SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended January 31, 1994 ("Fiscal 1993") or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _________to __________.
Commission file number 0-8493
STEWART & STEVENSON SERVICES, INC
(Exact name of registrant as specified in its charter)
Texas 74-1051605
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
2707 North Loop West, Houston, Texas 77008
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 868-7700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Without Par Value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant.
$1,289,619,649
(As of February 28, 1994)
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, Without Par Value 32,937,065 Shares
(Class) (Outstanding at February 28, 1994)
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
__________ __________________
Proxy Statement for the 1994 Annual Meeting of Shareholders Part III
PART I
Item 1. Business.
Stewart & Stevenson Services, Inc.(together with its wholly-owned
subsidiaries, the "Company" or "Stewart & Stevenson") was founded in
Houston, Texas in 1902 and was incorporated under the laws of the State
of Texas in 1947. Since its beginning, the Company has been primarily
engaged in custom fabrication enterprises. Stewart & Stevenson consists of
three business segments: the Engineered Power Systems segment, the
Distribution segment and the Tactical Vehicle Systems segment.
The Engineered Power Systems segment designs, engineers and markets engine-
driven equipment principally utilizing diesel or gas turbine engines supplied
by independent manufacturers. The Company's products include gas turbine
generator sets for primary electrical power, including cogeneration
applications, and diesel generator sets for primary, emergency or stand-by
electrical power sources. Stewart & Stevenson is the leading packager of
aeroderivative gas turbine engines for electrical power generation. A
majority of the gas turbine engines used by the Company is manufactured by
General Electric Corporation ("GE") and GE has selected the Company as the
exclusive packager in the United States and Canada for the LM6000, GE's
latest aeroderivative gas turbine engine adapted for industrial use. The
LM6000 is expected to play a key role for utilities needing additional peak
or base load capacity because of its higher fuel efficiency and competitive
capital cost. The Company's engineered power systems are marketed worldwide.
The Company believes that the international market offers significant
opportunities because of the potential growth in demand for electric power,
particularly in developing nations. In addition, the Company offers
long-term operation and maintenance contracts for large gas turbine projects.
The Company also manufactures power systems for both military and commercial
marine applications, aircraft ground support equipment and equipment for the
oilfield service industry.
The Distribution segment markets industrial equipment and related parts
manufactured by others and provides in-shop and on-site repair services for
such products. This segment began operations in 1938 and currently markets
Detroit Diesel engines, General Motors Electro-Motive diesel engines, Allison
automatic transmissions, Hyster material handling equipment, Thermo King
transport refrigeration units and John Deere construction, utility and
forestry equipment. The Distribution segment markets in Texas and other
Western and Southern states, as well as in Mexico, Venezuela and Central
America.
In October 1991, the Company was awarded contracts by the United States
Department of Defense to manufacture the U.S. Army's next generation of
medium tactical vehicles (the "Family of Medium Tactical Vehicles" or
"FMTV"). The FMTV contracts, valued at approximately $1.2 billion, call for
the production of approximately 11,000 trucks over a five year period
beginning in 1992. Under the contracts, the Department of Defense also has
the option to purchase approximately 11,000 additional trucks between Fiscal
1994 and Fiscal 1997. The FMTV includes newly-designed 2 1/2-ton and 5-ton
trucks which will be manufactured in several configurations, including troop
carriers, wreckers, cargo trucks, vans and dump trucks. All variants of the
FMTV incorporate a high level of common parts. Manufacturing of the FMTV is
being performed by the Company's Tactical Vehicle Systems segment at a
facility located near Houston, Texas, and initial truck deliveries commenced
in the first quarter of Fiscal 1993. The Company believes that it will be
able to sell additional trucks to other branches of the U.S. Armed Forces
and to the armed forces of foreign countries.
The Company's fiscal year begins on February 1 of the year stated and ends
on January 31 of the following year. For example, "Fiscal 1993" commenced on
February 1, 1993 and ended on January 31, 1994. Identifiable assets at the
close of Fiscals 1993, 1992, and 1991 and net sales, operating profit and
export sales for such fiscal years for the Company's business segments and
sales to customers which exceed ten percent of consolidated sales are
presented under "Industry Segment Data" in the notes to the consolidated
financial statements in Part II.
ENGINEERED POWER SYSTEMS SEGMENT
Stewart & Stevenson designs, engineers and markets engine-driven equipment of
various descriptions utilizing diesel or gas turbine engines manufactured by
independent suppliers. As a custom packager of engine-driven equipment, the
Company designs its products to meet the specific needs of its customers in a
variety of applications and sells such equipment under the "Stewart & Stevenson"
name throughout the world.
Operations of the Engineered Power Systems segment accounted for approximately
61.4%, 62.6% and 58.3%, respectively, of consolidated sales during Fiscals
1993, 1992 and 1991.
GAS TURBINE POWER SYSTEMS. The Company packages generator sets and mechanical
drive packages based on turbine engines purchased from General Electric
Corporation ("GE"), Allison Engine Company ("Allison") and the Garrett
Corporation ("Garrett"). The table below lists the capacity of generator sets
based on each model of gas turbine engine regularly packaged by the Company.
Generator Set
Capacity
Engine Model in Megawatts
_____________ _____________
GE LM6000 . . . 42.4 Mw
GE LM5000 STIG . 51.6 Mw
GE LM5000 . . . . 34.4 Mw
GE LM2500 STIG . 26.5 Mw
GE LM2500 . . . . 22.2 Mw
GE LM1600 . . . . 13.4 Mw
ALLISON 571K . . 5.6 Mw
ALLISON 501K . . 3.7 Mw
GARRETT IM831 . . 0.5 Mw
In recent years, demand for electrical power in the United States and in many
industrialized and developing nations has increased at a higher rate than
additional generating capacity has been added to the market. During the same
period, environmental and regulatory concerns have curtailed the construction
of nuclear and coal-fired generating facilities. Gas turbine generator sets
have a lower capital cost, higher efficiency, shorter lead times and are more
environmentally acceptable than alternative technologies. In addition, gas
turbine generator sets may be used for the simultaneous production of
electrical power and useful thermal energy ("cogeneration").
Stewart & Stevenson believes that the international market also provides
significant sales opportunities for the Company's gas turbine generator sets.
The market for electrical power in developing countries is growing and the
Company's gas turbine generator sets are well suited for the requirements of
developing countries; providing quick delivery, low initial capital costs and
ease of installation in areas without significant existing electrical power
infrastructure.
The gas turbine generator sets packaged by the Company in the 20 Mw to 50 Mw
size incorporate GE gas turbine engines and are marketed primarily to
independent power producers for prime power and cogeneration applications
and to public utilities for base load capacity or additional capacity during
peak demand periods. Stewart & Stevenson's package design and full-load
testing prior to shipment permit the complete installation and start-up of
the Company's gas turbine generators in as little as 30 days after shipment and
decrease both the time and expense required to build a complete electrical
generation facility. Generators in the 0.5 Mw to 20 Mw range are marketed
primarily to hospitals, hotels, office complexes and industrial facilities,
both for prime power and cogeneration applications.
During 1992, GE began supplying a new, more efficient aeroderivative gas
turbine, the LM6000 rated at 42 Mw. The LM6000's initial capital cost is
competitive with frame-type industrial gas turbines and provides simple-cycle
fuel efficiency in excess of 40%. As a result, total life-cycle costs of an
LM6000-driven generator set are expected to be substantially below life-cycle
costs of other generator sets of the same capacity. GE has selected Stewart &
Stevenson to be the exclusive packager of all LM6000 generator sets sold by GE
in the United States and Canada. This arrangement does not affect the
Company's worldwide marketing of power systems utilizing other GE
aeroderivative gas turbines or sales by the Company of packages based on the
LM6000 in jurisdictions other than the United States and Canada.
In addition to gas turbine generators, the Company packages compressors powered
by GE and Allison gas turbine engines and vessel propulsion systems
incorporating Allison gas turbines. The Company is also the exclusive marketing
agent for Garrett model IM831 industrial gas turbines and provides operating
and maintenance services to cogeneration facilities under long-term contracts.
A majority of the Company's gas turbine revenues are derived from packaging gas
turbine engines manufactured by GE. The Company has been an authorized packager
of GE gas turbine engines since 1979. The Company has no reason to believe that
its relationship with GE will not continue for the foreseeable future. Any
interruption of this relationship, however, would adversely affect the Company.
Sales of gas turbine products and services accounted for approximately 49.2%,
50.5% and 44.5%, respectively, of consolidated sales in Fiscals 1993, 1992 and
1991.
OTHER POWER SYSTEMS. The majority of other power systems packaged by Stewart &
Stevenson are generator sets and mechanical drive packages using diesel engines,
dual fuel engines or natural gas engines. Generator sets range in size from 20
kw to 12,700 kw and are based on diesel engines supplied by Detroit Diesel
Corporation ("Detroit Diesel"), General Motors Corporation ("General Motors") or
other independent manufacturers. The Company undertakes the selection of the
appropriate engine and generator based on the intended application and
fabricates the completed package according to a design developed specifically to
fit the needs of the customer. Diesel-driven generator sets are marketed by the
Company as both stand-by power sources for emergency use and as prime power
sources to supply electricity at remote locations. Mechanical drive packages
include pump packages for irrigation and compressor packages for pipelines.
The Company also produces and markets generator sets and mechanical drive
packages based on dual fuel and natural gas engines supplied by independent
suppliers of diesel engines modified by the Company to run on dual fuels or
natural gas.
For many years, Stewart & Stevenson has been a leading manufacturer of well
stimulation equipment and other diesel equipment for the oilfield service
industries. Despite the depressed domestic drilling markets, the Company has
continued to manufacture these products, primarily for sale in the international
market. Most of the Company's well stimulation equipment is manufactured
according to the Company's proprietary designs and incorporates advanced
microprocessor-based systems to automatically control the pressures, density and
other characteristics of the high pressure fluids used to fracture oil-bearing
formations. During Fiscal 1993, the Company acquired substantially all of the
assets of Quality Oilfield Products, Inc., a Houston-based manufacturer of
blowout preventors.
Stewart & Stevenson manufactures a complete line of aircraft ground support
equipment, including gate tractors, air-start units, ground power equipment,
airconditioning systems and baggage tractors.
Sales of other power systems and services accounted for 12.5%, 12.2% and 13.8%,
respectively, of consolidated sales in Fiscals 1993, 1992 and 1991.
DISTRIBUTION SEGMENT
Stewart & Stevenson markets various industrial equipment, components,
replacement parts, accessories and other material supplied by independent
manufacturers and provides in-shop and on-site repair services for diesel-driven
equipment. The following table contains the name of each manufacturer with whom
the Company presently maintains a distribution contract, a description of the
products and territories covered thereby and the original distribution contract
date relating to each product line.
<TABLE>
<CAPTION>
Original
Contract
Manufacturer Products Territories Date
_____________ __________ ____________ ___________
<S> <C> <C> <C>
Detroit Diesel Heavy Duty High Speed Texas, Colorado, New 1938
Diesel Engines Mexico, Wyoming, Nebraska,
Louisiana, Mississippi
and Alabama; Venezuela
Electro-Motive Segment Heavy Duty Medium Speed Texas, Colorado, New 1988
of General Motors Diesel Engines Mexico, Nebraska,
("Electro-Motive") Oklahoma, Arkansas, Louisiana,
Tennessee, Mississippi and
Alabama; Mexico; Central America;
most of South America
Cooper Industries, Inc. Large-bore Natural Gas, Varies depending on 1991
Dual Fuel and Diesel engine size, fuel and
Engines application
Allison Transmission On- and Off-Highway Texas, Colorado, New 1962
Segment of General Automatic Transmissions, Mexico, Wyoming, Nebraska,
Motors Power Shift Transmissions Louisiana, Mississippi
and Torque Converters and Alabama; Venezuela
Hyster Company Material Handling Texas 1960
Equipment
John Deere Corporation Construction, Utility Southeast Texas and 1987
and Forestry Equipment Wyoming
Thermo King Corp. Transport Refrigeration Southeast Texas and 1970
Equipment Southern Louisiana
</TABLE>
Distribution agreements generally require the Company to purchase and stock the
products and repair parts covered thereby for resale to end users, original
equipment manufacturers or independent dealers within the franchise area of
distribution. Such agreements also require the Company to provide after-sale
service within its designated territory and may contain provisions prohibiting
the sale of competitive products within the franchise territory. Distribution
operations are conducted at branch facilities located in major cities within the
Company's franchised area of distribution. New products are marketed primarily
under the trademarks and the trade names of the original manufacturer.
The Company's principal distribution agreements are subject to termination by
the suppliers for a variety of causes, including a change in control or a change
in the principal management of the Company. The Company's distribution
agreements with Detroit Diesel expire in 1995. Although no assurance can be
given that such distribution agreements will be renewed beyond their expiration
dates, they have been renewed regularly.
The Distribution segment also manufacturers and sells snow removal equipment,
wheel chair lifts, rail car movers and alternative fuel systems. Some products
manufactured by the Distribution segment are based upon proprietary designs
owned by the Company and others are based upon designs owned by others and
licensed to the Company.
Operations of the Distribution segment accounted for approximately 31.8%, 33.1%
and 41.7%, respectively, of consolidated sales during Fiscals 1993, 1992 and
1991. The Distribution segment's marketing units regularly sell certain
products manufactured by units of the Engineered Power Systems segment and also
sell to military and airline users. In both cases, such sales are included in
the Distribution segment.
TACTICAL VEHICLE SYSTEMS SEGMENT
In October 1991, the United States Department of Defense selected Stewart &
Stevenson to manufacture the next generation of medium tactical vehicles (the
"Family of Medium Tactical Vehicles" or "FMTV") for the U.S. Army and awarded
the Company contracts, valued at $1.2 billion, for the production of 2 1/2-ton
and 5-ton trucks, spare parts and logistical support. As is typical of multi-
year defense contracts, the FMTV contracts must be funded annually by the
Department of the Army and may be terminated at any time for the convenience of
the government. In the event that vehicle or spare parts deliveries are
canceled or terminated for the convenience of the government, the FMTV contracts
provide for termination charges that will substantially reimburse the Company
for all unamortized non-recurring costs.
The Family of Medium Tactical Vehicles is intended to become the U.S. Army's
next generation of basic transportation vehicle for personnel and materials. As
such, the FMTV will be produced in several variants to carry troops and cargo,
including cargo beds, vans, troop carriers, wreckers, dump trucks and tractors.
In addition, several of the vehicles will be specially configured for air
transportation. Although more than ten configurations of the FMTV will be
produced, a high degree of common components is incorporated in the Stewart &
Stevenson design.
The vehicles manufactured by the Company are based on a design acquired from
Steyr-Daimler-Puch, A.G., an established Austrian-based manufacturer of military
and commercial vehicles. It was adapted to the requirements of the U.S. Army by
Stewart & Stevenson and incorporates a diesel engine manufactured by
Caterpillar, Inc., an automatic transmission and transfer case manufactured by
Allison and drive axles manufactured by Rockwell Corporation. Although the FMTV
will be the Company's first high volume production vehicle, the Company has
previously packaged various equipment for the U.S. Armed Forces using diesel and
gas turbine engines.
Stewart & Stevenson believes that there will be opportunities to sell additional
vehicles to other branches of the U.S. Armed Forces and to the armed forces of
foreign countries. The FMTV contracts allow for such sales, and the Company's
facility has capacity to produce vehicles for those additional sales. The
Company has already begun marketing efforts with potential customers other than
the U.S. Army.
COMPETITION
The Company encounters strong competition in all segments of its business.
Competition involves pricing, quality, availability, the range of products and
services and other factors. Some of the Company's competitors have greater
financial resources than Stewart & Stevenson. The Company believes that its
reputation for quality engineering and after-sales service, as well as single-
source responsibility, are important to its market position.
The Engineered Power Systems segment competes with various entities, including
certain suppliers of major components, for sale of its products. Manufacturers
of gas turbine generator sets in the 20-50 Mw size include General Electric
Corporation, Dresser-Rand Power, Inc., Ruston Gas Turbines Ltd. and ABB Energy
Services, Inc., a subsidiary of Asea Brown Boveri. Competition in the market
for the other products manufactured by the Engineered Power Systems segment is
highly fragmented with no single competitor participating in all of the markets
of the Company. The Distribution segment competes with distributors for other
manufacturers in the sale of original equipment, with the manufacturers and
distributors of non-original equipment parts for the sale of spare parts and
with independent repair shops for in-shop and on-site repair services.
INTERNATIONAL OPERATIONS
The profit margin on export sales is typically not materially different from
that on domestic sales of the same or similar products with the same or similar
delivery requirements. International sales are subject to the risks of
international political and economic changes, such as changes in foreign
governmental policies, currency exchange rates and inflation. Generally, the
Company accepts payments only in United States Dollars and makes most sales to
customers outside the United States against letters of credit drawn on
established international banks, thereby limiting the Company's exposure to the
effects of exchange rate fluctuations and customer credit risks. In the limited
circumstances in which the Company has entered into contracts in foreign
currencies, it has hedged its exposure to fluctuations in such currencies.
UNFILLED ORDERS
Stewart & Stevenson's unfilled orders consist of written purchase orders,
letters of intent and oral commitments. These unfilled orders are generally
subject to cancellation or modification due to customer relationships or other
conditions. Purchase options are not included in unfilled orders until
exercised. Unfilled orders at the close of Fiscals 1993 and 1992 were as
follows:
<TABLE>
<CAPTION>
Estimated percentage to
be recognized in Fiscal Fiscal
Fiscal 1994 1993 1992
_______________________ _________ _________
(Dollars in millions)
<S> <C> <C> <C>
Engineered Power Systems
Equipment 60.0% $ 491.5 $ 489.4
Operations and Maintenance 16.3% 269.7 189.6
_________ _________
761.2 679.0
Distribution 100.0% 32.6 24.3
Tactical Vehicle Systems 21.4% 1,119.5 1,185.2
_________ _________
Total 31.9% $ 1,913.3 $ 1,888.5
========= =========
</TABLE>
Although no assurance can be given, the Company expects sales of the Engineered
Power Systems segment to continue to be weighted in favor of turbine-driven
equipment because of the large number of unfilled orders for these units, the
number of proposals that are presently outstanding and the current need for
additional electrical generating capacity in the United States and in many
foreign countries.
Unfilled orders of the Tactical Vehicle Systems segment consists principally of
the contracts awarded in October 1991, by the United States Department of the
Army, to manufacture medium tactical vehicles.
EMPLOYEES
At the end of Fiscal 1993, the Company employed approximately 3,400 persons.
The Company considers its employee relations to be satisfactory.
Item 2. Properties.
The Company maintains its corporate and executive offices at 2707 North Loop
West, Houston, Texas. The corporate office, which includes the national sales
offices for the Engineered Power Systems segment and administrative offices for
the Distribution segment, occupies about 78,000 square feet of space leased
from a limited partnership in which the Company owns an 80% limited partnership
interest.
Stewart & Stevenson's Engineered Power Systems segment is headquartered in
Houston, where the Company owns approximately 919,000 square feet and leases
approximately 48,000 square feet of space at six locations devoted to
manufacturing, warehousing and administration. The Company leases gas turbine
parts, service, operations and maintenance facilities in Bakersfield, California
and Long Beach, California totaling 8,200 square feet and maintains a sales
office in Alexandria, Virginia and Fort Lauderdale, Florida. The Company owns
gas turbine parts service, operations and maintenance facilities in Syracuse,
New York and a high pressure valve manufacturing facility in Jennings, Louisiana
totaling 15,000 and 89,000 square feet, respectively.
Activities of the Distribution segment are coordinated from Houston, where the
Company owns 303,000 square feet of space at three locations devoted to
equipment and parts sales and service. To service its distribution territory
(See "Item 1. Business -- Distribution Segment"), Stewart & Stevenson maintains
Company-operated facilities occupying 305,000 square feet of owned space and
391,000 square feet of leased space in 19 cities in Texas, Louisiana, Colorado,
New Mexico and Wyoming.
The Company's new Tactical Vehicle Systems segment is located in a 500,000
square foot company owned facility near Houston, Texas.
The Company considers all property owned or leased by it to be well maintained,
adequately insured and suitable for its purposes.
Item 3. Legal Proceedings.
On April 21, 1994, the Fourteenth Court of Appeals of the State of Texas
reversed a $17.5 million judgment in the case filed by Serv-Tech, Inc. against
the Company, Ohmstede, Inc., and Ohmstede Mechanical Services, Inc. of Beaumont,
Texas. The suit, filed on January 26, 1990, in the District Court of Harris
County, Texas, 125th Judicial District, claims that the Company breached a
secrecy agreement and misappropriated confidential information and trade
secrets of Serv-Tech, Inc. In the opinion of the management of the Company,
any further actions in connection with this suit will not have a material
impact on the Company's financial position or results of operations.
The Company has been advised that on January 5, 1993, John G. Runion, a former
consultant of the Company, filed a suit for himself and the United States of
America in the U. S. District Court, Southern District of Texas. The suite
alleges that the Company supplied false information in violation of the False
Claims Act (the"Act"), engaged in common law fraud and misapplied costs incurred
in connection with a change order under a 1987 government subcontract. Under
the provisions of the Act, the suit has not been served upon the Company pending
an investigation of the case by the U. S. Department of Justice and a
determination as to whether the Department of Justice will intervene and pursue
the matter on behalf of the United States. The suit alleges treble damages of
$21 million plus unspecified penalties. The Company has denied any wrongdoing
in connection with the pricing of the change order and believes that the case
will be resolved without any material effect on the financial position, net
worth or results of operation of the Company.
The Company is a defendant in a number of other lawsuits relating to
contractual, product liability, personal injury and warranty matters and
otherwise of the type normally incident to the Company's business. All such
cases involve primarily a claim for damages and no individual case or group of
cases presenting substantially the same legal or factual issues involve amounts
in excess of ten percent (10%) of the current assets of the Company or is
expected to result in any material liability.
Item 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
PART II
Item 5. Market for the Registrants's Common Equity and Related Stockholder
Matters.
The Company's Common Stock is traded in the over-the-counter market and listed
in the NASDAQ National Market (Symbol: SSSS). There were 813 shareholders of
record as of February 28, 1994. The following table sets forth the high and
low sales prices relating to the Company's Common Stock and the dividends paid
by the Company in each quarterly period within the last two fiscal years of
the Company.
<TABLE>
<CAPTION>
Fiscal Fiscal
1993 1992
______________________________ ______________________________
High Low Dividend High Low Dividend
______ ______ ________ ______ ______ ________
<S> <C> <C> <C> <C> <C> <C>
First Quarter 38 1/2 28 0.05 30 22 0.04
Second Quarter 46 35 0.06 30 1/4 22 0.05
Third Quarter 51 42 1/2 0.06 32 26 1/4 0.05
Fourth Quarter 53 44 1/4 0.06 37 29 0.05
</TABLE>
Item 6. Selected Financial Data.
The Selected Financial Data set forth below should be read in conjunction with
the accompanying Consolidated Financial Statements and notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Stewart & Stevenson Services, Inc.
CONSOLIDATED FINANCIAL REVIEW
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________________
(In thousands, except per share data)
Fiscal Fiscal Fiscal Fiscal Fiscal
1993 1992 1991 1990 1989
_________________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Financial Data:
Sales $981,892 $812,526 $686,363 $645,766 $604,868
Earnings before income taxes and accounting
change<F1> 85,301 64,376 52,259 43,152 39,009
Earnings before change in accounting 56,780 43,958 35,703 29,384 27,264
Net earnings<F1> 56,780 34,658 35,703 29,384 27,264
Total assets 692,624 573,348 477,858 394,118 311,273
Short-Term debt (including current portion of
Long- Term debt) 7,219 3,252 4,582 58,616 9,091
Long-Term debt 68,000 44,451 27,939 37,982 23,544
Per Share Data :
Earnings before change in accounting<F1> 1.73 1.35 1.18 0.99 0.97
Net earnings<F1> 1.73 1.06 1.18 0.99 0.97
Cash dividends declared 0.23 0.19 0.15 0.11 0.0725
<FN>
<F1> The Company adopted SFAS 106 effective February 1, 1992, resulting in a cumulative charge to 1992 earnings of $9,300, or $.29
per share, after a deferred tax benefit of $4,790 (see Note 7 in the notes to the consolidated financial statements).
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion and analysis, as well as the accompanying consolidated
financial statements and related footnotes will aid in understanding the
Company's results of operations as well as its financial position, cash flows,
indebtedness and other key financial information. During Fiscal 1992 the
Company adopted both the Statement of Financial Accounting Standards No. 106
"Employers' Accounting For Postretirement Benefits Other Than Pensions" (SFAS
106), and the Statement of Financial Accounting Standards No. 109 "Accounting
For Income Taxes" (SFAS 109).
SUMMARY
The following table sets forth for the periods indicated (i) percentages which
certain items reflected in the Company's Consolidated Statements of Earnings
bear to consolidated sales of the Company and (ii) the percentage increase
(decrease) of such items as compared to the indicated prior period:
<TABLE>
<CAPTION>
Relationship to Period to Period
Consolidated Sales Increase (Decrease)
Fiscal Year Fiscal Year
____________________________ ______________________
1993 1992 1991 1992-1993 1991-1992
________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 20.8% 18.4%
Cost of sales 84.1 84.4 83.0 20.4 20.4
_______________________________________________________
Gross profit 15.9 15.6 17.0 23.2 8.6
Selling and administrative expenses 7.0 7.5 8.8 11.7 .9
Interest expense .3 .5 1.0 (10.2) (45.6)
Other income (.1) (.3) (.4) (62.6) (13.1)
_______________________________________________________
7.2 7.7 9.4 13.5 (3.3)
_______________________________________________________
Earnings before income taxes and accounting change 8.7 7.9 7.6 32.5 23.2
Income taxes 2.9 2.5 2.4 35.9 22.8
_______________________________________________________
Earnings of consolidated companies 5.8 5.4 5.2 30.9 23.4
Equity in net earnings (loss) of unconsolidated affiliates .0 .0 .0 N/A (18.3)
_______________________________________________________
Earnings before change in accounting 5.8 5.4% 5.2% 29.2% 23.1%
=======================================================
</TABLE>
RESULTS OF OPERATIONS
Business Segment Highlights
<TABLE>
<CAPTION>
__________________________________________________________________________________________________
(Dollars in thousands)
Annual Annual
Fiscal Percent Fiscal Percent Fiscal
1993 Change 1992 Change 1991
__________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Sales:
Engineered Power Systems $602,853 +18% $508,898 +27% $400,133
Distribution 311,983 +16% 269,045 -6% 286,230
Tactical Vehicle Systems 65,894 +93% 34,112 N/A -0-
Corporate Services 1,162 +147% 471 N/A -0-
__________________________________________________________
$981,892 +21% $812,526 +18% $686,363
==========================================================
Operating Profit:
Engineered Power Systems $ 70,292 +18% $ 59,578 +20% $ 49,597
Distribution 20,309 +63% 12,478 -21% 15,884
Tactical Vehicle Systems 2,886 +80% 1,602 N/A -0-
Corporate Services 552 +183% 195 N/A -0-
__________________________________________________________
$ 94,039 +27% $ 73,853 +13% $ 65,481
==========================================================
</TABLE>
Fiscal 1993 vs. Fiscal 1992
Sales increased to $982 million for the twelve months ended January 31, 1994
("Fiscal 1993") from $813 million for the twelve months ended January 31, 1993
("Fiscal 1992"). This represents the setting of a new sales record for the
sixth consecutive year and is largely attributable to sales volume increases in
the Engineered Power Systems segment. The Engineered Power System's gas turbine
product lines were the primary source of its growth. The highest rate of
growth was experienced in the gas turbine after market, which consists of the
servicing of customers' equipment and the long-term contracting for the
operation and maintenance of the customers' power plants. The Distribution
segment's increased sales reflect both the general improvement in the U. S.
economy and in the market penetration of the products distributed. The Tactical
Vehicle Systems segment sales, which increased 93% in relation to Fiscal 1992,
reflect the commencement of low volume truck production during Fiscal 1993. The
Company's export sales declined slightly in Fiscal 1993, representing 24% of
consolidated sales in Fiscal 1993 as compared to 32% in Fiscal 1992.
Operating profit increased significantly during Fiscal 1993, with the overall
rate of growth exceeding the growth in revenue. The Distribution segment's
operating profit grew at a rate substantially greater than its sales volume
growth, reflecting primarily operating efficiencies achieved through better
utilization of existing plants. Both the Engineered Power Systems and the
Tactical Vehicle Systems segments' operating profits increased at a rate
comparable to sales volume growth.
Fiscal 1992 vs. Fiscal 1991
Sales increased to $813 million in Fiscal 1992 from $686 million in Fiscal
1991. The Engineered Power System's gas turbine product line was the
primary source of its growth. Export sales continued to represent a
significant portion of the Company's revenue, accounting for 32% of total
sales in Fiscal 1992 and 38% in Fiscal 1991. The Distribution segment
recorded lower sales during Fiscal 1992 in relation to Fiscal 1991. The
lower sales volume for the Distribution segment can be attributed to the
continued recession in the markets serviced, which resulted in reduced demand
for new equipment during Fiscal 1992. The Tactical Vehicle Systems segment,
which contributed only slightly to consolidated revenue for Fiscal 1992,
nevertheless had a significant impact on Fiscal 1992 growth.
Operating profits increased at a double digit rate during Fiscal 1992, due
to the significant increase in sales volume. Operating profit growth in the
Engineered Power Systems segment was principally the result of the continued
expansion of the gas sales turbine product lines in Fiscal 1992. The Engineered
Power Systems segment's operating profit growth was restrained during Fiscal
1992 due to lower operating profits in the diesel product lines. The transit
products group's operating losses moderated only slightly in Fiscal 1992.
The Company has ceased the marketing of its transit products and will direct
its resources to other product lines offering better economic opportunities.
Operating profits of the Distribution segment fell sharply during Fiscal 1992,
after experiencing an increase during Fiscal 1991. This decrease in operating
profits was primarily the result of the decline in total volume, a change in
product mix towards lower value added products and the incurrence of market
introduction expense associated with the Company's alternative fuels products.
The Tactical Vehicle Systems segment began to contribute to earnings during
Fiscal 1992 as it recognized its initial revenue under its contract with the
United States Department of the Army.
Net Period Expense
<TABLE>
<CAPTION>
__________________________________________________________________________________________________
(Dollars in thousands)
Annual Annual
Fiscal Percent Fiscal Percent Fiscal
1993 Change 1992 Change 1991
__________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Selling and administrative expenses $ 68,331 +12% $ 61,168 +1% $ 60,603
Interest expense 3,313 -10% 3,689 -46% 6,780
Other income (967) -63% (2,586) -13% (2,974)
__________________________________________________________
$ 70,677 +13% $ 62,271 -3% $ 64,409
==========================================================
Net period expense as a percentage of
sales 7.2% N/A 7.7% N/A 9.4%
==========================================================
</TABLE>
Net period expense continued to grow at a much slower rate than revenue.
Operating efficiencies as a result of spreading certain fixed administrative
costs over higher sales has facilitated the control of selling and
administrative expenses. The reduction of interest expense in Fiscal 1992
reflects primarily the use of the net proceeds of $58 million, from the sale of
2,300,000 shares of Common Stock in December 1991, to pay down debt.
Earnings Before Change In Accounting
<TABLE>
<CAPTION>
__________________________________________________________________________________________________
(Dollars in thousands)
Annual Annual
Fiscal Percent Fiscal Percent Fiscal
1993 Change 1992 Change 1991
__________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Amount $ 56,780 +29% $ 43,958 +23% $ 35,703
Percent of sales 5.8% N/A 5.4% N/A 5.2%
==================================================================================================
</TABLE>
Earnings before the change in accounting for SFAS 106 in Fiscal 1992 continued
to increase period to period in both amount and as a percentage of sales in
Fiscal 1993 and 1992. These increases reflect the growth in operating profits
each period and the reduction in interest expense during Fiscal 1992. The
effective income tax rate increased one percent in Fiscal 1993, principally
as a result of the retroactively imposed increase in the United States
corporate tax rate by the Omnibus Budget Reconciliation Act of 1993.
ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No.112 (SFAS 112), "Employer's Accounting for
Postemployment Benefits", in November 1992. SFAS 112 requires that the
liability for certain postemployment benefits, including salary continuation,
be recognized over the employees' service lives when certain conditions are
met. The Company currently plans to adopt SFAS 112 in Fiscal 1994 and does
not anticipate the impact will be material to the Company's financial
statements.
The Fiscal 1992 change in accounting represents the Company's adoption of
Statement of Financial Accounting Standards No. 106 (SFAS 106), "Employers'
Accounting for Postretirement Benefits other than Pensions" (see Note 7 in the
notes to consolidated financial statements). This standard requires that the
cost of retiree medical and other non-pension benefits be recognized on the
accrual method of accounting instead of expensing those costs when paid, as
had been the generally accepted practice. The Company elected to expense
previously unrecognized prior service costs immediately. This resulted in
a one-time charge to Fiscal 1992 earnings of $9.3 million, or $0.29 per share,
after a deferred tax benefit of $4.8 million.
The Company also adopted the Statement of Financial Accounting Standards No.
109 (SFAS 109), "Accounting for Income Taxes", effective February 1, 1992.
SFAS 109 changed the criteria for recognition and measurement of deferred tax
assets and reduces the complexity of accounting for income taxes established
by Statement of Financial Accounting Standards No.96 (SFAS 96), "Accounting
for Income Taxes". Since the Company previously followed SFAS 96, adoption
of SFAS 109 did not have a material impact on the Company's financial
statements.
GOVERNMENT CONTRACTING
The Company's government contract operations are subject to U.S. Government
investigations of business practices and cost classifications from which legal
or administrative proceedings can result. Based on government procurement
regulations, under certain circumstances a contractor can be fined, as well as
suspended or barred from government contracts. On November 5, 1993, the Company
was advised that a former consultant had filed a suit on his own behalf and on
behalf of the United States of America alleging that the Company
supplied false information, engaged in fraud and misapplied costs in
connection with a change order under a 1987 government subcontract. The suit
claims total damages of $21 million and unspecified penalties. Management of
the Company has denied any wrongdoing and believes the case will be resolved
with no material adverse effect on the Company's business, its financial
condition or its operating results.
UNFILLED ORDERS
The Company's unfilled orders consist of written purchase orders, letters of
intent, and oral commitments. These unfilled orders are generally subject to
cancellation or modification due to customer relationships or other conditions.
Purchase options are not included in unfilled orders until exercised. Unfilled
orders at the close of Fiscal 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
Estimated percentage
to be recognized in Fiscal Fiscal
Fiscal 1994 1993 1992
____________________ ________ ________
(Dollars in millions)
<S> <C> <C> <C>
Engineered Power Systems
Equipment 60.0% $ 491.5 $ 489.4
Operations and Maintenance 16.3% 269.7 189.6
________ ________
761.2 679.0
Distribution 100.0% 32.6 24.3
Tactical Vehicle Systems 21.4% 1,119.5 1,185.2
________ ________
Total 31.9% $1,913.3 $1,888.5
======== ========
</TABLE>
Although no assurance can be given, the Company expects sales of the Engineered
Power Systems segment to continue to be weighted in favor of turbine-driven
equipment because of the large number of unfilled orders for these units, the
number of proposals that are presently outstanding and the current need for
additional electrical generating capacity in the United States and in many
foreign countries.
Unfilled orders of the Tactical Vehicle Systems segment consists principally of
the contracts awarded in October 1991, by the United States Department of the
Army, to manufactured medium tactical vehicles (the "Family of Medium Tactical
Vehicles" or "FMTV").
CAPITAL EXPENDITURES AND COMMITMENTS
Capital Expenditures By Industry Segment
<TABLE>
<CAPTION>
__________________________________________________________________________________________________
(Dollars in thousands)
Annual Annual
Fiscal Percent Fiscal Percent Fiscal
1993 Change 1992 Change 1991
__________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Engineered Power Systems $ 14,502 -22% $ 18,646 +269% $ 5,058
Distribution 9,302 +67% 5,582 - 21% 7,041
Tactical Vehicle Systems 6,061 -84% 36,852 +166% 13,859
Corporate Services 781 -94% 13,985 +6,435% 214
__________________________________________________________
$ 30,646 -59% $ 75,065 +187% $ 26,172
==========================================================
</TABLE>
Capital expenditures returned to historical levels during Fiscal 1993 after
having increased significantly during Fiscal 1992. The capital expenditures
program at the Tactical Vehicle Systems segment and the program to upgrade the
Engineered Power Systems existing facilities were both substantially completed
during Fiscal 1993. The Corporate Services capital expenditures in Fiscal 1992
consisted primarily of the consolidation of a limited partnership, in which the
Company became a majority limited partner. This limited partnership owns the
building where the Company's corporate office is located. The Company expects
that the level of capital expenditures will moderate during Fiscal 1994.
Cash Dividends
<TABLE>
<CAPTION>
__________________________________________________________________________________________________
(In thousands, except per share data)
Annual Annual
Fiscal Percent Fiscal Percent Fiscal
1993 Change 1992 Change 1991
__________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Amount of Cash Dividends $ 7,563 +22% $ 6,193 +35% $ 4,601
Annual Rate of Cash
Dividends $ 0.23 +21% $ 0.19 +27% $ 0.15
__________________________________________________________________________________________________
</TABLE>
The amount of cash dividends increased 22% and 35% during Fiscal 1993 and 1992,
respectively. The amount of cash dividends represented 13%, 14% and 13% of
earnings before change in accounting for Fiscal 1993, 1992 and 1991,
respectively. Even though substantial dividends were paid, the Company
retained sufficient earnings to invest in new plant and equipment for a wide
variety of capital expenditure projects, particularly those which increase
productivity, and to provide adequate financial resources for internal and
external growth opportunities. The Board of Directors of the Company intends
to consider the payment of dividends on a quarterly basis, commensurate with
the Company's earnings and financial needs.
LIQUIDITY AND SOURCES OF CAPITAL
Cash Provided From Operations
<TABLE>
<CAPTION>
________________________________________________________________________________________________________________
(Dollars in thousands)
Annual Annual
Fiscal Percent Fiscal Percent Fiscal
1993 Change 1992 Change 1991
________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net earnings and accrued postretirement benefits $ 56,689 +14% $ 49,777 +39% $ 35,703
Depreciation and amortization 21,175 +72% 12,305 +49% 8,273
Deferred income taxes 413 N/A (2,935) N/A 3,304
_________________________________________________________
Funds from operations 78,277 +32% 59,147 +25% 47,280
Change in net operating assets and liabilities (86,304) N/A 17,249 N/A (9,462)
_________________________________________________________
Net cash provided by (used in) operating activities $ (8,027) N/A $ 76,396 +102% $ 37,818
=========================================================
</TABLE>
Funds from operations increased 32% during Fiscal 1993 versus a 25% increase
during 1992, reflecting primarily the growth in earnings each year, excluding
the adoption of SFAS 106 during Fiscal 1992. The Company's investment in net
operating assets and liabilities increased by an amount greater than that
provided from operations during Fiscal 1993. The growth in both inventories
(see Note 4 to the consolidated financial statements) and contract costs in
excess of customer funding (see Note 3 to the consolidated financial statements)
were the primary areas of increase in operating assets. The growth in
inventories during Fiscal 1993 is comparable to the sales growth rate for Fiscal
1993. Fiscal 1993's increase occurred primarily within the gas turbine product
lines and reflects the restoration of inventory to pre-1992 levels. The Fiscal
1993 growth in contract cost in excess of customer funding resulted from the
commencement of materials procurement required for higher levels of production
at the Tactical Vehicle Systems segment. The Company anticipates that the
working capital needs of the Tactical Vehicle Systems segment will increase
significantly during Fiscal 1994 as this segment moves from low level
production to high level production. Working capital to support the operations
of the Company fluctuates significantly depending on the progress payment
streams of the contracts in process. The Company regularly bids on commercial
and government contracts, which if awarded to the Company, could significantly
affect both working capital and capital expenditures needs.
The Company's liquidity was comparable at the end of both Fiscal 1993 and 1992
using several measures of liquidity and leverage. The Company's current ratio
(current assets divided by current liabilities) remained somewhat constant at
2.2:1 at the end of both Fiscal 1993 and Fiscal 1992. The long-term debt to
equity ratio (long-term debt including the current portion divided by total
shareholders' equity) was a modest 20% at the end of Fiscal 1993 and 16% at the
end of Fiscal 1992. The Company's interest coverage (earnings before income
taxes and interest expense divided by interest expense) was 26.7 times interest
for Fiscal 1993 and 17.8 times interest for Fiscal 1992.
The Company had $5 million in short-term borrowings at the end of Fiscal 1993
and no short-term borrowings at the end of Fiscal 1992. Long-term debt
increased modestly during Fiscal 1993 and Fiscal 1992 principally due to the
timing of customer progress payments for contracts in process and the
acquisition of a majority interest in a limited partnership, respectively (see
Note 6 to the consolidated financial statements).
The Company may expand its Distribution and Engineered Power Systems segments by
selective acquisition of additional distribution territories and product lines.
In the event that such activities or growth in existing operations create a need
for working capital or capital expenditures in excess of existing committed
lines of credit, the Company may seek to convert uncommitted borrowing
arrangements to committed credit facilities, to borrow under other long-term
financing sources or to issue additional equity securities. The Company's
current credit facilities appear adequate to meet its foreseeable cash
requirements.
Item 8. Financial Statements and Supplemental Data.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Stewart & Stevenson Services, Inc.
We have audited the accompanying consolidated statements of financial position
of Stewart & Stevenson Services, Inc. and subsidiaries as of January 31, 1994
and 1993, and the related consolidated statements of earnings, shareholders'
equity and cash flows for each of the three years in the period ended January
31, 1994. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Stewart & Stevenson Services,
Inc. and subsidiaries as of January 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 1994 in conformity with generally accepted accounting principles.
As discussed in Note 7 and Note 10 to the consolidated financial statements, in
Fiscal 1992 the Company changed its method of accounting for postretirement
medical benefit costs to conform with Statement of Financial Accounting
Standards No. 106 and its method of accounting for income taxes to conform with
Statement of Financial Accounting Standards No. 109.
Houston, Texas Arthur Andersen & Co.
April 21, 1994
Stewart & Stevenson Services, Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
______________________________________________________________________________________
(Dollars in thousands)
Fiscal Fiscal
1992 1993
______________________________________________________________________________________
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents $ 7,788 $ 21,939
Accounts and notes receivable, net 147,292 143,166
Recoverable costs and accrued profits not yet billed 115,868 56,693
Inventories 269,605 212,506
Other 224 1,234
________ ________
Total Current Assets 540,777 435,538
Property, Plant and Equipment, net 126,473 117,359
Other Assets 25,374 20,451
________ ________
$692,624 $573,348
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable $ 5,000 $ -0-
Accounts payable 131,780 128,770
Accrued payrolls and incentives 18,629 16,322
Billings on uncompleted contracts in incurred costs 31,088 16,984
Current income taxes 27,931 13,850
Current portion of long-term debt 2,219 3,252
Other accrued liabilities 24,539 19,720
________ ________
Total Current Liabilities 241,186 198,898
Long-Term Debt--less current portion 68,000 44,451
Deferred Income Taxes 5,868 5,455
Accrued Postretirement Benefits 15,028 15,119
Deferred Compensation 3,884 3,757
Shareholders' Equity
Common Stock, without par value, 50,000,000
shares authorized; 32,948,885 and 32,785,458
shares issued at January 31, 1994 and 1993,
respectively, including 11,820 shares held in
treasury 160,366 156,593
Retained earnings 198,325 149,108
________ ________
358,691 305,701
Less cost of treasury stock (33) (33)
________ ________
Total Shareholders' Equity $358,658 $305,668
________ ________
$692,624 $573,348
======== ========
</TABLE>
See notes to consolidated financial statements
Stewart & Stevenson Services, Inc.
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
____________________________________________________________________________________________________
(In thousands, except per share data)
Fiscal Fiscal Fiscal
1993 1992 1991
____________________________________________________________________________________________________
<S> <C> <C> <C>
Sales $981,892 $812,526 $686,363
Cost of sales 825,914 685,879 569,695
________ ________ ________
Gross profit 155,978 126,647 116,668
Selling and administrative expenses 68,331 61,168 60,603
Interest expense 3,313 3,689 6,780
Other income, net (967) (2,586) (2,974)
________ ________ ________
70,677 62,271 64,409
________ ________ ________
Earnings before income taxes and accounting change 85,301 64,376 52,259
Income taxes 27,999 20,597 16,775
________ ________ ________
Earnings of consolidated companies 57,302 43,779 35,484
Equity in net earnings (loss) of unconsolidated affiliates (522) 179 219
________ ________ ________
Earnings before change in accounting 56,780 43,958 35,703
Cumulative effect of change in accounting for
postretirement medical benefits, net -0- (9,300) -0-
________ ________ ________
Net earnings $ 56,780 $ 34,658 $ 35,703
======== ======== ========
Weighted average number of shares of Common Stock outstanding 32,861 32,560 30,224
======== ======== ========
Earnings per share before change in accounting $ 1.73 $ 1.35 $ 1.18
Cumulative effect of change in accounting for
postretirement medical benefits, per share -0- (.29) -0-
________ ________ ________
Net earnings per share $ 1.73 $ 1.06 $ 1.18
======== ======== ========
</TABLE>
See notes to consolidated financial statements
Stewart & Stevenson Services, Inc.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
________________________________________________________________________________________________________
(Dollars in thousands)
Common Retained Treasury
Stock Earnings Stock Total
________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Balance at end of Fiscal 1990 $ 92,308 $ 89,703 $ (33) $181,978
Net earnings 35,703 35,703
Cash dividends (4,601) (4,601)
Issuance of Common Stock (net of issuance cost) 58,323 58,323
Exercise of stock options 1,073 1,073
________ ________ ________ ________
Balance at end of Fiscal 1991 151,704 120,805 (33) 272,476
Net earnings 34,658 34,658
Stock dividends 162 (162) -0-
Cash dividends (6,193) (6,193)
Exercise of stock options 4,727 4,727
________ ________ ________ ________
Balance at end of Fiscal 1992 156,593 149,108 (33) 305,668
Net earnings 56,780 56,780
Cash dividends (7,563) (7,563)
Exercise of stock options 3,773 3,773
________ ________ ________ ________
Balance at end of Fiscal 1993 $160,366 $198,325 $ (33) $358,658
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements
Stewart & Stevenson Services, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
________________________________________________________________________________________________________
(Dollars in thousands)
Fiscal Fiscal Fiscal
1993 1992 1991
________________________________________________________________________________________________________
<S> <C> <C> <C>
Operating Activities
Net earnings $ 56,780 $ 34,658 $ 35,703
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Accrued postretirement benefits (91) 15,119 -0-
Depreciation and amortization 21,175 12,305 8,273
Deferred income taxes, net 413 (2,935) 3,304
Change in operating assets and liabilities:
Accounts and notes receivable (4,126) (22,136) (20,042)
Recoverable costs and accrued profits not yet billed (59,175) (5,664) 26,557
Inventories (57,099) 21,050 (72,287)
Accounts payable and accrued expenses 10,136 41,114 35,982
Billings on uncompleted contracts in excess of incurred costs 14,104 (8,680) 18,086
Current income taxes 14,081 2,083 69
Other--principally long-term assets and liabilities (4,225) (10,518) 2,173
________ ________ ________
Net Cash Provided by (Used in) Operating Activities (8,027) 76,396 37,818
Investing Activities
Expenditures for property, plant and equipment (30,646) (75,065) (26,172)
Disposal of property, plant and equipment 796 377 873
________ ________ ________
Net Cash Used in Investing Activities (29,850) (74,688) (25,299)
Financing Activities
Additions to long-term borrowings 192,918 190,000 131,200
Payments on long-term borrowings (170,402) (174,818) (142,264)
Net borrowings and payments on short-term notes payable 5,000 -0- (53,013)
Dividends paid (7,563) (6,193) (4,601)
Proceeds from issuance of Common Stock -0- -0- 58,323
Exercise of stock options 3,773 4,727 1,073
________ ________ ________
Net Cash Provided by (Used in) Financing Activities 23,726 13,716 (9,282)
________ ________ ________
Increase (decrease) in cash and equivalents (14,151) 15,424 3,237
Cash and equivalents, beginning of fiscal year 21,939 6,515 3,278
________ ________ ________
Cash and equivalents, end of fiscal year $ 7,788 $ 21,939 $ 6,515
======== ======== ========
</TABLE>
See notes to consolidated financial statements
Stewart & Stevenson Services, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
Note 1: Summary of Principal Accounting Policies
Fiscal Year: The Company's fiscal year begins on February 1 of the year stated
and ends on January 31 of the following year. For example, "Fiscal 1993"
commenced on February 1, 1993 and ended on January 31, 1994.
Consolidation: The consolidated financial statements include the accounts of
Stewart & Stevenson Services, Inc. and all of its majority-owned subsidiaries.
Investments in other partially-owned companies and joint ventures in which
ownership ranges from 20 to 50 percent are generally accounted for using the
equity method. All significant intercompany accounts and transactions have been
eliminated.
Change in Accounting: During Fiscal 1992, the Company adopted, effective
February 1, 1992, Statement of Financial Accounting Standards No. 106,
"Employers' Accounting For Postretirement Benefits Other Than Pensions" (SFAS
106)(see Note 7), and No. 109, "Accounting For Income Taxes" (SFAS 109)(see Note
10). In November 1992, the Financial Accounting Standards Board issued SFAS
112, "Employers' Accounting for Postemployment Benefits." The Company plans to
adopt SFAS 112 in Fiscal 1994 and does not anticipate the impact will be
material to the Company's financial statements.
Cash Equivalents: Interest-bearing deposits and other investments with
original maturities of three months or less are considered cash equivalents.
Inventories: Inventories are stated at the lower of cost (using LIFO) or market
(determined on the basis of estimated realizable values), less related customer
deposits. Inventory costs include material, labor and overhead. The carrying
values of these assets approximate their fair values.
Contract Revenues and Costs: Revenue is recognized when a product is shipped or
accepted by the customer, except for large gas turbine contracts, where revenue
is recognized using the percentage-of-completion method. Substantially all of
the revenues of the Tactical Vehicle Systems segment are recognized under the
units-of-delivery method, whereby sales and estimated average cost of the units
to be produced under the Family of Medium Tactical Vehicle (FMTV) contract are
recognized as deliveries are made or accepted. Profits expected to be realized
on contracts are based on the Company's estimates of total sales value and costs
at completion. These estimates are reviewed and revised periodically throughout
the lives of the contracts, and adjustments to profits resulting from such
revisions are recorded in the accounting period in which the revisions are made.
Depreciable Property: The Company depreciates property, plant and equipment
over their estimated useful lives, using accelerated and straight-line methods.
Expenditures for property, plant and equipment are capitalized and carried at
cost. When items are retired or otherwise disposed of, income is charged or
credited for the difference between net book value and proceeds realized
thereon. Ordinary maintenance and repairs are charged to expense and
replacements and betterments are capitalized.
Off-Balance Sheet Risk: The Company enters into forward exchange contracts to
hedge certain foreign currency transactions for periods consistent with the
terms of the underlying transactions. The Company does not engage in
speculation, nor does the Company typically hedge nontransaction-related balance
sheet exposure. While the forward contracts affect the Company's results of
operations, they do so only in connection with the underlying transactions. As
a result, they do not subject the Company to risk from exchange rate movements,
because gains and losses on these contracts offset losses and gains on the
transactions being hedged. The Company's other off-balance sheet risks are not
material.
Fair Value of Financial Instruments: The Company's financial instruments
consist primarily of cash and cash equivalents, trade receivables, trade
payables and debt instruments. The book values of cash and cash equivalents,
trade receivables and trade payables are considered to be representative of
their respective fair values. Generally, the Company's notes receivable and
payable have interest rates which are tied to current market rates. The Company
estimates that the book value of its financial instruments are in the aggregate
of market values.
Interest Costs: Interest costs incurred during the construction of major assets
for the Company's own use are capitalized, and totalled $228 in Fiscal 1991. No
interest was capitalized in Fiscal 1993 or 1992.
Warranty Costs: Expected warranty and performance guarantee costs are accrued
as revenue is recorded, based on historical experience and contract terms.
Net Earnings Per Share: Net earnings per share of Common Stock are computed by
dividing net earnings by the weighted average number of shares outstanding.
Common Stock equivalents (outstanding options to purchase shares of Common
Stock) were excluded from the computations as they were insignificant.
Common Stock: On December 18, 1991, the Company completed the public sale of
2,300,000 shares of Common Stock. The gross proceeds and total costs of the
issue were $58,512 and $189, respectively. Issuance costs are shown as a
reduction of Common Stock. The net proceeds of $58,323 from the issue were used
to retire debt until the anticipated expenditures related to the Company's
Tactical Vehicle Systems segment were incurred.
Reclassifications: The accompanying consolidated financial statements for
Fiscal 1992 and 1991 contain certain reclassifications to conform with the
presentation used in Fiscal 1993.
Note 2: Industry Segment Data
The Engineered Power Systems segment includes the designing, packaging,
manufacturing and marketing of diesel and gas turbine engine-driven equipment.
The Distribution segment includes the marketing of diesel engines, automatic
transmissions, material handling equipment, transport refrigeration units and
construction equipment and the provision of related parts and service. The
Tactical Vehicle Systems segment includes the designing, manufacturing and
marketing of tactical vehicles, primarily 2 1/2-ton and 5-ton trucks under
contract with the United States Army.
The high degree of integration of the Company's operations necessitates the use
of a substantial number of allocations and apportionments in the determination
of business segment information. Sales are shown net of intersegment
eliminations.
Corporate assets consist primarily of cash equivalents and the assets of a
limited partnership, in which the Company is the majority partner, which owns
the building where the corporate office is located. Corporate expenses include
the litigation expense associated with the Serv-Tech, Inc. lawsuit (see Note 5).
The Company markets its engineered power systems throughout the world and is not
dependent upon any single geographic region or single customer. Export sales,
including sales to domestic customers for export, for Fiscal 1993, 1992 and 1991
were $237,807, $256,269 and $258,272, respectively. Export sales in Fiscal
1993 included $113,597 destined for Asia, in Fiscal 1992 included $87,271
destined for South America, and in Fiscal 1991 included $152,217 destined for
the Far East.
Financial information relating to industry segments follows:
<TABLE>
<CAPTION>
___________________________________________________________________________________________________________
Operating Identifiable Capital
Sales Profit Assets Expenditures Depreciation
___________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Fiscal 1993
Engineered Power Systems $602,853 $ 70,292 $396,712 $ 14,502 $ 5,330
Distribution 311,983 20,309 157,696 9,302 5,075
Tactical Vehicle Systems 65,894 2,886 113,917 6,061 9,405
Corporate Services 1,162 552 24,299 781 926
________ ________ ________ ________ ________
Total $981,892 $ 94,039 $692,624 $ 30,646 $ 20,736
======== ======== ======== ======== ========
Fiscal 1992
Engineered Power Systems $508,898 $ 59,578 $311,075 $ 18,646 $ 3,267
Distribution 269,045 12,478 138,359 5,582 5,041
Tactical Vehicle Systems 34,112 1,602 86,351 36,852 3,303
Corporate Services 471 195 37,563 13,985 468
________ ________ ________ ________ ________
Total $812,526 $ 73,853 $573,348 $ 75,065 $ 12,079
======== ======== ======== ======== ========
Fiscal 1991
Engineered Power Systems $400,133 $ 49,597 $312,463 $ 5,058 $ 3,300
Distribution 286,230 15,884 130,272 7,041 4,528
Tactical Vehicle Systems -0- -0- 26,865 13,859 202
Corporate Services -0- -0- 8,258 214 121
________ ________ ________ ________ ________
Total $686,363 $ 65,481 $477,858 $ 26,172 $ 8,151
========= ======== ======== ======== ========
</TABLE>
Reconciliation of Operating profit to Earnings before income taxes and
accounting change follows:
<TABLE>
<CAPTION>
_____________________________________________________________________________________________
Fiscal Fiscal Fiscal
1993 1992 1991
_____________________________________________________________________________________________
<S> <C> <C> <C>
Operating profit $ 94,039 $ 73,853 $ 65,481
Corporate expenses (5,425) (5,819) (6,501)
Interest expense, net (3,313) (3,658) (6,721)
________ ________ ________
Earnings before income taxes and accounting change $ 85,301 $ 64,376 $ 52,259
======== ======== ========
</TABLE>
Note 3: Recoverable Costs and Accrued Profits Not Yet Billed
Amounts included in the financial statements which relate to recoverable costs
and accrued profits not yet billed on contracts in process are as follows:
<TABLE>
<CAPTION>
_______________________________________________________________________________________________
Fiscal Fiscal
1993 1992
_______________________________________________________________________________________________
<S> <C> <C>
Costs incurred on uncompleted contracts $355,184 $190,670
Accrued profits 33,300 13,117
________ ________
388,484 203,787
Less: Customer progress payments (303,704) (164,078)
________ ________
$ 84,780 $ 39,709
======== ========
Included in the statements of financial position:
Recoverable costs and accrued profits not yet billed $115,868 $ 56,693
Billings on uncompleted contracts in excess of incurred costs (31,088) (16,984)
________ ________
$ 84,780 $ 39,709
======== ========
</TABLE>
Recoverable costs and accrued profits related to the Tactical Vehicle Systems
segment include direct costs of manufacturing and engineering, and allocable
overhead costs. Generally, overhead costs include general and administrative
expenses allowable in accordance with the United States Government contract cost
principles and are charged to cost of goods sold at the time revenue is
recognized. General and administrative costs remaining in recoverable costs and
accrued profits not yet billed amounted to $17,852 and $9,585 at January 31,
1994 and 1993, respectively. The Company's total general and administrative
expense incurred amounted to $79,290, $70,075 and $62,915 in Fiscal 1993, 1992
and 1991, respectively.
The United States Government has a security interest in unbilled amounts
associated with contracts that provide for progress payments.
In accordance with industry practice, recoverable costs and accrued profits
include amounts relating to programs and contracts with long production cycles,
a portion of which is not expected to be realized within one year.
Note 4: Inventories
Summarized below are the components of inventories:
<TABLE>
<CAPTION>
______________________________________________________________________
Fiscal Fiscal
1993 1992
______________________________________________________________________
<S> <C> <C>
Engineered Power Systems $218,358 $185,338
Customer deposits (1,178) (6,827)
________ ________
Total Engineered Power Systems 217,180 178,511
Distribution 98,885 76,463
Excess of current cost over LIFO values (46,460) (42,468)
________ ________
Total Inventories $269,605 $212,506
======== ========
</TABLE>
The Company's inventory classifications correspond to its industry segments. As
a custom packager of power systems to customer specifications, the Engineered
Power Systems segment's inventory consists primarily of work-in-process which
includes purchased and manufactured components in various stages of assembly.
The Engineered Power Systems segment's inventory includes approximately $14,271
of costs on a certain U. S. Government contract in excess of contractual
authorization which will be billable upon either contractual amendment or
approval of claims increasing contract funding. Management's position,
supported by outside legal counsel which specializes in government procurement
law, is that the Company will recover a substantial portion of the amount
claimed, which significantly exceeds the inventory carrying value. The
Distribution segment's inventory consists primarily of industrial equipment,
equipment under modification and parts held in the Company's distribution
network for resale. The Tactical Vehicle Systems segment's inventory is
purchased solely for the production of the FMTV and, accordingly, is recorded as
recoverable costs and accrued profits not yet billed.
During Fiscal 1992, certain inventories were reduced. These reductions resulted
in liquidations of LIFO inventory quantities carried at lower costs prevailing
in prior fiscal years as compared with the cost of Fiscal 1992 purchases, the
effect of which increased pre-tax earnings in Fiscal 1992 by approximately $204.
Note 5: Commitments and Contingencies
As a custom packager of power systems, the Company issues bid and performance
guarantees in the form of performance bonds or standby letters of credit.
Performance type letters of credit totaled $73,189 at the close of Fiscal 1993.
On April 27, 1994, the Fourteenth Court of Appeals of the State of Texas
reversed a $17.5 million judgment against the Company in a case filed by Serv-
Tech, Inc. of Houston, Texas. In the opinion of management, any future action
in connection with this lawsuit will not have a material impact on the Company's
financial position or results of operations.
The Company has been advised that on January 5, 1993, a former consultant of the
Company filed a suit for himself and the United States of America alleging that
the Company supplied false information in violation of the False Claims Act (the
"Act"), engaged in common law fraud and misapplied costs incurred in connection
with a change order under a 1987 government subcontract. Under the provisions
of the Act, the suit has not been served upon the Company pending an
investigation of the case by the U. S. Department of Justice and a determination
as to whether the Department of Justice will intervene and pursue the matter on
behalf of the United States. The suit alleges damages of $21 million plus
unspecified penalties. The Company has denied any wrongdoing in connection with
the pricing of the change order and believes that the case will be resolved, if
served on the Company, without any material effect on the financial position,
net worth or results of operations of the Company.
The Company is a defendant in a number of other lawsuits of the type normally
associated with the Company's business and involving claims for damages.
Management is of the opinion that such lawsuits will not result in any material
liability to the Company.
In connection with the sale of gas turbine engine-driven equipment and the
execution of an operating and maintenance contract, the Company has entered into
an agreement with a bank under which the Company will repurchase a power plant
in the event that the owner defaults in the repayment of the loan secured by the
power plant. The repurchase obligation runs for seven years from the date of
commercial operation of the power plant and specifies a repurchase price not to
exceed $29 million.
The Company leases certain property and equipment under lease arrangements of
varying terms. Annual rentals under terms of noncancelable leases are less than
1% of consolidated revenue.
Note 6: Debt Arrangements
The Company has informal borrowing arrangements with banks which may be
withdrawn at the banks' option. Borrowings under these credit arrangements are
unsecured, are due within 90 days and bear interest at varying bid and
negotiated rates. On January 31, 1994, the amount outstanding under these
arrangements was $5,000, with an interest rate of 3.39%.
Long-Term Debt, which is generally unsecured, consisted of the following:
<TABLE>
<CAPTION>
_______________________________________________________________________________________
Fiscal Fiscal
1993 1992
_______________________________________________________________________________________
<S> <C> <C>
Notes payable to insurance companies:
-10.20%, principal due $1,000 annually to 1998 $ 5,000 $ 6,000
-10.25%, principal retired in 1993 -0- 1,417
-Installment note, 10.20%, due monthly to 1994 451 1,286
Debt of consolidated limited partnership:
-note payable to a bank, principal due monthly
commencing January 1, 1995 with a final maturity
date of January 1, 1998 (see note below) 9,000 9,000
Revolving credit notes payable to banks (see note below) 55,000 30,000
Other 768 -0-
________ ________
70,219 47,703
Less current portion (2,219) (3,252)
________ ________
Long-term Debt -- less current portion $ 68,000 $ 44,451
======== ========
</TABLE>
The Company has commitments of $55,000 from banks under revolving credit notes
(subject to reduction at the Company's election) which mature on July 31, 1995,
all of which was used at the end of Fiscal 1993. A commitment fee at the rate
of 1/4 of 1% is paid on the daily average unused balance during the revolving
period. Borrowings outstanding under the revolving credit notes bear interest
at various options, the maximum rate being the prime rate. In Fiscal 1992, the
Company entered into an interest rate swap agreement, which expires in Fiscal
1995, that presently converts $20,000 of floating rate debt into fixed rate debt
with an interest rate of 4.28%. The net interest paid or received is included
in interest expense.
The Company's unsecured long-term debt was issued pursuant to agreements
containing covenants which impose working capital requirements on the Company
and designated subsidiaries and restrict indebtedness, guarantees, rentals,
dividends and other items. At the close of Fiscal 1993, approximately $94,715
of retained earnings were available for payment of dividends under the most
restrictive covenant.
As a result of the acquisition of a majority interest in a partnership in which
the Company is a limited partner, the Company's Consolidated Statements of
Financial Position include the debt of this partnership, which owns the building
where the Company's corporate office is located. Such debt is solely the
obligation of the partnership and is secured by the office building and garage.
Interest is payable in monthly installments at various rates, the maximum rate
being 9%.
Interest paid on both long-term and short-term debt during Fiscal 1993, 1992 and
1991 was $3,425, $3,707 and $6,921, respectively. The Company anticipates long-
term revolving lines of credit will be available when the current revolving
credit notes become due in 1995. The amounts of long-term debt which will
become due during Fiscal 1994 through 1998, are approximately: 1994--$2,219;
1995--$56,108; 1996--$1,100; 1997--$9,792 and 1998--$1,000.
Note 7: Postretirement Medical Plan
The Company has a postretirement medical plan which covers most of its employees
and provides for the payment of medical costs of eligible employees and
dependents upon retirement. Effective February 1, 1992, the Company adopted
SFAS 106 and changed its method of accounting for such costs to the accrual
basis of accounting instead of expensing these costs when paid as had been the
generally accepted method. The Company elected to record the previously
unrecognized prior service cost of such benefits on the immediate recognition
basis resulting in a cumulative charge to Fiscal 1992 earnings of $9,300, or
$0.29 per share, after a deferred tax benefit of $4,790. Postretirement medical
benefit costs for Fiscal 1993 and Fiscal 1992 consisted of the following:
<TABLE>
<CAPTION>
____________________________________________________________________________________________________
Fiscal Fiscal
1993 1992
____________________________________________________________________________________________________
<S> <C> <C>
Service costs - benefits attributed to service during the period $ 377 $ 466
Interest cost on accumulated postretirement medical benefit obligation 768 1,105
Amortization of prior service costs (618) -0-
________ ________
Net postretirement medical benefit costs $ 527 $ 1,571
======== ========
</TABLE>
The amount paid in Fiscal 1991 for postretirement medical benefit costs was
$332.
The Company's postretirement medical plan currently is not funded. The Company
expects to continue financing postretirement medical costs as covered claims are
incurred. The status of the plan at January 31, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
_________________________________________________________________________________________
January 31, January 31,
1994 1993
_________________________________________________________________________________________
<S> <C> <C>
Accumulated postretirement medical benefit obligation
Retirees $ 6,201 $ 5,561
Employees eligible to retire 2,561 5,436
Employees not eligible to retire 1,419 4,122
________ ________
10,181 15,119
Unrecognized prior service cost 5,954 -0-
Unrecognized net losses (1,107) -0-
________ ________
$ 15,028 $ 15,119
======== ========
</TABLE>
Postretirement medical benefit amounts were determined by applying health care
costs trend rates of 10.5 to 13.0 percent for Fiscal 1993 and 11.0 to 14.0
percent for Fiscal 1992, gradually decreasing to 6.0 percent by 2010 to gross
eligible medical claims, and using a discount rate of 7.75 percent for Fiscal
1993 and 8 percent for Fiscal 1992. Changing the health care cost trend rates
by one percentage point would change the accumulated postretirement medical
benefit obligation at January 31, 1994 by approximately $863 and would change
postretirement medical benefit costs by approximately $102.
The Company made plan modifications during the fourth quarter of Fiscal 1992.
The plan was amended for employees that retire on or after February 1, 1993, to
modify the attribution period and the cost sharing provisions of the plan.
Note 8: Employee Pension and Other Benefit Plans
The Company has a noncontributory, defined benefit pension plan covering
substantially all of its full-time employees. The benefits are based on years
of service, limited to 45 years, and the employee's highest consecutive five-
year average compensation out of the last ten years of employment. The Company
funds pension costs in conformity with the funding requirements of applicable
government regulations.
The following table sets forth the plan's funded status and amounts recognized
in the Company's statements of financial position:
<TABLE>
<CAPTION>
_________________________________________________________________________________________
Fiscal Fiscal
1993 1992
_________________________________________________________________________________________
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $33,051 in 1993 and $26,124 in 1992 $ 34,714 $ 27,284
======== ========
Projected benefit obligation for service rendered to date $(44,421) $(38,785)
Plan assets at fair value, primarily publicly traded stocks
and bonds,including 120,956 shares of the Company's
Common Stock at the end of Fiscal 1993 and 1992 56,099 52,759
________ ________
Plan assets in excess of projected benefit obligations 11,678 13,974
Unrecognized net gain from past experience different
from that assumed (4,020) (6,462)
Unrecognized net asset at February 1, 1985 being amortized
over the average remaining service period (194) (844)
________ ________
Prepaid pension cost included in Other Assets $ 7,464 $ 6,668
======== ========
</TABLE>
Net pension credit for Fiscal 1993, 1992 and 1991 included the following
components:
<TABLE>
<CAPTION>
___________________________________________________________________________________________
Fiscal Fiscal Fiscal
1993 1992 1991
___________________________________________________________________________________________
<S> <C> <C> <C>
Service cost -- benefits earned during the year $ 2,012 $ 1,735 $ 1,645
Interest cost on projected benefit obligation 3,108 3,126 2,837
Actual return on plan assets (4,883) (4,550) (8,405)
Amortization of unrecognized net gain (493) (810) (324)
Net amortization and deferrals (540) (847) 3,840
________ ________ ________
Net periodic pension credit $ (796) $ (1,346) $ (407)
======== ======== ========
</TABLE>
The assumptions used in Fiscal 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
_____________________________________________________________________________
Fiscal Fiscal
1993 1992
_____________________________________________________________________________
<S> <C> <C>
Discount Rate 7.75% 9.00%
Long-term rate of return on 9.50% 10.00%
Rate of increase in graduated salary 4.50 - 5.00% 6.00 - 12.00%
</TABLE>
On April 10, 1990, the Company adopted an unfunded defined benefit retirement
plan for non-employee directors which provides for payments upon retirement,
death, or disability. Retirement expense for this plan in Fiscal 1993, 1992 and
1991, respectively, was $164, $71, and $66.
During Fiscal 1993, the Company adopted an unfunded supplemental retirement plan
for certain corporate officers. Retirement expense for the plan in Fiscal 1993
was $290. Prior service cost not yet recognized in periodic pension cost at
January 31, 1994 was $1,208.
In January 1994, the Company adopted an employee savings plan, which qualifies
under Section 401(k) of the Internal Revenue Code. Under the plan,
participating employees may contribute up to 15% of their pre-tax salary, but
not more than statutory limits. The Company contributes twenty five cents for
each dollar contributed by a participant, subject to certain limitations. The
Company's matching contribution to the savings plan was $13 in Fiscal 1993.
Under a nonqualified deferred compensation plan for certain employees, a portion
of eligible employees' discretionary income can be deferred at the election of
the employee. These deferred funds accrue interest payable to the employee at
the prime rate in effect at the end of the year.
Note 9: Stock Options
The Stewart & Stevenson Services, Inc. 1988 and 1993 Nonstatutory Stock Option
Plans authorize the grant of options to purchase an aggregate of up to 1,800,000
and 300,000 shares of Common Stock respectively, at not less than fair market
value at the date of grant. The options expire five to ten years from the date
of grant and become exercisable in four 25% cumulative annual increments
commencing one year from date of grant. Under the terms of the 1993
Nonstatutory Stock Option Plan, the number of options authorized for grant
increased from 300,000 to 415,000 shares of Common Stock on February 1, 1994.
Stock option activity under the plan was as follows:
<TABLE>
<CAPTION>
___________________________________________________________________________
Shares Option Price
under Range
Option Per Share
___________________________________________________________________________
<S> <C> <C>
Outstanding at end of Fiscal 1990 627,988 $ 4.75 - $ 13.125
Granted 354,000 $ 18.75
Exercised (234,588) $ 4.75 - $ 13.125
________
Outstanding at end of Fiscal 1991 747,400 $ 4.75 - $ 18.75
Granted 58,800 $ 27.75
Exercised (335,000) $ 4.75 - $ 18.75
________
Outstanding at end of Fiscal 1992 471,200 $ 4.75 - $ 27.75
Granted 178,000 $ 32.625
Exercised (171,100) $ 4.75 - $ 27.75
________
Outstanding at end of Fiscal 1993 478,100 $ 13.125 - $ 32.625
========
Options exercisable at end of Fiscal 1993 79,000 $ 13.125 - $ 27.75
========
Options available for future grants 692,800
========
</TABLE>
Note 10: Income Taxes
Effective February 1, 1992, the Company adopted the method of accounting for
income taxes promulgated by SFAS 109. The Company had previously accounted for
income taxes under the method promulgated by Statement of Financial Accounting
Standards No. 96 (SFAS 96). Under both SFAS 109 and SFAS 96, the deferred tax
liability is determined under the liability method based on the difference
between the financial statement and tax bases of assets and liabilities as
measured by the enacted statutory tax rates and deferred tax expense is the
result of changes in the net liability for deferred taxes. The principal types
of differences between assets and liabilities for financial statement and tax
return purposes are accumulated depreciation, pension accounting, contract
accounting, and nondeductible accruals. Adoption of SFAS 109 did not have a
material effect on Fiscal 1992 earnings before the change in accounting for SFAS
106.
The components of the income tax provision and the income tax payments were:
<TABLE>
<CAPTION>
___________________________________________________________________________________
Fiscal Fiscal Fiscal
1993 1992 1991
___________________________________________________________________________________
<S> <C> <C> <C>
Current $ 10,454 $ 17,917 $ 16,215
Deferred 17,545 2,680 560
________ ________ ________
Income tax provision $ 27,999 $ 20,597 $ 16,775
======== ======== ========
Income tax payments (excluding refunds) $ 11,965 $ 13,667 $ 15,761
======== ======== ========
</TABLE>
A reconciliation between the provision for income taxes and income taxes
computed by applying the statutory U. S. Federal income tax rates of 35% in
Fiscal 1993 and 34% in Fiscal 1992 and 1991 follows:
<TABLE>
<CAPTION>
________________________________________________________________________
Fiscal Fiscal Fiscal
1993 1992 1991
________________________________________________________________________
<S> <C> <C> <C>
Provision at statutory rates $ 29,856 $ 21,888 $ 17,712
Other (1,857) (1,291) (937)
________ ________ ________
$ 27,999 $ 20,597 $ 16,775
======== ======== ========
</TABLE>
The tax effects of the significant temporary differences which comprise the
deferred tax liability at the end of Fiscal 1993 and Fiscal 1992 are as follows:
<TABLE>
<CAPTION>
____________________________________________________________________________
Fiscal Fiscal
1993 1992
____________________________________________________________________________
<S> <C> <C>
Deferred Tax Assets
Postretirement benefit obligation $ 5,260 $ 5,140
Accrued expenses and other 11,426 8,650
Other 1,316 148
________ ________
Gross deferred tax assets 18,002 13,938
________ ________
Deferred Tax Liabilities
Property, plant and equipment 4,027 2,458
Pension accounting 2,412 2,161
Contract accounting 27,533 22,313
Prepaid expenses and deferred 16,997 6,144
Other 7,359 3,642
________ ________
Gross deferred tax liabilities 58,328 36,718
________ ________
Net deferred tax liability $ 40,326 $ 22,780
======== ========
Current portion of deferred tax liability $ 34,458 $ 17,325
Non-current portion of deferred tax liability 5,868 5,455
________ ________
Net deferred tax liability $ 40,326 $ 22,780
======== ========
</TABLE>
Note 11: Supplemental Financial Data
Receivables consist of the following:
<TABLE>
<CAPTION>
______________________________________________________________
Fiscal Fiscal
1993 1992
______________________________________________________________
<S> <C> <C>
Accounts receivable $145,433 $141,484
Notes receivable 3,576 3,430
Allowance for doubtful accounts (1,717) (1,748)
________ ________
$147,292 $143,166
======== ========
</TABLE>
At January 31, 1994, the Company does not have significant credit risk
concentrations. No single group or customer represents greater than 10% of
total accounts receivable.
Components of property, plant and equipment follow:
<TABLE>
<CAPTION>
____________________________________________________________________________________
Fiscal Fiscal
1993 1992
____________________________________________________________________________________
<S> <C> <C>
Machinery and equipment $107,405 $ 91,359
Buildings and leasehold improvements 76,533 69,564
Revenue earning assets 10,154 9,145
Accumulated depreciation and amortization (82,188) (63,338)
________ ________
111,904 106,730
Construction-in-progress 2,050 974
Land 12,519 9,655
________ ________
$126,473 $117,359
======== ========
</TABLE>
Note 12: Consolidated Quarterly Data (unaudited)
<TABLE>
<CAPTION>
_____________________________________________________________________________________________________
(Dollars in thousands, except per share data)
Fiscal 1993
_____________________________________________________________________________________________________
Fourth Third Second First
Quarter Quarter Quarter Quarter
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Sales $244,662 $259,141 $257,936 $220,153
Gross profit 43,399 40,867 38,024 33,688
Net earnings 16,831 14,068 13,789 12,092
Net earnings per share .51 .43 .42 .37
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1992
_____________________________________________________________________________________________________
Fourth Third Second First
Quarter Quarter Quarter Quarter
_____________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Sales $222,732 $208,260 $199,977 $181,917
Gross profit 33,569 33,899 31,459 27,720
Earnings before change in accounting 13,096 11,503 10,456 8,903
Net earnings (loss)<F1> 13,096 11,503 10,456 (397)
Earnings per share before change in accounting .40 .35 .32 .28
Net earnings (loss) per share <F1> .40 .35 .32 (.01)
<FN>
<F1> The net loss reported during the first quarter of Fiscal 1992 is after the change in accounting for postretirement medical
benefits. The effect of the change in accounting was to decrease net earnings and net earnings per share by $9,470 and $.29, $170
and $.01, and $183 and $.01 for the first, second and third quarters of Fiscal 1992, respectively.
</TABLE>
Item 9. Changes in and Disagreements With Accountants on With Accountants on
Accounting and Financial Disclosure.
None.
PART III
In accordance with General Instruction G(3) to Form 10-K, Items 10 through 13
have been omitted since the Company will file with the Commission a definitive
proxy statement complying with Regulation 14A involving the election of
directors not later than 120 days after the close of its fiscal year. Such
information is incorporated herein by reference.
CROSS REFERENCE
Form 10-K Item Number and Caption Caption in Definitive
Proxy Statement
________________________________________________________________________________
Item 10. Directors and Executive
Officers of the Registrant . . . . Election of Directors
Item 11. Executive Compensation . . . . . . Executive Compensation
Item 12. Security Ownership of
Certain Beneficial Owners
and Management . . . . . . . . . . Voting Securities and
Ownership Thereof by Certain
Beneficial Owners and
Management
Item 13. Certain Relationships
and Related Transactions . . . . . Election of Directors
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)1. The following financial statements for Stewart & Stevenson Services, Inc.
are filed as a part of this report:
Consolidated Statements of Financial Position--January 31, 1994 and 1993.
Consolidated Statements of Earnings--Years ended January 31, 1994, 1993
and 1992.
Consolidated Statements of Shareholders' Equity--Years ended January 31,
1994, 1993 and 1992.
Consolidated Statements of Cash Flows--Years ended January 31, 1994,
1993 and 1992.
Notes to Consolidated Financial Statements.
2. The following financial statement schedule for Stewart & Stevenson
Services, Inc. and Subsidiaries is filed as a part of this report:
IX -- Short-term Borrowings.
Schedules other than Schedule IX are omitted because of the absence of
conditions under which they are required or because the information is
included in the financial statements or notes thereto.
3. The following exhibits are filed as a part of this report pursuant to
Item 601 of Regulation S-K.
3.1 Second Restated Articles of Incorporation of Stewart & Stevenson
Services, Inc., effective as of April 20, 1992.
3.2 Third Restated Bylaws of Stewart & Stevenson Services, Inc.,
effective as of December 8, 1992.
10.1 Lease Agreement effective April 1, 1990, between Joe Manning, Jr.
and C.E. Ames, as Lessors, and the Company, as Lessee.
10.2 Lease Agreement effective January 1, 1991, between Joe Manning,
Jr., as Lessor, and the Company, as Lessee.
10.3 Lease Agreement effective January 1, 1988, between Miles McInnes
and Faye Manning Tosch, as Lessors, and the Company, as Lessee.
10.4 Lease Agreement effective March 1, 1986, between Joe Manning, Jr.
and Joe Manning, IV, as Lessors, and the Company, as Lessee.
10.5 Distributor Sales and Service Agreement effective January 1, 1993,
between the Company and Detroit Diesel Corporation.
10.6 Contract Number DAAE07-92-R001 dated October 11, 1991 between
Stewart & Stevenson Services, Inc. and the United States Department
of Defense, U. S. Army Tank-Automotive Command, as modified.
10.7 Contract Number DAAE07-92-R002 dated October 15, 1991
between Stewart & Stevenson Services, Inc. and the United States
Department of Defense, U. S. Army Tank-Automotive Command, as
modified.
10.8 Stewart & Stevenson Services, Inc. Deferred Compensation Plan dated
as of December 31, 1979.
10.9 Stewart & Stevenson Services, Inc. 1988 Nonstatutory Stock Option
Plan.
10.10 Amendment No. 1 to Stewart & Stevenson Services, Inc. 1988
Nonstatutory Stock Option Plan, dated September 11, 1990.
10.11 Stewart & Stevenson Services, Inc. Supplemental Executive Retirement
Plan
22.1 List of Subsidiaries
24.1 Consent of Arthur Andersen & Co., Independent Public Accountants.
(b) Reports on Form 8-K.--No reports on Form 8-K were filed during the last
quarter of the period covered by this report.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
Board of Directors and Shareholders
Stewart & Stevenson Services, Inc.
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of Stewart & Stevenson Services, Inc. included
in this Form 10-K, and have issued our report thereon dated April 21, 1994. Our
audit was made for the purpose of forming an opinion on the basic consolidated
financial statements taken as a whole. The schedule listed in Item 14a(2) is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has been subjected
to the auditing procedures applied in the audit of the basic consolidated
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Houston, Texas
April 21, 1994
<TABLE>
<CAPTION>
SCHEDULE IX--SHORT-TERM BORROWINGS
STEWART & STEVENSON SERVICES, INC. & SUBSIDIARIES
Three Years Ended January 31, 1994
(Dollars in Thousands)
________________________________________________________________________________________________________________
Column A Column B Column C Column D Column E Column F
________________________________________________________________________________________________________________
Maximum Average Average
Category of Weighted amount amount interest
aggregate Balance average outstanding outstanding rate
short-term at end of interest during the during the during
borrowings<F1> period rate period<F2> period<F3> period<F4>
____________ ____________ ____________ ____________ ____________ ____________
<S> <C> <C> <C> <C> <C>
Fiscal 1991
GMAC $ -0- .00% $ 1,296 $ 111 10.40%
Banks (unsecured) -0- .00 72,500 3,826 6.40
Banks (secured) -0- .00 329 106 8.85
Fiscal 1992
Banks (unsecured) $ -0- .00% $ 36,000 $ 1,292 4.04%
Fiscal 1993
Banks (unsecured) $ 5,000 3.39% $ 50,000 $ 19,250 3.52%
<FN>
<F1> GMAC--Notes payable to General Motors Acceptance Corporation generally
at prime plus 1% or non-interest bearing for 90 days on certain products
secured by new General Motors diesel engines and other equipment included
in inventory. The notes are due in specified installments at twelve,
fifteen and eighteen months or upon sale of the secured inventory.
Banks--Unsecured: Borrowings under credit arrangements which are due
within 90 days. Secured: Notes payable of the Company's finance
subsidiary which pledges notes receivable and certain other assets for
borrowings outstanding.
<F2> At any month end.
<F3> Total of month end outstanding balances divided by 12.
<F4> Stated interest rates of interest bearing notes applied to month end
outstanding balances divided by weighted average short-term debt
outstanding.
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on the 21st day of April,
1994.
STEWART & STEVENSON SERVICES, INC.
By: /s/ Bob H. O'Neal
Bob H. O'Neal
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 21st day of April, 1994.
/s/ Bob H. O'Neal /s/ Robert L. Hargrave
Bob H. O'Neal Robert L. Hargrave
Director and Principal Director, Principal
Executive Officer Financial Officer and
Principal Accounting Officer
/s/ C. Jim Stewart II /s/ J. Carsey Manning
C. Jim Stewart II J. Carsey Manning
Director Director
/s/ Donald E. Stevenson /s/ Robert H. Parsley
Donald E. Stevenson Robert H. Parsley
Director Director
/s/ Jack W. Lander, Jr. /s/ Jack T. Currie
Jack W. Lander, Jr. Jack T. Currie
Director Director
/s/ James H. Elder, Jr. ______________________
James H. Elder, Jr. Robert S. Sullivan
Director Director
/s/ Donald J. Atwood
Donald J. Atwood
Director
EXHIBIT INDEX
<TABLE>
<CAPTION>
Filed with Incorporated by Reference
Exhibit Number and Description this report Form Date File No. Exhibit
______________________________ ___________ ____ ________ ________ _______
<S> <C> <C> <C> <C> <C>
3.1 Second Restated Articles of Incorporation,
effective as of April 20, 1992. *
3.2 Third Restated Bylaws, effective as
December 8, 1992. *
10.1 Lease Agreement effective April 1, 1990,
between Joe Manning, Jr. and C. E. Ames,
as Lessors, and the Company, as Lessee. *
10.2 Lease Agreement effective January 1,
1991, between Joe Manning, Jr., as Lessor,
and the Company, as Lessee. *
10.3 Lease Agreement effective January 1, 1988,
between, Miles McInnes and Faye Manning Tosch,
as Lessor, and the Company, as Lessee. *
10.4 Lease Agreement effective March 1,
1986, between Joe Manning, Jr. and Joe
Manning, IV, as Lessors, and the Company,
as Lessee. *
10.5 Distributor Sales and Service Agreement
effective January 1, 1993, between the
Company and Detroit Diesel Corporation. 10-K 01/31/93 0-8493 10.1
10.6 Contract Number DAAE07-92-R001 dated
October 11, 1991 between Stewart &
Stevenson Services, Inc. and the United
States Department of Defense, U.S. Army
Tank - Automotive Command, as modified. S-3 12/28/91 33-44149 28.1
10.7 Contract Number DAAE07-92-R002 dated
October 15, 1991 between Stewart &
Stevenson Services, Inc. and the United
States Department of Defense, U.S. Army
Tank - Automotive Command, as modified. S-3 12/28/91 33-44149 28.2
10.8 Stewart & Stevenson Services, Inc.
Deferred Compensation Plan dated
as of December 31, 1979. *
10.9 Stewart & Stevenson Services, Inc.
1988 Nonstatutory Stock Option Plan. *
10.10 Amendment No. 1 to Stewart & Stevenson
Services, Inc. 1988 Non-Statutory Stock
Option Plan; dated September 11, 1990. *
10.11 Stewart & Stevenson Services, Inc.
Supplemental Executive Retirement Plan *
22.1 List of subsidiaries. *
24.1 Consent of Arthur Andersen & Co.,
Independent Public Accountants. *
</TABLE>
SECOND RESTATED ARTICLES OF INCORPORATION
OF
STEWART & STEVENSON SERVICES, INC.
1. Pursuant to the provisions of Article 4.07 of the Texas Business
Corporation Act, Stewart & Stevenson Services, Inc. hereby adopts these Second
Restated Articles of Incorporation which accurately copy the entire text of the
present Restated Articles of Incorporation and all amendments thereto that are
in effect to date and which contain no change in any provision thereof except
that the number of directors now constituting the board of directors and the
names and addresses of the persons serving as directors have been inserted in
lieu of similar information concerning the initial board of directors and the
name and address of each incorporator has been omitted.
2. These Second Restated Articles of Incorporation were adopted by
resolution of the board of directors of the corporation on April 7, 1992.
3. The Restated Articles of Incorporation and all amendments and
supplements thereto are hereby superseded by the following Second Restated
Articles of Incorporation which accurately copy the entire text thereof:
I.
The name of the corporation shall be STEWART & STEVENSON SERVICES, INC.
II.
Section 1. The purpose for which the corporation is organized is to engage in
any lawful business or activity, subject to the limitations hereinafter set
forth in Section 2 of this article.
Section 2. Nothing in this article is to be construed as authorizing the
corporation to transact any business in the State of Texas expressly prohibited
by any law of the State of Texas, or to engage in any activity in the State of
Texas which cannot lawfully be engaged in by a corporation incorporated under
the Texas Business Corporation Act or which cannot lawfully be engaged in
without first obtaining a license under the laws of the State of Texas and which
license cannot be granted to a corporation organized under the Texas Business
Corporation Act, or to operate in Texas any of the businesses referred to in
Section B(4) of Article 2.01 of the Texas Business Corporation Act, or to take
any action in violation of any of the laws referred to in Section C of Article
2.02 of the Texas Business Corporation Act.
III.
The post office address of the registered office of the corporation is 807
Brazos, Austin, Texas 78701, and the name of its registered agent at such
address is The Prentice-Hall Corporation System, Inc. subject to change as
provided in the Texas Business Corporation Act.
IV.
The names and addresses of the persons serving as directors of the corporation
at the time of the filing of these Second Restated Articles of Incorporation and
who shall serve until their successors shall be chosen and shall qualify are:
Name Address
C. Jim Stewart II 2707 North Loop West
Houston, Texas 77008
Bob H. O'Neal 2707 North Loop West
Houston, Texas 77008
J. Carsey Manning 2707 North Loop West
Houston, Texas 77008
Donald E. Stevenson 2707 North Loop West
Houston, Texas 77008
Robert H. Parsley 1600 First Interstate Bank Plaza
Houston, Texas 77002
James E. Knott #433 C. R. 239
Durango, Colorado 81301
J. W. Lander, Jr. 4200 Westheimer
Houston, Texas 77027
Robert L. Hargrave 2707 North Loop West
Houston, Texas 77008
James H. Elder, Jr. 741 Rocky River
Houston, Texas 77056
Jack T. Currie 515 Post Oak
Houston, Texas 77027
William E. Greehey 530 McCullough
San Antonio, Texas 78215
Robert S. Sullivan Frew & Tech Streets
Pittsburgh, PA 15213-3890
The number of directors may be increased or decreased from time to time by
amendment to the bylaws, but no decrease shall have the effect of shortening the
term of any incumbent director, and the number of directors shall not be
decreased to less than three (3) directors nor increased to more than twenty-
five (25) directors. In the absence of a bylaw fixing the number of directors,
the number shall be six (6).
V.
The period of duration of the corporation is perpetual.
VI.
The aggregate number of shares which the corporation shall have authority to
issue is fifty million (50,000,000) shares of common stock, without par value.
VII.
No shareholder shall be entitled as a matter of right to subscribe for, purchase
or receive any shares of stock, rights or options of the corporation which it
may issue or sell, whether out of the number of shares authorized by these
articles of incorporation or by amendment thereof or out of the shares of stock
of the corporation acquired by it after the issuance thereof, nor shall any
shareholder be entitled as a matter of right to subscribe for, purchase or
receive any bonds, debentures or other securities which the corporation may
issue or sell that shall be convertible into or exchangeable for stock or to
which shall be attached or appertain any warrant or warrants or other instrument
or instruments that shall confer upon the holder or owner of such obligation the
right to subscribe for, purchase, or receive from the corporation any shares of
its capital stock; but all such additional issues of stock, rights and options,
or of bonds, debentures or other securities convertible into or exchangeable for
stock or to which warrants shall be attached or appertain or which shall confer
upon the holder the right to subscribe for, purchase or receive any shares of
stock may be issued and disposed of by the Board of Directors to such persons,
firms or corporations as in their absolute discretion may deem advisable. The
acceptance of stock in the corporation shall be a waiver of any preemptive or
preferential right which in the absence of this provision might otherwise be
asserted by shareholders of the corporation or any of them.
VIII.
At every meeting of the shareholders, every holder of common stock of the
corporation shall be entitled to one vote for each share of common stock
standing in his name on the books of the corporation. No shareholder shall have
the right to cumulate his votes for the election of directors, but each share
shall be entitled to one vote in the election of each director.
Dated this 7th day of April, 1992.
STEWART & STEVENSON SERVICES, INC.
/s/ Lawrence E. Wilson
By: __________________________
Lawrence E. Wilson
Vice President & Secretary LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into on the date of the execution
hereof by and between JOE MANNING, JR., AND C.E. AMES, (hereinafter referred to
as "Lessor"), individual residents of Harris County, Texas, and STEWART &
STEVENSON SERVICES, INC. (hereinafter "Lessee"), a Texas corporation.
ARTICLE 1. PREMISES
Lessor hereby leases to Lessee and Lessee hereby leases from Lessor the
premises situated in Midland County, Texas, and more particularly described in
Exhibit A attached and made a part hereof. Said premises together with all
improvements thereon are hereinafter referred to as the "Leased Premises."
ARTICLE 2. TERM
The term of this Lease Agreement shall begin on April 1, 1990 and shall
terminate at midnight on March 31, 1997.
ARTICLE 3. RENT
Without offset or deduction, Lessee shall pay Lessor at the address shown
in Article 16, or at such other address as Lessor may from time to time notify
Lessee in writing, on the first day of each calendar month, monthly in advance,
as rent for each and every month in the term hereof the sum of $4,270.00.
ARTICLE 4. PAYMENT OF TAXES
Lessee shall pay all real property taxes relating to the Leased Premise.
Lessee will pay all personal property taxes relating to Lessee's equipment used
in the Leased Premises.
ARTICLE 5. UTILITY CHARGES
Lessee shall pay all utility charges for utilities used in and about the
Leased Premises. All such charges are to be paid by Lessee to the utility
companies or municipalities furnishing the same, before the same shall become
delinquent.
ARTICLE 6. INSURANCE
Throughout the duration of this Lease Agreement, Lessee shall maintain fire
and casualty insurance on the Leased Premises. Additionally, Lessee shall
maintain liability insurance protecting both Lessor and Lessee from claims by
third persons for personal injury and property damage.
ARTICLE 7. REPAIRS
At its own expense, Lessee shall perform all routine maintenance as is
reasonably necessary to keep the Leased Premises in good condition and repair,
normal wear and tear excepted. Lessee agrees that all damages or injury done by
Lessee to the Leased Premises shall be repaired by Lessee at Lessee's sole
expense (other than wear or damage to structural components such as the walls,
roofs, and foundations not caused by Lessee). All other damages or injury to
the Leased Premises which are beyond the reasonable control of Lessee including
but not limited to damage or injury covered by fire, flood, wind, acts of war or
acts of God, shall be repaired by Lessor at Lessor's expense.
ARTICLE 8. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS
Lessee shall have the right, with Lessor's approval, during the Lease Term
and any extended terms hereof at its sole cost and expense to affix and install
such property and equipment to, in or on the Leased Premises as Lessee deems
necessary. Any and all such alterations, improvements, equipment or fixtures
shall remain the property of Lessee, and Lessor agrees that Lessee shall have
the right to remove any and all such alterations, improvements, equipment and/or
fixtures.
ARTICLE 9. ENTRY AND INSPECTION
Lessee shall permit Lessor to enter and to inspect the Leased Premises at
any reasonable time and shall permit Lessor to make whatever reasonable repairs
Lessor deems necessary to satisfy Lessor's obligations under Article 7 of this
Lease Agreement.
ARTICLE 10. DESTRUCTION OF THE LEASED PREMISES
If the building situated upon the Leased Premises should be damaged or
destroyed by fire, tornado, or other casualty, Lessee shall give immediate
notice thereof to Lessor and Lessor shall immediately commence repairs to said
premises. If the building(s) situated on the Leased Premises should be totally
destroyed by fire, tornado, or other casualty or if the building(s) should be so
damaged that rebuilding or repair cannot be completed within sixty (60) days
after the date the Lessor is notified by Lessee of such damage or destruction,
this Lease Agreement shall terminate at Lessee's election and the rent shall be
abated effective with the date of such damage or destruction. Lessor will
rebuild or repair the Leased Premises promptly if requested to do so by Lessee.
ARTICLE 11. CONDEMNATION OF THE LEASED PREMISES
If during the term of this Lease Agreement, all of the Leased Premises
should be taken for any public or quasi-public use under any governmental law,
ordinance, or regulation, or by right of eminent domain, or should be sold to
the condemning authority under threat of condemnation, this Lease Agreement
shall terminate effective as of the date of the taking of the Lease Premises by
the condemning authority or as of the date of the sale of the Leased Premises to
such authority.
In the event such condemnation occurs, Lessee may, at its option,
terminate the Lease by giving written notice to Lessor. The effect of such
condemnation, should Lessee not exercise its option to terminate, will be to
terminate the lease as to the portion of the premises condemned, and leave it in
effect as to the remainder of the premises. Lessee's rental for the remainder
of the lease term and any extended terms shall be reduced by the amount that the
usefulness of the premises for Lessee's business has been reduced.
Lessor and Lessee shall each be entitled to receive and retain such
separate awards and portions of lump sum awards as may be allocated to their
respective interest in any condemnation proceedings. Termination of this Lease
Agreement will not affect the rights of the parties hereto to such awards.
ARTICLE 12. LIMITATION OF LIABILITY
Lessor shall not be liable for any injury or damage to the persons or
property of Lessee, its agents and employees, or to any other occupant of the
Leased Premises solely caused by Lessee's negligence.
ARTICLE 13. ASSIGNMENT OR SUBLEASING
Lessee neither will assign his rights hereunder, nor sublease the Leased
Premises or any part thereof, nor mortgage, pledge, or hypothecate its leasehold
interest without the express prior written consent of Lessor which consent will
not be unreasonably withheld.
ARTICLE 14. REMEDIES
14.1 The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease Agreement:
(a) Failure by Lessee to make any payment of rent or any other payment
required to be made by Lessee hereunder, as and when due, when such failure
shall continue for a period of ten (10) days after written notice thereof from
Lessor to Lessee.
(b) The failure by Lessee to observe or to perform any of the terms of
this Lease Agreement other than described in sub-article (a) above, where such
failure shall continue for a period of thirty (30) days after written notice
thereof from Lessor to Lessee; provided, however, that if the nature of Lessee's
default is such that more than thirty (30) days are reasonably required for its
cure, then Lessee shall not be deemed to be in default if Lessee commences such
a cure within the said thirty-day period and thereafter diligently prosecutes
such cure to completion.
(c) (i) The making of Lessee of any general assignment or general
arrangement for the benefit off creditors;
(ii) The adjudication of Lessee as a bankrupt;
(iii) The appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the premises or of Lessee's
interest in this Lease Agreement where possession is not restored to Lessee
within thirty (30) days;
(iv) The attachment, execution, or other judicial seizure of
substantially all of Lessee's assets located at the Leased Premises or of
Lessee's interest in this Lease Agreement, where such seizure is not discharged
within thirty (30) days.
14.2 In the event of any such default by Lessee, Lessor shall give Lessee
written notice of default by Certified Mail Return Receipt Requested. If Lessee
has failed to cure said default within ten (10) days from receipt of notice
(except as provided in Section 14.1 (b) Lessor shall have the right to:
(a) Terminate Lessee's right to possession of the Leased Premises by any
lawful means in which case this Lease Agreement shall terminate and Lessee shall
immediately surrender possession of the Leased Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee all damages incurred by
Lessor by reason of Lessee's default including, but not limited to, the cost of
recovering possession of the Leased Premises, balance of unpaid rent, and
reasonable attorney's fees. Unpaid installments of rent or other sums shall
bear interest from the date due at the rate of ten percent per annum.
(b) Pursue any other remedy now or hereafter available to Lessor under the
laws of the State of Texas.
ARTICLE 15. NON-WAIVER OF DEFAULT
The forbearance of the exercise of any right of Lessor or Lessee arising
hereunder shall not be deemed a waiver of any right of Lessor or Lessee. All
rights and remedies of Lessor or Lessee hereunder shall be cumulative and may be
exercised and enforced concurrently whenever and as often as occasion therefor
arises.
ARTICLE 16. NOTICE
All notices to be given to Lessee by Lessor shall be in writing, deposited
in the United States mail, certified or registered, postage prepaid, and
addressed to Lessee at Stewart & Stevenson Services, Inc., at P.O. Box 1637,
Houston, Texas 77251-1637, to the attention of David Stewart. All notices to be
given to Lessor by Lessee shall be in writing, deposited in the United States
mail, certified or registered, postage prepaid, and addressed to Lessor at 5608
Candlewood, Houston, Texas 77056, to the attention of Joe Manning. Notices
shall be deemed to be delivered when deposited in the United States mail as
above provided. Changes of address of either party must be by notice given to
the other party in the same manner as above provided.
ARTICLE 17. PRIOR AGREEMENTS SUPERCEDED
This Lease Agreement constitutes the sole and only agreement between the
parties respecting the subject matter of this Lease Agreement and supercedes any
prior agreements and understandings, whether oral or written.
ARTICLE 18. AMENDMENT
No amendment or alteration or the terms hereof shall be of any force or
effect unless the same shall be in writing, dated subsequent to the date of
execution hereof, and duly executed by the parties hereto.
EXECUTED this 17th day of May, 1990.
STEWART & STEVENSON SERVICES, INC.
By: /s/ C. Jim Stewart II By: /s/ Joe Manning, Jr.
_________________________ _________________________
C. Jim Stewart II
Chairman of the Board By: /s/ C.E. Ames
_________________________
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, the undersigned authority, on this day personally appeared C.
JIM STEWART II, an officer of Stewart & Stevenson Services, Inc., a Texas
corporation, known to me to be the person and officer whose name is subscribed
to the foregoing instrument and acknowledged to me that he executed the same in
the capacity therein stated for the purposes and consideration therein
expressed.
Given under my hand and seal of office, this 17th day of May, 1990.
/s/ Estelle M. Bartling
_______________________________
Notary Public in and for
Harris County, Texas
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, the undersigned authority, on this day personally appeared Joe
Manning, Jr., an individual resident of Harris County, Texas known to me to be
the person whose name is subscribed to the foregoing instrument and acknowledge
to me that he executed the same in the capacity therein stated for the purposes
and consideration therein expressed.
Given under my hand and seal of office, this 4th day of May, 1990.
/s/ Joeanne C. Bush
___________________________________
Notary Public in and for
Harris County, Texas
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, the undersigned authority, on this day personally appeared C.E.
Ames, an individual resident of Harris County, Texas known to me to be the
person whose name is subscribed to the foregoing instrument and acknowledged to
me that he executed the same in the capacity therein stated for the purposes and
consideration therein expressed.
Given under my hand and seal of office, this 4th day of May, 1990.
/s/ Joeanne C. Bush
_____________________________________
Notary Public in and for
Harris County, Texas
EXHIBIT A
Lessors, for themselves, their heirs, administrators, executors and assigns, in
consideration of rents hereinafter reserved and of the covenants and agreements
hereinafter contained, have demised, leased and by these presents do demise and
lease unto lessee all of a 10 acre tract of land located in Midland County,
Texas and all buildings situated thereon.
THIRD RESTATED
BYLAWS OF
STEWART & STEVENSON SERVICES, INC.
Effective December 8, 1992
ARTICLE I
Offices
Section 1.1. Offices. The principal business office of the Corporation
shall be at Houston, Texas or at such other location within the State of Texas
as the Board of Directors may, from time to time, establish by resolution. The
Corporation may have such other business offices within or without the State of
Texas as the Board of Directors may from time to time establish or the business
of the Corporation may require.
ARTICLE II
Capital Stock
Section 2.1. Certificates Representing Shares. Certificates representing
shares of stock of the Corporation shall be consecutively numbered and in such
form or forms as comply with the requirements of law and the Restated Articles
of Incorporation and as the Board of Directors shall approve. Such certificates
shall be signed by the President or a Vice President, and the Secretary or an
Assistant Secretary of the Corporation, and may be sealed with the seal of the
Corporation or a facsimile thereof. The signatures of the President or Vice
President and the Secretary or Assistant Secretary may be facsimiles, engraved
or printed, if the certificate is countersigned by a transfer agent, or
registered by a registrar, other than the Corporation itself or an employee of
the Corporation. In case any officer or officers who have signed or whose
facsimile signature or signatures have been placed upon such certificate shall
have ceased to be such officer or officers before such certificate is issued, it
may be adopted and issued by the Corporation with the same effect as if he or
they had not ceased to be such officer or officers as of the date of its
issuance, and the issuance and delivery thereof by the Corporation shall
constitute adoption thereof by the Corporation.
Section 2.2. Stock Certificate Register and Shareholders of Record. The
Secretary of the Corporation shall keep at the registered office of the
Corporation, or cause a duly appointed transfer agent or registrar to keep at
its principal office, a share register showing the names of the shareholders and
their addresses, the number of shares held by each, the number and date of issue
of all certificates representing shares of the Corporation, the number and date
of cancellation of every certificate surrendered for cancellation and whether
such certificates originated from original issue or transfer. Such information
may be kept in any medium capable of reproducing the information in clearly
legible form and shall be the official list of shareholders of record of the
Corporation for all purposes. The Corporation shall be entitled to treat the
holder of record of any shares of the Corporation as the owner thereof for all
purposes, and shall not be bound to recognize any equitable or other claim to,
or interest in, such shares or any rights deriving from such shares on the part
of any other person, including (but without limitation) a purchaser, assignee,
or transferee, unless and until such other person becomes the holder of record
of such shares, whether or not the Corporation shall have either actual or
constructive notice of the interest of such other person.
Section 2.3. Transfer of Stock. The shares represented by any share
certificates of the Corporation are transferable only on the stock certificate
register of the Corporation by the holder of record thereof in person or by a
duly authorized attorney or legal representative upon surrender of the
certificate for such shares properly endorsed or assigned.
Section 2.4. Transfer Agent and Registrar. The Board of Directors may
appoint one or more transfer agents or registrars of the shares, or both, and
may require all share certificates to bear the signature of a transfer agent or
registrar or both.
Section 2.5. Lost, Stolen or Destroyed Certificates. The Corporation may
issue a new certificate for shares of stock in the place of any certificate
theretofore issued and alleged to have been lost, stolen or destroyed, but the
Board of Directors may require the owner of such lost, stolen or destroyed
certificate, or his legal representative, to furnish an affidavit as to such
loss, theft, or destruction and to give a bond in such form and substance, and
with such surety or sureties, with fixed or open penalty, as it may direct, to
indemnify the Corporation, and the transfer agents and registrars, if any,
against any claim that may be made on account of the alleged loss, theft or
destruction of such certificate. Any such new certificate shall be plainly
marked "Duplicate" on its face.
ARTICLE III
The Shareholders
Section 3.1. Annual Meeting. The annual meeting of the shareholders for
the election of directors and for the transaction of such other business as may
properly come before the meeting shall be held at the principal office of the
Corporation, or at such other place within or without the State of Texas as may
be designated by the Board of Directors or officer calling the meeting, at 10:00
o'clock in the forenoon of the second Tuesday in June, or at such other date and
time as shall be designated from time to time by the Board of Directors and
stated in a notice of meeting.
Section 3.2. Special Meetings. Except as otherwise provided by law or by
the Restated Articles of Incorporation, special meetings of the shareholders may
be called by the Chairman of the Board, the President, the Board of Directors,
or the holders of not less than one-tenth of all the shares having voting power
at such meeting, and shall be held at the principal office of the Corporation,
at such time as is stated in the notice calling such meeting, or at such other
place as the person or body calling such meeting may determine and state in such
notice.
Section 3.3. Notice of Meetings - Waiver. Written or printed notice,
stating the place, day and hour of any meeting and, in case of a special
shareholders' meeting, the purpose or purposes for which the meeting is called,
shall be delivered not less than ten (10) nor more than fifty (50) days before
the date of the meeting, either personally or by mail, by or at the direction of
the Chairman of the Board, the President, or the officer, body or person calling
the meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
stock certificate register of the Corporation, with postage thereon prepaid.
Such further or earlier notice shall be given as may be required by law. Waiver
by a shareholder of notice in writing of a shareholders' meeting, signed by him,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. No notice shall be necessary for any adjourned meeting.
Section 3.4. Closing of Stock Certificate Register and Fixing Record Date.
For the purpose of determining shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any dividend or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors of the Corporation may provide
that the stock certificate register shall be closed for a stated period but not
to exceed, in any case, fifty (50) days. If the stock certificate register
shall be closed for the purpose of determining shareholders entitled to notice
of or to vote at a meeting of shareholders, such registers shall be closed for
at least ten (10) days immediately preceding such meeting. In lieu of closing
the stock certificate register, the Board of Directors may fix in advance a date
as the record date for any such determination of shareholders, such date in any
case to be not more than fifty (50) days and, in case of a meeting of
shareholders, not less than ten (10) days prior to the date on which the
particular action, requiring such determination of shareholders, is to be taken.
If the stock certificate register is not closed and no record date is fixed for
the determination of shareholders entitled to notice of or to vote at a meeting
of shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made, as provided in this Section, such determination
shall apply to any adjournment thereof except where the determination has been
made through the closing of the stock certificate register and the stated period
of closing has expired.
Section 3.5. Voting List. The officer or agent having charge of the stock
certificate register for shares of the Corporation shall make, at least ten (10)
days before such meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in al-
phabetical order, with the address of and the number of shares held by each,
which list, for a period of ten (10) days prior to such meeting, shall be kept
on file at the registered office of the Corporation and shall be subject to
inspection by any shareholder at any time during the usual business hours. Such
list shall also be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the meeting. Failure to comply with this Section shall not effect the
validity of any action taken at such meeting.
Section 3.6. Quorum and Officers. Except as otherwise provided by law, by
the Restated Articles of Incorporation or by these Bylaws, the holders of a
majority of the shares entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders, but the shareholders
present at any meeting, although less than a quorum, may from time to time
adjourn the meeting to some other day and hour, without notice other than
announcement at the meeting. The vote of the holders of a majority of the
shares entitled to vote and thus represented at a meeting at which a quorum is
present shall be the act of the shareholders' meeting, unless the vote of a
greater number is required by law, the Restated Articles of Incorporation or
these Bylaws. The Chairman of the Board, or in his absence, the President,
shall preside at and the Secretary, or in his absence, any Assistant Secretary
shall keep the records of each meeting of shareholders, and in the absence of
all such officers, their respective duties shall be performed by persons
appointed by the meeting.
Section 3.7. Proxies. A shareholder may vote either in person or by proxy
executed in writing by the shareholder, or by his duly authorized attorney-in-
fact. Proxies shall be dated but need not be sealed, witnessed or acknowledged.
No proxy shall be valid after eleven (11) months from the date of its execution
unless otherwise provided in the proxy. Each proxy shall be revocable unless
provided expressly therein to be irrevocable, and unless otherwise made
irrevocable by law. Proxies shall be filed with the Secretary of the
Corporation before or at the time of the meeting.
Section 3.8. Balloting. Upon the demand of any shareholder, the vote upon
any question before the meeting shall be by ballot. At each meeting inspectors
of election may be appointed by the presiding officer of the meeting, and at any
meeting for the election of directors, inspectors shall be so appointed on the
demand of any shareholder present or represented by proxy and entitled to vote
at the election of directors. No director or candidate for the office of
directors shall be appointed as such inspector.
Section 3.9. Voting Rights; Voting for Directors. Each outstanding share
of common stock shall be entitled to one (1) vote upon each matter submitted to
a vote at a meeting of shareholders. No shareholder shall have the right to
cumulate his votes for the election of directors, but each share shall be
entitled to one vote in the election of each director.
ARTICLE IV
The Board of Directors
Section 4.1. Number and Qualifications. The business and affairs of the
Corporation shall be managed and controlled by the Board of Directors, and
subject to any restrictions imposed by law, by the Restated Articles of
Incorporation, or by these Bylaws, the Board of Directors may exercise all the
powers of the Corporation. The Board of Directors shall consist of twelve (12)
members. The number thereof may be increased or decreased from time to time by
amendment to these Bylaws, but no decrease shall have the effect of shortening
the term of any incumbent director. Directors need not be residents of Texas and
need not be shareholders. No person shall be qualified for election or
reelection as a director of the Corporation if: (i) he was originally elected
as a director of the Corporation on or before June 19, 1981 and has attained the
age of 75 years prior to the date that such qualification is determined; or (ii)
he was originally elected or nominated for election as a director for the
Corporation after June 19, 1981, and has attained the age of 73 prior to the
date that such qualification is determined; or (iii) he is an incumbent director
and has attended fewer than fifty (50%) percent of the meetings of the Board of
Directors held during any fiscal year commencing after January 31, 1981, which
such incumbent was entitled to attend as a director.
Section 4.2. Classification and Term. The Board of Directors shall be
divided into three classes, each class consisting as nearly as possible of one-
third (1/3) of the number of directors that make up the full Board of Directors.
At each annual meeting of shareholders, the number of directors equal to the
number of the class whose term expires at the time of such meeting shall be
elected to hold office until the third succeeding annual meeting of
shareholders.
Section 4.3. Vacancies. Any vacancy on the Board of Directors may be
filled by the vote of a majority of the remaining directors though less than a
quorum of the Board of Directors; provided, that the Board of Directors may not
fill more than two (2) vacancies caused by an increase in the number of
directors during any period between two (2) successive annual meetings of
shareholders. A director elected to fill a vacancy shall hold office for the
unexpired portion of his predecessor's term if such vacancy was created by the
death, resignation, disqualification or removal of a director or until the next
annual meeting of shareholders if such vacancy was created by an increase in the
size of the Board of Directors.
Section 4.4. Place of Meeting. Meetings of the Board of Directors may be
held either within or without the State of Texas, at whatsoever place is
specified by the officer or director calling the meeting. In the absence of
other designation, the meeting shall be held at the principal business office of
the Corporation.
Section 4.5. Regular Meetings. The Board of Directors shall hold no fewer
than four (4) regular meetings in each fiscal year. One such regular meeting
(the "Annual Meeting of Directors") shall be held immediately following the
annual meeting of shareholders, at the place of such shareholder meeting, and
the other regular meetings shall be held at such times and places as the Board
of Directors shall establish by resolution at the regular meeting following the
annual meeting of shareholders. No notice of any kind of such regular meetings
shall be necessary to either old or new members of the Board of Directors.
Section 4.6. Special Meetings. Special meetings of the Board of Directors
shall be held at any time by call of the Chairman of the Board, the President
(if a director) or by a majority of the directors. The Secretary or officer
performing his duties shall give notice of special meetings to each director at
his usual business or residence address by mailing such notice at least five (5)
days or one hundred twenty (120) hours before the meeting or by delivering the
same at least one (1) day or twenty-four (24) hours before the meeting. No
notice shall be necessary for any adjourned meeting. A waiver of notice of any
special meeting, in writing, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be equivalent to
the giving of such notice. Such notice or waiver thereof need not specify the
business to be transacted at, or the purpose of, such meeting. Attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express and announced purpose
of objecting to the transaction of any business on the ground that the meeting
is not lawfully called or convened.
Section 4.7. Quorum. Three-fourths (3/4) of the number of directors fixed
by these Bylaws shall constitute a quorum for the transaction of business, but
any one or more directors, although less than a quorum, may adjourn the meeting
to some other day or hour. The act of a majority of the directors present at a
meeting at which a quorum is in attendance shall be the act of the Board of
Directors unless a larger number is required by applicable law, the Restated
Articles of Incorporation or these Bylaws.
Section 4.8. Chairman of the Board. At each Annual Meeting of Directors,
the Board of Directors shall elect from its membership a Chairman of the Board
who shall serve in such capacity until the next Annual Meeting of Directors or
until his death, resignation, disqualification or removal if sooner. The
Chairman of the Board shall preside at all meetings of the Board of Directors
and at all meetings of the shareholders of the Company.
Section 4.9. Procedure at Meetings. The Chairman of the Board shall
preside at meetings of the Board of Directors. In his absence at any meeting,
the President (if a director) shall preside, and in the absence of both the
Chairman of the Board and the President, a member of the Board of Directors
selected by the members present shall preside. The Secretary of the Corporation
shall act as secretary at all meetings of the Board, or in his absence the
presiding officer of the meeting may designate any person to act as secretary.
At meetings of the Board of Directors, business shall be transacted in such
order as from time to time the Board of Directors may determine.
Section 4.10. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his dissent shall be entered in the minutes of the meeting or unless he shall
file his written dissent to such action with the person acting as the secretary
of the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
Section 4.11. Compensation. Directors as such shall not receive any
stated salary for their service, but by resolution of the Board of Directors (a)
an annual directors fee and (b) a fixed sum and expenses for attendance, if any,
may be allowed to each director who is not an officer or employee of the
Corporation for attendance at each regular or special meeting of the Board of
Directors or of any Committee thereof; but nothing herein shall preclude any
director from serving the Corporation in any other capacity or receiving
compensation therefor.
Section 4.12. Standing Committees. The Board of Directors by resolution
adopted by a majority of the number of directors fixed by the Bylaws shall
designate from their number an Executive Committee and an Audit Committee.
The Executive Committee shall consist of five (5) persons. Each member
shall serve until the next annual meeting of shareholders or until such
director's retirement, removal, disqualification, or death. The Executive
Committee shall meet upon the call of the chairman of such committee or any two
(2) members thereof and shall have and may exercise all of the authority of the
Board of Directors in the business and affairs of the Corporation except (a) the
power to authorize or approve the sale or other transfer of any real property
now owned or hereafter acquired by the Corporation; (b) the power to vote,
direct the vote or grant proxies relating to any stock owned by the Corporation;
(c) the power to authorize or approve purchases or commitments for goods or
services with an aggregate market value in any single transaction or group of
related transactions exceeding $5,000,000 except for goods and services
purchased in the ordinary course of business for inventory or pursuant to
capital expenditure budgets approved by the Board of Directors; (d) the power to
authorize or approve the incurrence or guaranty of indebtedness with an original
principal amount in excess of $1,000,000 and a maturity of longer than one (1)
year; (e) the power to make loans, guaranties, investments, or other commitments
outside the ordinary course of business in excess of $5,000,000 at any time
outstanding to any one person or group of persons; and (f) where action of the
Board of Directors is specified by the Texas Business Corporation Act or by
other applicable law.
The Audit Committee shall consist of four (4) persons, all of whom shall be
independent of management and free of any relationship that, in the opinion of
the Board of Directors, would interfere with the exercise of independent
judgment as a committee member. Each member shall serve until the next annual
meeting of shareholders or until such director's retirement, removal,
disqualification, or death. The Audit Committee shall meet no fewer than two
(2) times in each fiscal year of the Corporation upon the call of the chairman
of such committee or any two (2) members thereof and shall have and may exercise
such responsibilities, authority and power as the Board of Directors specifies.
The designation of Standing Committees and delegation of authority thereto
shall not operate to relieve the Board of Directors, or any member thereof, of
any responsibility imposed upon it or him by law.
Section 4.13. Other Committees of the Board of Directors. The Board of
Directors, by resolution adopted by a majority of the number of directors fixed
by the Bylaws, may designate from their number such compensation, nominating and
other committees as they shall, from time to time, deem necessary and proper.
Such committees shall be composed of not less than three members and shall have
and exercise such of the Board of Directors' authority as shall by resolution,
be delegated to it. The designation of such other committees and the delegation
of authority thereto shall not operate to relieve the Board of Directors, or any
member thereof, of any responsibility imposed upon it or him by law.
Section 4.14. Meetings and Reports of the Committees. The Committees
shall meet from time to time as set forth in the Bylaws and on call of the
Chairman or any two or more members thereof. Notice of each such meeting,
stating the place, day and hour thereof, shall be served personally on each
member of such Committee, or shall be mailed, delivered or telephoned to his
address on the books of the Corporation, at least twenty-four (24) hours before
the meeting. No such notice need state the business proposed to be transacted
at the meeting. No notice of the time or place of any meeting of such Committee
need be given to any member thereof who attends in person or who, in writing
executed and filed with the records of the meeting either before or after the
holding thereof, waives such notice. No notice need be given of an adjourned
meeting of any Committee. Meetings of the Committees may be held at such place
or places, either within or outside of the State of Texas, as such Committee
shall determine, or as may be specified or fixed in the respective notices or
waivers thereof. Each Committee may fix its own rules of procedure. They shall
keep record of their proceedings and shall report these proceedings to the Board
of Directors at the regular meetings thereof held next after they have been
taken.
Section 4.15. Advisory Directors. The Board of Directors, by resolution
adopted by a majority of the number of directors fixed by the Bylaws, may
appoint from those persons who have previously served as a director of the
Corporation, such advisory directors as the Board of Directors may, from time to
time, determine to be desirable. Such advisory directors shall be ex-officio
members of the Board of Directors, shall hold office from the date elected until
the next following annual meeting of the Board of Directors unless sooner
removed in the manner provided for the removal of Directors, shall be entitled
to receive notice of and to attend all meetings of the Board of Directors and
shall be reimbursed for all out-of-pocket expenses incurred to attend meetings
of the Board of Directors. Advisory directors shall not be a member of any
committee of the Board of Directors, vote on any matter brought before the Board
of Directors for action or be counted for the purposes of determining whether a
quorum exists. Failure to notify the advisory directors of any meeting shall
not render any meeting or any action taken at such meeting void.
ARTICLE V
Officers
Section 5.1. Number. The officers of the Corporation shall consist of the
President, a Secretary and a Treasurer; and, in addition, such Vice Presidents,
other officers and assistant officers and agents as may be deemed necessary and
elected or appointed by the Board of Directors. Any two or more offices may be
held by the same person except that the President and Secretary shall not be the
same person.
Section 5.2. Election; Term; Qualification. Officers shall be chosen by
the Board of Directors at the Annual Meeting of the Directors and may be chosen
at any other meeting of the Board of Directors. Each officer shall hold office
until the next following Annual Meeting of Directors, or until his death,
resignation, retirement or removal.
Section 5.3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors at its pleasure, but
such removal shall be without prejudice to other contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not of
itself create any contract rights.
Section 5.4. Retirement. No person may serve as an officer of the
Corporation after the last day of the fiscal year in which such officer
celebrates his sixty-fifth birthday or such later date as is necessary to comply
with applicable laws.
Section 5.5. Vacancies. Any vacancy in any office for any cause may be
filled by the Board of Directors at any meeting.
Section 5.6. Duties. The officers of the Corporation shall have such
powers and duties, except as modified by the Board of Directors, as generally
pertain to their offices, respectively, as well as such powers and duties as
from time to time shall be conferred by the Board of Directors and by these
Bylaws.
Section 5.7. The President. The President shall, subject to the control
of the Board of Directors, have general supervision and control over all of the
business, assets and affairs of the Corporation. All other officers shall
report as directed by the President. In the absence of the Chairman of the
Board, the President shall perform all of the duties of the Chairman of the
Board, and when so acting shall have all of the powers of, and be subject to all
restrictions upon, the Chairman of the Board.
Section 5.8. Secretary. The Secretary shall: (a) keep the minutes of all
meetings of the shareholders, of the Board of Directors, and of all committees
of the Board of Directors, in one or more books provided for that purpose and
shall distribute a copy of all such minutes to the members of the Board of
Directors immediately on receipt thereof, (b) see that all notices are duly
given in accordance with the provisions of these Bylaws or as required by law,
(c) be custodian of the corporate records and of the seal of the Corporation and
see that the seal of the Corporation is affixed to all documents the execution
of which on behalf of the Corporation under its seal is duly authorized, (d)
have general charge of the stock certificate register, transfer books and stock
ledgers, and such other books and papers as the Board of Directors may direct,
of the Corporation, all of which shall, at all reasonable times, be open to the
examination of any director, upon application at the office of the Corporation
during business hours, and (e) in general perform all duties and exercise all
powers incident to the office of the Secretary and such other duties and powers
as the Board of Directors or the President from time to time may assign to or
confer on him.
Section 5.9. Treasurer. The Treasurer shall be the Chief Financial
Officer and shall keep complete and accurate records of account, showing
accurately at all times the financial condition of the Corporation. He shall be
the legal custodian of all monies, notes, securities, and other valuables which
may from time to time come into the possession of the Corporation. He shall
furnish at meetings of the Board of Directors, or whenever requested, a
statement of the financial condition of the Corporation, and shall perform such
other duties as the Bylaws may require or the Board of Directors may prescribe.
The Treasurer shall have the power and authority to incur or guaranty
indebtedness on behalf of the Corporation without the prior approval of the
Board of Directors provided that the original principal amount thereof is less
than $1,000,000 and the original maturity is less than one year.
Section 5.10. The Vice Presidents. The Board of Directors may from time
to time elect such Vice Presidents as the Board of Directors deems appropriate
and assign thereto such general or specific powers, authority and responsibility
as the Board of Directors deems appropriate. The Board of Directors may specify
the order in which the Vice Presidents may act in the absence of the President.
Any action taken by a Vice President in the performance of the duties of
President shall be conclusive evidence of the absence of the President. The
Vice Presidents shall perform such other duties as may, from time to time, be
assigned to them by the Board of Directors or the President. A Vice President
may also sign with the Secretary or an Assistant Secretary certificates of stock
of the Corporation.
Section 5.11. Assistant Officers. Any Assistant Secretary or Assistant
Treasurer appointed by the Board of Directors shall have power to perform, and
shall perform, all duties incumbent upon the Secretary or the Treasurer of the
Corporation, respectively, subject to the general direction of such officers,
and shall perform such other duties as the Bylaws may require or the Board of
Directors may prescribe.
Section 5.12. Salaries. The salaries or other compensation of the
officers shall be fixed from time to time by the Board of Directors. No officer
shall be prevented from receiving such salary or other compensation by reason of
the fact that he is also a director of the Corporation.
Section 5.13. Bonds of Officers. The Board of Directors may secure the
fidelity of any or all of such officers by bond or otherwise, in such terms and
with such surety or sureties, conditions, penalties or securities as shall be
required by the Board of Directors.
Section 5.14. Delegation. The Board of Directors may delegate temporarily
the powers and duties of any officer of the Corporation, in case of his absence
or for any other reason, to any other officer, and may authorize the delegation
by any officer of the Corporation of any of his powers and duties to any agent
or employee subject to the general supervision of such officer.
ARTICLE VI
Miscellaneous
Section 6.1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, of the Corporation to enter into any contract or
execute and deliver any instrument in the name of or on behalf of the
Corporation, and such authority may be general or confined to specific
instances; and, unless so authorized by the Board of Directors or by these
Bylaws, no officer, agent or employee shall have any power or authority to bind
the Corporation by any contract or engagement, or to pledge its credit or to
render it liable pecuniarily for any purpose or to any amount.
Section 6.2. Checks, Drafts, etc. All checks, drafts, or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officers or employees of the
Corporation as shall from time to time be authorized pursuant to these Bylaws or
by resolution of the Board of Directors.
Section 6.3. Depositories. All funds of the Corporation shall be
deposited from time to time to the credit of the Corporation in such banks,
trust companies, or other depositories as the Board of Directors may from time
to time designate, upon such terms and conditions as shall be fixed by the Board
of Directors. The Board of Directors may from time to time authorize the
opening and keeping with any such depository as it may designate of general and
special bank accounts, and may make such special rules and regulations with
respect thereto, not inconsistent with the provisions of these Bylaws, as it may
deem expedient.
Section 6.4. Endorsement of Stock Certificates. Subject to the specific
directions of the Board of Directors, any share or shares of stock issued by any
corporation and owned by the Corporation (including reacquired shares of the
Corporation) may, for sale or transfer, be endorsed in the name of the
Corporation by the President or any Vice President, and attested or witnessed by
the Secretary or any Assistant Secretary either with or without affixing the
corporate seal.
Section 6.5. Voting of Shares Owned by the Corporation. Subject to the
direction of the Board of Directors, the President, the Secretary and the
Treasurer, or any of them, shall have the power and authority on behalf of the
Corporation to attend and to vote and to grant proxies to be used at any meeting
of shareholders of any corporation in which the Corporation may hold stock. The
Board of Directors may confer like powers upon any other person or persons.
Section 6.6. Corporate Seal. The corporate seal shall be in the form of a
five pointed star surrounded by the words "Stewart & Stevenson Services, Inc.,"
and such seal, or a facsimile thereof, may be impressed on, affixed to, or in
any manner reproduced upon, instruments of any nature required to be executed by
officers of the Corporation.
Section 6.7. Fiscal Year. The fiscal year of the Corporation shall begin
on February 1 and end on January 31 of the next following year, or on such other
dates as the Board of Directors at any time shall determine.
Section 6.8. Resignations. Any director or officer may resign at any
time. Such resignations shall be made in writing and shall take effect at the
time specified therein, or, if no time be specified, at the time of its receipt
by the Chairman of the Board, President or Secretary. The acceptance of a
resignation shall not be necessary to make it effective, unless expressly so
provided in the resignation.
Section 6.9. Indemnification of Officers and Directors. The Corporation
shall indemnify any person against any judgment, penalty, fine, settlement and
reasonable expenses incurred by him in connection with any threatened, pending
or completed action, suit or proceeding in which such person is or is threatened
to be made a party because he is or was serving as an officer or director of the
Corporation or at the request of the Corporation as an officer, director,
partner, venturer, proprietor, trustee, employee, agent or other functionary of
another entity and (i) such person is wholly successful in the defense thereof,
or (ii) it is determined in the manner required by law that such person
conducted himself in good faith, reasonably believed that his conduct was in the
best interest of the Corporation and had no reasonable cause to believe that his
conduct was unlawful; provided, however, that no person shall be indemnified
with respect to any matter as to which such person is found liable to the
Corporation. Any such indemnification shall be reported in writing to the
shareholders of the Corporation on or before the notice or waiver of notice of
the next shareholders' meeting and in any event within twelve (12) months of the
indemnification. The right of indemnification under this Section 6.9 shall be
in addition to any other rights to which such persons may be entitled.
Section 6.10. Loans to and Guaranties for Officers and Directors. The
Corporation shall not lend money to or guaranty the indebtedness of any of its
officers or directors unless such loan or guaranty is approved by the number of
directors equal to a majority of the full Board of Directors none of whom are
then or will become as a result of such action indebted to the Corporation and
on the express finding by such directors that such loan or guaranty is
reasonably expected to directly or indirectly benefit the Corporation.
ARTICLE VII
Amendments
Section 7.1. Amendments. The Board of Directors, by the affirmative vote
of the number of directors which is equal to three-fourths (3/4) of the number
who would constitute a full Board of Directors at the time of such action, may
alter, amend or repeal these Bylaws or adopt new Bylaws. The shareholders by
affirmative vote of two-thirds (2/3) of the issued and outstanding shares
entitled to vote may alter, amend or repeal these Bylaws or adopt new Bylaws,
without notice at any regular meeting, or if notice of the proposed amendment be
contained in the notice of any special meeting.
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into on the date of the execution
hereof by and between JOE MANNING, JR., AND C.E. AMES, (hereinafter referred to
as "Lessor"), individual residents of Harris County, Texas, and STEWART &
STEVENSON SERVICES, INC. (hereinafter "Lessee"), a Texas corporation.
ARTICLE 1. PREMISES
Lessor hereby leases to Lessee and Lessee hereby leases from Lessor the
premises situated in Midland County, Texas, and more particularly described in
Exhibit A attached and made a part hereof. Said premises together with all
improvements thereon are hereinafter referred to as the "Leased Premises."
ARTICLE 2. TERM
The term of this Lease Agreement shall begin on April 1, 1990 and shall
terminate at midnight on March 31, 1997.
ARTICLE 3. RENT
Without offset or deduction, Lessee shall pay Lessor at the address shown
in Article 16, or at such other address as Lessor may from time to time notify
Lessee in writing, on the first day of each calendar month, monthly in advance,
as rent for each and every month in the term hereof the sum of $4,270.00.
ARTICLE 4. PAYMENT OF TAXES
Lessee shall pay all real property taxes relating to the Leased Premise.
Lessee will pay all personal property taxes relating to Lessee's equipment used
in the Leased Premises.
ARTICLE 5. UTILITY CHARGES
Lessee shall pay all utility charges for utilities used in and about the
Leased Premises. All such charges are to be paid by Lessee to the utility
companies or municipalities furnishing the same, before the same shall become
delinquent.
ARTICLE 6. INSURANCE
Throughout the duration of this Lease Agreement, Lessee shall maintain fire
and casualty insurance on the Leased Premises. Additionally, Lessee shall
maintain liability insurance protecting both Lessor and Lessee from claims by
third persons for personal injury and property damage.
ARTICLE 7. REPAIRS
At its own expense, Lessee shall perform all routine maintenance as is
reasonably necessary to keep the Leased Premises in good condition and repair,
normal wear and tear excepted. Lessee agrees that all damages or injury done by
Lessee to the Leased Premises shall be repaired by Lessee at Lessee's sole
expense (other than wear or damage to structural components such as the walls,
roofs, and foundations not caused by Lessee). All other damages or injury to
the Leased Premises which are beyond the reasonable control of Lessee including
but not limited to damage or injury covered by fire, flood, wind, acts of war or
acts of God, shall be repaired by Lessor at Lessor's expense.
ARTICLE 8. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS
Lessee shall have the right, with Lessor's approval, during the Lease Term
and any extended terms hereof at its sole cost and expense to affix and install
such property and equipment to, in or on the Leased Premises as Lessee deems
necessary. Any and all such alterations, improvements, equipment or fixtures
shall remain the property of Lessee, and Lessor agrees that Lessee shall have
the right to remove any and all such alterations, improvements, equipment and/or
fixtures.
ARTICLE 9. ENTRY AND INSPECTION
Lessee shall permit Lessor to enter and to inspect the Leased Premises at
any reasonable time and shall permit Lessor to make whatever reasonable repairs
Lessor deems necessary to satisfy Lessor's obligations under Article 7 of this
Lease Agreement.
ARTICLE 10. DESTRUCTION OF THE LEASED PREMISES
If the building situated upon the Leased Premises should be damaged or
destroyed by fire, tornado, or other casualty, Lessee shall give immediate
notice thereof to Lessor and Lessor shall immediately commence repairs to said
premises. If the building(s) situated on the Leased Premises should be totally
destroyed by fire, tornado, or other casualty or if the building(s) should be so
damaged that rebuilding or repair cannot be completed within sixty (60) days
after the date the Lessor is notified by Lessee of such damage or destruction,
this Lease Agreement shall terminate at Lessee's election and the rent shall be
abated effective with the date of such damage or destruction. Lessor will
rebuild or repair the Leased Premises promptly if requested to do so by Lessee.
ARTICLE 11. CONDEMNATION OF THE LEASED PREMISES
If during the term of this Lease Agreement, all of the Leased Premises
should be taken for any public or quasi-public use under any governmental law,
ordinance, or regulation, or by right of eminent domain, or should be sold to
the condemning authority under threat of condemnation, this Lease Agreement
shall terminate effective as of the date of the taking of the Lease Premises by
the condemning authority or as of the date of the sale of the Leased Premises to
such authority.
In the event such condemnation occurs, Lessee may, at its option,
terminate the Lease by giving written notice to Lessor. The effect of such
condemnation, should Lessee not exercise its option to terminate, will be to
terminate the lease as to the portion of the premises condemned, and leave it in
effect as to the remainder of the premises. Lessee's rental for the remainder
of the lease term and any extended terms shall be reduced by the amount that the
usefulness of the premises for Lessee's business has been reduced.
Lessor and Lessee shall each be entitled to receive and retain such
separate awards and portions of lump sum awards as may be allocated to their
respective interest in any condemnation proceedings. Termination of this Lease
Agreement will not affect the rights of the parties hereto to such awards.
ARTICLE 12. LIMITATION OF LIABILITY
Lessor shall not be liable for any injury or damage to the persons or
property of Lessee, its agents and employees, or to any other occupant of the
Leased Premises solely caused by Lessee's negligence.
ARTICLE 13. ASSIGNMENT OR SUBLEASING
Lessee neither will assign his rights hereunder, nor sublease the Leased
Premises or any part thereof, nor mortgage, pledge, or hypothecate its leasehold
interest without the express prior written consent of Lessor which consent will
not be unreasonably withheld.
ARTICLE 14. REMEDIES
14.1 The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease Agreement:
(a) Failure by Lessee to make any payment of rent or any other payment
required to be made by Lessee hereunder, as and when due, when such failure
shall continue for a period of ten (10) days after written notice thereof from
Lessor to Lessee.
(b) The failure by Lessee to observe or to perform any of the terms of
this Lease Agreement other than described in sub-article (a) above, where such
failure shall continue for a period of thirty (30) days after written notice
thereof from Lessor to Lessee; provided, however, that if the nature of Lessee's
default is such that more than thirty (30) days are reasonably required for its
cure, then Lessee shall not be deemed to be in default if Lessee commences such
a cure within the said thirty-day period and thereafter diligently prosecutes
such cure to completion.
(c) (i) The making of Lessee of any general assignment or general
arrangement for the benefit off creditors;
(ii) The adjudication of Lessee as a bankrupt;
(iii) The appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the premises or of Lessee's
interest in this Lease Agreement where possession is not restored to Lessee
within thirty (30) days;
(iv) The attachment, execution, or other judicial seizure of
substantially all of Lessee's assets located at the Leased Premises or of
Lessee's interest in this Lease Agreement, where such seizure is not discharged
within thirty (30) days.
14.2 In the event of any such default by Lessee, Lessor shall give Lessee
written notice of default by Certified Mail Return Receipt Requested. If Lessee
has failed to cure said default within ten (10) days from receipt of notice
(except as provided in Section 14.1 (b) Lessor shall have the right to:
(a) Terminate Lessee's right to possession of the Leased Premises by any
lawful means in which case this Lease Agreement shall terminate and Lessee shall
immediately surrender possession of the Leased Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee all damages incurred by
Lessor by reason of Lessee's default including, but not limited to, the cost of
recovering possession of the Leased Premises, balance of unpaid rent, and
reasonable attorney's fees. Unpaid installments of rent or other sums shall
bear interest from the date due at the rate of ten percent per annum.
(b) Pursue any other remedy now or hereafter available to Lessor under the
laws of the State of Texas.
ARTICLE 15. NON-WAIVER OF DEFAULT
The forbearance of the exercise of any right of Lessor or Lessee arising
hereunder shall not be deemed a waiver of any right of Lessor or Lessee. All
rights and remedies of Lessor or Lessee hereunder shall be cumulative and may be
exercised and enforced concurrently whenever and as often as occasion therefor
arises.
ARTICLE 16. NOTICE
All notices to be given to Lessee by Lessor shall be in writing, deposited
in the United States mail, certified or registered, postage prepaid, and
addressed to Lessee at Stewart & Stevenson Services, Inc., at P.O. Box 1637,
Houston, Texas 77251-1637, to the attention of David Stewart. All notices to be
given to Lessor by Lessee shall be in writing, deposited in the United States
mail, certified or registered, postage prepaid, and addressed to Lessor at 5608
Candlewood, Houston, Texas 77056, to the attention of Joe Manning. Notices
shall be deemed to be delivered when deposited in the United States mail as
above provided. Changes of address of either party must be by notice given to
the other party in the same manner as above provided.
ARTICLE 17. PRIOR AGREEMENTS SUPERCEDED
This Lease Agreement constitutes the sole and only agreement between the
parties respecting the subject matter of this Lease Agreement and supercedes any
prior agreements and understandings, whether oral or written.
ARTICLE 18. AMENDMENT
No amendment or alteration or the terms hereof shall be of any force or
effect unless the same shall be in writing, dated subsequent to the date of
execution hereof, and duly executed by the parties hereto.
EXECUTED this 17th day of May, 1990.
STEWART & STEVENSON SERVICES, INC.
By: /s/ C. Jim Stewart II By: /s/ Joe Manning, Jr.
_________________________ _________________________
C. Jim Stewart II
Chairman of the Board By: /s/ C.E. Ames
_________________________
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, the undersigned authority, on this day personally appeared C.
JIM STEWART II, an officer of Stewart & Stevenson Services, Inc., a Texas
corporation, known to me to be the person and officer whose name is subscribed
to the foregoing instrument and acknowledged to me that he executed the same in
the capacity therein stated for the purposes and consideration therein
expressed.
Given under my hand and seal of office, this 17th day of May, 1990.
/s/ Estelle M. Bartling
_______________________________
Notary Public in and for
Harris County, Texas
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, the undersigned authority, on this day personally appeared Joe
Manning, Jr., an individual resident of Harris County, Texas known to me to be
the person whose name is subscribed to the foregoing instrument and acknowledge
to me that he executed the same in the capacity therein stated for the purposes
and consideration therein expressed.
Given under my hand and seal of office, this 4th day of May, 1990.
/s/ Joeanne C. Bush
___________________________________
Notary Public in and for
Harris County, Texas
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, the undersigned authority, on this day personally appeared C.E.
Ames, an individual resident of Harris County, Texas known to me to be the
person whose name is subscribed to the foregoing instrument and acknowledged to
me that he executed the same in the capacity therein stated for the purposes and
consideration therein expressed.
Given under my hand and seal of office, this 4th day of May, 1990.
/s/ Joeanne C. Bush
_____________________________________
Notary Public in and for
Harris County, Texas
EXHIBIT A
Lessors, for themselves, their heirs, administrators, executors and assigns, in
consideration of rents hereinafter reserved and of the covenants and agreements
hereinafter contained, have demised, leased and by these presents do demise and
lease unto lessee all of a 10 acre tract of land located in Midland County,
Texas and all buildings situated thereon.
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into on the date of the execution
hereof by and between JOE MANNING, JR. (hereinafter referred to as "Lessor"), an
individual resident of Harris County, Texas, and STEWART & STEVENSON SERVICES,
INC. (hereinafter "Lessee"), a Texas corporation.
ARTICLE 1. PREMISES
Lessor hereby leases to Lessee and Lessee hereby leases from Lessor the
premises situated in Potter County, Texas, and more particularly described in
Exhibit A attached and made a part hereof. Said premises together with all
improvements thereon are hereinafter referred to as the "Leased Premises."
ARTICLE 2. TERM
The term of this Lease Agreement shall begin on January 1, 1991 and shall
terminate at midnight on December 31, 1995.
ARTICLE 3. RENT
Without offset or deduction, Lessee shall pay Lessor at the address shown
in Article 16, or at such other address as Lessor may from time to time notify
Lessee in writing, on the first day of each calendar month, monthly in advance,
as rent for each and every month in the term hereof the sum of $2,500.00.
ARTICLE 4. PAYMENT OF TAXES
Lessee shall pay all real property taxes relating to the Leased Premise.
Lessee will pay all personal property taxes relating to Lessee's equipment used
in the Leased Premises.
ARTICLE 5. UTILITY CHARGES
Lessee shall pay all utility charges for utilities used in and about the
Leased Premises. All such charges are to be paid by Lessee to the utility
companies or municipalities furnishing the same, before the same shall become
delinquent.
ARTICLE 6. INSURANCE
Throughout the duration of this Lease Agreement, Lessee shall maintain fire
and casualty insurance on the Leased Premises. Additionally, Lessee shall
maintain liability insurance protecting both Lessor and Lessee from claims by
third persons for personal injury and property damage.
ARTICLE 7. REPAIRS
At its own expense, Lessee shall perform all routine maintenance as is
reasonably necessary to keep the Leased Premises in good condition and repair,
normal wear and tear excepted. Lessee agrees that all damages or injury done by
Lessee to the Leased Premises shall be repaired by Lessee at Lessee's sole
expense (other than wear or damage to structural components such as the walls,
roofs, and foundations not caused by Lessee). All other damages or injury to
the Leased Premises which are beyond the reasonable control of Lessee including
but not limited to damage or injury covered by fire, flood, wind, acts of war or
acts of God, shall be repaired by Lessor at Lessor's expense.
ARTICLE 8. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS
Lessee shall have the right, with Lessor's approval, during the Lease Term
and any extended terms hereof at its sole cost and expense to affix and install
such property and equipment to, in or on the Leased Premises as Lessee deems
necessary. Any and all such alterations, improvements, equipment or fixtures
shall remain the property of Lessee, and Lessor agrees that Lessee shall have
the right to remove any and all such alterations, improvements, equipment and/or
fixtures.
ARTICLE 9. ENTRY AND INSPECTION
Lessee shall permit Lessor to enter and to inspect the Leased Premises at
any reasonable time and shall permit Lessor to make whatever reasonable repairs
Lessor deems necessary to satisfy Lessor's obligations under Article 7 of this
Lease Agreement.
ARTICLE 10. DESTRUCTION OF THE LEASED PREMISES
If the building situated upon the Leased Premises should be damaged or
destroyed by fire, tornado, or other casualty, Lessee shall give immediate
notice thereof to Lessor and Lessor shall immediately commence repairs to said
premises. If the building(s) situated on the Leased Premises should be totally
destroyed by fire, tornado, or other casualty or if the building(s) should be so
damaged that rebuilding or repair cannot be completed within sixty (60) days
after the date the Lessor is notified by Lessee of such damage or destruction,
this Lease Agreement shall terminate at Lessee's election and the rent shall be
abated effective with the date of such damage or destruction. Lessor will
rebuild or repair the Leased Premises promptly if requested to do so by Lessee.
ARTICLE 11. CONDEMNATION OF THE LEASED PREMISES
If during the term of this Lease Agreement, all of the Leased Premises
should be taken for any public or quasi-public use under any governmental law,
ordinance, or regulation, or by right of eminent domain, or should be sold to
the condemning authority under threat of condemnation, this Lease Agreement
shall terminate effective as of the date of the taking of the Lease Premises by
the condemning authority or as of the date of the sale of the Leased Premises to
such authority.
In the event such condemnation occurs, Lessee may, at its option,
terminate the Lease by giving written notice to Lessor. The effect of such
condemnation, should Lessee not exercise its option to terminate, will be to
terminate the lease as to the portion of the premises condemned, and leave it in
effect as to the remainder of the premises. Lessee's rental for the remainder
of the lease term and any extended terms shall be reduced by the amount that the
usefulness of the premises for Lessee's business has been reduced.
Lessor and Lessee shall each be entitled to receive and retain such
separate awards and portions of lump sum awards as may be allocated to their
respective interest in any condemnation proceedings. Termination of this Lease
Agreement will not affect the rights of the parties hereto to such awards.
ARTICLE 12. LIMITATION OF LIABILITY
Lessor shall not be liable for any injury or damage to the persons or
property of Lessee, its agents and employees, or to any other occupant of the
Leased Premises solely caused by Lessee's negligence.
ARTICLE 13. ASSIGNMENT OR SUBLEASING
Lessee neither will assign his rights hereunder, nor sublease the Leased
Premises or any part thereof, nor mortgage, pledge, or hypothecate its leasehold
interest without the express prior written consent of Lessor which consent will
not be unreasonably withheld.
ARTICLE 14. REMEDIES
14.1 The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease Agreement:
(a) Failure by Lessee to make any payment of rent or any other payment
required to be made by Lessee hereunder, as and when due, when such failure
shall continue for a period of ten (10) days after written notice thereof from
Lessor to Lessee.
(b) The failure by Lessee to observe or to perform any of the terms of
this Lease Agreement other than described in sub-article (a) above, where such
failure shall continue for a period of thirty (30) days after written notice
thereof from Lessor to Lessee; provided, however, that if the nature of Lessee's
default is such that more than thirty (30) days are reasonably required for its
cure, then Lessee shall not be deemed to be in default if Lessee commences such
a cure within the said thirty-day period and thereafter diligently prosecutes
such cure to completion.
(c) (i) The making of Lessee of any general assignment or general
arrangement for the benefit off creditors;
(ii) The adjudication of Lessee as a bankrupt;
(iii) The appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the premises or of Lessee's
interest in this Lease Agreement where possession is not restored to Lessee
within thirty (30) days;
(iv) The attachment, execution, or other judicial seizure of
substantially all of Lessee's assets located at the Leased Premises or of
Lessee's interest in this Lease Agreement, where such seizure is not discharged
within thirty (30) days.
14.2 In the event of any such default by Lessee, Lessor shall give Lessee
written notice of default by Certified Mail Return Receipt Requested. If Lessee
has failed to cure said default within ten (10) days from receipt of notice
(except as provided in Section 14.1 (b) Lessor shall have the right to:
(a) Terminate Lessee's right to possession of the Leased Premises by any
lawful means in which case this Lease Agreement shall terminate and Lessee shall
immediately surrender possession of the Leased Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee all damages incurred by
Lessor by reason of Lessee's default including, but not limited to, the cost of
recovering possession of the Leased Premises, balance of unpaid rent, and
reasonable attorney's fees. Unpaid installments of rent or other sums shall
bear interest from the date due at the rate of ten percent per annum.
(b) Pursue any other remedy now or hereafter available to Lessor under the
laws of the State of Texas.
ARTICLE 15. NON-WAIVER OF DEFAULT
The forbearance of the exercise of any right of Lessor or Lessee arising
hereunder shall not be deemed a waiver of any right of Lessor or Lessee. All
rights and remedies of Lessor or Lessee hereunder shall be cumulative and may be
exercised and enforced concurrently whenever and as often as occasion therefor
arises.
ARTICLE 16. NOTICE
All notices to be given to Lessee by Lessor shall be in writing, deposited
in the United States mail, certified or registered, postage prepaid, and
addressed to Lessee at Stewart & Stevenson Services, Inc., at P.O. Box 1637,
Houston, Texas 77251-1637, to the attention of David Stewart. All notices to be
given to Lessor by Lessee shall be in writing, deposited in the United States
mail, certified or registered, postage prepaid, and addressed to Lessor at 5608
Candlewood, Houston, Texas 77056, to the attention of Joe Manning. Notices
shall be deemed to be delivered when deposited in the United States mail as
above provided. Changes of address of either party must be by notice given to
the other party in the same manner as above provided.
ARTICLE 17. PRIOR AGREEMENTS SUPERCEDED
This Lease Agreement constitutes the sole and only agreement between the
parties respecting the subject matter of this Lease Agreement and supercedes any
prior agreements and understandings, whether oral or written.
ARTICLE 18. AMENDMENT
No amendment or alteration or the terms hereof shall be of any force or
effect unless the same shall be in writing, dated subsequent to the date of
execution hereof, and duly executed by the parties hereto.
EXECUTED this 21 day of January, 1991.
STEWART & STEVENSON SERVICES, INC.
By: /s/ C. Jim Stewart II By: /s/ Joe Manning, Jr.
_________________________ _________________________
C. Jim Stewart II
Chairman of the Board By: __________________________
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, the undersigned authority, on this day personally appeared C.
JIM STEWART II, an officer of Stewart & Stevenson Services, Inc., a Texas
corporation, known to me to be the person and officer whose name is subscribed
to the foregoing instrument and acknowledged to me that he executed the same in
the capacity therein stated for the purposes and consideration therein
expressed.
Given under my hand and seal of office, this 24th day of January, 1991.
/s/ Estelle M.Bartling
_______________________________
Notary Public in and for
Harris County, Texas
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, the undersigned authority, on this day personally appeared Joe
Manning, Jr., an individual resident of Harris County, Texas known to me to be
the person whose name is subscribed to the foregoing instrument and acknowledge
to me that he executed the same in the capacity therein stated for the purposes
and consideration therein expressed.
Given under my hand and seal of office, this 21st day of January, 1991.
/s/ Joeanne C. Bush
_____________________________________
Notary Public in and for
Harris County, Texas
EXHIBIT A
Lessors, for themselves, their heirs, administrators, executors and assigns, in
consideration of rents hereinafter reserved and of the covenants and agreements
hereinafter contained, have demised, leased and by these presents do demise and
lease unto lessee all of a tract, lot or parcel of land located in the Northeast
one-quarter of Section 58, Block 2, AB&M Survey, Potter County, Texas and all
buildings situated thereon.
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into on the date of execution
hereof by and between STEWART & STEVENSON SERVICES, INC. (hereinafter "Lessee"),
a Texas corporation, and MILES MCINNIS and FAYE TOTSCH (hereinafter referred to
as "Lessor"), individual residents of Texas.
ARTICLE 1. PREMISES
Lessor hereby leases to Lessee and Lessee hereby leases from Lessor the
premises situated in the City of Beaumont, Jefferson County, Texas, and more
particularly described in Exhibit A attached and made a part hereof. Said
premises together with all improvements thereon are hereinafter referred to as
the "Leased Premises".
ARTICLE 2. TERM
The term of this Lease Agreement shall begin on January 1, 1988, and shall
terminate at midnight on April 14, 1992, unless extended as provided below.
The term of this Lease Agreement may be extended, at the option of Lessee,
for five successive periods of one year, each such period of one year being
hereinafter referred to as an Extended Term, as follows:
First Extended Term - April 15, 1992 through April 14, 1993
Second Extended Term - April 15, 1993 through April 14, 1994
Third Extended Term - April 15, 1994 through April 14, 1995
Fourth Extended Term - April 15, 1995 through April 14, 1996
Fifth Extended Term - April 15, 1996 through April 14, 1997
Such options to extend the term of this Lease Agreement shall be exercised
by Lessee by the giving of written notice to Lessor not less than sixty days
prior to the expiration of the then existing term.
Each extended term shall be upon the same terms, covenants, and conditions,
with the same monthly rent payable, as provided in this Lease Agreement for the
initial term.
ARTICLE 3. PURCHASE OPTION
At any time from the date of execution of this Lease Agreement, Lessee may,
at its option, purchase the Leased Premises for a price to be agreed upon with
Lessor. Should the parties fail to agree upon such price, the price shall be
determined by appraisal. Lessor and Lessee shall each appoint one appraiser who
shall, in tern, jointly select a third appraiser. The three appraisers shall
appraise promptly the Leased Premises and the decision of any two appraisers as
to the purchase price for the Leased Premises shall be binding upon the parties.
ARTICLE 4. RENT
Without offset or deduction, Lessee shall pay Lessor at the address shown
in Article 18, or at such other address as Lessor may from time to time notify
Lessee in writing on the first day of each calendar month, monthly in advance,
for each and every month in the term hereof, the sum of Six Thousand Five
Hundred United States Dollars (U.S. $6,500.00). The monthly rent will be
divided as follows: 90.532% Miles McInnis and 9.478% Mrs. Faye Totsch.
ARTICLE 5. PAYMENT OF TAXES
Lessee, in addition to the rent and all other charges provided for in this
Lease Agreement, shall pay all taxes and assessments upon the Leased Premises
which are assessed during the existence of this Lease Agreement. All taxes
assessed prior to but payable in whole or in installments after the effective
date of this Lease Agreement and all taxes assessed during the existence of this
Lease Agreement but payable in whole or in installments after termination of
this Lease Agreement shall be adjusted and prorated so that Lessor shall pay its
prorated share for the period prior to the commencement and subsequent to the
termination of this Lease Agreement and Lessee shall pay its prorated share for
the duration of this Lease Agreement.
ARTICLE 6. UTILITY CHARGES
Lessee shall all charges for utilities used in and about the Leased
Premises. All such charges are to be paid by Lessee to the utility companies or
municipalities furnishing the same, before the same shall become delinquent.
ARTICLE 7. INSURANCE
Throughout the duration of this Lease Agreement, Lessee shall maintain
fire and casualty insurance equal to the replacement value of all structures and
fixtures situated upon the Leased Premises. Additionally, Lessee shall maintain
liability insurance protecting both Lessor and Lessee from claims by third
persons for personal injury and property damage.
ARTICLE 8. REPAIRS
At its own expense, Lessee shall perform all routine maintenance as is
reasonably necessary to keep the Leased Premises in good condition and repair
normal wear and tear excepted. Lessee agrees that all damages or injury done to
the Leased Premises shall be repaired by Lessee at Lessee's sole expense (other
than structural damage to the walls, roofs, and foundations not caused by
Lessee).
ARTICLE 9. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS
Lessee shall not make any alterations, additions, or improvements to the
Leased Premises without the prior written consent thereto by Lessor. All
alterations, additions, or improvements made by Lessee to the Leased Premises
shall become the property of Lessor at the termination of this Lease Agreement.
However, Lessee shall remove promptly, if Lessor so elects, all alterations,
additions, and improvements or any other property placed on the Leased Premises
by Lessee and Lessee shall repair any damages caused by such removal.
ARTICLE 10. ENTRY AND INSPECTION
Lessee shall permit Lessor to enter and to inspect the Leased Premises at
any time and shall permit Lessor to make whatever reasonable repairs Lessor
deems necessary to satisfy Lessee's obligations under Article 7 of this Lease
Agreement. Any such necessary repairs shall be charged to Lessee together with
interest at the rate of ten percent (10%) per annum from the time Lessor pays
for such repairs until the time Lessor in repaid by Lessee. The rights of
Lessor under this Article shall be exercisable without the rebate of any rent to
Lessee for the loss of any occupancy or quiet enjoyment of the Leased Premises
occasioned by such repairs.
ARTICLE 11. DESTRUCTION OF THE LEASED PREMISES
If the building situated upon the Lease Premises should be damaged or
destroyed by fire, tornado, or other casualty, Lessee shall give immediate
notice thereof to Lessor. If the building(s) situated on the Leased Premises
should be totally destroyed by fire, tornado, or other casualty or if the
building(s) should be so damaged that rebuilding or repair cannot be completed
within thirty days after the date the Lessor is notified by Lessee of such
damage or destruction, this Lease Agreement shall terminate at Lessee's election
nd the rent shall be abated effective with the date of such damage or
destruction. Lessor will rebuild or repair the Leased Premises promptly if
requested to do so by Lessee.
ARTICLE 12. CONDEMNATION OF THE LEASED PREMISES
If during the term of this Lease Agreement, all of the Leased Premises
should be taken for any public or quasi-public use under any governmental law,
ordinance, or regulation, or by right of eminent domain, or should be sold to
the condemning authority under threat of condemnation, this Lease Agreement
shall terminate effective as of the date of the taking of the Leased Premises by
the condemning authority or as of the date of the sale of the Leased Premises to
such authority.
If less, then all of the Leased Premises shall be taken for any public or
quasi-public use under any governmental law, ordinance, or regulation, or by
right of eminent domain, or should be sold to the condemning authority under
threat of condemnation, this Lease Agreement shall neither terminate nor shall
the rent be abated.
Lessor and Lessee shall each be entitled to receive and retain such
separate awards and portions of lump sum awards as may be allocated to their
respective interest in any condemnation proceedings. Termination of this Lease
Agreement will not affect the rights of the parties hereto to such awards.
ARTICLE 13. LIMITATION LIABILITY
Lessor shall not be liable for any injury or damage to the persons or
property of Lessee, its agents and employees, or to any other occupant of the
Leased Premises irrespective of how such injury or damage may be caused except
where such injury or damage is caused by Lessor or its agents in bad faith and
with the intent to cause such injury or damage.
ARTICLE 14. INDEMNITY
Except as to injury, death, or property damage proximately caused solely
by the negligence of Lessor for which Lessor in legally liable, Lessee agrees to
indemnify and to hold Lessor harmless from all claims, suit, actions, damages,
and liability (including attorney's fees and other expenses of defending against
all of the aforesaid) arising or alleged to have arisen from any act or
omissions or Lessee or Lessee's agent, employees, assignees, sublessees,
contractors, contractors, customers, or invitees, or arising from any injury to
or death of any person(s) or damage to the property of any person(s) occurring
on or about the Leased Premises or on the sidewalks adjacent thereto. Lessee
assumes full responsibility for the condition of the Leased Premises except as
otherwise provided in this Lease Agreement, and agrees to use and to occupy the
Leased Premises and to place its fixtures, equipment, merchandise, and other
property therein at its own risk.
ARTICLE 15. ASSIGNMENT OR SUBLEASING
Lessee neither will assign his rights hereunder, nor sublease the Leased
Premises or any part thereof, nor mortgage, pledge, or hypothecate its leasehold
interest without the express prior written consent of Lessor which consent will
not be unreasonably withheld. In any case where Lessor consents to any
assignment, subleasing, or mortgage, pledge, or hypothecation of the leasehold,
Lessee will remain liable for all its obligations hereunder.
ARTICLE 16. REMEDIES
16.1 The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease Agreement by Lessee:
(a) The vacating or abandonment of the Leased Premises.
(b) Failure by Lessee to make any payment or rent or any other payment
required to be made by Lessee hereunder, as and when due, when such failure
shall continue for a period of ten days after written notice thereof from Lessor
to Lessee.
(c) The failure by Lessee to observe or to perform any of the terms of
this Lease Agreement other than described in sub-article (b) above, where such
failure shall continue for a period of thirty days after written notice thereof
from Lessor to Lessee; provided, however, that if the nature of Lessee's default
is such that more than thirty days are reasonably required for its cure, then
Lessee shall not be deemed to be in default if Lessee commences such a cure
within the said thirty-day period and thereafter diligently prosecutes such cure
to completion.
(d) (i) The making of Lessee of any general assignment or general
arrangement for the benefit of creditors;
(ii) The adjudication of Lessee as a bankrupt;
(iii) The appointment of a trustee or receiver to take possession
of substantially all of Lessee's assets located at the premises or of Lessee's
interest in this Lease Agreement where possession is not restored to Lessee
within thirty days;
(iv) The attachment, execution, or other judicial seizure of
substantially of all of Lessee's assets located at the Leased Premises or of
Lessee's interest in this Lease Agreement, where such seizure is not discharged
within thirty days.
16.2 In the event of any such default by Lessee, Lessor may at any time
thereafter, with or without notice or demand and without limiting Lessor's
exercise of any right or remedy which Lessor may have be reason of such default
of breach;
(a) Terminate Lessee's right to possession of the Leased Premises by any
lawful means in which case this Lease Agreement shall terminate and Lessee shall
immediately surrender possession of the Lease Premises to Lessor. In such event
Lessor shall be entitled to recover from Lessee all damages incurred by Lessor
by reason or Lessee's default including, but not limited to, the cost of
recovering possession of the Leased Premises, expenses of reletting, including
necessary renovation and alteration of the Leased Premises, reasonable
attorney's fees, and any real estate commission actually paid; the worth at the
time of the award by the court having jurisdiction thereof of the amount of
which the unpaid rent for the balance of the term after the time of such award
exceeds the amount of such rental loss for the same period that Lessee proves
could be reasonably avoided; and that portion of the leasing commission paid by
Lessor applicable to the unexpired term of this Lease Agreement. Unpaid
installments of rent or other sums shall bear interest from the date due at the
rate of ten percent per annum. In the event Lessee shall have abandoned the
Leased Premises, Lessor shall have the option of either retaking possession of
the Leased Premises and recovering from Lessee the amount specified in this sub-
article or proceeding under the following sub-articles set forth below.
(b) Maintain Lessee's right to possession, in which case this Lease
Agreement shall continue in effect whether or not Lessee shall have abandoned
the premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease Agreement, including the right to recover
the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor under the
laws of the State of Texas.
ARTICLE 17. NON-WAIVER OF DEFAULT
The forbearance of the exercise of any right of Lessor arising hereunder
or the subsequent acceptance of rent hereunder by Lessor shall not be deemed a
waiver of any right of Lessor. All rights and remedies of Lessor hereunder
shall be cumulative and may be exercised and enforced concurrently whenever and
as often as occasion therefor arises.
ARTICLE 18. COMPLIANCE WITH THE LAW
Lessee, at its own cost and expense, shall comply with all applicable
laws, rules, regulations, and orders of all federal, state, and municipal
governments and agencies.
ARTICLE 19. NOTICE
All notices to be given to Lessee by Lessor shall be in writing, deposited
in the United States mail, certified or registered, postage prepaid, and
addressed to Lessee at Stewart & Stevenson Services, Inc., at P.O. Box 1637,
Houston, Texas 77001. All notices to be given to Lessor by Lessee shall be in
writing, deposited in the United States mail, certified or registered, postage
prepaid, and addressed to Lessor at 4113 San Carlos, Dallas, Texas 75205, to the
attention of Miles M. McInnis and Faye Totsch. Notices shall be deemed to be
delivered when deposited in the United States mail as above provided. Changes
of address of either party must be by notice given to the other party in the
same manner as above provided.
ARTICLE 20. PRIOR AGREEMENTS SUPERCEDED
This Lease Agreement constitutes the sole and only agreement between the
parties respecting the subject matter of this Lease Agreement and supercedes any
prior agreements and understandings, whether oral or written, including a lease
dated and beginning April 15, 1982, with monthly rental of $5,070.00.
ARTICLE 21. AMENDMENT
No amendment or alteration of the terms hereof shall be of any force or
effect unless the same shall be in writing, dated subsequent to the date of
execution hereof, and duly executed by the parties hereto.
EXECUTED this _____ day of ______________, 1987.
STEWART & STEVENSON SERVICES, INC.
By: /s/ C. Jim Stewart II /s/ Miles M. McInnis
_________________________ _________________________
C. Jim Stewart II Miles McInnis
/s/ Faye Totsch
_________________________
Faye Totsch
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, the undersigned authority, on this day personally appeared C.
JIM STEWART II, an officer of STEWART & STEVENSON SERVICES, INC., a Texas
corporation, known to me to be the person and officer whose name is subscribed
to the foregoing instrument and acknowledged to me that he executed the same in
the capacity therein stated for the purposes and consideration therein
expressed.
Given under my hand and seal of office, this ____ day of ____________,
1987.
My Commission Expires:
______________________________ ______________________________
Notary Public in and for
Harris County, Texas
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, the undersigned authority, on this day personally appeared
MILES McINNIS, an individual, known to me to be the person whose name is
subscribed to the foregoing instrument and acknowledged to me that he executed
the same in the capacity therein stated for the purposes and consideration
therein expressed.
Given under my hand and seal of office, this 11 day of December, 1987.
My Commission Expires:
_________________________
7/31/88 Notary Public in and for
Dallas County, Texas
STATE OF TEXAS )
)
COUNTY OF HARRIS )
Before me, the undersigned authority, on this day personally appeared FAYE
TOTSCH, an individual, known to me to be the person whose name is subscribed to
the foregoing instrument and acknowledged to me that he executed the same in the
capacity therein stated for the purposes and consideration therein expressed.
Given under my hand and seal of office, this ____ day of ____________,
1987.
My Commission Expires:
_______________________________ ________________________________
Notary Public in and for
Harris County, Texas
EXHIBIT A
City of Beaumont, County of Jefferson, State of Texas, and being a 100 foot by
500 foot tract out of the Southwest corner of the Howard Perkins 15.44 acre
tract; and being a tract of land out of Lot No. 1, Block 19, Range J of the Port
Arthur Land Company Lands and being a part of Lot 2, Block 1 of the Smith-Hodson
and Bigelow Truck Farm Subdivision as same as recorded in Volume 4, page 73 of
the Map Records of Jefferson County, Texas, and being more particularly
described as follows:
FOR locative point begin at a steel rod in the Northmost right-of-way line of
the Spurlock Road; said steel rod locating the Southwest corner of Lot 2, Block
1 of the Smith-Hodson and Bigelow Truck Farm Subdivision;
THENCE North 41 degrees 13 minutes East with the North right-of-way line of
Spurlock Road 93.33 feet to a steel bar locating the Southwest corner of the
Howard Perkins 15.44 acre tract of ground;
THENCE North 47 degrees 48 minutes West with the Westmost line of said 15.44
acre tract of ground 500 feet to a galvanized iron pipe for corner;
THENCE North 41 degrees 13 minutes East 100 feet to a galvanized iron pipe for
corner;
THENCE South 47 degrees 48 minutes East 500 feet to a galvanized iron pipe in
the North right-of-way line of Spurlock Road;
THENCE South 41 degrees 13 minutes West with the North line of Spurlock Road 100
feet to the place of beginning, containing 1.5 Acres.
STATE OF TEXAS )
)
COUNTY OF LUBBOCK )
LEASE AGREEMENT
This Lease Agreement is made and entered into on the date of execution
hereof by and between JOE MANNING AND JOE MANNING IV, (hereinafter called
"Lessors"), and STEWART & STEVENSON SERVICES, INC., (hereinafter called
"Lessee"), a Texas corporation.
ARTICLE 1. - PREMISES
Lessors hereby lease to Lessee and Lessee leases from Lessor the premises
described as follows:
"A 5-acre tract of land out of Section 3, Block 5, GS & SF RR Co.
Survey in Lubbock County, Texas, together with all improvements
thereon which include approximately 25,000 square feet of building,
subject to restrictions, easements, and reservations of record. Said
real property hereinafter called the "Leased Premises."
ARTICLE 2. - TERM
The term of this Lease Agreement shall begin on March 1, 1986 and shall
terminate on Midnight April 30, 1991, if Lessee gives Lessor thirty days notice
of Lessee's intent to so terminate this Lease Agreement. In the event the
Lessee does not give Lessor such notice, the term of this Lease shall continue
until Midnight April 30, 1996.
ARTICLE 3. - RENT
Without offset or deduction, Lessee shall pay Lessor the sum of $5,100.00
per month on the first day of each calendar month, monthly in advance for each
and every month for the first five years. Lessee shall pay Lessor the sum of
$5,100.00 per month for the second five years.
ARTICLE 4. - REPAIRS
At its own expense, Lessee shall make all repairs as should be reasonably
necessary to keep the Leased Premises in good condition and repair. Lessee
agrees that all damages or injury done to the Leased Premises, except damage
resulting from the acts or omissions of Lessor, Lessor's agents and employees,
or damage or destruction resulting in a termination of this Lease under Article
9, shall be repaired by Lessee at Lessee's expense. Lessor shall be responsible
for repairs to all structural components of the building such as roof and walls
unless damage is the result of Lessee's negligence.
ARTICLE 5. - ALTERATIONS, ADDITIONS AND IMPROVEMENTS
Lessee shall not make any alterations, additions or improvements to the
Leased Premises without consent thereto by Lessor. Lessor's consent shall not
be unreasonably withheld. At the termination of this Lease Agreement, Lessee
shall have the right to remove any fixtures installed by Lessee, provided Lessee
is not in default hereunder.
ARTICLE 6. - UTILITY CHARGES
Lessee shall pay all utility charges for the utilities used in and about
the Lease Premises. All such charges will be paid by Lessee to the utility
companies or municipalities furnishing the same, before the same shall become
delinquent.
ARTICLE 7. - PROPERTY TAXES
Lessee shall pay all municipal, county, school, state and other real
property taxes levied on the Leased Premises. All such taxes are to be paid by
Lessee before the same shall become delinquent.
ARTICLE 8. - INSURANCE
Lessee shall maintain, at its expense, fire and casualty insurance on the
Leased Premises.
ARTICLE 9. - DESTRUCTION OF THE LEASED PREMISES
If the buildings situated on the Leased Premises should be damaged or
destroyed by fire, tornado, or other casualty, Lessee shall give immediate
notice thereof to Lessor. If the buildings situated upon the Leased Premises
should be totally destroyed by fire, tornado, or other casualty, or if the
buildings should be so damaged that rebuilding or repair cannot be completed
within thirty days after Lessor is notified by Lessee of such damage or
destruction, Lessee shall have the option to terminate this Lease Agreement. In
such event, Lessee shall pay over to Lessor the proceeds of any insurance
relating to the buildings situated on the Leased Premises and the rent shall be
abated effective with the date of such damage or destruction. If this Lease is
not terminated, Lessee shall rebuild or repair any buildings situated on the
Leased Premises.
ARTICLE 10. - CONDEMNATION OF THE LEASED PREMISES
If, during the term of this Lease Agreement, all of the Leased Premises
should be taken for any public or quasi-public use under any governmental law,
ordinance or regulation, or by right of eminent domain, or should be sold to the
condemning authority under threat of condemnation, this Lease Agreement shall
terminate effective as of the date of the taking of the Leased terminate
effective as of the date of the taking of the Leased Premises by the condemning
authority or as of the sale of the Leased Premises to such authority.
If less than all of the Leased Premises shall be taken for any public or
quasi-public use under any governmental law, ordinance or regulation, or by
right of eminent domain, or should be sold to the condemning authority under
threat of condemnation, this Lease Agreement shall neither terminate nor shall
the rent be abated.
Lessor and Lessee shall each be entitled to receive and to retain such
separate awards and portions of the lump-sum awards as may be allocated to their
respective interests in any condemnation proceedings. Termination of this Lease
Agreement will not affect the rights of the parties hereto to such awards.
ARTICLE 11. - LESSEE'S RIGHT OF PURCHASE
Lessee shall have and is hereby granted the option to purchase the Leased
Premises at any time during the term of this Lease Agreement for the fair cash
market value of the property at the time said option is exercised. The fair
cash market value shall be determined by a panel of three appraisers, one
appraiser shall be appointed by the Lessor, one appraiser shall be appointed by
the Lessee, and one appraiser shall be appointed jointly by the appraisers
appointed by Lessor and Lessee. When and in the event Lessee exercises this
option, Lessor shall deliver Lessee a general warranty deed to the Leased
Premises at the time Lessee pays Lessor the fair cash value of the Leased
Premises.
ARTICLE 12. - WAIVER OF SUBROGATION
In the event Lessee sustains a loss which is covered by insurance and such
loss is caused in whole or in part by acts or omissions of Lessor or its agents
or employees, then Lessee agrees to look solely to the insurance proceeds and
Lessee shall have no right of action against Lessor or its agents or employees.
Lessee shall cause any insurance policy relating to the Leased Premises to be
endorsed with a waiver of subrogation as to Lessor.
ARTICLE 13. - REMEDIES
In the event Lessee defaults in the performance of its obligations
hereunder, Lessor shall have the right to terminate this Lease Agreement by
thirty days written notice to Lessee specifying the defaults together with
Lessor's intention to terminate the Lease Agreement. The Lease Agreement shall
terminate at the conclusion of said notice unless Lessee cures the defaults set
forth in the notice, in which event this Lease Agreement shall remain in full
force and effect.
ARTICLE 14. - NOTICE
Any notice required or permitted hereunder shall be in writing and shall be
sent by certified mail, return receipt requested, to Lessor c/o Joe Manning,
5608 Candlewood, Houston, Texas 77056, and Lessee at 2707 North Loop West,
Houston, Texas 77008, or to such other address as either Lessor or Lessee shall
designate in the manner herein set forth for the giving of notice.
ARTICLE 15. - PARTIES BOUND
This Lease Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, executors, administrators, legal
representatives, successors and assigns, except as otherwise prohibited by this
Lease Agreement.
ARTICLE 16. - PRIOR AGREEMENT SUPERSEDED
This Lease Agreement constitutes the sole and only agreement between the
parties respecting the subject matter of this Lease Agreement and supersedes any
prior agreements and understandings, whether oral or written. In addition,
Lessor and Lessee hereby specifically waive any rights and release the other
party from any obligation under the remaining terms of that certain lease
agreement relating to the Leased Premises dated as of March 1, 1983.
ARTICLE 17. - AMENDMENT
No amendment or alteration of the terms hereof shall be of any force or
effect unless the same shall be in writing, dated subsequent to the date of
execution hereof, and duly executed by the parties hereto.
EXECUTED THIS 1 DAY OF MARCH, 1986
LESSEE:
STEWART & STEVENSON SERVICES, INC.
By: /s/ C. Jim Stewart II
_________________________
C. JIM STEWART II
Chairman of the Board
LESSORS:
/s/ Joe Manning (Partner)
_________________________
JOE MANNING
__________________________
JOE MANNING, IV
STEWART & STEVENSON SERVICES, INC.
DEFERRED COMPENSATION PLAN
Stewart & Stevenson Services, Inc., a Texas Corporation with its principal place
of business in Houston, Texas (the "Company"), does hereby adopt and establish
this Deferred Compensation Plan (the "Plan") as a means for the Company's
Officers and key employees to defer receipt of certain commissions, bonuses,
profit sharing and other compensation for their current services which is not
received on a monthly basis (the "Compensation") until such later date specified
by such persons.
ARTICLE I
ELIGIBILITY
Any person who is either an Officer of the Company or determined by the
Committee named herein to be a key employee shall be eligible to participate in
the Plan. An Officer of the Company or person who is determined to be a key
employee on the date that the Plan is adopted by the Board of Directors may
elect to participate in the Plan as of the date of adoption or the first day of
any Fiscal Year of the Company ("Fiscal Year") thereafter. Any future Officer
of the Company or person who is hereafter determined to be a key employee may
elect to participate in the Plan as of the date of such election or
determination, as the case may be, or the first day of any Fiscal Year
thereafter. A participating Officer or key employee is hereinafter referred to
as a "Participant."
ARTICLE II
DEFERRED COMPENSATION
2.1 At the time he becomes a Participant under the Plan and before the
beginning of each Fiscal Year thereafter, each Participant shall, by
written notice delivered to the Company, specify the percentage of any
Compensation which shall thereafter become payable as a result of his
services during the next Fiscal Year that shall be deferred in accordance
with the terms and conditions of the Plan. Such percentage shall in no
event be subject to increase or decrease during the Fiscal Year that such
Compensation is earned. If an Officer or key employee becomes a
Participant under the Plan on a date other than the first day of a Fiscal
Year, his initial election shall only apply to the portion of such
Compensation equal to the fraction, the numerator of which shall be the
number of days in the Fiscal Year subsequent to the election and the
denominator of which shall be 365.
2.2 The Participant shall be credited as of the end of the Fiscal Year for
which the election was made, with the dollar amount of the Compensation
deferred pursuant to Section 2.1 and an interest equivalent in an amount
determined by applying to one-hundred percent (100%) of such Participant's
aggregate credits at the end of the preceding Fiscal Year an interest rate
equal to the prime interest rate charged by Texas Commerce Bank on that
date.
ARTICLE III
DISTRIBUTION
3.1 Distribution of a Participant's accrued credits and interest equivalents
shall commence on the first day of the Fiscal Year specified by the
Participant in writing, or, if no such specification is made, on the first
day of the Fiscal Year next following the Fiscal Year during which the
Participant ceases to be a full-time employee of the Company and, in either
event, shall be payable in as many approximately equal monthly installments
as shall be specified in writing by the Participant prior to such
distribution. The commencement date established pursuant to this Section
3.1 may be deferred for such additional period as the Participant may elect
by written notice delivered to the Company prior to the payment of any
distribution hereunder. The number of such installments shall be not less
than twelve (12) nor more than two hundred and forty (240), and may not be
increased or decreased after such distribution commences. In the event
that a Participant fails to specify the number of such installments,
distribution to him will be made in 120 installments.
3.2 On the last day of any Fiscal Year during which a Participant has received
any distribution under Section 3.1 of the Plan, such Participant shall
receive an additional payment equal to the prime interest rate charged by
Texas Commerce Bank on that date times the average balance of credits and
interests equivalents in such Participant's account during that Fiscal
Year.
3.3 Any credit, interest equivalent, or undistributed installment thereof,
which becomes distributable after the death of a Participant, shall be
distributed in installments as provided in Sections 3.1 and 3.2 to such
person or persons as the Participant may designate in writing to the
Company. A Participant may, at any time, change or revoke his beneficiary
designation by delivering written notice thereof to the Company. If there
is no unrevoked designation on file with the Company at the time of the
Participant's death, or if the person or persons designated therein shall
have predeceased the Participant, such distribution shall be made to the
Participant's estate.
3.4 The Company shall deduct from the amount of all distributions under the
Plan any taxes required to be withheld by the federal, any state or local
governments in respect to such distributions.
ARTICLE IV
FUNDING
4.1 The Plan shall be completely unfunded. No Participant or any other person
shall have any interest in any fund or in any specific asset or assets of
the Company by reason of any credit or interest equivalent hereunder, nor
any right to receive any distribution under the Plan except as and to the
extent expressly provided in the Plan.
4.2 No Participant shall have the right to assign, pledge or otherwise dispose
of any rights, credits or interest equivalents under the Plan, nor shall
the Participant's interest therein by subject to garnishment, attachment,
transfer by operation of law, or any other legal process.
<PAGE>
ARTICLE V
ADMINISTRATION
5.1 The Plan shall be administered by the Pension Committee (the "Committee")
of the Board of Directors according to the procedures established in the
Stewart & Stevenson Services, Inc. Pension Plan.
5.2 All determinations of the Committee as to any dispute or question arising
under the Plan, including all questions of construction and interpretation,
shall be final, binding and conclusive upon all persons. Without limiting
the generality of the foregoing, the determination of the Committee as to
which persons are eligible to participate herein or whether a Participant
has terminated his service and the date thereof shall be final, binding and
conclusive upon all persons.
5.3 The Company or the Committee may consult with legal counsel, who may be
counsel for the Company, with respect to its obligations or duties
hereunder, or with respect to any action or proceeding, and shall not be
liable with respect to any action taken or omitted by it in good faith
pursuant to the advice of such counsel.
ARTICLE VI
GENERAL
6.1 The Plan shall be deemed to have become effective on the date of its
adoption by the Board of Directors.
6.2 This Plan shall be subject to amendment or termination at any time after
the effective date by affirmative vote of the Board of Directors of the
Company, provided such amendment or termination shall not affect the right
of any person who became a Participant prior to such amendment or
termination to defer Compensation earned during the Fiscal Year in which
the Plan was terminated or during any previous Fiscal Year or to receive
disbursements under the Plan.
6.3 Neither the adoption nor the amendment of the Plan, nor any action of the
Board of Directors of the Company, nor any election to defer Compensation
hereunder, shall be construed to confer on any person any legal right to be
continued as an employee of the Company.
Dated this 31st day of December, 1979.
STEWART & STEVENSON SERVICES, INC.
By: /s/ Joe Manning
______________________________
President
ELECTION TO DEFER COMPENSATION
PURSUANT TO THE
STEWART & STEVENSON SERVICES, INC.
DEFERRED COMPENSATION PLAN
NAME:
OFFICE:
I hereby elect to participate in the Stewart & Stevenson Services, Inc. Deferred
Compensation Plan (the "Plan") as adopted by the Board of Directors of the
Company and specify that _____ percent of any discretionary compensation to be
paid to me for services rendered during the Fiscal Year beginning February 1,
19___ be deferred according to the provisions and conditions of the Plan.
Such deferred compensation is to be paid to me or my designated beneficiaries in
_____ equal monthly installments under the Plan (unless otherwise specified,
such payment will be made in 120 installments) commencing on (check one)
___ February 1, 19___.
___ First day (February 1) of the Fiscal
Year next following my termination
of employment
In the event of my death prior to receiving all monthly payments specified
above, I request that any further payments to which I am entitled be paid to the
beneficiary(s) designated below.
PRIMARY BENEFICIARY:
NAME:____________________ RELATIONSHIP:____________________
NAME:____________________ RELATIONSHIP:____________________
NAME:____________________ RELATIONSHIP:____________________
(If more than one named, the beneficiaries shall share equally unless otherwise
stated above.)
CONTINGENT BENEFICIARY:
NAME:____________________ RELATIONSHIP:____________________
NAME:____________________ RELATIONSHIP:____________________
NAME:____________________ RELATIONSHIP:____________________
(If more than one named, the beneficiaries shall share equally unless otherwise
stated above.)
DATED:____________________
BY:_______________________
Dated this _______________ day of _______________, 19___.
STEWART & STEVENSON SERVICES, INC.
By:________________________________
President
STEWART & STEVENSON SERVICES, INC.
1988 NONSTATUTORY STOCK OPTION PLAN
(the "Plan")
1. Purpose of the Plan. The purpose of this Plan is to provide a means
whereby Stewart & Stevenson Services, Inc., a Texas corporation (the "Company")
may, through the grant of nonstatutory stock options to Employees, (as defined
below) attract and retain persons of ability as employees and motivate such
employees to exert their best efforts on behalf of the Company. The term
"Employees" means those employees (including officers and directors who are also
employees) of the Company or any of its subsidiaries who, in the judgment of the
Committee referred to in Section 3 below, are considered especially important to
the future of the Company. The term "option" as used herein means the right to
purchase Common Stock, without par value, of the Company (the "Stock") under
this Plan.
2. Number of shares available to the Plan. Options may be granted by the
Company from time to time to Employees to purchase an aggregate of up to 300,000
shares of Stock, and such amounts of shares shall be reserved for options
granted under the Plan, subject to adjustment as provided in subsection 5(i).
The shares issued upon exercise of options granted under the Plan may be
authorized and unissued shares or shares held by the Company in its treasury.
Except as set forth in subsection 5 (h), should any option expire or be
cancelled prior to its exercise in full, the shares subject to such option may
again be made subject to an option under the Plan.
3. Administration of the Plan. The Plan shall be administered by the Stock
Option Committee (the "Committee") of the Board of Directors of the Company (the
"Board") consisting of not less than three (3) members appointed by the Board
and serving at the Board's pleasure. Each member of the Committee shall be both
a member of the Board who is not eligible to receive any option under the Plan
and a "disinterested person" within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934 (the "Exchange Act") or any successor rule or
regulation. Any vacancy occurring in the membership of the Committee shall be
filled by appointment of the Board.
The Committee may interpret the Plan, prescribe, amend and rescind any
rules and regulations necessary or appropriate for the administration of the
Plan, and take such other action as it deems necessary or advisable, except as
otherwise expressly reserved to the Board or the stockholders in the Plan. All
decisions and selections made by the Committee pursuant to the provisions of the
Plan shall be made by a majority of its members. Any decision reduced to
writing and signed by a majority of the members shall be fully effective as if
it had been made by a majority at a meeting duly held. Any interpretation,
determination or other action made or taken by the Committee shall be final,
binding and conclusive.
4. Grant of Options. Subject to the provisions of the Plan, the Committee
shall (a) determine and designate from time to time those Employees to whom
options are to be granted and the number of shares of Stock to be optioned to
each Employee; (b) determine the option price for each option, not to be less
than fair market value on the date it is granted, as defined by the Committee;
(c) determine the number of shares subject to each option; and (d) determine the
time or times when and the manner in which each option shall be exercisable and
the duration of the exercise period. The Committee shall thereupon grant
options in accordance with such determination as evidenced by a written option
agreement.
5. Terms and Conditions. Each option granted under the Plan shall be
evidenced by an agreement, in a form approved by the Committee, which shall be
subject to the following express terms and conditions and to such other terms
and conditions as the Committee may deem appropriate.
a. Option Period. Each option agreement shall specify the period for
which the option thereunder is granted and shall provide that the option shall
expire at the end of such period.
b. Option Price. The purchase price of each share of Stock subject to
each option granted pursuant to the Plan shall be determined by the Committee at
the time the option is granted.
c. Exercise Period. The Committee may provide in the option agreement
that an option may be exercised in whole immediately or is to be exercisable in
increments, immediately or after a designated holding period.
d. Payment of Purchase Price upon Exercise. Each option shall provide
that the purchase price of the shares as to which an option shall be exercised
shall be paid to the Company at the time of exercise either in cash or in such
other consideration as the Committee deems appropriate, including, but not
limited to, Stock already owned by the Employee having total fair market value,
as determined by the Committee, equal to the purchase price, or a combination of
cash and Stock having a total fair market value, as so determined, equal to the
purchase price.
e. Effect of Termination.
i. If an Employee's employment with the Company shall be
terminated for any reason other than death, disability, retirement or cause, the
Employee's right to exercise any option granted under the Plan, to the extent
that it was exercisable at the date of termination of such employment and shall
not have been exercised, shall expire thirty (30) days after such termination of
employment and all rights under the Plan shall cease.
ii. If an Employee's employment with the Company shall be
terminated be reason of retirement, the Employee shall have the right, during
the period ending one (1) year after such retirement, to exercise such option to
the extent that it was exercisable at the date of retirement of such employment
and shall not have been exercised, but in no event later than the date the
option would have expired had it not been for the retirement of the Employee's
employment.
iii. If an Employee's employment with the Company shall be terminated
by reason of disability, the Employee shall have the right to exercise such
option to the extent that it was exercisable at the date of termination of such
employment and shall not have been exercised, but in no event later than the
date the option would have expired had it not been for the termination of the
Employee's employment.
iv. If an Employee's employment with the Company shall be terminated
by reason of death, the estate of the Employee, subject to clause vii, shall
have the right to exercise such option to the extent that it was exercisable at
the date of death and shall have not have been exercised, but in no event later
than the date the option would have expired had it not been for the Employee's
death.
v. Upon the event of the Employee being terminated for cause, all
right to exercise any option shall terminate at the date of such termination of
employment. For this purpose, termination for cause shall mean termination of
the Employee's employment by written notice to the Employee specifying the event
relied upon for such termination, due to the Employee's misconduct with respect
to duties including but not limited to commission of a felony or perpetration of
a common law fraud which has resulted or is likely to result in economic damage
to the Company, all as the Committee, in its sole discretion, may determine.
vi. The term "disability" as used in this subsection means total and
permanent disability. The terms "disability" and "retirement" shall be
determined in accordance with applicable Company personnel policies as
interpreted in the exercise of the Committee's discretion.
vii. No transfer of an option by an Employee by will or by the laws of
descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with written notice of the same and an
authenticated copy of the will and/or such other evidence as the Committee may
deem necessary to establish the validity of the transfer and the acceptance of
the transferee or transferees of the terms and conditions of such option.
f. No Rights as Stockholders. No Employee shall have any rights as a
stockholder with respect to shares covered by an option until the date of
exercise and payment for such shares; except as provided in subsection 5(i), no
adjustment for dividends, or otherwise, shall be made if the record date
therefor is prior to the date of exercise of such option and payment for such
shares.
g. Extraordinary Corporate Transactions. Notwithstanding any other
limitation or restriction in the Plan, each outstanding option granted under the
Plan will become exercisable for the aggregate number of shares covered thereby,
except to the extent that the acceleration of the exercisability of any such
option would result in an "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended, in the event (i)
the Board or the stockholders of the Company approve (a) any consolidation or
merger of the Company in which the Company is not the surviving corporation,
other than a merger of the Company in which the holders of Stock immediately
prior to the merger have the same proportionate ownership of Stock of the
surviving corporation immediately after the merger, (b) any sale, lease,
exchange or other transfer of all, or substantially all, of the assets of the
Company or (c) the adoption of any plan or proposal for the liquidation or
dissolution of the Company; or (ii) any person acquires Stock pursuant to a
tender offer or exchange offer to acquire any Stock and after consummation of
such offer, the person owns thirty percent (30%) or more of the outstanding
Stock. Any of the transactions in clause (i) which has been approved by the
stockholders of the Company is hereinafter called an Approved Transaction, and
any tender offer or exchange offer satisfying the conditions of clause (ii) is
hereinafter called an Offer.
h. Limited Stock Appreciation Rights. The Committee may, but is not
required to, grant limited stock appreciation rights ("Limited SARs") to the
holder of any option granted under the Plan (a "Related Option") with respect to
all of the shares subject to the Related Option. Limited SARs may only be
granted concurrently with the grant of a Related Option. Limited SARs may not
be exercised within a period of six (6) months after the date of grant. Limited
SARs will be exercisable only when the fair market value, determined as of the
date of exercise of the Limited SARs, of each share of Stock with respect to
which such Limited SARs are to be exercised exceeds the option price per share
of Stock subject to the Related Option. Upon exercise of Limited SARs, the
Related Option shall be cancelled. Shares covered by a cancelled Related Option
shall be charged against the shares reserved for the Plan as if exercised and
shall not be available for future option grants under the Plan. Limited SARs
will not be exercisable unless at the time of the exercise the holder of the
Related Option is then, directly or indirectly, subject to Section 16(b) of the
Exchange Act.
Limited SARs may be exercised only in the event an Approved Transaction or
Offer occurs and then only during the 30-day period following either the
expiration of the Offer or the approval by the Company's stockholders of an
Approved Transaction.
Upon the exercise of Limited SARs, the holder thereof will receive for each
share of Stock for which the Limited SARs are exercised an amount in cash equal
to the excess of (a) the highest price per share paid or to be paid in any
Approved Transaction or Offer that is in effect at any time during the sixty
(60) days preceding the exercise of the Limited SARs or, if higher, the highest
reported closing sales price of a share of Stock at any time during the sixty
(60) days preceding the exercise of the Limited SARs over (b) the option price
per share of Stock subject to the Related Option.
i. Changes in Company's Capital Structure. The existence of outstanding
options shall not affect in any way the right or power of the Company or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issuance of
Stock or subscription rights thereto, or any issuance of bonds, debentures,
preferred or prior preference stock ahead of or affecting the Stock or the
rights thereof, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise. Provided,
however, that if the outstanding shares of Stock of the Company shall at any
time be changed or exchanged be declaration of a stock dividend, stock split,
combination of shares or recapitalization, the number and kind of shares subject
to the Plan or subject to any options theretofore granted, and the option prices
shall be appropriately and equitably adjusted so as to maintain the
proportionate number of shares without changing the aggregate option price.
j. Assignability. Options and Limited SARs shall not be assignable or
otherwise transferable except by will or by the laws of descent and
distribution, and no right or interest in this Plan or in options or Limited
SARs shall be subject to pledge, hypothecation, encumbrance, garnishment,
attachment, execution or levy of any kind.
k. Investment Representation. Each option agreement shall contain an
agreement that, upon demand by the Committee for such representation, the
Employee, or any person acting under subsection 5(e) shall deliver to the
Committee at the time of any exercise of an option a written representation that
the shares to be acquired upon such exercise are to be acquired for investment
and not for resale or with a view to the distribution thereof. Upon such
demand, delivery of such representation prior to the delivery of any shares
issued upon exercise of an option and prior to the expiration of the option
period shall be a condition precedent to the right of the Employee or such other
person to purchase any shares.
6. Withholding of Taxes. The Company may directly or indirectly withhold
all federal, state, city or other taxes as a result of the Employee's exercise
of options or Limited SARs. In order to provide for the necessary withholding
part of his compensation under this Plan, the Company will deduct the additional
amount of withholding required from the Employee's salary unless the Employee
makes other provision in accordance with this Plan. The Employee shall be
entitled to provide the Company with the necessary funds for this purpose or
accept a reduction in the amount of Stock with a value equal to the amount of
withholding required.
The Company will advise the Employee the appropriate time when the
additional withholding funds are required so that the Employee can provide for
the necessary funds or advise the Company that he will accept a reduction in the
amount of Stock due.
If a reduction in Stock is requested, the Company may deliver only the
number of whole shares remaining after the withholding has been accomplished.
7. Compliance with Other Laws and Regulations. The Plan, the grant and
exercise of options and Limited SARs thereunder, the obligation of the Company
to sell and deliver shares under such options, and the obligation of the Company
pursuant to the Limited SARs shall be subject to all applicable federal and
state laws, rules and regulations and to such approvals by any government or
regulatory agency as may be required. The Company shall not be required to
issue or deliver any certificates for shares of Stock prior to (a) the listing
of such shares on any stock exchange on which the Stock may then be listed and
(b) the completion of any registration or qualification of such shares under any
federal or state law, or any ruling or regulation of any government body which
the Company shall, in its sole discretion, determine to be necessary or
advisable.
8. Amendments or Termination. The Board of Directors may amend, alter or
discontinue the Plan, but no amendment or alteration shall be made which would
impair the rights of any participant under options or Limited SARs theretofore
granted without his consent and no amendment that would increase the number of
shares of Stock subject to options under the Plan, modify the definition of
Employee or the eligibility for receipt of options or Limited SARs under the
Plan, or increase the benefits accruing to Employees under the Plan shall be
effective without the prior approval of the holders of a majority of the
outstanding Stock represented at a duly called meeting of stockholders at which
a quorum is present.
9. Headings of No Effect. The Section and subsection headings contained in
this Plan are included solely for convenience of reference and shall not in any
way affect the meaning or interpretation of any of the provisions of the Plan.
10. Effective Date of the Plan. The effective date of the Plan shall be
April 12, 1988, subject to approval by stockholders of the Company holding not
less than a majority of the shares present and voting at its 1988 Annual Meeting
and registration of interests in the Plan and Stock to be issued pursuant to
options with the Securities and Exchange Commission, if required.
Notwithstanding the foregoing, if the Plan shall have been approved by the Board
prior to such Annual Meeting, options may be granted by the Committee as
provided herein subject to such subsequent stockholder approval and registration
of interests in the Plan and Stock to be issued pursuant to options with the
Securities and Exchange Commission, if required.
11. Plan Name. The Plan shall be known as the "Stewart & Stevenson
Services, Inc. 1988 Nonstatutory Stock Option Plan."
AMENDMENT NO. 1
TO
STEWART & STEVENSON SERVICES, INC.
1988 NONSTATUTORY STOCK OPTION PLAN
(the "Plan")
1. Paragraph 5.d of the Plan is amended to read in its entirety as follows:
d. Payment of Purchase Price upon Exercise: Each option shall provide that
the purchase price of the shares as to which an option shall be exercised
shall be paid to the Company at the time of exercise either in cash or in
Stock already owned by the Employee for a period of not less than six (6)
months and having total fair market value, as determined by the Committee,
equal to the purchase price, or a combination of cash and previously owned
Stock having a total fair market value, as so determined, equal to the
purchase price.
2. Paragraph 5.e of the Plan is amended to read in its entirety as follows:
e. Effect of Termination: Except as set forth below, all rights of any
Employee shall cease and all options granted pursuant to the Plan shall
terminate upon the termination of an Employee's employment with the
Company.
i. If an Employee's employment with the Company shall be terminated
for any reason other than death, disability, retirement or cause, the
Employee shall have the right, during the period ending thirty (30) days
after such termination, to exercise any option granted under the Plan to
the extent that it was exercisable at the date of termination of such
employment and shall not have been exercised, but in no event later than
the date such option would have expired had it not been for the termination
of the Employee's employment.
ii. If an Employee's employment with the Company shall be terminated
by reason of death, disability or retirement, all options granted to such
Employee shall become immediately exercisable and the Employee (or the
Employee's estate, subject to the terms of clause iv. below) shall have the
right, during the period ending one (1) year after such termination, to
exercise such option but in no event later than the date the option would
have expired had it not been for the termination of the Employee's
employment. The term "disability" as used in this subsection means total
and permanent disability. The terms "disability" and "retirement" shall
be determined in accordance with applicable Company personnel policies as
interpreted in the exercise of the Committee's discretion.
iii. Upon the event of the Employee being terminated for cause, all
right to exercise any option shall terminate at the date of such
termination of employment. For this purpose, termination for cause shall
mean termination of the Employee's employment by written notice to the
Employee specifying the event relied upon for such termination, due to the
Employee's misconduct with respect to duties including but not limited to
commission of a felony or perpetration of a common law fraud which has
resulted or is likely to result in economic damage to the Company, all as
the Committee, in its sole discretion, may determine.
iv. No transfer of an option by an Employee by will or by the laws of
descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with written notice of the same and an
authenticated copy of the will and/or such other evidence as the Committee
may deem necessary to establish the validity of the transfer and the
acceptance of the transferee or transferees of the terms and conditions of
such option.
3. Paragraph 1 of this Amendment No. 1 shall be effective as of June 13, 1990.
Paragraph 2 of this Amendment No. 1 shall become effective upon receipt of a No
Action Letter from the Securities and Exchange Commission indicating that
approval of this Amendment by the Shareholders of the Company is not required
for options granted pursuant to the Plan, as modified by the Amendment, to be
exempt from Section 16(b) of the Exchange Act of 1934 pursuant to Rule 16(b)-3
promulgated thereunder.
4. Every stock option agreement now outstanding pursuant to the Plan shall be
amended to include the terms of this Amendment No. 1.
STEWART & STEVENSON SERVICES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of February 1, 1993)
STEWART & STEVENSON SERVICES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of February 1, 1993)
TABLE OF CONTENTS
Article Section Page
I Establishment and Purpose
1.1 Establishment of Plan 1
1.2 Purpose 1
1.3 Application of the Plan 2
II Definitions and Construction
2.1 Definitions 3
2.2 Gender and Number; Headings 4
2.3 Incorporation of the Pension Plan 4
III Participation
3.1 Participation 6
IV Benefits
4.1 Amount of Benefits 7
4.2 Form of Payment and Commencement Date 9
4.3 Vesting 10
4.4 Death Benefits 10
V Administration
5.1 Administration 12
5.2 Finality of Determination 12
5.3 Expenses 12
5.4 Indemnification and Exculpation 12
VI Funding of the Plan
6.1 Funding 14
VII Merger, Amendment, and Termination
7.1 Merger, Consolidation, or Acquisition 15
7.2 Amendment and Termination 15
VIII Adoption Procedure
8.1 Adoption Procedure 17
8.2 Withdrawal of Participating Employer 18
IX General Provisions
9.1 Nonalienation 19
9.2 Effect on Other Benefit Plans 19
9.3 Employer-Employee Relationship 19
9.4 Incompetence 20
9.5 Binding on Employer, Eligible
Participants and Their Successors 20
9.6 Tax Liability 21
9.7 Severability 21
9.8 Applicable Law 21
APPENDIX A
Participating Employers Under the Plan 23
APPENDIX B
Eligible Participants Under the Plan 24
STEWART & STEVENSON SERVICES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(Effective as of February 1, 1993)
Article I. Establishment and Purpose
1.1 Establishment of Plan. STEWART & STEVENSON SERVICES, INC.,
("Company") hereby establishes, effective as of February 1, 1993, an unfunded
supplemental executive retirement plan to be known as the "Stewart & Stevenson
Services, Inc. Supplemental Executive Retirement Plan" ("Plan").
1.2 Purpose. The Plan is hereby established and is maintained for the
purpose of providing Eligible Participants who are eligible or who become
eligible to receive pension benefit payments under the "Stewart & Stevenson
Pension Plan," as amended and restated effective as of February 1, 1989 and as
amended thereafter ("Pension Plan") with supplemental retirement benefits which
are primarily designed to restore benefits which would be payable to such
Eligible Participants under the Pension Plan without regard to certain
limitations and restrictions under Code sections applicable to qualified plans,
namely the limitations and restrictions under Code Sections 401(a)(17) and
415(b). That portion of this Plan that restores benefits which are limited
solely by the application of Code Section 415(b) is intended as a separate
unfunded plan that meets the requirements of an "excess benefit plan" as
described in Section 3(36) of ERISA, and such separate plan shall hereby be
classified as such a plan. The remaining portion of the benefits restored by
this Plan is intended as a separate unfunded plan which is maintained primarily
for the purpose of providing deferred compensation for a select group of
management or highly compensated employees within the meaning of Section 201(2)
of ERISA, and such separate plan shall be hereby classified as such a plan with
the intent that it be exempt from the relevant requirements of Title I of ERISA.
This Plan is not intended to satisfy the qualification requirements of Code
Section 401.
1.3 Application of the Plan. The terms of this Plan are applicable only
to or with respect to those Members who are or who become eligible to receive a
Pension benefit under the Pension Plan on or after February 1, 1993, and who
become Eligible Participants under this Plan on or after such date.
Article II. Definitions and Construction
2.1 Definitions. All terms used in this Plan shall have the same meanings
assigned to them under the provisions of the Pension Plan, unless otherwise
qualified by the context hereof. Notwithstanding the prior sentence, the
following terms shall have the meanings set forth below, unless their context
clearly indicates to the contrary:
(a) "Board of Directors" means the Board of Directors of Stewart &
Stevenson Services, Inc.
(b) "Code" means the Internal Revenue Code of 1986 and the regulations
issued thereunder, as amended from time to time.
(c) "Compensation Committee" means the Compensation and Management
Development Committee of the Board of Directors, which is a standing
committee of such Board.
(d) "Eligible Participant" means a Member designated as an Eligible
Participant as provided in Section 3.1.
(e) "Employer" means the Company and each other Employer who is a
participating Employer under the Pension Plan and who has elected to
become a participating Employer under this Plan as provided in Article
VIII.
(f) "ERISA" means the Employee Retirement Income Security Act of 1974
and the regulations thereunder, as amended from time to time.
(g) "Member" means an Employee who has qualified as a "Member" under
the Pension Plan and who maintains such status at any relevant date.
(h) "Pension Committee" means the "Committee" as defined in the Pension
Plan, which is the administrative committee responsible for the general
administration of the Pension Plan. The Pension Committee is the
"administrator" (as such term is defined in Section 3(16)(A) of ERISA) of
the Plan and the Pension Plan.
(i) "Pension Plan" means the "Stewart & Stevenson Pension Plan," as
amended and restated effective as of February 1, 1989, and as the same
may thereafter be amended from time to time.
(j) "Plan" means the "Stewart & Stevenson Services, Inc. Supplemental
Executive Retirement Plan" as set forth in this document and as the same
may be amended from time to time.
2.2 Gender and Number; Headings. Except when otherwise indicated by the
context, any masculine terminology when used in this Plan shall also include the
feminine gender, and the definition of any term in the singular shall also
include the plural. Headings of Articles and Sections herein are included
solely for convenience, and if there is any conflict between such headings and
the text of the Plan, the text shall control.
2.3 Incorporation of the Pension Plan. The Pension Plan is hereby
incorporated by reference into and shall form a part of this Plan as fully as if
set forth herein verbatim. Any amendment made to the Pension Plan shall also be
incorporated by reference into and form a part of this Plan, effective as of the
effective date of such amendment. The Pension Plan, whenever referred to in
this Plan, shall mean the Pension Plan as amended, and as it exists as of the
date any determination is made of benefits payable under this Plan.
Article III. Participation
3.1 Participation. The Compensation Committee shall designate the key
management Employees of each participating Employer who are to be the Eligible
Participants under this Plan; provided, however, that any Employee so designated
for participation under this Plan must be a Member under the Pension Plan. Such
designations may be based on participation criteria established by the
Compensation Committee from time to time. The Compensation Committee may
terminate the "Eligible Participant" status of any designated Member at any
time. However, if the Compensation Committee should terminate the "Eligible
Participant" status of a designated Member, such Member shall be entitled to any
benefits accrued under this Plan as of the date of such action (determined as if
such member had terminated employment as of the date of such action and payable
in accordance with the provisions of Section 4.2 or Section 4.4, whichever is
applicable). The Compensation Committee may establish such procedures as it
deems appropriate for notifying Members of their status as Eligible Participants
under this Plan. The Members who are designated as Eligible Participants shall
be listed in Appendix B attached to the end of the Plan document.
Article IV. Benefits
4.1 Amount of Benefits.
(a) In General. If Pension benefits under the Pension Plan become payable
at or after the Normal Retirement Date of a Member who is an Eligible
Participant, and such Pension benefits are paid in the form of a single
life annuity for the life of such Member, the monthly supplemental
retirement benefit payable under this Plan to such Eligible Participant
shall be equal to the difference between the amount in (1) and the amount
in (2) below, but such amount shall in no event be greater than the amount
as provided in (c) below, where (1) and (2) are as follows--
(1) is the amount of the monthly normal retirement Pension benefit
that would have been payable under the Pension Plan to such Eligible
Participant if the provisions of the Pension Plan were applied without
regard to the compensation limitations of Code Section 401(a)(17) and
the benefit limitations of Code Section 415(b), but with such
calculation being modified as provided in (b) below; and
(2) is the amount of the monthly normal retirement Pension benefit
payable to such Eligible Participant under the Pension Plan.
(b) Compensation Modification. In calculating the monthly normal
retirement Pension benefit payable under the Pension Plan as provided for
under Section 4.1(a)(1), such Pension benefit calculation shall be on the
basis of the Eligible Participant's "total compensation" in determining his
Average Monthly Compensation under the Pension Plan. The determination of
an Eligible Participant's "total compensation" shall be as determined by
the Pension Committee, in its discretion and pursuant to such rules as it
may prescribe. The modification to an Eligible Participant's compensation
as provided herein is solely made for the purpose of determining the
Eligible Participant's supplemental retirement benefit payable under this
Plan, and such modification is not applicable to and does not alter the
calculation of the Eligible Participant's Pension benefit under the Pension
Plan, or the calculation in Section 4.1(a)(2).
(c) Maximum Benefit. The maximum monthly supplemental retirement benefit
which is payable under this Plan to an Eligible Participant, based on the
foregoing provisions of this Section 4.1, shall not be greater than the
difference between seventy-five percent (75%) of the Eligible Participant's
"Average Monthly Compensation" (as defined under the Pension Plan without
regard to the limitation on compensation under Code Section 401(a)(17)
at the time such monthly supplemental retirement benefit is determined, and
the Eligible Participant's monthly normal retirement Pension benefit as
described in Section 4.1(a)(2). The determination of the Eligible
Participant's Average Monthly Compensation under this Section 4.1(c) shall
be as determined by the Pension Committee in accordance with the Pension
Plan except that the limitation on compensation under Code Section
401(a)(17) shall not be applicable.
(d) Payments at Other Times and Other Forms. If benefits under the
Pension Plan become payable at a time other than as provided in Section
4.1(a) or in a form of payment other than a single life annuity, the amount
of the monthly supplemental retirement benefit payable under this Plan
shall be the Actuarial Equivalent of the amount as determined under
foregoing provisions of this Section 4.1, computed using the same Actuarial
Equivalent factors and assumptions used to compute the benefit payable
under the Pension Plan.
4.2 Form of Payment and Commencement Date.
(a) Form of Payment. The benefits payable under this Plan shall be paid
to the same recipients and in the same form and at the same time or times
as the benefits are payable to the recipients under the Pension Plan and
shall cease to any recipient at the same time as benefits payable to such
recipient under the Pension Plan shall cease. Notwithstanding the
foregoing provisions of this Section 4.2(a) and the provisions of Section
4.4 relating to the form of payment of a death benefit, the Pension
Committee, in its sole discretion, may elect to pay the benefits payable
under this Plan in the form of a single lump sum payment in lieu of
payments under the payment form that is otherwise applicable to a
recipient. The Pension Committee may make the election to pay benefits in
a lump sum payment form at the time of the initial commencement of benefit
payments or at any subsequent time, and the provisions of Section 4.1(d)
shall apply in determining the value of any such benefit payment.
(b) Commencement Date. Supplemental retirement benefits payable under
Section 4.1 shall commence as of the same date that Pension benefits
commence under the Pension Plan.
4.3 Vesting. An Eligible Participant shall become vested in the
supplemental retirement benefits payable under Section 4.1 at the same time that
he becomes vested in a Pension benefit under the Pension Plan. However, an
Eligible Participant (or any benefit recipient) shall have no right to a benefit
under this Plan if the Pension Committee or the Company determines that the
Eligible Participant engaged in a willful, deliberate, or gross act of
commission or omission which is injurious to the finances or reputation of the
Company or any of its affiliates.
4.4 Death Benefits. In the event a death benefit is payable under the
Pension Plan to the Eligible Surviving Spouse of an Eligible Participant prior
to his Annuity Starting Date, such Eligible Surviving Spouse shall also be
eligible to receive a death benefit under this Plan. Such death benefit shall
be calculated in the same manner as the applicable death benefit under the
Pension Plan, but by applying the provisions of Section 4.1 to determine the
benefit amount that would otherwise have been payable to the Eligible
Participant in order to determine the amount of death benefit payable to the
Eligible Surviving Spouse under this Plan. The death benefit so payable to the
Eligible Surviving Spouse under this Plan shall be payable at the same time and
in the same form as the death benefit payable under the Pension Plan.
Article V. Administration
5.1 Administration. This Plan shall be administered by the Pension
Committee appointed pursuant to the terms of the Pension Plan. The Pension
Committee shall administer this Plan in a manner consistent with the
administration of the Pension Plan, except that this Plan shall be administered
as an unfunded plan which is not intended to meet the qualification requirements
of Code Section 401. The Pension Committee shall have the same rights and
authority granted to it under the Pension Plan, which shall include the full
power, discretion and authority to interpret, construe and administer this Plan.
The Pension Committee shall establish and maintain such accounts or records as
the Pension Committee may from time to time consider necessary.
5.2 Finality of Determination. The determination of the Pension Committee
as to any disputed questions arising under this Plan, including questions of
construction and interpretation shall be final, binding, and conclusive upon all
persons.
5.3 Expenses. The expenses of administering this Plan shall be borne by
the Employers in the proportions determined by the Pension Committee.
5.4 Indemnification and Exculpation. The Employer shall indemnify and
hold harmless the members of the Committee, its agents, and officers, directors,
and employees of the Company or any other Employer against any and all expenses
and liabilities arising out of their administrative functions or fiduciary
responsibilities, including any expenses and liabilities that are caused by or
result from acts or omissions constituting the negligence of such individuals in
the performance of such functions or responsibilities, but excluding expenses
and liabilities that are caused by or result from such individuals' own gross
negligence or willful misconduct. Expenses against which such individuals shall
be indemnified hereunder shall include, without limitation, the amounts of any
settlement or judgment, costs, counsel fees, and related charges reasonably
incurred in connection with a claim asserted or a proceeding brought or
settlement thereof.
Article VI. Funding of the Plan
6.1 Funding. All amounts paid under this Plan shall be paid from the
general assets of the participating Employers. Benefits shall be reflected on
the accounting records of the Employers, but neither this Plan nor the
maintenance of such accounting records shall be construed to create, or require
the creation of a trust, custodial account, or escrow account with respect to
any Eligible Participant. No Eligible Participant shall have any right, title,
or interest whatsoever in or to any investment reserves, accounts, or funds,
that the Employers may purchase, establish, or accumulate to aid in providing
the unfunded benefit payments described in the Plan. Nothing contained in this
Plan, and no action taken pursuant to its provisions, shall create, or be
construed to create, a trust or fiduciary relationship of any kind between an
Employer or the Pension Committee and an Eligible Participant or any other
person. Eligible Participants shall not acquire any interest under the Plan
greater than that of an unsecured general creditor of an Employer. The Trust
Fund of the Pension Plan shall not be liable for any benefits accrued under
this Plan.
Article VII. Merger, Amendment, and Termination
7.1 Merger, Consolidation, or Acquisition. In the event of a merger,
consolidation, or acquisition where an Employer is not the surviving
organization, unless the successor or acquiring organization shall elect to
continue and carry on the Plan, this Plan shall terminate with respect to such
Employer, and no additional benefits shall accrue for the Eligible Participants
of such organization. Unpaid benefits shall be paid upon the termination of the
Plan, unless the successor or acquiring organization elects to accelerate
payment.
7.2 Amendment and Termination. The Board of Directors may amend, modify,
or terminate this Plan at any time and in any manner. Such actions by the Board
of Directors shall be binding upon all other Employers. In addition, this Plan
shall automatically terminate at the time of the termination of the Pension
Plan, and any benefit payment obligation under this Plan shall be measured with
respect to the benefits which are payable from the Pension Plan irrespective of
whether such benefits are actually paid due to an insufficiency of assets to pay
such benefits. However, in the event of the amendment, modification, or
termination of the Plan, the Employers shall remain liable for any benefits
accrued under the Plan as of the date of such action (determined on the basis of
each Eligible Participant's presumed termination of employment as of the date of
such amendment, modification, or termination). In the event of a termination of
the Plan pursuant to this Section 7.2, no further benefits shall accrue under
this Plan, and amounts which are then payable shall be paid upon the termination
of the Plan in the form of a single lump sum payment.
Article VIII. Adoption Procedure
8.1 Adoption Procedure. With the consent of the Company, any other
organization which satisfies the definition of Employer under the Pension Plan
and this Plan and which is eligible by the law to do so may adopt this Plan for
the benefit of its Employees who are or who become Members under the Pension
Plan, on express condition that the Company assumes no liability as a result of
any such adoption of this Plan by any other organization. Such other
organization may adopt this Plan by--
(a) executing an adoption instrument adopting the Plan, and agreeing
to be bound as a participating Employer by all the terms, provisions,
conditions, and limitations of the Plan; and
(b) compiling and submitting all information required by the
Company with reference to persons in its employment eligible for
membership in the Plan.
The adoption instrument shall specify the effective date of such
adoption of the Plan and shall become, as to such organization and persons in
its employment, a part of this Plan. Any such adoption instrument may be in any
form as recognized by the Company, including resolutions as may be adopted by
the governing body of such adopting Employer. The participating Employers under
the Plan shall be listed in Appendix A attached to the end of the Plan document.
8.2 Withdrawal of Participating Employer. Any participating Employer may
withdraw from the Plan by giving 30 days' notice in writing of its intention to
withdraw to the Company, unless a shorter notice shall be agreed to by the
Company.
Article IX. General Provisions
9.1 Nonalienation. No benefit payable at any time under the Plan shall be
subject in any manner to alienation, sale, transfer, assignment, pledge,
attachment, garnishment, or encumbrance of any kind, and shall not be subject to
or reached by any legal or equitable process (including execution, garnishment,
attachment, pledge, or bankruptcy) in satisfaction of any debt, liability, or
obligation, prior to receipt. Any attempt to alienate, sell, transfer, assign,
pledge, or otherwise encumber any such benefit, whether presently or thereafter
payable, shall be void. Notwithstanding the foregoing provisions of this
Section 9.1, no benefit amount payable under the Plan shall be payable until and
unless any and all amounts representing debts or other obligations owed to the
Company or other Employer by the Eligible Participant with respect to whom such
amount would otherwise be payable shall have been fully paid.
9.2 Effect on Other Benefit Plans. Amounts credited or paid under this
Plan shall not be considered to be compensation for the purposes of the Pension
Plan or any other retirement plans maintained by an Employer. The treatment of
such amounts under other employee benefit plans shall be determined pursuant to
the provisions of such plans.
9.3 Employer-Employee Relationship. The establishment of this Plan shall
not be construed as conferring any legal or other rights upon any Employee or
any person for a continuation of employment, nor shall it interfere with the
rights of an Employer to discharge any Employee or otherwise act with relation
to the Employee. An Employer may take any action (including discharge) with
respect to any Employee or other person and may treat such person without regard
to the effect which such action or treatment might have upon such person as an
Eligible Participant under this Plan.
9.4 Incompetence. Every person receiving or claiming benefits under the
Plan shall be conclusively presumed to be mentally competent until the date on
which the Pension Committee receives a written notice, in a form and manner
acceptable to the Pension Committee, that such person is incompetent, and that a
guardian, conservator, or other person legally vested with the care of such
person's person or estate has been appointed; provided, however, that if the
Pension Committee shall find that any person to whom a benefit is payable under
the Plan is unable to care for such person's affairs because of incompetency,
any payment due (unless a prior claim therefor shall have been made by a duly
appointed legal representative) may be paid as provided in the Pension Plan.
Any such payment so made shall be a complete discharge of liability therefor
under the Plan.
9.5 Binding on Employer, Eligible Participants and Their Successors. This
Plan shall be binding upon and inure to the benefit of the Employers, their
successors and assigns and the Eligible Participants, their heirs, executors,
administrators and legal representatives. The provisions of this Plan shall be
applicable with respect to each Employer separately, and amounts payable
hereunder shall be paid by the Employer of the particular Eligible Participant.
In the event any Eligible Participant becomes entitled to a benefit under the
Pension Plan based on service with more than one Employer, the benefit
obligations under this Plan shall be apportioned among such Employers as
determined by the Pension Committee.
9.6 Tax Liability. An Employer may withhold from any payment of benefits
hereunder any taxes required to be withheld and such sum as the Employer may
reasonably estimate to be necessary to cover any taxes for which the Employer
may be liable and which may be assessed with regard to such payment.
9.7 Severability. In the event any provision of this Plan shall be held
invalid or illegal for any reason, any illegality or invalidity shall not affect
the remaining parts of this Plan, but this Plan shall be construed and enforced
as if the illegal or invalid provision had never been inserted, and the Company
shall have the privilege and opportunity to correct and remedy such questions of
illegality or invalidity by amendment as provided in this Plan.
9.8 Applicable Law. This Plan shall be governed and construed in
accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officers effective as of February 1, 1993,
the effective date of this Plan.
STEWART & STEVENSON SERVICES, INC.
/s/ Robert L. Hargrave
By: _________________________
Its: Vice President & Treasurer
ATTEST:
/s/ Lawrence E. Wilson
By: _________________________
Its: Vice President & Secretary
APPENDIX A
TO THE
STEWART & STEVENSON SERVICES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Participating Employers Under the Plan
The following employers are participating Employers under the
Stewart & Stevenson Services, Inc. Supplemental Executive
Retirement Plan as of February 1, 1993, unless a later
participation date is designated:
Stewart & Stevenson Services, Inc.
C. Jim Stewart & Stevenson, Inc.
Each other participating Employer under the Pension Plan as of
February 1, 1993 or any subsequent date shall be a participating
Employer under this Plan as of such relevant effective date.
APPENDIX B
TO THE
STEWART & STEVENSON SERVICES, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Eligible Participants Under the Plan
The following individuals are designated as "Eligible
Participants" in accordance with and under the Stewart &
Stevenson Services, Inc. Supplemental Executive Retirement Plan:
Garth C. Bates, Jr.
C. LaRoy Hammer
Robert L. Hargrave
Bob H. O'Neal
Richard R. Stewart
Lawrence E. Wilson
SUBSIDIARIES OF STEWART & STEVENSON SERVICES, INC.
The following list sets forth the name of each subsidiary of the Company, which
is also the name under which such subsidiary does business:
Jurisdiction of
Incorporation
Or Organization
__________________
C. Jim Stewart & Stevenson, Inc. Delaware
Machinery Acceptance Corporation Texas
S&S International Sales, Inc. Barbados
Stewart & Stevenson International, Inc. Delaware
Stewart & Stevenson MVO, Inc. Texas
Stewart & Stevenson Operations, Inc. Delaware
Stewart & Stevenson Overseas, Inc. Texas
Stewart & Stevenson Power, Inc. Delaware
Stewart & Stevenson Realty Corporation Texas
Stewart & Stevenson Technical Services, Inc. Delaware
Stewart & Stevenson Transportation, Inc. Texas
Stewart & Stevenson (U.K.) Limited Scotland
The Company has additional subsidiaries which, if considered in the aggregate as
a single subsidiary, would not constitute a significant subsidiary.
Board of Directors and Shareholders
Stewart & Stevenson Services, Inc.
As independent public accountants, we hereby consent to the incorporation by
reference in Registration Statement No. 33-21515 on Form S-8 dated May 18, 1988,
Registration Statement No. 33-22463 on Form S-8 dated July 5, 1988, Registration
Statement No. 33-52881 on Form S-8 dated March 30, 1994 and Registration
Statement No. 33-52903 on Form S-8 dated March 30, 1994 of our reports dated
April 21, 1994 included in the Form 10-K of Stewart & Stevenson Services, Inc.
for the fiscal year ended January 31, 1994.
/s/ Arthur Andersen & Co.
ARTHUR ANDERSEN & CO.
Houston, Texas
April 21, 1994
