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                                                                    EXHIBIT 10.3

                             STOCK OPTION AGREEMENT
                                FOR THE GRANT OF
                      NON-QUALIFIED STOCK OPTIONS UNDER THE
                            STEWART ENTERPRISES, INC.
                        2000 INCENTIVE COMPENSATION PLAN

      THIS AGREEMENT (the "Agreement") is effective as of November 18, 2004 by
and between Stewart Enterprises, Inc., a Louisiana corporation ("SEI"), and
Kenneth C. Budde ("Optionee").

      WHEREAS, SEI maintains the 2000 Incentive Compensation Plan (the "Plan"),
under which the Compensation Committee of the Board of Directors of SEI (the
"Committee") may, among other things, grant options to purchase shares of SEI's
Class A common stock, no par value per share (the "Common Stock"), to key
employees of SEI and its subsidiaries (collectively, the "Company") as the
Committee may determine, subject to terms, conditions, or restrictions as it may
deem appropriate;

      WHEREAS, pursuant to the Plan, the Committee has granted options to the
Optionee, as described herein.

      NOW, THEREFORE, in consideration of the premises, it is agreed by and
between the parties as follows:

                                       1.
                                 GRANT OF OPTION

      In consideration of future services, SEI hereby grants to Optionee,
effective November 18, 2004 (the "Date of Grant") the right, privilege and
option to purchase 147,000 shares of Common Stock (the "Option") at an exercise
price of $7.03 per share (the "Exercise Price"). The Option shall be exercisable
at the time specified in Section 2 below. The Option is a non-qualified stock
option and shall not be treated as an incentive stock option under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").

                                       2.
                                TIME OF EXERCISE

      2.1 Subject to the provisions of the Plan and the other provisions of this
Agreement and subject to the Optionee remaining employed by the Company on the
applicable dates, the Optionee shall be entitled to exercise the Option as
follows:

           With respect to 36,750 of the shares covered by the Option, beginning
           on November 18, 2005;

           With respect to an additional 36,750 shares covered by the Option,
           beginning on November 18, 2006; and

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           With respect to the final 73,500 shares covered by the Option,
           beginning on November 18, 2007.

Notwithstanding the foregoing, the Option shall become accelerated and
immediately exercisable in full in the event of a Change of Control of SEI. The
Option shall expire and may not be exercised later than November 18, 2011:

      2.2 If Optionee's employment is terminated, the Option must be exercised,
to the extent exercisable at the time of termination, within the periods
specified below, but no later than November 18, 2011:

            (a) In the event of

                        (i) death,

                        (ii) disability within the meaning of Section 22(e)(3)
                  of the Code,

                        (iii) retirement on or after reaching age 65,

                        (iv) early retirement with the approval of the Board of
                  Directors or

                        (v) any termination, other than termination for "Cause,"
                  after Optionee has completed 15 or more years of service with
                  the Company,

      the Option must be exercised within one year following termination of
      employment, after which time the Option shall terminate.

            (b) In the event of termination for any other reason, the Option
      must be exercised, to the extent exercisable at the time of termination,
      within 30 days following termination of employment, after which time the
      Option shall terminate.

Any portion of the Option that is not yet exercisable at the time of termination
of employment shall terminate immediately upon termination of employment.

      2.3 The term "Cause" shall mean (a) Optionee's breach of any written
employment agreement between Optionee and SEI or a subsidiary or (b) the willful
engaging by Optionee in gross conduct injurious to SEI or the subsidiary that
employs Optionee, which in either case is not remedied within 10 days after SEI
or the employing subsidiary provides written notice to the Optionee of such
breach or willful misconduct.

                                       3.
                          METHOD OF EXERCISE OF OPTION

      Optionee may exercise all or a portion of the Option by delivering to SEI
a signed written notice of his intention to exercise the Option, specifying
therein the number of shares to be

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purchased. Upon receiving such notice, and after SEI has received payment of the
Exercise Price in the form permitted in the Plan, including payment by means of
a broker-assisted cashless exercise effected in accordance with procedures
established by SEI, the appropriate officer of SEI shall cause the transfer of
title of the shares purchased to Optionee on SEI's stock records and cause to be
issued to Optionee a stock certificate for the number of shares being acquired.
Optionee shall not have any rights as a shareholder until the stock certificate
is issued to him.

                                       4.
                               NON-TRANSFERABILITY

      The Option granted hereby may not be transferred, assigned, pledged or
hypothecated in any manner, by operation of law or otherwise, other than by
will, by the laws of descent and distribution, pursuant to a domestic relations
order or as otherwise permitted in the Plan. The Option shall not be subject to
execution, attachment or similar process.

                                        5.
                                      TAXES

      Upon the exercise of all or any portion of the Option, the Optionee must
deliver to SEI the amount of income tax withholding required by law. In
accordance with the terms of the Plan, the Optionee may satisfy the tax
withholding obligation by delivering currently owned shares of Common Stock or
by electing to have SEI withhold from the shares the Optionee otherwise would
receive upon exercise shares of Common Stock having a value equal to the minimum
amount required to be withheld.

                                       6.
                       NO CONTRACT OF EMPLOYMENT INTENDED

      Nothing in this Agreement shall confer upon Optionee any right to continue
in the employment of the Company, or to interfere in any way with the right of
the Company to terminate Optionee's employment relationship with the Company at
any time.

                                       7.
                                 BINDING EFFECT

      This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators and
successors.

                                       8.
                             INCONSISTENT PROVISIONS

      The Option granted hereby is subject to the provisions of the Plan as in
effect on the date hereof and as it may be amended. If any provision of this
Agreement conflicts with a provision of the Plan, the Plan provision shall
control. If any provision of this Agreement relating to the Option conflicts
with any provision of any employment or change of control agreement between the
Company and Optionee, the provision in the employment or change of control
agreement shall control.

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                                       9.
                                  GOVERNING LAW

      This Agreement shall be governed by and construed in accordance with the
laws of the State of Louisiana.

                                       10.
                                  SEVERABILITY

      If any term or provision of this Agreement, or the application thereof to
any person or circumstance, shall at any time or to any extent be invalid,
illegal or unenforceable in any respect as written, the Optionee and SEI intend
for any court construing this Agreement to modify or limit such provision so as
to render it valid and enforceable to the fullest extent allowed by law. Any
such provision that is not susceptible of such reformation shall be ignored so
as to not affect any other term or provision hereof, and the remainder of this
Agreement, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid, illegal or
unenforceable, shall not be affected thereby and each term and provision of this
Agreement shall be valid and enforced to the fullest extent permitted by law.

                                       11.
                         ENTIRE AGREEMENT; MODIFICATION

      The Plan and this Agreement contain the entire agreement between the
parties with respect to the subject matter contained herein and may not be
modified, except as provided in the Plan, as it may be amended from time to time
in the manner provided therein, or in this Agreement, as it may be amended from
time to time by a written document signed by each of the parties hereto. Any
oral or written agreements, representations, warranties, written inducements, or
other communications made prior to the execution of the Agreement shall be void
and ineffective for all purposes.

      By Optionee's signature below, Optionee represents that he is familiar
with the terms and provisions of the Plan, and hereby accepts this Agreement
subject to all of the terms and provisions thereof. Optionee has reviewed the
Plan and this Agreement in their entirety and fully understands all provisions
thereof. Optionee agrees to accept as binding, conclusive and final all
decisions or interpretations of the Compensation Committee upon any questions
arising under the Plan or this Agreement.

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      IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the day and year first above written.

                                    STEWART ENTERPRISES, INC.

                                    By: /s/JAMES W.MCFARLAND
                                        --------------------
                                           James W. McFarland,
                                        Chairman of the Compensation
                                        Committee of the Board of Directors

                                        /s/KENNETH C.BUDDE
                                    ------------------------------------
                                            Kenneth C. Budde
                                                Optionee

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