 and provides for annual rental payments equal to the
greater of (1) $144,000 or (2) 7 percent of the previous fiscal year's gross
sales for that funeral home. During fiscal year 2000, we made rental payments
under the lease of $144,000 to Mr. Holder. During fiscal year 2001 (through
April 30, 2001), the payments totaled $72,000.

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DESCRIPTION OF CERTAIN INDEBTEDNESS AND THE TENDER OFFER

Concurrently with the sale of the notes, we entered into new senior secured
credit facilities. In addition, we completed a tender offer for the purchase of
approximately $200.0 million combined principal amount of our 6.70% Notes and
6.40% ROARS.

NEW SENIOR SECURED CREDIT FACILITIES

Concurrently with the sale of the notes, we entered into a credit agreement
with a syndicate of financial institutions, which provides up to a maximum of
$550.0 million of senior secured credit facilities. The new senior secured
credit facilities consist of (1) a $175.0 million four-year revolving credit
facility, (2) a $75.0 million 18-month asset sale term loan, and (3) a five-year
$300.0 million term loan B. The borrowers under the new senior secured credit
facilities are Stewart Enterprises, Inc. and two wholly-owned subsidiaries of
Stewart Enterprises, Inc. formed under the laws of Puerto Rico (the "Puerto
Rican Subsidiaries"). In this description, "the Company" refers to Stewart
Enterprises, Inc. and not any of its subsidiaries.

Revolving Credit Facility

The new senior secured credit facilities include a $175.0 million four-year
revolving credit facility, $10.0 million of which is available for borrowings by
the Puerto Rican Subsidiaries. The amount available for borrowings is the total
commitment amount of the revolving credit facility less the sum of (1)
outstanding balances (including obligations in respect of letters of credit),
(2) the amount of the revolving credit facility required to satisfy the reserve
requirement described below, and (3) the amount required to be bonded ($41.1
million as of April 30, 2001) to guarantee our obligations relating to funds we
withdrew from our preneed funeral trusts in Florida (the "Florida Bond
Obligation").

Asset Sale Term Loan

The new senior secured credit facilities include an 18-month $75.0 million
asset sale term loan available for borrowings by the Company only. The loan was
drawn in full on the completion of the refinancing transactions, and the
principal amount will be due in 18 months.

Term Loan B

The new senior secured credit facilities include a five-year $300.0 million
term loan B, $30.0 million of which was advanced to the Puerto Rican
Subsidiaries. The term loan B was drawn in full on the completion of the
refinancing transactions and will be amortized during the first two years in
quarterly installments totaling $2.5 million each year, during the third year in
quarterly installments totaling $15.0 million, during the fourth year in
quarterly installments totaling $25.0 million and during the fifth year in
quarterly installments totaling $255.0 million. Prepayments on or before the
first anniversary following the completion of the refinancing transactions must
include a call premium such that prepayments are 101.0 percent of the principal
amount prepaid.

Required Reserve

As long as any of the 6.70% Notes or 6.40% ROARS are outstanding, the
Company, the Puerto Rican Subsidiaries, and the Company Guarantors and Puerto
Rican Guarantors described below, must maintain, on a consolidated basis, a
required reserve consisting of (1) availability under the revolving credit
facility, and/or (2) domestic cash, cash equivalents and marketable securities,
the access to which is restricted on terms satisfactory to the collateral agent
("Restricted Funds"). The required reserve is an amount equal to the lesser of
(1) the amount by which the net cash proceeds from asset sales (calculated on a
cumulative basis from the completion of the refinancing transactions) exceeds
$75.0 million and (2) the outstanding principal amount of the 6.70% Notes and
6.40% ROARS. Notwithstanding the foregoing, the required reserve cannot be less
than the following percentages of the outstanding principal amount of the 6.70%
Notes and 6.40% ROARS: 25 percent for the period June 30, 2002 through October
31, 2002, 50 percent for the period November 1, 2002 through January 31, 2003,
75 percent for the period February 1, 2003 through April 30, 2003 and
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100 percent for the period May 1, 2003 and thereafter. If the 6.40% ROARS are
remarketed (which would occur, if at all, on May 1, 2003), they will not be
considered outstanding for purposes of the requirement to maintain the required
reserve.

Purchases of 6.70% Notes and 6.40% ROARS

In order for the Company to purchase or otherwise retire any of the
remaining 6.70% Notes or remaining 6.40% ROARS, either voluntarily or at
maturity, the Company must provide evidence satisfactory to the administrative
agent that immediately after giving effect to the transaction the Company will
have liquidity of no less than $25.0 million. Liquidity is defined as
unrestricted domestic cash, cash equivalents and marketable securities, plus the
total commitment amount for the revolving credit facility less the sum of (1)
outstanding balances and letters of credit under the revolving credit facility
(giving pro forma effect to any use of the facility for the transaction), (2)
the amount required to be bonded to secure our obligations relating to funds we
withdrew from our preneed funeral trusts in Florida, and (3) the remaining
principal amount outstanding of the 6.70% Notes and 6.40% ROARS after the effect
of the transaction.

Interest Rates and Fees

The applicable margin spread for LIBOR rate loans under the revolving
credit facility and the term loan B is determined by reference to a pricing
schedule that is based upon our leverage ratio. The applicable margins for the
revolving credit facility and term loan B are generally subject to quarterly
adjustment within a range of 200 to 275 basis points for the revolving credit
facility and a range of 312.5 to 337.5 basis points for the term loan B, based
upon our leverage ratio. The applicable margin spread for LIBOR rate loans under
the asset sale term loan is 275 basis points. The default rate on the senior
secured credit facility is 2.0 percent above the otherwise applicable interest
rate. In addition, we will pay a commitment fee on the unused portion of the
revolving credit facility within a range of 50.0 to 62.5 basis points, based
upon our leverage ratio.

Mandatory Prepayments

We are required to repay outstanding loans under the new senior secured
credit facilities, subject to some conditions and exceptions, with (1) 100
percent of the after-tax net cash proceeds of asset dispositions (subject to
reinvestment provisions and other exceptions), (2) 100 percent of the net cash
proceeds from the issuance of debt (excluding notes offered hereby, the
remarketing or refinancing of any of the 6.70% Notes or 6.40% ROARS, and other
exceptions), and (3) 100 percent of the net cash proceeds from the issuance of
equity by the Company or any of its subsidiaries.

We will apply proceeds arising from these events first to reduce amounts
outstanding under the asset sale term loan. The proceeds will then be applied
(1) during the first year following completion of the refinancing transactions,
to pay amounts outstanding (but not reduce commitments) under the revolving
credit facility, and (2) thereafter to reduce outstanding amounts (but not
commitments) under the revolving credit facility until the required reserve is
equal to the outstanding principal amount of the 6.70% Notes and 6.40% ROARS.
The proceeds will then be applied to reduce the term loan B. Prepayments of the
term loan B will be applied first to reduce the principal amount due in the
fourth year ($25.0 million) until the remaining amount due in that year is not
more than $2.5 million, and thereafter in inverse order of maturity. Within each
maturity, prepayments of the term loan B will be applied first to amounts as to
which the Puerto Rican Subsidiaries are not obligors.

Optional Prepayments

Amounts under the revolving credit facility may be repaid and reborrowed
prior to the final maturity date, subject to the availability limit. The asset
sale term loan and the term loan B may be prepaid in whole or in part at any
time without penalty other than the call premium applicable to the term loan B
described above and customary breakage costs. Optional prepayments not applied
by the Company to reduce amounts outstanding under the revolving credit facility
will be applied first to reduce amounts outstanding under the

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asset sale term loan and then to reduce amounts outstanding under the term loan
B. Prepayments of the term loan B will be applied first to reduce the principal
amount due in the fourth year ($25.0 million) until the remaining amount due in
that year is not more than $2.5 million, and thereafter in inverse order of
maturity. Within each maturity, prepayments will be applied among amounts as to
which the Company and the Puerto Rican Subsidiaries, or the Company only, are
obligors, at the Company's election.

Covenants and Borrowing Limits

The new senior secured credit facilities contain affirmative and negative
covenants. The covenants include limitations on liens, limitations on mergers,
consolidations and asset sales, limitations on incurrence of debt, limitations
on dividends, stock redemptions and the redemption and/or prepayment of other
debt, limitations on investments and acquisitions, limitations on lease
payments, limitations on negative pledges and limitations on transactions with
affiliates. In addition, the credit agreement contains the following financial
covenants: (1) a maximum leverage ratio, (2) a minimum fixed charge coverage
ratio, and (3) a minimum interest coverage ratio. The financial covenants will
be calculated on a consolidated basis after giving pro forma effect to permitted
asset dispositions and acquisitions. Capital expenditures are limited to $35.0
million in fiscal year 2001, $45.0 million in fiscal year 2002, $50.0 million in
fiscal year 2003 and $55.0 million for each fiscal year thereafter. Beginning
with fiscal year 2003, if our leverage ratio for the preceding fiscal year is
not greater than 2.60 to 1.00, we may carry forward amounts permitted but not
used in the previous fiscal years on a cumulative basis, beginning with any
amounts unused in fiscal year 2002.

Events of Default

Events of default under the new senior secured credit facilities include
nonpayment of principal, interest or fees, violation of covenants, inaccuracy of
representations and warranties, bankruptcy and insolvency events,
cross-defaults, a default in the event of a change of control and other
customary events of default. If an event of default occurs, the lenders are
entitled to take various actions, including accelerating the amounts due under
the new senior secured credit facilities and requiring immediate repayment of
all amounts outstanding, terminating any commitment to fund additional loans
under the revolving credit facility and commencing proceedings to foreclose on
the collateral.

Security and Guarantees

The Company's obligations under the new senior secured credit facilities
are guaranteed by all of its existing and future direct and indirect
subsidiaries formed under the laws of the United States, any state thereof or
the District of Columbia, except for specified excluded subsidiaries (the
"Company Guarantors"). The specified excluded subsidiaries are (1) Investors
Trust, Inc. and three Delaware subsidiaries, which have been excluded for
regulatory and tax planning purposes and have combined assets of less than $4.0
million, and (2) immaterial subsidiaries prohibited by law from guaranteeing the
facilities. Each Puerto Rican Subsidiary's obligations under the new senior
secured credit facilities will be guaranteed by (1) the other Puerto Rican
Subsidiary, (2) the Company, (3) each of the Company Guarantors, and (4) all
existing and future direct and indirect subsidiaries of either of the Puerto
Rican Subsidiaries formed under the laws of Puerto Rico (the "Puerto Rican
Guarantors").

All obligations under the new senior secured credit facilities, the
guarantees and any interest rate protection and other hedging agreements with
any lender or its affiliates are secured equally and ratably with our remaining
existing 6.70% Notes and our remaining existing 6.40% ROARS by a first priority
perfected security interest in (1) all capital stock and other equity interests
of the Company's existing and future direct and indirect domestic subsidiaries,
other than certain domestic subsidiaries acceptable to the agents, (2) 65
percent of the voting equity interests and 100 percent of all other equity
interests (other than directors qualifying shares) of all direct existing and
future foreign subsidiaries, and (3) all other existing and future assets and
properties of the Company and the Company Guarantors, except for real property,
vehicles and other specified exclusions.

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The collateral is subject to the terms of the Collateral Documents, as
defined in the Second Supplemental Indenture dated as of June 29, 2001, relating
to the 6.70% Notes and 6.40% ROARS, which provide for a sharing of collateral
among the lenders under the new senior secured credit facilities and the holders
of our remaining 6.70% Notes and 6.40% ROARS.

THE TENDER OFFER

On May 15, 2001, we commenced an offer to purchase approximately $200.0
million in principal amount of our $300.0 million publicly held senior notes,
which consisted of $100.0 million 6.70% Notes and $200.0 million 6.40% ROARS. On
June 29, 2001, we repurchased $99.9 million of the 6.70% Notes and approximately
$100.1 million of the 6.40% ROARS. The remaining 6.70% Notes and 6.40% ROARS are
secured equally and ratably with the new senior secured credit facilities and
are senior debt in relation to the notes.

6.70% NOTES AND 6.40% ROARS

In December 1996, we issued $100.0 million aggregate principal amount of
the 6.70% Notes. When issued, the 6.70% Notes were unsubordinated, unsecured
obligations which ranked pari passu in right of payment with all of our other
unsubordinated and unsecured indebtedness. The 6.70% Notes are now secured
equally and ratably with the new senior secured credit facilities. The 6.70%
Notes are not redeemable prior to maturity and are not entitled to the benefit
of any mandatory redemption or sinking fund. Interest on the 6.70% Notes is
payable semi-annually on December 1 and June 1 of each year.

In April 1998, we issued $200.0 million aggregate principal amount of the
6.40% ROARS. When issued, the 6.40% ROARS were unsubordinated, unsecured
obligations which ranked pari passu in right of payment with all of our other
unsubordinated and unsecured indebtedness. The 6.40% ROARS are now secured
equally and ratably with the new senior secured credit facilities. Interest on
the 6.40% ROARS is payable semi-annually on November 1 and May 1 of each year.

Outstanding 6.40% ROARS must be redeemed by us or remarketed by the
remarketing dealer on May 1, 2003. We believe the remarketing dealer is likely
to elect to remarket the 6.40% ROARS if at the time immediately preceding May 1,
2003 the 10-year United States Treasury rate is less than 5.44 percent. If the
remarketing dealer does not elect to remarket the 6.40% ROARS, we must redeem
them on May 1, 2003 for 100 percent of their principal amount plus accrued
interest. If the remarketing dealer elects to remarket the 6.40% ROARS, we may
override that election by choosing to redeem the 6.40% ROARS on May 1, 2003 for
100 percent of their principal amount plus accrued interest, in which case we
will be obligated to pay the remarketing dealer the value of its remarketing
right. If the 6.40% ROARS are remarketed, holders of 6.40% ROARS immediately
prior to May 1, 2003 must tender their 6.40% ROARS to the remarketing dealer for
purchase on May 1, 2003 for a purchase price of 100 percent of their principal
amount plus accrued interest. Except as described above, the 6.40% ROARS are not
redeemable prior to maturity and are not entitled to the benefit of any
mandatory redemption or sinking fund. If remarketed, the 6.40% ROARS will become
due May 1, 2013, and the coupon for the remaining term will be 5.44 percent
(which was the 10-year United States Treasury rate at the time of initial
issuance of the 6.40% ROARS) plus our then current credit spread.

The indenture governing the 6.40% ROARS and 6.70% Notes contains covenants
that, among other things, and subject to some exceptions, (1) restrict our
ability and the ability of our subsidiaries to create liens and enter into sale
leaseback transactions, and (2) restrict our ability (but not our subsidiaries'
ability) to sell all or substantially all of our assets or merge or consolidate
with other companies.

OTHER LONG-TERM DEBT

As of April 30, 2001, our subsidiaries had approximately $25.0 million of
long-term debt that represents notes that our subsidiaries issued as part of the
purchase price of acquired businesses or debt that our subsidiaries assumed in
connection with acquisitions. Approximately $12.1 million of this debt is
secured by liens on the stock or assets of the related subsidiaries. This debt
remains outstanding after the completion of the refinancing transactions and is
senior debt in relation to the notes.
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In addition, immediately upon completion of the refinancing transactions,
we had letters of credit outstanding under the new revolving credit facility of
approximately $6.5 million, which constitute senior debt under the indenture for
the notes. Also, we have agreed to maintain unused availability under the new
revolving credit facility in an amount that will equal or exceed the Florida
Bond Obligation described above, which as of April 30, 2001 was $41.1 million.
This amount would also be considered senior debt if we were to borrow funds
under the revolving credit facility to extinguish the Florida Bond Obligation by
returning to the related trust funds the amounts we previously withdrew that
relate to the remaining preneed contracts.

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DESCRIPTION OF NOTES

You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the word
"Company" refers only to Stewart Enterprises, Inc. and not to any of its
subsidiaries.

The outstanding notes were issued under an Indenture (the "Indenture")
among the Company, the Guarantors and Firstar Bank, N.A., as trustee (the
"Trustee"), in a private transaction that was not subject to the registration
requirements of the Securities Act. The terms of the notes include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").

Any outstanding notes that remain outstanding after completion of the
exchange offer, together with the exchange notes issued in the exchange offer,
will be treated as a single class of securities under the Indenture.

The following description is a summary of the material provisions of the
Indenture and the Registration Rights Agreement. It does not restate those
agreements in their entirety. We urge you to read the Indenture and the
Registration Rights Agreement because they, and not this description, define
your rights as holders of the notes. Certain defined terms used in this
description but not defined below under "-- Certain Definitions" have the
meanings assigned to them in the Indenture.

BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES

The Notes

The notes:

- are general unsecured obligations of the Company;

- are subordinated in right of payment to all existing and future Senior
Debt of the Company;

- are pari passu in right of payment with any future senior subordinated
Indebtedness of the Company; and

- are guaranteed by the Guarantors.

The Guarantees

The notes are guaranteed by all of the Domestic Subsidiaries of the
Company, other than Investors Trust, Inc., which serves as the Company's
investment advisor on its investment portfolio and the Company's preneed
funeral, merchandise and perpetual care trust funds and escrow accounts;
SEI-DELFL, Inc., SEI-DELLA, Inc. and SEI-DELTX, Inc., which are immaterial
subsidiaries that are intended to be used for foreign tax planning purposes; and
other immaterial subsidiaries which are prohibited by law from guaranteeing the
notes. Except as provided under "-- Certain Covenants -- Limitations on
Issuances of Guarantees of Indebtedness," subsidiaries that are not Domestic
Subsidiaries will not be guarantors. For the fiscal year ended October 31, 2000,
subsidiaries which are not Guarantors had revenue of $200.3 million and net
earnings of $3.9 million, respectively. In the future, we may have additional
subsidiaries which are not "Domestic Subsidiaries."

Each Guarantee of the notes:

- is a general unsecured obligation of the Guarantor;

- is subordinated in right of payment to all existing and future Senior
Debt of the Guarantor; and

- is pari passu in right of payment with any future senior subordinated
Indebtedness of the Guarantor.

As of the date of the Indenture, all of our subsidiaries were "Restricted
Subsidiaries." However, under the circumstances described below under the
subheading "-- Certain Covenants -- Designation of Restricted and Unrestricted
Subsidiaries," we will be permitted to designate certain of our subsidiaries as
"Unrestricted
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Subsidiaries." Our Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants in the Indenture. Our Unrestricted Subsidiaries will not
guarantee the notes.

PRINCIPAL, MATURITY AND INTEREST

The Indenture provides for the issuance by the Company of notes with an
unlimited maximum aggregate principal amount. The Company may issue additional
notes (the "Additional Notes") from time to time. Any offering of Additional
Notes is subject to the covenant described below under the caption "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock." The
notes and any Additional Notes subsequently issued under the Indenture would be
treated as a single class for all purposes under the Indenture, including,
without limitation, waivers, amendments, redemptions and offers to purchase. The
Company will issue notes in denominations of $1,000 and integral multiples of
$1,000. The notes will mature on July 1, 2008.

Interest on the notes accrues at the rate of 10 3/4% per annum and is
payable semi-annually in arrears on January 1 and July 1, commencing on January
1, 2002. The Company will make each interest payment to the Holders of record on
the immediately preceding December 15 and June 15.

Interest on the notes accrues from the date of original issuance or, if
interest has already been paid, from the date it was most recently paid.
Interest is computed on the basis of a 360-day year comprised of twelve 30-day
months.

METHODS OF RECEIVING PAYMENTS ON THE NOTES

If a Holder has given wire transfer instructions to the Company, the
Company will pay all principal, interest and premium and Liquidated Damages, if
any, on that Holder's notes in accordance with those instructions. All other
payments on notes will be made at the office or agency of the Paying Agent and
Registrar within the City and State of New York unless the Company elects to
make interest payments by check mailed to the Holders at their addresses set
forth in the register of Holders.

PAYING AGENT AND REGISTRAR FOR THE NOTES

The Trustee will initially act as Paying Agent and Registrar. The Company
may change the Paying Agent or Registrar without prior notice to the Holders,
and the Company or any of its Subsidiaries may act as Paying Agent or Registrar.

TRANSFER AND EXCHANGE

A Holder may transfer or exchange notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of notes to be redeemed.

The registered Holder of a Note will be treated as the owner of it for all
purposes.

NOTE GUARANTEES

The Guarantors have jointly and severally guaranteed the Company's
obligations under the notes. Each Guarantee is subordinated to the prior payment
in full of all Senior Debt of that Guarantor. The obligations of each Guarantor
under its Guarantee is limited as necessary to prevent that Guarantee from
constituting a fraudulent conveyance under applicable law. See "Risk
Factors -- The notes and guarantees may not be enforceable because of fraudulent
conveyance laws."

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A Guarantor may not sell or otherwise dispose of all or substantially all
of its assets to, or consolidate with or merge with or into (whether or not such
Guarantor is the surviving Person), another Person, other than the Company or
another Guarantor, unless:

(1) immediately after giving effect to that transaction, no Default or
Event of Default exists; and

(2) either:

(a) the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such consolidation
or merger is a corporation organized or existing under the laws of the
United States, any state thereof or the District of Columbia and assumes
all the obligations of that Guarantor under the Indenture, its Guarantee
and the Registration Rights Agreement pursuant to a supplemental
indenture satisfactory to the Trustee; or

(b) such sale or other disposition complies with the "Asset Sale"
provisions of the Indenture, including the application of the Net
Proceeds therefrom.

The Guarantee of a Guarantor will be released:

(1) in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor (including by way of
merger or consolidation) to a Person that is not (either before or after
giving effect to such transaction) a Restricted Subsidiary of the Company,
if the sale or other disposition of all or substantially all of the assets
of that Guarantor complies with the "Asset Sale" provisions of the
Indenture, including the application of the Net Proceeds therefrom;

(2) in connection with any sale of all of the Capital Stock of a
Guarantor to a Person that is not (either before or after giving effect to
such transaction) a Restricted Subsidiary of the Company, if the sale of
all such Capital Stock of that Guarantor complies with the "Asset Sale"
provisions of the Indenture, including the application of the Net Proceeds
therefrom; or

(3) if the Company properly designates any Restricted Subsidiary that
is a Guarantor as an Unrestricted Subsidiary.

SUBORDINATION

The payment of principal, interest and premium and Liquidated Damages, if
any, on the notes is subordinated to the prior payment in full of all Senior
Debt of the Company, including Senior Debt of the Company incurred after the
date of the Indenture.

The holders of Senior Debt of the Company are entitled to receive payment
in full of all Obligations due in respect of Senior Debt of the Company
(including interest after the commencement of any bankruptcy proceeding at the
rate specified in the applicable Senior Debt of the Company) before the Holders
of notes are entitled to receive any payment with respect to the notes (except
that Holders of notes may receive and retain Permitted Junior Securities and
payments made from the trust described under "-- Legal Defeasance and Covenant
Defeasance"), in the event of any distribution to creditors of the Company:

(1) in a liquidation or dissolution of the Company;

(2) in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Company or its property;

(3) in an assignment for the benefit of creditors; or

(4) in any marshaling of the Company's assets and liabilities.

The Company also may not make any payment in respect of the notes (except
in Permitted Junior Securities or from the trust described under "-- Legal
Defeasance and Covenant Defeasance") if:

(1) a payment default on Designated Senior Debt of the Company occurs
and is continuing beyond any applicable grace period; or

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(2) any other default occurs and is continuing on any series of
Designated Senior Debt of the Company that permits holders of that series
of Designated Senior Debt of the Company to accelerate its maturity and the
Trustee receives a notice of such default (a "Payment Blockage Notice")
from the Company or the holders of any Designated Senior Debt of the
Company (a "nonpayment default").

Payments on the notes may and shall be resumed:

(1) in the case of a payment default on Designated Senior Debt of the
Company, upon the date on which such default is cured or waived; and

(2) in case of a nonpayment default, the earlier of the date on which
such default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of such
Designated Senior Debt of the Company has been accelerated.

No new Payment Blockage Notice may be delivered unless and until:

(1) 360 days have elapsed since the delivery of the immediately prior
Payment Blockage Notice; and

(2) all scheduled payments of principal, interest and premium and
Liquidated Damages, if any, on the notes that have come due have been paid
in full in cash.

No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice.

If the Trustee or any Holder of the notes receives a payment in respect of
the notes (except in Permitted Junior Securities or from the trust described
under "-- Legal Defeasance and Covenant Defeasance") when:

(1) the payment is prohibited by these subordination provisions; and

(2) the Trustee or the Holder has actual knowledge that the payment is
prohibited;

the Trustee or the Holder, as the case may be, shall hold the payment in trust
for the benefit of the holders of Senior Debt of the Company. Upon the proper
written request of the holders of Senior Debt of the Company, the Trustee or the
Holder, as the case may be, shall deliver the amounts in trust to the holders of
Senior Debt of the Company or their proper representative.

The Company must promptly notify holders of its Senior Debt if payment of
the notes is accelerated because of an Event of Default.

As a result of the subordination provisions described above, in the event
of a bankruptcy, liquidation or reorganization of the Company, Holders of notes
may recover less ratably than creditors of the Company who are holders of Senior
Debt of the Company.

Payments under the Note Guarantee of each Guarantor are subordinated to the
prior payment in full of all Senior Debt of such Guarantor, including Senior
Debt of such Guarantor incurred after the date of the Indenture, on the same
basis as provided above with respect to the subordination of payments on the
notes by the Company to the prior payment in full of Senior Debt of the Company.
See "Risk Factors -- Your right to receive payment on the notes and the
guarantees is junior to all of Stewart Enterprises, Inc.'s and the subsidiary
guarantor's senior debt."

"Designated Senior Debt" means:

(1) any Indebtedness outstanding under the Credit Agreement; and

(2) any other Senior Debt permitted under the Indenture the principal
amount of which is $50.0 million or more and that has been designated by
the Company as "Designated Senior Debt."

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"Permitted Junior Securities" means:

(1) Equity Interests in the Company or any Guarantor; or

(2) debt securities or rights to acquire debt securities that are
subordinated to all Senior Debt and any debt securities issued in exchange
for Senior Debt to substantially the same extent as, or to a greater extent
than, the notes and the Note Guarantees are subordinated to Senior Debt
under the Indenture.

"Senior Debt" means:

(1) all Indebtedness of the Company or any Guarantor outstanding from
time to time under Credit Facilities and all Hedging Obligations with
respect thereto;

(2) any other Indebtedness of the Company or any Guarantor permitted
to be incurred under the terms of the Indenture, unless the instrument
under which such Indebtedness is incurred expressly provides that it is on
a parity with or subordinated in right of payment to the notes or any Note
Guarantee; and

(3) all Obligations with respect to the items listed in the preceding
clauses (1) and (2).

Notwithstanding anything to the contrary, Senior Debt does not include:

(1) any liability for federal, state, local or other taxes owed or
owing by the Company;

(2) any Indebtedness of the Company to any of its Subsidiaries or
other Affiliates;

(3) any trade payables; or

(4) the portion of any Indebtedness that is incurred in violation of
the Indenture.

OPTIONAL REDEMPTION

At any time prior to July 1, 2004, the Company may redeem up to 35% of the
aggregate principal amount of notes issued under the Indenture at a redemption
price of 110.75% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the redemption date, with the net
cash proceeds of one or more Qualified Equity Offerings; provided that:

(1) at least 65% of the aggregate principal amount of notes issued
under the Indenture remains outstanding immediately after the occurrence of
such redemption (excluding notes held by the Company and its Subsidiaries);
and

(2) the redemption must occur within 45 days of the date of the
closing of such Qualified Equity Offering.

Except pursuant to the preceding paragraph, the notes are not redeemable at
the Company's option prior to July 1, 2005.

On or after July 1, 2005, the Company may redeem all or a part of the notes
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages, if any, thereon, to the applicable
redemption date, if redeemed during the twelve-month period beginning on July 1
of the years indicated below:

<Table>
<Caption>
YEAR PERCENTAGE
- ---- ----------

2005...................................................... 105.3750%
2006...................................................... 102.6875%
2007 and thereafter....................................... 100.0000%
</Table>

MANDATORY REDEMPTION

The Company is not required to make mandatory redemption or sinking fund
payments with respect to the notes.

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REPURCHASE AT THE OPTION OF HOLDERS

Change of Control

If a Change of Control occurs, each Holder of notes will have the right to
require the Company to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that Holder's notes pursuant to a Change of
Control Offer on the terms set forth in the Indenture. In the Change of Control
Offer, the Company will offer a Change of Control Payment in cash equal to 101%
of the aggregate principal amount of notes repurchased plus accrued and unpaid
interest and Liquidated Damages, if any, thereon, to the date of purchase.
Within 30 days following any Change of Control, the Company will mail a notice
to each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase notes on the Change of Control
Payment Date specified in such notice, which date shall be no earlier than 30
days and no later than 60 days from the date such notice is mailed, pursuant to
the procedures required by the Indenture and described in such notice. The
Company will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable in connection with the repurchase of the notes as
a result of a Change of Control. To the extent that the provisions of any
securities laws or regulations conflict with the Change of Control provisions of
the Indenture, the Company will comply with the applicable securities laws and
regulations and will not be deemed to have breached its obligations under the
Change of Control provisions of the Indenture by virtue of such conflict.

On the Change of Control Payment Date, the Company will, to the extent
lawful:

(1) accept for payment all notes or portions thereof properly tendered
pursuant to the Change of Control Offer;

(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all notes or portions thereof so tendered;
and

(3) deliver or cause to be delivered to the Trustee the notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of notes or portions thereof being purchased by the
Company.

The Paying Agent will promptly mail to each Holder of notes so tendered the
Change of Control Payment for such notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof.

Prior to complying with any of the provisions of this "Change of Control"
covenant, but in any event within 90 days following a Change of Control, the
Company will either repay all outstanding Senior Debt or obtain the requisite
consents, if any, under all agreements governing outstanding Senior Debt to
permit the repurchase of notes required by this covenant. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.

The Credit Agreement prohibits the Company from purchasing any notes, and
also provides that certain change of control events with respect to the Company
would constitute a default under that agreement. Any future credit agreements or
other agreements relating to Senior Debt to which the Company becomes a party
may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from purchasing notes,
the Company could seek the consent of its senior lenders to the purchase of
notes or could attempt to refinance the borrowings that contain such
prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing notes. In such
case, the Company's failure to purchase tendered notes would constitute an Event
of Default under the Indenture which would, in turn, constitute a default under
such Senior Debt. In such circumstances, the subordination provisions in the
Indenture would likely restrict payments to the Holders of notes.

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Except as described above with respect to a Change of Control, the
Indenture does not contain provisions that permit the Holders of the notes to
require that the Company repurchase or redeem the notes in the event of a
takeover, recapitalization or similar transaction.

The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all notes validly tendered and not withdrawn under such Change of
Control Offer.

The definition of Change of Control includes a phrase relating to the
direct or indirect sale, lease, transfer, conveyance or other disposition of
"all or substantially all" of the properties or assets of the Company and its
Subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
Holder of notes to require the Company to repurchase such notes as a result of a
sale, lease, transfer, conveyance or other disposition of less than all of the
assets of the Company and its Subsidiaries taken as a whole to another Person or
group may be uncertain.

Asset Sales

The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:

(1) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold or
otherwise disposed of;

(2) such fair market value is evidenced by (i) for any Asset Sale
resulting in Net Proceeds less than or equal to $10.0 million, an Officer's
Certificate delivered to the Trustee or (ii) for any Asset Sale resulting
in Net Proceeds in excess of $10.0 million, a resolution of the Board of
Directors set forth in an Officers' Certificate delivered to the Trustee;
and

(3) at least 75% of the consideration therefor received by the Company
or such Restricted Subsidiary is in the form of cash. For purposes of this
provision, each of the following shall be deemed to be cash:

(a) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet) of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are
by their terms subordinated to the notes or any Note Guarantee) that are
assumed by the transferee of any such assets pursuant to a written
agreement that releases or provides for the release of the Company or
such Restricted Subsidiary from further liability; and

(b) any securities, notes or other obligations received by the
Company or any such Restricted Subsidiary from such transferee that are
converted promptly, but in no event later than thirty days of such Asset
Sale, by the Company or such Restricted Subsidiary into cash (to the
extent of the cash received in that conversion).

Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds at its option:

(1) to repay Senior Debt;

(2) to acquire all or substantially all of the assets of, or a
majority of the Voting Stock of, another Permitted Business;

(3) to make a capital expenditure in or that is used or useful in a
Permitted Business; or

(4) to acquire other long-term assets in or that are used or useful in
a Permitted Business.

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Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture.

Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $10.0 million, the Company will make
an offer to purchase (an "Asset Sale Offer") to all Holders of notes and all
holders of other Indebtedness that is pari passu with the notes containing
provisions similar to those set forth in the Indenture with respect to offers to
purchase with the proceeds of sales of assets to purchase the maximum principal
amount of notes and such other pari passu Indebtedness that may be purchased out
of the Excess Proceeds. The offer price in any Asset Sale Offer will be equal to
100% of principal amount plus accrued and unpaid interest and Liquidated
Damages, if any, to the date of purchase, and will be payable in cash. If any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by the
Indenture. If the aggregate principal amount of notes and such other pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the notes and such other pari passu
Indebtedness to be purchased on a pro rata basis based on the principal amount
of notes and such other pari passu Indebtedness tendered. Upon completion of
each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.

The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with each
repurchase of notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sales
provisions of the Indenture, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under the Asset Sale provisions of the Indenture by virtue of such
conflict.

The agreements governing the Company's outstanding Senior Debt currently
prohibit the Company from purchasing any notes, and also provide that certain
asset sale events with respect to the Company would constitute a default under
these agreements. Any future credit agreements or other agreements relating to
Senior Debt to which the Company becomes a party may contain similar
restrictions and provisions. In the event an Asset Sale occurs at a time when
the Company is prohibited from purchasing notes, the Company could seek the
consent of its senior lenders to the purchase of notes or could attempt to
refinance the borrowings that contain such prohibition. If the Company does not
obtain such a consent or repay such borrowings, the Company will remain
prohibited from purchasing notes. In such case, the Company's failure to
purchase tendered notes would constitute an Event of Default under the Indenture
which would, in turn, constitute a default under such Senior Debt. In such
circumstances, the subordination provisions in the Indenture would likely
restrict payments to the Holders of notes.

SELECTION AND NOTICE

If less than all of the notes are to be redeemed at any time, the Trustee
will select notes for redemption as follows:

(1) if the notes are listed, in compliance with the requirements of
the principal national securities exchange on which the notes are listed;
or

(2) if the notes are not so listed, on a pro rata basis, by lot or by
such method as the Trustee shall deem fair and appropriate.

No notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each Holder of notes to be redeemed at its registered
address. Notices of redemption may not be conditional.

If any Note is to be redeemed in part only, the notice of redemption that
relates to that Note shall state the portion of the principal amount thereof to
be redeemed. A new Note in principal amount equal to the unredeemed portion of
the original Note will be issued in the name of the Holder thereof upon
cancellation

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of the original Note. Notes called for redemption become due on the date fixed
for redemption. On and after the redemption date, interest ceases to accrue on
notes or portions of them called for redemption.

CERTAIN COVENANTS

Restricted Payments

The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:

(1) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation, any payment
in connection with any merger or consolidation involving the Company or any
of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than (a) dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or (b) to
the Company or a Restricted Subsidiary of the Company);

(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company,
any direct or indirect parent of the Company or any Subsidiary of the
Company (other than a Wholly Owned Restricted Subsidiary);

(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the notes or the Note Guarantees, except a payment of
interest or principal at the Stated Maturity thereof; or

(4) make any Restricted Investment (all such payments and other
actions set forth in clauses (1) through (4) above being collectively
referred to as "Restricted Payments"),

unless, at the time of and after giving effect to such Restricted Payment:

(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and

(2) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in the first paragraph of
the covenant described below under the caption "-- Incurrence of
Indebtedness and Issuance of Preferred Stock"; and

(3) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (2), (3), (5) and (6) of the next succeeding
paragraph), is less than the sum, without duplication, of:

(a) 50% of the Consolidated Net Income of the Company for the
period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of the Indenture to the end of
the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus

(b) 100% of the aggregate net cash proceeds received by the Company
since the date of the Indenture as a contribution to its common equity
capital or from the issue or sale of Equity Interests of the Company
(other than Disqualified Stock) or from the issue or sale of convertible
or exchangeable Disqualified Stock or convertible or exchangeable debt
securities of the Company that have been converted into or exchanged for
such Equity Interests (other than Equity Interests (or Disqualified
Stock or debt securities) sold to a Subsidiary of the Company); plus

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(c) to the extent that any Restricted Investment that was made
after the date of the Indenture is sold for cash or otherwise liquidated
or repaid for cash, the lesser of (i) the cash return of capital with
respect to such Restricted Investment (less the cost of disposition, if
any) and (ii) the initial amount of such Restricted Investment; plus

(d) $15 million.

So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:

(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture;

(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or any
Guarantor or of any Equity Interests of the Company in exchange for, or out
of the net cash proceeds of the substantially concurrent sale (other than
to a Subsidiary of the Company or under an employee stock option plan
established by the Company) of, Equity Interests of the Company (other than
Disqualified Stock) or from the substantially concurrent cash capital
contribution received by the Company from its stockholders; provided that
the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (3) (b) of the preceding paragraph;

(3) the defeasance, redemption, repurchase or other acquisition of or
other payment on or with respect to subordinated Indebtedness of the
Company or any Guarantor with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;

(4) the payment of any dividend by a Restricted Subsidiary of the
Company to the holders of its common Equity Interests on a pro rata basis;

(5) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of the Company or any Restricted Subsidiary
of the Company held by any of the Company's directors or employees (or
those of any of its Restricted Subsidiaries) pursuant to any management
equity subscription agreement or stock option agreement; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $1.0 million in any twelve-month
period; provided that the Company may carry over and make in a subsequent
calendar year, in addition to the amounts permitted for such calendar year,
the amount of such purchases, redemptions or other acquisitions or
retirements for value permitted to have been made but not made in any
preceding calendar year up to a maximum of $3.0 million in any calendar
year; and

(6) repurchases of Capital Stock deemed to occur upon the cashless
exercise of stock options and warrants of the Company.

The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued to or by the Company or such Subsidiary, as
the case may be, pursuant to the Restricted Payment. The fair market value of
any assets or securities that are required to be valued by this covenant shall
be determined by the Board of Directors whose resolution with respect thereto
shall be delivered to the Trustee. The Board of Directors' determination must be
based upon an opinion or appraisal issued by an accounting, appraisal or
investment banking firm of national standing if the fair market value exceeds
$15.0 million. Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this "Restricted Payments" covenant were computed,
together with a copy of any fairness opinion or appraisal required by the
Indenture.

Incurrence of Indebtedness and Issuance of Preferred Stock

The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or
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otherwise, with respect to (collectively, "incur") any Indebtedness (including
Acquired Debt), and the Company will not issue any Disqualified Stock and the
Company will not permit any of its Restricted Subsidiaries to issue any
Disqualified Stock or preferred stock; provided, however, that the Company and
any Guarantor may incur Indebtedness (including Acquired Debt), if the Fixed
Charge Coverage Ratio for the Company's most recently ended four full fiscal
quarters for which internal financial statements are available immediately
preceding the date on which such additional Indebtedness is incurred would have
been at least 2.25 to 1 from the date of the Indenture through and including
October 31, 2002 and 2.50 to 1 thereafter, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred at the beginning of such four-quarter
period.

So long as no Default shall have occurred and be continuing or would be
caused thereby, the first paragraph of this covenant will not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):

(1) the incurrence by the Company of Indebtedness under Credit
Facilities (and the incurrence by the Guarantors of guarantees thereof) in
an aggregate principal amount at any one time outstanding (with letters of
credit being deemed to have a principal amount equal to the maximum
potential liability of the Company and its Restricted Subsidiaries
thereunder) not to exceed $550 million, of which up to $40 million may be
incurred by the Company's Puerto Rican Restricted Subsidiaries that are
borrowers under the Credit Agreement (and the Company and its Restricted
Subsidiaries may guarantee such borrowings by the Company's Puerto Rican
Restricted Subsidiaries), less the aggregate amount of all Net Proceeds of
Asset Sales applied by the Company or any Restricted Subsidiary to repay
any term Indebtedness under Credit Facilities pursuant to the covenant
"-- Repurchase at the Option of Holders -- Asset Sales";

(2) the incurrence by the Company and any Restricted Subsidiary of the
Existing Indebtedness;

(3) the incurrence by the Company and the Guarantors of Indebtedness
represented by the notes and the related Note Guarantees to be issued on
the date of the Indenture and the Exchange notes and the related Note
Guarantees to be issued pursuant to the Registration Rights Agreement;

(4) the incurrence by the Company or any Guarantor of Indebtedness
represented by Capital Lease Obligations, mortgage financings or purchase
money obligations, in each case, incurred for the purpose of financing all
or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Company or such
Guarantor, in an aggregate principal amount, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (4), not to exceed $25
million at any time outstanding;

(5) the incurrence by the Company or any of the Restricted Subsidiary
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the Indenture to be
incurred under the first paragraph of this covenant or clauses (2), (3),
(4), (5), or (11) of this paragraph;

(6) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; provided, however, that:

(a) if the Company or any Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly subordinated to the
prior payment in full in cash of all Obligations with respect to the
notes, in the case of the Company, or the Note Guarantee, in the case of
a Guarantor; and

(b) (i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than
the Company or a Restricted Subsidiary thereof and (ii) any sale or
other transfer of any such Indebtedness to a Person that is not either
the Company or a Wholly Owned Restricted Subsidiary thereof, shall be
deemed, in each case, to constitute an incurrence of such Indebtedness
by the Company or such Restricted Subsidiary, as the case may be, that
was not permitted by this clause (6);

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(7) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging (a) interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding, or (b) currency exchange rate risk with respect to any
currency exchanges;

(8) the guarantee by the Company or any of the Restricted Subsidiaries
of Indebtedness of the Company or a Guarantor that was permitted to be
incurred by another provision of this covenant;

(9) the accrual of interest, the accretion or amortization of original
issue discount and the payment of interest on any Indebtedness in the form
of additional Indebtedness with the same terms will not be deemed to be an
incurrence of Indebtedness for purposes of this covenant; provided, in each
such case, that the amount thereof is included in Fixed Charges of the
Company as accrued;

(10) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (10);

(11) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (11), not to exceed $30
million; and

(12) Indebtedness of the Company or any of its Restricted Subsidiaries
in respect of performance bonds, workers' compensation claims, surety or
appeal bonds and payment obligations in connection with self insurance or
similar obligations, in each case, incurred in the ordinary course of
business.

For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that any
proposed Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (1) through (12) above, or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Company will be
permitted to classify such item of Indebtedness on the date of its incurrence in
any manner that complies with this covenant. Indebtedness under Credit
Facilities outstanding on the date on which notes are first issued and
authenticated under the Indenture shall be deemed to have been incurred on such
date in reliance on the exception provided by clause (1) of the definition of
Permitted Debt.

Limitation on Senior Subordinated Debt

The Company will not incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is subordinate or junior in right of
payment to any Senior Debt of the Company and senior in any respect in right of
payment to the notes. No Guarantor will incur, create, issue, assume, guarantee
or otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to the Senior Debt of such Guarantor and senior in any respect
in right of payment to such Guarantor's Note Guarantee.

Liens

Other than Permitted Liens, the Company will not, and will not permit any
of its Restricted Subsidiaries to, create, incur, assume or otherwise cause or
suffer to exist or become effective any Lien of any kind securing Indebtedness,
Attributable Debt or trade payables upon any of their property or assets, now
owned or hereafter acquired, unless all payments due under the Indenture and the
notes are secured on an equal and ratable basis with the obligations so secured
until such time as such obligations are no longer secured by a Lien.

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Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries

The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to:

(1) pay dividends or make any other distributions on its Capital Stock
to the Company or any of its Restricted Subsidiaries, or with respect to
any other interest or participation in, or measured by, its profits, or pay
any indebtedness owed to the Company or any of its Restricted Subsidiaries;

(2) make loans or advances to the Company or any of its Restricted
Subsidiaries; or

(3) transfer any of its properties or assets to the Company or any of
its Restricted Subsidiaries.

However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:

(1) Existing Indebtedness and the Credit Agreement as in effect on the
date of the Indenture and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
are no more restrictive, taken as a whole, than those contained in such
Existing Indebtedness and the Credit Agreement, as in effect on the date of
the Indenture;

(2) the Indenture, the notes and the Note Guarantees;

(3) applicable law;

(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect
at the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture
to be incurred;

(5) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;

(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (3) of the preceding paragraph;

(7) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition;

(8) Permitted Refinancing Indebtedness, provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
and

(9) Permitted Liens securing Indebtedness that limit the right of the
debtor to dispose of the assets subject to such Lien.

Merger, Consolidation or Sale of Assets

The Company may not, directly or indirectly: (1) consolidate or merge with
or into another Person (whether or not the Company is the surviving
corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of the Company and its
Restricted Subsidiaries taken as a whole, in one or more related transactions,
to another Person; unless:

(1) either: (a) the Company is the surviving corporation in any such
consolidation or merger; or (b) the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, conveyance or other disposition shall have been made
is a
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corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia;

(2) the Person formed by or surviving any such consolidation or merger
(if other than the Company) or the Person to which such sale, assignment,
transfer, conveyance or other disposition shall have been made assumes all
the obligations of the Company or such Restricted Subsidiary (if such
Restricted Subsidiary is a Guarantor), as the case may be, under the notes,
the Indenture and the Registration Rights Agreement pursuant to agreements
reasonably satisfactory to the Trustee;

(3) immediately after such transaction no Default or Event of Default
exists; and

(4) if such transaction involves the Company, the Company or the
Person formed by or surviving any such consolidation or merger (if other
than the Company), or to which such sale, assignment, transfer, conveyance
or other disposition shall have been made will, on the date of such
transaction after giving pro forma effect thereto and any related financing
transactions as if the same had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of the covenant described above under the caption
"-- Incurrence of Indebtedness and Issuance of Preferred Stock."

In addition, neither the Company nor any Restricted Subsidiary may,
directly or indirectly, lease all or substantially all of its properties or
assets, in one or more related transactions, to any other Person. This "Merger,
Consolidation or Sale of Assets" covenant will not apply to a sale, assignment,
transfer, conveyance or other disposition of assets between or among the Company
and any of its Restricted Subsidiaries or to the merger or consolidation of any
Restricted Subsidiary into the Company.

Restriction on Transfer of Assets to Non-Guarantor Subsidiaries

The Indenture provides that the Company will not sell, convey, transfer or
otherwise dispose of its assets or property to any of its Restricted
Subsidiaries that are not Guarantors, except for sales, conveyances, transfers
or other dispositions (a) of assets or property having an aggregate fair market
value no greater than $5 million made after the date of the Indenture and in the
ordinary course of business; or (b) of assets or property having a fair market
value not in excess of the amount of Investments (other than Permitted
Investments) then permitted to be made pursuant to the "Restricted Payments"
covenant. The amount of any sale, conveyance, transfer or other disposition
permitted pursuant to clause (b) of this covenant will be treated as the payment
of a Restricted Payment in calculating the amount of Restricted Payments made by
the Company.

Transactions with Affiliates

The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:

(1) such Affiliate Transaction is on terms that are no less favorable
to the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person; and

(2) the Company delivers to the Trustee:

(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$3.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction
complies with this covenant and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the Board of
Directors; and

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(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to the Company or such
Restricted Subsidiary of such Affiliate Transaction from a financial
point of view issued by an accounting, appraisal or investment banking
firm of national standing.

The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:

(1) transactions between or among the Company and/or its Restricted
Subsidiaries;

(2) payment of reasonable directors fees and expenses to Persons who
are not otherwise Affiliates of the Company;

(3) Restricted Payments that are permitted by the provisions of the
Indenture described above under the caption "-- Restricted Payments;"

(4) any issuance of securities, or other payments, awards or grants in
cash, securities or otherwise pursuant to, or the funding of, employment
arrangements, stock options and stock ownership plans approved by the Board
of Directors and made in the ordinary course of business;

(5) loans or advances to employees in the ordinary course of business
in accordance with the past practices of the Company or any of the
Restricted Subsidiaries, but in any event not to exceed $3.0 million in the
aggregate outstanding at any one time;

(6) the issuance or sale for cash of any Capital Stock (other than
Disqualified Stock) to Affiliates of the Company; and

(7) the agreements described in "Certain Relationships and Related
Transactions" and in existence on the date of the Indenture and renewals of
such agreements in a manner not less advantageous to the Holders of the
notes.

Additional Note Guarantees

If the Company or any of its Restricted Subsidiaries acquires or creates
another Domestic Subsidiary on or after the date of the Indenture, then that
newly acquired or created Domestic Subsidiary must become a Guarantor and
execute a supplemental indenture and deliver an Opinion of Counsel to the
Trustee within 15 Business Days of the date on which it was acquired or created.

Designation of Restricted and Unrestricted Subsidiaries

The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate
fair market value of all outstanding Investments owned by the Company and its
Restricted Subsidiaries in the Subsidiary so designated will be deemed to be a
Restricted Investment made as of the time of such designation and that
designation will only be permitted if such Investment would be permitted at that
time and if such Restricted Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary. The Board of Directors of the Company may at any time
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided
that such designation shall be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of the Company of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if (1) such
Indebtedness is permitted under the covenant described under the caption
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock," calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period; and (2) no Default or Event
of Default would be in existence following such designation.

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Sale and Leaseback Transactions

The Company will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
the Company or any Restricted Subsidiary may enter into a sale and leaseback
transaction if:

(1) the Company or that Restricted Subsidiary, as applicable, could
have incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction under the Fixed Charge
Coverage Ratio test in the first paragraph of the covenant described above
under the caption "-- Incurrence of Indebtedness and Issuance of Preferred
Stock";

(2) the gross cash proceeds of that sale and leaseback transaction are
at least equal to the fair market value, as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to
the Trustee, of the property that is the subject of that sale and leaseback
transaction; and

(3) the transfer of assets in that sale and leaseback transaction is
permitted by, and the Company applies the proceeds of such transaction in
compliance with, the covenant described above under the caption
"-- Repurchase at the Option of Holders -- Asset Sales."

Limitation on Issuances and Sales of Equity Interests in Restricted Subsidiaries

The Company will not, and will not permit any of its Restricted
Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any
Equity Interests in any Restricted Subsidiary of the Company to any Person
(other than the Company or a Wholly Owned Restricted Subsidiary of the Company),
unless:

(1) such transfer, conveyance, sale, lease or other disposition is of
all the Equity Interests in such Restricted Subsidiary, provided, that in
the event that such Restricted Subsidiary is a non-Domestic Subsidiary, (a)
such transfer, conveyance, sale, lease or other disposition is of Equity
Interests representing at least eighty percent (80%) of the Voting Stock of
all Equity Interests in such Restricted Subsidiary and (b) the Equity
Interests retained by the Company are treated as an Investment of the
Company; and

(2) the cash Net Proceeds from such transfer, conveyance, sale, lease
or other disposition are applied in accordance with the covenant described
above under the caption "-- Repurchase at the Option of Holders -- Asset
Sales."

In addition, the Company will not permit any Restricted Subsidiary of the
Company to issue any of its Equity Interests (other than, if necessary, shares
of its Capital Stock constituting directors' qualifying shares) to any Person
other than to the Company and/or a Wholly Owned Restricted Subsidiary of the
Company.

Limitations on Issuances of Guarantees of Indebtedness

The Company will not permit any of its Restricted Subsidiaries, directly or
indirectly, to Guarantee or pledge any assets to secure the payment of any other
Indebtedness of the Company unless such Restricted Subsidiary simultaneously
executes and delivers a supplemental indenture providing for the Guarantee of
the payment of the notes by such Restricted Subsidiary, which Guarantee shall be
senior to or pari passu with such Subsidiary's Guarantee of or pledge to secure
such other Indebtedness unless such other Indebtedness is Senior Debt, in which
case the Guarantee of the notes may be subordinated to the Guarantee of such
Senior Debt to the same extent as the notes are subordinated to such Senior
Debt.

Notwithstanding the preceding paragraph, any Note Guarantee will provide by
its terms that it will be automatically and unconditionally released and
discharged under the circumstances described above under the caption "-- Note
Guarantees." The form of the Note Guarantee will be attached as an exhibit to
the Indenture.

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Business Activities

The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Restricted Subsidiaries taken as a
whole.

Payments for Consent

The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any Holder of notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of the Indenture or the notes unless such consideration is offered to be paid
and is paid to all Holders of the notes that consent, waive or agree to amend in
the time frame set forth in the solicitation documents relating to such consent,
waiver or agreement.

Reports

Whether or not required by the Commission, so long as any notes are
outstanding, the Company will furnish to the Trustee for forwarding to the
Holders of notes, within the time periods specified in the Commission's rules
and regulations:

(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Company were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report on
the annual financial statements by the Company's certified independent
accountants; and

(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports.

In addition, whether or not required by the Commission, the Company will
file a copy of all of the information and reports referred to in clauses (1) and
(2) above with the Commission for public availability within the time periods
specified in the Commission's rules and regulations (unless the Commission will
not accept such a filing) and make such information available to securities
analysts and prospective investors upon request. In addition, the Company and
the Guarantors have agreed that, for so long as any notes remain outstanding,
they will furnish to the Holders and to securities analysts and prospective
investors, upon their request, the information required to be delivered pursuant
to Rule 144A(d)(4) under the Securities Act.

If the Company has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the annual financial information required by the preceding
paragraph shall include a reasonably detailed presentation, either on the face
of the financial statements or in the footnotes thereto, of the financial
condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of the Company.

EVENTS OF DEFAULT AND REMEDIES

Each of the following is an Event of Default:

(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the notes whether or not prohibited by
the subordination provisions of the Indenture;

(2) default in payment when due of the principal of, or premium, if
any, on the notes, whether or not prohibited by the subordination
provisions of the Indenture;

(3) failure by the Company or any of its Restricted Subsidiaries to
comply with the provisions described under the captions "-- Repurchase at
the Option of Holders -- Change of Control," "-- Repurchase at the Option
of Holders -- Asset Sales" or "-- Certain Covenants -- Merger,
Consolidation or Sale of Assets";

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(4) failure by the Company or any of its Restricted Subsidiaries for
30 days after notice to comply with any of the other agreements in the
Indenture;

(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, if that default:

(a) is caused by a failure to pay principal of, or interest or
premium, if any, on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default
(a "Payment Default"); or

(b) results in the acceleration of such Indebtedness prior to its
express maturity,

and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $10.0 million or more;

(6) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $10.0 million, which judgments
are not paid, discharged or stayed for a period of 60 days;

(7) except as permitted by the Indenture, any Note Guarantee shall be
held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor, or
any Person acting on behalf of any Guarantor, shall deny or disaffirm its
obligations under its Note Guarantee; and

(8) certain events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries.

In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to the Company or any Restricted
Subsidiary, all outstanding notes will become due and payable immediately
without further action or notice. If any other Event of Default occurs and is
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding notes may declare all the notes to be due and payable
immediately.

Holders of the notes may not enforce the Indenture or the notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in principal amount of the then outstanding notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest or Liquidated
Damages) if it determines that withholding notice is in their interest.

The Holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest or Liquidated Damages on, or the principal of, the notes.

In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the notes. If an Event of Default occurs during any time that
the notes are outstanding, by reason of any willful action (or inaction) taken
(or not taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the notes, then the premium specified in the
Indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the notes.

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The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture. Upon becoming aware of any Default or
Event of Default, the Company is required to deliver to the Trustee a statement
specifying such Default or Event of Default.

NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS

No director, officer, employee, incorporator or stockholder of the Company
or any Guarantor, as such, shall have any liability for any obligations of the
Company or the Guarantors under the notes, the Indenture, the Note Guarantees or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the notes. The waiver may not be effective to waive liabilities
under the federal securities laws.

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes and all obligations
of the Guarantors discharged with respect to their Note Guarantees ("Legal
Defeasance") except for:

(1) the rights of Holders of outstanding notes to receive payments in
respect of the principal of, or interest or premium and Liquidated Damages,
if any, on such notes when such payments are due from the trust referred to
below;

(2) the Company's obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed, lost
or stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;

(3) the rights, powers, trusts, duties and immunities of the Trustee,
and the Company's and the Guarantor's obligations in connection therewith;
and

(4) the Legal Defeasance provisions of the Indenture.

In addition, the Company may, at its option and at any time, elect to have
the obligations of the Company and the Guarantors released with respect to
certain covenants that are described in the Indenture ("Covenant Defeasance")
and thereafter any omission to comply with those covenants shall not constitute
a Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events (not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
notes.

In order to exercise either Legal Defeasance or Covenant Defeasance:

(1) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, or
interest and premium and Liquidated Damages, if any, on the outstanding
notes on the stated maturity or on the applicable redemption date, as the
case may be, and the Company must specify whether the notes are being
defeased to maturity or to a particular redemption date;

(2) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee
confirming that (a) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or (b) since the date
of the Indenture, there has been a change in the applicable federal income
tax law, in either case to the effect that, and based thereon such Opinion
of Counsel shall confirm that, the Holders of the outstanding notes will
not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax
on the same amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred;

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(3) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably acceptable to the
Trustee confirming that the Holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;

(4) no Default or Event of Default shall have occurred and be
continuing either: (a) on the date of such deposit; or (b) insofar as
Events of Default from bankruptcy or insolvency events are concerned, at
any time in the period ending on the 91st day after the date of deposit;

(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument to which the Company or any of its Subsidiaries is
a party or by which the Company or any of its Subsidiaries is bound;

(6) the Company must have delivered to the Trustee an Opinion of
Counsel to the effect that, assuming no intervening bankruptcy of the
Company or any Guarantor between the date of deposit and the 91st day
following the deposit and assuming that no Holder is an "insider" of the
Company under applicable bankruptcy law, after the 91st day following the
deposit, the trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;

(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and

(8) the Company must deliver to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.

AMENDMENT, SUPPLEMENT AND WAIVER

Except as provided in the next two succeeding paragraphs, the Indenture or
the notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, notes), and any existing default or
compliance with any provision of the Indenture or the notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes).

Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any notes held by a non-consenting Holder):

(1) reduce the principal amount of notes whose Holders must consent to
an amendment, supplement or waiver;

(2) reduce the principal of or change the fixed maturity of any Note
or alter the provisions, or waive any payment, with respect to the
redemption of the notes;

(3) reduce the rate of or change the time for payment of interest on
any Note;

(4) waive a Default or Event of Default in the payment of principal
of, or interest or premium, or Liquidated Damages, if any, on the notes
(except a rescission of acceleration of the notes by the Holders of at
least a majority in aggregate principal amount of the notes and a waiver of
the payment default that resulted from such acceleration);

(5) make any Note payable in money other than U.S. dollars;

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(6) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of notes to receive
payments of principal of, or interest or premium or Liquidated Damages, if
any, on the notes;

(7) release any Guarantor from any of its obligations under its Note
Guarantee or the Indenture, except in accordance with the terms of the
Indenture;

(8) impair the right to institute suit for the enforcement of any
payment on or with respect to the notes or the Note Guarantees;

(9) amend, change or modify the obligation of the Company to make and
consummate an Asset Sale Offer with respect to any Asset Sale in accordance
with the "Repurchase at the Option of Holders -- Asset Sales" covenant or
the obligation of the Company to make and consummate a Change of Control
Offer in the event of a Change of Control in accordance with the
"Repurchase at the Option of Holders -- Change of Control" covenant,
including, in each case, amending, changing or modifying any definition
relating thereto;

(10) except as otherwise permitted under the "Merger, Consolidation
and Sale of Assets" covenant, consent to the assignment or transfer by the
Company or any Guarantor of any of their rights or obligations under the
Indenture;

(11) amend or modify any of the provisions of the Indenture or the
related definitions affecting the subordination or ranking of the notes or
any Note Guarantee in any manner adverse to the holders of the notes or any
Note Guarantee; or

(12) make any change in the preceding amendment and waiver provisions.

Notwithstanding the preceding, without the consent of any Holder of notes,
the Company, the Guarantors and the Trustee may amend or supplement the
Indenture or the notes:

(1) to cure any ambiguity, defect or inconsistency;

(2) to provide for uncertificated notes in addition to or in place of
certificated notes;

(3) to provide for the assumption of the Company's or any Guarantor's
obligations to Holders of notes in the case of a merger or consolidation or
sale of all or substantially all of the Company's or such Guarantor's
assets;

(4) to make any change that would provide any additional rights or
benefits to the Holders of notes or that does not adversely affect the
legal rights under the Indenture of any such Holder; or

(5) to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indenture under the Trust Indenture
Act.

SATISFACTION AND DISCHARGE

The Indenture will be discharged and will cease to be of further effect as
to all notes issued thereunder, when:

(1) either:

(a) all notes that have been authenticated (except lost, stolen or
destroyed notes that have been replaced or paid and notes for whose
payment money has theretofore been deposited in trust and thereafter
repaid to the Company) have been delivered to the Trustee for
cancellation; or

(b) all notes that have not been delivered to the Trustee for
cancellation have become due and payable by reason of the making of a
notice of redemption or otherwise or will become due and payable within
one year and the Company or any Guarantor has irrevocably deposited or
caused to be deposited with the Trustee as trust funds in trust solely
for the benefit of the Holders, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will

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be sufficient without consideration of any reinvestment of interest, to
pay and discharge the entire indebtedness on the notes not delivered to
the Trustee for cancellation for principal, premium and Liquidated
Damages, if any, and accrued interest to the date of maturity or
redemption;

(2) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or shall occur as a result of such
deposit and such deposit will not result in a breach or violation of, or
constitute a default under, any other instrument to which the Company or
any Guarantor is a party or by which the Company or any Guarantor is bound;

(3) the Company or any Guarantor has paid or caused to be paid all
sums payable by it under the Indenture; and

(4) the Company has delivered irrevocable instructions to the Trustee
under the Indenture to apply the deposited money toward the payment of the
notes at maturity or the redemption date, as the case may be.

In addition, the Company must deliver an Officers' Certificate and an
Opinion of Counsel to the Trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.

CONCERNING THE TRUSTEE

If the Trustee becomes a creditor of the Company or any Guarantor, the
Indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest, it must eliminate such
conflict within 90 days, apply to the Commission for permission to continue or
resign.

The Holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that, in case an Event of Default
shall occur and be continuing, the Trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
Holder of notes, unless such Holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.

ADDITIONAL INFORMATION

Anyone who receives this prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to Stewart Enterprises,
Inc., 110 Veterans Memorial Boulevard, Metairie, Louisiana 70005, Attention:
Martin R. de Laureal, Vice President of Investor Relations.

BOOK-ENTRY, DELIVERY AND FORM

The exchange notes will be represented by one or more notes in registered,
global form without interest coupons (collectively, the "Global Notes"). The
Global Notes will be deposited upon issuance with the Trustee as custodian for
The Depository Trust Company ("DTC"), in New York, New York, and registered in
the name of DTC or its nominee, for credit to an account of a direct or indirect
participant in DTC, including the Euroclear System ("Euroclear") and Clearstream
Banking, S.A. ("Clearstream").

Except as set forth below, the Global Notes may be transferred, in whole
and not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Notes may not be exchanged for notes
in certificated form except in the limited circumstances described below. See
"-- Exchange of Global Notes for Certificated Notes." Except in the limited
circumstances described below, owners of beneficial interests in the Global
Notes will not be entitled to receive physical delivery of notes in certificated
form.

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Transfers of beneficial interests in the Global Notes will be subject to
the applicable rules and procedures of DTC and its direct or indirect
participants (including, if applicable, those of Euroclear and Clearstream),
which may change from time to time.

DEPOSITORY PROCEDURES

The following description of the operations and procedures of DTC,
Euroclear and Clearstream are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to changes by them. The Company takes no
responsibility for these operations and procedures and urges investors to
contact the system or their participants directly to discuss these matters.

DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interests in, and transfers of ownership interests
in, each security held by or on behalf of DTC are recorded on the records of the
Participants and Indirect Participants.

DTC has also advised the Company that, pursuant to procedures established
by it:

(1) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the exchange agent with portions of the
principal amount of the Global Notes; and

(2) ownership of these interests in the Global Notes will be shown on,
and the transfer of ownership thereof will be effected only through,
records maintained by DTC (with respect to the Participants) or by the
Participants and the Indirect Participants (with respect to other owners of
beneficial interest in the Global Notes).

Investors in the Global Notes who are Participants in DTC's system may hold
their interests therein directly through DTC. Investors in the Global Notes who
are not Participants may hold their interests therein indirectly through
organizations (including Euroclear and Clearstream) which are Participants in
such system. All interests in a Global Note, including those held through
Euroclear or Clearstream, may be subject to the procedures and requirements of
DTC. Those interests held through Euroclear or Clearstream may also be subject
to the procedures and requirements of such systems. The laws of some states
require that certain Persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to transfer beneficial
interests in a Global Note to such Persons will be limited to that extent.
Because DTC can act only on behalf of Participants, which in turn act on behalf
of Indirect Participants, the ability of a Person having beneficial interests in
a Global Note to pledge such interests to Persons that do not participate in the
DTC system, or otherwise take actions in respect of such interests, may be
affected by the lack of a physical certificate evidencing such interests.

EXCEPT AS DESCRIBED BELOW, OWNERS OF AN INTEREST IN THE GLOBAL NOTES WILL
NOT HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
"HOLDERS" THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.

Payments in respect of the principal of, and interest and premium and
Liquidated Damages, if any, on a Global Note registered in the name of DTC or
its nominee will be payable to DTC in its capacity as the registered Holder
under the Indenture. Under the terms of the Indenture, the Company and the
Trustee will treat the Persons in whose names the notes, including the Global
Notes, are registered as the owners thereof

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for the purpose of receiving payments and for all other purposes. Consequently,
neither the Company, the Trustee nor any agent of the Company or the Trustee has
or will have any responsibility or liability for:

(1) any aspect of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interest in the Global Notes or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect
Participant's records relating to the beneficial ownership interests in the
Global Notes; or

(2) any other matter relating to the actions and practices of DTC or
any of its Participants or Indirect Participants.

DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date unless DTC has reason to believe it will not receive
payment on such payment date. Each relevant Participant is credited with an
amount proportionate to its beneficial ownership of an interest in the principal
amount of the relevant security as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial owners of notes
will be governed by standing instructions and customary practices and will be
the responsibility of the Participants or the Indirect Participants and will not
be the responsibility of DTC, the Trustee or the Company. Neither the Company
nor the Trustee will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the notes, and the Company and the
Trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.

Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds, and transfers between
participants in Euroclear and Clearstream will be effected in accordance with
their respective rules and operating procedures.

Cross-market transfers between the Participants in DTC, on the one hand,
and Euroclear or Clearstream participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or
Clearstream, as the case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions to Euroclear or
Clearstream, as the case may be, by the counterparty in such system in
accordance with the rules and procedures and within the established deadlines
(Brussels time) of such system. Euroclear or Clearstream, as the case may be,
will, if the transaction meets its settlement requirements, deliver instructions
to its respective depositary to take action to effect final settlement on its
behalf by delivering or receiving interests in the relevant Global Note in DTC,
and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. Euroclear participants and
Clearstream participants may not deliver instructions directly to the
depositories for Euroclear or Clearstream.

DTC has advised the Company that it will take any action permitted to be
taken by a Holder of notes only at the direction of one or more Participants to
whose account DTC has credited the interests in the Global Notes and only in
respect of such portion of the aggregate principal amount of the notes as to
which such Participant or Participants has or have given such direction.
However, if there is an Event of Default under the notes, DTC reserves the right
to exchange the Global Notes for legended notes in certificated form, and to
distribute such notes to its Participants.

Although DTC, Euroclear and Clearstream have agreed to the foregoing
procedures to facilitate transfers of interests in the Global Notes among
participants in DTC, Euroclear and Clearstream, they are under no obligation to
perform or to continue to perform such procedures, and may discontinue such
procedures at any time. Neither the Company nor the Trustee nor any of their
respective agents will have any responsibility for the performance by DTC,
Euroclear or Clearstream or their respective participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.

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EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES

A Global Note is exchangeable for definitive notes in registered
certificated form ("Certificated Notes") if:

(1) DTC (a) notifies the Company that it is unwilling or unable to
continue as depositary for the Global Notes and the Company fails to
appoint a successor depositary or (b) has ceased to be a clearing agency
registered under the Exchange Act;

(2) the Company, at its option, notifies the Trustee in writing that
it elects to cause the issuance of the Certificated Notes; or

(3) there shall have occurred and be continuing a Default or Event of
Default with respect to the notes.

In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the Trustee by or on
behalf of DTC in accordance with the Indenture. In all cases, Certificated Notes
delivered in exchange for any Global Note or beneficial interests in Global
Notes will be registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with its customary
procedures).

EXCHANGE OF CERTIFICATED NOTES FOR GLOBAL NOTES

Certificated Notes may not be exchanged for beneficial interests in any
Global Note unless the transferor first delivers to the Trustee a written
certificate (in the form provided in the Indenture) to the effect that such
transfer will comply with the appropriate transfer restrictions applicable to
such notes.

SAME DAY SETTLEMENT AND PAYMENT

The Company will make payments in respect of the notes represented by the
Global Notes (including principal, premium, if any, interest and Liquidated
Damages, if any) by wire transfer of immediately available funds to the accounts
specified by the Global Note Holder. The Company will make all payments of
principal, interest and premium and Liquidated Damages, if any, with respect to
Certificated Notes by wire transfer of immediately available funds to the
accounts specified by the Holders thereof or, if no such account is specified,
by mailing a check to each such Holder's registered address. The notes
represented by the Global Notes are expected to trade in DTC's Same-Day Funds
Settlement System, and any permitted secondary market trading activity in such
notes will, therefore, be required by DTC to be settled in immediately available
funds. The Company expects that secondary trading in any Certificated Notes will
also be settled in immediately available funds.

Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
(which must be a business day for Euroclear and Cedel) immediately following the
settlement date of DTC. DTC has advised the Company that cash received in
Euroclear or Cedel as a result of sales of interests in a Global Note by or
through a Euroclear or Cedel participant to a Participant in DTC will be
received with value on the settlement date of DTC but will be available in the
relevant Euroclear or Cedel cash account only as of the business day for
Euroclear or Cedel following DTC's settlement date.

CERTAIN DEFINITIONS

Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.

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"Acquired Debt" means, with respect to any specified Person:

(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and

(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.

"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise. For purposes of this definition, the terms
"controlling," "controlled by" and "under common control with" shall have
correlative meanings.

"Asset Sale" means:

(1) the sale, lease, conveyance or other disposition of any assets or
rights; provided that the sale, conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of the
Indenture described above under the caption "-- Repurchase at the Option of
Holders -- Change of Control" and/or the provisions described above under
the caption "-- Certain Covenants -- Merger, Consolidation or Sale of
Assets" and not by the provisions of the Asset Sale covenant; and

(2) the issuance of Equity Interests by any of the Company's
Restricted Subsidiaries or the sale of Equity Interests in any of its
Subsidiaries.

Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:

(1) any single transaction or series of related transactions that
involves assets having a fair market value of less than $3 million;

(2) a transfer of assets or Equity Interests or a merger or
consolidation between or among the Company and its Restricted Subsidiaries;

(3) an issuance of Equity Interests by a Restricted Subsidiary to the
Company or to another Restricted Subsidiary;

(4) the sale or lease of equipment, inventory, accounts receivable or
other assets in the ordinary course of business or Foreign Cash Equivalents
owned by any Restricted Subsidiary other than a Domestic Restricted
Subsidiary;

(5) the sale or other disposition of cash or Cash Equivalents owned by
the Company or its Restricted Subsidiaries or Foreign Cash Equivalents
owned by any Restricted Subsidiary other than a Domestic Restricted
Subsidiary;

(6) the sale or other disposition of marketable securities owned by
the Company or its Restricted Subsidiaries on the date of the Indenture;

(7) a Restricted Payment that is permitted by the covenant described
above under the caption "-- Certain Covenants -- Restricted Payments;" and

(8) the sale or other disposition of funds placed into escrow accounts
or trust funds for purposes of future delivery of property, merchandise or
services or care and maintenance of cemetery property, in each case in
connection with the ordinary course of business.

"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction, including any period for which such lease has
been

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extended or may, at the option of the lessor, be extended. Such present value
shall be calculated using a discount rate equal to the rate of interest implicit
in such transaction, determined in accordance with GAAP.

"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as that term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire by conversion or
exercise of other securities, whether such right is currently exercisable or is
exercisable only upon the occurrence of a subsequent condition. The terms
"Beneficially Owns" and "Beneficially Owned" shall have a corresponding meaning.

"Board of Directors" means:

(1) with respect to a corporation, the board of directors of the
corporation;

(2) with respect to a partnership, the Board of Directors of the
general partner of the partnership; and

(3) with respect to any other Person, the board or committee of such
Person serving a similar function.

"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.

"Capital Stock" means:

(1) in the case of a corporation, corporate stock;

(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;

(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and

(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.

"Cash Equivalents" means:

(1) United States dollars;

(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged in
support thereof) having maturities of not more than six months from the
date of acquisition;

(3) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any domestic commercial bank having capital
and surplus in excess of $500.0 million and a Thomson Bank Watch Rating of
"B" or better;

(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;

(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Rating Services and in each
case maturing within six months after the date of acquisition; and

(6) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (5) of this
definition.

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"Change of Control" means the occurrence of any of the following:

(1) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or consolidation), in one or a
series of related transactions, of all or substantially all of the
properties or assets of the Company and its Restricted Subsidiaries, taken
as a whole, to any "person" (as that term is used in Section 13(d)(3) of
the Exchange Act);

(2) the adoption of a plan relating to the liquidation or dissolution
of the Company;

(3) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) other than the Principal and his Related
Parties becomes the beneficial owner (as defined above), directly or
indirectly, of 35% or more of the voting power of all classes of Voting
Stock of the Company;

(4) the first day on which a majority of the members of the Board of
Directors of the Company are not Continuing Directors; or

(5) the Company consolidates with, or merges with or into, any Person,
or any Person consolidates with, or merges with or into the Company, in any
such event pursuant to a transaction in which any of the outstanding Voting
Stock of the Company or such other Person is converted into or exchanged
for cash, securities or other property, other than any such transaction
where (A) the Voting Stock of the Company outstanding immediately prior to
such transaction is converted into or exchanged for Voting Stock (other
than Disqualified Stock) of the surviving or transferee Person constituting
a majority of the outstanding shares of such Voting Stock of such surviving
or transferee Person (immediately after giving effect to such issuance) and
(B) immediately after such transaction, no "person" or "group" (as such
terms are used in Section 13(d) and 14(d) of the Exchange Act) other than
the Principal and his Related Parties becomes, directly or indirectly, the
beneficial owner (as defined above) of 35% or more of the voting power of
all classes of Voting Stock of the Company.

"Consolidated Cash Flow" means, with respect to any specified Person for
any period, the Consolidated Net Income of such Person for such period plus:

(1) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such Consolidated Net Income;
plus

(2) consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether or not paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations,
imputed interest with respect to Attributable Debt, commissions, discounts
and other fees and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments pursuant to, and other net
costs associated with, Hedging Obligations), to the extent that any such
expense was deducted in computing such Consolidated Net Income; plus

(3) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and all other non-cash expenses (excluding any
such non-cash expense to the extent that it represents (i) an accrual of or
reserve for cash expenses in any future period or (ii) amortization of a
prepaid cash expense that was paid in a prior period (except for
amortization representing prearranged or preneed acquisition costs)) of
such Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income; minus

(4) non-cash items increasing such Consolidated Net Income for such
period, other than the accrual of revenue consistent with past practice, in
each case, on a consolidated basis and determined in accordance with GAAP.

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Notwithstanding the preceding, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash expenses
of, a Restricted Subsidiary of the Company shall be added to Consolidated Net
Income to compute Consolidated Cash Flow of the Company only to the extent that
a corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.

"Consolidated Net Income" means, with respect to any specified Person for
any period, the aggregate of the Net Income of such Person and its Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that:

(1) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary, including any Unrestricted Subsidiary, or that is
accounted for by the equity method of accounting shall be included only to
the extent of the amount of dividends or distributions paid in cash to the
specified Person or a Restricted Subsidiary thereof;

(2) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders;

(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded; and

(4) the cumulative effect of a change in accounting principles shall
be excluded.

"Consolidated Net Worth" means, with respect to any specified Person as of
any date, the sum of:

(1) the consolidated equity of the common stockholders of such Person
and its consolidated Restricted Subsidiaries as of such date; plus

(2) the respective amounts reported on such Person's balance sheet as
of such date with respect to any series of preferred stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only
to the extent of any cash received by such Person upon issuance of such
preferred stock.

"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who:

(1) was a member of such Board of Directors on the date of the
Indenture; or

(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election.

"Credit Agreement" means that certain Credit Agreement, dated as of June
29, 2001, by and among the Company, the PR Borrowers (as defined therein), the
guarantor subsidiaries named therein, Bank of America, N.A., as administrative
agent, and the other Lenders named therein providing for up to $550 million in
borrowings, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith, and in each case as
amended, modified, renewed, refunded, rearranged, replaced and/or refinanced
from time to time.

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"Credit Facilities" means, one or more debt facilities (including, without
limitation, the Credit Agreement) or commercial paper facilities, in each case
with banks or other institutional lenders providing for revolving credit loans,
term loans, receivables financing (including through the sale of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, rearranged, replaced and/or refinanced in
whole or in part from time to time.

"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.

"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is one year after the
date on which the notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase such Capital
Stock upon the occurrence of a change of control or an asset sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
the Company may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with the covenant
described above under the caption "-- Certain Covenants -- Restricted Payments."

"Domestic Subsidiary" means any Restricted Subsidiary that was formed under
the laws of the United States or any state thereof or the District of Columbia.

"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).

"Existing Indebtedness" means the aggregate principal amount of
Indebtedness of the Company and its Subsidiaries (other than Indebtedness under
the Credit Agreement) in existence on the date of the Indenture.

"Fixed Charges" means, with respect to any specified Person for any period,
the sum, without duplication, of:

(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued,
including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings,
and net of the effect of all payments made or received pursuant to Hedging
Obligations; plus

(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus

(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries,
whether or not such Guarantee or Lien is called upon; plus

(4) the product of (a) all dividends, whether paid or accrued and
whether or not in cash, on any series of Disqualified Stock or preferred
stock of such Person or any of its Restricted Subsidiaries, other than
dividends on Equity Interests payable solely in Equity Interests of the
Company (other than Disqualified Stock) or to the Company or a Restricted
Subsidiary of the Company, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person, expressed as a
decimal, in each case, on a consolidated basis and in accordance with GAAP.

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"Fixed Charge Coverage Ratio" means with respect to any specified Person
for any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the specified Person or any of its Subsidiaries incurs, assumes, Guarantees,
repays, repurchases or redeems any Indebtedness or issues, repurchases or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated and on or prior to the date
on which the event for which the calculation of the Fixed Charge Coverage Ratio
is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee,
repayment, repurchase or redemption of Indebtedness, or such issuance,
repurchase or redemption of preferred stock, and the use of the proceeds
therefrom as if the same had occurred at the beginning of the applicable
four-quarter reference period.

In addition, for purposes of calculating the Fixed Charge Coverage Ratio:

(1) acquisitions and dispositions that have been made by the specified
Person or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions and
application of the proceeds therefrom, during the four-quarter reference
period or subsequent to such reference period and on or prior to the
Calculation Date shall be given pro forma effect as if they had occurred on
the first day of the four-quarter reference period and Consolidated Cash
Flow for such reference period shall be calculated on a pro forma basis in
accordance with Regulation S-X under the Securities Act, but without giving
effect to clause (3) of the proviso set forth in the definition of
Consolidated Net Income;

(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, shall be excluded; and

(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, shall be excluded, but only to the
extent that the obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Subsidiaries following
the Calculation Date.

"Foreign Cash Equivalents" means:

(1) the official currency of Australia, Belgium, Canada, France,
Germany, Mexico, the Netherlands, New Zealand, Spain and the United
Kingdom;

(2) securities issued or directly and fully guaranteed or insured by
the government of any of Australia, Belgium, Canada (including any province
thereof), France, Germany, Mexico, the Netherlands, New Zealand, Spain or
the United Kingdom or any agency or instrumentality of any of the foregoing
(provided that the full faith and credit of the relevant jurisdiction is
pledged in support thereof), and in each case having maturities of not more
than six months from the date of acquisition;

(3) certificates of deposit, time deposits and money market deposits
with maturities of six months or less from the date of acquisition,
bankers' acceptances with maturities not exceeding six months and overnight
bank deposits, in each case with any commercial bank or trust company
organized in a country listed in clause (1) above and having capital and
surplus in excess of $500.0 million (or its foreign currency equivalent);

(5) money market funds at least 95% of the assets of which constitute
Cash Equivalents or Foreign Cash Equivalents of the kinds described in
clauses (1) through (4) of this definition; and

(6) other securities owned by the Company's Restricted Subsidiaries,
other than Domestic Restricted Subsidiaries, on the date of the Indenture.

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other
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entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.

"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.

"Guarantors" means:

(1) each direct or indirect Domestic Subsidiary of the Company,
excluding (a) Investors Trust, Inc., (b) SEI-DELFL, Inc., SEI-DELLA, Inc.
and SEI-DELTX, Inc., and (c) immaterial subsidiaries which are prohibited
by law from guaranteeing the notes; and

(2) any other subsidiary that executes a Note Guarantee in accordance
with the provisions of the Indenture;

and their respective successors and assigns.

"Hedging Obligations" means, with respect to any specified Person, the
obligations of such Person under:

(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and

(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates or currency exchange rates.

"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:

(1) in respect of borrowed money;

(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);

(3) in respect of banker's acceptances;

(4) representing Capital Lease Obligations;

(5) in respect of the balance deferred and unpaid of the purchase
price of any property, except any such balance that constitutes an accrued
expense or trade payable; or

(6) representing any Hedging Obligations,

if and to the extent any of the preceding items (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance
sheet of the specified Person prepared in accordance with GAAP. In
addition, the term "Indebtedness" includes (a) all Indebtedness of others
secured by a Lien on any asset of the specified Person (whether or not such
Indebtedness is assumed by the specified Person); provided that, where the
specified Person has not assumed or otherwise become liable for such
Indebtedness, the amount of such Indebtedness shall be the fair market
value (and where such fair market value is in excess of $10.0 million, such
value shall be determined by the Board of Directors) of the asset securing
such Indebtedness at the date of determination, and (b) to the extent not
otherwise included, the Guarantee by the specified Person of any
indebtedness of any other Person.

The amount of any Indebtedness outstanding as of any date shall be:

(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and

(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.

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"Investments" means, with respect to any Person, all direct or indirect
investments by such Person in other Persons (including Affiliates) in the forms
of loans (including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and other advances and loans to
officers and employees made consistent with past practices), purchases or other
acquisitions for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be classified as
investments on a balance sheet prepared in accordance with GAAP. If the Company
or any Restricted Subsidiary of the Company sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of the Company
such that, after giving effect to any such sale or disposition, such Person is
no longer a Restricted Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Equity Interests of such Restricted Subsidiary not sold
or disposed of in an amount determined as provided in the final paragraph of the
covenant described above under the caption "-- Certain Covenants -- Restricted
Payments." The acquisition by the Company or any Restricted Subsidiary of the
Company of a Person that holds an Investment in a third Person shall be deemed
to be an Investment by the Company or such Restricted Subsidiary in such third
Person in an amount equal to the fair market value of the Investment held by the
acquired Person in such third Person in an amount determined as provided in the
final paragraph of the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments."

"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.

"Net Income" means, with respect to any specified Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, excluding, however:

(1) any gain or loss, together with any related provision for taxes on
such gain or loss, realized in connection with: (a) any Asset Sale (without
taking into account clause (1) of the second paragraph of such definition)
or any write-down resulting from the adoption by the Board of Directors of
the specified Person of a plan for any such Asset Sale; or (b) the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries;

(2) any extraordinary gain or loss, together with any related
provision for taxes on such extraordinary gain or loss; and

(3) any loss related to the Company or one or more of its Restricted
Subsidiaries relieving some individuals with whom the Company or such
Subsidiary has entered into noncompetition agreements from the obligation
not to compete, as described elsewhere in this prospectus, in an amount not
to exceed $20 million.

"Net Proceeds" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of (i) the direct costs
relating to such Asset Sale, including, without limitation, legal, accounting
and investment banking fees, and sales commissions, and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof, in each
case, after taking into account any available tax credits or deductions and any
tax sharing arrangements, (ii) amounts required to be applied to the repayment
of Indebtedness secured by a Lien on the asset or assets that were the subject
of such Asset Sale and (iii) any reserve for (1) any adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP and
(2) any indemnification obligations associated with such transactions.

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"Non-Recourse Debt" means Indebtedness:

(1) as to which neither the Company nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender;

(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of
any other Indebtedness (other than the notes) of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity; and

(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries.

"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.

"Permitted Business" means any business conducted or proposed to be
conducted (as described in the prospectus) by the Company and its Restricted
Subsidiaries on the date of the Indenture and other businesses, including those
conducting financing and insurance operations reasonably related or ancillary
thereto.

"Permitted Investments" means:

(1) any Investment in the Company or in a Wholly Owned Restricted
Subsidiary of the Company;

(2) any Investment in Cash Equivalents;

(3) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of such Investment:

(a) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company; or

(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly Owned Restricted Subsidiary of
the Company;

(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"-- Repurchase at the Option of Holders -- Asset Sales";

(5) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company;

(6) Hedging Obligations;

(7) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (7) since the date of the
Indenture, not to exceed $25 million;

(8) receivables owing to the Company or any Restricted Subsidiary if
created or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided, however,
that such trade terms may include such concessionaire trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances;

(9) stock, obligations or securities received in settlement of debts
created in the ordinary course of business and owing to the company or any
Restricted Subsidiary or in satisfaction of judgments;

(10) investments existing as of the date of the Indenture;

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(11) funds placed into escrow accounts or trust funds for purposes of
future delivery of property, merchandise or services or care and
maintenance of cemetery property, all in connection with the ordinary
course of business; and

(12) any investment by a Restricted Subsidiary, other than a Domestic
Restricted Subsidiary, in Foreign Cash Equivalents.

"Permitted Liens" means:

(1) Liens on the assets of the Company and any Guarantor securing
Senior Debt that was permitted by the terms of the Indenture to be
incurred;

(2) Liens in favor of the Company or any Restricted Subsidiary;

(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided that such Liens were in existence prior
to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with
the Company or the Restricted Subsidiary;

(4) Liens on property existing at the time of acquisition thereof by
the Company or any Restricted Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such acquisition and
do not extend to any property other than the property so acquired by the
Company or the Restricted Subsidiary;

(5) Liens to secure Indebtedness (including Capital Lease Obligations)
permitted by clause (4) of the second paragraph of the covenant entitled
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Preferred Stock" covering only the assets acquired with such Indebtedness;

(6) Liens existing on the date of the Indenture; and

(7) Liens incurred in the ordinary course of business of the Company
or any Restricted Subsidiary of the Company with respect to obligations
that do not exceed $10.0 million at any one time outstanding.

"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, rearrange, renew, replace,
defease or refund other Indebtedness of the Company or any of its Restricted
Subsidiaries (other than intercompany Indebtedness); provided that:

(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount (or
accreted value, if applicable) of the Indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus all accrued interest thereon
and the amount of any reasonably determined premium necessary to accomplish
such refinancing and such reasonable expenses incurred in connection
therewith);

(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;

(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
notes on terms at least as favorable in all material respects to the
Holders of notes as those contained in the documentation governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; and

(4) such Indebtedness is incurred either by the Company or by the
Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.

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"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.

"Principal" means Frank B. Stewart, Jr.

"Puerto Rican Restricted Subsidiary" means any wholly-owned Restricted
Subsidiary of the Company that is formed under the laws of Puerto Rico and
conducts a Permitted Business solely in Puerto Rico.

"Qualified Equity Offering" means (a) an offer and sale of Equity Interests
(other than Disqualified Stock) of the Company pursuant to a registration
statement that has been declared effective by the Commission pursuant to the
Securities Act (other than a registration statement on Form S-8 or otherwise
relating to equity securities issuable under any employee benefit plan of the
Company) or (b) any sale (other than to a Subsidiary) of Equity Interests (other
than Disqualified Stock) of the Company so long as, at the time of consummation
of such sale, the Company has a class of common equity securities registered
pursuant to Section 12(b) or Section 12(g) under the Exchange Act.

"Related Party" means:

(1) any family member of any Principal; or

(2) any trust, the beneficiary, owner or Person beneficially holding
an 80% or more controlling interest of which consists of the Principal
and/or such other Persons referred to in the immediately preceding clause
(1).

"Restricted Investment" means an Investment other than a Permitted
Investment.

"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.

"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.

"Subsidiary" means, with respect to any specified Person:

(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person (or a combination thereof); and

(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or one or more
Subsidiaries of such Person (or any combination thereof).

"Unrestricted Subsidiary" means any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary:

(1) has no Indebtedness other than Non-Recourse Debt;

(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted
Subsidiary than those that might be obtained at the time from Persons who
are not Affiliates of the Company;

(3) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries has any direct or indirect obligation (a) to
subscribe for additional Equity Interests or (b) to maintain or

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preserve such Person's financial condition or to cause such Person to
achieve any specified levels of operating results; and

(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its Restricted
Subsidiaries.

Any designation of a Restricted Subsidiary of the Company as an
Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the preceding conditions and was permitted by the covenant
described above under the caption "-- Certain Covenants -- Restricted Payments."
If, at any time, any Unrestricted Subsidiary would fail to meet the preceding
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of Preferred
Stock," the Company shall be in default of such covenant.

"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.

"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:

(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by

(2) the then outstanding principal amount of such Indebtedness.

"Wholly Owned Restricted Subsidiary" of any specified Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares or
Investments by foreign nationals mandated by applicable law) shall at the time
be owned by such Person and/or by one or more Wholly Owned Restricted
Subsidiaries of such Person.

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CERTAIN UNITED STATES FEDERAL TAX CONSIDERATIONS

The following general discussion of certain U.S. federal income tax
considerations relating to the exchange notes applies to you if you acquired the
outstanding notes at the original issue price within the meaning of Section 1273
of the Code and hold the outstanding notes and exchange notes as a "capital
asset" within the meaning of Section 1221 of the Code. This discussion is based
on the Internal Revenue Code of 1986, as amended, Treasury Regulations
promulgated thereunder, administrative positions of the Internal Revenue Service
and judicial decisions now in effect, all of which are subject to change
(possibly with retroactive effect) or to different interpretations.

We have not sought a ruling from the IRS with respect to the U.S. federal
income tax consequences of the Exchange Offer or the acquiring, holding or
disposing of an exchange note. There can be no assurance that the IRS will not
challenge one or more of the conclusions described herein.

This discussion does not purport to deal with all aspects of U.S. federal
income taxation that may be relevant to a particular holder in light of the
holder's circumstances (for example, a person subject to the alternative minimum
tax provisions of the Code). In addition, it is not intended to be wholly
applicable to all categories of investors, some of which (like dealers in
securities, banks, insurance companies, tax-exempt organizations, persons
holding a note as part of a "straddle," "hedge," "conversion transaction" or
other risk reduction transaction and persons who have a "functional currency"
other than the U.S. dollar) may be subject to special rules.

This discussion does not address any aspect of state, local or foreign law,
or U.S. federal estate and gift tax law other than U.S. federal estate tax law
as applicable to a Non-U.S. Holder nor does it address exchange notes held
through a partnership or other pass-through entity.

WE ADVISE YOU TO CONSULT WITH YOUR TAX ADVISERS REGARDING THE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF HOLDING AND DISPOSING OF THE
EXCHANGE NOTES.

TAX CONSEQUENCES TO U.S. HOLDERS

The following general discussion is limited to certain United States
federal income tax consequences to a holder of an exchange note that is a "U.S.
Holder." For purposes of this discussion, a "U.S. Holder" is a beneficial owner
of an exchange note that for U.S. federal income tax purposes is (i) a citizen
or resident (as defined in Section 7701(b) of the Code) of the United States,
(ii) a corporation (or an entity treated as a corporation) created or organized
in the United States or under the law of the United States, any state or the
District of Columbia, (iii) an estate the income of which is subject to U.S.
federal income taxation regardless of source or (iv) a trust if a U.S. court is
able to exercise primary supervision over the administration of the trust and
one or more U.S. persons have the authority to control all substantial decisions
of the trust.

TAXATION OF STATED INTEREST ON THE NOTES. Generally, payments of stated
interest on an exchange note will be includible in a U.S. Holder's gross income
and taxable as ordinary income for U.S. federal income tax purposes at the time
such interest is paid or accrued in accordance with the U.S. Holder's regular
method of tax accounting.

SALE, EXCHANGE OR RETIREMENT OF AN EXCHANGE NOTE. Each U.S. Holder
generally will recognize capital gain or loss upon a sale, exchange or
retirement of an exchange note measured by the difference, if any, between (i)
the amount of cash and the fair market value of any property received (except to
the extent that the cash or other property received in respect of an exchange
note is attributable to the payment of accrued interest on the exchange note not
previously included in income, which amount will be taxable as ordinary income)
and (ii) the holder's adjusted tax basis in the exchange note. The gain or loss
will be long-term capital gain or loss if the exchange note has been held for
more than one year at the time of the sale, exchange or retirement. A U.S.
Holder's initial basis in an exchange note generally will be the amount paid for
the exchange note.

Prospective investors should be aware that the resale of an exchange note
may be affected by the "market discount" rules of the Code, under which a
portion of any gain realized on the retirement or other

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disposition of an exchange note by a subsequent holder that acquires the
exchange note at a market discount generally would be treated as ordinary income
to the extent of the market discount that accrues while that holder holds the
exchange note.

EXCHANGE OFFER. The exchange of the exchange notes for the outstanding
notes pursuant to the Exchange Offer will not constitute a material modification
of the terms of the notes and therefore will not constitute a taxable event for
U.S. federal income tax purposes. As such, the exchange will have no U.S.
federal income tax consequences to a U.S. Holder, so that the U.S. Holder's
holding period and adjusted tax basis for a note would not be affected, and the
U.S. Holder would continue to take into account income in respect of an exchange
note in the same manner as before the exchange.

INFORMATION REPORTING AND BACKUP WITHHOLDING. A U.S. Holder of an exchange
note may be subject, under certain circumstances, to information reporting and
"backup withholding" at a rate of 31% with respect to certain "reportable
payments," including interest on or principal (and premium, if any) of a note
and the gross proceeds from a disposition of an exchange note. The backup
withholding rules apply if the holder, among other things, (i) fails to furnish
a social security number or other taxpayer identification number ("TIN")
certified under penalties of perjury within a reasonable time after the request
therefor, (ii) furnishes an incorrect TIN, (iii) fails to properly report the
receipt of interest or dividends or (iv) under certain circumstances, fails to
provide a certified statement, signed under penalties of perjury, that the TIN
furnished is the correct number and that the holder is not subject to backup
withholding. A U.S. Holder who does not provide us with its correct TIN also may
be subject to penalties imposed by the IRS. Backup withholding will not apply
with respect to payments made to certain holders, including corporations and
tax-exempt organizations, provided their exemptions from backup withholding are
properly established. We will report annually to the IRS and to each U.S. Holder
of an exchange note the amount of any "reportable payments" and the amount of
tax withheld, if any, with respect to those payments.

Any amounts withheld under the backup withholding rules from a payment to a
U.S. Holder will be allowed as a refund or as a credit against that U.S.
Holder's U.S. federal income tax liability, provided the requisite procedures
are followed.

TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following general discussion is limited to certain United States
federal income tax consequences to a holder of a note that is a "Non-U.S.
Holder." As used herein, a "Non-U.S. Holder" is a beneficial owner of an
exchange note, that, for U.S. federal income tax purposes, is (i) a nonresident
alien individual, (ii) a corporation (or an entity treated as a corporation)
created or organized in or under the law of a country (or a political
subdivision thereof) other than the United States or (iii) a foreign estate or
trust, which generally is an estate or trust that is not a U.S. Holder. For
purposes of the withholding tax discussed below (other than backup withholding),
a Non-U.S. Holder includes a nonresident fiduciary of an estate or trust. For
purposes of the discussion below, interest and gain on the sale, exchange or
other disposition of the exchange notes will be considered to be "U.S. trade or
business income" if such income or gain is:

- effectively connected with the conduct of a U.S. trade or business; or

- in the case of a treaty resident, attributable to a U.S. permanent
establishment (or, in the case of an individual, a fixed base) in the
United States.

INTEREST. Generally, interest paid to a Non-U.S. Holder of an exchange
note will not be subject to United States federal income or withholding tax if
such interest is not U.S. trade or business income and is "portfolio interest."
Generally, interest on the exchange notes will qualify as portfolio interest if
the Non-U.S. Holder:

- does not actually or constructively own 10% or more of the total combined
voting power of all classes of our stock;

- is not a controlled foreign corporation with respect to which we are a
"related person" within the meaning of the Code; and
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- certifies, under penalties of perjury on a Form W-8BEN, that such holder
is not a United States person and provides such holder's name and
address.

The gross amount of payments of interest that do not qualify for the
portfolio interest exception and that are not U.S. trade or business income will
be subject to U.S. withholding tax at a rate of 30% unless a treaty applies to
reduce or eliminate withholding. U.S. trade or business income will be taxed at
regular graduated U.S. rates rather than the 30% gross rate. In the case of a
Non-U.S. Holder that is a corporation, such U.S. trade or business income also
may be subject to the branch profits tax. To claim an exemption from
withholding, or to claim the benefits of a treaty, a Non-U.S. Holder must
provide a properly executed Form W-8BEN (claiming treaty benefits) or W-8ECI
(claiming exemption from withholding because income is U.S. trade or business
income) (or such successor forms as the IRS designates), as applicable prior to
the payment of interest. These forms must be periodically updated. A Non-U.S.
Holder who is claiming the benefits of a treaty may be required, in certain
instances, to obtain a U.S. taxpayer identification number and to provide
certain documentary evidence issued by foreign governmental authorities to prove
residence in the foreign country. Also, under these regulations special
procedures are provided for payments through qualified intermediaries.

DISPOSITION OF THE EXCHANGE NOTES. A Non-U.S. Holder generally will not be
subject to U.S. federal income tax in respect of gain recognized on a
disposition of the exchange notes unless:

- the gain is U.S. trade or business income in which case the branch
profits tax may also apply to a corporate Non-U.S. Holder;

- the Non-U.S. Holder is an individual who is present in the United States
for 183 or more days in the taxable year of the disposition and meets
other requirements; or

- the Non-U.S. Holder is subject to U.S. tax under provisions applicable to
certain U.S. expatriates (including certain former citizens or residents
of the United States).

UNITED STATES FEDERAL ESTATE TAX. Exchange notes held (or treated as held)
by an individual who is a Non-U.S. Holder at the time of his or her death will
not be subject to United States federal estate tax, provided that the interest
on such exchange notes would be exempt as portfolio interest when received by
the Non-U.S. Holder at the time of his or her death.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX

We must report annually to the IRS and to each Non-U.S. Holder any interest
that is paid to the Non-U.S. Holder. Copies of these information returns also
may be made available under the provisions of a specific treaty or other
agreement to the tax authorities of the country in which the Non-U.S. Holder
resides.

The 31% backup withholding tax and certain information reporting will not
apply to such payments of interest with respect to which either the requisite
certification, as described above, has been received or an exemption otherwise
has been established, provided that neither we nor our paying agent have actual
knowledge that the holder is a United States person or that the conditions of
any other exemption are not, in fact, satisfied.

The payment of the proceeds from the disposition of the exchange notes to
or through the United States office of any broker, U.S. or foreign, will be
subject to information reporting and possible backup withholding unless the
owner certifies as to its non-U.S. status under penalties of perjury or
otherwise establishes an exemption, provided that the broker does not have
actual knowledge that the holder is a United States person or that the
conditions of any other exemption are not, in fact, satisfied. The payment of
the proceeds from the disposition of the exchange notes to or through a non-U.S.
office of a non-U.S. broker will not be subject to information reporting or
backup withholding unless the non-U.S. broker has certain types of relationships
with the United States (a "U.S. related person"). In the case of the payment of
the proceeds from the disposition of the exchange notes to or through a non-U.S.
office of a broker that is either a U.S. person or a U.S. related person, the
Treasury Regulations require information reporting (but not back-up

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withholding) on the payment unless the broker has documentary evidence in its
files that the owner is a Non-U.S. Holder and the broker has no knowledge to the
contrary.

BACKUP WITHHOLDING IS NOT AN ADDITIONAL TAX. ANY AMOUNTS WITHHELD UNDER THE
BACKUP WITHHOLDING RULES FROM A PAYMENT TO A NON-U.S. HOLDER WILL BE REFUNDED OR
CREDITED AGAINST THE HOLDER'S U.S. FEDERAL INCOME TAX LIABILITY, IF ANY, IF THE
HOLDER PROVIDES THE REQUIRED INFORMATION TO THE IRS.

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PLAN OF DISTRIBUTION

Each participating broker-dealer that receives exchange notes for its own
account pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such exchange notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a participating broker-dealer in connection with resales of exchange notes
received in exchange for outstanding notes where such outstanding notes were
acquired as a result of market-making activities or other trading activities. We
have agreed that for a period of 180 days after the date of this prospectus, we
will make this prospectus, as amended or supplemented, available to any
participating broker-dealer for use in connection with any such resale.

We will not receive any proceeds from any sales of the exchange notes by
participating broker-dealers. Exchange notes received by participating
broker-dealers for their own account pursuant to the exchange offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the exchange notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such participating broker-dealer and/or the purchasers of
any such exchange notes. Any participating broker-dealer that resells the
exchange notes that were received by it for its own account pursuant to the
exchange offer and any broker or dealer that participates in a distribution of
such exchange notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of exchange notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a participating broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.

For a period of 180 days after the date of this prospectus we will promptly
send additional copies of this prospectus and any amendment or supplement to
this prospectus to any participating broker-dealer that requests such documents
in the letter of transmittal.

Prior to the exchange offer, there has not been any public market for the
outstanding notes. The outstanding notes have not been registered under the
Securities Act and will be subject to restrictions on transferability to the
extent that they are not exchanged for exchange notes by holders who are
entitled to participate in this exchange offer. The holders of outstanding
notes, other than any holder that is our affiliate within the meaning of Rule
405 under the Securities Act, who are not eligible to participate in the
exchange offer are entitled to certain registration rights, and we are required
to file a shelf registration statement with respect to their outstanding notes.
The exchange notes will constitute a new issue of securities with no established
trading market. We do not intend to list the exchange notes on any national
securities exchange or to seek the admission thereof to trading in the National
Association of Securities Dealers Automated Quotation System. The Initial
Purchasers have informed us that they intend to make a market in the notes.
However, they are not obligated to do so, and any Initial Purchaser may cease
its market-making activities at any time. In addition, such market-making
activity will be subject to the limits imposed by the Securities Act and the
Exchange Act and may be limited during the exchange offer and the pendency of
the shelf registration statements. Accordingly, no assurance can be given that
an active public or other market will develop for the exchange notes or as to
the liquidity of the trading market for the exchange notes. If a trading market
does not develop or is not maintained, holders of the exchange notes may
experience difficulty in reselling the exchange notes or may be unable to sell
them at all. If a market for the exchange notes develops, any such market may be
discontinued at any time.

LEGAL MATTERS

The validity of the exchange notes will be passed upon for us by Jones,
Walker, Waechter, Poitevent, Carrere & Denegre, L.L.P., New Orleans, Louisiana.

117
129

EXPERTS

The financial statements as of October 31, 2000 and 1999 and for each of
the three years in the period ended October 31, 2000 included in this
registration statement have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

AVAILABLE INFORMATION AND INCORPORATION BY REFERENCE

This prospectus is part of a registration statement on Form S-4 that we
have filed with the Securities and Exchange Commission (the "SEC"). You should
rely only on information incorporated by reference or provided in this
prospectus. We have not authorized anyone else to provide you with different
information. We are not making an offer of these securities in any state where
the offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front cover of
those documents.

We are subject to the informational requirements of the Securities Exchange
Act of 1934 (the "Exchange Act") and file reports and other information with the
SEC. These reports and other information filed with the SEC can be inspected,
and copies may be obtained, at the Public Reference Room of the SEC, 450 Fifth
Street, NW, Washington, D.C. 20549, at prescribed rates, as well as at the
following regional offices of the SEC: Seven World Trade Center, New York, New
York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Information on the operation of the Public Reference Room
of the SEC may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information that we have filed electronically
with the SEC.

The SEC allows the "incorporation by reference" of information filed with
them, which means we can disclose important information to you by referring you
to those documents. The information included in the following documents is
incorporated by reference and is considered to be a part of this prospectus. The
most recent information that we file with the SEC automatically updates and
supersedes older information. We have previously filed the following documents
with the SEC and we are incorporating them by reference into this prospectus.

1. Our Annual Report on Form 10-K for the fiscal year ended October
31, 2000 (filed January 25, 2001);

2. Our Quarterly Reports on Form 10-Q for the quarter ended January
31, 2001 (filed March 19, 2001) and for the quarter ended April 30, 2001
(filed June 14, 2001); and

3. Our Current Reports on Form 8-K filed on November 30, 2000,
December 11, 2000, December 13, 2000, March 9, 2001, March 15, 2001, May
16, 2001, June 4, 2001, June 5, 2001, June 14, 2001, June 21, 2001, June
29, 2001 and July 12, 2001.

We also incorporate by reference all documents which we may file with the
SEC after the date of this prospectus and prior to the termination of any
offering of securities offered by this prospectus under Section 13(a), 13(c), 14
or 15(d) of the Exchange Act.

At your request, we will provide you with a free copy of any of these
filings (except for exhibits, unless the exhibits are specifically incorporated
by reference into the filing). You may request copies of these documents by
contacting us at the following address and telephone number:

Stewart Enterprises, Inc.
110 Veterans Memorial Boulevard
Metairie, Louisiana 70005
Attention: Martin R. de Laureal
(504) 837-5880

118
130

INDEX TO HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS

<Table>
<Caption>
PAGE
----

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE
AND SIX MONTHS ENDED APRIL 30, 2001 AND 2000:

Consolidated Statements of Earnings --
Three Months Ended April 30, 2001 and 2000................ F-2

Consolidated Statements of Earnings --
Six Months Ended April 30, 2001 and 2000.................. F-3

Consolidated Balance Sheets --
April 30, 2001 and October 31, 2000....................... F-4

Consolidated Statement of Shareholders' Equity --
Six Months Ended April 30, 2001........................... F-5

Consolidated Statements of Cash Flows --
Six Months Ended April 30, 2001 and 2000.................. F-6

Notes to Consolidated Financial Statements --
Six Months Ended April 30, 2001 and 2000.................. F-7

AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL
YEARS ENDED OCTOBER 31, 2000, 1999 AND 1998:

Report of Independent Accountants........................... F-24

Consolidated Statements of Earnings --
Years Ended October 31, 2000, 1999 and 1998............... F-25

Consolidated Balance Sheets as of October 31, 2000 and
1999...................................................... F-26

Consolidated Statements of Shareholders' Equity --
Years Ended October 31, 2000, 1999 and 1998............... F-27

Consolidated Statements of Cash Flows --
Years Ended October 31, 2000, 1999 and 1998............... F-29

Notes to Consolidated Financial Statements --
Years Ended October 31, 2000, 1999 and 1998............... F-30

Report of Independent Accountants........................... F-63

Schedule II --
Valuation and Qualifying Accounts......................... F-64
</Table>

F-1
131

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>
THREE MONTHS ENDED
APRIL 30,
-------------------
2001 2000
-------- --------

Revenues:
Funeral................................................... $107,958 $115,741
Cemetery.................................................. 62,981 73,120
-------- --------
170,939 188,861
-------- --------
Costs and expenses:
Funeral................................................... 82,366 84,936
Cemetery.................................................. 47,358 54,141
-------- --------
129,724 139,077
-------- --------
Gross profit.............................................. 41,215 49,784
Corporate general and administrative expenses............... 4,905 4,883
-------- --------
Operating earnings........................................ 36,310 44,901
Interest expense, net....................................... (12,504) (14,447)
Other income (expense), net................................. 2,349 (10)
-------- --------
Earnings before income taxes.............................. 26,155 30,444
Income taxes................................................ 9,547 11,112
-------- --------
Net earnings.............................................. $ 16,608 $ 19,332
======== ========
Net earnings per common share:
Basic..................................................... $ .15 $ .18
======== ========
Diluted................................................... $ .15 $ .18
======== ========
Weighted average common shares outstanding (in thousands):
Basic..................................................... 107,306 106,557
======== ========
Diluted................................................... 107,320 106,596
======== ========
Dividends declared per common share......................... $ -- $ .02
======== ========
Pro forma amounts assuming 2001 change in accounting
principles was applied retroactively:
Net earnings.............................................. $ 16,447
========
Basic earnings per common share........................... $ .15
========
Diluted earnings per common share......................... $ .15
========
</Table>

See accompanying notes to consolidated financial statements.
F-2
132

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>
SIX MONTHS ENDED
APRIL 30,
--------------------
2001 2000
--------- --------

Revenues:
Funeral................................................... $ 215,307 $238,387
Cemetery.................................................. 132,322 143,434
--------- --------
347,629 381,821
--------- --------
Costs and expenses:
Funeral................................................... 164,972 172,849
Cemetery.................................................. 98,357 110,480
--------- --------
263,329 283,329
--------- --------
Gross profit.............................................. 84,300 98,492
Corporate general and administrative expenses............... 9,066 10,143
--------- --------
Operating earnings........................................ 75,234 88,349
Interest expense, net....................................... (25,783) (29,030)
Other income, net........................................... 3,184 796
--------- --------
Earnings before income taxes and cumulative effect of
change in accounting principles........................ 52,635 60,115
Income taxes................................................ 19,212 21,942
--------- --------
Earnings before cumulative effect of change in accounting
principles............................................. 33,423 38,173
Cumulative effect of change in accounting principles, net of
a $166,669 income tax benefit (Note 2).................... (250,004) --
--------- --------
Net earnings (loss)....................................... $(216,581) $ 38,173
========= ========
Basic earnings per common share:
Earnings before cumulative effect of change in accounting
principles............................................. $ .31 $ .36
Cumulative effect of change in accounting principles...... (2.33) --
--------- --------
Net earnings (loss)....................................... $ (2.02) $ .36
========= ========
Diluted earnings per common share:
Earnings before cumulative effect of change in accounting
principles............................................. $ .31 $ .36
Cumulative effect of change in accounting principles...... (2.33) --
--------- --------
Net earnings (loss)....................................... $ (2.02) $ .36
========= ========
Weighted average common shares outstanding (in thousands):
Basic..................................................... 107,131 106,414
========= ========
Diluted................................................... 107,136 106,432
========= ========
Dividends declared per common share......................... $ -- $ .04
========= ========
Pro forma amounts assuming 2001 change in accounting
principles was applied retroactively:
Net earnings.............................................. $ 33,180
========
Basic earnings per common share........................... $ .31
========
Diluted earnings per common share......................... $ .31
========
</Table>

See accompanying notes to consolidated financial statements.
F-3
133

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>
APRIL 30, OCTOBER 31,
2001 2000
---------- -----------

ASSETS
Current assets:
Cash and cash equivalent investments...................... $ 103,721 $ 91,595
Marketable securities..................................... 3,088 7,273
Receivables, net of allowances............................ 92,825 177,474
Inventories............................................... 52,738 51,049
Prepaid expenses.......................................... 5,618 4,063
---------- ----------
Total current assets................................ 257,990 331,454
Receivables due beyond one year, net of allowances.......... 88,089 217,073
Prearranged receivables..................................... 1,394,038 --
Intangible assets........................................... 683,614 668,462
Deferred charges............................................ 265,966 126,158
Cemetery property, at cost.................................. 438,771 441,646
Property and equipment, at cost:
Land...................................................... 78,855 78,736
Buildings................................................. 357,910 353,189
Equipment and other....................................... 166,158 161,223
---------- ----------
602,923 593,148
Less accumulated depreciation............................. 159,719 145,219
---------- ----------
Net property and equipment................................ 443,204 447,929
Long-term investments....................................... 5,586 4,203
Merchandise trust asset..................................... -- 234,752
Deferred income taxes....................................... 96,339 --
Other assets................................................ 4,449 4,514
---------- ----------
$3,678,046 $2,476,191
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (Note 8)............. $ 501,150 $ 29,857
Accounts payable.......................................... 14,539 20,342
Accrued payroll........................................... 16,813 17,433
Accrued insurance......................................... 15,339 16,470
Accrued interest.......................................... 12,572 13,039
Accrued other............................................. 21,168 22,084
Income taxes payable...................................... 6,681 --
Deferred income taxes..................................... 17,375 15,251
---------- ----------
Total current liabilities........................... 605,637 134,476
Long-term debt, less current maturities..................... 365,223 920,670
Deferred income taxes....................................... -- 83,740
Prearranged deferred revenue................................ 1,820,406 108,744
Estimated cost to deliver merchandise....................... -- 139,183
Other long-term liabilities................................. 13,850 14,721
---------- ----------
Total liabilities................................... 2,805,116 1,401,534
---------- ----------
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 103,965,419 and 103,277,329 shares at April
30, 2001 and October 31, 2000, respectively............ 103,965 103,277
Class B authorized 5,000,000 shares; issued and
outstanding 3,555,020 shares at April 30, 2001 and
October 31, 2000; 10 votes per share; convertible into
an equal number of Class A shares...................... 3,555 3,555
Additional paid-in capital................................ 674,847 673,658
Retained earnings......................................... 190,817 407,398
Cumulative foreign translation adjustment................. (98,400) (103,553)
Unrealized depreciation of investments.................... (1,038) (9,678)
Derivative financial instrument losses.................... (816) --
---------- ----------
Total shareholders' equity.......................... 872,930 1,074,657
---------- ----------
$3,678,046 $2,476,191
========== ==========
</Table>

See accompanying notes to consolidated financial statements.
F-4
134

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>
CUMULATIVE UNREALIZED DERIVATIVE
ADDITIONAL FOREIGN APPRECIATION FINANCIAL TOTAL
COMMON PAID-IN RETAINED TRANSLATION (DEPRECIATION) INSTRUMENT SHAREHOLDERS'
STOCK(1) CAPITAL EARNINGS ADJUSTMENT OF INVESTMENTS GAINS (LOSSES) EQUITY
-------- ---------- --------- ----------- -------------- -------------- -------------

Balance October 31, 2000...... $106,832 $673,658 $ 407,398 $(103,553) $(9,678) $ -- $1,074,657
Comprehensive income (loss):
Net loss..................... (216,581) (216,581)
Other comprehensive income
(loss):
Foreign translation
adjustment............... 5,153 5,153
Cumulative effect of change
in accounting for
unrealized appreciation
of investments under SAB
No. 101.................. 8,494 8,494
Unrealized appreciation of
investments.............. 229 229
Deferred income tax expense
on unrealized
appreciation of
investments.............. (83) (83)
Cumulative effect of change
in accounting for
derivative financial
instrument............... 4,693 4,693
Unrealized loss on
derivative instrument
designated and qualifying
as a cash flow hedging
instrument............... (5,509) (5,509)
-------- -------- --------- --------- ------- ------- ----------
Total other comprehensive
income (loss)............ 5,153 8,640 (816) 12,977
-------- -------- --------- --------- ------- ------- ----------
Total comprehensive income
(loss)..................... (216,581) 5,153 8,640 (816) (203,604)
Issuance of common stock...... 688 1,189 1,877
-------- -------- --------- --------- ------- ------- ----------
Balance April 30, 2001........ $107,520 $674,847 $ 190,817 $ (98,400) $(1,038) $ (816) $ 872,930
======== ======== ========= ========= ======= ======= ==========
</Table>

- ---------------

(1) Amount includes shares of common stock with a stated value of $1 per share.

See accompanying notes to consolidated financial statements.
F-5
135

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>
SIX MONTHS ENDED
APRIL 30,
--------------------
2001 2000
--------- --------

Cash flows from operating activities:
Net earnings (loss)....................................... $(216,581) $ 38,173
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization........................ 39,143 28,707
Provision for doubtful accounts...................... 9,148 17,584
Cumulative effect of change in accounting
principles.......................................... 250,004 --
Net gains on sales of marketable securities.......... -- (780)
Loss on sale of subsidiaries......................... 776 --
Provision (benefit) for deferred income taxes........ 1,280 (1,747)
Changes in assets and liabilities, net of effects
from acquisitions:
Increase in other receivables..................... (2,023) (15,006)
Increase in other deferred charges and intangible
assets.......................................... (720) (3,751)
(Increase) decrease in inventories and cemetery
property........................................ 1,329 (4,060)
Increase (decrease) in accounts payable and
accrued expenses................................ 215 (3,106)
Change in prearranged activity.................... (8,333) 57
Prearranged acquisition costs..................... (16,114) --
Increase in merchandise trust, less estimated cost
to deliver merchandise.......................... -- (14,084)
Decrease in other................................. (832) (3,545)
--------- --------
Net cash provided by operating activities......... 57,292 38,442
--------- --------
Cash flows from investing activities:
Proceeds from sales of marketable securities.............. 4,474 45,816
Purchases of marketable securities and long-term
investments............................................ (511) (12,946)
Proceeds from sale of subsidiaries........................ 2,881 --
Additions to property and equipment....................... (11,246) (23,627)
Other..................................................... 1,227 1,208
--------- --------
Net cash provided by (used in) investing
activities.......................................... (3,175) 10,451
--------- --------
Cash flows from financing activities:
Funeral trust withdrawal.................................. $ 40,000 $ --
Proceeds from long-term debt.............................. -- 8,366
Repayments of long-term debt.............................. (83,483) (9,574)
Issuance of common stock.................................. 610 1,923
Dividends................................................. -- (4,261)
--------- --------
Net cash used in financing activities.................. (42,873) (3,546)
--------- --------
Effect of exchange rates on cash and cash equivalents....... 882 (2,050)
--------- --------
Net increase in cash........................................ 12,126 43,297
Cash and cash equivalents, beginning of period.............. 91,595 30,877
--------- --------
Cash and cash equivalents, end of period.................... $ 103,721 $ 74,174
========= ========
Supplemental cash flow information:
Cash paid during the period for:
Income taxes........................................... $ 1,100 $ 8,700
Interest............................................... $ 29,900 $ 33,600
Noncash investing and financing activities:
Subsidiaries acquired through seller financing......... $ -- $ 13,900
Issuance of common stock to fund employee benefit
plan.................................................. $ 1,267 $ --
</Table>

See accompanying notes to consolidated financial statements
F-6
136

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 the United States. Through
its subsidiaries, the Company offers a complete line of funeral merchandise and
services, along with cemetery property, merchandise and services.

As of April 30, 2001, the Company owned and operated 321 funeral homes and
151 cemeteries in 30 states within the United States and Puerto Rico, and 291
funeral homes and 10 cemeteries in Mexico, Australia, New Zealand, Canada,
Spain, Portugal, the Netherlands, Argentina, France and Belgium. For the six
months ended April 30, 2001, foreign operations contributed approximately 18
percent of total revenue and, as of April 30, 2001, represented approximately 16
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.

The information as of April 30, 2001, and for the three and six months
ended April 30, 2001 and 2000, 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, 2000.

The results of operations for the three and six months ended April 30, 2001
are not necessarily indicative of the results to be expected for the fiscal year
ending October 31, 2001.

(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.

(e) Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 2000 consolidated financial
statements. These reclassifications had no effect on net earnings or
shareholders' equity. In fiscal year 2001, prearranged acquisition costs and the
change in prearranged activity are included in cash flows from operating
activities in

F-7
137
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(1) BASIS OF PRESENTATION -- (CONTINUED)

the accompanying statements of cash flows. These cash flows have characteristics
of both cash flows from operating and investing activities. For comparative
purposes, a reclassification has been made to the consolidated statement of cash
flows for the six months ended April 30, 2000.

(2) CHANGE IN ACCOUNTING PRINCIPLES

(a) SAB No. 101

The Company reached a final resolution on discussions with the Securities
and Exchange Commission on Staff Accounting Bulletin No. 101 ("SAB No.
101") -- "Revenue Recognition in Financial Statements" as it relates to
prearranged sales activities. Although not required to implement SAB No. 101
until the fourth quarter of fiscal year 2001, the Company elected to implement
the new accounting guidance in the first fiscal quarter of 2001. The accounting
for the Company's preneed sales activities was affected as follows:

For preneed sales of interment rights, the associated revenue and all costs
to acquire the sale are recognized in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 66, "Accounting for Sales of Real Estate."
Under SFAS No. 66, recognition of revenue and costs must be deferred until 10
percent of the property sale price has been collected. Previously, the revenue
and costs were recognized at the time the contract was executed with the
customer.

For preneed sales of cemetery merchandise, primarily vaults and markers,
and preneed sales of cemetery service fees, primarily openings and closings of
burial sites and installations of markers, the associated revenue and all costs
to acquire the sale are deferred until the merchandise is delivered or the
service is performed. Previously, the revenue and costs were recognized at the
time the contract was executed with the customer.

Cemetery merchandise trust earnings are deferred until the underlying
merchandise is delivered. Previously, the earnings were recognized as earned in
the trust.

Accounting for preneed funeral service sales and earnings on preneed
funeral merchandise and services trust funds was not affected, as those revenues
were recognized upon delivery of funeral merchandise and services under the
Company's historical accounting methods.

Preneed funeral merchandise sales, primarily caskets, and associated direct
selling costs, primarily commissions and direct marketing costs, are deferred
until the merchandise is delivered, at which time they will be reflected in
funeral revenue and funeral cost of sales, respectively. Previously, these sales
and associated direct costs were recognized as funeral revenue and funeral cost
of sales, respectively, when the contract was executed with the customer.

The method of accounting for perpetual care trusts was not affected.
Earnings on those trusts continue to be recognized as they are earned in the
trusts to offset the costs of maintaining the Company's cemeteries.

The implementation of SAB No. 101 resulted in several changes to the
Company's balance sheet including the addition of two new categories:
prearranged receivables and prearranged deferred revenue. Prearranged
receivables are related to preneed sales of funeral and cemetery merchandise and
services. Prearranged receivables represent the funds owed to the Company (1)
from preneed funeral merchandise and services trusts and from preneed cemetery
merchandise and services trusts, which represent amounts already paid by
customers, and realized earnings on those amounts, (2) from customers and (3)
from insurance companies. Prearranged deferred revenue represents the revenue
the Company will recognize upon delivery of

F-8
138
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(2) CHANGE IN ACCOUNTING PRINCIPLES -- (CONTINUED)

the preneed funeral and cemetery merchandise and services at the time of need.
The net change in prearranged receivables and prearranged deferred revenue is
recognized in the cash flow statement in the operating section as a change in
prearranged activity.

Prior to the adoption of SAB No. 101, neither the funeral trust assets nor
the receivables related to preneed funerals were included on the balance sheet.
Receivables due from customers related to preneed cemetery merchandise and
services were previously included with other receivables on the balance sheet.
The preneed cemetery merchandise and services trust asset was previously
presented net of the liability for the estimated cost to deliver cemetery
services and merchandise.

All direct costs to acquire the sales of preneed funeral and cemetery
merchandise and cemetery services are now included in deferred charges (asset).
Previously, these costs were expensed as incurred. Also included in deferred
charges are the costs to acquire preneed funeral service sales, which is
consistent with the Company's historical accounting methods. The cost to acquire
all preneed merchandise and service sales are included in the operating section
of the cash flow statement as prearranged acquisition costs.

The Company filed a Form 8-K dated March 14, 2001 which describes in detail
the new accounting methods as compared to its previous accounting methods.

The cumulative effect of these changes on prior years resulted in a
decrease in net earnings for the six months ended April 30, 2001 of $250,004
(net of a $166,669 income tax benefit), or $2.33 per share. The effect of the
change in accounting principles for the three and six months ended April 30,
2001 was an increase in net earnings of $3,148 and $6,868 respectively, or $.03
and $.06 per share, respectively. The Company corrected the application of
purchase price allocations related to certain prior period acquisitions. These
non-SAB No. 101 adjustments were immaterial to the Company's financial position
and current and prior period results.

(b) Other Changes

Effective November 1, 2000, the Company adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." SFAS No. 137, "Accounting
for Derivative Instruments and Hedging Activities -- Deferral of the Effective
Date of FASB Statement No. 133," and SFAS No. 138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities," are amendments to the
accounting and reporting standards of SFAS No. 133 and were adopted by the
Company concurrently with SFAS No. 133.

SFAS No. 133 requires the Company to recognize all derivatives on the
balance sheet at fair value. The adoption of SFAS No. 133 on November 1, 2000
did not have an impact on results of operations and resulted in $4,693 being
recognized in other comprehensive income for the cumulative effect of a change
in accounting for a derivative financial instrument. The notional amounts of
derivative financial instruments do not represent amounts exchanged between
parties and, therefore, are not a measure of the Company's exposure resulting
from its use of derivatives. The amounts exchanged are calculated based upon the
notional amounts as well as other terms of the instruments, which relate to
interest rates, exchange rates or other indices.

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 $200,000.
This agreement, which became effective March 4, 1999, effectively converted
$200,000

F-9
139
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(2) CHANGE IN ACCOUNTING PRINCIPLES -- (CONTINUED)

of variable-rate debt bearing interest based on three-month LIBOR to a fixed
rate based on the swap rate of 4.915 percent.

In accordance with SFAS No. 133, the Company accounts for the interest rate
swap as a cash flow hedge whereby the fair value of the interest rate swap is
reflected as a current liability in the accompanying consolidated balance sheet
with the offset recorded to other comprehensive income. The estimated fair value
of the interest rate swap as of April 30, 2001, based on quoted market prices,
was a loss of $816. The timing of the swap is simultaneous with the timing of
the variable interest payments. Therefore, interest expense includes amounts
related to the underlying hedged debt and to the swap in the accompanying
financial statements.

In 2000, the Financial Accounting Standards Board ("FASB" or the "Board")
issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities -- a replacement of FASB Statement No. 125."
SFAS No. 140 is effective for transfers occurring after March 31, 2001 and for
disclosures relating to securitization transactions and collateral for fiscal
years ending after December 15, 2000. The implementation of SFAS No. 140 did not
have an impact on the Company's results of operations or financial condition for
the three and six months ended April 30, 2001.

(3) PROPOSED ACCOUNTING CHANGES

In February 2001, the Financial Accounting Standards Board issued an
exposure draft of a proposed Statement, "Business Combinations and Intangible
Assets -- Accounting for Goodwill." If adopted, the exposure draft would
eliminate the amortization of goodwill, but would require that goodwill be
tested for impairment using a fair-value approach. Based on the current version
of the exposure draft, the Company would not be required or allowed to adopt the
provisions of the exposure draft until the first quarter of fiscal year 2002. If
the exposure draft is issued as currently proposed and on the schedule currently
contemplated, the Company estimates that it would incur a pre-tax noncash
impairment charge of between $100,000 and $300,000 for the Company's domestic
operations. However, the Company would no longer be required to amortize
goodwill, which amounted to $19,644 ($14,409 related to domestic operations) in
fiscal year 2000. Foreign operations would not be affected as they will have
been previously marked to fair value. See Note 8 -- "Subsequent
Events -- Foreign Asset Sales and Related Noncash Charges." The exposure draft
may or may not be issued as currently proposed, and any changes in its terms or
effective date, or changes in the fair value of the Company's relevant
businesses, could change the estimated impairment charge materially.

(4) ACQUISITIONS

During the six months ended April 30, 2001, the Company had no
acquisitions, compared to four cemeteries purchased during the six months ended
April 30, 2000.

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 were originally based on
preliminary information.

(5) CONTINGENCIES

In Re Stewart Enterprises, Inc. Securities Litigation, No. 01-30035 on the
docket of the United States Court of Appeals for the Fifth Circuit. On March 9,
2001, plaintiffs in this action voluntarily withdrew their appeal, effectively
ending the litigation. The appeal related to 16 putative securities class action
lawsuits filed
F-10
140
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(5) CONTINGENCIES -- (CONTINUED)

in the United States District Court for the Eastern District of Louisiana in the
fall of 1999 against the Company, certain of its directors and officers and the
lead underwriters in the Company's January 1999 common stock offering. In
December 2000, the District Court dismissed the suits against all defendants for
failure of the plaintiffs to state a claim. On January 4, 2001, the plaintiffs
filed a notice of appeal which has now been withdrawn. The Company made no
payments to the plaintiffs in connection with the withdrawal.

The Company and certain of its subsidiaries are parties to a number of
other legal proceedings that have arisen in the ordinary course of business.
While the outcome of these proceedings cannot be predicted with certainty,
management does not expect these matters to have a material adverse effect on
the consolidated financial position, results of operations or cash flows of the
Company.

The Company carries insurance with coverages and coverage limits that it
believes to be adequate. Although there can be no assurance that such insurance
is sufficient to protect the Company against all contingencies, management
believes that its insurance protection is reasonable in view of the nature and
scope of the Company's operations.

(6) RECONCILIATION OF BASIC AND DILUTED PER SHARE DATA

<Table>
<Caption>
EARNINGS SHARES PER SHARE
THREE MONTHS ENDED APRIL 30, 2001 (NUMERATOR) (DENOMINATOR) DATA
- --------------------------------- ----------- ------------- ---------

Net earnings...................................... $16,608
=======
Basic earnings per common share:
Earnings available to common
shareholders.......................... $16,608 107,306 $.15
====
Effect of dilutive securities:
Time-vest stock options assumed
exercised............................. -- 14
------- -------
Diluted earnings per common share:
Earnings available to common
shareholders plus time-vest stock
options assumed exercised............. $16,608 107,320 $.15
======= ======= ====
</Table>

<Table>
<Caption>
EARNINGS SHARES PER SHARE
THREE MONTHS ENDED APRIL 30, 2000 (NUMERATOR) (DENOMINATOR) DATA
- --------------------------------- ----------- ------------- ---------

Net earnings...................................... $19,332
=======
Basic earnings per common share:
Earnings available to common
shareholders.......................... $19,332 106,557 $.18
====
Effect of dilutive securities:
Time-vest stock options assumed
exercised............................. -- 39
------- -------
Diluted earnings per common share:
Earnings available to common
shareholders plus time-vest stock
options assumed exercised............. $19,332 106,596 $.18
======= ======= ====
</Table>

F-11
141
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(6) RECONCILIATION OF BASIC AND DILUTED PER SHARE DATA -- (CONTINUED)

<Table>
<Caption>
EARNINGS SHARES PER SHARE
SIX MONTHS ENDED APRIL 30, 2001 (NUMERATOR) (DENOMINATOR) DATA
- ------------------------------- ----------- ------------- ---------

Earnings before cumulative effect of change in
accounting principles........................... $33,423
=======
Basic earnings per common share:
Earnings available to common
shareholders.......................... $33,423 107,131 $.31
====
Effect of dilutive securities:
Time-vest stock options assumed
exercised............................. -- 5
------- -------
Diluted earnings per common share:
Earnings available to common
shareholders plus time-vest stock
options assumed exercised............. $33,423 107,136 $.31
======= ======= ====
</Table>

<Table>
<Caption>
EARNINGS SHARES PER SHARE
SIX MONTHS ENDED APRIL 30, 2000 (NUMERATOR) (DENOMINATOR) DATA
- ------------------------------- ----------- ------------- ---------

Net earnings...................................... $38,173
=======
Basic earnings per common share:
Earnings available to common
shareholders.......................... $38,173 106,414 $.36
====
Effect of dilutive securities:
Time-vest stock options assumed
exercised............................. -- 18
------- -------
Diluted earnings per common share:
Earnings available to common
shareholders plus time-vest stock
options assumed exercised............. $38,173 106,432 $.36
======= ======= ====
</Table>

Options to purchase 8,005,594 and 8,161,911 shares of common stock at
prices ranging from $4.28 to $27.25 per share and $3.44 to $27.25 per share were
outstanding during the three and six months ended April 30, 2001, respectively,
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 October 31, 2001 and April
12, 2005, were still outstanding as of April 30, 2001.

Options to purchase 7,005,126 and 5,528,180 shares of common stock at
prices ranging from $5.50 to $27.25 per share were outstanding during the three
and six months ended April 30, 2000, respectively, 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.

F-12
142
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(7) SEGMENT DATA

The Company's reportable segment information was as follows:

<Table>
<Caption>
RECONCILING CONSOLIDATED
FUNERAL CEMETERY ITEMS(1) TOTALS
---------- --------- ----------- ------------

Revenues from external customers:
Three months ended April 30,
2001.............................. $ 107,958 62,981 -- $ 170,939
2000.............................. $ 115,741 73,120 -- $ 188,861
Six months ended April 30,
2001.............................. $ 215,307 132,322 -- $ 347,629
2000.............................. $ 238,387 143,434 -- $ 381,821
Gross profit:
Three months ended April 30,
2001.............................. $ 25,592 15,623 -- $ 41,215
2000.............................. $ 30,805 18,979 -- $ 49,784
Six months ended April 30,
2001.............................. $ 50,335 33,965 -- $ 84,300
2000.............................. $ 65,538 32,954 -- $ 98,492
Total assets:
April 30, 2001....................... $2,344,182 1,263,496 70,368 $3,678,046
October 31, 2000..................... $1,253,754 1,145,612 76,825 $2,476,191
</Table>

- ---------------

(1) Reconciling items consist of unallocated corporate assets, depreciation and
amortization on unallocated corporate assets and additions to corporate
long-lived assets.

A reconciliation of total segment gross profit to total earnings before
income taxes and cumulative effect of change in accounting principles for the
three and six months ended April 30, 2001 and 2000, is as follows:

<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
------------------- -------------------
2001 2000 2001 2000
-------- -------- -------- --------

Gross profit for reportable segments........ $ 41,215 $ 49,784 $ 84,300 $ 98,492
Corporate general and administrative
expenses.................................. (4,905) (4,883) (9,066) (10,143)
Interest expense, net....................... (12,504) (14,447) (25,783) (29,030)
Other income (expense), net................. 2,349 (10) 3,184 796
-------- -------- -------- --------
Earnings before income taxes and cumulative
effect of change in accounting
principles................................ $ 26,155 $ 30,444 $ 52,635 $ 60,115
======== ======== ======== ========
</Table>

(8) SUBSEQUENT EVENTS

(a) Refinancing Transactions

On May 15, 2001, the Company commenced a tender offer for up to $200,000 of
its $300,000 publicly held senior notes as the first step in a comprehensive
plan to refinance substantially all of its long-term debt. Pursuant to that
plan, the Company also expects to refinance its $600,000 revolving credit
facility (of which $442,000 was outstanding as of May 31, 2001) and redeem all
of its privately held senior notes ($64,762 was outstanding as of May 31, 2001).

F-13
143
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(8) SUBSEQUENT EVENTS -- CONTINUED

In order to provide the funds necessary to refinance those obligations and
pay related tender premiums, prepayment penalties, fees and expenses, the
Company plans to privately place, under Rule 144A, $300,000 in notes and to
enter into new senior secured credit facilities which are expected to consist of
a $225,000 four-year revolving credit facility, a $75,000 18-month asset sale
term loan and a $250,000 five-year term loan B. The obligations under the new
senior secured credit facilities and the new notes will be guaranteed by
substantially all of the Company's domestic subsidiaries. The obligations and
guarantees under the new senior secured credit facilities will be secured by a
substantial portion of the assets of the Company and the subsidiary guarantors.
If the refinancing transactions are completed, the publicly held senior notes
not purchased in the tender offer will be secured equally and ratably with the
new senior secured credit facilities but will not be guaranteed.

The purpose of these transactions is primarily to improve the Company's
liquidity by retiring its $600,000 revolving credit facility, which matures on
April 30, 2002, and replacing it with the smaller revolving credit facility,
which will be due in 2005. In addition, the refinancing plan will generally
extend the maturities of the Company's other long-term debt, except for the
18-month asset sale term loan, which will provide the Company with shorter-term
financing while it pursues the sale of its foreign operations, excess cemetery
property and certain other assets. Although the Company's refinancing plan is
designed to improve the Company's liquidity, the new financing will result in
significantly higher interest costs, and the covenants to be contained in the
new credit agreement will be significantly more restrictive than the covenants
in its current credit agreement. As of April 30, 2001, the Company's weighted
average cost of debt was 6.3 percent. Upon completion of the refinancing, the
Company expects that its average borrowing cost will increase by 350 to 400
basis points. However, the effect of the rate increases may be mitigated in the
future if the Company is able to substantially reduce its total debt with the
proceeds from the sale of its foreign operations. In addition, the Company
expects to incur charges in the range of $5,000 to $6,000 after taxes in the
quarter ending July 31, 2001, relating to the early extinguishment of debt. In
connection with the refinancing transactions, the Company expects to incur
tender premiums, prepayment penalties and other fees and expenses which will
result in a cash outlay of approximately $31,000. This cash outlay has been
reflected in the expected 350 to 400 basis point increase in the Company's rates
and in the early extinguishment of debt charge previously mentioned.

Each of the refinancing transactions will be conditioned on the completion
of the others, and none are yet the subject of definitive agreements.
Accordingly, no assurance can be given that any of the refinancing transactions
will be completed successfully.

(b) Foreign Asset Sales and Related Noncash Charges

The Company has decided to pursue the sale of its foreign operations. Its
financial advisors have completed their evaluation of those operations, and
except for Argentina, have submitted financial and other information to
prospective buyers and have received one or more indications of interest and/or
formal proposals for the purchase of each of the Company's foreign operations.
The sale process in Argentina will begin in the near term. The Company is now in
various stages of negotiations with prospective buyers and believes that it will
be able to dispose of all foreign operations at acceptable prices, resulting in
cash proceeds within the range of $200,000 to $250,000 including tax benefits.
Further, the Company expects these sales to be completed before the end of
fiscal year 2002. The revenues, operating earnings and EBITDA for the Company's
foreign operations in fiscal year 2000 pro forma for SAB No. 101 were $139,826
($129,676 funeral and $10,150 cemetery), $22,712 and $36,377, respectively. The
Company defines EBITDA as

F-14
144
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(8) SUBSEQUENT EVENTS -- CONTINUED

earnings before the cumulative effect of the change in accounting principles and
before gross interest expense, taxes, depreciation and amortization. The
Company's consolidated EBITDA for fiscal year 2000 was $229,378 (pro forma to
reflect the changes resulting from its implementation of SAB No. 101). After
applying all net proceeds to reduce debt, the net reduction in earnings per
share, assuming all sales are consummated, is expected to be approximately
$0.04.

Based on its progress to date and management's and the Board of Directors'
decision to proceed with these sales if acceptable prices and terms can be
obtained, the Company will be writing down the aggregate value of these assets
to their estimated fair value. As a result, the Company estimates that it will
incur an aggregate pre-tax noncash charge to earnings of $230,000 to $250,000
($175,000 to $195,000, or $1.62 to $1.81 per share, after tax) in the quarter
ending July 31, 2001. Since the Company has already reduced shareholders' equity
for the cumulative foreign translation adjustment incurred in each period that
it has owned these businesses, the Company estimates that the total charge to
shareholders' equity will be $115,000 to $135,000 after tax, all of which will
be recorded in the quarter ending July 31, 2001.

In accordance with the aforementioned plans, the Company announced in a
press release dated June 4, 2001, that it has entered into a definitive
agreement to sell its operations in Mexico. The net proceeds from the sale will
be approximately US$70,000 before taxes, which will be used to pay down
outstanding debt. The Company expects to recognize a small gain or loss on that
sale, although the exact amount will depend on the exchange rate of the Mexican
peso and the U.S. dollar at the time of closing. The transaction is scheduled to
close on or about July 31, 2001, and is subject to customary closing conditions
and a 45-day antitrust review period under Mexican antitrust laws. The revenues,
operating earnings and EBITDA for the Company's Mexican operations in fiscal
year 2000 pro forma for SAB No. 101 were $22,774, $10,145 and $12,723,
respectively.

(d) Other Noncash Charges

In addition to its foreign operations, the Company has identified certain
assets, primarily excess cemetery property and funeral home real estate, that it
expects to sell. In addition, it has reviewed noncompetition agreements that it
entered into with sellers, key employees and others in connection with previous
acquisitions, and it is considering relieving some of these individuals from the
obligation not to compete, although it would continue to make the payments in
accordance with the contract terms. This obligation, which the Company
previously recorded, will be included in other long-term liabilities on the
balance sheet. As a result of the foregoing, the Company estimates that it would
incur an aggregate pre-tax noncash charge to earnings of $15,000 to $30,000
($9,000 to $18,000, or $.08 to $.17 per share, after tax) in the quarter ending
July 31, 2001.

(9) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES

The following presents the condensed consolidating historical financial
statements as of April 30, 2001 and October 31, 2000 and for the three months
and six months ended April 30, 2001, for the direct and indirect domestic
subsidiaries of the Company that are anticipated to serve as guarantors of the
Senior Subordinated Notes, and the financial results of the Company's
subsidiaries that are not anticipated to serve as guarantors.

F-15
145
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(9) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES -- CONTINUED

CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS AND OTHER COMPREHENSIVE INCOME

<Table>
<Caption>
THREE MONTHS ENDED APRIL 30, 2001
--------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------

Revenues:
Funeral......................... $ -- $ 73,586 $ 34,372 $ -- $107,958
Cemetery........................ -- 53,807 9,174 -- 62,981
------- -------- -------- ------- --------
-- 127,393 43,546 -- 170,939
------- -------- -------- ------- --------
Costs and expenses:
Funeral......................... -- 55,388 26,978 -- 82,366
Cemetery........................ -- 39,379 7,949 30 47,358
------- -------- -------- ------- --------
-- 94,767 34,927 30 129,724
------- -------- -------- ------- --------
Gross profit.................... -- 32,626 8,619 (30) 41,215
Corporate general and
administrative expenses......... 5,072 (159) (2) (6) 4,905
------- -------- -------- ------- --------
Operating earnings (loss)....... (5,072) 32,785 8,621 (24) 36,310
Interest income (expense), net.... 20,137 (22,221) (11,987) 1,567 (12,504)
Other income, net................. 600 2,103 1,213 (1,567) 2,349
------- -------- -------- ------- --------
Earnings (loss) before income
taxes........................ 15,665 12,667 (2,153) (24) 26,155
Income taxes...................... 5,717 4,458 (618) (10) 9,547
------- -------- -------- ------- --------
Net earnings (loss) before
equity in subsidiaries....... 9,948 8,209 (1,535) (14) 16,608
------- -------- -------- ------- --------
Equity in subsidiaries............ 6,660 -- -- (6,660) --
------- -------- -------- ------- --------
Net earnings (loss)............. 16,608 8,209 (1,535) (6,674) 16,608
Other comprehensive income,
net.......................... (816) (1,079) (7,032) -- (8,927)
------- -------- -------- ------- --------
Comprehensive income (loss)..... $15,792 $ 7,130 $ (8,567) $(6,674) $ 7,681
======= ======== ======== ======= ========
</Table>

F-16
146
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(9) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES -- CONTINUED

CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS AND OTHER COMPREHENSIVE INCOME

<Table>
<Caption>
THREE MONTHS ENDED APRIL 30, 2000
--------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------

Revenues:
Funeral......................... $ -- $ 70,911 $ 44,830 $ -- $115,741
Cemetery........................ -- 64,166 8,954 -- 73,120
------- -------- -------- -------- --------
-- 135,077 53,784 -- 188,861
------- -------- -------- -------- --------
Costs and expenses:
Funeral......................... -- 52,944 31,992 -- 84,936
Cemetery........................ -- 46,197 7,938 6 54,141
------- -------- -------- -------- --------
-- 99,141 39,930 6 139,077
------- -------- -------- -------- --------
Gross profit.................... -- 35,936 13,854 (6) 49,784
Corporate general and
administrative expenses......... 4,837 46 -- -- 4,883
------- -------- -------- -------- --------
Operating earnings (loss)....... (4,837) 35,890 13,854 (6) 44,901
Interest income (expense), net.... 14,487 (20,217) (9,487) 770 (14,447)
Other income (loss), net.......... (335) 966 129 (770) (10)
------- -------- -------- -------- --------
Earnings before income taxes.... 9,315 16,639 4,496 (6) 30,444
Income taxes...................... 3,400 6,073 1,641 (2) 11,112
------- -------- -------- -------- --------
Net earnings before equity in
subsidiaries................. 5,915 10,566 2,855 (4) 19,332
------- -------- -------- -------- --------
Equity in subsidiaries............ 13,417 -- -- (13,417) --
------- -------- -------- -------- --------
Net earnings.................... 19,332 10,566 2,855 (13,421) 19,332
Other comprehensive income,
net.......................... -- (2,161) (12,884) -- (15,045)
------- -------- -------- -------- --------
Comprehensive income (loss)..... $19,332 $ 8,405 $(10,029) $(13,421) $ 4,287
======= ======== ======== ======== ========
</Table>

F-17
147
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(9) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES -- CONTINUED

CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS AND OTHER COMPREHENSIVE INCOME

<Table>
<Caption>
SIX MONTHS ENDED APRIL 30, 2001
-----------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------

Revenues:
Funeral.......................... $ -- $ 145,107 $ 70,200 $ -- $ 215,307
Cemetery......................... -- 115,994 16,328 -- 132,322
--------- --------- -------- -------- ---------
-- 261,101 86,528 -- 347,629
--------- --------- -------- -------- ---------
Costs and expenses:
Funeral.......................... -- 110,282 54,690 -- 164,972
Cemetery......................... -- 82,865 15,480 12 98,357
--------- --------- -------- -------- ---------
-- 193,147 70,170 12 263,329
--------- --------- -------- -------- ---------
Gross profit..................... -- 67,954 16,358 (12) 84,300
Corporate general and
administrative expenses.......... 9,345 (279) -- -- 9,066
--------- --------- -------- -------- ---------
Operating earnings (loss)........ (9,345) 68,233 16,358 (12) 75,234
Interest income (expense), net..... 40,557 (46,039) (23,939) 3,638 (25,783)
Other income, net.................. 1,731 2,707 2,384 (3,638) 3,184
--------- --------- -------- -------- ---------
Earnings (loss) before income
taxes and cumulative effect of
change in accounting
principles.................... 32,943 24,901 (5,197) (12) 52,635
Income taxes....................... 12,024 9,089 (1,897) (4) 19,212
--------- --------- -------- -------- ---------
Earnings (loss) before cumulative
effect of change in accounting
principles.................... 20,919 15,812 (3,300) (8) 33,423
Cumulative effect of change in
accounting principles............ -- (234,016) (15,988) -- (250,004)
--------- --------- -------- -------- ---------
Net earnings (loss) before equity
in subsidiaries............... 20,919 (218,204) (19,288) (8) (216,581)
--------- --------- -------- -------- ---------
Equity in subsidiaries............. (237,500) -- -- 237,500 --
--------- --------- -------- -------- ---------
Net loss......................... (216,581) (218,204) (19,288) 237,492 (216,581)
Other comprehensive income,
net........................... 386 7,437 5,154 -- 12,977
--------- --------- -------- -------- ---------
Comprehensive loss............... $(216,195) $(210,767) $(14,134) $237,492 $(203,604)
========= ========= ======== ======== =========
</Table>

F-18
148
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(9) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES -- CONTINUED

CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS AND OTHER COMPREHENSIVE INCOME

<Table>
<Caption>
SIX MONTHS ENDED APRIL 30, 2000
---------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------

Revenues:
Funeral......................... $ -- $151,282 $ 87,105 $ -- $238,387
Cemetery........................ -- 125,408 18,026 -- 143,434
-------- -------- -------- -------- --------
-- 276,690 105,131 -- 381,821
-------- -------- -------- -------- --------
Costs and expenses:
Funeral......................... -- 107,097 65,752 -- 172,849
Cemetery........................ -- 93,840 16,628 12 110,480
-------- -------- -------- -------- --------
-- 200,937 82,380 12 283,329
-------- -------- -------- -------- --------
Gross profit.................... -- 75,753 22,751 (12) 98,492
Corporate general and
administrative expenses......... 10,039 104 -- -- 10,143
-------- -------- -------- -------- --------
Operating earnings (loss)....... (10,039) 75,649 22,751 (12) 88,349
Interest income (expense), net.... 29,664 (40,768) (19,016) 1,090 (29,030)
Other income (loss), net.......... (158) 1,528 516 (1,090) 796
-------- -------- -------- -------- --------
Earnings before income taxes.... 19,467 36,409 4,251 (12) 60,115
Income taxes...................... 7,105 13,289 1,552 (4) 21,942
-------- -------- -------- -------- --------
Net earnings before equity in
subsidiaries................. 12,362 23,120 2,699 (8) 38,173
-------- -------- -------- -------- --------
Equity in subsidiaries............ 25,811 -- -- (25,811) --
-------- -------- -------- -------- --------
Net earnings.................... 38,173 23,120 2,699 (25,819) 38,173
Other comprehensive income,
net.......................... -- (3,392) (18,077) -- (21,469)
-------- -------- -------- -------- --------
Comprehensive income (loss)..... $ 38,173 $ 19,728 $(15,378) $(25,819) $ 16,704
======== ======== ======== ======== ========
</Table>

F-19
149
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(9) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES -- CONTINUED

CONDENSED CONSOLIDATING BALANCE SHEETS

<Table>
<Caption>
APRIL 30, 2001
------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------- ------------ ------------

ASSETS

Current assets:
Cash and cash equivalent
investments................... $ 65,997 $ (1,960) $ 39,684 $ -- $ 103,721
Marketable securities............ 2,797 (1,549) 1,840 -- 3,088
Receivables, net of allowances... 1,181 53,521 38,123 -- 92,825
Inventories...................... 369 38,741 13,628 -- 52,738
Prepaid expenses................. 1,893 1,543 2,182 -- 5,618
----------- ---------- --------- -------- ----------
Total current assets.......... 72,237 90,296 95,457 -- 257,990
Receivables due beyond one year,
net of allowances................ -- 61,680 26,409 -- 88,089
Prearranged receivables............ -- 1,263,872 130,166 -- 1,394,038
Intangible assets.................. 147 474,135 209,332 -- 683,614
Deferred charges................... 1,869 240,511 23,586 -- 265,966
Cemetery property, at cost......... -- 381,754 56,910 107 438,771
Property and equipment, at cost.... 26,325 429,498 147,004 96 602,923
Less accumulated depreciation...... 8,618 122,749 28,313 39 159,719
----------- ---------- --------- -------- ----------
Net property and equipment......... 17,707 306,749 118,691 57 443,204
Deferred income taxes.............. (133) 96,472 -- -- 96,339
Investment in subsidiaries......... 86,421 -- -- (86,421) --
Other assets....................... 1,802 1,322 6,911 -- 10,035
----------- ---------- --------- -------- ----------
$ 180,050 $2,916,791 $ 667,462 $(86,257) $3,678,046
=========== ========== ========= ======== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current maturities of long-term
debt.......................... $ 501,150 $ -- $ -- $ -- $ 501,150
Accounts payable................. 345 798 13,367 29 14,539
Accrued expenses................. 13,950 42,341 9,601 -- 65,892
Income taxes payable............. (797) 2,194 7,044 (1,760) 6,681
Deferred income taxes............ (307) 14,817 2,597 268 17,375
----------- ---------- --------- -------- ----------
Total current liabilities..... 514,341 60,150 32,609 (1,463) 605,637
Long-term debt, less current
maturities....................... 288,765 (549) 77,007 -- 365,223
Intercompany payables, net......... (1,600,084) 1,126,088 489,520 (15,524) --
Deferred income taxes.............. 4,160 (2,226) (1,326) (608) --
Prearranged deferred revenue....... 500 1,652,886 167,020 -- 1,820,406
Other long-term liabilities........ -- 6,433 7,265 152 13,850
----------- ---------- --------- -------- ----------
Total liabilities............. (792,318) 2,842,782 772,095 (17,443) 2,805,116
----------- ---------- --------- -------- ----------
Common stock....................... 107,520 336 53 (389) 107,520
Other.............................. 865,664 74,712 (6,287) (68,425) 865,664
Accumulated other comprehensive
loss............................. (816) (1,039) (98,399) -- (100,254)
----------- ---------- --------- -------- ----------
Total shareholders' equity.... 972,368 74,009 (104,633) (68,814) 872,930
----------- ---------- --------- -------- ----------
$ 180,050 $2,916,791 $ 667,462 $(86,257) $3,678,046
=========== ========== ========= ======== ==========
</Table>

F-20
150
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(9) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES -- CONTINUED

CONDENSED CONSOLIDATING BALANCE SHEETS

<Table>
<Caption>
OCTOBER 31, 2000
------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------- ------------ ------------

ASSETS

Current assets:
Cash and cash equivalent
investments................... $ 59,862 $ (299) $ 32,032 $ -- $ 91,595
Marketable securities............ 5,356 190 1,727 -- 7,273
Receivables, net of allowances... 1,004 122,232 54,238 -- 177,474
Inventories...................... 383 44,467 15,799 -- 60,649
Prepaid expenses................. 769 1,941 1,353 -- 4,063
----------- ---------- --------- --------- ----------
Total current assets.......... 67,374 168,531 105,149 -- 341,054
Receivables due beyond one year,
net of allowances................ -- 152,093 64,980 -- 217,073
Intangible assets.................. 191 457,088 211,183 -- 668,462
Deferred charges................... 2,007 108,792 15,359 -- 126,158
Cemetery property, at cost......... -- 377,898 63,748 -- 441,646
Property and equipment, at cost.... 24,768 422,609 145,675 96 593,148
Less accumulated depreciation...... 6,924 113,325 24,900 70 145,219
----------- ---------- --------- --------- ----------
Net property and equipment......... 17,844 309,284 120,775 26 447,929
Merchandise trust, less estimated
cost to deliver.................. -- 112,732 (26,763) -- 85,969
Investment in subsidiaries......... 323,921 -- -- (323,921) --
Other assets....................... 1,505 1,785 5,427 -- 8,717
----------- ---------- --------- --------- ----------
$ 412,842 $1,688,203 $ 559,858 $(323,895) $2,337,008
=========== ========== ========= ========= ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current maturities of long-term
debt.......................... $ 29,857 $ -- $ -- $ -- $ 29,857
Accounts payable................. 299 3,988 16,026 29 20,342
Accrued expenses................. 14,572 43,409 11,181 (136) 69,026
Income taxes payable............. (13,796) 3,448 12,031 (1,683) --
Deferred income taxes............ (307) 14,695 2,425 (1,562) 15,251
----------- ---------- --------- --------- ----------
Total current liabilities..... 30,625 65,540 41,663 (3,352) 134,476
Long-term debt, less current
maturities....................... 836,385 -- 84,285 -- 920,670
Intercompany payables, net......... (1,654,754) 1,194,997 473,017 (13,260) --
Deferred income taxes.............. 13,400 71,857 (276) (1,241) 83,740
Deferred revenue................... 500 64,664 43,580 -- 108,744
Other long-term liabilities........ -- 6,481 8,088 152 14,721
----------- ---------- --------- --------- ----------
Total liabilities............. (773,844) 1,403,539 650,357 (17,701) 1,262,351
----------- ---------- --------- --------- ----------
Common stock....................... 106,832 224 53 (277) 106,832
Other.............................. 1,081,056 292,916 13,001 (305,917) 1,081,056
Accumulated other comprehensive
loss............................. (1,202) (8,476) (103,553) -- (113,231)
----------- ---------- --------- --------- ----------
Total shareholders' equity.... 1,186,686 284,664 (90,499) (306,194) 1,074,657
----------- ---------- --------- --------- ----------
$ 412,842 $1,688,203 $ 559,858 $(323,895) $2,337,008
=========== ========== ========= ========= ==========
</Table>

F-21
151
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(9) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES -- CONTINUED

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

<Table>
<Caption>
SIX MONTHS ENDED APRIL 30, 2001
---------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------

Net cash provided by (used in)
operating activities............ $ 27,185 $ 29,174 $(1,331) $ 2,264 $ 57,292
-------- -------- ------- ------- --------
Cash flows from investing
activities:
Proceeds from sales of
marketable securities........ -- 4,474 -- -- 4,474
Purchases of marketable
securities and long-term
investments.................. -- -- (511) -- (511)
Proceeds from sale of
subsidiaries................. -- 2,881 -- -- 2,881
Additions to property and
equipment.................... -- (9,900) (1,346) -- (11,246)
Other........................... -- 619 608 -- 1,227
-------- -------- ------- ------- --------
Net cash used in investing
activities................. -- (1,926) (1,249) -- (3,175)
-------- -------- ------- ------- --------
Cash flows from financing
activities:
Funeral trust withdrawal........ -- 40,000 -- -- 40,000
Repayments of long-term debt.... (76,330) -- (7,153) -- (83,483)
Intercompany receivables
(payables)................... 54,670 (68,909) 16,503 (2,264) --
Issuance of common stock........ 610 -- -- -- 610
-------- -------- ------- ------- --------
Net cash provided by (used
in) financing activities... (21,050) (28,909) 9,350 (2,264) (42,873)
-------- -------- ------- ------- --------
Effect of exchange rates on cash
and cash equivalents............ -- -- 882 -- 882
-------- -------- ------- ------- --------
Net increase (decrease) in cash... 6,135 (1,661) 7,652 -- 12,126
Cash and cash equivalents,
beginning of period............. 59,862 (299) 32,032 -- 91,595
-------- -------- ------- ------- --------
Cash and cash equivalents, end of
period.......................... $ 65,997 $ (1,960) $39,684 $ -- $103,721
======== ======== ======= ======= ========
</Table>

F-22
152
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(9) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES -- CONTINUED

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

<Table>
<Caption>
SIX MONTHS ENDED APRIL 30, 2000
--------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
------- ------------ ------------- ------------ ------------

Net cash provided by (used in)
operating activities............ $22,759 $ 28,485 $(14,640) $ 1,838 $ 38,442
------- -------- -------- ------- --------
Cash flows from investing
activities:
Proceeds from sales of
marketable securities........ -- 45,358 458 -- 45,816
Purchases of marketable
securities and long-term
investments.................. -- (7,821) (5,125) -- (12,946)
Additions to property and
equipment.................... (1,610) (20,034) (1,983) -- (23,627)
Other........................... -- 1,083 125 -- 1,208
------- -------- -------- ------- --------
Net cash provided by (used
in) investing activities... (1,610) 18,586 (6,525) -- 10,451
------- -------- -------- ------- --------
Cash flows from financing
activities:
Proceeds from long-term debt.... 8,366 -- -- -- 8,366
Repayments of long-term debt.... (8,880) -- (694) -- (9,574)
Intercompany receivables
(payables)................... 19,043 (45,613) 28,408 (1,838) --
Issuance of common stock........ 1,923 -- -- -- 1,923
Dividends....................... (4,261) -- -- -- (4,261)
------- -------- -------- ------- --------
Net cash provided by (used
in) financing activities... 16,191 (45,613) 27,714 (1,838) (3,546)
------- -------- -------- ------- --------
Effect of exchange rates on cash
and cash equivalents............ -- -- (2,050) -- (2,050)
------- -------- -------- ------- --------
Net increase in cash.............. 37,340 1,458 4,499 -- 43,297
Cash and cash equivalents,
beginning of period............. 11,689 1,649 17,539 -- 30,877
------- -------- -------- ------- --------
Cash and cash equivalents, end of
period.......................... $49,029 $ 3,107 $ 22,038 $ -- $ 74,174
======= ======== ======== ======= ========
</Table>

F-23
153

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Shareholders of Stewart Enterprises, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, shareholders' equity and cash flows present
fairly, in all material respects, the financial position of Stewart Enterprises,
Inc. and Subsidiaries at October 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
October 31, 2000, in conformity with accounting principles generally accepted in
the United States of America. These financial statements are the responsibility
of the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

As described in Note 3 to the financial statements, the Company changed its
method of accounting for funeral services investment trust fund earnings in
1999.

PricewaterhouseCoopers LLP

New Orleans, Louisiana
December 12, 2000, except for
Note 19 as to which the date is
January 9, 2001

F-24
154

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>
YEAR ENDED OCTOBER 31,
------------------------------
2000 1999 1998
-------- -------- --------

Revenues:
Funeral................................................... $451,852 $445,877 $379,095
Cemetery.................................................. 282,949 310,231 269,270
-------- -------- --------
734,801 756,108 648,365
-------- -------- --------
Costs and expenses:
Funeral................................................... 335,163 319,002 260,669
Cemetery.................................................. 220,598 226,705 191,712
-------- -------- --------
555,761 545,707 452,381
-------- -------- --------
Gross profit.............................................. 179,040 210,401 195,984
Corporate general and administrative expenses............... 19,763 19,161 16,621
-------- -------- --------
Operating earnings before performance-based stock
options................................................ 159,277 191,240 179,363
Performance-based stock options............................. -- -- 76,762
-------- -------- --------
Operating earnings........................................ 159,277 191,240 102,601
Interest expense, net....................................... (56,284) (52,174) (41,792)
Other income, net........................................... 2,194 3,485 4,155
-------- -------- --------
Earnings before income taxes and cumulative effect of
change in accounting principle......................... 105,187 142,551 64,964
Income taxes................................................ 38,393 52,031 23,062
-------- -------- --------
Earnings before cumulative effect of change in accounting
principle.............................................. 66,794 90,520 41,902
Cumulative effect of change in accounting principle (net of
$28,798 income tax benefit in 1999) (Note 3).............. -- (50,101) --
-------- -------- --------
Net earnings.............................................. $ 66,794 $ 40,419 $ 41,902
======== ======== ========
Basic earnings per common share:
Earnings before cumulative effect of change in accounting
principle.............................................. $ .63 $ .84 $ .43
Cumulative effect of change in accounting principle....... -- (.47) --
-------- -------- --------
Net earnings.............................................. $ .63 $ .37 $ .43
======== ======== ========
Diluted earnings per common share:
Earnings before cumulative effect of change in accounting
principle.............................................. $ .63 $ .84 $ .43
Cumulative effect of change in accounting principle....... -- (.47) --
-------- -------- --------
Net earnings.............................................. $ .63 $ .37 $ .43
======== ======== ========
Weighted average common shares outstanding (in thousands):
Basic..................................................... 106,600 107,452 97,691
======== ======== ========
Diluted................................................... 106,603 107,834 98,444
======== ======== ========
Pro forma amounts assuming change in accounting principle
was applied retroactively:
Net earnings........................................... $ 33,199
========
Basic earnings per common share........................ $ .34
========
Diluted earnings per common share...................... $ .34
========
</Table>

See accompanying notes to consolidated financial statements.
F-25
155

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>
OCTOBER 31,
-----------------------
2000 1999
---------- ----------

ASSETS
Current assets:
Cash and cash equivalent investments...................... $ 91,595 $ 30,877
Marketable securities..................................... 7,273 46,549
Receivables, net of allowances............................ 177,474 176,215
Inventories............................................... 60,649 51,431
Prepaid expenses.......................................... 4,063 5,997
---------- ----------
Total current assets................................ 341,054 311,069
Receivables due beyond one year, net of allowances.......... 217,073 237,578
Intangible assets........................................... 668,462 673,361
Deferred charges............................................ 126,158 109,436
Cemetery property, at cost.................................. 441,646 424,032
Property and equipment, at cost:
Land...................................................... 78,736 83,237
Buildings................................................. 353,189 329,721
Equipment and other....................................... 161,223 158,722
---------- ----------
593,148 571,680
Less accumulated depreciation............................. 145,219 124,635
---------- ----------
Net property and equipment................................ 447,929 447,045
Long-term investments....................................... 4,203 16,812
Merchandise trust, less estimated cost to deliver........... 85,969 58,999
Other assets................................................ 4,514 5,548
---------- ----------
$2,337,008 $2,283,880
========== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...................... $ 29,857 $ 12,582
Accounts payable.......................................... 20,342 21,802
Accrued payroll........................................... 17,433 21,784
Accrued insurance......................................... 16,470 11,535
Accrued interest.......................................... 13,039 16,757
Accrued other............................................. 22,084 26,328
Income taxes payable...................................... -- 5,495
Deferred income taxes..................................... 15,251 17,193
---------- ----------
Total current liabilities............................... 134,476 133,476
Long-term debt, less current maturities..................... 920,670 938,831
Deferred income taxes....................................... 83,740 81,434
Deferred revenue............................................ 108,744 64,961
Other long-term liabilities................................. 14,721 8,566
---------- ----------
Total liabilities....................................... 1,262,351 1,227,268
---------- ----------
Commitments and contingencies (Note 16)
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
October 31, 2000 and 1999, respectively................ 103,277 102,664
Class B authorized 5,000,000 shares; issued and
outstanding 3,555,020 shares at October 31, 2000 and
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......................................... 407,398 347,002
Cumulative foreign translation adjustment................. (103,553) (65,152)
Unrealized depreciation of investments.................... (9,678) (3,348)
---------- ----------
Total shareholders' equity.............................. 1,074,657 1,056,612
---------- ----------
$2,337,008 $2,283,880
========== ==========
</Table>

See accompanying notes to consolidated financial statements.
F-26
156

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>
UNREALIZED
COMMON STOCK CUMULATIVE APPRECIATION
----------------------------- ADDITIONAL FOREIGN (DEPRECIATION) TOTAL
SHARES -- PAID-IN RETAINED TRANSLATION OF SHAREHOLDERS'
CLASSES A AND B AMOUNT CAPITAL EARNINGS ADJUSTMENT INVESTMENTS EQUITY
------------------ -------- ---------- -------- ----------- -------------- -------------
(IN THOUSANDS)

Balance October 31, 1997... 97,363(2) $ 97,363 $477,499 $279,104 $ (36,609) $ 2,213 $ 819,570
Comprehensive income:
Net earnings............. 41,902 41,902
Other comprehensive
income:
Foreign translation
adjustment........... (28,278) (28,278)
Unrealized depreciation
of investments....... (5,242) (5,242)
Deferred income tax
benefit on unrealized
depreciation of
investments.......... 1,861 1,861
------- -------- -------- -------- --------- -------- ----------
Total other
comprehensive
income............... (28,278) (3,381) (31,659)
------- -------- -------- -------- --------- -------- ----------
Total comprehensive
income................... 41,902 (28,278) (3,381) 10,243

Issuance of common stock... 68 68 1,320 1,388
Subsidiaries acquired with
common stock............. 294 294 7,411 7,705
Stock options exercised.... 637 637 14,714 15,351
Purchase and retirement of
common stock............. (334) (334) (8,767) (9,101)
Dividends ($.06 per
share)(1)................ (5,866) (5,866)
------- -------- -------- -------- --------- -------- ----------
Balance October 31, 1998... 98,028(2) $ 98,028 $492,177 $315,140 $ (64,887) $ (1,168) $ 839,290
======= ======== ======== ======== ========= ======== ==========

Comprehensive income:
Net earnings............. 40,419 40,419
Other comprehensive income:
Foreign translation
adjustment........... (265) (265)
Unrealized depreciation
of investments....... (3,433) (3,433)
Deferred income tax
benefit on unrealized
depreciation of
investments.......... 1,253 1,253
------- -------- -------- -------- --------- -------- ----------
Total other
comprehensive
income............... (265) (2,180) (2,445)
------- -------- -------- -------- --------- -------- ----------
Total comprehensive
income................... 40,419 (265) (2,180) 37,974

Sales and issuance of
common stock............. 13,741 13,741 206,713 220,454
Subsidiaries acquired with
common stock............. 19 19 281 300
Stock options exercised.... 11 11 91 102
Purchase and retirement of
common stock............. (5,580) (5,580) (27,371) (32,951)
Dividends ($.08 per
share)................... (8,557) (8,557)
------- -------- -------- -------- --------- -------- ----------
Balance October 31, 1999... 106,219(2) $106,219 $671,891 $347,002 $ (65,152) $ (3,348) $1,056,612
======= ======== ======== ======== ========= ======== ==========
</Table>

(continued)
F-27
157
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Balance October 31, 1999... 106,219(2) $106,219 $671,891 $347,002 $ (65,152) $ (3,348) $1,056,612
Comprehensive income:
Net earnings............. 66,794 66,794
Other comprehensive
income:
Foreign translation
adjustment........... (38,401) (38,401)
Unrealized depreciation
of investments....... (9,969) (9,969)
Deferred income tax
benefit on unrealized
depreciation of
investments.......... 3,639 3,639
------- -------- -------- -------- --------- -------- ----------
Total other
comprehensive
income............... (38,401) (6,330) (44,731)
------- -------- -------- -------- --------- -------- ----------
Total comprehensive
income................... 66,794 (38,401) (6,330) 22,063

Issuance of common stock... 613 613 1,767 2,380
Dividends ($.06 per
share)................... (6,398) (6,398)
------- -------- -------- -------- --------- -------- ----------
Balance October 31, 2000... 106,832(2) $106,832 $673,658 $407,398 $(103,553) $ (9,678) $1,074,657
======= ======== ======== ======== ========= ======== ==========
</Table>

- ---------------

(1) Share and per share information has been adjusted to give effect to a
two-for-one common stock split effective April 24, 1998.

(2) Includes 3,555 shares (in thousands) of Class B common stock.

See accompanying notes to consolidated financial statements.

F-28
158

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>
YEAR ENDED OCTOBER 31,
--------------------------------
2000 1999 1998
-------- --------- ---------

Cash flows from operating activities:
Net earnings.............................................. $ 66,794 $ 40,419 $ 41,902
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Performance-based stock options......................... -- -- 76,762
Depreciation and amortization........................... 54,267 50,620 38,742
Provision for doubtful accounts......................... 35,877 33,914 28,325
Cumulative effect of change in accounting principle..... -- 50,101 --
Net gains on sales of marketable securities............. (1,079) (4,221) (2,727)
Provision for deferred income taxes..................... 9,001 11,139 532
Changes in assets and liabilities, net of effects from
acquisitions:
Increase in prearranged funeral trust receivables..... -- -- (8,252)
Increase in other receivables......................... (20,897) (108,610) (90,997)
Increase in deferred charges and intangible assets.... (6,064) (7,987) (11,306)
Increase in inventories and cemetery property......... (16,336) (18,831) (15,343)
Increase (decrease) in accounts payable and accrued
expenses........................................... (6,751) 683 6,517
Increase in merchandise trust, less estimated cost to
deliver merchandise................................ (31,541) (28,761) (20,641)
Changes in prearranged funeral activity, net.......... (17,687) (10,807) (24,026)
Increase (decrease) in other.......................... 3,967 (2,041) 2,916
-------- --------- ---------
Net cash provided by operating activities............... 69,551 5,618 22,404
-------- --------- ---------
Cash flows from investing activities:
Proceeds from sale of marketable securities............... 65,100 42,240 19,039
Purchases of marketable securities and long-term
investments............................................. (13,771) (26,185) (30,438)
Purchases of subsidiaries, net of cash, seller financing
and stock issued........................................ (804) (162,032) (223,414)
Additions to property and equipment....................... (36,017) (54,883) (44,805)
Other..................................................... 1,326 3,111 2
-------- --------- ---------
Net cash provided by (used in) investing activities..... 15,834 (197,749) (279,616)
-------- --------- ---------
Cash flows from financing activities:
Proceeds from long-term debt.............................. 8,366 247,579 602,782
Repayments of long-term debt.............................. (23,150) (232,775) (270,682)
Retirement of performance-based stock options............. -- -- (69,431)
Issuance of common stock.................................. 2,380 220,556 11,738
Purchase and retirement of common stock................... -- (32,951) (9,101)
Dividends................................................. (6,398) (8,557) (5,866)
-------- --------- ---------
Net cash provided by (used in) financing activities..... (18,802) 193,852 259,440
-------- --------- ---------
Effect of exchange rates on cash and cash equivalents....... (5,865) (1,577) (3,135)
-------- --------- ---------
Net increase (decrease) in cash............................. 60,718 144 (907)
Cash and cash equivalents, beginning of year................ 30,877 30,733 31,640
-------- --------- ---------
Cash and cash equivalents, end of year...................... $ 91,595 $ 30,877 $ 30,733
======== ========= =========
Supplemental cash flow information:
Cash paid during the year for:
Income taxes............................................ $ 30,400 $ 48,900 $ 8,900
Interest................................................ $ 65,100 $ 51,400 $ 38,000

Noncash investing and financing activities:
Subsidiaries acquired through seller financing............ $ 13,900 $ 1,600 $ 16,200
Subsidiaries acquired with common stock................... $ -- $ 300 $ 7,705
</Table>

See accompanying notes to consolidated financial statements.

F-29
159

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(1) THE COMPANY

Stewart Enterprises, Inc. (the "Company") is the third largest provider of
products and services in the death care industry in North America. Through its
subsidiaries, the Company offers a complete line of funeral merchandise and
services, along with cemetery property, merchandise and services. For the year
ended October 31, 2000, the funeral and cemetery segments contributed
approximately 61 percent and 39 percent, respectively, of consolidated total
revenues and 65 percent and 35 percent, respectively, of consolidated total
gross profit.

As of October 31, 2000, the Company owned and operated 627 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. The Company commenced its international
operations in Mexico in fiscal year 1994 and entered Australia in fiscal year
1995, New Zealand and Canada in fiscal year 1996, Spain and Portugal in fiscal
year 1997, and the Netherlands, Argentina, France and Belgium in fiscal year
1998. For fiscal year 2000, foreign operations contributed approximately 20
percent of consolidated total revenue and, as of October 31, 2000, represented
approximately 19 percent of consolidated total assets.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Principles of Consolidation

The accompanying consolidated financial statements include the Company and
its subsidiaries. All significant intercompany balances and transactions have
been eliminated.

(b) Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, the 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.

Estimated fair value amounts have been determined using available market
information and the valuation methodologies described below. However,
considerable judgment is required in interpreting market data to develop
estimates of fair value. Accordingly, the estimates presented herein may not be
indicative of the amounts the Company could realize in a current market. The use
of different market assumptions or valuation methodologies may have a material
effect on the estimated fair value amounts.

The carrying amounts of cash and cash equivalents and current receivables
approximate fair value due to the short-term nature of these instruments. The
carrying amount of receivables due beyond one year approximates fair value
because they bear interest at rates currently offered by the Company for
receivables with similar terms and maturities. The carrying amounts of
marketable securities and long-term investments are stated at fair value as they
are classified as available for sale under the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The fair value of the Company's
long-term floating rate debt is estimated using future cash flows discounted at
market rates for similar types of borrowing arrangements. The fair value of the
Company's long-term fixed-rate debt is estimated using quoted market prices,
where applicable, or future cash flows discounted at rates for similar types of
borrowing arrangements. See Note 11.

F-30
160
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

(d) Inventories

Inventories are stated at the lower of cost (specific identification and
first-in, first-out methods) or net realizable value. The portion of developed
cemetery property that management estimates will be used in the next twelve
months is included in inventories.

(e) Depreciation and Amortization

Buildings and equipment are depreciated over their estimated useful lives,
ranging from 19 to 45 years and from 3 to 10 years, respectively, primarily
using the straight-line method. For the fiscal years ended October 31, 2000,
1999 and 1998, depreciation expense totaled approximately $28,938, $25,418 and
$21,094, respectively.

Goodwill, or costs in excess of net assets of companies acquired, totaled
approximately $667,128 and $669,790 as of October 31, 2000 and 1999,
respectively, and is amortized principally over 40 years using the straight-line
method. The Company continually evaluates the recoverability of this intangible
asset by assessing whether the amortization of the goodwill balance over its
remaining life can be recovered through undiscounted expected future cash flows.
Other intangible assets are amortized over five years using the straight-line
method. Accumulated amortization was $82,944 and $63,300 as of October 31, 2000
and 1999, respectively.

(f) Foreign Currency Translation

In accordance with SFAS No. 52, "Foreign Currency Translation," all assets
and liabilities of the Company's foreign subsidiaries are translated into U.S.
dollars at the exchange rate in effect at the end of the period, and revenues
and expenses are translated at average exchange rates prevailing during the
period. The resulting translation adjustments are reflected in a separate
component of shareholders' equity.

During fiscal year 1998, the Company reported translation adjustments for
its Mexican operations under the method prescribed for highly inflationary
economies. Under that method, foreign currency translation adjustments are
reflected in results of operations, instead of in shareholders' equity. This
change did not have a material effect on the Company's results of operations for
fiscal year 1998.

As of January 1, 1999, the Mexican economy was no longer considered highly
inflationary according to the SEC staff. Accordingly, subsequent to January 1,
1999, gains and losses resulting from translation of the financial statements of
the Company's Mexican operations are reflected in shareholders' equity and the
functional currency used by our Mexican operations returned to the Mexican peso.
These changes did not have a material effect on the Company's results of
operations for fiscal years 2000, 1999 and 1998.

(g) Funeral Revenue

The Company sells prearranged funeral services and merchandise under
contracts that provide for delivery of the services and merchandise at the time
of death. Prearranged funeral services are recorded as funeral revenue in the
period the funeral is performed. Prearranged funeral merchandise is recognized
as revenue upon delivery in jurisdictions where such sales are included in
funeral and insurance contracts. The Company considers prearranged funeral
contracts to be investments in future funeral revenue made to retain and expand
future market share. In 2000, the net effect of prearranged funeral contracts
has been reclassified from cash flows from investing activities to cash flows
from operating activities. Cash flows related to these prearranged funeral
contracts have characteristics of both cash flows from operating and investing
activities.

F-31
161
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

For comparative purposes, the reclassification was made to the 1999 and 1998
consolidated statement of cash flows.

Commissions and direct marketing costs relating to prearranged funeral
services and prearranged funeral merchandise sales are accounted for in the same
manner as the revenue to which they relate. Where revenue is deferred, the
related commissions and direct marketing costs are deferred and amortized as the
funeral contracts are delivered. Conversely, where revenues are recognized
currently, the related costs are expensed as incurred. Indirect costs of
marketing prearranged funeral services are expensed in the period in which
incurred.

Prearranged funeral services and merchandise generally are funded either
through trust funds or escrow accounts established by the Company or through
insurance. Principal amounts deposited in the trust funds or escrow accounts are
available to the Company as funeral services and merchandise are delivered and
are refundable to the customer in those situations where state law provides for
the return of those amounts under the purchaser's option to cancel the contract.
Certain jurisdictions provide for non-refundable trust funds or escrow accounts
where the Company receives such amounts upon cancellation by the customer.
Earnings are withdrawn only as funeral services and merchandise are delivered or
contracts are cancelled, except in jurisdictions that permit earnings to be
withdrawn currently and in unregulated jurisdictions where escrow accounts are
used. When prearranged funeral services and merchandise are funded through
insurance policies purchased by customers from third-party insurance companies,
the Company earns a commission on the sale of the policies. Insurance
commissions, net of related expenses, are recognized at the point at which the
commission is no longer subject to refund. Policy proceeds are available to the
Company as funeral services and merchandise are delivered.

Effective November 1, 1998, the Company changed its method of accounting
for prearranged funeral trust earnings. See Note 3.

Funeral services sold at the time of need are recorded as funeral revenue
in the period the funeral is performed.

(h) Cemetery Revenue

The Company recognizes income currently from the sale of unconstructed
mausoleum crypts to the extent it has available inventory. Costs of mausoleum
and lawn crypts sold but not yet constructed are based upon management's
estimated cost to construct those items.

In certain jurisdictions in which the Company operates, local law or
contracts with customers generally require that a portion of the sale price of
prearranged cemetery merchandise be placed in trust funds or escrow accounts.
The Company recognizes as revenue on a current basis all dividends and interest
earned, and net capital gains realized, by prearranged merchandise trust funds
or escrow accounts. At the same time, the liability for the estimated cost to
deliver merchandise is adjusted through a charge to earnings to reflect
inflationary merchandise cost increases. Principal and earnings are withdrawn
only as the merchandise is delivered or contracts are cancelled.

Pursuant to perpetual care contracts and laws, a portion, generally 10
percent, of the proceeds from cemetery property sales is deposited into
perpetual care trust funds. The income from these funds, which have been
established in most jurisdictions in which the Company operates cemeteries, is
used for maintenance of those cemeteries, but principal, including in some
jurisdictions net realized capital gains, must generally be held in perpetuity.
Accordingly, the trust fund corpus is not reflected in the consolidated
financial statements.

F-32
162
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

The Company recognizes and withdraws currently all dividend and interest income
earned and, where permitted, capital gains realized by perpetual care funds.

Some of the Company's sales of cemetery property and merchandise are made
under installment contracts bearing interest at prevailing rates. Finance
charges are recognized as cemetery revenue under the effective interest method
over the terms of the related installment receivables.

(i) Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between tax bases and financial
reporting bases of assets and liabilities. The Company has not provided for
possible United States federal income taxes on the undistributed earnings of
foreign subsidiaries that are considered to be reinvested indefinitely.

(j) Earnings Per Common Share

Basic earnings per common share is computed by dividing net earnings by the
weighted average number of common shares outstanding during each period. Diluted
earnings per common share is computed by dividing net earnings by the weighted
average number of common shares outstanding plus the number of additional common
shares that would have been outstanding if the dilutive potential common shares
(in this case, exercise of the Company's time-vest stock options) had been
issued during each period. See Note 12. The Company's share and per share
amounts have been adjusted for a two-for-one common stock split effective April
24, 1998.

(k) Recent Accounting Standards

SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," establishes accounting and reporting standards for derivative
instruments. SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133," and
SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities," are amendments to the accounting and reporting standards of SFAS
No. 133 and must be adopted concurrently with SFAS No. 133. 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, 137 and
138 on its consolidated financial condition and results of operations, and the
pronouncements are not expected to have an impact on the Company's consolidated
statement of earnings. It is estimated that the adoption of the new standards
will result in an increase in shareholders' equity of approximately $4,693. This
estimate is based on market information and the fair value of the Company's
three-year interest rate swap as of October 31, 2000. The actual effect on the
Company's financial statements will depend on the fair value of the swap at the
date of adoption.

The Company and other industry participants continue to discuss directly
with the staff of the Securities and Exchange Commission ("SEC") the application
of its recently issued Staff Accounting Bulletin No. 101 -- "Revenue Recognition
in Financial Statements" ("SAB 101") 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

F-33
163
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)

prearranged sales. The amounts deferred will be recognized in future years as
the products and services that have been bought and paid for are ultimately
delivered.

Based on the tentative agreement with the SEC staff, the Company estimates
that although there will be no negative impact on cash flow, had it adopted SAB
101 in fiscal year 2000, before adjusting for the cumulative effect, the
implementation would have reduced earnings by a range of $0.09 to $0.13 per
share. The Company also estimates that had SAB 101 been adopted in fiscal year
2000, it would have resulted in a nonrecurring, noncash $250,000 to $275,000
after-tax charge for the cumulative effect of the changes. This would have
resulted in an additional backlog that would have produced approximately $1
billion of revenue in the future as these prepaid products and services are
delivered. Based on what the Company currently knows, the implementation of SAB
101 should not cause a violation of any financial covenants in its debt
agreements. The SEC and the industry have not reached a final resolution of
these discussions, but the Company anticipates that they will be finalized
shortly. 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," ("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.

(l) Reclassifications

Certain reclassifications have been made to the 1998 and 1999 consolidated
financial statements to conform with the presentation used in the 2000
consolidated financial statements. These reclassifications had no effect on net
earnings or shareholders' equity. In addition, prearranged acquisition costs, as
previously reported, have been reclassified in the accompanying statement of
cash flows and resulted in a decrease in cash flows from operating activities
for the years ended October 31, 1998, 1999 and 2000 by $24.0 million, $10.8
million and $17.7 million, respectively, and an increase in cash flows from
investing activities by a corresponding amount.

(3) CHANGE IN ACCOUNTING PRINCIPLES

The Company changed the following accounting principle effective November
1, 1998:

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. The new method will
allow the Company to take a longer-term view and increase its flexibility in
managing the funeral trust funds.

The cumulative effect of this change on prior years resulted in a decrease
in net earnings for the year ended October 31, 1999, of $50,101 (net of a
$28,798 income tax benefit), or $.47 per share. For the year ended October 31,
1999, the current year effect of the change in accounting principle was a
decrease in net earnings of $16,190, or $.15 per share.

F-34
164
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(4) ACQUISITION OF SUBSIDIARIES

The following table reflects the Company's acquisition activity during the
past three fiscal years:

<Table>
<Caption>
BUSINESSES ACQUIRED
--------------------------
FUNERAL HOMES CEMETERIES
------------- ----------

Fiscal year 2000............................................ -- 4
Fiscal year 1999............................................ 83 17
Fiscal year 1998............................................ 153 9
</Table>

The following table reflects, on an unaudited pro forma basis, the combined
operations of the Company and the businesses acquired during fiscal year 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.

<Table>
<Caption>
YEAR ENDED OCTOBER 31,
-----------------------
2000 1999
---------- ----------
(UNAUDITED)

Revenues.................................................... $735,064 $760,491
======== ========
Operating earnings.......................................... $159,309 $191,794
======== ========
Earnings before cumulative effect of change in accounting
principle................................................. $ 66,811 $ 90,827
======== ========
Net earnings................................................ $ 66,811 $ 40,726
======== ========
Basic earnings per common share:
Earnings before cumulative effect of change in accounting
principle.............................................. $ .63 $ .85
======== ========
Net earnings.............................................. $ .63 $ .38
======== ========
Diluted earnings per common share:
Earnings before cumulative effect of change in accounting
principle.............................................. $ .63 $ .84
======== ========
Net earnings.............................................. $ .63 $ .38
======== ========
Weighted average common shares outstanding (in thousands):
Basic..................................................... 106,600 107,452
======== ========
Diluted................................................... 106,603 107,834
======== ========
</Table>

F-35
165
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(4) ACQUISITION OF SUBSIDIARIES -- (CONTINUED)

The effect of acquisitions at dates of purchase on the consolidated
financial statements was as follows:

<Table>
<Caption>
YEAR ENDED OCTOBER 31,
------------------------------
2000 1999 1998
-------- -------- --------

Current assets........................................ $ 14,878 $ 24,730 $ 35,561
Receivables due beyond one year....................... -- 70 91
Cemetery property..................................... 2,630 25,131 47,987
Property and equipment, net........................... 3,652 33,751 42,247
Deferred charges and other assets..................... 4,960 2,076 2,242
Intangible assets, net................................ 30,274 125,924 177,708
Deferred tax asset.................................... 2,689 -- --
Current liabilities................................... (526) (18,450) (9,128)
Long-term debt........................................ (13,898) (14,249) (33,872)
Deferred income taxes................................. -- (5,317) (20,107)
Deferred revenue...................................... (41,485) (6,942) (10,357)
Other long-term liabilities........................... (2,370) (4,392) (1,253)
-------- -------- --------
804 162,332 231,119
Common stock used for acquisitions.................... -- 300 7,705
-------- -------- --------
Cash used for acquisitions............................ $ 804 $162,032 $223,414
======== ======== ========
</Table>

(5) PREARRANGED FUNERAL SERVICES

The following summary reflects prearranged funeral services sold, but not
yet delivered, which are funded with trusts, escrow accounts and insurance and
related prearranged funeral trust fund and escrow account balances. The
trust-and insurance-funded balances are not reflected in the accompanying
consolidated financial statements. Amounts which represent the Company's
voluntary deposits into escrow accounts in those jurisdictions where trust or
escrow arrangements are neither statutorily nor contractually required
aggregated $4,203 and $14,347 as of October 31, 2000 and 1999, respectively, and
are classified as long-term investments.

Amounts deposited in the trust funds and escrow accounts and funded through
insurance are available to the Company when the services are performed. Funds
held in trust or escrow are invested, and earnings (including net realized
capital gains) realized on irrevocable trust funds and escrow accounts are
deferred until the underlying funeral service is delivered, in accordance with
the Company's change in accounting method effective November 1, 1998. Under the
Company's previous accounting method, earnings of $26,463 were included in
funeral revenue for fiscal year 1998.

F-36
166
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(5) PREARRANGED FUNERAL SERVICES -- (CONTINUED)

<Table>
<Caption>
OCTOBER 31,
-------------------
2000 1999
-------- --------

Trust or escrow funded:
Prearranged funeral services sold, but not delivered...... $610,113 $615,956
======== ========
Investments at market value............................... $614,454 $610,701
Receivables to be collected on prearranged funeral service
contracts.............................................. 116,832 106,605
-------- --------
$731,286 $717,306
======== ========
Insurance-funded and other prearranged funeral services..... $259,589 $241,860
======== ========
Investments consist of:
U.S. Government, agencies and municipalities.............. $ 30,649 $ 27,189
Canadian Government, agencies and municipalities.......... 30,866 30,937
Corporate bonds........................................... 82,955 80,644
Preferred stocks.......................................... 60,611 60,577
Common stocks............................................. 185,839 177,163
Money market funds and other short-term investments....... 169,659 183,029
Short-term fixed income foreign investments............... 52,124 57,270
-------- --------
Total value at cost....................................... 612,703 616,809
Net unrealized appreciation (depreciation)................ 1,751 (6,108)
-------- --------
Total value at market..................................... $614,454 $610,701
======== ========
</Table>

(6) CEMETERY TRUST FUNDS AND ESCROW ACCOUNTS

The following summary reflects the Company's merchandise trust fund and
escrow account balances, as well as merchandise sold, but undelivered, at
current cost. Merchandise sold, but undelivered, is reflected at current cost in
the accompanying consolidated balance sheets net of the related merchandise
trust fund and escrow account balances and accumulated earnings. As of October
31, 2000 and 1999, there were no merchandise trust fund and escrow account
balances classified as long-term investments.

Amounts deposited in the trust funds and escrow accounts are invested, and
the revenue on the funds (including net realized capital gains) of $21,021,
$17,371 and $13,157 is reflected in cemetery revenue for 2000, 1999 and 1998,
respectively. Amounts deposited in merchandise trust funds and escrow accounts
that are invested in debt securities as of October 31, 2000 totaled $65,704 and
are scheduled to mature as follows: $8,549 in less than one year; $21,502 in one
through five years; $35,049 in five through ten years; and $604 in more than ten
years.

F-37
167
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(6) CEMETERY TRUST FUNDS AND ESCROW ACCOUNTS -- (CONTINUED)

<Table>
<Caption>
OCTOBER 31,
-------------------
2000 1999
-------- --------

Merchandise trust funds and escrow accounts:
Merchandise sold, but not delivered, at current cost...... $146,287 $140,270
======== ========
Investments at market value............................... $232,256 $199,269
Amounts to be collected on merchandise contracts.......... 60,510 66,624
-------- --------
$292,766 $265,893
======== ========
Investments consist of:
U.S. Government, agencies and municipalities.............. $ 12,536 $ 10,213
Corporate bonds........................................... 53,953 44,588
Preferred stocks.......................................... 24,336 23,737
Common stocks............................................. 105,669 78,952
Money market funds and other short-term investments....... 49,044 46,287
-------- --------
Total value at cost....................................... 245,538 203,777
Net unrealized depreciation............................... (13,282) (4,508)
-------- --------
Total value at market..................................... $232,256 $199,269
======== ========
</Table>

The following summary reflects the Company's perpetual care trust fund and
escrow account balances. Since principal cannot be withdrawn, these balances are
not reflected in the accompanying financial statements, except for $2,465,
classified as long-term investments as of October 31, 1999, which represents the
Company's voluntary deposits into escrow accounts in those jurisdictions where
trust or escrow arrangements are neither statutorily nor contractually required.
As of October 31, 2000, there were no perpetual care escrow account balances
classified as long-term investments. Funds held in trust or escrow are invested,
and the earnings withdrawn from the trust funds and escrow accounts are used for
the maintenance of cemetery grounds. For the years ended October 31, 2000, 1999
and 1998, such withdrawals, included in cemetery revenue, totaled $16,630,
$14,470, and $12,615, respectively.

<Table>
<Caption>
OCTOBER 31,
-------------------
2000 1999
-------- --------

Perpetual care trust funds and escrow accounts:
Investments at market value............................... $213,588 $201,021
Amounts to be collected under existing agreements......... 10,413 10,328
-------- --------
$224,001 $211,349
======== ========
Investments consist of:
U.S. Government, agencies and municipalities.............. $ 14,190 $ 15,516
Corporate bonds........................................... 49,096 41,723
Preferred stocks.......................................... 18,897 17,676
Common stocks............................................. 67,549 63,370
Money market funds and other short-term investments....... 55,744 53,441
-------- --------
Total value at cost....................................... 205,476 191,726
Net unrealized appreciation............................... 8,112 9,295
-------- --------
Total value at market..................................... $213,588 $201,021
======== ========
</Table>

F-38
168
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(7) CASH AND CASH EQUIVALENT INVESTMENTS

The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. The Company deposits
its cash and cash equivalent investments with high quality credit institutions.
Such balances typically exceed applicable FDIC insurance limits.

<Table>
<Caption>
OCTOBER 31,
-----------------
2000 1999
------- -------

Cash........................................................ $69,594 $26,268
Cash equivalent investments................................. 22,001 4,609
------- -------
$91,595 $30,877
======= =======
</Table>

(8) MARKETABLE SECURITIES AND LONG-TERM INVESTMENTS

Marketable securities consist of investments in fixed maturities and equity
securities. The market value as of October 31, 2000 was $7,273, which included
gross unrealized losses of $1,893. The market value as of October 31, 1999 was
$46,549, which included gross unrealized gains of $2,040 and gross unrealized
losses of $3,287. The Company realized net gains on the sales of securities of
$1,079, $4,221 and $2,727 for the years ended October 31, 2000, 1999 and 1998,
respectively. The cost of securities sold was determined by using the average
cost method.

The market value of long-term investments as of October 31, 2000 and 1999
was $4,203 and $16,812, respectively, which included gross unrealized gains of
$28 and $341, and gross unrealized losses of $0 and $109, respectively. There
were no amounts classified as long-term investments and invested in debt
securities as of October 31, 2000. See Notes 5 and 6 which include details of
the Company's long-term investments.

(9) RECEIVABLES

<Table>
<Caption>
OCTOBER 31,
-------------------
2000 1999
-------- --------

Current receivables are summarized as follows:
Installment contracts due within one year................. $ 93,061 $ 88,673
Trade accounts, notes and other........................... 49,582 41,334
Allowance for sales cancellations and doubtful accounts... (9,924) (11,432)
Amounts to be collected for perpetual care funds.......... (5,913) (5,628)
-------- --------
126,806 112,947
Funeral receivables....................................... 50,668 63,268
-------- --------
Net current receivables........................... $177,474 $176,215
======== ========
Long-term receivables are summarized as follows:
Installment contracts due beyond one year................. $238,433 $256,835
Allowance for sales cancellations and doubtful accounts... (16,860) (14,557)
Amounts to be collected for perpetual care funds.......... (4,500) (4,700)
-------- --------
Net long-term receivables......................... $217,073 $237,578
======== ========
</Table>

F-39
169
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(9) RECEIVABLES -- (CONTINUED)

The Company's receivables as of October 31, 2000 are expected to mature as
follows:

<Table>

Years ending October 31,
2001.................................................... $177,474
2002.................................................... 36,106
2003.................................................... 33,070
2004.................................................... 24,966
2005.................................................... 22,980
Later years............................................. 99,951
--------
$394,547
========
</Table>

(10) INVENTORIES AND CEMETERY PROPERTY

Inventories are comprised of the following:

<Table>
<Caption>
OCTOBER 31,
-----------------
2000 1999
------- -------

Developed cemetery property................................. $18,248 $15,850
Merchandise and supplies.................................... 42,401 35,581
------- -------
$60,649 $51,431
======= =======
</Table>

Cemetery property is comprised of the following:

<Table>
<Caption>
OCTOBER 31,
-------------------
2000 1999
-------- --------

Developed cemetery property................................. $ 94,382 $ 94,221
Undeveloped cemetery property............................... 347,264 329,811
-------- --------
$441,646 $424,032
======== ========
</Table>

The Company evaluates the recoverability of the cost of undeveloped
cemetery property through comparison with undiscounted expected future cash
flows.

F-40
170
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(11) LONG-TERM DEBT

The following is a summary of long-term debt:

<Table>
<Caption>
OCTOBER 31,
-------------------
2000 1999
-------- --------

Revolving Credit Facilities (see "Revolving Credit Facility"
and "Revolving Line of Credit Note" below)................ $529,000 $529,000
Senior Notes.............................................. 88,572 95,714
6.70% Notes............................................... 100,000 100,000
6.40% Notes............................................... 204,781 205,164
Other, principally seller financing of acquired operations
or assumption upon acquisition, weighted average
interest rate of 6.4% as of October 31, 2000, partially
secured by assets of subsidiaries, with maturities
through 2023........................................... 28,174 21,535
-------- --------
950,527 951,413
Less current maturities..................................... 29,857 12,582
-------- --------
$920,670 $938,831
======== ========
</Table>

In April 1997, the Company completed the syndication of a $600,000
revolving credit facility ("Revolving Credit Facility"). The Revolving Credit
Facility matures on April 30, 2002 and contains a facility fee which was 22.5
basis points on October 31, 2000. Borrowings bear interest at the lead lending
bank's prime rate or certain optional rates at the Company's election. Under
this agreement $529,000 was outstanding with weighted average interest rates of
6.46 percent and 5.63 percent as of October 31, 2000 and 1999, respectively,
which includes the effect of the interest rate swap agreement discussed below.
As of October 31, 2000 and 1999, the carrying value of these borrowings,
including accrued interest, was $529,000 and $533,086, respectively, whereas the
fair value was $512,193 and $524,924, respectively. Additionally, as of October
31, 2000 and 1999, the Company had outstanding letters of credit in the amount
of $5,551 and $4,813, respectively, resulting in $65,449 and $66,187,
respectively, of availability under its Revolving Credit Facility.

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 $200,000.
This agreement which became effective March 4, 1999, effectively converted
$200,000 of variable-rate debt bearing interest based on three-month LIBOR to a
fixed rate based on the swap rate of 4.915 percent. The estimated fair value of
the interest rate swap as of October 31, 2000 and 1999, based on quoted market
prices, was $4,693 and $6,090, respectively. As of October 31, 2000 and 1999,
the Company had $529,000 of outstanding borrowings under its $600,000 Revolving
Credit Facility, $329,000 of which was not hedged by the interest rate swap
agreement and was subject to a weighted average short-term variable interest
rate of 7.16 percent and 5.92 percent, respectively.

Additionally, the Company has available with a separate financial
institution an uncollateralized and uncommitted revolving line of credit
("Revolving Line of Credit Note") used to support the interim cash funding for
advances to be made under the Revolving Credit Facility in amounts less than
$5,000. Borrowings under the Revolving Line of Credit Note are limited to
$10,000, bear interest at the lending bank's cost of funds rate and are payable
on demand. There were no amounts outstanding under the Revolving Line of Credit
Note as of October 31, 2000 and 1999.

F-41
171
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(11) LONG-TERM DEBT -- (CONTINUED)

On December 21, 1993, the Company issued $50,000 of uncollateralized senior
notes, bearing interest at a rate of 6.04 percent and maturing on November 30,
2003. Principal payments of $7,143 are due each year; the first such payment was
made on November 30, 1997, and the final payment is due on November 30, 2003. On
November 7, 1994, the Company issued $75,000 of uncollateralized senior notes
with an average maturity of seven years and a weighted average interest rate of
8.44 percent. A principal payment of $15,000 was made on May 1, 1998. The
remaining notes have a weighted average interest rate of 8.49 percent, and
principal payments are due as follows: $16,667 on each of November 1, 2000, 2001
and 2002, and $10,000 on November 1, 2006. As of October 31, 2000 and 1999, the
carrying value of the Company's senior notes, including accrued interest, was
$91,822 and $99,145, respectively, whereas the fair value was $74,853 and
$91,137, respectively.

In December 1996, the Company issued $100,000 of unsecured, unsubordinated
debt securities in the form of 6.70 percent Notes due in 2003. Net proceeds were
approximately $99,400, of which $96,800 was used to reduce balances outstanding
under the Company's revolving credit facilities, with the remaining $2,600 used
for acquisitions and general corporate purposes. As of October 31, 2000 and
1999, the carrying value of these notes, including accrued interest, was
$102,773, whereas the fair value was $65,573 and $84,553, respectively.

In April 1998, the Company issued $200,000 of 6.40 percent Remarketable Or
Redeemable Securities ("6.40% ROARS") due May 1, 2013 (remarketing date May 1,
2003). The 6.40% ROARS were priced to the public at 99.677 percent to yield
6.476 percent. Net proceeds were approximately $203,631, including the payment
made to the Company by the remarketing dealer for the right to remarket the
securities after five years. The proceeds were used to reduce balances
outstanding under the Company's revolving credit facilities. The net effective
rate to the Company, assuming the securities are redeemed by the Company after
five years, is 5.77 percent. If the securities are remarketed after five years,
the net effective rate for the remaining term will be 5.44 percent (10-year
Treasury rate, fixed upon initial issuance of the 6.40% ROARS) plus the
Company's then current credit spread. If the 6.40% ROARS are redeemed by the
Company on May 1, 2003, a principal payment of $200,000 will be required. As of
October 31, 2000 and 1999, the carrying value of these notes, including accrued
interest and the unamortized portion of the option premium, was $211,146 and
$211,528, respectively, whereas the fair value was $136,444 and $175,366,
respectively.

The bank loan agreements and senior note agreements contain various
restrictive covenants that limit consolidated funded indebtedness, indebtedness
of subsidiaries, the sale of assets to entities outside the consolidated group
and the payment of dividends on, and repurchases of, the capital stock of the
Company. Additionally, the bank loan agreements contain change of control
provisions. The Company is also required to maintain specified financial ratios
related to net worth and fixed charges.

Scheduled principal payments and maturities of the Company's long-term debt
for the fiscal years ending October 31, 2001 through October 31, 2005, excluding
the Revolving Credit Facility and assuming the 6.40% ROARS are redeemed by the
Company on May 1, 2003, are approximately $29,474 in 2001, $28,482 in 2002,
$228,528 in 2003, $112,087 in 2004 and $2,049 in 2005. Current maturities of
long-term debt of $29,857 as of October 31, 2000, as reported in the Company's
consolidated balance sheets, include $383 relating to the unamortized 6.40%
ROARS option premium.

All of the Company's debt is uncollateralized, except for approximately
$14,000 of term notes incurred principally in connection with acquisitions that
are secured by mortgages on some of the Company's funeral homes. These notes
were either assumed by the Company upon its acquisition of the property or
represent seller financing for the acquired property.

F-42
172
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(12) RECONCILIATION OF BASIC AND DILUTED PER SHARE DATA

<Table>
<Caption>
EARNINGS SHARES PER SHARE
YEAR ENDED OCTOBER 31, 2000 (NUMERATOR) (DENOMINATOR) DATA
--------------------------- ----------- ------------- ---------

Net earnings...................................... $66,794
=======
Basic earnings per common share:
Net earnings available to common
shareholders.......................... $66,794 106,600 $.63
====
Effect of dilutive securities:
Time-vest stock options assumed
exercised............................. -- 3
------- -------
Diluted earnings per common share:
Net earnings available to common shareholders
plus time-vest stock options assumed
exercised.................................... $66,794 106,603 $.63
======= ======= ====
</Table>

<Table>
<Caption>
EARNINGS SHARES PER SHARE
YEAR ENDED OCTOBER 31, 1999 (NUMERATOR) (DENOMINATOR) DATA
--------------------------- ----------- ------------- ---------

Earnings before cumulative effect of change in
accounting principle............................ $90,520
=======
Basic earnings per common share:
Earnings available to common
shareholders.......................... $90,520 107,452 $.84
====
Effect of dilutive securities:
Time-vest stock options assumed
exercised............................. -- 382
------- -------
Diluted earnings per common share:
Earnings available to common
shareholders plus time-vest stock
options assumed exercised............. $90,520 107,834 $.84
======= ======= ====
</Table>

<Table>
<Caption>
EARNINGS SHARES PER SHARE
YEAR ENDED OCTOBER 31, 1998 (NUMERATOR) (DENOMINATOR) DATA
--------------------------- ----------- ------------- ---------

Net earnings...................................... $41,902
=======
Basic earnings per common share:
Net earnings available to common
shareholders.......................... $41,902 97,691 $.43
====
Effect of dilutive securities:
Time-vest stock options assumed
exercised............................. -- 753
------- -------
Diluted earnings per common share:
Net earnings available to common
shareholders plus time-vest stock
options assumed exercised............. $41,902 98,444 $.43
======= ======= ====
</Table>

Options to purchase 7,049,471 shares of common stock at prices ranging from
$4.16 to $27.25 were outstanding but were not included in the computation of
diluted earnings per share for the fiscal year ended October 31, 2000 because
the options' exercise prices 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 at the end of fiscal year 2000.

F-43
173
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(12) RECONCILIATION OF BASIC AND DILUTED PER SHARE DATA -- (CONTINUED)

Options to purchase 1,733,504 shares of common stock at prices ranging from
$16.00 to $27.25 were outstanding but were not included in the computation of
diluted earnings per share for the fiscal year ended October 31, 1999 because
the options' exercise prices 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 at the end of fiscal year 1999.

Options to purchase 319,210 shares of common stock at $25.81 and 895,560
shares of common stock at $27.25 were outstanding but were not included in the
computation of diluted earnings per share for the fiscal year ended October 31,
1998 because the options' exercise prices were greater than the average market
price of the common shares. The options, which expire on July 31, 2004, were
still outstanding at the end of fiscal year 1998.

(13) INCOME TAXES

Income tax expense (benefit) is comprised of the following components:

<Table>
<Caption>
U.S. AND
YEAR ENDED OCTOBER 31, POSSESSIONS STATE FOREIGN TOTAL
- ---------------------- ----------- ------ ------- -------

2000:
Current tax expense......................... $20,094 $3,196 $ 6,102 $29,392
Deferred tax expense........................ 5,626 759 2,616 9,001
------- ------ ------- -------
$25,720 $3,955 $ 8,718 $38,393
======= ====== ======= =======
1999:
Current tax expense......................... $27,869 $4,783 $ 8,240 $40,892
Deferred tax expense........................ 4,628 2,923 3,588 11,139
------- ------ ------- -------
$32,497 $7,706 $11,828 $52,031
======= ====== ======= =======
1998:
Current tax expense......................... $13,871 $3,918 $ 4,741 $22,530
Deferred tax expense (benefit).............. (2,075) 617 1,990 532
------- ------ ------- -------
$11,796 $4,535 $ 6,731 $23,062
======= ====== ======= =======
</Table>

The reconciliation of the statutory tax rate to the effective tax rate is
as follows:

<Table>
<Caption>
YEAR ENDED OCTOBER 31,
-------------------------
2000 1999 1998
----- ----- -----

Statutory tax rate........................................ 35.00% 35.00% 35.00%
Increases (reductions) in tax rate resulting from:
State and U.S. possessions.............................. 2.44 4.03 6.21
Goodwill and other...................................... 2.28 2.17 3.86
Dividend exclusion...................................... (2.48) (1.56) (2.21)
Foreign tax rate differential........................... (0.74) (1.86) (5.57)
Foreign tax credit...................................... -- (1.28) (1.79)
----- ----- -----
Effective tax rate........................................ 36.50% 36.50% 35.50%
===== ===== =====
</Table>

F-44
174
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(13) INCOME TAXES -- (CONTINUED)

Deferred tax assets and liabilities consist of the following:

<Table>
<Caption>
OCTOBER 31,
-------------------
2000 1999
-------- --------

Deferred tax assets:
Domestic trust earnings................................... $ 47,416 $ 44,653
Allowance for sales cancellations and doubtful accounts... 8,157 8,483
Deferred preneed sales and expenses....................... 16,109 17,806
Unrealized depreciation of investments.................... 5,563 1,925
Deferred compensation..................................... 649 795
Other..................................................... 3,305 2,966
-------- --------
81,199 76,628
-------- --------
Deferred tax liabilities:
Purchase accounting adjustments........................... 127,990 130,778
Foreign trust earnings.................................... 16,035 14,101
Deferred revenue on cemetery property and merchandise
sales.................................................. 19,117 15,845
State income taxes........................................ 5,151 5,102
Percentage of completion on long-term contracts........... 255 605
Goodwill.................................................. 6,685 4,133
Non-compete amortization.................................. 1,992 1,914
Depreciation.............................................. 877 343
Other..................................................... 2,088 2,434
-------- --------
180,190 175,255
-------- --------
$ 98,991 $ 98,627
======== ========
Current net deferred liability.............................. $ 15,251 $ 17,193
Long-term net deferred liability............................ 83,740 81,434
-------- --------
$ 98,991 $ 98,627
======== ========
</Table>

For the year ended October 31, 2000, the Company's earnings before income
taxes generated from properties in foreign jurisdictions were negative. For the
years ended October 31, 1999 and 1998, approximately 4 percent and 5 percent,
respectively, of the Company's earnings before performance-based stock options
and income taxes were generated from properties in foreign jurisdictions.

The Company has not recognized a deferred tax liability of approximately
$10,000 for the undistributed earnings of non-U.S. subsidiaries because the
Company currently considers these earnings to be reinvested indefinitely.

(14) BENEFIT PLANS

Stewart Enterprises Employees' Retirement Trust

The Company has a defined contribution retirement plan, the "Stewart
Enterprises Employees' Retirement Trust (A Profit-Sharing Plan) ("SEERT")." This
plan covers substantially all employees with more than one year of service who
have attained the age of 21. Contributions are made to the plan at the
discretion of the Company's Board of Directors. Additionally, employees who
participate may contribute up to 15 percent of their earnings. The first 5
percent of such employee contributions are eligible for Company

F-45
175
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(14) BENEFIT PLANS -- (CONTINUED)

matching contributions at the rate of $.50 for each $1.00 contributed. The
Company's expense, including the Company's matching contributions, for the
fiscal years ended October 31, 2000, 1999 and 1998 was approximately $3,350,
$3,700 and $3,550, respectively.

Non-qualified Supplemental Retirement and Deferred Compensation Plan

The Company has a non-qualified key employee defined contribution
supplemental retirement plan, which provides certain highly compensated
employees the opportunity to accumulate deferred compensation which cannot be
accumulated under SEERT due to certain limitations. Contributions are made to
the plan at the discretion of the Company's Board of Directors. Additionally,
employees who participate may contribute up to 15 percent of their earnings. The
first 5 percent of such employee contributions are eligible for Company matching
contributions at the rate of $.50 for each $1.00 contributed. The Company's
expense, including the Company's matching contributions, for the fiscal years
ended October 31, 2000, 1999 and 1998 was approximately $250, $300, and $300,
respectively.

1995 Incentive Compensation Plan

In August 1995, the Board of Directors adopted, and in December 1995 and
December 1996 amended, the 1995 Incentive Compensation Plan, pursuant to which
officers and other employees of the Company may be granted stock options, stock
awards, restricted stock, stock appreciation rights, performance share awards or
cash awards by the Compensation Committee of the Board of Directors. From
September 7, 1995 through April 7, 1998, the Company granted options to officers
and other employees for the purchase of a total of 7,424,536 shares of Class A
common stock at exercise prices equal to the fair market value at the grant
dates, which ranged from $10.50 to $21.50 per share. In general, two thirds of
the options became exercisable in full on the first day between the date of
grant and August 31, 2000 that the average of the closing sale prices of a share
of the Company's Class A common stock for the 20 preceding consecutive trading
days equaled or exceeded $26.44, which represented a 20 percent annual
compounded growth in the price of a share of the Company's Class A common stock
over five years.

The remaining options generally become exercisable in 20 percent annual
increments beginning on September 7, 1996, except for grants issued since the
initial grant date, which options vest over the remainder of the original
five-year period. 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 October 31, 2001. As of October 31,
2000, 4,983,230 options had been repurchased or exercised under this plan, and
1,062,118 options had been forfeited.

During April 1998, the stock price performance target was achieved, and the
Company's performance-based stock options granted under the Company's 1995
Incentive Compensation Plan and covering 4,855,886 shares vested. Accordingly,
during the second quarter of fiscal year 1998, the Company was required by
accounting principles generally accepted in the United States of America to
record a nonrecurring, noncash charge to earnings of $76,762 ($50,279, or $.51
per share, after tax).

Additionally, to encourage optionees to exercise their options immediately
in order to renew the performance-based option program and to reduce potential
dilution from additional shares in the market, the Company offered to repurchase
the options for the difference between $27.31, the closing price on the date on
which the options vested, and the exercise price of the options. The repurchase
of certain of the options by the Company and the exercise of the remaining
options resulted in a cash outlay of $69,431.

F-46
176
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(14) BENEFIT PLANS -- (CONTINUED)

From July 1998 to February 1999, the Company granted new options under the
1995 Incentive Compensation Plan to officers and employees for the purchase of
3,682,250 shares of Class A common stock at exercise prices equal to the fair
market value at the grant dates, which ranged from $16.00 to $27.25 per share.
One third of the options become exercisable in 20 percent annual increments
beginning on July 17, 1999. The remaining two thirds of the options become
exercisable in full on the first day between the grant date and July 17, 2003
that the average of the closing sale prices of a share of Class A common stock
over the 20 preceding consecutive trading days equals or exceeds $67.81, which
represents a 20 percent annual compounded growth in the price of a share of
Class A common stock over five years. Accounting principles generally accepted
in the United States of America require that a charge to earnings be recorded
for the performance-based options for the difference between the exercise price
and the then current stock price when achievement of the performance objective
becomes probable. All of the options expire on July 31, 2004. As of October 31,
2000, none of these options had been exercised, and 1,427,200 options had been
forfeited.

In January 2000, the Company granted new options under the 1995 Incentive
Compensation Plan to officers and employees for the purchase of 4,018,168 shares
of Class A common stock at exercise prices equal to the fair market value at the
grant dates, which ranged from $5.50 to $6.00 per share. The options become
exercisable in 25 percent annual increments beginning January 21, 2001. All of
these options expire on January 21, 2005. As of October 31, 2000, none of these
options had been exercised, and 620,640 options had been forfeited.

2000 Incentive Compensation Plan

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. From April 2000 through July 2000, the Company had granted options to
officers and other employees for the purchase of a total of 2,237,732 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. As of October 31, 2000, none of these
options had been exercised, and 241,360 options had been forfeited.

Directors' Stock Option Plan

Effective January 2, 1996, the Board of Directors adopted, and in December
1996 amended, the Directors' Stock Option Plan, pursuant to which each director
of the Company who is not an employee of the Company was granted an option to
purchase 72,000 shares of the Company's Class A common stock. From January 2,
1996 through October 31, 1997, the Company granted a total of 360,000 options at
exercise prices equal to the fair market value at the grant dates, which ranged
from $12.34 to $18.25 per share. The options generally became exercisable in 25
percent annual increments beginning January 2, 1997, except for grants issued
since the initial grant date, which options vested over the remainder of the
original four-year period. All of the options expired on January 2, 2001. As of
October 31, 2000, 91,052 options had been exercised, and none of these options
had been forfeited.

In January 2000, the Company granted new options under the Directors' Stock
Option Plan to directors of the Company who are not employees of the Company for
the purchase of a total of 72,000 shares of

F-47
177
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(14) BENEFIT PLANS -- (CONTINUED)

Class A common stock at an exercise price of $6.00 per share. The options vested
immediately. All of these options expire on January 31, 2005. As of October 31,
2000, none of these options had been exercised or forfeited.

2000 Directors' Stock Option Plan

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. On April 13, 2000,
the Company 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. As of October 31,
2000, none of these options had been exercised or forfeited.

Employee Stock Purchase Plan

On July 1, 1992, the Company adopted an "Employee Stock Purchase Plan" and
reserved 2,250,000 shares of Class A common stock for purchase by eligible
employees, as defined. The plan provides to eligible employees the opportunity
to purchase the Company's Class A common stock semi-annually on June 30 and
December 31. The purchase price is established at a 15 percent discount from
fair market value, as defined. As of October 31, 2000, 894,543 shares had been
acquired under this plan.

Statement of Financial Accounting Standards No. 123

The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," and continues to apply Accounting
Principles Board Opinion No. 25 and related interpretations in accounting for
its stock-based compensation plans. The following table is a summary of the
Company's stock options outstanding as of October 31, 2000, 1999 and 1998, and
the changes that occurred during fiscal years 2000, 1999 and 1998.

<Table>
<Caption>
2000 1999 1998
--------------------- --------------------- ---------------------
NUMBER OF WEIGHTED NUMBER OF WEIGHTED NUMBER OF WEIGHTED
SHARES AVERAGE SHARES AVERAGE SHARES AVERAGE
UNDERLYING EXERCISE UNDERLYING EXERCISE UNDERLYING EXERCISE
OPTIONS PRICES OPTIONS PRICES OPTIONS PRICES
---------- -------- ---------- -------- ---------- --------

Outstanding at beginning of
year...................... 6,241,122 $20.81 6,187,038 $20.77 6,993,710 $11.38
Granted..................... 6,527,900 $ 5.06 90,000 $22.67 4,268,250 $25.98
Exercised/Repurchased....... -- $ -- (14,724) $10.50 (4,991,580) $12.24
Forfeited................... (3,199,936) $16.69 (21,192) $22.58 (83,342) $10.70
---------- ---------- ----------
Outstanding at end of
year...................... 9,569,086 $11.44 6,241,122 $20.81 6,187,038 $20.77
========== ========== ==========
Exercisable at end of
year...................... 2,023,224 $14.44 2,199,099 $13.78 1,349,651 $11.76
========== ========== ==========
Weighted-average fair value
of options granted........ $ 2.60 $10.28 $ 7.11
</Table>

F-48
178
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(14) BENEFIT PLANS -- (CONTINUED)

The following table further describes the Company's stock options
outstanding as of October 31, 2000:

<Table>
<Caption>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------- --------------------------------
NUMBER WEIGHTED AVERAGE NUMBER
RANGE OF OUTSTANDING REMAINING WEIGHTED AVERAGE EXERCISABLE WEIGHTED AVERAGE
EXERCISE PRICES AT 10/31/2000 CONTRACTUAL LIFE EXERCISE PRICE AT 10/31/2000 EXERCISE PRICE
- ---------------- ------------- ---------------- ---------------- ------------- ----------------

$ 2.22 to
$ 5.00........ 2,196,372 4.43 years $ 4.24 -- $ --
$ 5.01 to
$10.00........ 3,469,528 4.23 years $ 5.56 72,000 $ 6.00
$10.01 to
$15.00........ 1,307,446 .86 years $10.81 1,307,446 $10.81
$15.01 to
$20.00........ 202,416 .87 years $17.50 196,464 $17.53
$20.01 to
$25.00........ 144,774 1.03 years $21.49 143,474 $21.49
$25.01 to
$27.25........ 2,248,550 3.75 years $26.75 303,840 $26.76
--------- ---------
$ 2.22 to
$27.25........ 9,569,086 3.58 years $11.44 2,023,224 $14.44
========= =========
</Table>

SFAS 123 applies only to options granted and shares acquired under the
Company's Employee Stock Purchase Plan since the beginning of the Company's 1996
fiscal year. Consequently, the pro forma amounts disclosed below do not reflect
any compensation cost for the 7.8 million stock options outstanding as of the
beginning of fiscal year 1996. If the Company had elected to recognize
compensation cost for its stock option and employee stock purchase plans based
on the fair value at the grant dates for awards under those plans, in accordance
with SFAS 123, net earnings and earnings per share would have been as follows:

<Table>
<Caption>
(UNAUDITED)
YEAR ENDED OCTOBER 31,
-----------------------------
2000 1999 1998
------- ------- -------

Net earnings - as reported........... $66,794 $40,419 $41,902
- pro forma............. 61,939 35,735 40,027

Basic earnings per common share - as reported........... $ .63 $ .37 $ .43
- pro forma............. .58 .33 .41

Diluted earnings per common share - as reported........... $ .63 $ .37 $ .43
- pro forma............. .58 .33 .41
</Table>

The fair value of the Company's stock options used to compute pro forma net
earnings and earnings per share disclosures is the estimated present value at
grant date using the Black-Scholes option pricing model with the following
weighted average assumptions for fiscal years 2000, 1999 and 1998, respectively:
expected dividend yield of .1 percent, .3 percent and .3 percent; expected
volatility of 39.3 percent, 21.3 percent and 20.9 percent; risk-free interest
rate of 6.2 percent, 5.5 percent and 5.5 percent; and an expected term of 4.9
years, 4.8 years and 4.7 years.

Likewise, the fair value of shares acquired through the Employee Stock
Purchase Plan is estimated on each semi-annual grant date using the
Black-Scholes option pricing model with the following weighted average
assumptions for fiscal years 2000, 1999 and 1998, respectively: expected
dividend yield of .1 percent, .4 percent and .2 percent; expected volatility of
48.3 percent, 38.1 percent and 20.5 percent; risk-free interest rate of 5.8
percent, 4.9 percent and 5.3 percent; and an expected term of .5 years, for all
years.

F-49
179
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(15) SHAREHOLDER RIGHTS PLAN

On November 3, 1999, the Company's Board of Directors adopted a rights plan
intended to protect shareholder interests in the event the Company becomes the
subject of a takeover initiative that the Company's Board of Directors believes
could deny the Company's shareholders the full value of their investment. This
plan does not prohibit the Board from considering any offer that it deems
advantageous to its shareholders.

The rights were issued to each common shareholder of record on October 28,
1999, and will be exercisable only if a person acquires, or announces a tender
offer that would result in ownership of 15 percent or more of the Company's
outstanding Class A and Class B common stock. The initial exercise price will be
$24.00 per right. The rights will expire on October 28, 2009, unless redeemed or
exchanged at an earlier date.

(16) COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS

In Re Stewart Enterprises, Inc. Securities Litigation, No. 01-30035 on the
docket of the United States Court of Appeal for the Fifth Circuit. During the
fall of 1999, 16 putative securities class action lawsuits were filed in the
United States District Court for the Eastern District of Louisiana against the
Company, certain of its directors and officers and the lead underwriters of the
Company's January 1999 common stock offering. The suits were consolidated, and
the court appointed lead plaintiffs as well as lead and liaison counsel for the
plaintiffs, who filed a consolidated amended complaint.

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 December 7, 2000, the District Court granted motions to dismiss, filed
by the Company and the other defendants, dismissing the complaint against all
defendants for failure to state a claim. On January 4, 2001, the plaintiffs
filed a notice of appeal.

The outcome and the costs of defending this litigation cannot be predicted
at this time. The Company believes that the claims are without merit and intends
to defend itself vigorously.

F-50
180
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(16) COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS -- (CONTINUED)

As of October 31, 2000, the Company had advanced approximately $1,411,
including accrued interest, to fund premiums on a split-dollar "second-to-die"
life insurance policy on behalf of the Company's Chairman, Mr. Frank B. Stewart,
Jr., and Mrs. Stewart. The advances are collateralized by the assignment of
other insurance policies and the pledge of Class A common stock of the Company.
In 1992, the Company agreed to continue to advance such premiums for a
twelve-year period and will be repaid at the earliest of (a) the surrender of
the policy, (b) the deaths of Mr. and Mrs. Stewart, or (c) 60 days following
payment in full of all premiums on the policy.

The Company has noncancellable operating leases, primarily for land and
buildings, that expire over the next 1 to 23 years, except for nine leases that
expire between 2032 and 2072. Rent expense under these leases was $9,527, $8,042
and $7,805 for the years ended October 31, 2000, 1999 and 1998, respectively.
Through July of 2000, the Company leased office space from an affiliated
company. Rental payments to the affiliated company were approximately $479,
$534, and $636 for the years ended October 31, 2000, 1999 and 1998,
respectively. The Company now leases a smaller portion of the office space from
a non-affiliated company. Rental payments to the non-affiliated company were
$132 for the year ended October 31, 2000.

The Company's future minimum lease payments as of October 31, 2000 are
$8,528, $7,165, $5,693, $4,585, $3,810 and $34,749 for the years ending October
31, 2001, 2002, 2003, 2004, 2005 and later years, respectively. Additionally,
the Company has entered into non-compete agreements with prior owners of
acquired subsidiaries that expire through 2012. The Company's future non-compete
payments as of October 31, 2000 for the same periods are $6,969, $6,312, $5,625,
$4,437, $3,075 and $5,838, respectively.

With potential long-term debt maturities of $557,482, $228,528 and $112,087
in fiscal years 2002, 2003 and 2004, respectively, management of liquidity and
capitalization represents a significant short- and medium-term priority for the
Company. The Company believes that its ability to meet its future capital
requirements will depend primarily upon the successful implementation of its
strategies to provide cash from operations and generate cash from other sources,
such as the possible sale of some or all of its foreign operations, and its
ability to refinance its revolving credit facility and public debt prior to or
at their maturities.

(17) SEGMENT DATA

In fiscal year 1999, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." The accounting policies of
the segments are the same as those described in the "Summary of Significant
Accounting Policies." The Company evaluates the performance of its segments and
allocates resources to them based on gross profit.

The Company's operations are product-based and geographically-based. As
such, the Company's primary reportable operating segments presented in the
following table are based on products and services and include funeral and
cemetery operations.

The Company's funeral homes offer a complete range of funeral services and
products both at the time of need and on a prearranged basis. The Company's
services and products include family consultation, removal and preparation of
remains, the use of funeral home facilities for visitation, worship and funeral
services, transportation services, flowers and caskets. In addition to
traditional funeral services, all of the Company's funeral homes offer cremation
products and services.

The Company's cemetery operations involve the sale of cemetery property and
related merchandise, including lots, lawn crypts, family and community
mausoleums, monuments, memorials and burial vaults,

F-51
181
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(17) SEGMENT DATA -- (CONTINUED)

along with the sale of burial site openings and closings. Cemetery property and
merchandise sales are made both at the time of need and on a prearranged basis.

The Company conducts both funeral and cemetery operations domestically
including the United States and Puerto Rico, and in Mexico, Canada, Australia
and Argentina. The Company conducts funeral operations in New Zealand, Spain,
Portugal, the Netherlands, Belgium and France.

The table below presents information about reported segments for fiscal
years ended October 31, 2000, 1999 and 1998:

<Table>
<Caption>
RECONCILING CONSOLIDATED
FUNERAL CEMETERY ITEMS(1) TOTALS
---------- -------- ----------- ------------

Revenues from external customers
October 31, 2000...................... $ 451,852 282,949 -- $ 734,801
October 31, 1999...................... $ 445,877 310,231 -- $ 756,108
October 31, 1998...................... $ 379,095 269,270 -- $ 648,365

Gross profit
October 31, 2000...................... $ 116,689 62,351 -- $ 179,040
October 31, 1999...................... $ 126,875 83,526 -- $ 210,401
October 31, 1998...................... $ 118,426 77,558 -- $ 195,984

Total assets
October 31, 2000...................... $1,263,354 996,830 76,824 $2,337,008
October 31, 1999...................... $1,242,119 996,282 45,479 $2,283,880
October 31, 1998...................... $1,265,237 746,569 37,132 $2,048,938

Depreciation and amortization
October 31, 2000...................... $ 36,864 13,067 4,336 $ 54,267
October 31, 1999...................... $ 36,373 11,850 2,397 $ 50,620
October 31, 1998...................... $ 28,299 8,546 1,897 $ 38,742

Additions to long-lived assets (2)
October 31, 2000...................... $ 35,371 33,714 4,394 $ 73,479
October 31, 1999...................... $ 62,926 66,356 11,919 $ 141,201
October 31, 1998...................... $ 64,344 81,407 10,504 $ 156,255
</Table>

- ---------------

(1) Reconciling items consist of unallocated corporate assets, depreciation and
amortization on unallocated corporate assets and additions to corporate
long-lived assets.

(2) Long-lived assets include cemetery property and net property and equipment.

F-52
182
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(17) SEGMENT DATA -- (CONTINUED)

A reconciliation of total segment gross profit to total earnings before
income taxes and cumulative effect of change in accounting principle for fiscal
years ended October 31, 2000, 1999 and 1998, is as follows:

<Table>
<Caption>
2000 1999 1998
-------- -------- --------

Gross profit for reportable segments................. $179,040 $210,401 $195,984
Corporate general and administrative expenses........ (19,763) (19,161) (16,621)
Performance-based stock options...................... -- -- (76,762)
Interest expense, net................................ (56,284) (52,174) (41,792)
Other income, net.................................... 2,194 3,485 4,155
-------- -------- --------
Earnings before income taxes and cumulative effect of
change in accounting principle..................... $105,187 $142,551 $ 64,964
======== ======== ========
</Table>

<Table>
<Caption>
U.S. AND
POSSESSIONS(1) FOREIGN(2) CONSOLIDATED
-------------- ---------- ------------

Revenues from external customers
October 31, 2000........................................ $588,480 146,321 $734,801
October 31, 1999........................................ $603,530 152,578 $756,108
October 31, 1998........................................ $534,427 113,938 $648,365

Gross profit
October 31, 2000........................................ $155,223 23,817 $179,040
October 31, 1999........................................ $180,693 29,708 $210,401
October 31, 1998........................................ $170,415 25,569 $195,984

Long-lived assets(3)
October 31, 2000........................................ $765,240 124,335 $889,575
October 31, 1999........................................ $735,649 135,428 $871,077
October 31, 1998........................................ $647,350 121,447 $768,797
</Table>

- ---------------

(1) Includes the Company's operations in the United States and the Commonwealth
of Puerto Rico.

(2) Foreign revenue is based on the country in which the sales originate. The
Company commenced its foreign operations as follows: Mexico - August 1994;
Australia - December 1994; New Zealand - April 1996; Canada - October 1996;
Spain - April 1997; Portugal - September 1997; the Netherlands - December
1997; Argentina - April 1998; France and Belgium - May 1998.

(3) Long-lived assets include cemetery property and net property and equipment.

F-53
183
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(18) QUARTERLY FINANCIAL DATA (UNAUDITED)

<Table>
<Caption>
YEAR ENDED OCTOBER 31, 2000 FIRST SECOND THIRD FOURTH
- --------------------------- -------- -------- -------- --------

Revenues................................... $192,960 $188,861 $181,823 $171,157
Gross profit............................... 48,708 49,784 45,935 34,613
Net earnings............................... 18,841 19,332 18,077 10,544
Earnings per common share:
Basic.................................... .18 .18 .17 .10
Diluted.................................. .18 .18 .17 .10
</Table>

<Table>
<Caption>
YEAR ENDED OCTOBER 31, 1999(1) FIRST SECOND THIRD FOURTH
- ------------------------------ -------- -------- -------- --------

Revenues................................... $178,172 $194,297 $193,721 $189,918
Gross profit............................... 54,241 57,668 53,674 44,818
Earnings before cumulative effect of change
in accounting principle.................. 23,501 27,108 23,347 16,564
Earnings per common share before cumulative
effect of change in accounting principle:
Basic.................................... .24 .24 .21 .15
Diluted.................................. .24 .24 .21 .15
Net earnings (loss)(2)..................... (26,600) 27,108 23,347 16,564
Earnings per common share:
Basic.................................... (.27) .24 .21 .15
Diluted.................................. (.27) .24 .21 .15
</Table>

- ---------------

(1) The first, second and third quarters of fiscal year 1999 have been restated
from the Company's respective Quarterly Reports on Form 10-Q to reflect the
Company's change in accounting principle effective November 1, 1998. As a
result, first quarter of fiscal year 1999 reflects a $3,016 decrease in
earnings, $.03 per share (basic and diluted), before the cumulative effect
of the change in accounting principle. Second quarter of fiscal year 1999 as
presented above reflects a decrease in net earnings of $5,055, or $.05 per
share (basic and diluted), as a result of the accounting change. Third
quarter of fiscal year 1999 as presented above reflects a decrease in net
earnings of $5,552, or $.05 per share (basic and diluted), as a result of
the accounting change. See Note 3.

(2) In addition, the first quarter as presented above includes a $50,101
decrease in net earnings (net of a $28,798 income tax benefit), or $.51 per
share (basic and diluted), for the cumulative effect of the change in
accounting principle.

(19) SUBSEQUENT EVENTS

Subsequent to fiscal year 2000, the Company withdrew approximately $40,000
from its funeral trust funds by obtaining a bond to guarantee performance under
certain specified contracts in lieu of trusting requirements. The Company agreed
to maintain unused credit facilities in the aggregate that will equal or exceed
the bond amount related to these contracts. The Company used the proceeds along
with cash on hand to make approximately $24,900 of regularly scheduled principal
payments and an additional $55,000 principal payment to reduce the balance of
its revolving credit facility.

F-54
184
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(20) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES

The following presents the condensed consolidating historical financial
statements as of October 31, 2000 and 1999 and for the three fiscal years ended
October 31, 2000, 1999 and 1998, for the direct and indirect domestic
subsidiaries of the Company that are anticipated to serve as guarantors of the
Senior Subordinated Notes, and the financial results of the Company's
subsidiaries that are not anticipated to serve as guarantors.

CONDENSED CONSOLIDATING STATEMENTS OF EARNINGS AND OTHER COMPREHENSIVE INCOME

<Table>
<Caption>
YEAR ENDED OCTOBER 31, 2000
---------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------

Revenues:
Funeral......................... $ -- $286,080 $165,772 $ -- $451,852
Cemetery........................ -- 248,434 34,515 -- 282,949
-------- -------- -------- -------- --------
-- 534,514 200,287 -- 734,801
-------- -------- -------- -------- --------
Costs and expenses:
Funeral......................... (250) 209,611 125,802 -- 335,163
Cemetery........................ -- 186,436 34,155 7 220,598
-------- -------- -------- -------- --------
(250) 396,047 159,957 7 555,761
-------- -------- -------- -------- --------
Gross profit.................... 250 138,467 40,330 (7) 179,040
Corporate general and
administrative expenses......... 19,810 -- -- (47) 19,763
-------- -------- -------- -------- --------
Operating earnings (loss)....... (19,560) 138,467 40,330 40 159,277
Interest income (expense), net.... 55,571 (79,665) (37,300) 5,110 (56,284)
Other income, net................. 1,790 2,505 2,852 (4,953) 2,194
-------- -------- -------- -------- --------
Earnings before income taxes.... 37,801 61,307 5,882 197 105,187
Income taxes...................... 12,589 23,728 2,003 73 38,393
-------- -------- -------- -------- --------
Net earnings before equity in
subsidiaries................. 25,212 37,579 3,879 124 66,794
Equity in subsidiaries............ 41,582 -- -- (41,582) --
-------- -------- -------- -------- --------
Net earnings.................... 66,794 37,579 3,879 (41,458) 66,794
Other comprehensive loss, net... (1,202) (5,127) (38,402) -- (44,731)
-------- -------- -------- -------- --------
Comprehensive income (loss)..... $ 65,592 $ 32,452 $(34,523) $(41,458) $ 22,063
======== ======== ======== ======== ========
</Table>

F-55
185
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(20) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES -- (CONTINUED)

<Table>
<Caption>
YEAR ENDED OCTOBER 31, 1999
---------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------

Revenues:
Funeral......................... $ -- $281,865 $164,012 $ -- $445,877
Cemetery........................ -- 267,696 42,535 -- 310,231
-------- -------- -------- -------- --------
-- 549,561 206,547 -- 756,108
-------- -------- -------- -------- --------
Costs and expenses:
Funeral......................... (250) 193,412 125,840 -- 319,002
Cemetery........................ -- 190,885 35,768 52 226,705
-------- -------- -------- -------- --------
(250) 384,297 161,608 52 545,707
-------- -------- -------- -------- --------
Gross profit.................... 250 165,264 44,939 (52) 210,401
Corporate general and
administrative expenses......... 16,763 2,426 -- (28) 19,161
-------- -------- -------- -------- --------
Operating earnings (loss)....... (16,513) 162,838 44,939 (24) 191,240
Interest income (expense), net.... 48,413 (69,563) (31,024) -- (52,174)
Other income (expense) net........ (46) 345 3,186 -- 3,485
-------- -------- -------- -------- --------
Earnings before income taxes and
cumulative effect of change
in accounting principle...... 31,854 93,620 17,101 (24) 142,551
Income taxes...................... 14,093 32,823 5,115 -- 52,031
-------- -------- -------- -------- --------
Earnings before cumulative
effect of change in
accounting principle......... 17,761 60,797 11,986 (24) 90,520
Cumulative effect of change in
accounting principle............ -- (45,442) (4,659) -- (50,101)
-------- -------- -------- -------- --------
Net earnings before equity in
subsidiaries................. 17,761 15,355 7,327 (24) 40,419
Equity in subsidiaries............ 22,658 -- -- (22,658) --
-------- -------- -------- -------- --------
Net earnings.................... 40,419 15,355 7,327 (22,682) 40,419
Other comprehensive loss, net... -- (1,827) (618) -- (2,445)
-------- -------- -------- -------- --------
Comprehensive income............ $ 40,419 $ 13,528 $ 6,709 $(22,682) $ 37,974
======== ======== ======== ======== ========
</Table>

F-56
186
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(20) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES -- (CONTINUED)

<Table>
<Caption>
YEAR ENDED OCTOBER 31, 1998
---------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ------------ ------------- ------------ ------------

Revenues:
Funeral......................... $ -- $244,329 $134,766 $ -- $379,095
Cemetery........................ -- 234,409 34,861 -- 269,270
-------- -------- -------- -------- --------
-- 478,738 169,627 -- 648,365
-------- -------- -------- -------- --------
Costs and expenses:
Funeral......................... (250) 161,321 99,598 -- 260,669
Cemetery........................ -- 167,522 24,166 24 191,712
-------- -------- -------- -------- --------
(250) 328,843 123,764 24 452,381
-------- -------- -------- -------- --------
Gross profit.................... 250 149,895 45,863 (24) 195,984
Corporate general and
administrative expenses......... 15,871 750 -- -- 16,621
Performance-based stock options... 44,153 30,546 2,063 -- 76,762
-------- -------- -------- -------- --------
Operating earnings (loss)....... (59,774) 118,599 43,800 (24) 102,601
Interest income (expense), net.... 38,966 (56,669) (26,118) 2,029 (41,792)
Other income, net................. 4,857 3,081 3,264 (7,047) 4,155
-------- -------- -------- -------- --------
Earnings (loss) before income
taxes........................ (15,951) 65,011 20,946 (5,042) 64,964
Income taxes...................... (6,185) 24,817 6,187 (1,757) 23,062
-------- -------- -------- -------- --------
Net earnings (loss) before
equity in subsidiaries....... (9,766) 40,194 14,759 (3,285) 41,902
Equity in subsidiaries............ 51,668 -- -- (51,668) --
-------- -------- -------- -------- --------
Net earnings.................... 41,902 40,194 14,759 (54,953) 41,902
Other comprehensive loss, net... -- (3,381) (28,278) -- (31,659)
-------- -------- -------- -------- --------
Comprehensive income (loss)..... $ 41,902 $ 36,813 $(13,519) $(54,953) $ 10,243
======== ======== ======== ======== ========
</Table>

F-57
187
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(20) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES -- (CONTINUED)

CONDENSED CONSOLIDATING BALANCE SHEETS

ASSETS
Current assets:
Cash and cash equivalent
investments.................. $ 59,862 $ (299) $ 32,032 $ -- $ 91,595
Marketable securities.......... 5,356 190 1,727 -- 7,273
Receivables, net of
allowances................... 1,004 122,232 54,238 -- 177,474
Inventories.................... 383 44,467 15,799 -- 60,649
Prepaid expenses............... 769 1,941 1,353 -- 4,063
----------- ---------- -------- --------- ----------
Total current assets......... 67,374 168,531 105,149 -- 341,054
Receivables due beyond one year,
net of allowances.............. -- 152,093 64,980 -- 217,073
Intangible assets................ 191 457,088 211,183 -- 668,462
Deferred charges................. 2,007 108,792 15,359 -- 126,158
Cemetery property, at cost....... -- 377,898 63,748 -- 441,646
Property and equipment, at
cost........................... 24,768 422,609 145,675 96 593,148
Less accumulated depreciation.... 6,924 113,325 24,900 70 145,219
----------- ---------- -------- --------- ----------
Net property and equipment....... 17,844 309,284 120,775 26 447,929
Merchandise trust, less estimated
cost to deliver................ -- 112,732 (26,763) -- 85,969
Investment in subsidiaries....... 323,921 -- -- (323,921) --
Other assets..................... 1,505 1,785 5,427 -- 8,717
----------- ---------- -------- --------- ----------
$ 412,842 $1,688,203 $559,858 $(323,895) $2,337,008
=========== ========== ======== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current maturities of long-term
debt......................... $ 29,857 $ -- $ -- $ -- $ 29,857
Accounts payable............... 299 3,988 16,026 29 20,342
Accrued expenses............... 14,572 43,409 11,181 (136) 69,026
Income taxes payable........... (13,796) 3,448 12,031 (1,683) --
Deferred income taxes.......... (307) 14,695 2,425 (1,562) 15,251
----------- ---------- -------- --------- ----------
Total current liabilities.... 30,625 65,540 41,663 (3,352) 134,476
Long-term debt, less current
maturities..................... 836,385 -- 84,285 -- 920,670
Intercompany payables, net....... (1,654,754) 1,194,997 473,017 (13,260) --
Deferred income taxes............ 13,400 71,857 (276) (1,241) 83,740
Deferred revenue................. 500 64,664 43,580 -- 108,744
Other long-term liabilities...... -- 6,481 8,088 152 14,721
----------- ---------- -------- --------- ----------
Total liabilities............ (773,844) 1,403,539 650,357 (17,701) 1,262,351
----------- ---------- -------- --------- ----------
Common stock..................... 106,832 224 53 (277) 106,832
Other............................ 1,081,056 292,916 13,001 (305,917) 1,081,056
Accumulated other comprehensive
loss........................... (1,202) (8,476) (103,553) -- (113,231)
----------- ---------- -------- --------- ----------
Total shareholders' equity... 1,186,686 284,664 (90,499) (306,194) 1,074,657
----------- ---------- -------- --------- ----------
$ 412,842 $1,688,203 $559,858 $(323,895) $2,337,008
=========== ========== ======== ========= ==========
</Table>

F-58
188
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(20) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES -- (CONTINUED)

<Table>
<Caption>
OCTOBER 31, 1999
------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
----------- ------------ ------------- ------------ ------------

ASSETS

Current assets:
Cash and cash equivalent
investments...................... $ 11,689 $ 1,649 $ 17,539 $ -- $ 30,877
Marketable securities.............. 2,920 41,529 2,100 -- 46,549
Receivables, net of allowances..... 1,311 113,441 61,463 -- 176,215
Inventories........................ 364 39,408 11,659 -- 51,431
Prepaid expenses................... 514 4,166 1,317 -- 5,997
----------- ---------- -------- --------- ----------
Total current assets............. 16,798 200,193 94,078 -- 311,069
Receivables due beyond one year, net
of allowances...................... -- 173,325 64,253 -- 237,578
Intangible assets.................... 278 440,311 232,772 -- 673,361
Deferred charges..................... 3,890 90,901 14,645 -- 109,436
Cemetery property, at cost........... -- 367,229 56,803 -- 424,032
Property and equipment, at cost...... 22,042 388,815 160,727 96 571,680
Less accumulated depreciation........ 3,668 94,543 26,397 27 124,635
----------- ---------- -------- --------- ----------
Net property and equipment........... 18,374 294,272 134,330 69 447,045
Merchandise trust, less estimated
cost to deliver.................... -- 82,397 (23,398) -- 58,999
Investment in subsidiaries........... 282,321 -- -- (282,321) --
Other assets......................... 1,290 5,322 15,748 -- 22,360
----------- ---------- -------- --------- ----------
$ 322,951 $1,653,950 $589,231 $(282,252) $2,283,880
=========== ========== ======== ========= ==========

LIABILITIES AND
SHAREHOLDERS' EQUITY

Current liabilities:
Current maturities of long-term
debt............................. $ 12,582 $ -- $ -- $ -- $ 12,582
Accounts payable................... (227) 8,113 13,887 29 21,802
Accrued expenses................... 19,650 41,336 15,418 -- 76,404
Income taxes payable............... (11,429) 3,386 13,516 22 5,495
Deferred income taxes.............. (162) 15,279 2,076 -- 17,193
----------- ---------- -------- --------- ----------
Total current liabilities........ 20,414 68,114 44,897 51 133,476
Long-term debt, less current
maturities......................... 930,939 376 7,516 -- 938,831
Intercompany payables, net........... (1,764,347) 1,235,101 543,006 (13,760) --
Deferred income taxes................ 10,083 62,930 12,268 (3,847) 81,434
Deferred revenue..................... 750 34,954 29,257 -- 64,961
Other long-term liabilities.......... -- 150 8,264 152 8,566
----------- ---------- -------- --------- ----------
Total liabilities................ (802,161) 1,401,625 645,208 (17,404) 1,227,268
----------- ---------- -------- --------- ----------

Common stock......................... 106,219 337 52 (389) 106,219
Other................................ 1,018,893 255,337 9,122 (264,459) 1,018,893
Accumulated other comprehensive
loss............................... -- (3,349) (65,151) -- (68,500)
----------- ---------- -------- --------- ----------
Total shareholders' equity....... 1,125,112 252,325 (55,977) (264,848) 1,056,612
----------- ---------- -------- --------- ----------
$ 322,951 $1,653,950 $589,231 $(282,252) $2,283,880
=========== ========== ======== ========= ==========
</Table>

F-59
189
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(20) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

Net cash provided by (used in)
operating activities................ $ 39,948 $ 25,098 $ 5,005 $(500) $ 69,551
-------- -------- -------- ----- --------
Cash flows from investing activities:
Proceeds from sale of marketable
securities....................... 2,990 45,624 16,486 -- 65,100
Purchases of marketable securities
and long-term investments........ (5,426) (4,285) (4,060) -- (13,771)
Purchases of subsidiaries, net of
cash, seller financing and stock
issued........................... -- (804) -- -- (804)
Additions to property and
equipment........................ (2,936) (28,669) (4,412) -- (36,017)
Other............................... -- 1,192 134 -- 1,326
-------- -------- -------- ----- --------
Net cash provided by (used in)
investing activities........... (5,372) 13,058 8,148 -- 15,834
-------- -------- -------- ----- --------
Cash flows from financing activities:
Proceeds from long-term debt........ 8,366 -- -- -- 8,366
Repayments of long-term debt........ (12,344) -- (10,806) -- (23,150)
Intercompany receivables
(payables)....................... 21,593 (40,104) 18,011 500 --
Issuance of common stock............ 2,380 -- -- -- 2,380
Dividends........................... (6,398) -- -- -- (6,398)
-------- -------- -------- ----- --------
Net cash provided by (used in)
financing activities........... 13,597 (40,104) 7,205 500 (18,802)
-------- -------- -------- ----- --------
Effect of exchange rates on cash and
cash equivalents.................... -- -- (5,865) -- (5,865)
-------- -------- -------- ----- --------
Net increase (decrease) in cash....... 48,173 (1,948) 14,493 -- 60,718
-------- -------- -------- ----- --------
Cash and cash equivalents, beginning
of period........................... 11,689 1,649 17,539 -- 30,877
-------- -------- -------- ----- --------
Cash and cash equivalents, end of
period.............................. $ 59,862 $ (299) $ 32,032 $ -- $ 91,595
======== ======== ======== ===== ========
</Table>

F-60
190
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(20) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES -- (CONTINUED)

<Table>
<Caption>
YEAR ENDED OCTOBER 31, 1999
----------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------

Net cash provided by (used in)
operating activities........... $ 93,251 $ (75,363) $(12,320) $ 50 $ 5,618
--------- --------- -------- ------- ---------
Cash flows from investing
activities:
Proceeds from sale of
marketable securities....... -- 14,740 27,500 -- 42,240
Purchases of marketable
securities and long-term
investments................. (2,992) (17,126) (6,067) -- (26,185)
Purchases of subsidiaries, net
of cash, seller financing
and stock issued............ -- (133,554) (28,478) -- (162,032)
Additions to property and
equipment................... (10,891) (29,238) (14,754) -- (54,883)
Other.......................... -- 519 2,592 -- 3,111
--------- --------- -------- ------- ---------
Net cash used in investing
activities................ (13,883) (164,659) (19,207) -- (197,749)
--------- --------- -------- ------- ---------
Cash flows from financing
activities:
Proceeds from long-term debt... 246,573 -- 1,006 -- 247,579
Repayments of long-term debt... (231,995) -- (780) -- (232,775)
Intercompany receivables
(payables).................. (269,902) 240,238 29,714 (50) --
Issuance of common stock....... 220,556 -- -- -- 220,556
Purchase and retirement of
common stock................ (32,951) -- -- -- (32,951)
Dividends...................... (8,557) -- -- -- (8,557)
--------- --------- -------- ------- ---------
Net cash provided by (used
in) financing
activities................ (76,276) 240,238 29,940 (50) 193,852
--------- --------- -------- ------- ---------
Effect of exchange rates on cash
and cash equivalents........... -- -- (1,577) -- (1,577)
--------- --------- -------- ------- ---------
Net increase (decrease) in
cash........................... 3,092 216 (3,164) -- 144
Cash and cash equivalents,
beginning of period............ 8,597 1,433 20,703 -- 30,733
--------- --------- -------- ------- ---------
Cash and cash equivalents, end of
period......................... $ 11,689 $ 1,649 $ 17,539 $ -- $ 30,877
========= ========= ======== ======= =========
</Table>

F-61
191
STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

(20) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS OF GUARANTORS OF SENIOR
SUBORDINATED NOTES -- (CONTINUED)

<Table>
<Caption>
YEAR ENDED OCTOBER 31, 1998
----------------------------------------------------------------------
GUARANTOR NON-GUARANTOR
PARENT SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ------------ ------------- ------------ ------------

Net cash provided by (used in)
operating activities............... $ 58,086 $ (14,573) $ (17,823) $(3,286) $ 22,404
--------- --------- --------- ------- ---------
Cash flows from investing activities:
Proceeds from sale of marketable
securities...................... -- 12,567 6,472 -- 19,039
Purchases of marketable securities
and long-term investments....... -- (19,229) (11,209) -- (30,438)
Purchases of subsidiaries, net of
cash, seller financing and stock
issued.......................... -- (137,855) (85,559) -- (223,414)
Additions to property and
equipment....................... (4,053) (28,526) (12,224) -- (44,803)
--------- --------- --------- ------- ---------
Net cash used in investing
activities.................... (4,053) (173,043) (102,520) -- (279,616)
--------- --------- --------- ------- ---------
Cash flows from financing activities:
Proceeds from long-term debt....... 602,782 -- -- -- 602,782
Repayments of long-term debt....... (270,682) -- -- -- (270,682)
Intercompany receivables
(payables)...................... (340,565) 212,004 130,293 (1,732) --
Retirement of performance-based
stock options................... (39,923) (27,633) (1,875) -- (69,431)
Issuance of common stock........... 11,738 -- -- -- 11,738
Purchase and retirement of common
stock........................... (9,101) -- -- -- (9,101)
Dividends.......................... (5,866) -- (5,018) 5,018 (5,866)
--------- --------- --------- ------- ---------
Net cash provided by (used in)
financing activities.......... (51,617) 184,371 123,400 3,286 259,440
--------- --------- --------- ------- ---------
Effect of exchange rates on cash and
cash equivalents................... -- -- (3,135) -- (3,135)
--------- --------- --------- ------- ---------
Net increase (decrease) in cash...... 2,416 (3,245) (78) -- (907)
Cash and cash equivalents, beginning
of period.......................... 6,181 4,678 20,781 -- 31,640
--------- --------- --------- ------- ---------
Cash and cash equivalents, end of
period............................. $ 8,597 $ 1,433 $ 20,703 $ -- $ 30,733
========= ========= ========= ======= =========
</Table>

F-62
192

REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

The Board of Directors and Shareholders of
Stewart Enterprises, Inc.:

Our report on the consolidated financial statements of Stewart Enterprises,
Inc. and Subsidiaries, which includes an explanatory paragraph related to
changes in the Company's method of accounting for funeral services investment
trust fund earnings in 1999, is included on page F-24. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedule listed on Page F-64. This financial statement schedule is the
responsibility of the Company's management.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.

PricewaterhouseCoopers LLP

New Orleans, Louisiana
December 12, 2000, except for
Note 19 as to which the date is
January 9, 2001

F-63
193

STEWART ENTERPRISES, INC.
AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)

<Table>
<Caption>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- ------------------------ ------------- --------------
ADDITIONS
------------------------
BALANCE AT CHARGED TO CHARGED
BEGINNING OF COSTS AND TO OTHER DEDUCTIONS BALANCE AT END
DESCRIPTION PERIOD EXPENSES ACCOUNTS(1) -- WRITE-OFFS OF PERIOD
----------- ------------ ---------- ----------- ------------- --------------

Current -- Allowance for
contract cancellations and
doubtful accounts:
Year ended October 31,
2000....................... $11,432 14,351 53 15,912 $ 9,924
1999....................... $10,738 14,050 2,223 15,579 $11,432
1998....................... $ 6,869 16,191 1,875 14,197 $10,738
Due after one year -- Allowance
for contract cancellations and
doubtful accounts:
Year ended October 31,
2000....................... $14,557 21,526 -- 19,223 $16,860
1999....................... $12,063 19,864 -- 17,370 $14,557
1998....................... $ 9,696 12,134 728 10,495 $12,063
Accumulated amortization of
intangible assets:
Year ended October 31,
2000....................... $63,300 19,644 -- -- $82,944
1999....................... $43,831 19,469 -- -- $63,300
1998....................... $29,383 14,448 -- -- $43,831
</Table>

- ---------------

(1) Amounts charged to other accounts represent principally the opening balance
in the allowance for contract cancellations and doubtful accounts for
acquired companies.

F-64
194

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The Company has entered into a definitive agreement to sell its operations
in Mexico. The net proceeds from the sale are expected to be approximately US
$70 million before taxes, which will be used to pay down existing debt. The
transaction is scheduled to close in August 2001. The following unaudited pro
forma information is presented for comparative purposes only and does not
purport to be indicative of the results of operations or the financial position
that would have resulted had the sale of the Company's Mexican operations been
consummated on the date indicated, at the beginning of the period indicated, or
that may result in the future.

The following presents the condensed statement of earnings of the Company
for the six months ended April 30, 2001, pro forma adjustments assuming the
pending sale of the Company's Mexican operations had been consummated on
November 1, 2000, and the pro forma condensed statement of earnings for the six
months ended April 30, 2001.

CONDENSED STATEMENTS OF EARNINGS

<Table>
<Caption>
SIX MONTHS ENDED APRIL 30, 2001
----------------------------------------------
PRO FORMA
CONSOLIDATED (1) ADJUSTMENTS (2) PRO FORMA
---------------- --------------- ---------

Revenues:
Funeral............................................. $215,307 $(10,655) $204,652
Cemetery............................................ 132,322 (490) 131,832
-------- -------- --------
347,629 (11,145) 336,484
-------- -------- --------
Costs and expenses:
Funeral............................................. 164,972 (5,159) 159,813
Cemetery............................................ 98,357 (758) 97,599
-------- -------- --------
263,329 (5,917) 257,412
-------- -------- --------
Gross profit........................................ 84,300 (5,228) 79,072
Corporate general and administrative expenses......... 9,066 -- 9,066
-------- -------- --------
Operating earnings.................................. 75,234 (5,228) 70,006
Net interest income (expense)......................... (25,783) 653 (25,130)
Other income, net..................................... 3,184 (80) 3,104
-------- -------- --------
Earnings before income taxes and cumulative effect
of change in accounting principles............... 52,635 (4,655) 47,980
Income taxes.......................................... 19,212 (948) 18,264
-------- -------- --------
Earnings before cumulative effect of change in
accounting principles............................ $ 33,423 $ (3,707) $ 29,716
======== ======== ========
Earnings per common share:
Basic............................................... $ .31 $ .28
======== ========
Diluted............................................. $ .31 $ .28
======== ========
Weighted average common shares outstanding (in
thousands):
Basic............................................... 107,131 107,131
======== ========
Diluted............................................. 107,136 107,136
======== ========
</Table>

P-1
195

NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF EARNINGS FOR THE SIX MONTHS
ENDED APRIL 30, 2001

(1) Reflects the historical, condensed consolidated results of operations of
Stewart Enterprises, Inc.

(2) Reflects the deconsolidation of the Company's Mexican operations and the pro
forma adjustment for the interest savings relating to the repayment of the
Company's revolving credit facility. The sale of the Company's Mexican
operations was assumed to be consummated on November 1, 2000 for US $70
million in net proceeds, before taxes. Such US $70 million in net proceeds
were assumed to repay the Company's revolving credit facility which had an
average borrowing rate of 6.878 percent for the first six months of fiscal
year 2001 and resulted in interest savings of $2,407. The interest savings
of $2,407 is netted with the deconsolidation of Mexico's interest income of
$1,754 to arrive at net interest income of $653 as shown above. The gain on
the sale of the Mexican operations and the tax liability related to the gain
were excluded from the pro forma adjustments in the condensed statement of
earnings above. See the discussion of the gain in the assumptions used in
the pro forma condensed balance sheet.

P-2
196

The following presents the condensed balance sheet of the Company as of
April 30, 2001, pro forma adjustments assuming the pending sale of the Company's
Mexican operations had been consummated on April 30, 2001, and the pro forma
condensed balance sheet as of April 30, 2001.

CONDENSED BALANCE SHEETS

<Table>
<Caption>
APRIL 30, 2001
-----------------------------------------------
PRO FORMA
CONSOLIDATED (1) ADJUSTMENTS (2) PRO FORMA
---------------- --------------- ----------

ASSETS
Current assets:
Cash and cash equivalent investments...................... $ 103,721 $ (27,403) $ 76,318
Marketable securities..................................... 3,088 -- 3,088
Receivables, net of allowances............................ 92,825 (165) 92,660
Inventories............................................... 52,738 (7,300) 45,438
Prepaid expenses.......................................... 5,618 (357) 5,261
---------- --------- ----------
Total current assets............................... 257,990 (35,225) 222,765
Receivables due beyond one year, net of allowances.......... 88,089 -- 88,089
Prearranged receivables..................................... 1,394,038 (111,861) 1,282,177
Intangible assets........................................... 683,614 (5,860) 677,754
Deferred charges............................................ 265,966 (7,749) 258,217
Cemetery property, at cost.................................. 438,771 -- 438,771
Property and equipment, at cost............................. 602,923 (11,342) 591,581
Less accumulated depreciation............................... 159,719 (1,381) 158,338
---------- --------- ----------
Net property and equipment.................................. 443,204 (9,961) 433,243
Deferred income taxes....................................... 96,339 (15,302) 81,037
Other assets................................................ 10,035 (5,263) 4,772
---------- --------- ----------
$3,678,046 $(191,221) $3,486,825
========== ========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt...................... $ 501,150 $ (70,000) $ 431,150
Accounts payable.......................................... 14,539 (655) 13,884
Accrued expenses.......................................... 65,892 (359) 65,533
Income taxes payable...................................... 6,681 (5,566) 1,115
Deferred income taxes..................................... 17,375 -- 17,375
---------- --------- ----------
Total current liabilities.......................... 605,637 (76,580) 529,057
Long-term debt, less current maturities..................... 365,223 -- 365,223
Prearranged deferred revenue................................ 1,820,406 (133,968) 1,686,438
Other long-term liabilities................................. 13,850 -- 13,850
---------- --------- ----------
Total liabilities.................................. 2,805,116 (210,548) 2,594,568
---------- --------- ----------
Shareholders' Equity:
Common stock................................................ 107,520 -- 107,520
Other....................................................... 865,664 (11,378) 854,286
Accumulated other comprehensive income...................... (100,254) 30,705 (69,549)
---------- --------- ----------
Total shareholders' equity......................... 872,930 19,327 892,257
---------- --------- ----------
$3,678,046 $(191,221) $3,486,825
========== ========= ==========
</Table>

P-3
197

NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEETS

(1) Reflects the historical, condensed consolidated financial position of
Stewart Enterprises, Inc.

(2) Reflects the deconsolidation of the Company's Mexican financial position and
the pro forma adjustments for the repayment of the Company's revolving
credit facility, the gain on the sale of the Mexican operations and the tax
liability related to the sale. The sale of the Company's Mexican operations
was assumed to be consummated on April 30, 2001 for US $70 million in net
proceeds, before taxes. The proceeds were assumed to repay the Company's
revolving credit facility. The book value of the Mexican operations was
assumed to be $69,224, which resulted in a book gain of $776. The tax basis
of the Mexican operations was assumed to be $35,275, which resulted in a
taxable gain of $34,725 and a tax liability of $12,154.

P-4
198

The following presents the condensed statement of earnings of the Company
for the fiscal year ended October 31, 2000, pro forma adjustments assuming the
pending sale of the Company's Mexican operations had been consummated on
November 1, 1999, and the pro forma condensed statement of earnings for the
fiscal year ended October 31, 2000.

CONDENSED STATEMENTS OF EARNINGS

<Table>
<Caption>
YEAR ENDED OCTOBER 31, 2000
----------------------------------------------
PRO FORMA
CONSOLIDATED (1) ADJUSTMENTS (2) PRO FORMA
---------------- --------------- ---------

Revenues:
Funeral............................................. $451,852 $(26,297) $425,555
Cemetery............................................ 282,949 (1,457) 281,492
-------- -------- --------
734,801 (27,754) 707,047
-------- -------- --------
Costs and expenses:
Funeral............................................. 335,163 (13,535) 321,628
Cemetery............................................ 220,598 (2,672) 217,926
-------- -------- --------
555,761 (16,207) 539,554
-------- -------- --------
Gross profit........................................ 179,040 (11,547) 167,493
Corporate general and administrative expenses......... 19,763 -- 19,763
-------- -------- --------
Operating earnings.................................. 159,277 (11,547) 147,730
Net interest income (expense)......................... (56,284) 3,325 (52,959)
Other income, net..................................... 2,194 (437) 1,757
-------- -------- --------
Earnings before income taxes........................ 105,187 (8,659) 96,528
Income taxes.......................................... 38,393 (1,888) 36,505
-------- -------- --------
Net earnings........................................ $ 66,794 $ (6,771) $ 60,023
======== ======== ========
Earnings per common share:
Basic............................................... $ .63 $ .56
======== ========
Diluted............................................. $ .63 $ .56
======== ========
Weighted average common shares outstanding (in
thousands):
Basic............................................... 106,600 106,600
======== ========
Diluted............................................. 106,603 106,603
======== ========
</Table>

P-5
199

NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENTS OF EARNINGS FOR THE YEAR ENDED
OCTOBER 31, 2000

(1) Reflects the historical condensed consolidated results of operations of
Stewart Enterprises, Inc.

(2) Reflects the deconsolidation of the Company's Mexican operations and the pro
forma adjustment for the interest savings relating to the repayment of the
Company's revolving credit facility. The sale of the Company's Mexican
operations was assumed to be consummated on November 1, 1999 for US $70
million in net proceeds, before taxes. The proceeds were assumed to repay
the Company's revolving credit facility which had an average borrowing rate
of 6.619 percent for fiscal year 2000 and resulted in interest savings of
$4,633. The interest savings of $4,633 is netted with the deconsolidation of
Mexico's interest income of $1,308 to arrive at net interest income of
$3,325 as shown above. The gain on the sale of the Mexican operations and
the tax liability related to the gain were excluded from the pro forma
adjustments in the condensed statement of earnings above. See the discussion
of the gain in the assumptions used in the pro forma condensed balance
sheet.

P-6
200

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

$300,000,000

(STEWART ENTERPRISES, INC. LOGO)

Offer to Exchange $300,000,000
Registered 10 3/4% Senior Subordinated Notes due 2008
for any and all outstanding
10 3/4% Senior Subordinated Notes due 2008

--------------------

PROSPECTUS
--------------------

August 14, 2001

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
201

PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 83 of the Louisiana Business Corporation Law gives Louisiana
corporations broad powers to indemnify their present and former directors and
officers and those of affiliated corporations against expenses incurred in the
defense of any lawsuit to which they are made parties by reason of being or
having been such directors or officers; gives a director or officer who
successfully defends an action the right to be so indemnified, subject to
specific conditions and exclusions; and authorizes Louisiana corporations to buy
directors' and officers' liability insurance. Such indemnification is not
exclusive of any other rights to which those indemnified may be entitled under
any by-law, agreement, authorization of shareholders or otherwise.

Our By-laws make mandatory the indemnification of directors and officers
permitted by the Louisiana Business Corporation Law. The standard to be applied
in evaluating any claim for indemnification (excluding claims for expenses
incurred in connection with the successful defense of any proceeding or matter
therein for which indemnification is mandatory without reference to any such
standard) is whether the claimant acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
corporation. With respect to any criminal action or proceeding, the standard is
that the claimant had no reasonable cause to believe the conduct was unlawful.
No indemnification is permitted in respect of any claim, issue or matter as to
which a director or officer shall have been adjudged by a court of competent
jurisdiction to be liable for willful or intentional misconduct or to have
obtained an improper personal benefit, unless, and only to the extent that the
court shall determine upon application that, in view of all the circumstances of
the case, he is fairly and reasonably entitled to indemnity for such expenses
that the court shall deem proper.

We have in effect a directors' and officers' liability insurance policy
that provides for indemnification of our officers and directors against losses
arising from claims asserted against them in their capacities as officers and
directors, subject to limitations and conditions set forth in such policy.

We have entered into indemnity agreements with each of our directors and
executive officers, pursuant to which we have agreed under certain circumstances
to purchase and maintain directors' and officers' liability insurance, unless
such insurance is not reasonably available or, in the reasonable judgment of the
Board of Directors, there is insufficient benefit to us from such insurance. The
agreements also provide that we will indemnify each director and executive
officer against any costs and expenses, judgments, settlements and fines
incurred in connection with any claim involving him by reason of his position as
director or officer that are in excess of the coverage provided by any such
insurance, provided that he meets certain standards of conduct.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
------- -----------

II-1
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<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
------- -----------

4.5 Indenture dated as of December 1, 1996 by and between
Stewart and Citibank, N.A. as Trustee (incorporated by
reference to Exhibit 4.1 to Stewart's Current Report on Form
8-K dated December 5, 1996), Supplemental Indenture dated
April 24, 1998 (incorporated by reference to Exhibit 4.1 to
Stewart's Current Report on Form 8-K dated April 21, 1998)
and Second Supplemental Indenture dated June 29, 2001
(incorporated by reference to Exhibit 4.2 to Stewart's
Current Report on Form 8-K dated July 12, 2001).
4.6 Form of 6.70% Note due 2003.
4.7 Form of 6.40% Remarketable Or Redeemable Securities (ROARS)
due May 1, 2013 (Remarketing date May 1, 2003).
4.8 Credit Agreement dated June 29, 2001 by and among Stewart,
Empresas Stewart-Cementerios and Empresas
Stewart-Funerarias, as Borrowers, Bank of America, N.A., as
Administrative Agent, Collateral Agent and as a Lender,
Deutsche Banc Alex. Brown Inc., as Syndication Agent,
Bankers Trust Company, as a Lender and the other Lenders
party thereto from time to time (incorporated by reference
to Exhibit 4.1 to Stewart's Current Report on Form 8-K dated
July 12, 2001).
4.9 Credit Agreement by and among Stewart, its subsidiaries and
Citicorp USA, Inc., Bank of America Illinois, and
NationsBank of Texas, N.A. dated April 14, 1997
(incorporated by reference to Exhibit 4.2 to Stewart's
Registration Statement on Form S-3 (Registration No.
333-27771) filed with the Commission on May 23, 1997).
4.10 See Stewart's Amended and Restated Articles of
Incorporation, as amended, and By-laws, as amended and
restated, defining the rights of holders of Class A and
Class B common stock (incorporated by reference to Exhibit
3.1 to Stewart's Annual Report on Form 10-K for the fiscal
year ended October 31, 1999 and Exhibit 3.2 to Stewart's
Quarterly Report on Form 10-Q for the quarter ended July 31,
2000, respectively).
4.11 Specimen of Class A common stock certificate (incorporated
by reference to Exhibit 4.2 to Amendment No. 3 to Stewart's
Registration Statement on Form S-1 (Registration No.
33-42336) filed with the Commission on October 7, 1991).
4.12 Rights Agreement, dated as of October 28, 1999, between
Stewart and ChaseMellon Shareholder Services, L.L.C. as
Rights Agent (incorporated by reference to Exhibit 1 to
Stewart's Form 8-A dated November 3, 1999).
</Table>

Stewart hereby agrees to furnish to the Commission, upon request, a copy
of the instruments which define the rights of holders of Stewart's
long-term debt. None of such instruments (other than those included as
exhibits herein) represent long-term debt in excess of 10 percent of
Stewart's consolidated total assets.

<Table>

5.1 Opinion of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P. regarding the validity of the exchange
notes.
5.2 Opinion of Holland & Knight, LLP regarding the validity of
the exchange notes.
12.1 Calculation of Ratio of Earnings to Fixed Charges.
12.2 Calculation of Pro Forma Ratio of Earnings to Fixed Charges.
23.1 Consent of PricewaterhouseCoopers LLP.
</Table>

II-2
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<Table>

23.2 Consent of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P. (included in Exhibit 5).
24 Power of Attorney (included on the signature page of this
registration statement).
25 Statement of eligibility of trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</Table>

(b) Financial Statement Schedules

<Table>

1 Schedule II Valuation and Qualifying Accounts (included on
page F-64 of the prospectus).
</Table>

ITEM 22. UNDERTAKINGS.

The undersigned registrants hereby undertake:

(a)(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:

(A) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.

(B) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in the
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement.

(C) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the exchange offer.

(b) For purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act that is incorporated by
reference in this registration statement shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.

(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions
described under Item 20 or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant
in the successful defense of any action,

II-3
204

suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of
such issue.

(d) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13
of this Form, within one business day of the receipt of such
request, and to send the incorporated documents by first class mail
or other equally prompt means. This includes information contained
in documents filed subsequent to the effective date of the
registration statement through the date of responding to the
request.

(e) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved
therein, that was not the subject of and included in the
registration statement when it became effective.

II-4
205

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New Orleans, State of
Louisiana, on August 14, 2001.

STEWART ENTERPRISES, INC.

By: /s/ WILLIAM E. ROWE
----------------------------------

William E. Rowe
President and Chief Executive
Officer

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of William E. Rowe and Kenneth C. Budde, or
either of them, his true and lawful attorney-in-fact and agent, with full power
of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement, and to file the same with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and ratifying
and confirming all that said attorney-in-fact and agent or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----

/s/ FRANK B. STEWART, JR. Chairman of the Board August 14, 2001
- -----------------------------------------------------
Frank B. Stewart, Jr.

/s/ WILLIAM E. ROWE President, Chief Executive August 14, 2001
- ----------------------------------------------------- Officer and a Director
William E. Rowe (Principal Executive Officer)

/s/ KENNETH C. BUDDE Executive Vice President, August 14, 2001
- ----------------------------------------------------- President-Corporate Division,
Kenneth C. Budde Chief Financial Officer and a
Director (Principal Financial
Officer)

/s/ MICHAEL G. HYMEL Vice President and Chief August 14, 2001
- ----------------------------------------------------- Accounting Officer (Principal
Michael G. Hymel Accounting Officer)

/s/ DARWIN C. FENNER Director August 14, 2001
- -----------------------------------------------------
Darwin C. Fenner

/s/ JOHN P. LABORDE Director August 14, 2001
- -----------------------------------------------------
John P. Laborde

/s/ JAMES W. MCFARLAND Director August 14, 2001
- -----------------------------------------------------
James W. McFarland

/s/ MICHAEL O. READ Director August 14, 2001
- -----------------------------------------------------
Michael O. Read
</Table>

S-1
206

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrants
named below have duly caused this registration statement to be signed on their
behalf by the undersigned, thereunto duly authorized, in the City of New
Orleans, State of Louisiana, on August 14, 2001.

S.E. OF TUCSON, ARIZONA, INC.
GRIFFIN-LEGGETT, INC.
FOREST HILLS CEMETERY, INC.
GRIFFIN LEGGETT HEALEY & ROTH, INC.
GRIFFIN-LEGGETT INSURANCE AGENCY, INC.
GROSS FUNERAL HOME, INC.
REST HILLS MEMORIAL PARK, INC.
GRIFFIN LEGGETT -- CONWAY, INC.
DILDAY BROTHERS HUNTINGTON VALLEY MORTUARY
HOPSON MORTUARY, INC.
LASSILA FUNERAL CHAPELS, INC.
SANTA BARBARA FUNERAL SERVICES, INC.
S.E. ACQUISITION OF CALIFORNIA, INC.
ALL SOULS MORTUARY, INC.
ASHES TO ASHES, INC.
ASSUMPTION MORTUARY, INC.
BARSTOW FUNERAL HOMES, INC.
BUCHHEIM FAMILY, INC.
CALVARY MORTUARY OF LOS ANGELES, CALIFORNIA, INC.
CATHOLIC MORTUARY SERVICES, INC.
DeYOUNG MEMORIAL CHAPEL, INC.
HOLY CROSS MORTUARY OF CULVER CITY, CALIFORNIA, INC.
HOLY CROSS MORTUARY OF POMONA, CALIFORNIA, INC.
LOMBARD & CO.
N.D. DAVIS & ASSOCIATES, INC.
QUEEN OF HEAVEN MORTUARY, INC.
RESURRECTION MORTUARY, INC.
RICHARD PIERCE FUNERAL SERVICE
RIVER CITIES FUNERAL CHAPEL, INC.
S.E. ACQUISITION OF DELANO, CALIFORNIA, INC.
S.E. ACQUISITION OF GLENDALE, CALIFORNIA, INC.
S.E. ACQUISITION OF LANCASTER, CALIFORNIA, INC.
S.E. ACQUISITION OF LOS OSOS MORTUARY AND MEMORIAL PARK, INC.
S.E. ACQUISITION OF OAKHURST, CALIFORNIA, INC.
S.E. ACQUISITION OF OROVILLE, CALIFORNIA, INC.
S.E. ACQUISITION OF SAN DIEGO, CALIFORNIA, INC.
SAN FERNANDO MISSION MORTUARY, INC.
SANTA CLARA MORTUARY, INC.
SCOVERN MORTUARY, A CALIFORNIA CORPORATION
SDCA HOLDINGS, INC.
SAN DIEGO CEMETERY ASSOCIATION
SIMPLICITY PLAN OF CALIFORNIA, INC.
STEWART PRE-NEED SERVICES, INC.
STRICKLIN/SNIVELY MORTUARY
CATALINA CHANNEL CREMATION SOCIETY
WALLACE E. WHITE & HOWARD J. CALLANAN, INC.
WOODSIDE CHAPEL OF CRIPPEN & FLYNN
SENTINEL CREMATION SOCIETIES, INC.
S-2
207

S.E. ACQUISITION OF MURIETTA, CALIFORNIA, INC.
S.E. ACQUISITION OF SANTA MARIA, CALIFORNIA, INC.
VICTOR V. DESROSIER, INC.
CEMETERY MANAGEMENT, INC.
ARLINGTON MEMORIAL PARK CEMETERY AND FUNERAL HOME, INC.
BALDWIN-FAIRCHILD FUNERAL HOMES, INC.
ALL FAITHS MEMORIAL PARK, INC.
ORLANDO FUNERAL HOME, INCORPORATED
THE SIMPLICITY PLAN, INC.
BAY AREA CREMATORY, INC.
BRUCE OCALA FUNERAL HOME, INC.
BETH DAVID FUNERAL CHAPEL TAMPA, INC.
BETH DAVID MEMORIAL CHAPEL, INC.
CHAPEL HILL CEMETERY, INC.
GLEN HAVEN MEMORIAL PARK, INC.
HIGHLAND MEMORY GARDENS, INC. (FL)
SEMORAN FUNERAL HOME, INC.
FLORIDA HILLS MEMORIAL GARDENS, INC.
GARDEN OF MEMORIES, INC.
A.P. BOZA FUNERAL HOME, INC.
CURRY & SON FUNERAL HOME, INC.
WOODLAWN MEMORY GARDENS, INC. (ST. PETE)
GOOD SHEPHERD MEMORIAL GARDENS, INC.
DAVID C. GROSS FUNERAL HOME, INC.
HUBBELL FUNERAL HOME AND CREMATORY, INC.
KENT R. PALMER, INC.
KICLITER FUNERAL HOME, INC.
MADCEM OF FLORIDA, INC.
MEMORIAL PARK CEMETERY, INC.
OAKLAWN PARK CEMETERY AND FUNERAL HOME, INC.
ROBERTS FUNERAL HOME, INC.
ROYAL PALM MEMORIAL GARDENS, INC.
SYLVAN ABBEY MEMORIAL PARK, INC.
TRINITY MEMORIAL GARDENS OF LAKELAND, INC.
TURNER CREMATORY, INC.
TURNER FUNERAL HOMES, INC.
WALSH & WOOD FUNERAL HOME, INC.
WOODLAWN PARK CEMETERY COMPANY (MIAMI)
MEMORIAL SUNSET PARK, INC.
NATIONAL MONUMENT CO., INC.
SOUTH DADE-PALMS MEMORIAL PARK, INC.
SIMPLE TRIBUTE OF FLORIDA, INC.
CHEATHAM HILL MEMORIAL PARK, INC.
EMPRESAS STEWART -- CEMENTERIOS, INC.
EMPRESAS STEWART -- FUNERARIAS, INC.
SIMPLE TRIBUTE, INC.
EASTLAWN CORPORATION
HOLLY HILL MEMORIAL PARK, INC.
ROSE HAVEN FUNERAL HOME & CEMETERY, INC.
ACME MAUSOLEUM CORPORATION
INTERNATIONAL STONE & ERECTORS, INC.
LAKE LAWN METAIRIE FUNERAL HOME, INC.
LAKE LAWN METAIRIE FUNERAL HOME (JOINT VENTURE)
S-3
208

LAKE LAWN PARK, INC.
METAIRIE CEMETERY ASSOCIATION
PINE CREST CEMETERY, INC.
ALL FAITHS FUNERAL HOME, INC.
MOUNT OLIVET CEMETERY, INC.
S.E. AUSTRALIA, INC.
S.E. SOUTH-CENTRAL, INC.
ELLISON FUNERAL HOME, INC.
KILGORE-GREEN FUNERAL HOME, INC.
LATHAN FUNERAL HOME, INC.
PINE CREST FUNERAL HOME, INC.
FAITH MEMORIAL PARK & MAUSOLEUM COMPANY, INC.
VALHALLA MEMORY GARDENS AND FUNERAL HOME, INC.
ROCKCO AND SON FUNERAL HOME, INC.
ROCKCO'S FUNERAL HOMES, INC.
S.E. ACQUISITION OF LITHONIA, GEORGIA, INC.
ANDREW J. McGANN & SON FUNERAL HOME, INC.
S.E. ACQUISITION OF BLUE ISLAND, ILLINOIS, INC.
S.E. ACQUISITION OF OAK LAWN AND ORLAND PARK, ILLINOIS, INC.
S.E. CEMETERY MANAGEMENT OF ILLINOIS, INC.
THEIS-GORSKI FUNERAL HOME, INC.
KNUTSON FUNERAL HOMES, INC.
PAULEY FUNERAL HOME, INC.
RUNYAN MANGOLD, INC.
PROFESSIONAL FUNERAL SERVICES, INC.
D.W. NEWCOMER'S SONS, INC.
DWN PROPERTIES, INC.
FUNERAL SECURITY PLANS, INC.
S.E. ACQUISITION OF BOONVILLE, MISSOURI, INC.
WYUKA FUNERAL HOME, INC.
WYUKA SIMPLICITY PLAN, INC.
S.E. ACQUISITION OF ALBUQUERQUE, NEW MEXICO, INC.
S.E. ACQUISITION OF SANTA FE, NEW MEXICO, INC.
S.E. ACQUISITION OF MUSKOGEE, OKLAHOMA, INC.
MT. JULIET FUNERAL HOME, INC.
MT. JULIET MEMORIAL GARDENS, INC.
NAVE FUNERAL HOME OF LEBANON, INC.
SIMPLE TRIBUTE OF TENNESSEE, INC.
CEMETERY SERVICES, INC.
S.E. CEMETERY MANAGEMENT OF WISCONSIN, INC.
WISCONSIN MEMORIAL PARK COMPANY, INC.
TIME-LOCK INSURANCE AGENCY, INC.
SIMPLE TRIBUTE, INC.
SIMPLE TRIBUTE OF FLORIDA, INC.
SIMPLE TRIBUTE OF TENNESSEE, INC.
SIMPLE TRIBUTE OF MARYLAND, INC.
ST. BERNARD MEMORIAL GARDENS, INC.
ST. BERNARD MEMORIAL FUNERAL HOME, INC.
ST. VINCENT de PAUL CEMETERY ASSOCIATION
STEWART ENTERPRISES (EUROPE), INC.
STEWART RESOURCE CENTER, INC.
STEWART SERVICES, INC.
S.E. MID-ATLANTIC, INC.
S-4
209

GARNER FAMILY FUNERAL HOME, INC.
HAISTEN FUNERAL HOMES, INC.
HAISTEN FUNERAL HOME OF HENRY COUNTY, INC.
HIGGINS AND SON FUNERAL HOME, INC.
S.E. ACQUISITION OF PIKEVILLE, KENTUCKY, INC.
BOUNDS FUNERAL HOME, INC.
CEDAR HILL CEMETERY COMPANY, INC.
CREST LAWN MEMORIAL GARDENS, INC.
FORT LINCOLN CEMETERY, INC.
FORT LINCOLN FUNERAL HOME, INC.
GALLERY GRANITE CORPORATION
HILLCREST MEMORIAL CEMETERY, INC.
HINES-RINALDI FUNERAL HOME, INC.
JOHN M. TAYLOR FUNERAL HOME, INC.
LOUDON PARK CEMETERY COMPANY
DRUID RIDGE CEMETERY COMPANY
LOUDON PARK FUNERAL HOME, INC.
NALLEY'S FUNERAL HOME, INC.
NATIONAL HARMONY MEMORIAL PARK, INC.
PARKLAWN, INC.
THE PARKWOOD CEMETERY COMPANY
PARKWOOD MANAGEMENT COMPANY
WILLIAM W. CHAMBERS, INC.
SIMPLE TRIBUTE OF MARYLAND, INC.
GORNY & GORNY PATERSON-CLIFTON MORTUARY
S.E. ACQUISITION OF CLIFTON, NEW JERSEY, INC.
C.J. APPLEGATE AND SONS, INC.
GARDINIER COLLETTI MEMORIAL HOME, INC.
MATTLE GRAY NULTON FUNERAL HOME, INC.
MURPHY FUNERAL SERVICE, INC.
NULTON FUNERAL HOME, INC.
OTTO REDANZ FUNERAL HOME, INC.
CORNELL & DAGGETT, INC.
S.E. ACQUISITION OF FREDONIA, NEW YORK, INC.
BROWN MEMORIALS, INC.
CATAWBA MEMORIAL PARK, INC.
CENTRAL STONE WORKS, INCORPORATED
HAROLD C. DAVIS, INC.
EVANS FUNERAL HOME, INC.
EVERGREEN MEMORIAL GARDENS, INC.
GARRETT -- HILLCREST, INC.
HIGHLAND MEMORY GARDENS OF FRANKLIN COUNTY, INC.
JOHNSON FUNERAL HOME, INC.
LANCASTER FUNERAL HOMES, INC.
MCLAURIN'S FUNERAL HOME, INC.
MILLER-LEE, INC.
PARKLAWN MEMORIAL GARDENS, INC.
POLLOCK WELLS FUNERAL SERVICE, INC.
STEPHENS SERVICES, INC.
THOMAS-YELVERTON COMPANY
1730 INVESTMENT CO., INC.
MEMORIAL PARKS, INCORPORATED
BENJAMIN FRANKLIN P. M., INC.
S-5
210

GEORGE WASHINGTON MEMORIAL PARK, INC.
KIRK & NICE SUBURBAN CHAPEL, INC.
KIRK & NICE, INC.
S.E. ACQUISITION OF PENNSYLVANIA, INC.
S.E. CEMETERY MANAGEMENT OF PENNSYLVANIA, INC.
SUNSET MEMORIAL PARK COMPANY
PET HAVEN, INC.
DUNBAR FUNERAL HOME, INC.
THE MACKEY MORTUARY, INC.
CANNON FUNERAL HOME, INC.
OCONEE MEMORIAL FUNERAL HOME, INC.
PINEVIEW, INC.
S.E. ACQUISITION OF NORTH AUGUSTA, SOUTH CAROLINA, INC.
S.E. ACQUISITION OF CHARLESTON, INC.
S.E. ACQUISITION OF LIBERTY, SOUTH CAROLINA, INC.
S.E. ACQUISITION OF SOUTH CAROLINA, INC.
MONTE VISTA BURIAL PARK, INC.
BLUE RIDGE MEMORIAL GARDENS, INC. (VA)
CLINCH VALLEY MEMORIAL CEMETERY, INC.
EVERLY COMMUNITY FUNERAL CARE, INC.
EVERLY FUNERAL HOMES, INCORPORATED
EVERLY PFP, INC.
SIMPLICITY PLANS OF ALABAMA, INC.
FAIRFAX FUNERAL HOME, INC.
JOSEPH W. TEAGUE FUNERAL HOME, INC.
RICHMOND MEMORIAL PARKS, INC.
WASHINGTON MEMORIAL CEMETERY, INCORPORATED
WISE CORPORATION
BARTLETT-BURDETTE-COX FUNERAL HOME, INC.
CALFEE FUNERAL SERVICE OF PINEVILLE, INC.
CASDORPH & CURRY FUNERAL HOME, INC.
DODD-PAYNE-HESS FUNERAL HOME, INC.
EVANS FUNERAL HOME, INC. (WEST VIRGINIA)
GRACELAND MAUSOLEUM, INC.
KIMES FUNERAL HOME, INC.
KLINGEL-CARPENTER MORTUARY, INC.
S.E. ACQUISITION OF MALDEN, WEST VIRGINIA, INC.
WILSON FUNERAL HOME, INC.
LAKEWOOD MEMORIAL PARK, INC.
MEMORIAL SERVICES OF COLUMBIA, INC.
MEMORIAL FUNERAL HOME, INC.
LINCOLN MEMORIAL MORTUARY, INC.
S.E. ACQUISITION OF NEVADA, INC.
DESERT MEMORIAL, INC.
NEPTUNE SOCIETY OF NEVADA, INC.
RENO MEMORIAL, INC.
S.E. ACQUISITION OF RENO, NEVADA, INC.
STRONG & BURNS FUNERAL HOME, INC.
MONTLAWN MEMORIAL PARK, INC.
ROCKY MOUNT MEMORIAL PARK, INC.
S.E. ACQUISITION OF OREGON, INC.
AMLING/SCHROEDER FUNERAL SERVICE, INC.
CASCADE CREMATORY, INC.
S-6
211

CHAPEL OF THE ROSES, INC.
CHAPEL OF THE VALLEY FUNERAL HOME, INC.
DUTTON, INC.
J.P. FINLEY AND SON MORTUARY, INC.
SUNSET HILLS MEMORIAL PARK
GREENWOOD CEMETERY, INC.
NISWONGER & REYNOLDS, INC.
S.E. ACQUISITION OF MYRTLE CREEK, OREGON, INC.
S.E. ACQUISITION OF REEDSPORT, OREGON, INC.
TABOR'S DESERT HILLS MORTUARY, INC.
CAROLINA FINANCIAL CORPORATION OF PICKENS
HILL-CREST MEMORIAL PARK
OCONEE MEMORIAL GARDENS, INC.
DILLARD MEMORIAL, INC.
COLE & GARRETT FUNERAL HOMES, INC.
HIGHLAND MEMORIAL CEMETERY, INC.
HOLLY HILLS, INC.
KINGSPORT CEMETERY CORPORATION
THE NASHVILLE HISTORIC CEMETERY ASSOCIATION, INC.
PASADENA FUNERAL HOME, INC.
RESTLAND FUNERAL HOME, INC.
ANDERSON-CLAYTON BROS. FUNERAL HOMES, INC.
LITTLE BETHEL MEMORIAL PARK, INC.
ROSELAWN MEMORIAL GARDENS, INC.
BELEW FUNERAL HOME, INC.
BEXAR COUNTY MORTUARY SERVICES, INC.
BLUEBONNET HILLS MEMORIAL PARK, INC.
BLUEBONNET HILLS FUNERAL HOME, INC.
BRIGHT-HOLLAND FUNERAL HOME, INC.
CRESPO & SONS, INCORPORATED
DALTON & SON FUNERAL HOME, INC.
EMERALD HILLS FUNERAL CORPORATION
J. E. FOUST & SON FUNERAL DIRECTORS, INC.
GUARDIAN CREMATION SOCIETY, INC.
GUARDIAN FUNERAL HOME, INC.
HILLTOP MEMORIAL PARK
LAUREL LAND MEMORIAL PARK, INC.
LAUREL LAND FUNERAL HOME, INC.
SINGING HILLS FUNERAL HOME, INC.
LAUREL LAND OF FORT WORTH, INC.
LAUREL LAND FUNERAL HOME OF FORT WORTH, INC.
LYONS FUNERAL HOME, INC.
METROCREST FUNERAL HOME, INC.
RESTLAND OF DALLAS, INC.
ABBEY PLAN OF TEXAS, INC.
HIGHLAND MEMORIAL GARDENS, INC.
SIMPLICITY PLAN OF TEXAS, INC.
SOUTHPARK FUNERAL HOME, INC.
SOUTH MEMORIAL PARK, INC.
S.E. ACQUISITION OF WASHINGTON, INC.
E.R. BUTTERWORTH & SONS
CREMATION SOCIETY NORTHWEST, INC.
EVERGREEN STAPLES FUNERAL CHAPEL, INC.
S-7
212

CUNNINGHAM MEMORIAL PARK, INC.
LEGACY ONE, INC.
FINDLAY CEMETERY, INC.
EASTLAWN MEMORIAL GARDENS, INCORPORATED
GRANDVIEW MEMORY GARDENS, INCORPORATED
GREENHILLS MEMORY GARDENS, INC.
HIGHLAND MEMORY GARDENS, INCORPORATED (VA)
HOLLY MEMORIAL GARDENS, INC.
MONTICELLO MEMORY GARDENS, INC.
SUNSET MEMORY GARDENS, INC.
BLUE RIDGE FUNERAL HOME, INC.
BLUE RIDGE MEMORIAL GARDENS, INC. (WVA)
C.G.R., INC.
EASTERN CEMETERY ASSOCIATES, INC.
ETERNAL LIGHT FUNERALS, INC.
KANAWHA PLAZA PARTNERSHIP
LEGACY ONE SERVICE CORPORATION
LOI CHARLESTON, INC.
MOUNTAIN VIEW MEMORY GARDENS, INC.
NATIONAL EXCHANGE TRUST, LTD.
NATIONAL FUNERAL SERVICES, INCORPORATED
PLEASANT VIEW MEMORY GARDENS, INC.
WILLIAMS-BLUE RIDGE FUNERAL HOME, INC.

By: /s/ KENNETH C. BUDDE
----------------------------------
Kenneth C. Budde
Assistant Treasurer

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----

/s/ WILLIAM E. ROWE Vice-President, Director August 13, 2001
- ----------------------------------------------------- (Principal Executive Officer)
William E. Rowe

/s/ KENNETH C. BUDDE Assistant Secretary, Assistant August 13, 2001
- ----------------------------------------------------- Treasurer, Director (Principal
Kenneth C. Budde Financial and Accounting
Officer)

/s/ BRIAN J. MARLOWE Vice-President, Director August 13, 2001
- -----------------------------------------------------
Brian J. Marlowe
</Table>

S-8
213

EXHIBIT LIST

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
------- -----------

2 Definitive Agreement for the sale of Stewart's Mexican
operations (incorporated by reference to Exhibit 2.0 to
Stewart's Quarterly Report on Form 10-Q for the quarter
ended April 30, 2001).
4.1 Indenture dated June 29, 2001 by and among Stewart, the
Guarantors named therein and Firstar Bank, N.A., as Trustee.
4.2 Form of 10 3/4% Senior Subordinated Note due 2008 (included
in Exhibit 4.1).
4.3 Registration Rights Agreement dated June 29, 2001 by and
among Stewart, the Guarantors named therein and Banc of
America Securities LLC, Deutsche Banc Alex. Brown Inc.,
Credit Lyonnais Securities (USA) Inc. and SunTrust Equitable
Securities Corporation.
4.4 Form of exchange note.
4.5 Indenture dated as of December 1, 1996 by and between
Stewart and Citibank, N.A. as Trustee (incorporated by
reference to Exhibit 4.1 to Stewart's Current Report on Form
8-K dated December 5, 1996), Supplemental Indenture dated
April 24, 1998 (incorporated by reference to Exhibit 4.1 to
Stewart's Current Report on Form 8-K dated April 21, 1998)
and Second Supplemental Indenture dated June 29, 2001
(incorporated by reference to Exhibit 4.2 to Stewart's
Current Report on Form 8-K dated July 12, 2001).
4.6 Form of 6.70% Note due 2003.
4.7 Form of 6.40% Remarketable Or Redeemable Securities (ROARS)
due May 1, 2013 (Remarketing date May 1, 2003).
4.8 Credit Agreement dated June 29, 2001 by and among Stewart,
Empresas Stewart-Cementerios and Empresas
Stewart-Funerarias, as Borrowers, Bank of America, N.A., as
Administrative Agent, Collateral Agent and as a Lender,
Deutsche Banc Alex. Brown Inc., as Syndication Agent,
Bankers Trust Company, as a Lender and the other Lenders
party thereto from time to time (incorporated by reference
to Exhibit 4.1 to Stewart's Current Report on Form 8-K dated
July 12, 2001).
4.9 Credit Agreement by and among Stewart, its subsidiaries and
Citicorp USA, Inc., Bank of America Illinois, and
NationsBank of Texas, N.A. dated April 14, 1997
(incorporated by reference to Exhibit 4.2 to Stewart's
Registration Statement on Form S-3 (Registration No.
333-27771) filed with the Commission on May 23, 1997).
4.10 See Stewart's Amended and Restated Articles of
Incorporation, as amended, and By-laws, as amended and
restated, defining the rights of holders of Class A and
Class B common stock (incorporated by reference to Exhibit
3.1 to Stewart's Annual Report on Form 10-K for the fiscal
year ended October 31, 1999 and Exhibit 3.2 to Stewart's
Quarterly Report on Form 10-Q for the quarter ended July 31,
2000, respectively).
4.11 Specimen of Class A common stock certificate (incorporated
by reference to Exhibit 4.2 to Amendment No. 3 to Stewart's
Registration Statement on Form S-1 (Registration No.
33-42336) filed with the Commission on October 7, 1991).
4.12 Rights Agreement, dated as of October 28, 1999, between
Stewart and ChaseMellon Shareholder Services, L.L.C. as
Rights Agent (incorporated by reference to Exhibit 1 to
Stewart's Form 8-A dated November 3, 1999).
5.1 Opinion of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P. regarding the validity of the exchange
notes.
5.2 Opinion of Holland & Knight, LLP regarding the validity of
the exchange notes.
</Table>

i
214

<Table>
<Caption>
EXHIBIT
NUMBER DESCRIPTION
------- -----------

12.1 Calculation of Ratio of Earnings to Fixed Charges.
12.2 Calculation of Pro Forma Ratio of Earnings to Fixed Charges.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P. (included in Exhibit 5).
24 Power of Attorney (included on the signature page of this
registration statement).
25 Statement of eligibility of trustee.
99.1 Form of Letter of Transmittal.
99.2 Form of Notice of Guaranteed Delivery.
</Table>