##### 



Exhibit 10.3
 Confirmation of OTC Convertible Note Hedge
 Date:
    
    June 21, 2007To:
    
    Stewart Enterprises, Inc. (Counterparty)Attention:
    
    Thomas M. Kitchen, Chief Financial OfficerFacsimile No.:
    
    (504) 729-1407Telephone No.:
    
    (504) 729-1425From:
    
    Merrill Lynch International (MLI)Address:
    
    Merrill Lynch InternationalMerrill Lynch Financial Centre
2 King Edward Street
London EC1A 1HQAttention:
    
    Manager, Fixed Income SettlementsFacsimile No.:
    
    44 207 995 2004Telephone No.:
    
    44 207 995 3769
   Confirmation ) Agent MLPFS ) Transaction
 Swap
Definitions Equity
Definitions Definitions ),
 Master Agreement Agreement )




---



##### 



General Terms:
 Trade Date:
    
    June 21, 2007Effective Date:
    
    The date of issuance of the Reference Notes.Option Style:
    
    Modified American, as described under Settlement Terms below.Option Type:
    
    CallSeller:
    
    MLIBuyer:
    
    CounterpartyShares:
    
    The shares of Class A common stock, no par value, of
Counterparty (Security Symbol: STEI) or such other securities
or property into which the Reference Notes are convertible on
the date of determination.Number of Options:
    
    The number of Convertible Notes in denominations of USD1,000
principal amount issued by Counterparty on the closing date for
the initial issuance of the Convertible Notes.Number of Shares:
    
    The product of the Number of Options, the Applicable Percentage
and the Conversion Rate (as defined in the Note Indenture).Premium:
    
    $32,500,000.00.Premium Payment Date:
    
    The date of issuance of the Reference Notes.Exchange:
    
    NASDAQRelated Exchange(s):
    
    All ExchangesReference Notes:
    
    3.375%. Convertible Senior Notes due 2016 of CounterpartyApplicable Percentage:
    
    100%. For the avoidance of doubt, the Calculation Agent shall,
as it deems necessary, take into account the Applicable
Percentage in determining or calculating any delivery or
payment obligations hereunder, whether upon a Conversion Date
(as defined below) or otherwise.Note Indenture:
    
    The indenture, dated as of closing of the issuance of the
Reference Notes, between Counterparty and U.S. Bank, N.A., as
trustee relating to the Reference Notes, as the same may be
amended, modified or supplemented from time to time. Certain
defined terms used herein have the meanings assigned to them
 Confirmation OTC Convertible Note Hedge
 - 2 -




---



##### 



in the Note Indenture.Procedures for Exercise:Potential Exercise Dates:
    
    Each Conversion Date.Conversion Date:
    
    Each conversion date for any Reference Note pursuant to the
terms of the Note Indenture occurring before the Expiration
Date.
On each Conversion Date, a number of Options equal to the
number of Convertible Notes in denominations of $1,000
principal amount submitted for conversion on such ConversionRequired Exercise on Conversion 
Dates:
    
    Date in accordance with the terms of the Note Indenture shall
be automatically exercised.Exercise Period:
    
    The period from and excluding the Effective Date to and
including the Expiration Date.Expiration Date:
    
    The earliest of (i) the maturity date of the Reference Notes,
(ii) the first day on which none of such Reference Notes remain
outstanding, whether by virtue of conversion, issuer repurchase
or otherwise and (iii) the occurrence of an Additional
Termination Event and designation of an Early Termination Date
hereunder in respect of the termination of the Transaction in
whole but not in part.Multiple Exercise:
    
    Applicable, as provided above under Required Exercise on
Conversion Dates.Minimum Number of Options:
    
    ZeroMaximum Number of Options:
    
    Number of OptionsAutomatic Exercise:
    
    As provided above under Required Exercise on Conversion Dates.Exercise Notice:
    
    Notwithstanding the exercise of any Options hereunder, Buyer
shall be entitled to receive the deliveries provided under
Settlement Terms below only if Buyer shall have notified
Seller in writing prior to 5:00 PM, New York City time, on the
Business Day, as defined in the Note Indenture, prior to the
first Scheduled Trading Day of the Conversion Reference
Period, as defined in the Note Indenture, relating to the
Convertible Notes converted on the Conversion Date relating to
the relevant Exercise Date (such time, the Notice Deadline)
of (i) the number of Options being exercised, (ii) the
scheduled settlement date under the Note Indenture for the
Convertible Notes converted on the Conversion Date occurring on
the Exercise Date for such exercise and (iii) the applicable
Cash Percentage, as defined in the Note Indenture, for such
Convertible Notes; providedthat, notwithstanding the
foregoing, such notice (and the related automatic exercise of
Options) shall be effective if given after the relevant Notice
Deadline but prior to 5:00 PM New York City time, on the fifth
Exchange Business Day of such Conversion Reference Period, as
defined in the Note Indenture, in which event the Calculation
Agent shall have the right to adjust the Delivery Obligation
(as defined below) as appropriate to reflect the additional
costs (including, but not limited to, hedging mismatches and
market losses) and reasonable expenses incurred by Seller in
connection with its hedging activities (including the unwinding
of any hedge position) as a result of its not having received
such notice prior to the applicable Notice Deadline.
Notwithstanding the foregoing, in respect of Options with a
related Exercise Date on or after the 42nd Scheduled Trading
Day, as defined in the Note Indenture, occurring prior to the
Maturity Date, as defined in the Note
 Confirmation OTC Convertible Note Hedge
 - 3 -




---



##### 



Indenture, then, in
lieu of the notice described in the preceding sentence, Buyer
shall notify Seller of the applicable Cash Percentage, as
defined in the Note Indenture, in respect of the Conversion
Reference Period for such Convertible Notes on the date it
notifies the Trustee, as defined in the Note Indenture,
thereof; providedthat in the event that Buyer does not notify
the Trustee of the Cash Percentage pursuant to the Note
Indenture, then the notice by Buyer to Seller otherwise
required by this sentence shall be deemed to have been provided
and the applicable Cash Percentage shall be deemed to be zero.Sellers Telephone Number and
Telex and/or Facsimile Number
and Contact Details for purpose
of Giving Notice:
    
    Address: Merrill Lynch International
Merrill Lynch Financial Centre
2 King Edward Street
London EC1A 1HQ
Attention: Manager, Fixed Income Settlements Facsimile No.: +44
207 995 2004
Telephone No.: +44 207 995 3769Settlement Terms:Settlement Date
    
    As defined in the Note Indenture.Delivery Obligation:
    
    In lieu of the obligations set forth in Sections 8.1 and 9.1 of
the Equity Definitions, and subject to Exercise Notice above,
in respect of an Exercise Date occurring on a Conversion Date,
Seller will deliver to Buyer on the related Settlement Date (x)
the product of the Applicable Percentage and a number of Shares
equal to the aggregate number of Shares, if any (and cash in
lieu of fractional shares, if any) and (y) the product of the
Applicable Percentage and the amount of cash, if any, in lieu
of the Daily Share Amount, as defined in the Note Indenture,
in each case, that Buyer is obligated to deliver or pay, as the
case may be, to the holder(s) of the Convertible Notes
converted on such Conversion Date pursuant to Section 4.02 or
Section 4.12 of the Note Indenture (such Shares and cash,
collectively, the Convertible Obligation).Other Applicable Provisions:
    
    To the extent Seller is obligated to deliver Shares hereunder,
the provisions of Sections 9.1(c), 9.8, 9.9, 9.10, 9.11 (except
that the Representation and Agreement contained in Section 9.11
of the Equity Definitions shall be modified by excluding any
representations therein relating to restrictions, obligations,
limitations or requirements under applicable securities laws as
a result of the fact that Buyer is the issuer of the Shares)
and 9.12 of the Equity Definitions will be applicable as if
Physical Settlement applied to the Transaction.Adjustments:Method of Adjustment:
    
    Calculation Agent Adjustment; provided that, notwithstanding
Section 11.2 of the Equity Definitions, the terms of this
Transaction shall be adjusted in a manner corresponding to the
adjustments of the Conversion Rate of the Reference Notes as
provided in the Note Indenture.Potential Adjustment Event:
    
    Notwithstanding Section 11.2(e) of the Equity Definitions, a
Potential Adjustment Event means the occurrence of an event
or condition set forth in Section 4.06 of the Note Indenture.Extraordinary Events:Merger Events:
    
    Notwithstanding Section 12.1(b) of the Equity Definitions, a
Merger Event
 Confirmation OTC Convertible Note Hedge
 - 4 -




---



##### 



means the occurrence of any event or condition
to which Section 4.10(a) of the Note Indenture applies.Consequences for Merger Events:Share-for-Share:
    
    The Transaction will be adjusted in a manner corresponding to
the adjustments to the Reference Notes as provided in the Note
Indenture.Share-for-Other:
    
    The Transaction will be adjusted in a manner corresponding to
the adjustments to the Reference Notes as provided in the Note
Indenture.Share-for-Combined:
    
    The Transaction will be adjusted in a manner corresponding to
the adjustments to the Reference Notes as provided in the Note
Indenture.Notice of Merger Consideration:
    
    Upon the occurrence of a Merger Event that causes the Shares to
be converted into the right to receive more than a single type
of consideration (determined based in part upon any form of
stockholder election), Buyer shall reasonably promptly (but in
any event prior to the third Exchange Business Day prior to the
effective date of such Merger Event) notify the Calculation
Agent of the weighted average of the types and amounts of
consideration received by the holders of Shares entitled to
receive cash, securities or other property or assets with
respect to or in exchange for such Shares in any Merger Event
who affirmatively make such an election.Tender Offer:
    
    Applicable, subject to Consequences of Tender Offers below.
Notwithstanding Section 12.1(d) of the Equity Definitions,
Tender Offer means the occurrence of any event or condition
set forth in Section 4.06(e) of the Note Indenture.Consequences of Tender Offers:
    
    The Transaction will be adjusted in a manner corresponding to
the adjustments to the Reference Notes as provided in the Note
Indenture.Nationalization, Insolvency and
Delisting:
    
    Not ApplicableAdditional Disruption Events:Change in Law:
    
    Not ApplicableFailure to Deliver:
    
    Not Applicable.Insolvency Filing:
    
    Not ApplicableHedging DisruptionEvent:
    
    Not ApplicableIncreased Cost ofHedging:
    
    Not ApplicableLoss of Stock Borrow:
    
    Not ApplicableIncreased Cost ofStock Borrow:
    
    Not Applicable
 Confirmation OTC Convertible Note Hedge
 - 5 -




---



##### 



Non-Reliance:
    
    ApplicableAgreements and AcknowledgmentsRegarding Hedging Activities:
    
    ApplicableAdditional Acknowledgments:
    
    Applicable
 Additional Agreements, Representations and Covenants
 1.
    
    Buyer hereby represents and warrants to Seller, on each day from the Trade Date to and
including the earlier of (i) July 27, 2007 and (ii) the date by which Seller is able to
initially complete a hedge of its position relating to this Transaction, that:
 a.
    
    it will effect (and cause any affiliated purchaser (as defined in Rule 10b-18
promulgated under the Securities Exchange Act of 1934, as amended (the Exchange
Act))to effect) any purchases, direct or indirect (including by means of any
cash-settled or other derivative instrument), of Shares or any security convertible
into or exchangeable or exercisable for Shares solely through Agent in a manner that
would not cause any purchases by Seller of its hedge in connection with this
Transaction not to comply applicable securities laws;b.
    
    it will not engage in, or be engaged in, any distribution, as such term is
defined in Regulation M promulgated under the Exchange Act, other than a distribution
meeting the requirements of the exceptions set forth in sections 101(b)(10) and
102(b)(7) of Regulation M (it being understood that Buyer makes no representation
pursuant to this clause in respect of any action or inaction taken by Seller or any
initial purchaser of the Reference Notes); andc.
    
    Buyer has publicly disclosed all material information necessary for Buyer to be
able to purchase or sell Shares in compliance with applicable federal securities laws.
 2.
    
    If Buyer would be obligated to pay cash (other than payment of the Premium) to, or receive
cash from, Seller pursuant to the terms of this Agreement for any reason without having had
the right (other than pursuant to this paragraph (2)) to elect to deliver or receive Shares in
satisfaction of such payment obligation, then Buyer may elect (by giving notice to Seller no
later than 8 a.m. New York time on the Exchange Business Day immediately following the date of
occurrence of the event giving rise to such payment obligation) that such payment obligation
shall be satisfied by the delivery of a number of Shares (or, if the Shares have been
converted into other securities or property in connection with an Extraordinary Event, a
number or amount of such other securities or property as a holder of Shares would be entitled
to receive upon the consummation or closing of such Extraordinary Event) having a cash value
equal to the amount of such payment obligation. Such number or amount of Shares or other
securities or property to be delivered shall be determined by the Calculation Agent to be the
number of Shares or number or amount of such other securities or property that could be
purchased or sold, as applicable, over a reasonable period of time with the cash equivalent of
such payment obligation). Settlement relating to any delivery of Shares or other securities or
property pursuant to this paragraph (2) shall occur within a reasonable period of time.
Notwithstanding anything herein or in the Agreement to the contrary, the aggregate number of
Shares that Counterparty may be required to deliver to MLI under this Transaction shall not
exceed 10,000,000 Shares, as adjusted by the Calculation Agent to account for any subdivision,
stock-split, stock combination, reclassification or similar dilutive or anti-dilutive event
with respect to the Shares.
 3.
    
    Counterparty is not, and after giving effect to the Transaction contemplated hereby, will not
be, an investment company as such term is defined in the Investment Company Act of 1940, as
amended.
 Confirmation OTC Convertible Note Hedge
 - 6 -




---



##### 



4.
    
    As of the Trade Date and each date on which a payment or delivery is made by Counterparty
hereunder, (i) the assets of Counterparty at their fair valuation exceed the liabilities of
Counterparty, including contingent liabilities; (ii) the capital of Counterparty is adequate
to conduct its business; and (iii) Counterparty has the ability to pay its debts and other
obligations as such obligations mature and does not intend to, or believe that it will,
incur debt or other obligations beyond its ability to pay as such obligations mature.
 5.
    
    The representations and warranties set forth in Section 1 of the Purchase Agreement (as
defined below) are hereby deemed to be repeated to MLI as if set forth herein.
 6.
    
    Seller hereby represents and warrants to Buyer that the Premium paid hereunder was determined
as a result of the application of models and procedures regularly employed by Seller in
similar arms-length transactions with companies entering into derivative transactions on
their own stock and was determined independently of any underwriting or other services
provided to Buyer in connection with the issuance of the Reference Notes.
 Additional Termination Events:
 provided
 1.
    
    Amendment Event means that the Counterparty, without MLIs consent, amends,
modifies, supplements or obtains a waiver of (a) any term of the Note Indenture (as in effect
prior to such amendment, modification, supplement or waiver) or the Reference Notes relating
to the principal amount, coupon, maturity, repurchase obligation of the Counterparty or
redemption right of the Counterparty, (b) any term relating to conversion of the Reference
Notes, including, without limitation, any changes to the conversion price, conversion
settlement dates or conversion conditions or (c) any term that would require consent of the
holders of 100% of the principal amount of the Reference Notes to amend.2.
    
    Repayment Event means that (a) any Reference Notes are repurchased (whether in
connection with or as a result of a fundamental change or change of control, howsoever
defined, or for any other reason) by the Counterparty, (b) any Reference Notes are delivered
to the Counterparty in exchange for delivery of any property or assets of the Counterparty or
any of its subsidiaries (howsoever described), other than as a result of and in connection
with a Conversion Date, (c) any principal of any of the Reference Notes is repaid prior to the
Final Maturity Date (as defined in the Note Indenture) (whether following acceleration of the
Reference Notes or otherwise), provided that no payments of cash made in respect of the
conversion of a Reference Note shall be deemed a payment of principal under this clause (c),
(d) any Reference Notes are exchanged by or for the benefit of the holders thereof for any
other securities of the Counterparty or any of its Affiliates (or any other property, or any
combination thereof) pursuant to any exchange offer or similar transaction or (e) any of the
Reference Notes is surrendered by Counterparty to the trustee for cancellation, other than
registration of a transfer of such Reference Notes or as a result of and in connection with a
Conversion Date.3.
    
    Initial Purchase Event.If an Initial Purchase Event (as defined below) occurs, this
Transaction shall terminate automatically in its entirety and, notwithstanding anything to the
contrary herein, only the payments specified below shall be required hereunder in connection
with such Initial Purchase Event.Initial Purchase Event means that the transactions contemplated by the Purchase
Agreement shall fail to close for any reason by the closing date for the offering of the
Reference Notes as specified in the Purchase Agreement.
 Confirmation OTC Convertible Note Hedge
 - 7 -




---



##### 



If an Initial Purchase Event occurs due to a breach of the Purchase Agreement by
Counterparty, then all payments previously made hereunder shall be returned to the person
making such payment, including the Premium, less an amount equal to the product of (a)
11,311,700 Shares, (b) 0.30 and (c) an amount equal to the excess, if any, of the closing
price of the Shares on the Trade Date over the closing price of the Shares on the date of
the Termination Event (the Break Expense); provided that any negative amount shall
be replaced by zero and provided further that to the extent the Premium has not been paid,
Buyer shall promptly pay Seller the Break Expense. Seller and Buyer agree that actual
damages would be difficult to ascertain under these circumstances and that the amount of
liquidated damages resulting from the determination in the preceding sentence is a good
faith estimate of such damages and not a penalty.If an Initial Purchase Event occurs for any reason other than due to a breach of the
Purchase Agreement by Counterparty, then all payments previously made hereunder, including
the Premium, promptly shall be returned to the person making such payment and no payments
shall be required hereunder in connection with such Initial Purchase Event.
 Staggered Settlement:
 Nominal Settlement
Date ), Staggered Settlement Date )
 1.
    
    in such notice, Seller will specify to Buyer the related Staggered Settlement Dates (each of
which will be on or prior to such Nominal Settlement Date, but not more than 30 days prior to
such Nominal Settlement Date) or delivery times and how it will allocate the Shares it is
required to deliver hereunder among the Staggered Settlement Dates or delivery times; and2.
    
    the aggregate number of Shares that Seller will deliver to Buyer hereunder on all such
Staggered Settlement Dates or delivery times will equal the number of Shares that Seller would
otherwise be required to deliver on such Nominal Settlement Date.
  Disposition of Hedge Shares:
 Hedge Shares provided, however,
 Confirmation OTC Convertible Note Hedge
 - 8 -




---



##### 



VWAP Price
 Conversion Rate Adjustment Notices
  Compliance with 
Securities Laws:
    
    Each party represents and agrees that, in connection with this Transaction and all related or
contemporaneous sales and purchases of Shares by either party, Buyer, or in the case of Seller,
the person(s) that directly influences the specific trading decisions of Seller, has complied and
will comply with the applicable provisions of the Securities Act of 1933, as amended (the
Securities Act),and the Exchange Act, and the rules and regulations each thereunder,
including, without limitation, Section 9(a) of, and Rules 10b-5 and 13e and Regulation M under,
the Exchange Act; provided that each party shall be entitled to rely conclusively on any
information communicated by the other party concerning such other partys market activities.
Each party acknowledges that the offer and sale of the Transaction to it is intended to be exempt
from registration under the Securities Act by virtue of Section 4(2) thereof. Accordingly, Buyer
represents and warrants to Seller that (i) it has the financial ability to bear the economic risk
of its investment in the Transaction and is able to bear a total loss of its investment, (ii) it
is an accredited investor as that term is defined in Regulation D as promulgated under the
Securities Act and (iii) the disposition of the Transaction is restricted under this
Confirmation, the Securities Act and state securities laws.Buyer further represents:(a) Buyer is not entering into this Transaction to create actual or apparent trading activity in
the Shares (or any security convertible into or exchangeable for Shares) or to raise or depress
or otherwise manipulate the price of the Shares (or any security convertible into or exchangeable
for Shares);(b) Buyer acknowledges that as of the date hereof and without limiting the generality of Section
13.1 of the Equity Definitions, Seller is not making any representations or warranties with
respect to the treatment of the Transaction under FASB Statements 149 or 150, EITF Issue No.
00-19 (or any successor issue statements) or under FASBs Liabilities & Equity Project.Account for payments to Buyer:
    
    SunTrust Bank
 Confirmation OTC Convertible Note Hedge
 - 9 -




---



##### 



Atlanta, Georgia
ABA #061000104
Credit Stewart Enterprises, Inc
1000032706300
SWIFT Code (for international wires): SNTRUS3AAccount for payment to Seller:
    
    JP Morgan Chase Bank, New York
ABA 021000021
FAO: MLI EQUITY DERIVATIVES
Acct: 066213118Account Details:
    
    Accounts for deliveries of Shares:
    
    To be advisedBankruptcy Rights:
    
    In the event of Buyers bankruptcy, Sellers rights in connection with this Transaction shall not
exceed those rights held by common shareholders. For the avoidance of doubt, the parties
acknowledge and agree that Sellers rights with respect to any other claim arising from this
Transaction prior to Buyers bankruptcy shall remain in full force and effect and shall not be
otherwise abridged or modified in connection herewith.Set-Off:
    
    Each party waives any and all rights it may have to set-off, whether arising under any agreement,
applicable law or otherwise.Collateral:
    
    None.Transfer:
    
    Buyer shall have the right to assign its rights and delegate its obligations hereunder with
respect to any portion of this Transaction, subject to Sellers consent, such consent not to be
unreasonably withheld; provided that such assignment or transfer shall be subject to receipt by
Seller of opinions and documents reasonably satisfactory to Seller and effected on terms
reasonably satisfactory to the Seller with respect to any legal and regulatory requirements
relevant to the Seller; provided further that Buyer shall not be released from its obligation to
deliver any Exercise Notice or its obligations pursuant to Disposition of Hedge Shares,
Repurchase Notices or Conversion Rate Adjustment Notices above.Seller may transfer any of its rights or delegate its obligations under this Transaction with the
prior written consent of Buyer, which consent shall not be unreasonably withheld.Regulation:
    
    Seller is regulated by The Securities and Futures Authority Limited.
 Matters Relating to Agent:
 1.
    
    MLPFS will be responsible for the operational aspects of the Transactions effected through
it, such as record keeping, reporting, and confirming Transactions to Buyer and Seller;2.
    
    Unless Buyer is a major U.S. institutional investor, as defined in Rule 15a-6 of the
Exchange Act, neither Buyer nor Seller will contact the other without the direct involvement
of MLPFS;3.
    
    MLPFSs sole role under this Agreement and with respect to any Transaction is as an agent of
Buyer and Seller on a disclosed basis and MLPFS shall have no responsibility or liability to
Buyer or Seller hereunder except for gross negligence or willful misconduct in the performance
of its duties as agent. MLPFS is authorized to act as agent for Buyer, but only to the extent
expressly required to satisfy the requirements of Rule 15a-6 under the Exchange Act in respect
of the Options described hereunder. MLPFS shall have no authority to act as agent for Buyer
generally or with respect to transactions or other matters governed by this Agreement, except
to the extent expressly required to satisfy the requirements of Rule 15a-6 or in
 Confirmation OTC Convertible Note Hedge
 - 10 -




---



##### 



accordance with express instructions from Buyer.
 ISDA Master Agreement:
  Specified Entity
 Specified Transaction
 Cross Default Section 5(a)(vi)
 Credit Event Upon Merger Section 5(b)(iv)
 Automatic Early Termination Section 6(a)
 Payments on Early Termination. Section 6(e)
 Termination Currency
 Tax Representations.
 (a)
    
    Payer Representations.For the purpose of Section 3(e) of the Agreement, each party
represents to the other party that it is not required by any applicable law, as modified by
the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to
make any deduction or withholding for or on account of any Tax from any payment (other than
interest under Section 2(e), 6(d)(ii), or 6(e) of the Agreement) to be made by it to the other
party under the Agreement. In making this representation, each party may rely on (i) the
accuracy of any representations made by the other party pursuant to Section 3(f) of the
Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of
the Agreement, and the accuracy and effectiveness of any document provided by the other party
pursuant to Section 4(a)(i) or 4(a)(iii) of the Agreement, and (iii) the satisfaction of the
agreement of the other party contained in Section 4(d) of the Agreement; provided that it will
not be a breach of this representation where reliance is placed on clause (ii) above and the
other party does not deliver a form or document under Section 4(a)(iii) of the Agreement by
reason of material prejudice to its legal or commercial position.(b)
    
    Payee Representations.For the purpose of Section 3(f) of the Agreement, each party makes the
following representations to the other party:(i) MLI represents that it is a company organized under the laws of England and Wales.(ii) MLI represents that it is a non-withholding foreign partnership for United States
Federal income tax purposes and each partner of MLI is a non-U.S. branch of a foreign
person for purposes of section 1.1441-4(a)(3)(ii) of the United States Treasury Regulations
and a foreign person for purposes of section 1.6041-4(a)(4) of the United States Treasury
Regulations.
 Confirmation OTC Convertible Note Hedge
 - 11 -




---



##### 



(iii) MLI represents that no partner of MLI is (i) a bank that has entered into this
Agreement in the ordinary course of its trade or business of making loans, as described in
section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the Code), (ii) a
10% shareholder of Counterparty within the meaning of Code section 871(h)(3)(B), or (iii) a
controlled foreign corporation with respect to Counterparty within the meaning of Code
section 881(c)(3)(C).(iv) Counterparty represents that it is a corporation incorporated in Louisiana.
 Delivery Requirements. Sections 4(a)(i) (ii)
 (a)
    
    Tax forms, documents or certificates to be delivered are:MLI agrees to complete (accurately and in a manner reasonably satisfactory to Counterparty),
execute, and deliver to Counterparty, United States Internal Revenue Service Form W-8 IMY
and all required attachments, or any successor of such form(s): (i) before the first payment
date under this agreement; (ii) promptly upon reasonable demand by Counterparty; and (iii)
promptly upon learning that any such Form previously provided by MLI has become obsolete or
incorrect.Counterparty agrees to complete (accurately and in a manner reasonably satisfactory to MLI),
execute, and deliver to MLI, United States Internal Revenue Service Form W-9 or W-8 BEN, or
any successor of such form(s): (i) before the first payment date under this agreement; (ii)
promptly upon reasonable demand by MLI; and (iii) promptly upon learning that any such
form(s) previously provided by Counterparty has become obsolete or incorrect.(b)
    
    Other documents to be delivered:
 Covered byParty Required to
    
    
    
    
    
    Section 3(d)Deliver Document
    
    Document Required to be Delivered
    
    When Required
    
    RepresentationCounterparty
    
    Evidence of the authority and
true signatures of each official
or representative signing this
Confirmation
    
    Upon or before
execution and
delivery of this
Confirmation
    
    YesCounterparty
    
    Certified copy of the resolution
of the Board of Directors or
equivalent document authorizing
the execution and delivery of
this Confirmation and such other
certificates as Seller shall
reasonably request
    
    Upon or before
execution and
delivery of this
Confirmation
    
    YesSeller
    
    Guarantee of its Credit Support
Provider, substantially in the
form of Exhibit A attached
hereto, together with evidence
of the authority and true
signatures of the signatories,
if applicable
    
    Upon or before
execution and
delivery of this
Confirmation
    
    Yes
 Additional Notice Requirements.
 Confirmation OTC Convertible Note Hedge
 - 12 -




---



##### 



Addresses for Notices. Section 12(a)
 Address for notices or communications to
Seller for all purposes:
 Address:
    
    Merrill Lynch International
Merrill Lynch Financial Centre
2 King Edward Street
London EC1A 1HQAttention:
    
    Manager, Fixed Income SettlementsFacsimile No.:
    
    44 207 995 2004Telephone No.:
    
    44 207 995 3769
 Sections 5 6 7
 Address:
    
    GMI Counsel
Merrill Lynch World Headquarters
4 World Financial Center
New York, New York 10080Attention:
    
    Global Equity DerivativesFacsimile No.:
    
    (212) 449-6576Telephone No.:
    
    (212) 449-6309
 Address for notices or communications to Counterparty for all purposes:
 Address:
    
    Stewart Enterprises, Inc.
1333 S. Clearview Parkway
Jefferson, LA 70121Attention:
    
    Thomas M. Kitchen, Chief Financial OfficerFacsimile No.:
    
    (504) 729-1407Telephone No.:
    
    (504) 729-1425
 Section 5 6 11 13
 Address:
    
    Jones, Walker, Waechter, Poitevent,
Carrère and Denègre, L.L.P.
201 St. Charles Avenue
New Orleans, LA 70170-5100Attention:
    
    Dionne M. RousseauFacsimile No.:
    
    (504) 589-8338Telephone No.:
    
    (504) 582-8338
 Process Agent.
 Address:
    
    Merrill Lynch, Pierce, Fenner & Smith Incorporated
222 Broadway, 16thFloor
New York, New York 10038Attention:
    
    Litigation DepartmentCounterparty does not appoint a Process Agent.
 Multibranch Party.
    
    For the purpose of Section 10(c) of the Agreement: Neither Seller nor Counterparty
 Confirmation OTC Convertible Note Hedge
 - 13 -




---



##### 



is a Multibranch Party.Calculation Agent.
    
    Seller; providedthat all determinations made by the Calculation Agent shall be made in good faith and
in a commercially reasonable manner. Following any calculation by the Calculation Agent hereunder, upon
a prior written request by Buyer, the Calculation Agent will provide to Buyer by e-mail to the e-mail
address provided by Buyer in such a prior written request a report (in a commonly used file format for
the storage and manipulation of financial data) displaying in reasonable detail the basis for such
calculation; and provided furtherthat no transferee of the Transaction in accordance with the terms of
this Confirmation that is not an affiliate of MLI shall act as Calculation Agent with respect to such
transferred Transaction without the prior consent of Buyer, such consent not to be unreasonably
withheld.
 Credit Support Document.
   Credit Support Provider.
   Governing Law.
 Waiver of Jury Trial.
 Netting of Payments. Section 2(c)
 Basic Representations. Section 3(a) Section 3(a)(iv); Section 3(a)(v) Sections 3(a)(vi),
 Eligible Contract Participant; Line of Business. ( CEA ),
 Acknowledgements:
 (a)
    
    The parties acknowledge and agree that there are no other representations, agreements or
other undertakings of the parties in relation to this Transaction, except as set forth in this
Confirmation.(b)
    
    The parties hereto intend for:
 Confirmation OTC Convertible Note Hedge
 - 14 -




---



##### 



(i)
    
    Seller to be a financial institution as defined in Section 101(22) of Title
11 of the United States Code (the Bankruptcy Code)and this Transaction to be
a securities contract as defined in Section 741(7) of the Bankruptcy Code and a swap
agreement as defined in Section 101(53C) of the Bankruptcy Code, qualifying for the
protections of, among other sections, Sections 362(b)(6), 362 (b)(17), 546(e), 546(g),
555 and 560 of the Bankruptcy Code;(ii)
    
    a partys right to liquidate this Transaction and to exercise any other
remedies upon the occurrence of any Event of Default under the Agreement with respect
to the other party to constitute a contractual right as defined in the Bankruptcy
Code;(iii)
    
    all payments for, under or in connection with this Transaction, all payments
for the Shares and the transfer of such Shares to constitute settlement payments as defined in the
Bankruptcy Code.
 Amendment of Section 6(d)(ii). Section 6(d)(ii)
 Amendment of Definition of Reference Market-Makers. Section 14
 Consent to Recording.
 Disclosure.
 Severability. provided, however, Section 2 5 6 13 Section
14
 Affected Parties. Section 6(e)
 Signatures follow on separate page]
 Confirmation OTC Convertible Note Hedge
 - 15 -




---



##### 



Very truly yours,MERRILL LYNCH INTERNATIONALBy:Name:Title:
 Confirmed as of the date first above
written:STEWART ENTERPRISES, INC.By:Name:Title:Acknowledged and agreed as to matters to the Agent:MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,
Solely in its capacity as Agent hereunderBy:Name:Title:




---



##### 



EXHIBIT A
 GUARANTEE OF MERRILL LYNCH & CO., INC.




---



##### 



MERRILL LYNCH & CO., INC.By:Name:Title:Date: