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, 1995 ("Fiscal 1994") 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:
Name of Each
Title of each class Exchange on Which Registered
___________________ ____________________________
Rights to Purchase Shares of Common NASDAQ Stock Market
Stock, without par value
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. [ ]
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant.
$923,162,460
(As of February 28, 1995)
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 32,997,815 Shares
(Class) (Outstanding at February 28, 1995)
DOCUMENTS INCORPORATED BY REFERENCE
Document Part of Form 10-K
________ _________________
Proxy Statement for the 1995 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. In addition, this segment offers operation and
maintenance contracts for large gas turbine projects and petroleum production
facilities. The Company's products include gas turbine generator sets for
primary electrical power and diesel generator sets for primary, emergency or
stand-by electrical power sources. Stewart & Stevenson is a 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. The
Company's engineered power systems and operations and maintenance services 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.
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, Waukesha natural gas engines, Deutz diesel engines,
Hyster material handling equipment, Thermo King transport refrigeration units
and John Deere construction, utility and forestry equipment. The Distribution
segment markets primarily in Texas and other Western and Southern states, as
well as in Mexico, Venezuela and Central America.
The Tactical Vehicle Systems segment has received contracts with 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 call for the production of approximately 11,000 newly-
designed 2 1/2-ton and 5-ton trucks 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. 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 1994" commenced on
February 1, 1994 and ended on January 31, 1995. Identifiable assets at the
close of Fiscal 1994, 1993 and 1992 and net sales, operating profit and export
sales for such fiscal years for the Company's business segments and sales to
customers which exceed 10% 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 and provides operation and maintenance services for power
generation and petroleum facilities. 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. Both equipment and services are sold
under the "Stewart & Stevenson" name throughout the world.
Operations of the Engineered Power Systems segment accounted for approximately
56.5%, 61.4% and 62.6%, respectively, of consolidated sales during Fiscal 1994,
1993 and 1992.
Gas Turbine Power Systems. The Company packages gas turbine products 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 . . . . . . . 40.3 Mw
GE LM5000 STIG . . . . 51.6 Mw
GE LM5000 . . . . . . . 34.4 Mw
GE LM2500+ . . . . . . 27.6 Mw
GE LM2500 STIG . . . . 26.5 Mw
GE LM2500 . . . . . . . 22.2 Mw
GE LM1600 . . . . . . . 13.4 Mw
ALLISON 501K . . . . . 3.7 Mw
GARRETT IM831 . . . . . 0.5 Mw
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"). The gas turbine generator sets packaged by the Company in
the 20 Mw to 52 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. Generators in the 0.5 Mw to 20 Mw range
are marketed to hospitals, hotels, office complexes and industrial facilities,
both for prime power and cogeneration applications. 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.
The Company assembles turbine-driven mechanical drive packages, including gas
compressor sets powered by GE and Allison gas turbine engines and vessel
propulsion systems incorporating Allison gas turbine engines. The table below
lists the output of each model of gas turbine engine offered by the Company for
mechanical drive applications.
Engine Model Output
____________ ______
GE LM6000 . . . . . . . 55,545 Shp
GE LM2500+ . . . . . . 37,000 Shp
GE LM2500 . . . . . . . 31,235 Shp
GE LM1600 . . . . . . . 18,745 Shp
ALLISON 501K . . . . . 5,510 Shp
Like the Company's turbine-driven generator sets, gas compression packages are
designed to be easily and quickly installed at the customer's location and can
be full-load tested at the Company's facility before shipment. Gas compressor
sets are marketed to gas production and pipeline operators for both offshore
and onshore installation.
Stewart & Stevenson enters into operation and maintenance contracts under which
the Company provides all labor, supervision and expertise necessary to operate,
maintain and repair power generation, gas compression and petroleum production
and processing facilities. Operation and maintenance contracts may have a term
of up to 10 years and provide for a fixed fee out of which the Company must pay
all costs incurred under the contract or for the payment of a fixed fee plus
reimbursement of the costs incurred by the Company. The Company has provided
operation and maintenance services for power generation facilities since 1986.
During Fiscal 1994, the Company acquired substantially all of the operating and
maintenance assets of Creole International, Inc. and its subsidiaries. The
Creole companies were primarily engaged in the operation and maintenance of
petroleum production, processing and transportation facilities. Operation and
maintenance services are provided on a world-wide basis.
During January 1995, the Company and General Electric Capital Corporation ("GE
Capital") announced an agreement in principle to jointly offer turbine-driven
equipment for lease. Partnerships owned by GE Capital and the Company will
contract with the Company for the complete installation of a power generation
or gas compression facility and for operation and maintenance services during
the term of the lease. The complete system, including operation and
maintenance services, will be leased to an independent power producer, public
utility, gas producer or transporter or industrial user for an all-inclusive
lease payment.
In addition to complete turbine-driven packages and operation and maintenance
services, Stewart & Stevenson offers parts and repair services for turbine-
driven equipment and is authorized to perform complete overhaul services on GE
and Allison gas turbine engines. Other turbine products manufactured by the
Company include an exhaust flow enhancement device, manufactured under license
from Norlock Technologies, Inc. This new product improves power output and
fuel efficiency and reduces exhaust gas turbulence.
Stewart & Stevenson believes that the international market provides significant
sale and lease opportunities for the Company's gas turbine products. 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.
A majority of the Company's gas turbine sales is derived from packaging gas
turbine engines manufactured by GE. The Company is the exclusive packager of
all LM6000 generator sets sold by GE in the United States and Canada and 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 47.6%,
49.2% and 50.5%, respectively, of consolidated sales in Fiscal 1994, 1993 and
1992.
Other Power Systems. The majority of other power systems packaged by Stewart &
Stevenson are generator sets and mechanical drive packages using reciprocating
engines fueled with diesel, natural gas, or both. Generator sets range in size
from 20 kw to 12,700 kw and are based on 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. Reciprocating engine 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.
Stewart & Stevenson is also 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. Other oilfield equipment includes coil-tubing equipment, blowout
preventors and high pressure valves for the drilling and workover industry.
Stewart & Stevenson manufactures a complete line of aircraft ground support
equipment, including gate tractors, air-start units, ground power equipment and
air conditioning systems.
Sales of other power systems and services accounted for 8.8%, 12.5% and 12.2%,
respectively, of consolidated sales in Fiscal 1994, 1993 and 1992.
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 Corporation Heavy Duty High Speed Texas, Colorado, New 1938
Diesel Engines Mexico, Wyoming, Nebraska,
Louisiana, Mississippi and
Alabama; Venezuela
Electro-Motive Division Heavy Duty Medium Speed Texas, Colorado, New 1988
of General Motors Corporation Diesel Engines Mexico, Nebraska, Oklahoma,
Arkansas, Louisiana, Tennessee,
Mississippi and Alabama; Mexico;
Central America; most of South
America
Cooper Industries, Inc. Large-bore Natural Gas, Varies depending on engine 1991
Dual Fuel and Diesel size, fuel and application
Engines
Allison Transmission On- and Off-Highway Texas, Colorado, New 1962
Division of General Automatic Transmissions, Mexico, Wyoming, Nebraska,
Motors Corporation Power Shift Transmissions Louisiana, Mississippi and
and Torque Converters Alabama; Venezuela
Hyster Company Material Handling Texas 1960
Equipment
John Deere Industrial Construction, Utility Southeast Texas and 1987
Equipment Company and Forestry Equipment Wyoming
Thermo King Corporation Transport Refrigeration Southeast Texas and 1970
Equipment Southern Louisiana
Waukesha Engine Natural Gas Industrial Colorado, Montana, 1995
Division of Dresser Engines North Dakota, Oklahoma,
Industries, Inc. Wyoming, New Mexico,
Utah, Oregon, Hawaii,
Kansas, Arizona, California,
Washington and Nevada
Deutz Corporation Diesel Engines Colorado, Wyoming, 1995
Arizona, New Mexico,
Washington and Alaska
</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. During Fiscal 1994, the Company acquired substantially all of
the assets of Power Application & Mfg. Co. ("PAMCO"), a Waukesha distributor
for the western United States.
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 manufactures and sells snow removal equipment,
wheel chair lifts and rail car movers. 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 30.4%, 31.8%
and 33.1%, respectively, of consolidated sales during Fiscal 1994, 1993 and
1992. 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 the U.S. Army's next generation of
basic transportation vehicle for personnel and materials. As such, the FMTV is
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 are specially configured for airborne operation. Although more
than ten configurations of the FMTV are being 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 is 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.
Operations of the Tactical Vehicle Systems segment accounted for approximately
13.0%, 6.7% and 4.2%, respectively, of consolidated sales during Fiscal 1994,
1993 and 1992.
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 20-52 Mw size include General Electric
Corporation, Ruston Gas Turbines Ltd., ABB Energy Services, Inc., a subsidiary
of Asea Brown Boveri, Seimens and Westinghouse. Competition in the market for
the other products manufactured by the Engineered Power Systems segment is
highly diversified 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.
The performance of operation and maintenance contracts in some countries could
be disrupted by political unrest, terrorist activity or government action. The
Company believes that any such disruption would be temporary. No business
segment of the Company is dependent on foreign operations.
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 1994 and 1993 were as
follows:
<TABLE>
<CAPTION>
Estimated percentage
to be recognized in Fiscal Fiscal
Fiscal 1995 1994 1993
___________________ ______ ______
(Dollars in millions)
<S> <C> <C> <C>
Engineered Power Systems
Equipment 69.2% $ 416.0 $ 491.5
Operations and Maintenance 18.3% 311.6 269.7
_________ _________
727.6 761.2
Distribution 100.0% 40.0 32.6
Tactical Vehicle Systems 13.3% 1,017.8 1,119.5
_________ _________
Total 29.2% $1,785.4 $1,913.3
========= =========
</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 worldwide
need for additional electrical generating capacity.
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 1994, the Company employed approximately 4,300 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 966,000 square feet and leases
approximately 48,000 square feet of space at seven locations devoted to
manufacturing, warehousing and administration. The Company leases gas turbine
operations and maintenance facilities in Long Beach, California totaling 5,000
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, Bakersfield, California and
Shreveport, Louisiana and a high pressure valve manufacturing facility in
Jennings, Louisiana totaling 15,000, 14,000, 40,000 and 89,000 square feet,
respectively.
Activities of the Distribution segment are coordinated from Houston, where the
Company owns 293,000 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 546,000 square feet of owned space and
398,000 square feet of leased space in 25 cities in Texas, Louisiana, Colorado,
New Mexico, Wyoming, Utah, North Dakota, Kansas, Washington and California.
The Tactical Vehicle Systems segment is located in a 500,000 square foot
Company-owned facility near Houston, Texas and leases 88,000 square feet of
warehousing facilities in Houston and Lubbock, 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.
The Company has been advised that on January 5, 1993, John G. Runion, a former
consultant of the Company, filed a civil suit for himself and the United States
of America in the U. S. District Court, Southern District of Texas. The suit
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 is aware that the Defense
Criminal Investigation Service and the United States Air Force Office of
Special Investigation are conducting an investigation into whether the Company
violated any criminal statute in connection with the same facts. The Company
has denied any wrongdoing in connection with the pricing of the change order
and believes that both the criminal investigation and the civil case will be
resolved 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 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.
None.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
The Company's Common Stock is traded on the NASDAQ Stock Market under the
symbol: SSSS. There were 864 shareholders of record as of February 28, 1995.
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.
<TABLE>
<CAPTION>
Fiscal Fiscal
1994 1993
______________________________ ______________________________
High Low Dividend High Low Dividend
_____ ____ ________ _____ ____ ________
<S> <C> <C> <C> <C> <C> <C>
First Quarter 53 3/4 41 1/4 0.06 38 1/2 28 0.05
Second Quarter 45 3/4 38 1/4 0.07 46 3/4 35 3/4 0.06
Third Quarter 40 3/4 33 3/4 0.07 51 3/4 42 1/2 0.06
Fourth Quarter 38 3/4 28 0.07 53 3/4 44 1/4 0.06
</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
1994 1993 1992 1991 1990
_________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Financial Data:
Sales $1,138,336 $981,892 $812,526 $686,363 $645,766
Earnings before income
taxes and accounting change <F1> 102,852 85,301 64,376 52,259 43,152
Earnings before accounting change <F1> 67,558 56,780 43,958 35,703 29,384
Net earnings <F1> 67,558 56,780 34,658 35,703 29,384
Total assets 875,616 692,624 573,348 477,858 394,118
Short-Term Debt (including
current portion of Long-Term Debt) 43,344 7,219 3,252 4,582 58,616
Long-Term Debt 116,900 68,000 44,451 27,939 37,982
Per Share Data :
Earnings before accounting change <F1> 2.05 1.73 1.35 1.18 0.99
Net earnings <F1> 2.05 1.73 1.06 1.18 0.99
Cash dividends declared 0.27 0.23 0.19 0.15 0.11
<FN>
<F1> The Company adopted Statement of Financial Accounting Standard No. 106
effective February 1, 1992, resulting in a cumulative charge to 1992
earnings of $9,300, or $0.29 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.
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 Percentage
Consolidated Sales Increase (Decrease)
__________________________________________________________________________________________________________
Fiscal Fiscal Fiscal Fiscal
1994 1993 1992 1993-1994 1992-1993
==========================================================================================================
<S> <C> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 15.9% 20.8%
Cost of sales 84.0 84.1 84.4 15.7 20.4
_________________________________
Gross profit 16.0 15.9 15.6 17.0 23.2
Selling and administrative expenses 6.6 7.0 7.5 10.1 11.7
Interest expense .6 .3 .5 107.2 (10.2)
Other income, net (.2) (.1) (.3) 161.4 (62.6)
_________________________________
7.0 7.2 7.7 12.6 13.5
_________________________________
Earnings before income taxes
and accounting change 9.0 8.7 7.9 20.6 32.5
Income taxes 3.0 2.9 2.5 23.3 35.9
__________________________________
Earnings of consolidated
companies before accounting change 6.0 5.8 5.4 19.3 30.9
Equity in net earnings (loss) of
unconsolidated affiliates (.1) .0 .0 N/A N/A
__________________________________
Earnings before accounting change 5.9% 5.8% 5.4% 19.0 29.2
==================================
</TABLE>
RESULTS OF OPERATIONS
Business Segment Highlights
<TABLE>
<CAPTION>
_____________________________________________________________________________________________________________________________
(Dollars in thousands)
Sales Growth Rate
_____________________________________________________________________________________
Fiscal Fiscal Fiscal Fiscal
1994 1993 1992 1993-1994 1992-1993
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Engineered Power Systems $ 642,804 57% $602,853 61% $508,898 63% +7% +18%
Distribution 346,564 30 311,983 32 269,045 33 +11 +16
Tactical Vehicle Systems 147,920 13 65,894 7 34,112 4 +124 +93
Corporate Services 1,048 - 1,162 - 471 - -10 +147
___________________________________________________________
$1,138,336 100% $981,892 100% $812,526 100% +16 +21
===========================================================
</TABLE>
<TABLE>
<CAPTION>
Operating Profit Growth Rate
_____________________________________________________________________________________
Fiscal Fiscal Fiscal Fiscal
1994 1993 1992 1993-1994 1992-1993
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Engineered Power Systems $ 82,395 71% $70,292 75% $59,578 81% +17% +18%
Distribution 24,015 21 20,309 22 12,478 17 +18 +63
Tactical Vehicle Systems 8,782 8 2,886 3 1,602 2 +204 +80
Corporate Services 376 - 552 - 195 - -32 +183
___________________________________________________________
$115,568 100% $94,039 100% $73,853 100% +23 +27
===========================================================
</TABLE>
<TABLE>
<CAPTION>
Operating Profit as a Percentage of Sales
___________________________________________________________
Fiscal Fiscal Fiscal
1994 1993 1992
__________________________________________________________________________________________________
<S> <C> <C> <C>
Engineered Power Systems 12.8% 11.7% 11.7%
Distribution 6.9 6.5 4.6
Tactical Vehicle Systems 5.9 4.4 4.7
Corporate Services 35.9 47.5 41.4
Consolidated 10.2 9.6 9.1
</TABLE>
Fiscal 1994 vs. Fiscal 1993
Sales increased to $1,138 million for Fiscal 1994 from $982 million for Fiscal
1993. This increase represents the setting of a new sales record for the
seventh consecutive year. In total, sales increased by 16% with each of the
Company's segments recording new sales records. The Company's international
sales increased 28% to over $301 million.
The Tactical Vehicle Systems segment showed the largest sales growth during
Fiscal 1994, increasing sales by 124%. This sales growth, although
significant, was less than was anticipated. Sales growth was restrained by the
government's decision to delay both the testing of trucks and the approval for
purchasing of key components, which effectively precluded the Company from
achieving its planned production quantities. The Company has reached an
agreement with the U. S. Army to restart Initial Operational Test and
Evaluation of the FMTV truck program in April, 1995. The agreement also
provides additional contract funding for direct support by the Company in
connection with the restarted tests. Other provisions of the agreement permit
the Company to file for compensation of the costs created by the suspension of
testing in Fiscal 1994. The Company expects U. S. Government testing to be
completed in June, 1995, which will enable the Company to increase from the
current low level production to full rate production in the fourth quarter of
Fiscal 1995.
The Company's Distribution segment's sales increased by 11% in Fiscal 1994.
This increase reflects the continuation of both the growth of the economies of
the territories serviced by the Company and the market's reception of the
products which the Company sells. The Company continued to expand the
territories in which it operates and the products it represents through the
acquisition, during the fourth quarter of Fiscal 1994, of substantially all of
the assets of PAMCO, a Waukesha distributor for the western United States.
The Engineered Power Systems segment of the Company experienced continued
growth with Fiscal 1994 sales increasing 7%. The gas turbine product lines
provided the majority of the sales growth. Gas turbine product support sales
growth continued to exceed expectations and contributed significantly to this
increase. Gas turbine product support consists of the servicing of customers'
equipment and the long-term contracting for the operation and maintenance of
the customers' power plants. Gas turbine equipment sales increased, but at a
slower rate than the prior year, reflecting the U. S. utility market's
uncertain response to deregulation trends. Excluding the discontinued bus
product line, the diesel products group showed a slight increase in sales,
primarily in products sold to the airline market. During the third quarter of
Fiscal 1994, the Company completed its previously announced acquisition of
substantially all of the assets of Creole International, Inc., a provider of
operating and maintenance services for turbine and reciprocating engine driven
equipment.
Operating profit grew by approximately 23% during Fiscal 1994 to $116 million.
Each of the Company's segment's operating profits increased both in absolute
amounts and as a percentage of sales. The Tactical Vehicle Systems segment's
growth reflects both an increase in production levels and an improvement in the
anticipated profitability of the FMTV program. The Engineered Power Systems
segment had an improved revenue mix resulting primarily from the rapid growth
rate of its gas turbine product support sales which generally realize a higher
operating profit. The Distribution segment benefitted from improved operating
efficiencies and a revenue blend of higher value added products.
Fiscal 1993 vs. Fiscal 1992
Sales increased to $982 million for Fiscal 1993 from $813 million for Fiscal
1992, primarily due to sales volume increases in the Engineered Power Systems
segment. The Engineered Power Systems' gas turbine product lines were the
primary source of its growth, with the highest rate of growth experienced in
the gas turbine product support group. 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 sales. 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.
Net Period Expense
<TABLE>
<CAPTION>
___________________________________________________________________________________________________________
(Dollars in thousands) Percentage Change
Fiscal Fiscal Fiscal Fiscal
1994 1993 1992 1993-1994 1992-1993
___________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Selling and administrative expenses $75,249 $68,331 $61,168 +10% +12%
Interest expense 6,865 3,313 3,689 +107 -10
Other income, net (2,528) (967) (2,586) +161 -63
________________________________
$79,586 $70,677 $62,271 +13 +13
================================
Net period expense as a percentage of sales 7.0% 7.2% 7.7%
================================
</TABLE>
Net period expense continued to grow at a much slower rate than sales.
Operating efficiencies as a result of spreading certain fixed administrative
costs over increased sales has facilitated the control of selling and
administrative expenses. Interest expense increased significantly during
Fiscal 1994, resulting from increases in interest rates and in the level of
borrowing required to finance operations.
Earnings Before Accounting Change
<TABLE>
<CAPTION>
___________________________________________________________________________________________________________
(Dollars in thousands) Percentage Change
Fiscal Fiscal Fiscal Fiscal
1994 1993 1992 1993-1994 1992-1993
___________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Amount $67,558 $56,780 $43,958 +19% +29%
Percentage of sales 5.9% 5.8% 5.4%
===============================================================================
</TABLE>
Earnings before the accounting change continued to increase in both amount and
as a percentage of sales in Fiscal 1994 and 1993. These increases reflect the
growth in operating profits each period.
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 be recognized over the employees'
service lives when certain conditions are met. The Company adopted SFAS 112 in
Fiscal 1994. The adoption of SFAS 112 did not have a material impact on 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
cumulative charge to Fiscal 1992 earnings of $9.3 million, or $0.29 per share,
after a deferred tax benefit of $4.8 million.
During Fiscal 1992, 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.
FINANCIAL CONDITION
Company's Capital
<TABLE>
<CAPTION>
____________________________________________________________________________________________
(Dollars in thousands) Fiscal 1994 Fiscal 1993
Amount Percentage Amount Percentage
____________________________________________________________________________________________
<S> <C> <C> <C> <C>
Long-Term Debt $116,900 21% $ 68,000 15%
Other Long-Term Liabilities 28,559 5 24,780 5
Shareholders' Equity 419,003 74 358,658 80
______________________________________________
$564,462 100% $451,438 100%
==============================================
</TABLE>
The Company's capital consisted principally of shareholders' equity at the end
of Fiscal 1994 and 1993. Shareholders' equity increased $60,345 during Fiscal
1994 and $52,990 during Fiscal 1993 primarily as a result of earnings retained
after dividends.
The Company had $42 million and $5 million in short-term borrowings at the end
of Fiscal 1994 and 1993, respectively. Total debt increased during Fiscal 1994
and 1993 principally due to the timing of customer progress payments for
contracts in process in Fiscal 1994 and 1993 and the previously discussed
acquisitions made in Fiscal 1994. See related Note 6 in the notes 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 has an agreement in principle to sell to GE Capital warrants for the
Company's Common Stock in connection with certain transactions as described in
Note 9 of the consolidated financial statements. The Company's current credit
facilities appear adequate to meet its foreseeable cash requirements.
LIQUIDITY
Cash Provided From Operations
<TABLE>
<CAPTION>
_________________________________________________________________________________________
(Dollars in thousands) Fiscal Fiscal Fiscal
1994 1993 1992
__________________________________________________________________________________________
<S> <C> <C> <C>
Earnings before accounting change $ 67,558 $ 56,780 $43,958
Depreciation and amortization 23,954 21,175 12,305
Deferred income taxes 2,170 413 (2,935)
____________________________________
Funds from operations 93,682 78,368 53,328
Change in net operating assets and liabilities (146,288) (86,395) 23,068
____________________________________
Net cash provided by (used in) operating activities $ (52,606) $ (8,027) $76,396
====================================
</TABLE>
Funds from operations increased 20% during Fiscal 1994 versus a 47% increase
during 1993, reflecting primarily the growth in earnings each year. The
Company's investment in net operating assets and liabilities increased by an
amount greater than that provided from operations during Fiscal 1994 and 1993.
The significant components of net operating assets and liabilities grew at
rates comparable with sales growth, excluding recoverable costs and accrued
profits not yet billed. Significant growth in recoverable costs and accrued
profits not yet billed occurred in both the Tactical Vehicle Systems segment
and the Engineered Power Systems segment. The Tactical Vehicle Systems segment
is primarily funded progress payments under government regulations which
require that contractors retain a significant amount of the contract costs
until government acceptance of the product. The production delays for the FMTV
contract increased costs and delayed deliveries resulting in a build up in the
unliquidated contract costs in excess of what was planned. The Engineered
Power Systems segment's gas turbine product line's mix of international
contracts, which generally provide for lower customer contract funding
requirements, experienced significant growth resulting in the increased
recoverable costs and accrued profits not yet billed. Working capital to
support the operations of the Company fluctuates significantly depending on the
aforementioned 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 1994 and 1993
using several measures of liquidity and leverage. The Company's current ratio
(current assets divided by current liabilities) remained somewhat constant at
2.3:1 and 2.2:1 at the end of Fiscal 1994 and Fiscal 1993, respectively. The
long-term debt to equity ratio (long-term debt including the current portion
divided by total shareholders' equity) was 28% at the end of Fiscal 1994 and
20% at the end of Fiscal 1993. The Company's interest coverage (earnings
before income taxes and interest expense divided by interest expense) decreased
to 16.0 times interest for Fiscal 1994 versus 26.7 times interest for Fiscal
1993, as a result of increasing interest rates and total debt outstanding.
CAPITAL EXPENDITURES AND COMMITMENTS
Capital Expenditures By Industry Segment
<TABLE>
<CAPTION>
___________________________________________________________________________________________________________
(Dollars in thousands) Percentage Change
Fiscal Fiscal Fiscal Fiscal
1994 1993 1992 1993-1994 1992-1993
___________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Engineered Power Systems $12,082 $14,502 $18,646 -17% -22%
Distribution 17,651 9,302 5,582 +90 +67
Tactical Vehicle Systems 2,929 6,061 36,852 -52 -84
Corporate Services 717 781 13,985 -8 -94
________________________________
$33,379 $30,646 $75,065 +9 -59
================================
</TABLE>
Capital expenditures returned to historical levels in Fiscal 1994 and 1993
after having increased significantly during Fiscal 1992. The Distribution
segment's increase during Fiscal 1994 includes the capital assets acquired in
the acquisition of PAMCO. The capital expenditures program at the Tactical
Vehicle Systems segment and the program to upgrade the Engineered Power Systems
segment's 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.
Cash Dividends
<TABLE>
<CAPTION>
___________________________________________________________________________________________________________
(In thousands, except per share data) Growth Rate
Fiscal Fiscal Fiscal Fiscal
1994 1993 1992 1993-1994 1992-1993
___________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Amount of Cash Dividends $8,904 $7,563 $6,193 +18% +22%
Annual Rate of Cash Dividends per Share $ 0.27 $ 0.23 $ 0.19 +17 +21
</TABLE>
The amount of cash dividends increased 18% and 22% during Fiscal 1994 and 1993,
respectively. Cash dividends represented 13%, 13% and 14% of earnings before
accounting change for Fiscal 1994, 1993 and 1992, 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.
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
treble 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.
Major contracts for military systems are performed over extended periods of
time and are subject to changes in scope of work and delivery schedules.
Pricing negotiations on changes and settlement of claims often extend over
prolonged periods of time. The Company's ultimate profitability on such
contracts will depend not only upon the accuracy of the Company's cost
projections, but also the eventual outcome of an equitable settlement of
contractual issues with the U.S. Government.
The contract to produce 2 1/2-ton and 5-ton trucks for the U. S. Army is
subject to congressional approval of necessary funding for future program
years. As of January 31, 1995, funding for purchases for Program Year Five had
not been received. If such funding is not approved or is limited or delayed,
the number of trucks produced in each fiscal year may be reduced or contract
performance may be delayed.
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, 1995
and 1994, and the related consolidated statements of earnings, shareholders'
equity and cash flows for each of the three years in the period ended January
31, 1995. 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, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
January 31, 1995 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. As discussed in Note
8 to the consolidated financial statements, effective February 1, 1994, the
Company changed its method of accounting for postemployment benefits to conform
with Statement of Financial Accounting Standard No. 112.
ARTHUR ANDERSEN LLP
Houston, Texas
March 13, 1995
Stewart & Stevenson Services, Inc.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
______________________________________________________________________________________________
(Dollars in thousands) Fiscal Fiscal
1994 1993
______________________________________________________________________________________________
<S> <C> <C>
Assets
Current Assets
Cash and equivalents $ 3,987 $ 7,788
Accounts and notes receivable, net 186,814 147,292
Recoverable costs and accrued profits not yet billed 227,467 115,868
Inventories 295,867 269,605
Other 364 224
_________ _________
Total Current Assets 714,499 540,777
Property, Plant and Equipment, net 131,860 126,473
Other assets 29,257 25,374
_________ _________
$875,616 $692,624
========= =========
Liabilities and Shareholders' Equity
Current Liabilities
Notes Payable $ 42,000 $ 5,000
Accounts Payable 164,474 131,780
Accrued payrolls and incentives 21,611 18,629
Billings on uncompleted contracts in excess of incurred costs 11,284 31,088
Current income taxes 42,240 27,931
Current portion of long-term debt 1,344 2,219
Other accured liabilities 28,201 24,539
_________ _________
Total Current Liabilities 311,154 241,186
Long-Term Debt 116,900 68,000
Deferred Income Taxes 8,038 5,868
Accrued Postretirement Benefits 15,252 15,028
Deferred Compensation 5,269 3,884
Shareholders' Equity
Common Stock, without par value, 50,000,000
shares authorized; 33,009,635 and 32,948,885
shares issued at January 31, 1995 and 1994,
respectively, including 11,820 shares held in treasury 162,057 160,366
Retained earnings 256,979 198,325
_________ _________
419,036 358,691
Less cost of treasury stock (33) (33)
_________ _________
Total Shareholders' Equity 419,003 358,658
_________ _________
$875,616 $692,624
========= =========
</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
1994 1993 1992
___________________________________________________________________________________________________________
<S> <C> <C> <C>
Sales $1,138,336 $981,892 $812,526
Cost of sales 955,898 825,914 685,879
___________ _________ _________
Gross profit 182,438 155,978 126,647
Selling and administrative expenses 75,249 68,331 61,168
Interest expense 6,865 3,313 3,689
Other income, net (2,528) (967) (2,586)
___________ _________ _________
79,586 70,677 62,271
___________ _________ _________
Earnings before income taxes and accounting change 102,852 85,301 64,376
Income taxes 34,520 27,999 20,597
___________ _________ _________
Earnings of consolidated companies before accounting change 68,332 57,302 43,779
Equity in net earnings (loss) of unconsolidated affiliates (774) (522) 179
___________ _________ _________
Earnings before accounting change 67,558 56,780 43,958
Cumulative effect of accounting change -0- -0- (9,300)
___________ _________ _________
Net earnings $ 67,558 $ 56,780 $ 34,658
=========== ========= =========
Weighted average number of shares of Common Stock outstanding 32,973 32,861 32,560
=========== ========= =========
Earnings per share before accounting change $ 2.05 $ 1.73 $ 1.35
Cumulative effect of accounting change, per share -0- -0- (.29)
___________ _________ _________
Net earnings per share $ 2.05 $ 1.73 $ 1.06
=========== ========= =========
</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 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
Net earnings 67,558 67,558
Cash dividends (8,904) (8,904)
Exercise of stock options 1,691 1,691
_________ _________ _________ _________
Balance at end of Fiscal 1994 $162,057 $256,979 $ (33) $419,003
========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements
Stewart & Stevenson Services, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
___________________________________________________________________________________________________________
(Dollars in thousands) Fiscal Fiscal Fiscal
1994 1993 1992
___________________________________________________________________________________________________________
<S> <C> <C> <C>
Operating Activities
Net earnings $ 67,558 $ 56,780 $ 34,658
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Accrued postretirement benefits 224 (91) 15,119
Depreciation and amortization 23,954 21,175 12,305
Deferred income taxes, net 2,170 413 (2,935)
Change in operating assets and liabilities:
Accounts and notes receivable (39,522) (4,126) (22,136)
Recoverable costs and accrued profits not yet billed (111,599) (59,175) (5,664)
Inventories (26,262) (57,099) 21,050
Accounts payable 32,694 3,010 30,283
Billings on uncompleted contracts in excess
of incurred costs (19,804) 14,104 (8,680)
Current income taxes 14,309 14,081 2,083
Other current liabilities 6,644 7,126 10,831
Other--principally long-term assets and liabilities (2,972) (4,225) (10,518)
__________ __________ __________
Net Cash Provided by (Used in) Operating Activities (52,606) (8,027) 76,396
Investing Activities
Expenditures for property, plant and equipment (33,379) (30,646) (75,065)
Disposal of property, plant and equipment 4,372 796 377
__________ __________ __________
Net Cash Used in Investing Activities (29,007) (29,850) (74,688)
Financing Activities
Additions to long-term borrowings 85,000 192,918 190,000
Payments on long-term borrowings (36,975) (170,402) (174,818)
Net borrowings and payments on short-term notes payable 37,000 5,000 -0-
Dividends paid (8,904) (7,563) (6,193)
Exercise of stock options 1,691 3,773 4,727
__________ __________ __________
Net Cash Provided by Financing Activities 77,812 23,726 13,716
__________ __________ __________
Increase (decrease) in cash and equivalents (3,801) (14,151) 15,424
Cash and equivalents, beginning of fiscal year 7,788 21,939 6,515
__________ __________ __________
Cash and equivalents, end of fiscal year $ 3,987 $ 7,788 $ 21,939
========== ========== ==========
</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 1994"
commenced on February 1, 1994 and ended on January 31, 1995.
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.
Accounting Change: Effective February 1, 1992, the Company adopted 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). During the
fourth quarter of Fiscal 1994, the Company adopted, effective February 1, 1994,
Statement of Financial Accounting Standards No. 112, "Employers' Accounting for
Postemployment Benefits" ("SFAS 112")(see Note 8).
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. The revenues
of the Tactical Vehicle Systems segment are generally recognized under the
units-of-production 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 units are substantially completed. Profits expected
to be realized on contracts are based on the Company's estimates of total sales
value and costs at completion. Changes in estimates for sales, costs, and
profits are recognized in the period which they are determinable using the
cumulative catch-up method of accounting. In certain cases the estimated sales
values include amounts expected to be realized from contract adjustments or
claims subject to negotiations or legal proceedings. Any anticipated losses on
contracts are charged in full to operations in the period in which they are
determinable.
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 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 approximates market
values.
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) are excluded from the computations as they are insignificant.
Reclassifications: The accompanying consolidated financial statements for
Fiscal 1993 and 1992 contain certain reclassifications to conform with the
presentation used in Fiscal 1994.
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
and the operations and maintenance of large gas turbine projects and petroleum
production facilities. 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 and equivalents and the assets of a
limited partnership.
The Company markets its engineered power systems throughout the world and is
not dependent upon any single geographic region or single customer. Other than
the U. S. Government, no single group or customer represents greater than 10%
of consolidated sales. Export sales, including sales to domestic customers for
export, for Fiscal 1994, 1993 and 1992 were $301,885, $237,807 and $256,269,
respectively. Export sales to any single geographic region in Fiscal 1994 were
not material to consolidated sales. Export sales in Fiscal 1993 included
$113,597 destined for Asia and in Fiscal 1992 included $87,271 destined for
South America.
Financial information relating to industry segments is as follows:
<TABLE>
<CAPTION>
_______________________________________________________________________________________________________________
Operating Identifiable Capital
Sales Profit Assets Expenditures Depreciation
_______________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Fiscal 1994
Engineered Power Systems $ 642,804 $ 82,395 $478,354 $12,082 $ 6,759
Distribution 346,564 24,015 222,462 17,651 6,113
Tactical Vehicle Systems 147,920 8,782 152,772 2,929 9,943
Corporate Services 1,048 376 22,028 717 805
___________ _________ _________ ________ ________
Total $1,138,336 $115,568 $875,616 $33,379 $23,620
=========== ========= ========= ======== ========
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
=========== ========= ========= ======== ========
</TABLE>
A reconciliation of Operating profit to Earnings before income taxes and
accounting change is as follows:
<TABLE>
<CAPTION>
_____________________________________________________________________________________________________________
Fiscal Fiscal Fiscal
1994 1993 1992
_____________________________________________________________________________________________________________
<S> <C> <C> <C>
Operating profit $115,568 $94,039 $73,853
Corporate expenses (5,851) (5,425) (5,819)
Interest expense (6,865) (3,313) (3,658)
_________ ________ ________
Earnings before income taxes and accounting change $102,852 $85,301 $64,376
========= ======== ========
</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
1994 1993
_________________________________________________________________________________________________
<S> <C> <C>
Costs incurred on uncompleted contracts $ 581,151 $ 355,184
Accrued profits 47,627 33,300
__________ __________
628,778 388,484
Less: Customer progress payments (412,595) (303,704)
__________ __________
$ 216,183 $ 84,780
========== ==========
Included in the statements of financial position:
Recoverable costs and accrued profits not yet billed $ 227,467 $ 115,868
Billings on uncompleted contracts in excess of incurred costs (11,284) (31,088)
__________ __________
$ 216,183 $ 84,780
========== ==========
</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 sales at the time revenue is
recognized. General and administrative costs remaining in recoverable costs
and accrued profits not yet billed amounted to $22,582 and $17,852 at January
31, 1995 and 1994, respectively. The Company's total general and
administrative expense incurred amounted to $86,292, $79,290 and $70,075 in
Fiscal 1994, 1993 and 1992, 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 not
yet billed 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
1994 1993
_______________________________________________________________________________________
<S> <C> <C>
Engineered Power Systems $229,898 $218,358
Customer deposits (5,169) (1,178)
_________ _________
Total Engineered Power Systems 224,729 217,180
Distribution 121,273 98,885
Excess of current cost over LIFO values (50,135) (46,460)
_________ _________
Total Inventories $295,867 $269,605
========= =========
</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 at January 31,
1995 and 1994 includes approximately $14,789 and $14,271, respectively, 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.
During Fiscal 1994 and 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 1994 and 1992 purchases, the effect of which increased pre-tax earnings
in Fiscal 1994 and 1992 by approximately $1,741 and $204, respectively.
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 $44,415 at the close of Fiscal 1994.
Major contracts for military systems are performed over extended periods of
time and are subject to changes in scope of work and delivery schedules.
Pricing negotiations on changes and settlement of claims often extend over
prolonged periods of time. The Company's ultimate profitability on such
contracts will depend not only upon the accuracy of the Company's cost
projections, but also the eventual outcome of an equitable settlement of
contractual issues with the U. S. Government.
The Company has been advised that on January 5, 1993, a former consultant of
the Company filed a civil 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 treble damages of
$21 million plus unspecified penalties. The Company is aware that the Defense
Criminal Investigation Service and the United States Air Force Office of
Special Investigation are conducting an investigation into whether the Company
violated any criminal statute in connection with the same facts. The Company
has denied any wrongdoing in connection with the pricing of the change order
and believes that both the criminal investigation and the civil case will be
resolved 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 relating to
contractual, product liability, personal injury and warranty matters and
otherwise of the type normally incident to the Company's business. Management
is of the opinion that such lawsuits will not result in any material liability
to the Company.
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 sales.
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, 1995 and 1994, the amounts outstanding under
these arrangements were $42,000 and $5,000, respectively, with a weighted
average interest rate of 6.30% and 3.39%, respectively.
Long-Term Debt, which is generally unsecured, consists of the following:
<TABLE>
<CAPTION>
__________________________________________________________________________________________________________
Fiscal Fiscal
1994 1993
__________________________________________________________________________________________________________
<S> <C> <C>
Notes payable to insurance companies:
-10.20%, principal due $1,000 annually to 1998 $ 4,000 $ 5,000
-Installment note, 10.20%, principal retired in 1994 -0- 451
Debt of consolidated limited partnership:
-note payable to a bank, principal due monthly to 1998 (see note below) 9,000 9,000
Revolving credit notes payable to banks (see note below) 105,000 55,000
Other 244 768
_________ ________
118,244 70,219
Less current portion (1,344) (2,219)
_________ ________
Long-Term Debt $116,900 $68,000
========= ========
</TABLE>
The Company has commitments of $105,000 from banks under revolving credit notes
(subject to reduction at the Company's election) which mature on December 31,
1997. A commitment fee at the rate of 15 basis points per annum 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 $10,000 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 1994, approximately $124,678
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 1994, 1993
and 1992 was $6,679, $3,425 and $3,707, respectively. The amounts of long-term
debt which will become due during Fiscal 1995 through 1998, are approximately:
1995--$1,344; 1996--$1,100; 1997--$106,100 and 1998--$9,700.
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. The plan
is currently not funded. The Company expects to continue financing
postretirement medical costs as covered claims are incurred.
Postretirement medical benefit costs includes the following components:
<TABLE>
<CAPTION>
______________________________________________________________________________________________________
Fiscal Fiscal Fiscal
1994 1993 1992
______________________________________________________________________________________________________
<S> <C> <C> <C>
Service costs - benefits attributed to service during the period $ 418 $ 377 $ 466
Interest cost on accumulated postretirement medical benefit
obligation 678 768 1,105
Amortization of prior service costs (718) (618) -0-
______ ______ _______
Net postretirement medical benefit costs $ 378 $ 527 $1,571
====== ====== =======
</TABLE>
The status of the plan is as follows:
<TABLE>
<CAPTION>
______________________________________________________________________________________________
January 31, January 31,
1995 1994
______________________________________________________________________________________________
<S> <C> <C>
Accrued Postretirement Benefits:
Retirees $ 4,454 $ 6,201
Employees eligible to retire 1,978 2,561
Employees not eligible to retire 1,500 1,419
________ ________
7,932 10,181
Unrecognized prior service cost 5,328 5,954
Unrecognized net gain (loss) 1,992 (1,107)
________ ________
$15,252 $15,028
======== ========
</TABLE>
Postretirement medical benefit amounts were determined by applying health care
costs trend rates of 9.5 to 11.5 percent for Fiscal 1994 and 10.5 to 13.0
percent for Fiscal 1993, gradually decreasing to 5.5 percent by 2012 to gross
eligible medical claims, and using a discount rate of 8.75 percent for Fiscal
1994 and 7.75 percent for Fiscal 1993. Changing the health care cost trend
rates by one percentage point would change the accumulated postretirement
medical benefit obligation at January 31, 1995 by approximately $766 and
the postretirement medical benefit costs for Fiscal 1994 by approximately $126.
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 pension 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
1994 1993
___________________________________________________________________________________________________________
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $34,096 in 1994 and $33,051 in 1993 $ 36,028 $ 34,714
========= =========
Projected benefit obligation for service rendered to date $(43,764) $(44,421)
Plan assets at fair value, primarily publicly traded stocks and bonds,
including 70,956 and 120,956 shares of the Company's Common Stock
at the end of Fiscal 1994 and 1993, respectively 60,686 56,099
_________ _________
Plan assets in excess of projected benefit obligations 16,922 11,678
Unrecognized net gain from past experience different from that assumed (9,114) (4,020)
Unrecognized net asset at February 1, 1985 amortized over the
average remaining service period -0- (194)
_________ _________
Prepaid pension cost included in Other Assets $ 7,808 $ 7,464
========= =========
</TABLE>
Net pension credit includes the following components:
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________
Fiscal Fiscal Fiscal
1994 1993 1992
_________________________________________________________________________________________________________________________
<S> <C> <C> <C>
Service cost -- benefits earned during the year $ 1,815 $ 2,012 $ 1,735
Interest cost on projected benefit obligation 3,541 3,108 3,126
Actual return on plan assets (5,494) (4,883) (4,550)
Amortization of unrecognized net gain (406) (493) (810)
Net amortization and deferrals 200 (540) (847)
________ ________ ________
Net periodic pension credit $ (344) $ (796) $(1,346)
======== ======== ========
</TABLE>
The assumptions used are as follows:
<TABLE>
<CAPTION>
_________________________________________________________________________________________________________________________
Fiscal Fiscal
1994 1993
_________________________________________________________________________________________________________________________
<S> <C> <C>
Discount Rate 8.75% 7.75%
Long-term rate of return on assets 9.50% 9.50%
Rate of increase in future compensation 4.50 - 5.00% 4.50 - 5.00%
</TABLE>
The Company has 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 1994, 1993 and 1992, respectively,
was $68, $164 and $71.
During Fiscal 1993, the Company adopted an unfunded supplemental retirement
plan for certain corporate officers. Retirement expense for the plan in Fiscal
1994 and 1993 was $216 and $290, respectively. Prior service cost not yet
recognized in periodic pension cost was $1,804 and $1,208 at January 31, 1995
and 1994, respectively.
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 $399 and $13 in Fiscal
1994 and 1993, respectively.
Effective February 1, 1994, the Company adopted SFAS 112. The statement
requires the accrual of the estimated costs of benefits provided by the
employer to former or inactive employees after employment but prior to
retirement. Adoption of SFAS 112 did not have a material impact upon the
consolidated financial position or results of operations.
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 fiscal year.
Note 9: Common Stock
Proposed issuance of common stock warrants: On January 10, 1995, the Company
announced that an agreement in principle had been reached with GE Capital
Corporation ("GE Capital"), a wholly owned subsidiary of General Electric
Company, to offer for lease power plants and gas compression stations
manufactured by the Company. Under the agreement, the Company will contribute
10% of the equity requirements for each lease transaction and GE Capital has
agreed to purchase warrants for the Company's Common Stock to fund the
Company's equity participation. Completion of this transaction is subject to
due diligence, further negotiations and approval of a definitive agreement by
the board of directors of both companies.
Shareholder Rights Plan: On March 9, 1995, the Company announced that its Board
of Directors adopted a shareholder rights plan. The Company adopted the plan
to protect shareholders against unsolicited attempts to acquire control of the
Company that do not offer what the Company believes to be an adequate price to
all shareholders. The rights will be issued to shareholders of record on March
20, 1995 and will expire on March 20, 2005.
The plan provides for the issuance of one right for each outstanding share of
the Company's Common Stock. The rights will become exercisable only if a
person or group acquires 15% or more of the Company's outstanding voting stock
or announces a tender or exchange offer that would result in ownership of 15%
or more of the Company's stock. Each right will entitle the holder to buy one-
third of a share of Common Stock at an exercise price of $30 per right, subject
to antidilution adjustments. The Company's Board of Directors may, at its
option, redeem all rights for $.01 per right at any time prior to the
acquisition of 15% or more of the Company's stock by a person or group. If a
person or group acquires 15% or more of the Company's outstanding voting stock,
each right will entitle holders, other than the acquiring party, to purchase
shares of the Company's Common Stock having a market value of twice the
exercise price of the right.
The plan also includes an exchange option. If a person or group acquires 15%
or more, but less than 50%, of the outstanding voting stock, the Board of
Directors may at its option exchange the rights in whole or in part for shares
of the Company's stock for each two shares of Common Stock for which a right is
then exercisable. This exchange would not apply to shares held by the person
or group holding 15% or more of the Company's voting stock.
If, after the rights have become exercisable, the Company merges or otherwise
combines with another entity, or sells 50% or more of its assets or earning
power, each right then outstanding will entitle its holder to purchase for $30,
subject to antidilution adjustments, a number of the acquiring party's common
shares having a market value of twice that amount.
Stock Options: The Stewart & Stevenson Services, Inc. 1988 Nonstatutory Stock
Option Plan and the Stewart & Stevenson Services, Inc. 1993 Nonofficer Stock
Option Plan authorize the grant of options to purchase an aggregate of up to
1,800,000 and 415,000 shares of Common Stock, respectively, at not less than
fair market value at the date of grant. The options have a term not exceeding
ten years and vest over periods not exceeding four years. Under the terms of
the 1993 Nonofficer Stock Option Plan, the number of options available for
grant increased from 415,000 to 514,550 shares as of February 1, 1995.
Stock option activity under the plan is as follows:
<TABLE>
<CAPTION>
___________________________________________________________________________________________________
Shares Option Price
under Range
Option Per Share
___________________________________________________________________________________________________
<S> <C> <C>
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
Granted 180,050 $50.25
Exercised (60,750) $13.125 - $32.625
Cancelled (12,225) $18.75 - $50.25
_________
Outstanding at end of Fiscal 1994 585,175 $18.75 - $50.25
=========
Options exercisable at end of Fiscal 1994 170,150 $18.75 - $50.25
=========
Options available for future grants at the end of Fiscal 1994 639,975
=========
</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 accounting change for SFAS
106.
The components of the income tax provision and the income tax payments are as
follows:
<TABLE>
<CAPTION>
__________________________________________________________________________________________
Fiscal Fiscal Fiscal
1994 1993 1992
__________________________________________________________________________________________
<S> <C> <C> <C>
Current $ 2,194 $10,454 $17,917
Deferred 32,326 17,545 2,680
________ ________ ________
Income tax provision $34,520 $27,999 $20,597
======== ======== ========
Income tax payments (excluding refunds) $17,422 $11,965 $13,667
======== ======== ========
</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
both Fiscal 1994 and 1993 and 34% in Fiscal 1992 is as follows:
<TABLE>
<CAPTION>
_________________________________________________________________________________________
Fiscal Fiscal Fiscal
1994 1993 1992
__________________________________________________________________________________________
<S> <C> <C> <C>
Provision at statutory rates $35,998 $29,856 $21,888
Other (1,478) (1,857) (1,291)
________ ________ ________
$34,520 $27,999 $20,597
======== ======== ========
</TABLE>
The tax effects of the significant temporary differences which comprise
the deferred tax liability at the end of Fiscal 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
_____________________________________________________________________________
Fiscal Fiscal
1994 1993
_____________________________________________________________________________
<S> <C> <C>
Deferred Tax Assets
Postretirement benefit obligation $ 5,338 $ 5,260
Accrued expenses and other reserves 11,072 11,426
Other 54 1,316
________ ________
Gross deferred tax assets 16,464 18,002
Deferred Tax Liabilities
Property, plant and equipment 4,602 4,027
Pension accounting 2,449 2,412
Contract accounting 34,817 27,533
Prepaid expenses and deferred charges 37,563 16,997
Other 9,685 7,359
________ ________
Gross deferred tax liabilities 89,116 58,328
________ ________
Net deferred tax liability $72,652 $40,326
======== ========
Current portion of deferred tax liability $64,614 $34,458
Non-current portion of deferred tax liability 8,038 5,868
________ ________
Net deferred tax liability $72,652 $40,326
======== ========
</TABLE>
Note 11: Supplemental Financial Data
Receivables consist of the following:
<TABLE>
<CAPTION>
______________________________________________________________________________
Fiscal Fiscal
1994 1993
______________________________________________________________________________
<S> <C> <C>
Accounts receivable $186,024 $145,433
Notes receivable 2,458 3,576
Allowance for doubtful accounts (1,668) (1,717)
_________ _________
$186,814 $147,292
========= =========
</TABLE>
At January 31, 1995, the Company does not have significant credit risk
concentrations. No single group or customer, other than the U. S. Government,
represents greater than 10% of total accounts receivable. The U. S. Government
accounted for approximately 12.7% and 10.2% of accounts receivable at January
31, 1995 and 1994, respectively.
Components of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
______________________________________________________________________________
Fiscal Fiscal
1994 1993
______________________________________________________________________________
<S> <C> <C>
Machinery and equipment $114,592 $107,405
Buildings and leasehold improvements 89,178 76,533
Revenue earning assets 10,556 10,154
Accumulated depreciation and amortization (98,355) (82,188)
_________ _________
115,971 111,904
Construction-in-progress 1,585 2,050
Land 14,304 12,519
_________ _________
$131,860 $126,473
========= =========
</TABLE>
Note 12: Consolidated Quarterly Data (unaudited)
<TABLE>
<CAPTION>
____________________________________________________________________________________________________
Fiscal 1994
____________________________________________________________________________________________________
Fourth Third Second First
Quarter Quarter Quarter Quarter
____________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Sales $287,815 $304,248 $287,118 $259,155
Gross profit 50,501 47,176 44,215 40,546
Net earnings 18,438 17,603 16,488 15,029
Net earnings per share .56 .53 .50 .46
</TABLE>
<TABLE>
<CAPTION>
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>
Item 9. Changes in and Disagreements 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 Caption in Definitive
Number and Caption Proxy Statement
___________________ _____________________
Item 10. Directors and Executive
Officers of the Registrant . . . . Election of Directors;
Executive Officers;
Compliance with
Securities Laws
Item 11. Executive Compensation . . . . . . Election of Directors;
Performance of Stewart
& Stevenson Common Stock;
Report of the
Compensation and
Management Development
Committee; 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 . . . . . Transactions with
Management and Certain
Business Relationships
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, 1995 and 1994.
Consolidated Statements of Earnings--Years ended January 31, 1995, 1994
and 1993.
Consolidated Statements of Shareholders' Equity--Years ended January 31,
1995, 1994 and 1993.
Consolidated Statements of Cash Flows--Years ended January 31, 1995, 1994
and 1993.
Notes to Consolidated Financial Statements.
2. Schedules 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 Company has several instruments which define the rights of holders
of long-term debt. Except for the instruments listed as exhibits 4.1,
4.2 and 4.3 below, the total amount of securities authorized under any
individual instrument with respect to long-term debt does not exceed 10%
of the total assets of the Company and its subsidiaries on a
consolidated basis. The Company agrees to furnish upon request by the
Securities and Exchange Commission any instruments not filed herewith
relating to its long-term debt.
The Company will furnish to any shareholder of record as of April 25,
1995, a copy of any exhibit to this annual report upon receipt of a
written request addressed to Mr. Lawrence E. Wilson, Vice President and
Secretary, P. O. Box 1637, Houston, Texas 77251-1637 and the payment of
$.20 per page with a minimum charge of $5.00 for reasonable expenses
prior to furnishing such exhibits.
The following exhibits are 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 (incorporated by
reference to Exhibit 3.1 of the Form 10-K of Stewart & Stevenson
for the fiscal year ended January 31, 1994 under the Commission
File No. 0-8493).
3.2 Third Restated Bylaws of Stewart & Stevenson Services, Inc.,
effective as of December 8, 1992 (incorporated by reference to
Exhibit 3.2 of the Form 10-K of Stewart & Stevenson for the fiscal
year ended January 31, 1994 under the Commission File No. 0-8493).
*4.1 Loan Agreement effective September 3, 1993, between Stewart &
Stevenson Services, Inc. and Texas Commerce Bank National
Association and ABN AMRO Bank, N.V., Houston Agency and The Bank
of New York, a New York Banking Corporation and NationsBank of
Texas, National Association.
*4.2 Agreement and First Amendment to Loan Agreement effective July 31,
1994, between Stewart & Stevenson Services, Inc. and Texas
Commerce Bank National Association and ABN AMRO Bank, N.V.,
Houston Agency and The Bank of New York, a New York Banking
Corporation and NationsBank of Texas, National Association.
*4.3 Agreement and Second Amendment to Loan Agreement effective
December 23, 1994, between Stewart & Stevenson Services, Inc. and
Texas Commerce Bank National Association and ABN AMRO Bank, N.V.,
Houston Agency and The Bank of New York, a New York Banking
Corporation and NationsBank of Texas, National Association and
Bank of America Illinois, an Illinois Banking Association and PNC
Bank, National Association, a National Banking Association.
4.4 Rights Agreement effective March 13, 1995, between Stewart &
Stevenson Services, Inc. and The Bank of New York (incorporated by
reference to Exhibit 1 of the Form 8-A Registration Statement of
Stewart & Stevenson under the Commission File No. 001-11443).
10.1 Lease Agreement effective April 1, 1990, between Joe Manning, Jr.
and C. E. Ames, as Lessors, and the Company, as Lessee
(incorporated by reference to Exhibit 10.1 of the Form 10-K of
Stewart & Stevenson for the fiscal year ended January 31, 1994
under the Commission File No. 0-8493).
10.2 Lease Agreement effective January 1, 1991, between Joe Manning,
Jr., as Lessor, and the Company, as Lessee (incorporated by
reference to Exhibit 10.2 of the Form 10-K of Stewart & Stevenson
for the fiscal year ended January 31, 1994 under the Commission
File No. 0-8493).
10.3 Lease Agreement effective January 1, 1988, between Miles McInnes
and Faye Manning Tosch, as Lessors, and the Company, as Lessee
(incorporated by reference to Exhibit 10.3 of the Form 10-K of
Stewart & Stevenson for the fiscal year ended January 31, 1994
under the Commission File No. 0-8493).
10.4 Lease Agreement effective March 1, 1986, between Joe Manning, Jr.
and Joe Manning, IV, as Lessors, and the Company, as Lessee
(incorporated by reference to Exhibit 10.4 of the Form 10-K of
Stewart & Stevenson for the fiscal year ended January 31, 1994
under the Commission File No. 0-8493).
10.5 Distributor Sales and Service Agreement effective January 1, 1993,
between the Company and Detroit Diesel Corporation (incorporated by
reference to Exhibit 10.1 of the Form 10-K of Stewart & Stevenson
for the fiscal year ended January 31, 1993 under the Commission
File No. 0-8493).
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
(incorporated by reference to Exhibit 28.1 of the Form S-3
Registration Statement of Stewart & Stevenson under the Commission
File No. 33-44149).
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
(incorporated by reference to Exhibit 28.2 of the Form S-3
Registration Statement of Stewart & Stevenson under the Commission
File No. 33-44149).
10.8 Stewart & Stevenson Services, Inc. Deferred Compensation Plan dated
as of December 31, 1979 (incorporated by reference to Exhibit 10.8
of the Form 10-K of Stewart & Stevenson for the fiscal year ended
January 31, 1994 under the Commission File No. 0-8493).
10.9 Stewart & Stevenson Services, Inc. 1988 Nonstatutory Stock Option
Plan (incorporated by reference to Exhibit 10.9 of the Form 10-K of
Stewart & Stevenson for the fiscal year ended January 31, 1994
under the Commission File No. 0-8493).
10.10 Amendment No. 1 to Stewart & Stevenson Services, Inc. 1988
Nonstatutory Stock Option Plan, dated September 11, 1990
(incorporated by reference to Exhibit 10.10 of the Form 10-K of
Stewart & Stevenson for the fiscal year ended January 31, 1994
under the Commission File No. 0-8493).
10.11 Stewart & Stevenson Services, Inc. Supplemental Executive
Retirement Plan (incorporated by reference to Exhibit 10.11 of the
Form 10-K of Stewart & Stevenson for the fiscal year ended January
31, 1994 under the Commission File No. 0-8493).
*21.1 List of Subsidiaries.
*23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
*27.1 Financial Data Schedules.
__________
* Filed with this report.
(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.
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 11th day of April,
1995.
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 11th day of April, 1995.
/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/ Robert S. Sullivan /s/ Richard R. Stewart
Robert S. Sullivan Richard R. Stewart
Director Director
/s/ Orson C Clay /s/ Brian H. Rowe
Orson C Clay Brian H. Rowe
Director 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. 10-K 1/31/94 0-8493 3.1
3.2 Third Restated Bylaws, effective as of
December 8, 1992. 10-K 1/31/94 0-8493 3.2
4.1 Loan Agreement effective September 3, 1993,
between Stewart & Stevenson Services, Inc.
and Texas Commerce Bank National Association
and ABN AMRO Bank, N.V., Houston Agency and
The Bank of New York, a New York Banking
Corporation and NationsBank of Texas,
National Association. *
4.2 Agreement and First Amendment to Loan Agreement
effective July 31, 1994, between Stewart & Stevenson
Services, Inc. and Texas Commerce Bank National
Association and ABN AMRO Bank, N.V., Houston
Agency and The Bank of New York, a New York
Banking Corporation and NationsBank of Texas,
National Association. *
4.3 Agreement and Second Amendment to Loan
Agreement effective December 23, 1994,
between Stewart & Stevenson Services,
Inc. and Texas Commerce Bank National
Association and ABN AMRO Bank, N.V., Houston
Agency and The Bank of New York, a New York
Banking Corporation and NationsBank of
Texas, National Association and Bank of
America Illinois, an Illinois Banking
Association and PNC Bank, a National
Banking Association. *
4.4 Rights Agreement effective March 13, 1995,
between Stewart & Stevenson Services, Inc.
and The Bank of New York. 8-A 3/15/95 001-11443 1
10.1 Lease Agreement effective April 1, 1990,
between Joe Manning, Jr. and C. E. Ames,
as Lessors, and the Company, as Lessee. 10-K 1/31/94 0-8493 10.1
10.2 Lease Agreement effective January 1, 1991,
between Joe Manning, Jr., as Lessor, and
the Company, as Lessee. 10-K 1/31/94 0-8493 10.2
10.3 Lease Agreement effective January 1, 1988,
between Miles McInnes and Faye Manning Tosch,
as Lessors, and the Company, as Lessee. 10-K 1/31/94 0-8493 10.3
10.4 Lease Agreement effective March 1, 1986, between
Joe Manning, Jr. and Joe Manning, IV, as Lessors,
and the Company, as Lessee. 10-K 1/31/94 0-8493 10.4
10.5 Distributor Sales and Service Agreement effective
January 1, 1993, between the Company and Detroit
Diesel Corporation. 10-K 1/31/93 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-K 1/31/94 0-8493 10.8
10.9 Stewart & Stevenson Services, Inc. 1988 Nonstatutory
Stock Option Plan. 10-K 1/31/94 0-8493 10.9
10.10 Amendment No. 1 to Stewart & Stevenson Services, Inc.
1988 Nonstatutory Stock Option Plan, dated September
11, 1990. 10-K 1/31/94 0-8493 10.10
10.11 Stewart & Stevenson Services, Inc. Supplemental
Executive Retirement Plan. 10-K 1/31/94 0-8493 10.11
21.1 List of subsidiaries. *
23.1 Consent of Arthur Andersen LLP,
Independent Public Accountants. *
27.1 Financial Data Schedules. *
</TABLE>
EXHIBIT 4.1
LOAN AGREEMENT
by and among
STEWART & STEVENSON SERVICES, INC.,
a Texas corporation,
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
a national banking association
acting in its individual capacity
and as Agent for Lenders
and
THE OTHER LENDERS NOW OR HEREAFTER
A PARTY HERETO
______________
$55,000,000 Revolving Credit Facility
and
$55,000,000 Discretionary
Letter of Credit Facility
______________
September 3, 1993
I N D E X
1. CERTAIN DEFINITIONS 1
Accounts and Inventory 1
Additional Interest 1
Adjusted CD Rate 1
Adjusted Eurodollar Interbank Rate 1
Affiliate 1
Agreement 1
Alternate Rates 1
Alternate Rate Borrowing 2
Annual Financial Statements 2
Application 2
Bankruptcy Code 2
Base CD Rate 2
Base Rate 2
Base Rate Borrowing 3
Borrowing Authorization 3
Business Day 3
Calculation Date 3
Capital Expenditures 3
Capital Lease Obligations 3
Cash Interest Expense 4
CD Rate 4
CD Rate Borrowing 4
CD Reserve Requirement 4
Ceiling Rate 4
Chapter One 4
Code 4
Commitment 4
Compliance Certificate 5
Controlled Group 5
Cover 5
Credit Documents 5
Dealer Rate 5
Default 5
EBITDA 5
Eligible Assignee 6
Environmental Claim 6
Environmental Liabilities 6
Environmental Permit 6
ERISA 6
Eurodollar Business Day 6
Eurodollar Interbank Rate 6
Eurodollar Rate 6
Eurodollar Rate Borrowing 7
Eurodollar Reserve Requirement 7
Event of Default 7
Facility Debt 7
FDIC Percentage 7
Federal Funds Rate 7
FMTV Capital Expenditures 7
Funding Loss 7
GAAP 8
Governmental Authority 8
Hazardous Substance 8
Indebtedness 8
Interest Bearing Debt 9
Interest Bearing Debt to Total Capitalization 9
Interest Coverage Ratio 9
Interest Options 9
Interest Payment Dates 9
Interest Period 9
Investment 9
Legal Requirement 10
Letter of Credit 10
Letter of Credit Agreement 10
Letter of Credit Documents 10
Letter of Credit Liabilities 10
Lien 10
Loan Availability Period 10
Loans 10
MAC 10
Majority Lenders 10
Margin Percentage 10
Maturity Date 11
Maximum Commitment 11
Negotiated Base Rate 11
Negotiated Rate 11
Negotiated Rate Borrowing 11
Net Income 12
Net Tangible Assets 12
Notes 12
Organizational Documents 12
Original Notes 12
Past Due Rate 12
PBGC 12
Percentage 12
Permitted Investments 12
Person 12
Plan 12
Prime Rate 13
Proper Form 13
Property 13
Quarterly Financial Statements 13
Rate Designation Notice 13
Regulation D 13
Request for Credit 14
Requirements of Environmental Law 14
Subsidiary 14
Superseded Loan Agreement 14
Tangible Net Worth 14
Taxes 14
Termination Date 14
Texas Credit Code 14
Total Capitalization 14
Unfunded Liabilities 14
2. LOANS 15
3. INTEREST OPTIONS FOR LOANS 17
4. CONDITIONS PRECEDENT 21
5. REPRESENTATIONS AND WARRANTIES 22
6. AFFIRMATIVE COVENANTS 26
7. NEGATIVE COVENANTS 29
8. DEFAULT 32
9. LENDERS' RIGHT TO CURE 34
10. THE AGENT 34
11. PARTICIPATION; ASSIGNMENT 36
12. USURY NOT INTENDED; SAVINGS PROVISIONS 37
13. DOCUMENTATION REQUIREMENTS 37
14. SURVIVAL 38
15. BORROWER AGREES TO PAY OR REIMBURSE AGENT'S EXPENSES; INDEMNIFICATION 38
16. AMENDMENTS IN WRITING 39
17. NOTICES 39
18. "INCLUDING" IS NOT LIMITING; SECTION HEADINGS AND REFERENCES; EXHIBITS,
ETC 39
19. OFFSET RIGHTS 40
20. VENUE 40
21. RIGHTS CUMULATIVE; DELAY NOT WAIVER 40
22. ENTIRE AGREEMENT; FORMER AGREEMENT SUPERSEDED 41
23. SEVERABILITY 41
24. DTPA WAIVER 41
25. RELEASE OF CLAIMS 42
26. COUNTERPARTS 42
27. ASSIGNMENT TO FEDERAL RESERVE BANK 42
EXHIBITS:
A - Note form
B - Rate Designation Notice
C - Request for Credit
D - Compliance Certificate
E - Assignment form
SCHEDULES:
I - Litigation
II - Subsidiaries
III - Investments
IV - Liens
LOAN AGREEMENT
This Loan Agreement ("Agreement") is made as of September 3, 1993 by and
among STEWART & STEVENSON SERVICES, INC. ("Borrower"), a Texas corporation, the
financial institutions (collectively herein called "Lenders") which are now or
may hereafter become a party hereto, and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association (in its individual capacity, "TCB"),
as agent for Lenders (in such capacity, "Agent"). Borrower has requested that
Lenders make loans to and issue letters of credit for the account of Borrower in
the following manner and subject to the following terms and conditions:
1. CERTAIN DEFINITIONS. Unless a particular word or phrase is otherwise
defined or the context otherwise requires, capitalized words and phrases used in
this Agreement shall have the following meanings (all definitions that are
defined in this Agreement in the singular to have the same meanings when used in
the plural and vice versa):
Accounts and Inventory shall have the respective meanings assigned to them
in the Texas Business and Commerce Code in force on the date hereof.
Additional Interest means the aggregate of all amounts accrued or paid
pursuant to the Notes or any of the other Credit Documents (other than interest
on the Notes at the Stated Rate) which, under applicable laws, are or may be
deemed to constitute interest on the indebtedness evidenced by the Notes.
Adjusted CD Rate means, with respect to each Interest Period applicable to
a CD Rate Borrowing, a rate per annum equal to the sum of (a) the quotient,
expressed as a percentage, of (i) the Dealer Rate with respect to such Interest
Period divided by (ii) 1.0000 minus the CD Reserve Requirement in effect on the
first day of such Interest Period plus (b) the FDIC Percentage in effect on the
first day of such Interest Period.
Adjusted Eurodollar Interbank Rate means, with respect to each Interest
Period applicable to a Eurodollar Rate Borrowing, a rate per annum equal to the
quotient, expressed as a percentage, of (a) the Eurodollar Interbank Rate with
respect to such Interest Period divided by (b) 1.0000 minus the Eurodollar
Reserve Requirement in effect on the first day of such Interest Period.
Affiliate means any Person controlling, controlled by or under common
control with any other Person. For purposes of this definition, "control"
(including "controlled by" and "under common control with") means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of any indicia of equity rights (whether issued and outstanding
capital stock, partnership interests or otherwise) or by any other means.
Agreement means this Loan Agreement, as it may from time to time be
amended, modified, restated or supplemented.
Alternate Rates means the CD Rate, the Eurodollar Rate and the Negotiated
Rate.
Alternate Rate Borrowing means that portion of the principal balance of the
Loans at any time bearing interest at an Alternate Rate.
Annual Financial Statements means for any fiscal year of a Person the
annual financial statements of such Person, including all notes thereto, which
statements shall include a balance sheet as of the end of such fiscal year and
an income statement, retained earnings statement and statement of cash flows for
such fiscal year, all setting forth in comparative form the corresponding
figures from the previous fiscal year, all prepared in conformity with GAAP, and
accompanied by an unqualified report and opinion of Arthur Andersen & Co. or
independent certified public accountants of recognized national standing
satisfactory to Majority Lenders, which shall state that such financial
statements, in the opinion of such accountants, present fairly, in all material
respects, the financial position of such Person as of the date thereof and the
results of its operations for the period covered thereby in conformity with
GAAP. Such statements shall be accompanied by a certificate of such accountants
that in making the appropriate audit and/or investigation in connection with
such report and opinion, such accountants did not become aware of any Default
or, if in the opinion of such accountant any such Default exists, a description
of the nature and status thereof. The Annual Financial Statements for Borrower
and its Subsidiaries shall be prepared on both a consolidated and a
consolidating basis (the parties recognizing that such consolidating statements
will be prepared in accordance with GAAP only to the extent normal and
customary).
Application shall have the meaning ascribed to such term in the Letter of
Credit Agreement.
Bankruptcy Code means the United States Bankruptcy Code, as amended, and
any successor statute.
Base CD Rate means, for any day, a rate per annum equal to the sum of
(a) the quotient, expressed as a percentage, of (1) the secondary market rate
for three-month certificates of deposit reported as being in effect on such day
(or, if such day is not a Business Day, the immediately preceding Business Day)
by the Federal Reserve Board through the public information telephone line of
the Federal Reserve Bank of New York (which rate will, under the current
practices of the Federal Reserve Board, be published in Federal Reserve
Statistical Release H.15[519] during the week following such day) or, if such
rate is not so reported on such day or such immediately preceding Business Day,
the average of the secondary market quotations for three-month certificates of
deposit of major money center banks in New York City received at approximately
10:00 a.m., Houston, Texas time, on such day (or, if such day shall not be a
Business Day, on the next preceding Business Day) by Agent from three New York
City negotiable certificate of deposit dealers of recognized standing selected
by Agent in its sole and absolute discretion, divided by (2) 1.0000 minus the CD
Reserve Requirement in effect on such day plus (b) the FDIC Percentage in effect
for such day.
Base Rate means for any day a rate per annum (rounded upwards to the
nearest 1/16 of 1%) equal to the lesser of (a) the greater of (1) the Prime Rate
for that day, (2) the Base CD Rate for that day plus 1 1/4%, and (3) the Federal
Funds Rate for that day plus 1/2 of 1% and (b) the Ceiling Rate. If for any
reason Agent shall have determined (which determination shall be conclusive and
binding, absent manifest error) that it is unable to ascertain the Base CD Rate
or the Federal Funds Rate, or both, for any reason, including the inability or
failure of Agent to obtain sufficient quotations in accordance with the terms
hereof, the Base Rate shall, until the circumstances giving rise to such
inability no longer exist, be the lesser of (a) the Prime Rate and (b) the
Ceiling Rate.
Base Rate Borrowing means that portion of the principal balance of the
Loans at any time bearing interest at the Base Rate.
Borrowing Authorization means a certificate, in Proper Form, of the
Secretary or an Assistant Secretary of a corporation as to the resolutions of
the Board of Directors of such corporation authorizing the execution, delivery
and performance of the documents to be executed by such corporation; the
incumbency and signature of the officer of such corporation executing such
documents on behalf of such corporation, and the Organizational Documents of
such corporation.
Business Day means any day other than a day on which commercial banks are
authorized or required to close in Houston, Texas or in the jurisdiction in
which the principal place of business of any Lender is located.
Calculation Date shall mean the Business Day on which Agent receives either
an Annual Financial Statement of Borrower, as contemplated in Section 6(b), or
the Quarterly Financial Statements of Borrower for a quarter-annual period as
contemplated in Section 6(b), together with the applicable schedules and
certificates required hereunder.
Capital Expenditures means, as to any Person, expenditures in respect of
fixed or capital assets by such Person, including the capital portion of lease
payments made in respect of Capital Lease Obligations, but excluding
expenditures for the restoration, repair or replacement of any fixed or capital
asset which was destroyed or damaged, in whole or in part, to the extent
financed by the proceeds of an insurance policy maintained by such Person and
further excluding (a) the FMTV Capital Expenditures and (b) Capital Expenditures
of up to $29,000,000 incurred on or before October 31, 1993. Expenditures in
respect of replacements and maintenance consistent with the business practices
of a Person in respect of plant facilities, machinery, fixtures and other like
capital assets utilized in the ordinary course of business are not Capital
Expenditures to the extent such expenditures are not capitalized in preparing a
balance sheet of such Person in accordance with GAAP.
Capital Lease Obligations means, as to any Person, the obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal Property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP (including Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board, as amended) and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13).
Cash Interest Expense means, for any period, the cash interest payments by
a Person made during such period in connection with such Person's Interest
Bearing Debt.
CD Rate means for any day a rate per annum equal to the lesser of (a) the
sum of (1) the Adjusted CD Rate in effect on the first day of the Interest
Period for the applicable CD Rate Borrowing plus (2) the applicable Margin
Percentage in effect on the first day of the Interest Period for the applicable
CD Rate Borrowing and (b) the Ceiling Rate. The CD Rate shall be computed on
the basis of the actual number of days elapsed in a year consisting of 360 days.
The CD Rate is subject to adjustments for reserves, insurance assessments and
other matters as provided for in Section 4(c).
CD Rate Borrowing means that portion of the Loans at any time bearing
interest at the CD Rate.
CD Reserve Requirement means, on any day, that percentage (expressed as a
decimal fraction and rounded, if necessary, to the next highest one ten
thousandth [.0001]) which is in effect on such day for determining all reserve
requirements (including basic, supplemental, marginal and emergency reserves)
applicable to new, non-personal, negotiable certificates of deposit issued by
Agent, in amounts of $100,000 or more with maturities equal to or comparable
with the applicable Interest Period, all as specified by any governmental
authority, including those imposed under Regulation D. The CD Reserve
Requirement shall be adjusted automatically on and as of the effective date of
any change without notice to Borrower or any other Person. Each determination
of the CD Reserve Requirement by Agent shall be conclusive and binding, absent
manifest error, and may be computed by using any reasonable averaging and
attribution method.
Ceiling Rate means, on any day, the maximum nonusurious rate of interest
permitted for that day by whichever of applicable federal or Texas laws permits
the higher interest rate, stated as a rate per annum. On each day, if any, that
Chapter One establishes the Ceiling Rate, the Ceiling Rate shall be the
"indicated rate ceiling" (as defined in Chapter One) for that day. Lenders may
from time to time, as to current and future balances, implement any other
ceiling under Chapter One by notice to Borrower, if and to the extent permitted
by Chapter One. Without notice to Borrower or any other Person, the Ceiling
Rate shall automatically fluctuate upward and downward as and in the amount by
which such maximum nonusurious rate of interest permitted by applicable law
fluctuates.
Chapter One means Chapter One of the Texas Credit Code, as in effect on the
date hereof.
Code means the Internal Revenue Code of 1986, as amended, as now or
hereafter in effect, together with all regulations, rulings and interpretations
thereof or thereunder by the Internal Revenue Service.
Commitment means the Maximum Commitment or such lesser amount as Borrower
may designate by notice to Agent pursuant to Section 2(b).
Compliance Certificate shall have the meaning given to it in Section 6(b).
Controlled Group means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the applicable Person, are treated as a single employer
under Section 414 of the Code.
Cover for Letter of Credit Liabilities shall be effected by paying to Agent
immediately available funds or other collateral acceptable to Majority Lenders,
in an amount equal to any required prepayment, to be held by Agent in a
collateral account maintained by Agent and collaterally assigned as security by
Borrower for the financial accommodations extended pursuant to this Agreement
and the other Credit Documents using documentation in Proper Form. Such amount
shall be retained by Agent in such collateral account until such time as the
applicable Letters of Credit shall have expired and the Reimbursement
Obligations, if any, with respect thereto shall have been fully satisfied;
provided, however, that Agent shall not be required to release any amount in
such collateral account if a Default or Event of Default has occurred and is
continuing.
Credit Documents means any and all papers now or hereafter governing,
evidencing, guaranteeing or securing or otherwise relating to all or any part of
the Facility Debt, including the Notes, this Agreement, Borrowing Authorizations
of Borrower, the Letter of Credit Documents, all instruments, certificates and
agreements now or hereafter executed or delivered to Agent or any Lender
pursuant to any of the foregoing or in connection with the Loans or the Letters
of Credit or any commitment regarding the Loans or the Letters of Credit and all
amendments, modifications, renewals, extensions, increases and rearrangements
of, and substitutions for, any of the foregoing.
Dealer Rate means, for each Interest Period, the rate of interest per
annum, rounded, if necessary, to the next highest whole multiple of one-
sixteenth percent (1/16%), quoted by Agent at or before 10:00 a.m., Houston,
Texas time (or as soon thereafter as practicable), on the first day of such
Interest Period, to be the arithmetic average of the prevailing rates per annum
at the time of determination and in accordance with the then existing practice
in the applicable market, bid by one or more certificate of deposit dealers of
recognized standing selected by Agent in its sole discretion, for the purchase
at face value of domestic negotiable certificates of deposit from Agent, or any
affiliate of Agent selected by Agent as the reference bank, having a maturity
equal to the length of such Interest Period and in an amount equal (or as nearly
equal as may be) to the CD Rate Borrowing to which such Interest Period
relates. Each determination by Agent of the Dealer Rate shall be conclusive and
binding, absent manifest error, and may be computed using any reasonable
averaging and attribution method.
Default means an Event of Default or an event which with notice or lapse of
time or both would, unless cured or waived, become an Event of Default.
EBITDA means Net Income plus (a) interest expense; (b) depreciation,
amortization, depletion and obsolescence of Property; (c) other non-cash
extraordinary charges (net of non-cash extraordinary credits), and (d) tax
expense, all determined in accordance with GAAP. EBITDA shall be determined on
a consolidated basis.
Eligible Assignee means a financial institution acceptable to Agent and
Borrower, which acceptance shall not be unreasonably withheld.
Environmental Claim shall mean any third party (including any Governmental
Authority) action, lawsuit, claim or proceeding which seeks to impose liability
for violation of a Requirement of Environmental Law or of an Environmental
Permit.
Environmental Liabilities shall mean all liabilities arising from any
Environmental Claim under any theory of recovery, at law or in equity, and
whether based on negligence, strict liability or otherwise, including: remedial,
removal, response, abatement, restoration (including natural resources),
investigative, monitoring, personal injury and damage to property, natural
resources or injuries to Persons, and any other related costs, expenses, losses,
damages, penalties, fines, liabilities and obligations.
Environmental Permit shall mean any permit, license, approval or other
authorization under any Requirement of Environmental Law relating to emissions,
discharges, releases or threatened releases of pollutants, contaminants or
Hazardous Substances or toxic materials or wastes into ambient air, surface
water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of, wastes, pollutants, contaminants or Hazardous Substances.
ERISA means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and all rules, regulations, rulings and interpretations
adopted by the Internal Revenue Service or the U.S. Department of Labor
thereunder.
Eurodollar Business Day means a Business Day on which transactions in
United States dollar deposits between banks may be carried on in whatever
Eurodollar interbank market may be selected by Agent in accordance herewith.
Eurodollar Interbank Rate means, for each Interest Period, the rate of
interest per annum, rounded, if necessary, to the next highest whole multiple of
one-sixteenth percent (1/16%), quoted by Agent at or before 10:00 a.m., Houston,
Texas time (or as soon thereafter as practicable), on the date two Eurodollar
Business Days before the first day of such Interest Period, to be the arithmetic
average of the prevailing rates per annum at the time of determination and in
accordance with the then existing practice in the applicable market, for the
offering to Agent by one or more prime banks selected by Agent in its sole
discretion, in whatever Eurodollar interbank market may be selected by Agent in
its sole discretion, of deposits in United States dollars for delivery on the
first day of such Interest Period and having a maturity equal to the length of
such Interest Period and in an amount equal (or as nearly equal as may be) to
the Eurodollar Rate Borrowing to which such Interest Period relates. Each
determination by Agent of the Eurodollar Interbank Rate shall be conclusive and
binding, absent manifest error, and may be computed using any reasonable
averaging and attribution method.
Eurodollar Rate means for any day a rate per annum equal to the lesser of
(a) the sum of (1) the Adjusted Eurodollar Interbank Rate in effect on the first
day of the Interest Period for the applicable Eurodollar Rate Borrowing plus (2)
the applicable Margin Percentage in effect on the first day of the Interest
Period for the applicable Eurodollar Rate Borrowing and (b) the Ceiling Rate.
Subject to Section 12, each Eurodollar Rate is subject to adjustments for
reserves, insurance assessments and other matters as provided for in Section
3(c).
Eurodollar Rate Borrowing means each portion of the principal balance of
the Loans at any time bearing interest at a Eurodollar Rate.
Eurodollar Reserve Requirement means, on any day, that percentage
(expressed as a decimal fraction and rounded, if necessary, to the next highest
one ten thousandth [.0001]) which is in effect on such day for determining all
reserve requirements (including basic, supplemental, marginal and emergency
reserves) applicable to "Eurocurrency liabilities," as currently defined in
Regulation D, all as specified by any governmental authority, including those
imposed under Regulation D. Each determination of the Eurodollar Reserve
Requirement by Agent shall be conclusive and binding, absent manifest error, and
may be computed using any reasonable averaging and attribution method.
Event of Default shall have the meaning assigned to it in Section 8.
Facility Debt means the Indebtedness evidenced by the Notes and the Letter
of Credit Liabilities and any and all other Indebtedness arising pursuant to
this Agreement or any other Credit Document from time to time.
FDIC Percentage means, on any day, the annual assessment rate in effect on
such day which is payable by a member of the Bank Insurance Fund classified as
well capitalized and within supervisory subgroup "B" (or a comparable risk
classification) within the means of 12 C.F.R. Section 372.3(d) (or any successor
provision) to the Federal Deposit Insurance Corporation (or any successor) for
its insuring time deposits at offices of such member in the United States. Each
determination of the FDIC Percentage by Agent shall be conclusive and binding,
absent manifest error, and may be computed by using any reasonable averaging and
attribution method.
Federal Funds Rate means, for any period, a fluctuating interest rate per
annum equal for each day during such period to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal funds brokers of recognized
standing selected by Agent in its sole and absolute discretion.
FMTV Capital Expenditures shall mean the sum of all capitalized leases and
capital expenditures, determined in accordance with GAAP, relating to the
performance by Borrower of that certain contract between Borrower and the United
States of America to assemble and furnish medium tactical vehicles.
Funding Loss means, with respect to (a) Borrower's payment of principal of
an Alternate Rate Borrowing on a day other than the last day of the applicable
Interest Period; (b) Borrower's failure to borrow an Alternate Rate Borrowing on
the date specified by Borrower; (c) Borrower's failure to make any prepayment of
the Loans (other than Base Rate Borrowings) on the date specified by Borrower,
or (d) any cessation of an Alternate Rate to apply to the Loans or any part
thereof pursuant to Section 3(c), in each case whether voluntary or involuntary,
any loss, expense, penalty, premium or liability incurred by Agent or any Lender
(including any loss or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by Agent or any Lender to fund
or maintain a Loan).
GAAP means, as to a particular Person, such accounting practice as, in the
opinion of the independent certified public accountants of recognized national
standing regularly retained by such Person and acceptable to Majority Lenders,
conforms at the time to generally accepted accounting principles, consistently
applied. Generally accepted accounting principles means those principles and
practices (a) which are recognized as such by the Financial Accounting Standards
Board or equivalent non-United States counterpart, (b) which are applied for all
periods after the date hereof in a manner consistent with the manner in which
such principles and practices were applied to the most recent audited financial
statements of the relevant Person furnished to Lenders, and (c) which are
consistently applied for all periods after the date hereof so as to reflect
properly the financial condition, and results of operations and changes in
financial position, of such Person. If any change in any accounting principle
or practice is required by the Financial Accounting Standards Board or
equivalent non-United States counterpart in order for such principle or practice
to continue as a generally accepted accounting principle or practice, all
reports and financial statements required hereunder may be prepared in
accordance with such change only after written notice of such change is given to
Agent.
Governmental Authority means any sovereign governmental authority, the
United States of America, any State of the United States and any political
subdivision of any of the foregoing, and any central bank, agency, department,
commission, board, bureau, court or other tribunal having jurisdiction over
Agent, any Lender, Borrower, any Subsidiary of Borrower, or any of their respec-
tive Property.
Hazardous Substance shall mean petroleum products and any hazardous or
toxic waste or substance defined or regulated as a hazardous substance from time
to time by any law, rule, regulation or order described in the definition of
"Requirements of Environmental Law".
Indebtedness means and includes (a) all items which in accordance with GAAP
would be included on the liability side of a balance sheet on the date as of
which Indebtedness is to be determined (excluding capital stock, surplus,
surplus reserves and deferred credits); (b) all guaranties, letter of credit
contingent reimbursement obligations, endorsements and other contingent
obligations in respect of, or any obligations to purchase or otherwise acquire,
Indebtedness of others, and (c) all Indebtedness secured by any Lien existing on
any interest of the Person with respect to which Indebtedness is being
determined in Property owned subject to such Lien whether or not the
Indebtedness secured thereby shall have been assumed (up to the amount of such
Indebtedness or the book value of such Property, whichever is less); provided,
that such term shall not mean or include any Indebtedness in respect of which
monies sufficient to pay and discharge the same in full (either on the expressed
date of maturity thereof or on such earlier date as such Indebtedness may be
duly called for redemption and payment) shall be deposited with a depository,
agency or trustee acceptable to Majority Lenders in trust for the payment
thereof.
Interest Bearing Debt means, as to any Person, (i) Indebtedness of such
Person for borrowed money (other than Indebtedness which is non-recourse to such
Person), (ii) Indebtedness of such Person for deferred compensation and (iii)
Capital Lease Obligations.
Interest Bearing Debt to Total Capitalization means, as of any day, the
ratio of Interest Bearing Debt to Total Capitalization.
Interest Coverage Ratio means, as of any day, the ratio of (a) the amount
of EBITDA for the 12-month period ending on such date less cash taxes and
Capital Expenditures for such period to (b) Cash Interest Expense for such
period.
Interest Options means the Base Rate and the Alternate Rates.
Interest Payment Dates means (a) for Base Rate Borrowings, the last
Business Day of each October, January, April and July and the Maturity Date; and
(b) for Alternate Rate Borrowings, the end of the applicable Interest Period
(and if such Interest Period exceeds three months' duration, quarterly,
commencing on the first quarterly anniversary of the first day of such Interest
Period), and, in all cases, the Maturity Date.
Interest Period means, for each Alternate Rate Borrowing, a period
commencing on the date such Alternate Rate Borrowing began and ending on the
numerically corresponding day which is, subject to availability, (a) for each CD
Rate Borrowing, 30, 60, 90 or 180 days thereafter, (b) for each Eurodollar Rate
Borrowing, one, two, three or six months thereafter and (c) for each Negotiated
Rate Borrowing, overnight or no less than seven but no more than 30 days
thereafter, as Borrower shall elect in accordance herewith; provided, (v) any
Interest Period with respect to a Eurodollar Rate Borrowing which would
otherwise end on a day which is not a Eurodollar Business Day shall be extended
to the next succeeding Eurodollar Business Day, unless such Eurodollar Business
Day falls in another calendar month, in which case such Interest Period shall
end on the next preceding Eurodollar Business Day; (w) any Interest Period with
respect to a CD Rate Borrowing or Negotiated Rate Borrowing which would
otherwise end on a day which is not a Business Day shall be extended to the next
succeeding Business Day (subject to the provisions of the clause [y] below), (x)
any Interest Period with respect to a Eurodollar Rate Borrowing which begins on
the last Eurodollar Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at the end of
such Interest Period) shall end on the last Eurodollar Business Day of the
appropriate calendar month; (y) no Interest Period shall ever extend beyond the
Maturity Date; and (z) Interest Periods shall be selected by Borrower in such a
manner that the Interest Period with respect to any portion of the Loans which
shall become due shall not extend beyond such due date.
Investment means the purchase or other acquisition of any securities or
Indebtedness of, or the making of any loan, advance, transfer of Property or
capital contribution to, or the incurring of any liability in respect of the
Indebtedness of, any Person.
Legal Requirement means any law, statute, ordinance, decree, requirement,
order, judgment, rule, or regulation (or interpretation of any of the foregoing)
of, and the terms of any license or permit issued by, any Governmental
Authority, whether presently existing or arising in the future. The term "Legal
Requirement" includes Requirements of Environmental Law.
Letter of Credit shall have the meaning ascribed to such term in the Letter
of Credit Agreement.
Letter of Credit Agreement means the Letter of Credit Agreement dated
concurrently herewith executed by and among Borrower, Agent, TCB and the other
Lenders, as it may from time to time be amended, modified, restated or
supplemented.
Letter of Credit Documents means the Letter of Credit Agreement, the
Letters of Credit, the Letter of Credit Requests and the Applications.
Letter of Credit Liabilities shall have the meaning ascribed to such term
in the Letter of Credit Agreement.
Letter of Credit Request shall have the meaning assigned to it in Section 3
of the Letter of Credit Agreement.
Lien means any mortgage, pledge, charge, encumbrance, security interest,
collateral assignment or other lien or restriction of any kind, whether based on
common law, constitutional provision, statute or contract, and shall include
reservations, exceptions, encroachments, easements, rights of way, covenants,
conditions, restrictions, leases and other title exceptions.
Loan Availability Period means the period from and including the date
hereof to (but not including) the Termination Date.
Loans means the loans described in and provided for by Section 2.
MAC means Machinery Acceptance Corporation, a Texas corporation.
Majority Lenders means Lenders the aggregate of whose Percentages is
greater than fifty percent (50%).
Margin Percentage means, on any day, the per annum percentage corresponding
to the Interest Bearing Debt to Total Capitalization Ratio (determined as of the
most recent Calculation Date) on such day as provided below:
(A) From the date hereof through and including July 31, 1994:
Interest Bearing Debt Per Annum
to Total Capitalization Ratio Percentage
35% or greater 1/2%
20% to, but not including, 35% 3/8%
less than 20% 1/4%
(B) From August 1, 1994 and at any time thereafter:
Interest Bearing Debt Per Annum
to Total Capitalization Ratio Percentage
35% or greater 1/2%
20% to, but not including, 35% 3/8%
less than 20% 3/8%
Provided, that with respect to (a) any Loan made on or after August 1, 1994 and
which bears interest at either the CD Rate or the Eurodollar Rate and (b) any
conversion of any portion of the Loans to a CD Rate Borrowing or a Eurodollar
Rate Borrowing which occurs on or after August 1, 1994, if at the time that such
Loan is made or conversion occurs the aggregate outstanding principal balance of
the Notes (after giving effect to any Loan then being requested) is equal to or
greater than one-third (1/3) of the Commitment, the Margin Percentage applicable
to such Loan or conversion shall be the amount set forth above plus an
additional one-eighth of one percent (1/8%) per annum during the entire Interest
Period applicable to such Loan or conversion.
Maturity Date means the maturity of the Notes, July 31, 1995, as the same
may hereafter be accelerated pursuant to the provisions of any of the Credit
Documents.
Maximum Commitment means Fifty-Five Million Dollars ($55,000,000).
Negotiated Base Rate means, for each Interest Period, the rate of interest
per annum quoted by Agent to Borrower at the time of the applicable request by
Borrower for a Negotiated Rate Borrowing as the "Negotiated Base Rate."
Negotiated Rate means for any day a rate per annum equal to the lesser of
(a) the Negotiated Base Rate in effect of the first day of the Interest Period
for the applicable Negotiated Rate Borrowing and (b) the Ceiling Rate. Subject
to Section 12, the Negotiated Rate is subject to adjustments for reserves,
insurance assessments and other matters as provided for in Section 3(c).
Negotiated Rate Borrowing means each portion of the principal balance of
the Loans at any time bearing interest at the Negotiated Rate.
Net Income means gross revenues and other proper income credits, less all
proper income charges (including Taxes on income), all determined in accordance
with GAAP. Net Income shall be determined on a consolidated basis.
Net Tangible Assets means, as to a particular Person, assets (valued at
cost less normal depreciation) of such Person and its Subsidiaries minus
intangibles of such Person and its Subsidiaries, all determined in accordance
with GAAP.
Notes means the promissory notes of Borrower evidencing the Loans
substantially in the form of Exhibit A, and any and all renewals, extensions,
modifications, rearrangements and/or replacements thereof.
Organizational Documents means the certificate or articles of incorporation
and bylaws of a corporation.
Original Notes shall mean the promissory notes issued pursuant to the
Superseded Loan Agreement.
Past Due Rate shall mean a rate per annum equal to the lesser of (a) the
Base Rate plus four percent (4%) and (b) the Ceiling Rate.
PBGC means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
Percentage means, for any Lender, such Lender's interest in the Maximum
Commitment. The dollar amount of each Lender's interest in the Maximum
Commitment as of the date hereof is set forth opposite such Lender's name on the
signature pages of this Agreement.
Permitted Investments means: (a) readily marketable securities issued or
fully guaranteed by the United States of America with maturities of not more
than one year, (b) financial instruments (including commercial paper) with
maturities of not more than 270 days of Persons, in each case, rated "Prime 2"
or better by Moody's Investors Service, Inc. or "A-2" or better by Standard and
Poor's Corporation; (c) certificates of deposit, eurodollar deposits or repur-
chase obligations having a maturity of not more than one year from the date of
issuance thereof, or tax exempt bonds backed by letters of credit, in each case,
issued by any U.S. domestic bank having capital surplus of at least $100,000,000
or by any other financial institution acceptable to Majority Lenders, all of the
foregoing, and (d) readily marketable shares of any money market fund having
total assets in excess of $250,000,000 and not disapproved in writing by
Majority Lenders.
Person means any individual, corporation, partnership, joint venture, joint
stock association, business or other trust, unincorporated organization,
Governmental Authority or any other form of entity.
Plan means an employee pension benefit plan which is covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the Code
and is either (a) maintained by Borrower, any Subsidiary of Borrower or any
member of a Controlled Group for employees of Borrower or any of its
Subsidiaries or (b) maintained pursuant to a collective bargaining agreement or
any other arrangement under which more than one employer makes contributions and
to which Borrower or any member of a Controlled Group for employees of Borrower
or any of its Subsidiaries is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions.
Prime Rate means, on any day, the prime rate for that day as announced from
time to time by TCB and thereafter entered in the minutes of its Loan and
Discount Committee. Without notice to Borrower or any other Person, the Prime
Rate shall automatically fluctuate upward and downward as and in the amount by
which said prime rate fluctuates, with each change to be effective as of the
date of each change in said prime rate. The Prime Rate is a reference rate and
does not necessarily represent the lowest or best rate or a favored rate, and
Agent and Lenders disclaim any statement, representation or warranty to the
contrary. Any Lender may make commercial loans or other loans at rates of
interest at, above or below the Prime Rate.
Proper Form means in form and substance satisfactory to Agent and Majority
Lenders.
Property means any interest in any kind of property or asset, whether real,
personal or mixed, tangible or intangible.
Quarterly Financial Statements means for any fiscal quarter of a Person the
quarterly financial statements of such Person which statements shall include a
balance sheet as of the end of such fiscal quarter and an income statement, and
a statement of cash flows for the fiscal year to date, subject only to normal
year-end adjustments, all setting forth in comparative form the corresponding
figures for the corresponding fiscal quarter of the preceding year, prepared in
accordance with GAAP and certified as presenting fairly the financial condition
and results of operations by the chief financial officer or treasurer of such
Person. The Quarterly Financial Statements for Borrower and its Subsidiaries
shall be prepared on both a consolidated and a consolidating basis (the parties
recognizing that such consolidating statements will be prepared in accordance
with GAAP only to the extent normal and customary and the statement of cash
flows need not be furnished in a consolidating form).
Rate Designation Date means that Business Day which is (a) in the case of
Base Rate Borrowings and Negotiated Rate Borrowings, 10:00 a.m., Houston, Texas
time, on the date of such borrowing; (b) in the case of Eurodollar Rate
Borrowings, 10:00 a.m., Houston, Texas time, on the date two Eurodollar Business
Days preceding the first day of any proposed Interest Period, and (c) in the
case of CD Rate Borrowings, 10:00 a.m., Houston, Texas time, on the Business Day
immediately preceding the first day of any proposed Interest Period.
Rate Designation Notice means a written notice substantially in the form of
Exhibit B.
Regulation D means Regulation D of the Board of Governors of the Federal
Reserve System from time to time in effect and includes any successor or other
regulation relating to reserve requirements applicable to member banks of the
Federal Reserve System.
Request for Credit means a request for credit duly executed by an
appropriate officer on behalf of Borrower, appropriately completed and
substantially in the form of Exhibit C attached hereto.
Requirements of Environmental Law means all requirements imposed by any law
(including The Resource Conservation and Recovery Act and The Comprehensive
Environmental Response, Compensation, and Liability Act), rule, regulation or
order of any Governmental Authority in effect at the applicable time which
relate to (i) pollution, protection or clean-up of the air, surface water,
ground water or land; (ii) solid, gaseous or liquid waste generation, recycling,
reclamation, treatment, storage, disposal or transportation; or (iii) regulation
of the manufacture, processing, distribution in commerce, use, discharge,
release, threatened release, emission or storage of Hazardous Substances.
Subsidiary means, as to a particular parent Person, any other Person of
which 50% or more of the indicia of equity rights (whether outstanding capital
stock, partnership interests or otherwise) is at the time directly or indirectly
owned or held by such parent Person, or by one or more of its Affiliates. In
cases herein where reference is made to the Subsidiaries of Borrower, such
references shall not refer to or include 2707 North Loop West, Ltd., a Texas
limited partnership, until such time as Borrower or any of its Subsidiaries
becomes the general partner thereof.
Superseded Loan Agreement shall have the meaning ascribed to it in Section
22.
Tangible Net Worth means total stockholders' equity (adjusted for treasury
stock), less all intangibles, all determined in accordance with GAAP.
Taxes means any tax, levy, impost, duty, charge or fee.
Termination Date means the earlier of (a) the Maturity Date or (b) the date
of termination of the Commitment pursuant to Section 8.
Texas Credit Code means Title 79, Texas Revised Civil Statutes, 1925, as
amended.
Total Capitalization shall mean the sum of (i) all Interest Bearing Debt
and (ii) total stockholders' equity of Borrower (adjusted for treasury stock).
Unfunded Liabilities means, with respect to any Plan, at any time, the
amount (if any) by which (a) the present value of all benefits under such Plan
exceeds (b) the fair market value of all Plan assets allocable to such benefits,
all determined as of the then most recent actuarial valuation report for such
Plan, but only to the extent that such excess represents a potential liability
of any member of the applicable Controlled Group to the PBGC or a Plan under
Title IV of ERISA.
The words "hereof," "herein," and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not any
particular provision of this Agreement.
2. LOANS.
(a) Loans and Commitments. Subject to the terms and conditions
hereof, each Lender severally agrees to make Loans to Borrower from time to time
during the Loan Availability Period, not to exceed at any time outstanding such
Lender's Percentage of the Commitment, Borrower having the right to borrow,
repay and reborrow. Each Request for Credit by Borrower shall be deemed a
request for a Loan from each Lender equal to such Lender's Percentage of the
aggregate amount so requested, and such aggregate amount shall be equal to the
lesser of (1) an integral multiple of $1,000,000 and (2) the unused portion of
the Commitment. Each repayment of the Loans shall be deemed a repayment of each
Lender's Loans equal to such Lender's Percentage of the aggregate amount so
repaid, and the aggregate amount so repaid shall be equal to the lesser of (i)
an integral multiple of $1,000,000 and (ii) the aggregate unpaid principal
balance of the Notes. The obligations of Lenders hereunder are several and not
joint, and the preceding two sentences will give rise to certain inappropriate
results if special provisions are not made to accommodate the failure of a
Lender to fund a Loan as and when required by this Agreement; therefore,
notwithstanding anything herein to the contrary, (I) no Lender shall be required
to make Loans at any one time outstanding in excess of such Lender's Percentage
of the Commitment or of the requested Loan and (II) if a Lender fails to make a
Loan as and when required hereunder and Borrower subsequently makes a repayment
on the Loans, such repayment shall be split among the non-defaulting Lenders
ratably in accordance with their respective Percentages until each Lender has
its Percentage of all of the outstanding Loans, and the balance of such
repayment shall be divided among all of Lenders in accordance with their
respective Percentages. The Loans shall be evidenced by the Notes.
(b) Reduction in Commitment. Borrower shall have the right to
terminate or permanently reduce the unused portion of the Commitment at any time
or from time to time, provided that Borrower may not decrease the Commitment to
an amount less than the aggregate outstanding principal balance of the Notes.
Each decrease in the Commitment pursuant to this Section shall be permanent and
shall be an integral multiple of $1,000,000. Each notice of a decrease in the
Commitment shall be effective upon the date specified therein; provided that
Agent must receive such notice at least five (5) Business Days prior to its
effective date.
(c) Commitment Fee. In consideration of the Commitment, Borrower
agrees to pay a commitment fee (computed on the basis of the actual number of
days elapsed in a year composed of 365 or 366 days, as the case may be) of (1)
twenty five (25) basis points per annum through and including July 31, 1994, and
(2) eighteen and three-fourths (18.75) basis points per annum thereafter, in
each case, on the daily average difference between the Commitment and the
aggregate principal balance of the Notes, such fee to be due and payable to
Agent for the account of Lenders on each Interest Payment Date for Base Rate
Borrowings before the Termination Date, and on the Termination Date, in addition
to the installments of interest on the Notes. All past due commitment fees
shall bear interest at the Past Due Rate. Lenders and Borrower agree that
Chapter 15 of the Texas Credit Code shall not apply to this Agreement, the Notes
or any Loan.
(d) Mandatory Payments of Principal and Interest. Accrued and unpaid
interest on the unpaid principal balance of the Notes shall be due and payable
on the Interest Payment Date. The entire unpaid principal balance of each Note
shall be finally due and payable on the Maturity Date. All payments hereon made
pursuant to this Section shall be applied first to accrued interest, the balance
to principal. If any payment provided for in any Note shall become due on a day
other than a Business Day, such payment may be made on the next succeeding
Business Day (unless the result of such extension of time would be to extend the
date of such payment into another calendar month or beyond the Maturity Date,
and in either such event such payment shall be made on the Business Day
immediately preceding the day on which such payment would otherwise have been
due), and such extension of time shall in such case be included in the
computation of interest on the Notes.
(e) Mandatory Prepayments. Borrower shall from time to time prepay
the Loans in such amounts as shall be necessary so that at all times the
aggregate principal amount of all Loans outstanding shall be less than or equal
to the Commitment.
(f) Funding Mechanics for Loans. Agent shall forward a copy of each
Request for Credit to Lenders promptly upon each receipt. Each Lender shall
provide Agent with such Lender's Percentage of each requested Loan in
immediately available funds no later than the date Borrower has requested such
Loan to be made. If any Lender fails to so provide funds to Agent, Agent may
(but shall not be obligated to) advance to Borrower such Lender's Percentage of
such requested Loan; such advance shall be payable by such Lender on demand and
shall bear interest at the Federal Funds Rate. Agent shall disburse to Lenders
all funds received by it from or on account of Borrower pursuant to the Credit
Documents in accordance with the respective interests of Lenders therein (in
accordance with their respective Percentages) by wire transfer of immediately
available funds (1) if such funds are received by Agent prior to 12:00 noon,
Houston, Texas time, on the day of receipt and (2) if such funds are received by
Agent after 12:00 noon, during the next Business Day, without interest, premium
or penalty thereon. If Agent does not so disburse such funds, such funds shall
be payable by Agent on demand and shall bear interest from the day when due at
the Federal Funds Rate. If a Lender owes any amount to Agent pursuant to this
Agreement, Agent shall give notice thereof, specifying the amount thereof and
reasonable detail as to the determination thereof, to such Lender and the same
shall be due and payable on demand and shall bear interest from the date when
due at the Federal Funds Rate.
(g) Sharing of Payments, Etc. If a Lender shall obtain payment of
any principal of or interest on any Loan made by it under this Agreement, on any
Letter of Credit Liabilities or on other Facility Debt then due to such Lender
hereunder, through the exercise of any right of set-off (including, without
limitation, any right of setoff or lien granted under Section 19 hereof),
banker's lien, counterclaim or similar right, or otherwise, it shall promptly
purchase from the other Lenders participations in the Loans made, Letter of
Credit Liabilities or other Facility Debt held by the other Lenders in such
amounts, and make such other adjustments from time to time as shall be equitable
to the end that all Lenders shall share the benefit of such payment (net of any
expenses which may be incurred by such Lenders in obtaining or preserving such
benefit) pro rata in accordance with their respective Percentages. To such end,
Lenders shall make appropriate adjustments among themselves (by the resale of
participations sold or otherwise) if such payment is rescinded or must otherwise
be restored. Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any Lender so purchasing a participation in the Loans
made, Letter of Credit Liabilities or other Facility Debt held, by other Lenders
may exercise all rights of setoff, bankers' lien, counterclaim or similar rights
with respect to such participation as fully as if such Lender were a direct
holder of Loans, Letter of Credit Liabilities or other Facility Debt in the
amount of such participation. Nothing contained herein shall require any Lender
to exercise any such right or shall affect the right of any Lender to exercise,
and retain the benefits of exercising, any such right with respect to any other
Indebtedness of Borrower.
3. INTEREST OPTIONS FOR LOANS.
(a) Options Available. The outstanding principal balances of the
Notes shall bear interest at the Base Rate; provided, that (1) all past due
amounts, both principal and accrued interest, shall bear interest at the Past
Due Rate, and (2) subject to the provisions hereof, Borrower shall have the
option of having all or any portion of the principal balances of the Notes from
time to time outstanding bear interest at an Alternate Rate. The records of
Agent with respect to Interest Options, Interest Periods and the amounts of
Loans to which they are applicable shall be binding and conclusive, absent
manifest error. Interest on the Loans shall be calculated at the Base Rate
except where it is expressly provided pursuant to this Agreement that an
Alternate Rate is to apply. Interest on the amount of each advance against the
Notes shall be computed on the amount of that advance and from the date it is
made. Notwithstanding anything in this Agreement to the contrary, for the full
term of the Notes the interest rate produced by the aggregate of all sums paid
or agreed to be paid to the holder of the Notes for the use, forbearance or
detention of the debt evidenced thereby (including all interest on the Notes at
the Stated Rate plus the Additional Interest) shall not exceed the Ceiling
Rate.
(b) Designation and Conversion. Borrower shall have the right to
designate or convert its Interest Options in accordance with the provisions
hereof. Provided no Default has occurred and is continuing and subject to the
last sentence of Section 3(a) and the provisions of Section 3(c), Borrower may
elect to have an Alternate Rate apply or continue to apply to all or any portion
of the principal balance of the Notes. Each change in Interest Options shall be
a conversion of the rate of interest applicable to the specified portion of the
Loans, but such conversion shall not change the respective outstanding principal
balance of the Notes. The Interest Options shall be designated or converted in
the manner provided below:
(i) Borrower shall give Agent telephonic notice, promptly confirmed by a
Rate Designation Notice (in the case of a conversion of an outstanding Loan) or
a Request for Credit (in the case of a new Loan). Each such telephonic and
written notice shall specify the amount of the Loan which is the subject of the
designation, if any; the amount of borrowings into which such borrowings are to
be converted or for which an Interest Option is designated; the proposed date
for the designation or conversion and the Interest Period or Periods, if any,
selected by Borrower. Such telephonic notice shall be irrevocable and shall be
given to Agent no later than the applicable Rate Designation Date.
(ii) No more than six (6) Alternate Rate Borrowings shall be in effect at
any time.
(iii) Each designation or conversion of a Eurodollar Rate Borrowing shall
occur on a Eurodollar Business Day. Each designation or conversion of a CD Rate
Borrowing or a Negotiated Rate Borrowing shall occur on a Business Day.
(iv) Except as provided in Section 3(c), no Alternate Rate Borrowing shall
be converted on any day other than the last day of the applicable Interest
Period.
(c) Special Provisions Applicable to Alternate Rate Borrowings.
(i) Options Unlawful. If the adoption of any applicable Legal Requirement
or any change in any applicable Legal Requirement or in the interpretation or
administration thereof by any Governmental Authority or compliance by Agent or
any Lender with any request or directive (whether or not having the force of
law) of any Governmental Authority shall at any time make it unlawful or
impossible for Agent or any Lender to permit the establishment of or to maintain
any Alternate Rate Borrowing, the commitment to establish or maintain such
Alternate Rate Borrowing shall forthwith be canceled and Borrower shall
forthwith, upon demand by Agent to Borrower, (1) convert the Alternate Rate
Borrowing with respect to which such demand was made to a Base Rate Borrowing or
another Alternate Rate Borrowing; (2) pay all accrued and unpaid interest to
date on the amount so converted; and (3) pay any amounts required to compensate
Agent or any Lender for any additional cost or expense which Agent or any Lender
may incur as a result of such adoption of or change in such Legal Requirement or
in the interpretation or administration thereof and any Funding Loss which Agent
or any Lender may incur as a result of such conversion. If, when Agent so
notifies Borrower, Borrower has given a Rate Designation Notice or a Request for
Credit specifying an Alternate Rate Borrowing but the selected Interest Period
has not yet begun, such Rate Designation Notice or Request for Credit, as the
case may be, shall be deemed to be of no force and effect, as if never made, and
the balance of the Loans specified in such Rate Designation Notice or Request
for Credit, as the case may be, shall bear interest at the Base Rate until a
different available Interest Option shall be designated in accordance herewith.
(ii) Increased Cost of Borrowings. Subject to Section 12, if the adoption
of any applicable Legal Requirement or any change in any applicable Legal
Requirement or in the interpretation or administration thereof by any
Governmental Authority or compliance by Agent or any Lender with any request or
directive (whether or not having the force of law) of any Governmental Authority
shall at any time as a result of any portion of the principal balances of the
Notes being maintained on the basis of an Alternate Rate would:
(1) subject Agent or any Lender (or make it apparent that Agent or
any Lender is subject) to any Taxes, or any deduction or withholding for any
Taxes, on or from any payment due under any Alternate Rate Borrowing or other
amount due hereunder, other than income and franchise taxes of the United States
and its political subdivisions; or
(2) change the basis of taxation of payments due from Borrower to any
Lender under any Alternate Rate Borrowing (otherwise than by a change in the
rate of taxation of the overall net income of such Lender); or
(3) impose, modify, increase or deem applicable any reserve
requirement (excluding that portion of any reserve requirement included in the
calculation of the applicable Alternate Rate), special deposit requirement or
similar requirement (including state law requirements and Regulation (D)
imposed, modified, increased or deemed applicable by any Governmental Authority
against assets held by Agent or any Lender, or against deposits or accounts in
or for the account of Agent or any Lender, or against loans made by Agent or any
Lender, or against any other funds, obligations or other property owned or held
by Agent or any Lender; or
(4) impose on Agent or any Lender any other condition regarding any
Alternate Rate Borrowing;
and the result of any of the foregoing is to increase the cost to
Agent or any Lender of agreeing to make or of making, renewing or maintaining
such Alternate Rate Borrowing, or reduce the amount of principal or interest
received by Agent or any Lender, then, upon demand by Agent, Borrower shall pay
to Agent, from time to time as specified by Agent, additional amounts which
shall compensate Agent and each Lender for such increased cost or reduced
amount. The determination by Agent or any Lender, as the case may be, of the
amount of any such increased cost, increased reserve requirement or reduced
amount shall be conclusive and binding, absent manifest error. Each Lender will
notify Borrower through Agent of any event occurring after the date of this
Agreement which will entitle such Lender to compensation pursuant to this
Section as promptly as practicable after it obtains knowledge thereof and
determines to request such compensation.
(iii) Inadequacy of Pricing and Rate Determination. Subject to Section
12, if for any reason with respect to any Interest Period Agent (or, in the case
of clause 3 below, the applicable Lender) shall have determined (which
determination shall be conclusive and binding upon Borrower) that:
(1) Agent is unable through its customary general practices to
determine any applicable Alternate Rate, or
(2) by reason of circumstances affecting the applicable Eurodollar
market, generally, Agent is not being offered deposits in United States dollars
in such market, for the applicable Interest Period and in an amount equal to the
amount of any applicable Alternate Rate Borrowing requested by Borrower, or
(3) any applicable Alternate Rate will not adequately and fairly
reflect the cost to any Lender of making and maintaining such Alternate Rate
Borrowing hereunder for any proposed Interest Period,
Agent shall give Borrower notice thereof and thereupon, (A) any Rate
Designation Notice or Request for Credit previously given by Borrower
designating the applicable Alternate Rate Borrowing which has not commenced as
of the date of such notice from Agent shall be deemed for all purposes hereof to
be of no force and effect, as if never given, and (B) until Agent shall notify
Borrower that the circumstances giving rise to such notice from Agent no longer
exist, each Rate Designation Notice and Request for Credit requesting the
applicable Alternate Rate shall be deemed a request for a Base Rate Borrowing,
and any applicable Alternate Rate Borrowing then outstanding shall be converted,
without any notice to or from Borrower, upon the termination of the Interest
Period then in effect with respect to it, to a Base Rate Borrowing.
(iv) Funding Losses. Borrower shall indemnify Agent and each Lender
against and hold Agent and each Lender harmless from any Funding Loss. This
agreement shall survive the payment of the Notes. A certificate as to any
additional amounts payable pursuant to this Section submitted to Borrower shall
be conclusive and binding upon Borrower, absent manifest error.
(d) Funding Offices; Adjustments Automatic; Calculation Year. Any
Lender may, if it so elects, fulfill its obligation as to any Alternate Rate
Borrowing by causing a branch or Affiliate of such Lender to make such Loan and
may transfer and carry such Loan at, to or for the account of any branch office
or Affiliate of such Lender; provided, that in such event for the purposes of
this Agreement such Loan shall be deemed to have been made by such Lender, and
the obligation of Borrower to repay such Loan shall nevertheless be to such
Lender, as the case may be, and shall be deemed held by it for the account of
such branch or Affiliate. Without notice to Borrower or any other Person, each
rate required to be calculated or determined under this Agreement shall
automatically fluctuate upward and downward in accordance with the provisions of
this Agreement. Interest at the Prime Rate shall be computed on the basis of
the actual number of days elapsed in a year consisting of 365 or 366 days, as
the case may be. All other interest and fees required to be calculated or
determined under this Agreement shall be computed on the basis of the actual
number of days elapsed in a year consisting of 360 days, unless the Ceiling Rate
would thereby be exceeded, in which event, to the extent necessary to avoid
exceeding the Ceiling Rate, the applicable interest and fees shall be computed
on the basis of the actual number of days elapsed in the applicable calendar
year in which accrued.
(e) Funding Sources. Each Lender shall be entitled to fund and
maintain its funding of all or any part of the Loans in any manner it sees fit,
it being understood, however, that for the purposes of this Agreement all
determinations hereunder shall be made as if each Lender had actually funded and
maintained each Alternate Rate Borrowing during each Interest Period through the
purchase of deposits having a maturity corresponding to such Interest Period and
bearing an interest rate equal to the Alternate Rate for such Interest Period.
(f) Stated Rate; Recapture. As used in the Credit Documents, "Stated
Rate means the effective weighted per annum rate of interest applicable to the
Loans; provided, that if on any day such rate shall exceed the Ceiling Rate for
that day, the Stated Rate shall be fixed at the Ceiling Rate on that day and on
each day thereafter until the total amount of interest accrued at the Stated
Rate on the unpaid principal balance of the Notes plus the Additional Interest
equals the total amount of interest which would have accrued if there had been
no Ceiling Rate. If the Notes mature (or are prepaid) before such equality is
achieved, then, in addition to the unpaid principal and accrued interest then
owing pursuant to the other provisions of the Credit Documents, Borrower
promises to pay on demand to the order of the holders of the Notes interest in
an amount equal to the excess (if any) of (a) the lesser of (i) the total
interest which would have accrued on the Notes if the Stated Rate had been
defined as equal to the Ceiling Rate from time to time in effect and (ii) the
total interest which would have accrued on the Notes if the Stated Rate were not
so prohibited from exceeding the Ceiling Rate, over (b) the total interest
actually accrued on the Notes to such maturity (or prepayment) date. Without
notice to Borrower or any other Person, the Stated Rate shall automatically
fluctuate upward and downward in accordance with the provisions of this
definition.
4. CONDITIONS PRECEDENT.
(a) All Loans. The obligation of any Lender to make any Loan is
subject to the accuracy of all representations and warranties of Borrower in
this Agreement and any other Credit Document on the date thereof as if made on
such date (and such Lender's receipt of evidence of such accuracy), to the
performance by Borrower of its obligations under the Credit Documents (and such
Lender's receipt of evidence of such performance) and to the satisfaction of the
following conditions:
(i) Agent shall have received (1) no later than (A) in the case of a
Negotiated Rate Borrowing, the earlier of (y) 30 minutes from the time that a
Negotiated Rate has been quoted for such Loan and (z) 10:00 a.m., Houston, Texas
time, and (B) in all other cases, 10:00 a.m. Houston, Texas time, on the
applicable Rate Designation Date, telephonic notice from Borrower of the pro-
posed date and amount of such Loan, and (2) no later than 12:00 noon, Houston,
Texas time, on the applicable Rate Designation Date, a Request for Credit signed
by the President, a Vice President, the Treasurer or the Assistant Treasurer of
Borrower and complete in all material respects. If any telephonic request for a
Loan is received by Agent after the applicable times set forth above, or if the
corresponding Request for Credit for such telephonic request is not received by
12:00 noon, Houston, Texas time, such telephonic request shall be treated as
having been received on the next Business Day.
(ii) prior to the date thereof, there shall have occurred, in the sole
opinion of Majority Lenders, no material adverse change in the Property,
liabilities, financial condition, business or affairs of Borrower or any of its
Subsidiaries from those reflected in the most recent financial statements
delivered to Lenders as of the date hereof or in the facts warranted or
represented in any Credit Document.
(iii) no Default or Event of Default shall have occurred and be continuing
or will occur as a result of the requested Loan.
(iv) the making of such Loan shall not be prohibited by, or subject Agent
or any Lender to any penalty or onerous condition under, any applicable Legal
Requirement.
(v) all of the Credit Documents have been executed and delivered, and
shall be valid, enforceable and in full force and effect.
(vi) all fees and expenses owed to Agent or any Lender under any of the
Credit Documents as of the date thereof shall have been paid in full.
(vii) Agent and Lenders shall have received such other documents as any of
them may reasonably require.
Each such Loan shall be subject to the further condition that, at the time
thereof, all legal matters incident to the transactions herein contemplated
shall be satisfactory to Agent's legal counsel. Delivery of any Request for
Credit to Agent shall constitute a representation by Borrower that the
representations and warranties made by Borrower under this Agreement and the
other Credit Documents are true and correct as of the date of delivery of such
Request for Credit.
(b) First Loan. In addition to the conditions described in Section
4(a), the obligation of Lenders to make the initial Loan is subject to the
following, in Proper Form: (1) Lenders shall have received their respective
Notes and Agent shall have received the other Credit Documents; (2) Agent shall
have received a duly executed Borrowing Authorization of Borrower; (3) Agent
shall have received a current certificate from the Secretary of State or other
appropriate official of the State of Texas as to the continued existence and
good standing of Borrower, (4) Agent shall have received a legal opinion from
the general counsel for Borrower acceptable to Agent and Majority Lenders.
5. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants
that:
(a) Borrower and each of its Subsidiaries (i) is duly organized,
validly existing and in good standing under the laws of the state of its
organization and has full legal right, power and authority to carry on its
business as presently conducted and to execute, deliver and perform its
obligations under the Credit Documents executed by it, and (ii) is duly
qualified to do business and in good standing in each jurisdiction in which the
nature of the business it conducts makes such qualification necessary or
desirable.
(b) The execution, delivery and performance of the Credit Documents
executed by Borrower have been duly authorized by all necessary action under
Borrower's Organizational Documents and otherwise.
(c) Borrower's execution, delivery and performance of the Credit
Documents do not and will not require (i) any consent of any other Person or
(ii) any consent, license, permit, authorization or other approval (including
foreign exchange approvals) of any Governmental Authority, or any notice to,
exemption by, any registration, declaration or filing with or the taking of any
other action in respect of, any Governmental Authority.
(d) The execution, delivery and performance of any Credit Document
will not (i) violate any Legal Requirement or the Organizational Documents of
Borrower or any of its Subsidiaries or (ii) conflict with or result in a breach
of the terms, conditions or provisions of, or cause a default under, any
agreement, instrument, franchise, license or concession to which Borrower or any
of its Subsidiaries is a party or by which any of them is bound.
(e) Borrower has duly and validly executed, issued and delivered each
Credit Document to which it is a party. The Credit Documents are in proper
legal form for prompt enforcement and they are Borrower's legal, valid and
binding obligations, enforceable in accordance with their terms. Borrower's
obligations under them rank and will rank at least equal in priority of payment
with all of Borrower's other Indebtedness (except only for Indebtedness
preferred by operation of law or Indebtedness disclosed in writing to Lenders
before execution and delivery of this Agreement).
(f) All information supplied to Agent or any Lender, and all
statements made to Agent or any Lender, by or on behalf of Borrower or any of
its Subsidiaries before, concurrently with or after execution of this Agreement
are and will be true, correct, complete, valid and genuine in all material
respects. The most recent financial statements for Borrower and its
Subsidiaries furnished to Lenders as of the date hereof fairly present the
financial condition of Borrower and its Subsidiaries as of its date and for the
period then ended in accordance with GAAP. No material adverse change has
occurred in the financial conditions reflected in any such statements since
their dates.
(g) Borrower and each of its Subsidiaries have filed all tax returns
required to be filed and paid all Taxes shown thereon to be due, including
interest and penalties, except for Taxes which are being diligently contested in
good faith and for payment of which adequate reserves have been set aside.
(h) Except as set forth on Schedule I, there is no litigation,
condemnation or other action, suit or proceeding pending--or, to the best of
Borrower's knowledge, threatened--against or affecting Borrower or any of its
Subsidiaries, at law or in equity, or before or by any Governmental Authority,
which individually or together with all other such action, suit or proceeding
presenting substantially the same issue of fact, involves the assertion of
claims for actual damages in excess of, on an aggregate basis, $1,000,000, or
otherwise might result in any material adverse change in the business or
financial condition or in other Property of Borrower or any of its Subsidiaries
or any interest in it.
(i) Neither Borrower nor any of its Subsidiaries is in default with
respect to any order, writ, injunction, decree or demand of any Governmental
Authority, in the payment of any Indebtedness for borrowed money or under any
agreement or other papers evidencing or securing any such Indebtedness.
(j) Neither Borrower nor any of its Subsidiaries is a party to any
contract or agreement which materially and adversely affects any of their
businesses, Property or financial conditions.
(k) Borrower and its Subsidiaries are now solvent, and no bankruptcy
or insolvency proceedings are pending or contemplated by or--to Borrower's
knowledge--against Borrower or any of its Subsidiaries. Borrower's liabilities
and obligations under the Credit Documents to which it is a party do not and
will not render Borrower insolvent, cause Borrower's liabilities to exceed
Borrower's assets or leave Borrower with too little capital to properly conduct
all of its business as now conducted or contemplated to be conducted.
(l) No representation or warranty contained in any Credit Document
and no statement contained in any certificate, schedule, list, financial
statement or other papers furnished to Agent or any Lender by or on behalf of
Borrower contains--or will contain--any untrue statement of material fact, or
omits--or will omit--to state a material fact necessary to make the statements
contained therein not misleading.
(m) None of the proceeds of any Note and no draws under Letters of
Credit will be used for the purpose of purchasing or carrying, directly or
indirectly, any margin stock or for any other purpose which would make such
credit a "purpose credit" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System.
(n) Borrower and each of its Subsidiaries possess all permits,
licenses, patents, trademarks, tradenames and copyrights required to conduct
their respective businesses.
(o) Borrower and each of its Subsidiaries are in compliance with all
applicable Legal Requirements and Borrower and each of its Subsidiaries manage
and operate (and will continue to manage and operate) their businesses in
accordance with good industry practices.
(p) With respect to each Plan, Borrower and each member of a
Controlled Group for the employees of Borrower or any of its Subsidiaries have
fulfilled their obligations, including obligations under the minimum funding
standards of ERISA and the Code and are in compliance in all material respects
with the provisions of ERISA and the Code. No event has occurred which could
result in a liability of Borrower or any member of a Controlled Group for the
employees of Borrower or any of its Subsidiaries to the PBGC or a Plan (other
than to make contributions in the ordinary course). Since the effective date of
Title IV of ERISA, there have not been any nor are there now existing any events
or conditions that would cause the Lien provided under Section 4068 of ERISA to
attach to any Property of Borrower or any member of a Controlled Group for the
employees of Borrower or any of its Subsidiaries. There are no Unfunded
Liabilities with respect to any Plan. No "prohibited transaction" has occurred
with respect to any Plan.
(q) Neither Borrower nor any of its Subsidiaries is an investment
company within the meaning of the Investment Company Act of 1940, as amended,
or, directly or indirectly, controlled by or acting on behalf of any Person
which is an investment company, within the meaning of said Act.
(r) Neither Borrower nor any of its Subsidiaries is an "affiliate" or
a "subsidiary company" of a "public utility company," or a "holding company," or
an "affiliate" or a "subsidiary company" of a "holding company," as such terms
are defined in the Public Utility Holding Company Act of 1935, as amended ("PUHC
Act"). Further, none of the transactions contemplated under this Agreement
shall cause or constitute a violation of any of the provisions, rules,
regulations or orders of or under the PUHC Act and the PUHC Act does not in any
manner impair the legality, validity or enforceability of the Notes or the
liabilities of Borrower under any of the Credit Documents.
(s) Borrower and its Subsidiaries are in compliance with all
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in any applicable Requirement of
Environmental Law or Environmental Permit, except where failure to be in such
compliance could not reasonably be expected to have a material adverse effect on
Borrower and its Subsidiaries on a consolidated basis. Borrower and its
Subsidiaries (i) have obtained and maintained in effect all Environmental
Permits, the failure to obtain which could reasonably be expected to have a
material adverse effect on Borrower and its Subsidiaries on a consolidated
basis, (ii) along with their Property are not subject to any (A) Environmental
Claims or (B) Environmental Liabilities arising from or based upon any act,
omission, event, condition or circumstance occurring or existing on or prior to
the date hereof which could reasonably be expected to have a material adverse
effect on Borrower and its Subsidiaries on a consolidated basis, and (iii) have
not received individually or collectively any notice of any violation or alleged
violation of any Requirements of Environmental Law or Environmental Permit or
any Environmental Claim in connection with their respective Property which could
reasonably be expected to have a material adverse effect on Borrower and its
Subsidiaries on a consolidated basis.
(t) Borrower's fiscal year ends January 31.
(u) Borrower has no Subsidiaries other than the Subsidiaries listed
on Schedule II. Each such Subsidiary is owned in the percentage set forth
opposite such Subsidiary's name on Schedule II.
(v) All statements made by or on behalf of Borrower in connection
with this Agreement or any other Credit Document shall constitute the joint and
several representations and warranties of the Person making the statement and of
Borrower.
(w) Borrower and each of its Subsidiaries has good and marketable
title to their respective Property free and clear of all material Liens, except
for those permitted in Section 7(a). All rights, permits, easements, servitudes
and rights-of-way included in or necessary to the development, maintenance and
operation of any such Property have been obtained and are in full force and
effect.
(x) Neither Borrower nor any of its Subsidiaries has made any
Investment in, advance to or guaranty of the obligations of any Person, except
as set forth in Schedule III.
(y) All leases of real and personal Property to which Borrower or any
of its Subsidiaries is a lessee are in full force and effect, and no default has
occurred with regard to any such lease.
(z) Neither Borrower nor any agent acting for it has offered the
Notes or any similar obligation of Borrower for sale to or solicited any offers
to buy the Notes or any similar obligations of Borrower from any Person other
than Lenders, and Borrower will take no action which would subject the sale of
the Notes to the provisions of Section 5 of the Securities Act of 1933, as
amended, or any applicable state securities law.
(aa) Borrower and each of its Subsidiaries carries insurance with
reputable insurers in respect of such of its Property, in such amounts and
against such risks as is customarily maintained by other Persons of similar size
engaged in similar businesses.
6. AFFIRMATIVE COVENANTS. Borrower covenants and agrees that prior to
termination of this Agreement:
(a) Borrower shall (and shall cause each of its Subsidiaries to) at
all times (i) pay when due all Taxes and governmental charges of every kind upon
it or against its income, profits or Property, unless and only to the extent
that the same shall be contested diligently in good faith and reserves have been
established therefor; (ii) to the extent applicable, do all things necessary to
preserve its existence, qualifications, rights and franchises in all states
where such qualification is necessary or desirable; (iii) comply with all
applicable Legal Requirements (including Requirements of Environmental Law) in
respect of the conduct of its business and the ownership of its Property; (iv)
cause its Property to be protected, maintained and kept in good repair and make
all replacements and additions to its Property as may be reasonably necessary to
conduct its business properly and efficiently, and (v) pay punctually and
discharge when due, or renew or extend, any Indebtedness incurred by it and
discharge, perform and observe the covenants, provisions and conditions to be
performed, discharged and observed on its part in connection therewith, or in
connection with any agreement or other instrument relating thereto or in
connection with any mortgage, pledge or lien existing at any time upon any of
its Property; provided, however, that nothing contained in this subparagraph (v)
shall require payment, discharge, renewal or extension of any such Indebtedness
or discharge, performance or observance of any such covenants, provisions and
conditions so long as any claims which may be asserted against with respect to
any such Indebtedness or any such covenants, provisions and conditions shall be
contested diligently and in good faith and reserves with respect thereto shall
be established.
(b) Borrower shall furnish or cause to be furnished to Agent and
shall furnish to each Lender (without duplication) three (3) copies of each of
the following: (1) as soon as available and in any event within 120 days after
the end of each fiscal year of Borrower, Annual Financial Statements of Borrower
and its Subsidiaries; (2) as soon as available and in any event within 60 days
after the end of each fiscal quarter (except the last fiscal quarter) of each
fiscal year of Borrower, Quarterly Financial Statements of Borrower and its
Subsidiaries; (3) promptly upon their becoming available, all financial
statements, registration statements, reports and proxy statements which Borrower
or any of its Subsidiaries may file with the Securities and Exchange Commission
from time to time; (4) as soon as available and in any event within 60 days
after the end of each fiscal quarter of each fiscal year of Borrower, a schedule
of all contingent liabilities of Borrower and its Subsidiaries as of the end of
the period covered thereby; (5) concurrently with the financial statements
provided for in subsections (1) and (2) of this Section 6(b), such schedules,
computations and other information, in reasonable detail, as may be required by
Agent or any Lender to demonstrate compliance with the covenants set forth
herein or reflecting any non-compliance therewith as of the applicable date, and
a compliance certificate ("Compliance Certificate") in the form of Exhibit D,
duly executed by the chief financial officer, treasurer or assistant treasurer
of Borrower, and (5) such other information relating to the financial condition,
operations, prospects or business of Borrower and its Subsidiaries as from time
to time may be reasonably requested by Agent or any Lender. Each delivery of a
financial statement pursuant to this Section shall constitute a republication of
the representations and warranties contained in Section 5.
(c) Borrower and its Subsidiaries shall have and maintain, on a
consolidated basis, at all times:
(1) an Interest Bearing Debt to Total Capitalization Ratio for
Borrower of not greater than 0.40 to 1.00.
(2) a Tangible Net Worth for Borrower of not less than
$250,000,000.
(3) an Interest Coverage Ratio for Borrower of not less than
2.00 to 1.00.
(d) Borrower shall (and shall cause each of its Subsidiaries to)
permit each Lender upon reasonable advance notice to inspect its Property, to
examine its files, books and records and make and take away copies thereof, and
to discuss its affairs with its officers and accountants, all at such times
during normal business hours and such intervals and to such extent as such
Lender may reasonably desire. All such information shall be maintained by
Lenders in confidence and shall not be disclosed to any Person except (a) in
connection with a sale of a Lender's interest hereunder, (b) in connection with
the enforcement or collection of any Credit Document, (c) as may be required or
directed by any Legal Requirement or Governmental Authority, (d) where such
information has become a part of the public domain, and (e) Affiliates of
Lenders.
(e) Borrower shall promptly execute and deliver (or cause to be
executed and delivered), at Borrower's expense, any and all other and further
instruments which may be requested by any Lender or Agent to cure any defect in
the execution and delivery of any Credit Document or more fully to describe
particular aspects of the agreements and undertakings set forth in the Credit
Documents.
(f) Borrower shall (and shall cause each of its Subsidiaries to)
maintain books of record and account in accordance with GAAP.
(g) Borrower shall (and shall cause each of its Subsidiaries to)
maintain insurance with such insurers, on such of its Property, officers,
directors and employees, in such amounts and against such risks as is
customarily maintained by other Persons of similar size to that of, and engaged
in businesses substantially similar to those of, Borrower and its Subsidiaries,
and furnish Agent satisfactory evidence thereof promptly upon request.
(h) Borrower shall notify Agent immediately upon acquiring knowledge
of the occurrence of, or if Borrower or any of its Subsidiaries causes or
intends to cause, as the case may be: (1) the institution of any lawsuit or
administrative proceeding affecting Borrower or any of its Subsidiaries, the
adverse determination under which could have a material adverse effect on the
business, condition (financial or otherwise), operations, Property or prospects
of Borrower or any of its Subsidiaries or on the ability of Borrower to perform
its obligations under any Credit Document to which it is a party; (2) any
material adverse change, either in any case or in the aggregate, in the assets,
liabilities, business, condition (financial or otherwise), operations, Property
or prospects of Borrower or any of its Subsidiaries; (3) any Event of Default or
any Default, together with a detailed statement by an appropriate officer or
other responsible party acceptable to Agent on behalf of Borrower of the steps
being taken to cure the effect of such Event of Default or Default; (4) the
receipt of any notice from, or the taking of any other action by, the holder of
any Indebtedness of Borrower or any of its Subsidiaries with respect to a
claimed default, together with a detailed statement by an appropriate officer or
other responsible party acceptable to Agent on behalf of Borrower specifying the
notice given or other action taken by such holder and the nature of the claimed
default and what action is being taken or proposed to take with respect thereto;
(5) the occurrence of a default or event of default by Borrower or any of its
Subsidiaries under any agreement to which it is a party, which default or event
of default could reasonably be expected to have a material adverse effect on the
business, condition (financial or otherwise), operations, Property or prospects
of Borrower or any of its Subsidiaries; and (6) any change in the accuracy of
the representations and warranties of Borrower in this Agreement or any other
Credit Document.
(i) Borrower shall promptly furnish to Agent (1) immediately upon
receipt, a copy of any notice of complete or partial withdrawal liability under
Title IV of ERISA and any notice from the PBGC under Title IV of ERISA of an
intent to terminate or appoint a trustee to administer any Plan, (2) if
requested by any Lender, promptly after the filing thereof with the United
States Secretary of Labor or the PBGC or the Internal Revenue Service, copies of
each annual and other report with respect to each Plan or any trust created
thereunder, (3) immediately upon becoming aware of the occurrence of any
"reportable event," as such term is defined in Section 4043 of ERISA, for which
the disclosure requirements of Regulation Section 2615.3 promulgated by the PBGC
have not been waived, or of any "prohibited transaction," as such term is
defined in Section 4975 of the Code, in connection with any Plan or any trust
created thereunder, a written notice signed by an appropriate officer or other
responsible party acceptable to Agent on behalf of Borrower or the applicable
member of a Controlled Group for employees of Borrower or any of its
Subsidiaries specifying the nature thereof, what action Borrower or the
applicable member of such Controlled Group is taking or proposes to take with
respect thereto, and, when known, any action taken by the PBGC, the Internal
Revenue Service or the Department of Labor with respect thereto, (4) promptly
after the filing or receiving thereof by Borrower or any member of a Controlled
Group for employees of Borrower or any of its Subsidiaries of any notice of the
institution of any proceedings or other actions which may result in the
termination of any Plan, and (5) each request for waiver of the funding
standards or extension of the amortization periods required by Sections 303 and
304 of ERISA or Section 412 of the Code promptly after the request is submitted
by Borrower or any member of a Controlled Group for employees of Borrower or any
of its Subsidiaries to the Secretary of the Treasury, the Department of Labor or
the Internal Revenue Service, as the case may be. To the extent required under
applicable statutory funding requirements, Borrower will fund, and will cause
each of its Subsidiaries to fund, all current service pension liabilities as
they are incurred under the provisions of all Plans from time to time in effect,
and comply with all applicable provisions of ERISA. Borrower covenants that it
shall and shall cause each of its Subsidiaries and each other member of a
Controlled Group for employees of Borrower or any of its Subsidiaries to (a)
make contributions to each Plan in a timely manner and in an amount sufficient
to comply with the contribution obligations under such Plan and the minimum
funding standards requirements of ERISA; (b) prepare and file in a timely manner
all notices and reports required under the terms of ERISA including annual
reports, and (c) pay in a timely manner all required PBGC premiums.
(j) Subject to Section 12, if, after the date of this Agreement, any
Lender shall have determined that the adoption or effectiveness of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein or any change after the date hereof with respect to any existing law, or
any change in the interpretation or administration thereof by any Governmental
Authority charged with the interpretation or administration thereof or any
change after the date hereof with respect to any existing law, or compliance by
such Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such Governmental Authority has or would
have the effect of reducing the rate of return on such Lender's capital (or on
the capital of any Person owning or holding a participation interest in the
Facility Debt) as a consequence of its obligations to Borrower with respect to
the Loans to a level below that which could have been achieved but for such
adoption, effectiveness, change or compliance (taking into consideration such
Lender's policies with respect to capital adequacy) by an amount deemed by such
Lender to be material, then from time to time, Borrower shall pay to such Lender
such additional amount or amounts as will compensate such Lender for such
reduction. A certificate of such Lender setting forth such amount or amounts as
shall be necessary to compensate such Lender as specified in this Section shall
be delivered as soon as practicable to Borrower and shall be conclusive and
binding, absent manifest error. Borrower shall pay such Lender the amount shown
as due on any such certificate within fifteen (15) days after such Lender
delivers such certificate. In preparing such certificate, such Lender may
employ such assumptions and allocations of costs and expenses as it shall in
good faith deem reasonable and may use any reasonable averaging and attribution
method.
(k) The proceeds of the Loans will be used for general corporate
purposes and working capital for Borrower and its Subsidiaries.
7. NEGATIVE COVENANTS. Borrower further covenants and agrees that prior
to termination of this Agreement:
(a) Borrower will not (and will not permit any of its Subsidiaries
to) create or suffer to exist any Lien upon any of its Property now owned or
hereafter acquired, or acquire any Property upon any conditional sale or other
title retention device or arrangement or any purchase money security agreement;
or in any manner directly or indirectly sell, assign, pledge or otherwise
transfer any of its Accounts or contract rights; provided, however, that
Borrower or any of its Subsidiaries may create or suffer to exist: (1)
artisans', mechanics', operators' or drillers' Liens to secure claims for labor,
materials or supplies arising in the ordinary course of business, and Liens for
Taxes, but only to the extent that payment of the foregoing shall not at the
time be due or shall be contested in good faith by appropriate proceedings
diligently conducted and with respect to which appropriate reserves have been
set aside; (2) Liens in effect on the date hereof and disclosed on Schedule IV,
provided that neither the Indebtedness secured thereby nor the Property covered
thereby shall increase; (3) Liens in favor of Agent for the ratable benefit of
all Lenders or in favor of all Lenders on a pari passu basis; (4) deposits or
pledges to secure payment of workers' compensation, unemployment insurance, old
age pensions or other social security, or to secure the performance of bids,
tenders, contracts (other than those relating to borrowed money) or leases or to
secure statutory obligations or surety or appeal bonds, or to secure indemnity,
performance or other similar bonds in the ordinary course of business, or in
connection with contests, to the extent that payment thereof shall not at the
time be due or shall be contested in good faith by appropriate proceedings dili-
gently conducted and there have been set aside on its books appropriate reserves
with respect thereto; (5) Liens arising out of judgments or awards against
Borrower or any of its Subsidiaries with respect to which Borrower or such
Subsidiary shall be in good faith prosecuting an appeal or a proceeding for
review; (6) Liens consisting of encumbrances, easements or reservations of, or
rights of others for, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, zoning restrictions, restrictions on
the use of real Property and minor defects and irregularities in the title
thereto, landlord's or lessor's liens under leases to which Borrower or any of
its Subsidiaries is a party and other similar encumbrances, none of which in-
terferes with the use of the Property subject thereto by Borrower or such
Subsidiary in the ordinary conduct of its business; (7) Liens or security
interests on assets of a Subsidiary of Borrower to secure obligations of such
Subsidiary to Borrower or another Subsidiary of Borrower; (8) Liens in or
affecting Property of Borrower or any of its Subsidiaries securing any
Indebtedness representing the purchase price, or any portion thereof, of any
Property acquired or being acquired by Borrower or a Subsidiary, provided that
such Liens shall attach only to Property of Borrower that is financed with such
Indebtedness, and shall be in accordance with or similar to arrangements in
existence as of the date hereof; (9) Liens in or limitations on the use of funds
held in trust securing the repayment of Indebtedness to any Industrial
Development Corporation, and (10) Liens in Property acquired by Borrower that
existed when such Property was acquired (provided, that the Indebtedness which
such Liens secure is not increased).
(b) Borrower will not (and will not permit any of its Subsidiaries
to), in any single transaction or series of transactions, directly or
indirectly: (1) consolidate, terminate, liquidate or dissolve; (2) be a party
to any consolidation, termination, merger or consolidation; (3) modify or amend
any of its Organizational Documents if doing so would have a material adverse
effect on Borrower's ability to repay the Facility Debt; or (4) sell, convey,
lease, transfer or otherwise dispose of assets representing more than 10% of Net
Tangible Assets of Borrower and its Subsidiaries in the aggregate during the
term hereof, or agree to take any such action, except for sale of Inventory in
the ordinary course of business. Borrower will not (and will not permit any of
its Subsidiaries to) pledge, transfer or otherwise dispose of any of the indicia
of equity rights (whether issued and outstanding capital stock, partnership
interests or otherwise) of a Subsidiary or any Indebtedness of a Subsidiary, or
permit any Subsidiary of any such Person to issue any additional indicia of
equity rights (whether issued and outstanding capital stock, partnership
interests or otherwise) other than to its parent. Notwithstanding the
foregoing,
(1) Any of Borrower's Subsidiaries may merge or consolidate with
Borrower (provided that Borrower shall be the continuing or surviving
Corporation), or with any one or more of Borrower's Subsidiaries, or with any
other Person or Persons, provided that each surviving Person after any such
merger or consolidation shall be a Subsidiary of Borrower;
(2) Shares of stock and Indebtedness of any Subsidiary of Borrower at
any time owned by or owed to Borrower or any of Borrower's Subsidiaries may be
sold for a cash consideration which represents the fair value (as determined in
good faith by the Board of Directors of Borrower) at the time of sale of the
shares of stock or Indebtedness so sold, provided that the assets of such
Subsidiary do not constitute more than ten percent (10%) of the Net Tangible
Assets of Borrower and all of its Subsidiaries and that such Subsidiary shall
not have contributed more than 10% of Net Income during the most recently
completed fiscal year of Borrower, and, further provided, that upon consummation
of such sale and after giving effect thereto, no Default exists under the Credit
Documents; and
(3) Borrower may merge or consolidate with any other Person provided
that Borrower shall be the surviving Person and as such shall not, immediately
after such merger or consolidation, be in default hereunder.
(c) Borrower will not (and will not permit any of its Subsidiaries
to) enter into any transaction or agreement with any officer, director, partner,
trustee or owner or holder of any indicia of equity rights (whether issued and
outstanding capital stock, partnership interests or otherwise) of Borrower or
any of its Subsidiaries (or any Affiliate of any such Person) unless the same is
upon terms substantially similar to those obtainable from wholly unrelated
sources.
(d) Borrower will not (and, subject to the last sentence of this
Section, will not permit any of its Subsidiaries to) make any Investment in, any
Person, or make any commitment to make any such Investment, except (1) indicia
of equity rights of Borrower's Subsidiaries; (2) Permitted Investments; (3)
normal and reasonable travel advances in the ordinary course of business to
employees; (4) stock of or additional capital contributions to Subsidiaries; (5)
customer obligations and receivables owing to Borrower or any of its
Subsidiaries and arising out of sales or leases made or the rendering of
services by Borrower or any of its Subsidiaries in the ordinary course of
business; (6) acquisitions (with or without recourse and with or without
discount) of negotiable instruments evidencing customer obligations and
receivables of Borrower or any of its Subsidiaries and arising out of sales of
leases made by Borrower or any of its Subsidiaries in the ordinary course of
business; (7) acquisitions of Indebtedness of Borrower or any Subsidiary by
Borrower or any other Subsidiary, and (8) other Investments not to exceed an
aggregate original cost amount of $30,000,000 outstanding at any one time
subject to the provisions of Section 5(m). Notwithstanding the foregoing, the
limitations on Investments set forth above in this Section shall not apply to
those made by MAC so long as the assets of MAC do not exceed three percent (3%)
of the Net Tangible Assets of Borrower and its Subsidiaries.
8. DEFAULT. The occurrence of any of the following events shall
constitute an Event of Default (herein so called) under this Agreement:
(a) any part of the Facility Debt is not paid when due, whether by
lapse of time or acceleration or otherwise.
(b) Borrower or any of its Subsidiaries fails to perform, observe or
comply with--or defaults under--any of the terms, covenants, conditions or
provisions of any Credit Document.
(c) any representation or warranty made in any Credit Document or in
any other report or other paper now or hereafter provided to any Lender or Agent
pursuant or incident to any Credit Document or the Facility Debt proves to have
been untrue or misleading in any material respect as of the date made or deemed
made.
(d) any of Borrower and its Subsidiaries: (i) voluntarily suspends
transaction of business; (ii) becomes insolvent or unable to pay its
Indebtedness as it matures; (iii) commences a voluntary case in bankruptcy or a
voluntary petition seeking reorganization or to effect a plan or other
arrangement with creditors; (iv) makes an assignment for the benefit of
creditors; (v) applies for or consents to the appointment of a receiver or
trustee for any such Person or for any substantial portion of its Property; or
(vi) makes an assignment to an agent authorized to liquidate any substantial
part of its assets.
(e) in respect of any of Borrower and its Subsidiaries: (i) an
involuntary case shall be commenced with any court or other authority seeking
liquidation, reorganization or a creditor's arrangement of any such Person; (ii)
an order of any court or other authority shall be entered appointing any
receiver or trustee for any such Person or for any substantial portion of its
Property; or (iii) a writ or warrant of attachment or any similar process shall
be issued by any court or other authority against any substantial portion of the
Property of any such Person and such petition seeking liquidation,
reorganization or a creditor's arrangement or such order appointing a receiver
or trustee is not vacated or stayed, or such writ, warrant of attachment or
similar process is not vacated, released or bonded off within sixty (60) days
after its entry or levy.
(f) dissolution, liquidation or termination of Borrower or any of its
Subsidiaries, except as permitted in Section 7(b).
(g) any action, suit or proceeding shall be commenced against or
affecting any or involving the validity or enforceability of any Credit
Document, at law or in equity, or before any Governmental Authority, which in
Majority Lenders' reasonable judgment, impairs or might impair Lenders' ability
to collect the Facility Debt when due or the enforceability of any Credit
Document.
(h) any one or more final judgments in the aggregate for the payment
of money in excess of $100,000 shall be rendered against Borrower or any of its
Subsidiaries and the same shall remain unstayed or undischarged for a period of
30 days or any appeal time provided by applicable law, if longer.
(i) Borrower or any of its Subsidiaries shall be prevented or
relieved by any Governmental Authority from performing or observing any material
term, covenant or condition of any Credit Document.
(j) any change shall occur in the Property, financial condition,
business, operations, affairs or circumstances of Borrower or any of its
Subsidiaries which materially adversely effects Borrower and its Subsidiaries
taken as a whole.
(k) Borrower or any of its Subsidiaries shall fail to pay when due
any principal of or interest on any borrowed money obligation or the holder of
such other obligation declares--or has the right to declare--such obligation due
before its stated maturity because of default.
(l) Borrower or any of its Subsidiaries shall be in default under or
in violation of any Legal Requirement of any Governmental Authority having
jurisdiction over it or any of its Property.
(m) Borrower or any of its Subsidiaries shall have concealed,
removed, or permitted to be concealed or removed, any part of its Property, with
intent to hinder, delay or defraud any of its creditors, or made or suffered a
transfer of any of its Property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law, or shall have made any transfer of its
Property to or for the benefit of a creditor at a time when other creditors
similarly situated have not been paid, or, while insolvent, shall have suffered
or permitted any creditor to obtain a lien upon any of its Property through
legal proceedings or distraint which is not vacated with thirty (30) days from
its date.
Upon the occurrence of any Event of Default, and at any time thereafter, the
obligation, if any, to make Loans or to consider issuing Letters of Credit shall
cease and terminate, and Majority Lenders shall have the right, at their option,
(1) to declare the Commitment terminated (whereupon the Commitment shall be
terminated) and to declare the unpaid balance of the Indebtedness evidenced by
the Notes to be immediately due and payable without further notice (including
notice of intent to accelerate and notice of acceleration), protest or demand or
presentment for payment, ALL OF WHICH ARE HEREBY EXPRESSLY WAIVED BY BORROWER,
(2) to require Borrower to pay to Agent for the account of Lenders, in
immediately available funds, an amount equal to the then aggregate amount
available for drawings under all Letters of Credit (which funds shall be held by
Agent as Cover), and (3) acting through Agent to enforce or exercise any and all
powers, rights and remedies available at law or provided in this Agreement, the
Notes, the other Credit Documents or any other document executed pursuant hereto
or in connection herewith.
9. LENDERS' RIGHT TO CURE. If Borrower should fail to comply with any of
its agreements, covenants or obligations under any Credit Document, Agent or any
Lender (in Borrower's name or in its own name) may perform them or cause them to
be performed for Borrower's account and at Borrower's expense, but shall have no
obligation to perform any of them or cause them to be performed. Any and all
expenses thus incurred or paid by Agent or such Lender shall be Borrower's
obligations to such Person due and payable on demand, or if no demand is sooner
made, then they shall be due on or before four (4) years after the respective
dates on which they were incurred, and each shall bear interest from the date
such Person pays it until the date Borrower repays it to such Person, at the
Past Due Rate. Upon making any such payment or incurring any such expense, such
Person shall be fully and automatically subrogated to all of the rights of the
Person receiving such payment. The amount and nature of any such expense and
the time when it was paid shall be fully established by the affidavit of Agent
or the applicable Lender or any of such Person's officers or agents. The
exercise of the privileges granted to Agent and Lenders in this Section shall in
no event be considered or constitute a cure of the default or a waiver of
Agent's or any Lender's right at any time after an Event of Default to declare
the Notes to be at once due and payable, but is cumulative of such right and of
all other rights given by this Agreement, the Notes and the Credit Documents and
of all rights given Agent and Lenders by law or in equity.
10. THE AGENT.
(a) Appointment. Each Lender hereby irrevocably appoints and
authorizes Agent to act on such Lender's behalf and to exercise such powers
under the Credit Documents as are specifically delegated to or required of Agent
by the terms thereof, together with such powers as are reasonably incidental
thereto. As to any matters not expressly provided for by the Credit Documents
(including enforcement or collection of the Notes), Agent shall not be required
to exercise any discretion or take any action, but shall be required to act or
to refrain from acting (and shall be fully protected in so acting or refraining
from acting) upon the instructions of Majority Lenders, and such instructions
shall be binding upon all Lenders and all holders of the Notes; provided that
Agent shall not be required to take any action which it reasonably believes may
(1) expose it to personal liability or (2) be contrary to the Credit Documents
or applicable Legal Requirements.
(b) Liability. Neither Agent nor any of its directors, officers,
agents or employees shall be liable for any action taken or omitted to be taken
by it under or in connection with the Credit Documents (1) with the consent or
at the request of Majority Lenders or (2) in the absence of its or their own
gross negligence or willful misconduct (IT BEING THE EXPRESS INTENTION OF
LENDERS THAT AGENT AND ITS DIRECTORS, OFFICERS, AGENTS AND EMPLOYEES SHALL HAVE
NO LIABILITY FOR ACTIONS AND OMISSIONS UNDER THE CREDIT DOCUMENTS RESULTING FROM
ITS OR THEIR ORDINARY OR CONTRIBUTORY NEGLIGENCE). Without limiting the
generality of the foregoing, Agent (1) may treat the payee of each Note as the
holder thereof until it receives written notice of the assignment or transfer
thereof, in Proper Form and signed by such payee; (2) may consult with legal
counsel (including counsel for Borrower), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (3) makes no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements, warranties
or representations made in or in connection with the Credit Documents, other
than those made by Agent in writing; (4) except as otherwise expressly provided
herein, shall not have any duty to ascertain or to inquire as to the performance
or observance of any of the terms, covenants or conditions of the Credit
Documents or to inspect the Property (including the books and records) of
Borrower; (5) shall not be responsible to any Lender for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Credit Documents, and (6) shall incur no liability under or with respect to the
Credit Documents by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram, telecopier, cable or telex)
reasonably believed by it to be genuine and signed or sent by the proper party
or parties.
(c) TCB a Lender. With respect to its Loans and Notes, TCB shall
have the same rights and powers under the Credit Documents as any other Lender
and may exercise the same as though it were not Agent. The term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include TCB in its
individual capacity. TCB and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any kind
of business with, Borrower and any Person who may do business with or own
securities of Borrower, all as if it was not Agent and without any duty to
account therefor to Lenders.
(d) Independent Review. Each Lender acknowledges and agrees that it
has, independently and without reliance upon Agent or any other Lender and based
on the financial statements referred to in Section 5(f) and such other documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges and agrees
that it will, independently and without reliance upon Agent or any other Lender
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement.
(e) Indemnification. Agent shall not be required to take any action
hereunder or to prosecute or defend any suit in respect of the Credit Documents
unless indemnified to its satisfaction by Lenders against loss, cost, liability
and expense. If any indemnity furnished to Agent shall become impaired, it may
call for additional indemnity and cease to do the acts indemnified against until
such additional indemnity is given. In addition, Lenders agree to indemnify
Agent (to the extent not reimbursed by Borrower), ratably according to their
respective Percentages, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against Agent in any way relating to or arising out of the
Credit Documents or any action taken or omitted by Agent under the Credit
Documents; provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the gross negligence or willful
misconduct of Agent. EACH LENDER AGREES, HOWEVER, THAT IT EXPRESSLY INTENDS
UNDER THIS SECTION TO INDEMNIFY AGENT RATABLY AS AFORESAID FOR ALL SUCH
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES AND DISBURSEMENTS ARISING OUT OF OR RESULTING FROM THE SOLE OR
CONTRIBUTORY NEGLIGENCE OF AGENT. Without limitation of the foregoing, each
Lender agrees to reimburse Agent promptly upon demand for such Lender's
Percentage of any out-of-pocket expenses (including reasonable counsel fees)
incurred by Agent in connection with the preparation, execution, administration,
or enforcement of, or legal advice in respect of rights or responsibilities
under, the Credit Documents to the extent that Agent is not reimbursed for such
expenses by Borrower. The provisions of this Section shall survive the
termination of this Agreement and/or the payment or assignment of any of the
Notes.
(f) Knowledge of Defaults. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless it shall have received written notice from Borrower or a Lender
referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default." If Agent receives such a
notice, it shall give notice thereof to Lenders; provided that if such notice is
received from a Lender, Agent also shall give notice thereof to Borrower. Agent
shall be entitled to take action or refrain from taking action with respect to
such Default or Event of Default as provided in this Section 10.
(g) Resignation; Removal. Agent may resign at any time by giving
written notice thereof to Lenders and Borrower, and may be removed as agent
under the Credit Documents at any time with or without cause by Majority
Lenders. Upon any such resignation or removal, Majority Lenders shall have the
right to appoint a successor Agent. If no successor Agent shall have been so
appointed by Majority Lenders and shall have accepted such appointment within 30
days after the notice of resignation or removal, then the retiring Agent may, on
behalf of Lenders, appoint a successor, which shall be a commercial bank
organized under the laws of the United States or of any State thereof and having
a combined capital and surplus of at least $100,000,000. Upon the acceptance of
any appointment as Agent under the Credit Documents by a successor, such
successor shall thereupon succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent and the retiring Agent shall
be discharged from its duties and obligations under the Credit Documents. After
the resignation or removal of Agent under the Credit Documents, the provisions
of this Section 10 shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent.
(h) Reliance by Borrower. In any case requiring approval or consent
by Majority Lenders, Borrower shall be entitled to rely on the written
representation by Agent that Agent has obtained such approval or consent.
11. PARTICIPATION; ASSIGNMENT. Each Lender reserves the right, in its
sole discretion, without notice to Borrower, to sell to any bank, savings and
loan, savings bank, credit union or other deposit-taking financial institution
participations in all or any part of such Lender's Loans, Notes or interest in
the Commitment or interest in the Letter of Credit Liabilities or the Letter of
Credit Documents in which event, the provisions of the Credit Documents shall
inure to the benefit of each purchaser of a participation, but the pro rata
treatment of payments and funding obligations hereunder shall be determined as
if such Lender had not sold such participation. Each Lender may assign any or
all or its rights and obligations under the Credit Documents to any Eligible
Assignee, with the consent of Issuer (as defined in the Letter of Credit
Agreement) if such assignment involves the Commitment or such Lender's Note,
such consent not to be unreasonably withheld; provided that (a) no such
assignment shall result in a Lender with an interest in the Commitment of less
than $5,000,000, and (b) each such assignment shall be substantially in the form
of Exhibit E, with the assignor to exchange its Note for a new Note and the
assignee to receive a new Note and with the assignor to have no further right or
obligation with respect to the rights and obligations assumed by the assignee.
No Lender may assign its interest in the Loans and the Commitment without
assigning a like interest in the assigning Lender's interest in the Letter of
Credit Liabilities and the Letter of Credit Documents and vice versa. Borrower
agrees to cooperate with the prompt execution and delivery of documents
reasonably necessary to such assignment process, including the issuance of a new
Note to the assignor (if retaining an interest hereunder) and the assignee
immediately upon delivery to Borrower of the assignor's Note. Upon such
assignment, the assignee shall be a Lender for all purposes under the Credit
Documents and the Percentages (in each case as appropriate) and Percentages of
the assignor and assignee Lenders shall be adjusted appropriately.
12. USURY NOT INTENDED; SAVINGS PROVISIONS. Notwithstanding any provision
to the contrary contained in any Credit Document, it is expressly provided that
in no case or event shall the aggregate of any amounts accrued or paid pursuant
to this Agreement which under applicable laws are or may be deemed to constitute
interest ever exceed the maximum nonusurious interest rate permitted by
applicable Texas or federal laws, whichever permit the higher rate. In this
connection, Borrower and Lenders stipulate and agree that it is their common and
overriding intent to contract in strict compliance with applicable usury laws.
In furtherance thereof, none of the terms of this Agreement shall ever be
construed to create a contract to pay, as consideration for the use, forbearance
or detention of money, interest at a rate in excess of the maximum rate
permitted by applicable laws. Borrower shall never be liable for interest in
excess of the maximum rate permitted by applicable laws. If, for any reason
whatever, such interest paid or received during the full term of the applicable
Indebtedness produces a rate which exceeds the maximum rate permitted by
applicable laws, Lenders shall credit against the principal of such Indebtedness
(or, if such Indebtedness shall have been paid in full, shall refund to the
payor of such interest) such portion of said interest as shall be necessary to
cause the interest paid to Agent produce a rate equal to the maximum rate
permitted by applicable laws. All sums paid or agreed to be paid to Agent or
any Lender for the use, forbearance or detention of money shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread in
equal parts throughout the full term of the applicable Indebtedness, so that the
interest rate is uniform throughout the full term of such Indebtedness. The
provisions of this Section shall control all agreements, whether now or
hereafter existing and whether written or oral, between or among Borrower, Agent
and/or any Lender.
13. DOCUMENTATION REQUIREMENTS. Each written instrument required by this
Agreement, the Notes or the other Credit Documents to be furnished to Agent or
any Lender shall be duly executed by the person or persons specified (or where
no particular person is specified, by such person as Agent or such Lender shall
require), duly acknowledged where reasonably required by Agent or such Lender
and, in the case of affidavits and similar sworn instruments, duly sworn to and
subscribed before a notary public duly authorized to act by Governmental
Authority; shall be furnished to Agent or such Lender in one or more copies as
required by such Lender; and shall in all respects be in form and substance
satisfactory to Agent or such Lender and to its legal counsel.
14. SURVIVAL. All covenants, agreements, representations and warranties
made by Borrower in this Agreement, the other Credit Documents and any other
document executed pursuant hereto or in connection herewith, and in any
certificates or other documents or instruments delivered pursuant to this
Agreement, the other Credit Documents or any other document executed pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement, the other Credit Documents and the other documents executed pur-
suant hereto or in connection herewith, and shall continue in full force and
effect until full payment of Facility Debt, complete performance of all of the
obligations of Borrower under the Credit Documents and final termination of
Lenders' obligations--if any--to make any further advances under the Notes or to
provide any other financial accommodation to Borrower (provided, however, that
all reimbursement obligations, indemnification and hold harmless obligations and
other similar obligations of Borrower under any of the Credit Documents shall
survive such payment, performance and termination). All such covenants,
agreements, representations and warranties shall be binding upon any successors
and assigns of Borrower, but any attempted assignment of any rights of Borrower
hereunder without the prior written consent of Majority Lenders shall be null
and void. No Person other than Borrower shall have any right or action hereon
or any rights to Loans at any time, the Loans shall not constitute a trust fund
for the benefit of any third parties and no third party shall under any
circumstances have or be entitled to any Lien or any trust impressed on any
undisbursed Loans.
15. BORROWER AGREES TO PAY OR REIMBURSE AGENT'S EXPENSES; INDEMNIFICATION.
To the extent not prohibited by applicable law, Borrower will pay all costs and
expenses and reimburse Agent for any and all reasonable expenditures of every
character incurred or expended from time to time, regardless of whether an Event
of Default shall have occurred, in connection with the preparation, negotiation,
documentation, closing, renewal, revision, modification, increase, review or
restructuring of any loan or credit facility secured by the Credit Documents,
including legal, accounting, auditing, architectural, engineering and inspection
services and disbursements, and shall pay Agent and Lenders for any and all
reasonable expenditures of every character incurred or expended in connection
with collecting or attempting to enforce or collect any Credit Document.
Provided, that no right or option granted by Borrower to Agent or any Lender or
otherwise arising pursuant to any provision of any Credit Document shall be
deemed to impose or admit a duty on Agent or any Lender to supervise, monitor or
control any aspect of the character or condition of any operations conducted in
connection therewith for the benefit of Borrower or any Person other than Agent
or such Lender. Borrower shall indemnify Agent, Lenders and each Affiliate
thereof and their respective directors, officers, employees and agents from, and
hold each of them harmless against, any and all losses, liabilities (including
Environmental Liabilities), claims (including Environmental Claims), expenses
(including reasonable attorneys' fees) or damages to which any of them may
become subject, insofar as such losses, liabilities, claims, expenses or damages
arise out of or result from (a) any actual or proposed use by Borrower of the
proceeds of any Loan made or Letter of Credit issued by any Lender or growing
out of or resulting from any Credit Document or any transaction or event
contemplated therein; (b) violation by Borrower or any of its Subsidiaries of
any law, rule, regulation or order including those relating to Hazardous
Substances, petroleum, petroleum products or petroleum wastes; (c) any Lender or
Agent being deemed an operator of any of Borrower's real or personal Property by
a court or other regulatory or administrative agency or tribunal or other third
party, to the extent such losses, liabilities, claims or damages arise out of or
result from any Hazardous Substance, petroleum, petroleum product or petroleum
waste located in on or under such property, or (d) any investigation, litigation
or other proceeding (including any threatened investigation or proceeding)
relating to any of the foregoing. The obligations of the Borrower under this
Section shall survive the termination of this Agreement and the repayment and
expiry of the Loans and all Letter of Credit Liabilities. Any amount to be paid
under this Section by Borrower to Agent or any Lender shall be a demand
obligation owing by Borrower to Agent or such Lender and shall bear interest
from the date of expenditure until paid at the Past Due Rate.
16. AMENDMENTS IN WRITING. This Agreement shall not be changed orally
but shall be changed only by agreement in writing signed by Borrower, Agent and
all Lenders. Any waiver or consent with respect to this Agreement shall be
effective only in the specific instance and for the specific purpose for which
given. No course of dealing between the parties, no usage of trade and no parol
or extrinsic evidence of any nature shall be used to supplement or modify any of
the terms or provisions of this Agreement.
17. NOTICES. Any notice, request or other communication required or
permitted to be given hereunder shall be given in writing by (a) delivering it
against receipt for it, (b) depositing it with an overnight delivery service or
by depositing it in a receptacle maintained by the United States Postal Service,
postage prepaid, registered or certified mail, return receipt requested,
addressed to the respective parties at the addresses shown herein (and if so
given, shall be deemed given when mailed), or (c) by telecopy (provided, that
notice by telecopy is intended for the convenience of the Person giving such
notice and the Person receiving such notice may rely on, and shall not be liable
for acting or refraining from acting upon, any notice, instruction or request
purporting to have been signed or presented by the proper Person). Borrower's
address for notice may be changed at any time and from time to time, but only
after 30 days' advance written notice to Agent and Lenders and shall be the most
recent such address furnished in writing by Borrower to Agent and Lenders.
Agent's address for notice may be changed at any time and from time to time, but
only after ten days' advance written notice to Borrower and shall be the most
recent such address furnished in writing by Agent to Borrower and Lenders. Any
Lender's address for notice may be changed at any time and from time to time,
but only after ten days' advanced notice to Borrower, Agent and the other
Lenders and shall be the most recent such address furnished in writing by such
Lender to Borrower, Agent and the other Lenders. Actual notice, however and
from whomever given or received, shall always be effective when received.
Notwithstanding anything to the contrary contained in the Section, any notice
required or permitted to be given to Agent under Section 2 shall be effective
only when actually received by Agent.
18. "INCLUDING" IS NOT LIMITING; SECTION HEADINGS AND REFERENCES;
EXHIBITS, ETC. Wherever the term "including" or a similar term is used in this
Agreement, it shall be read as if it were written "including by way of example
only and without in any way limiting the generality of the clause or concept
referred to." The headings used is this Agreement are included for reference
only and shall not be considered in interpreting, applying or enforcing this
Agreement. References in any Credit Document to paragraph or section numbers
are references to paragraphs or sections, as the case may be, to such Credit
Document. References in any Credit Document to Exhibits, Schedules, Annexes and
Appendices are to the Exhibits, Schedules, Annexes and Appendices to such Credit
Document and they shall be deemed incorporated into such Credit Document by
reference.
19. OFFSET RIGHTS. Each Lender is hereby authorized at any time and from
time to time, without notice to any Person (and Borrower hereby WAIVES any such
notice) to the fullest extent permitted by law, to set-off and apply any and all
monies, securities and other Property of Borrower now or in the future in the
possession, custody or control of such Lender, or on deposit with or otherwise
owed to Borrower by such Lender--including all such monies, securities and other
Property held in general, special, time, demand, provisional or final accounts
or for safekeeping or as collateral or otherwise (but excluding those accounts
clearly designated as escrow or trust accounts held by Borrower for others
unaffiliated with Borrower)--against any and all of Borrower's obligations to
Agent or any Lender now or hereafter existing under this Agreement, irrespective
of whether any demand shall have made under this Agreement. Each Lender agrees
to use reasonable efforts to promptly notify Borrower after any such set-off and
application, provided that failure to give--or delay in giving--any such notice
shall not affect the validity of such set-off and application or impose any
liability on such Lender. Each Lender's rights under this Section are in
addition to other rights and remedies (including other rights of set-off) which
such Lender may have. Borrower is hereby authorized, without notice to any
Person (and Lenders hereby WAIVE any such notice), to set-off and apply against
any and all amounts from time to time owing to any Lender hereunder or under
such Lender's Note, any and all of such Lender's obligation to Borrower pursuant
to any general, special, time, demand, provisional or final account with such
Lender to the extent (but only to the extent) that such account is not insured
by the Federal Deposit Insurance Corporation and Borrower incurs a loss thereof
as a result of the bankruptcy, insolvency, liquidation, dissolution or other
cessation of business by such Lender. Borrower's rights under this Section are
in addition to other rights and remedies (including other rights of set-off)
which Borrower may have at law or in equity with respect to a failed financial
institution.
20. VENUE. This Agreement is performable in Harris County, Texas, which
shall be a proper place of venue for suit on or in respect of this Agreement.
Borrower irrevocably agrees that any legal proceeding in respect of this
Agreement shall be brought in the district courts of Harris County, Texas or the
United States District Court for the Southern District of Texas, Houston
Division (collectively, the "Specified Courts"). Borrower hereby irrevocably
submits to the nonexclusive jurisdiction of the state and federal courts of the
State of Texas. Borrower hereby irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any suit, action or proceeding arising out of or relating to any
Credit Document brought in any Specified Court, and hereby further irrevocably
waives any claims that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum. Borrower further irrevocably
consents to the service of process out of any of the Specified Courts in any
such suit, action or proceeding by the mailing of copies thereof by certified
mail, return receipt requested, postage prepaid, to Borrower at its address as
provided in this Agreement or as otherwise provided by Texas law. Nothing
herein shall affect the right of Agent or any Lender to commence legal
proceedings or otherwise proceed against Borrower in any jurisdiction or to
serve process in any manner permitted by applicable law. Borrower agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. This agreement shall be governed by and construed in
accordance with the applicable laws of the State of Texas and the United States
of America from time to time in effect.
21. RIGHTS CUMULATIVE; DELAY NOT WAIVER. Agent's or any Lender's exercise
of any right, benefit or privilege under any of the Credit Documents or any
other papers or at law or in equity shall not preclude the concurrent or
subsequent exercise of Agent's or any Lender's other present or future rights,
benefits or privileges. The remedies provided in this Agreement are cumulative
and not exclusive of any remedies provided by law, the Credit Documents or any
other papers; provided, however, that to the extent of any conflict between any
provision of this Agreement and any provision contained in any Note, the other
Credit Documents or any other document executed pursuant hereto or in connection
herewith, the provisions of this Agreement shall control. Every power, right or
remedy of Agent or any Lender set forth in this Agreement, the Notes, the other
Credit Documents or any other document executed pursuant hereto or in connection
herewith, or afforded by law may be exercised from time to time, and as often as
may be deemed expedient by the Person entitled to enforce or exercise such. No
failure by Agent or any Lender to exercise, and no delay in exercising, any
right under any Credit Document or any other papers shall operate as a waiver
thereof.
22. ENTIRE AGREEMENT; FORMER AGREEMENT SUPERSEDED. This Agreement
embodies the entire agreement and understanding among Borrower and Agent and
Lenders relating to the subject matter hereof and supersedes all prior
proposals, agreements and understandings relating to such subject matter. The
other Credit Documents are incorporated herein by reference; however, in the
event and to the extent of any conflict, the provisions of this Agreement shall
control. Without limiting the effect of the foregoing provisions of this
Section 22, this Agreement supersedes all of the terms and provisions of that
certain Loan Agreement dated as of October 11, 1991, by and among Borrower, TCB
individually and as agent, NationsBank of Texas, National Association, a
national banking association, and BANK ONE, TEXAS, NATIONAL ASSOCIATION, a
national banking association, as amended from time to time (collectively, the
"Superseded Loan Agreement"). All rights of Borrower to request loans under the
Superseded Loan Agreement are hereby terminated.
23. SEVERABILITY. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under present or future laws, the legality,
validity and enforceability of the remaining provisions of this Agreement shall
not be affected thereby, and this Agreement shall be liberally construed so as
to carry out the intent of the parties to it. Each waiver in this Agreement is
subject to the overriding and controlling rule that it shall be effective only
if and to the extent that (a) it is not prohibited by applicable law and (b)
applicable law neither provides for nor allows any material sanctions to be
imposed against Agent or any Lender for having bargained for and obtained it.
24. DTPA WAIVER. Borrower hereby waives all rights, remedies, claims,
demands and causes of action based upon or related to the Texas Deceptive Trade
Practices-Consumer Protection Act as described in Sections 17.41 et seq. of the
Texas Business & Commerce Code, as the same pertains or may pertain to any
Credit Document or any of the transactions contemplated therein, to the maximum
extent that such rights, etc. may lawfully and effectively be waived. In
furtherance of this waiver, Borrower hereby represents and warrants to Agent and
Lenders that (a) Borrower is represented by legal counsel in connection with the
negotiations, execution and delivery of this Agreement and the other Credit
Documents, (b) Borrower has a choice other than to enter into this waiver in
that it can obtain the Loans from another institution or institutions and (c)
Borrower does not consider itself to be in a significantly disparate bargaining
position relative to Agent and Lenders with respect to this Agreement and the
other Credit Documents.
25. RELEASE OF CLAIMS. Borrower hereby releases, discharges and acquits
forever Agent and Lenders and their respective officers, directors, trustees,
agents, employees and counsel (in each case, past, present or future) from any
and all Claims existing as of the date hereof (or the date of actual execution
hereof by Borrower, if later) including those arising pursuant to the Superseded
Loan Agreement and/or any of the Original Notes. As used herein, the term
"Claim" shall mean any and all liabilities, claims, defenses, demands, actions,
causes of action, judgments, deficiencies, interest, liens, costs or expenses
(including court costs, penalties, attorneys' fees and disbursements, and
amounts paid in settlement) of any kind and character whatsoever, including
claims for usury, breach of contract, breach of commitment, negligent
misrepresentation or failure to act in good faith, in each case whether now
known or unknown, suspected or unsuspected, asserted or unasserted or primary or
contingent, and whether arising out of written documents, unwritten
undertakings, course of conduct, tort, violations of laws or regulations or
otherwise.
26. COUNTERPARTS. This Agreement may be executed in several identical
counterparts, and by the parties hereto on separate counterparts, and each
counterpart, when so executed and delivered, shall constitute an original
instrument, and all such separate counterparts shall constitute but one and the
same instrument.
27. ASSIGNMENT TO FEDERAL RESERVE BANK. Notwithstanding any other
language in this Agreement, any Lender shall may at any time assign all or any
portion of its rights under this Agreement, its Note and the Credit Document to
a Federal Reserve Bank as collateral in accordance with Regulation A and the
applicable operating circular of such Federal Reserve Bank.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SECTION 26.02
THIS AGREEMENT, THE LETTER OF CREDIT AGREEMENT, THE NOTES AND THE OTHER
CREDIT DOCUMENTS AND ALL OTHER CREDIT DOCUMENTS EXECUTED BY ANY OF THE PARTIES
SUBSTANTIALLY CONCURRENTLY HEREWITH CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
STEWART & STEVENSON SERVICES, INC.,
a Texas corporation
/s/ Kyle J. Gideon
By:______________________________
Name: Kyle J. Gideon
Title: Assistant Treasurer
Address for Notices:
If by mail:
Stewart & Stevenson Services, Inc.
P. O. Box 1637
Houston, Texas 77251-1637
Attention: Chief Financial Officer
If by hand delivery or telecopy:
Stewart & Stevenson Services, Inc.
2707 North Loop West, 8th Floor
Houston, Texas 77008
Attention: Chief Financial Officer
Telecopier No. (713) 868-0208
The undersigned legal counsel for Borrower signs this Agreement not as a
party to it but solely for the purpose of complying with the provisions of
Section 17.42(a)(3) of the Texas Deceptive Trade Practices-Consumer Protection
Act described in Section 24.
/s/ Lawrence E. Wilson
______________________________
LAWRENCE E. WILSON
Title: Vice President & General Counsel
Texas Bar No.: 21704000
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking
association acting in its individual
capacity and as Agent for Lenders
named herein
/s/ Mona M. Foch
By:______________________________
Name: Mona M. Foch
Title: Vice President
Address for Notices:
Texas Commerce Bank
National Association
712 Main Street
Houston, Texas 77002
Attention: Manager, Manufacturing and Oilfield
Services Division
Telecopy No. (713) 216-4227
Interest in
Maximum
Commitment: $20,000,000
ABN AMRO BANK, N.V., HOUSTON AGENCY
/s/ John H. Phelan
By:______________________________
Name: John H. Phelan
Title: Group Vice President
/s/ David P. Orr
By:______________________________
Name: David P. Orr
Title: Vice President
Address for Notices:
ABN AMRO Bank N.V., Houston Agency
Three Riverway, Suite 1600
Houston, Texas 77056
Attention: Belinda Rowell
Telecopy No. (713) 629-7533
Interest in
Maximum
Commitment: $10,000,000
THE BANK OF NEW YORK,
a New York banking corporation
/s/ Jan K. Stewart
By:______________________________
Name: Jan K. Stewart
Title: Vice President
Address for Notices:
The Bank of New York
One Wall Street, 19th Floor
New York, New York 10286
Attention: Ms. Julie Brennan
Telecopy No.: (212) 635-6434
Interest in
Maximum
Commitment: $10,000,000
NATIONSBANK OF TEXAS, NATIONAL
ASSOCIATION, a national banking
association
/s/ Frank T. Hundley
By:______________________________
Name: Frank T. Hundley
Title: Vice President
Address for Notices:
NationsBank of Texas, National Association
700 Louisiana
P.O. Box 2518
Houston, Texas 77252-2518
Attention: Corporate Banking Group
Telecopy No.: (713) 247-6719
Interest in
Maximum
Commitment: $15,000,000
EXHIBITS:
A - Note form
B - Rate Designation Notice
C - Request for Credit
D - Compliance Certificate
E - Assignment form
SCHEDULES:
I - Litigation
II - Subsidiaries
III - Investments
IV - Liens
NOTE
Houston, Texas
$_______________ _______________, 199__
FOR VALUE RECEIVED, STEWART & STEVENSON SERVICES, INC. ("Maker"), a Texas
corporation, promises to pay to the order of _________________________________
("Payee"), a _______________, at the principal office of Texas Commerce Bank
National Association, a national banking association, 712 Main Street, Houston,
Harris County, Texas 77002, in immediately available funds and in lawful money
of the United States of America, the principal sum of
________________________________________ Dollars ($____________) (or the unpaid
balance of all principal advanced against this note, if that amount is less),
together with interest on the unpaid principal balance of this note from time to
time outstanding at the rate or rates provided in the Loan Agreement
(hereinafter defined); provided, that for the full term of this note the
interest rate produced by the aggregate of all sums paid or agreed to be paid to
the holder of this note for the use, forbearance or detention of the debt
evidenced hereby (including, but not limited to, all interest on this note at
the Stated Rate plus the Additional Interest) shall not exceed the Ceiling Rate.
Any term defined in the Loan Agreement (as amended, supplemented, restated or
replaced from time to time, the "Loan Agreement") dated as of September ___,
1993 among Maker, certain financial institutions named therein and Texas
Commerce Bank National Association, individually and as agent for the financial
institutions from time to time a party thereto, which is used in this note and
which is not otherwise defined in this note shall have the meaning ascribed to
it in the Loan Agreement.
1. Loan Agreement; Advances; Security. This note has been issued
pursuant to the terms of the Loan Agreement, and is one of the Notes referred to
in the Loan Agreement. Advances against this note by Payee or other holder
hereof shall be governed by the terms and provisions of the Loan Agreement.
Reference is hereby made to the Loan Agreement for all purposes. Payee is
entitled to the benefits of the Loan Agreement. The unpaid principal balance of
this note at any time shall be the total of all amounts lent or advanced against
this note less the amount of all payments or permitted prepayments made on this
note and by or for the account of Maker. All loans and advances and all payments
and permitted prepayments made hereon may be endorsed by the holder of this note
on a schedule which may be attached hereto (and thereby made a part hereof for
all purposes) or otherwise recorded in the holder's records; provided, that any
failure to make notation of (a) any advance shall not cancel, limit or otherwise
affect Maker's obligations or any holder's rights with respect to that advance,
or (b) any payment or permitted prepayment of principal shall not cancel, limit
or otherwise affect Maker's entitlement to credit for that payment as of the
date received by the holder.
2. Mandatory Payments of Principal and Interest.
(a) Accrued and unpaid interest on the unpaid principal balance of this
note shall be due and payable on the Interest Payment Dates.
(b) The entire unpaid principal balance of this note shall be finally due
and payable on the Maturity Date.
(c) All payments hereon made pursuant to this Section shall be applied
first to accrued interest, the balance to principal.
(d) If any payment provided for in this note shall become due on a day
other than a Business Day, such payment may be made on the next succeeding
Business Day (unless the result of such extension of time would be to extend the
date for such payment into another calendar month or beyond the Maturity Date,
and in either such event such payment shall be made on the Business Day immedi-
ately preceding the day on which such payment would otherwise have been due),
and such extension of time shall in such case be included in the computation of
interest on this note.
(e) The Loan Agreement provides for required prepayments of the
Indebtedness evidenced hereby upon terms and conditions specified therein.
3. No Usury Intended; Spreading. Notwithstanding any provision to the
contrary contained in this note or any of the other Credit Documents, it is
expressly provided that in no case or event shall the aggregate of (i) all
interest on the unpaid balance of this note, accrued or paid from the date
hereof and (ii) the aggregate of any other amounts accrued or paid pursuant to
this note or any of the other Credit Documents, which under applicable laws are
or may be deemed to constitute interest upon the indebtedness evidenced by this
note from the date hereof, ever exceed the Ceiling Rate. In this connection,
Maker and Payee stipulate and agree that it is their common and overriding
intent to contract in strict compliance with applicable federal and Texas usury
laws (and the usury laws of any other jurisdiction whose usury laws are deemed
to apply to this note or any of the other Credit Documents despite the intention
and desire of the parties to apply the usury laws of the State of Texas). In
furtherance thereof, none of the terms of this note or any of the other Credit
Documents shall ever be construed to create a contract to pay, as consideration
for the use, forbearance or detention of money, interest at a rate in excess of
the Ceiling Rate. Maker or other parties now or hereafter becoming liable for
payment of the indebtedness evidenced by this note shall never be liable for
interest in excess of the Ceiling Rate. If, for any reason whatever, the
interest paid or received on this note during its full term produces a rate
which exceeds the Ceiling Rate, the holder of this note shall credit against the
principal of this note (or, if such indebtedness shall have been paid in full,
shall refund to the payor of such interest) such portion of said interest as
shall be necessary to cause the interest paid on this note to produce a rate
equal to the Ceiling Rate. All sums paid or agreed to be paid to the holder of
this note for the use, forbearance or detention of the indebtedness evidenced
hereby shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread in equal parts throughout the full term of this note, so
that the interest rate is uniform throughout the full term of this note. The
provisions of this Section shall control all agreements, whether now or
hereafter existing and whether written or oral, between Maker and Payee.
4. Default. The Loan Agreement provides for the acceleration of the
maturity of this note and other rights and remedies upon the occurrence of
certain events specified therein.
5. Waivers by Maker and Others. Except to the extent, if any, that
notice of default is expressly required herein or in any of the other Credit
Documents, Maker and any and all co-makers, endorsers, guarantors and sureties
severally WAIVE notice (including, but not limited to, notice of intent to
accelerate and notice of acceleration, notice of protest and notice of
dishonor), demand, presentment for payment, protest, diligence in collecting and
the filing of suit for the purpose of fixing liability and consent that the time
of payment hereof may be extended and re-extended from time to time without
notice to any of them. Each such person agrees that his, her or its liability
on or with respect to this note shall not be affected by any release of or
change in any guaranty or security at any time existing or by any failure to
perfect or to maintain perfection of any lien against or security interest in
any such security or the partial or complete unenforceability of any guaranty or
other surety obligation, in each case in whole or in part, with or without
notice and before or after maturity.
6. Section Headings. Section headings appearing in this note are for
convenient reference only and shall not be used to interpret or limit the
meaning of any provision of this note.
7. Choice of Law. This note shall be governed by and construed in
accordance with the applicable laws of the state of Texas and the United States
of America from time to time in effect.
8. Successors and Assigns. This note and all the covenants and
agreements contained herein shall be binding upon, and shall inure to the
benefit of, the respective legal representatives, heirs, successors and assigns
of Maker and Payee.
9. Records of Payments. The records of Payee shall be prima facie
evidence of the amounts owing on this note.
10. Severability. If any provision of this note is held to be illegal,
invalid or unenforceable under present or future laws, the legality, validity
and enforceability of the remaining provisions of this note shall not be
affected thereby, and this note shall be liberally construed so as to carry out
the intent of the parties to it.
11. Revolving Loan. Subject to the terms and provisions of the Loan
Agreement, Maker may use all or any part of the credit provided to be evidenced
by this note at any time before the Maturity Date. Maker may borrow, repay and
reborrow hereunder, and except as set forth in the Loan Agreement there is no
limitation on the number of advances made hereunder. Pursuant to Article
15.10(b) of Chapter 15 ("Chapter 15") of the Texas Credit Code, as amended,
Maker and Payee expressly agree that Chapter 15 shall not apply to this note or
to any Loan evidenced by this note and that neither this note nor any such Loan
shall be governed by or subject to the provisions of Chapter 15 in any manner
whatsoever.
12. Business Loans. Maker warrants and represents to Payee and all other
holders of this note that all loans evidenced by this note are and will be for
business, commercial, investment or other similar purpose and not primarily for
personal, family, household or agricultural use, as such terms are used in
Chapter One.
STEWART & STEVENSON SERVICES, INC.,
a Texas corporation
By:______________________________
Name:____________________________
Title:___________________________
RATE DESIGNATION NOTICE
The undersigned hereby certifies that (he) (she) is the
______________________________ of Stewart & Stevenson Services, Inc.
("Borrower"), a Texas corporation, and that as such is authorized to execute
this Rate Designation Notice on behalf of Borrower pursuant to the Loan
Agreement (as it may be amended, supplemented or restated from time to time, the
"Loan Agreement") dated as of September ___, 1993, by and among Borrower and
Texas Commerce Bank National Association, a national banking association, acting
as agent (in such capacity, "Agent") and the financial institutions which are a
party thereto from time to time. Any term used herein and not otherwise defined
herein shall have the meaning herein ascribed to it in the Loan Agreement.
In accordance with the Loan Agreement, Borrower hereby notifies Lender of
the exercise of an Interest Option.
Current borrowings
A. 1. Amount of Interest
Option now in effect: _______________
2. Expiring Interest Period: _______________
B. Proposed conversion
1. Amount: $ _______________
2. Date Interest Option is to be
effective: _______________
3. Interest Option to be applicable
(check one):
( ) Base Rate
( ) Eurodollar Rate
( ) CD Rate
( ) Negotiated Rate
_______________
Must be the President, a vice president, the Treasurer or an Assistant
Treasurer of Borrower.
4. Interest Period (if an Alternate Rate
is being selected): ____________________ (if available)
Borrower represents and warrants that the Interest Option and Interest
Period (if any) selected above comply with all provisions of the Loan Agreement
and that there exists no Event of Default or any event which, with the passage
of time, the giving of notice or both, would be an Event of Default.
Date:_______________ STEWART & STEVENSON SERVICES,
INC., a Texas corporation
By:______________________________
Name:____________________________
Title:___________________________
REQUEST FOR CREDIT
______________
Texas Commerce Bank
National Association, as Agent
712 Main Street
Houston, Texas 77002
Attention:______________________________
Gentlemen:
The undersigned hereby certifies that (he) (she) is the
_________________________________ of Stewart & Stevenson Services, Inc.
("Borrower"), a Texas corporation, and that as such is authorized to execute
this Request for Credit (the "Request") on behalf of Borrower pursuant to the
Loan Agreement (as it may be amended, supplemented or restated from time to
time, the "Loan Agreement") dated as of September ___, 1993, by and among
Borrower and Texas Commerce Bank National Association, a national banking
association, acting as agent (in such capacity, "Agent") and the financial
institutions which are a party thereto from time to time. Capitalized terms
used herein and not defined herein shall have the respective meanings assigned
to them in the Loan Agreement. The Loan being requested hereby is to be in the
amount set forth in (b) below and is requested to be made on
______________________________, which is a Business Day. On behalf of Borrower,
the undersigned further certifies, represents and warrants as follows:
a. As of the date hereof:
(1) Aggregate outstanding amount
of Loans is: $_______________
(2) The current Commitment is: $_______________
(3) The available Commitment
(clause 2 - clause 1) is: $_______________
_______________
Must be the President, a vice president, the Treasurer or an Assistant
Treasurer of Borrower.
b. If and only if the available Commitment is positive, Borrower hereby
requests a Loan in the amount of $____________ (which is no more than the
available Commitment).
c. The requested Loan is to be a (check one) ( ) Base Rate Borrowing ( )
CD Rate Borrowing ( ) Eurodollar Rate Borrowing ( ) Negotiated Rate Borrowing.
If the Loan is to be an Alternate Borrowing, the applicable Interest Period is
to be _______________.
d. The representations and warranties made in each Credit Document are
true and correct in all respects on and as of the time of delivery hereof, with
the same force and effect as if made on and as of the time of delivery hereof.
e. No Default has occurred and is continuing or will occur as a result of
the requested Loan.
Thank you for your attention to this matter.
Very truly yours,
STEWART & STEVENSON SERVICES,
INC., a Texas corporation
By:______________________________
Name:____________________________
Title:___________________________
COMPLIANCE CERTIFICATE
The undersigned hereby certifies that (he) (she) is the
______________________________, of Stewart & Stevenson Services, Inc.
("Borrower"), a Texas corporation, and that as such is authorized to execute
this certificate on behalf of Borrower pursuant to the Loan Agreement (as it may
be amended, supplemented or restated from time to time, the "Loan Agreement")
dated as of September ___, 1993, by and among Borrower and Texas Commerce Bank
National Association, a national banking association, acting as agent (in such
capacity, "Agent") and the financial institutions which are a party thereto from
time to time; and that a review of Borrower and its Subsidiaries has been made
under (his) (her) supervision with a view to determining whether Borrower has
fulfilled all of its obligations under the Loan Agreement and the other Credit
Documents; and on behalf of Borrower further certifies, represents and warrants
as follows (each capitalized term used herein having the same meaning given to
it in the Loan Agreement unless otherwise specified):
(a) Borrower has fulfilled its respective obligations under the Credit
Documents.
(b) The representations and warranties made in each Credit Document are
true and correct in all respects on and as of the time of delivery hereof, with
the same force and effect as if made on and as of the time of delivery hereof.
(c) The financial statements delivered to Agent and Lenders concurrently
with this Compliance Certificate have been prepared in accordance with GAAP
consistently followed throughout the period indicated and fairly present the
financial condition and results of operations of the applicable Persons as at
the end of, and for, the period indicated.
(d) No Default has occurred and is continuing. In this regard, the
compliance with the provisions of Section 6(c) of the Loan Agreement is as
follows:
Section 6(c)(1) -- Interest Bearing Debt to Total Capitalization Ratio
actual Interest Bearing Debt to Total Capitalization Ratio for
Borrower and its Subsidiaries as of the date hereof:
__.____ : 1.00
required Interest Bearing Debt to Total Capitalization Ratio for
Borrower and its Subsidiaries as of the date hereof:
_______________
Must be the Chief Financial Officer, Treasurer or any Assistant Treasurer
of Borrower.
0.40 : 1.00
Section 6(c)(2) -- Tangible Net Worth
actual Tangible Net Worth for Borrower and its Subsidiaries as of the
date hereof:
$_______________
required Tangible Net Worth for Borrower and its Subsidiaries as of
the date hereof:
$250,000,000
Section 6(c)(3) -- Interest Coverage Ratio
actual Interest Coverage Ratio for Borrower and its Subsidiaries as of
the date hereof:
__.____ : 1.00
required Interest Coverage Ratio for Borrower and its Subsidiaries as
of the date hereof:
2.00 : 1.00
(e) There has occurred no material adverse change in the assets,
liabilities, financial condition, business or affairs of Borrower or any of its
Subsidiaries since the date of the Loan Agreement.
DATED as of_______________.
STEWART & STEVENSON SERVICES, INC.,
a Texas corporation
By:______________________________
Name:____________________________
Title:___________________________
ASSIGNMENT AND ACCEPTANCE
Dated: _____________, 199__
Reference is made to the Loan Agreement dated as of September ___, 1993 (as
restated, amended, modified, supplemented and in effect from time to time, the
"Loan Agreement"), among Stewart & Stevenson Services, Inc. ("Borrower"), a
Texas corporation, the financial institutions named therein, and Texas Commerce
Bank National Association, individually and as agent (in such capacity, "Agent")
for the financial institutions from time to time a party thereto. Capitalized
terms used herein and not otherwise defined shall have the meanings assigned to
such terms in the Loan Agreement. This Assignment and Acceptance, between
Assignor (as defined and set forth on Schedule I) and Assignee (as defined and
set forth on Schedule I) is dated as of the Effective Date (as set forth on
Schedule I).
1. Assignor hereby irrevocably sells and assigns to Assignee without
recourse to Assignor, and Assignee hereby irrevocably purchases and assumes from
Assignor without recourse to Assignor, as of the Effective Date, an undivided
interest (the "Assigned Interest") in and to all Assignor's rights and
obligations under the Loan Agreement and the Letter of Credit Agreement
respecting the credit facilities provided for in the Loan Agreement and the
Letter of Credit Agreement as are set forth on Schedule I (collectively, the
"Assigned Facilities," individually, an "Assigned Facility"), in the amounts as
set forth on Schedule I.
2. Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Agreement or any other Credit Document or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Loan Agreement, any other Credit Document or any other instrument
or document furnished pursuant thereto, other than that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of Borrower or its Subsidiaries or the performance or observance by Borrower or
its Subsidiaries of any of Borrower's obligations under the Loan Agreement, the
Letter of Credit Agreement, any other Credit Document or any other instrument or
document furnished pursuant thereto; and (iii) attaches the Note held by it
evidencing the Assigned Facility relating to Loans (the "Loan Facility"), and
requests that Agent exchange such Note for a new Note payable to Assignor (if
Assignor has retained any interest in the Loan Facility) and a new Note payable
to Assignee in the respective amounts which reflect the assignment being made
hereby (and after giving effect to any other assignments which have become
effective on the Effective Date).
3. Assignee (i) represents and warrants that it is legally authorized to
enter into this Assignment and Acceptance; (ii) confirms that it has received a
copy of the Loan Agreement, together with copies of the most recent financial
statements delivered pursuant to Section 6(b) thereof, the Letter of Credit
Agreement, the Negotiated Rate Quote Procedure dated concurrently herewith by
and among Agent and Lenders, and any and all amendments and supplements thereto,
and such other documents and information as it has deemed appropriate to make
its own credit analysis; (iii) agrees that it will, independently and without
reliance upon Agent, Assignor or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Loan Agreement;
(iv) appoints and authorizes Agent to take such action as agent on its behalf
and to exercise such powers under the Loan Agreement as are delegated to Agent
by the terms thereof, together with such powers as are reasonably incidental
thereto; (v) agrees that it will be bound by the provisions of the Loan
Agreement and will perform in accordance with its terms all the obligations
which by the terms of the Loan Agreement are required to be performed by it as a
Lender; (vi) if Assignee is organized under the laws of a jurisdiction outside
the United States, attaches the forms prescribed by the Internal Revenue Service
of the United States certifying as to Assignee's exemption from United States
withholding taxes with respect to all payments to be made to Assignee under the
Loan Agreement or such other documents as are necessary to indicate that all
such payments are subject to such tax at a rate reduced by an applicable tax
treaty, and (vii) has supplied the information requested on the administrative
questionnaire attached hereto as Exhibit A.
4. Following the execution of this Assignment and Acceptance, it will be
delivered to Agent for acceptance by it and Borrower and recording by Agent
pursuant to Section 11 of the Loan Agreement, effective as of the Effective Date
(which Effective Date shall, unless otherwise agreed to by Agent, be at least
five Business Days after the execution of this Assignment and Acceptance).
5. Upon such acceptance and recording, from and after the Effective Date,
Agent shall make all payments in respect of the Assigned Facilities (including
payments of principal, interest, fees and other amounts) to Assignee, whether
such amounts have accrued prior to the Effective Date or accrue subsequent to
the Effective Date. Assignor and Assignee shall make all appropriate
adjustments in payments for periods prior to the Effective Date by Agent or with
respect to the making of this assignment directly between themselves.
6. From and after the Effective Date, (i) Assignee shall be a party to
the Loan Agreement, the Letter of Credit Agreement and the other Credit
Documents to which Assignor is a party and, to the extent provided in this
Assignment and Acceptance, have the rights and obligations of a Lender under all
of the Credit Documents, and (ii) Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Loan Agreement, the Letter of Credit Agreement and the
other Credit Documents to which Assignor is a party.
7. The purchase price to be paid simultaneously herewith to Assignor is
the principal amount together with all interest which has accrued but is unpaid,
as of the Effective Date.
8. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective duly authorized officers on
Schedule I hereto.
Schedule I to Assignment and Acceptance
Legal Name of Assignor: ____________________________
Legal Name of Assignee: _________________________________________
Effective Date of Assignment: __________________, 199___
Percentage assigned of each
Assigned Facility (to at least
Principal 8 decimals) (Shown as a
amount (or, percentage aggregate
with respect original principal amount
to Letters (or, with respect to Letters
Assigned of Credit, face Credit, face amount)
Facilities amount) assigned of all Lenders)
Loans: $______________ ______%
Letter of Credit
participation interests $______________ ______%
Accepted:
TEXAS COMMERCE BANK NATIONAL ______________________________
ASSOCIATION, as Agent as Assignor
By:_______________________________ By:______________________________
Name:_____________________________ Name:____________________________
Title:____________________________ Title:___________________________
STEWART & STEVENSON SERVICES, INC.,
a Texas corporation ____________________________
as Assignee
By:_________________________________ By:______________________________
Name:_______________________________ Name:____________________________
Title:______________________________ Title:___________________________
SCHEDULE I
LITIGATION
The following list sets forth each case that individually or in the aggregate
with all other similar cases involves the assertion of claims for damages in
excess of $1,000,000.
Regional Transportation District v. Stewart & Stevenson Services, Inc. In
the District Court, Boulder County, Colorado $ 1,991,666
John Runion v. Stewart & Stevenson Services, Inc., CRS Sirrine, Inc., Metcalf &
Eddy, Inc., CRS-Sirrine and Metcalf & Eddy Joint Venture Cause No. 89-038905
in the 152nd Judicial District Court of Harris County Texas $ 1,247,866
Serv-Tech, Inc. v. Stewart & Stevenson Services, Inc., Ohmstede, Inc., Ohmstede
Mechanical Services, Inc., Robert G. Wetzel, Gene P. Livingston, James B.
Jeffrey and Thomas B. Boisture, Civil Action No. 90-04285, in the 125th Judicial
District Court of Harris County, Texas $ 17,500,000
Southwest Mobile Systems Corporation v. Stewart & Stevenson Services, Inc. C.A.
No. H-92-0386, in the U.S. District Court for the Southern District of Texas,
Houston Division $ 15,500,000
SCHEDULE II
LIST OF 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
NAME ORGANIZATION %
C. Jim Stewart & Stevenson, Inc. Delaware 100
Machinery Acceptance Corporation Texas 100
S&S International Sales, Inc. Barbados 100
Stewart & Stevenson MVO, Inc. Texas 100
Stewart & Stevenson Operations, Inc. Delaware 100
Stewart & Stevenson Overseas, Inc. Texas 100
Stewart & Stevenson Power, Inc. Delaware 100
Stewart & Stevenson Realty Corporation Texas 100
Stewart & Stevenson Transportation, Inc. Texas 100
Stewart & Stevenson de Venezuela, S.A. Venezuela 61.25
Thomassen Stewart & Stevenson International b.v. Netherlands 50
The Company has additional subsidiaries which, if considered in the aggregate as
a single subsidiary, would not constitute a significant subsidiary.
SCHEDULE III
INVESTMENTS
($000's omitted)
EQUITY INVESTMENTS
Thomassen Stewart & Stevenson International B.V.
50% ownership interest in Joint Venture $ 96
Stewart & Stevenson de Venezuela, S.A.
Common Stock 46
Project Orange
Limited Partnership interest 3,000
Thore, Inc.
Preferred Stock 1
NOTES RECEIVABLE
Gas Turbine Operations
Centrais Electricas 563
Dunkirk Cogen 420
Florida Gas Transmission 10
CFR BIO-Gen Corporation 365
Besicorp Group Inc. 2,800
Kamine Development Corp. 2,800
Stewart & Stevenson Realty Corporation
Mischer 300
Dodd Diesel 345
David James 108
CONTINGENT LIABILITIES
Hyster - assignment of customer leases with recourse 310
Citicorp - assignment of customer installment sale
contract with recourse 135
Banque de Suez - guarantee and repurchase agreement for TSSI 7,498
N.V. Nationale Borg-Maatschappij - counter guarantees for
performance of TSSI 1,864
ABN*AMRO Bank - counter guarantees for performance of TSSI
Comelco - assignment of customer installment sale contract
with limited recourse 4
SCHEDULE IV
LIENS
None
EXHIBIT 4.2
AGREEMENT AND FIRST AMENDMENT
TO LOAN AGREEMENT
(July 31, 1994)
THIS AGREEMENT AND FIRST AMENDMENT TO LOAN AGREEMENT (this "Amendment"),
dated as of July 31, 1994, is made and entered into by and among STEWART &
STEVENSON SERVICES, INC. (the "Borrower"), a Texas corporation; the financial
institutions listed on the signature pages hereto (the "Lenders") and TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, a national banking association domiciled in
Houston, Harris County, Texas, acting in its capacity as agent for the Lenders
(in such capacity, the "Agent"). The Borrower, the Lenders and the Agent are
herein sometimes called the "Parties".
Recitals:
1. The Parties have entered into a Loan Agreement dated as of September
3, 1993 (which Loan Agreement, as amended to the date hereof, is herein called
the "Loan Agreement").
2. The Parties desire to amend the Loan Agreement in certain respects to
reduce the Margin Percentage, to reduce the commitment fees to be paid to the
Lenders, to increase the minimum Tangible Net Worth requirement, to extend the
maturity thereof, and to make certain other changes thereto, all as is more
fully described below.
Agreements:
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are acknowledged by
the Parties, the Parties agree as follows:
1. Margin Percentage Amended. The definition of "Margin Percentage" in
Section 1 of the Loan Agreement is amended to provide in its entirety as
follows:
Margin Percentage means, on any day, the per annum percentage corresponding
to the Interest Bearing Debt to Total Capitalization Ratio (determined as of the
most recent Calculation Date) on such day as provided below:
Interest Bearing Debt Per Annum
to Total Capitalization Ratio Percentage
35% or greater 45.0 basis points
20% to, but not including, 35% 32.5 basis points
less than 20% 25.0 basis points
2. Maturity Date Extended. The definition of "Maturity Date" in Section
1 of the Loan Agreement is amended to provide in its entirety as follows:
Maturity Date means the maturity of the Notes, July 31, 1997, as the same
may hereafter be accelerated pursuant to the provisions of any of the Credit
Documents.
3. Amendment of Section 2(c). Section 2(c) of the Loan Agreement is
hereby amended to provide in its entirety as follows:
(c) Commitment Fee. In consideration of the Commitment, Borrower agrees
to pay a commitment fee (computed on the basis of the actual number of days
elapsed in a year composed of 365 or 366 days, as the case may be) of fifteen
(15) basis points per annum on the daily average difference between the
Commitment and the aggregate principal balance of the Notes, such fee to be due
and payable to Agent for the account of Lenders on each Interest Payment Date
for Base Rate Borrowings before the Termination Date, and on the Termination
Date, in addition to the installments of interest on the Notes. All past due
commitment fees shall bear interest at the Past Due Rate. Lenders and Borrower
agree that Chapter 15 of the Texas Credit Code shall not apply to this
Agreement, the Notes or any Loan.
4. Tangible Net Worth. Section 6(c)(2) of the Loan Agreement is hereby
amended by deleting the amount "$250,000,000" where it appears therein and
substituting therefor the amount "$350,000,000."
5. Conditions Precedent. This Amendment shall be effective July 31,
1994, subject to the satisfaction, in a manner satisfactory to the Agent, of
each of the following conditions precedent:
(a) The Agent shall have received the following, each of which shall be in
form and substance satisfactory to the Agent in its sole discretion and duly and
validly executed:
(1) A certificate of the Secretary or any Assistant Secretary of the
Borrower, dated as of the date hereof, as to (1) the resolutions of the Board of
Directors of the Borrower authorizing the execution, delivery and performance of
this Amendment (a copy of such resolutions to be attached to such certificate),
such certificate to state that said copy is a true and correct copy of such
resolutions and that such resolutions were duly adopted and have not been
amended, superseded, revoked or modified in any respect and remain in full force
and effect as of the date of such certificate; (2) the absence of any change
since September 3, 1993, in any of (i) the incumbency and signatures of the
officer or officers of the Borrower; (ii) the Articles of Incorporation of the
Borrower; or (iii) the Bylaws of the Borrower; and
(2) this Amendment, duly executed by the Borrower, the Lenders and
the Agent.
(b) The Borrower shall have paid all accrued and unpaid fees and other
amounts in connection with this Amendment.
(c) No Default shall have occurred and be continuing.
(d) Such effectiveness shall not violate any legal requirement applicable
to the Agent or any Lender.
6. Representations True; No Default. The Borrower represents and
warrants to the Agent and each Lender that (a) the representations and
warranties contained in the Loan Agreement and in the other Credit Documents are
true and correct on and as of the date hereof as though made on and as of such
date (except to the extent such representations and warranties are expressly
stated to be made solely as of an earlier date) and (b) no event has occurred
and is continuing which constitutes an Event of Default under the Loan Agreement
or any of the other Credit Documents or which upon the giving of notice or the
lapse of time or both would constitute such an Event of Default.
7. Ratification. Except as expressly amended hereby, the Loan Agreement,
as hereby amended, and the other Credit Documents are in all respects ratified
and confirmed and are, and shall continue to be, in full force and effect. The
Borrower hereby agrees and acknowledges that all of its liabilities and
obligations under the Loan Agreement, the other Credit Documents, or otherwise,
remain in full force and effect as of the date of this Amendment.
8. Definitions and References. Unless otherwise defined herein, terms
used herein which are defined in the Loan Agreement or in the other Credit
Documents shall have the meanings therein ascribed to them. The term
"Agreement" as used in the Loan Agreement and the term "Loan Agreement" as used
in the other Credit Documents or any other instrument, document or writing
furnished to the Agent or any Lender by or on behalf of the Borrower shall mean
the Loan Agreement as hereby amended.
9. Expenses; Additional Information. The Borrower shall pay to the Agent
on demand all expenses (including reasonable counsel's fees) incurred in
connection with the preparation, reproduction, execution and delivery of this
Amendment and with respect to advising the Agent as to its rights and
responsibilities under the Loan Agreement, as hereby amended. In addition, the
Borrower shall pay all costs and expenses of the Agent and each Lender
(including counsel's fees) in connection with the enforcement of this Amendment.
10. Severability. If any term or provision of this Amendment or the
application thereof to any person or circumstances shall, to any extent, be
deemed invalid or unenforceable, the remainder of this Amendment, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and this Amendment shall be valid and enforced to the fullest extent
permitted by applicable law. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions thereof or affecting the validity or
enforceability of such provision in any other jurisdiction and, to this end, the
provisions of this Amendment are severable.
11. INDEMNIFICATION. The Borrower shall indemnify the Agent, the Lenders
and each Affiliate thereof and their respective directors, officers, employees
and agents from, and hold each of them harmless against, any and all losses,
liabilities (including Environmental Liabilities), claims (including
Environmental Claims), expenses (including reasonable attorneys' fees) or
damages to which any of them may become subject, insofar as such losses,
liabilities, claims, expenses or damages arise out of or result from (a) any
actual or proposed use by the Borrower of the proceeds of any Loan made or
Letter of Credit issued by any Lender or growing out of or resulting from any
Credit Document or any transaction or event contemplated therein; (b) violation
by the Borrower or any of its Subsidiaries of any law, rule, regulation or order
including those relating to Hazardous Substances, petroleum, petroleum products
or petroleum wastes; (c) any Lender or the Agent being deemed an operator of any
of the Borrower's real or personal Property by a court or other regulatory or
administrative agency or tribunal or other third party, to the extent such
losses, liabilities, claims or damages arise out of or result from any Hazardous
Substance, petroleum, petroleum product or petroleum waste located in on or
under such property, or (d) any investigation, litigation or other proceeding
(including any threatened investigation or proceeding) relating to any of the
foregoing. The obligations of the Borrower under this Section shall survive the
termination of the Loan Agreement (as amended by this Amendment and as it may
otherwise be amended, restated, modified and supplemented from time to time) and
the repayment and expiry of the Loans and all Letter of Credit Liabilities. Any
amount to be paid under this Section by the Borrower to the Agent or any Lender
shall be a demand obligation owing by the Borrower to the Agent or such Lender
and shall bear interest from the date of expenditure until paid at the Past Due
Rate.
12. DTPA WAIVER. The Borrower hereby waives all rights, remedies,
claims, demands and causes of action based upon or related to the Texas
Deceptive Trade Practices-Consumer Protection Act as described in Sections 17.41
et seq. of the Texas Business & Commerce Code, as the same pertains or may
pertain to any Credit Document or any of the transactions contemplated therein,
to the maximum extent that such rights, etc. may lawfully and effectively be
waived. In furtherance of this waiver, the Borrower hereby represents and
warrants to the Agent and the Lenders that (a) the Borrower is represented by
legal counsel in connection with the negotiations, execution and delivery of
this Amendment, (b) the Borrower has a choice other than to enter into this
waiver in that it can obtain the Loans from another institution or institutions
and (c) the Borrower does not consider itself to be in a significantly disparate
bargaining position relative to the Agent and the Lenders with respect to this
Amendment.
13. RELEASE OF CLAIMS. The Borrower hereby releases, discharges and
acquits forever the Agent and the Lenders and their respective officers,
directors, trustees, agents, employees and counsel (in each case, past, present
or future) from any and all Claims existing as of the date hereof (or the date
of actual execution hereof by the Borrower, if later). As used herein, the term
"Claim" shall mean any and all liabilities, claims, defenses, demands, actions,
causes of action, judgments, deficiencies, interest, liens, costs or expenses
(including court costs, penalties, attorneys' fees and disbursements, and
amounts paid in settlement) of any kind and character whatsoever, including
claims for usury, breach of contract, breach of commitment, negligent
misrepresentation or failure to act in good faith, in each case whether now
known or unknown, suspected or unsuspected, asserted or unasserted or primary or
contingent, and whether arising out of written documents, unwritten
undertakings, course of conduct, tort, violations of laws or regulations or
otherwise.
14. Miscellaneous. This Amendment (a) shall be binding upon and inure to
the benefit of the Borrower, the Agent and the Lenders and their respective
successors, assigns, receivers and trustees (however, the Borrower may not
assign its rights hereunder without the prior written consent of the Lenders);
(b) may be modified or amended only by a writing signed by each party; (c) SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS
(WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES); (d) may be executed
in several counterparts, and by the Parties on separate counterparts, and each
counterpart, when so executed and delivered, shall constitute an original
agreement, and all such separate counterparts shall constitute but one and the
same agreement; and (e) embodies the entire agreement and understanding between
the Parties with respect to the subject matter hereof and supersedes all prior
agreements, consents and understandings relating to such subject matter. The
headings herein shall be accorded no significance in interpreting this
Amendment.
15. THIS AMENDMENT TOGETHER WITH ALL OTHER CREDIT DOCUMENTS REPRESENT THE
FINAL AGREEMENT AMONG THE PARTIES AS TO THE SUBJECT MATTER HEREOF AND THEREOF
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG
THE PARTIES.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed
by their respective duly authorized officers effective as of the date written
above.
STEWART & STEVENSON SERVICES, INC.,
a Texas corporation
/s/ Kyle J. Gideon
By:______________________________
Name: Kyle J. Gideon
Title: Assistant Treasurer
The undersigned legal counsel for the Borrower signs this Amendment not as
a party to it but solely for the purpose of complying with the provisions of
Section 17.42(a)(3) of the Texas Deceptive Trade Practices-Consumer Protection
Act described in Section 11.
/s/ Lawrence E. Wilson
______________________________
LAWRENCE E. WILSON
Title: Vice President and General Counsel
Texas Bar No.: 21704000
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association
acting in its individual capacity and as the Agent
for the Lenders named herein
/s/ Mona M. Foch
By:______________________________
Name: Mona M. Foch
Title: Vice President
ABN AMRO BANK N.V., HOUSTON AGENCY
/s/ David P. Orr
By:______________________________
Name: David P. Orr
Title: Vice President
/s/ Lila Jordan
By:______________________________
Name: Lila Jordan
Title: Vice President
THE BANK OF NEW YORK,
a New York banking corporation
/s/ Alan F. Lyster, Jr.
By:______________________________
Name: Alan F. Lyster, Jr.
Title: Vice President
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION, a
national banking association
/s/ Frank R. Hundley
By:______________________________
Name: Frank R. Hundley
Title: Vice President
EXHIBIT 4.3
AGREEMENT AND SECOND AMENDMENT
TO LOAN AGREEMENT
(December 23, 1994)
THIS AGREEMENT AND SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment"),
dated as of December 23, 1994, is made and entered into by and among STEWART &
STEVENSON SERVICES, INC. (the "Borrower"), a Texas corporation; the financial
institutions listed on the signature pages hereto (collectively, the "Lenders")
and TEXAS COMMERCE BANK NATIONAL ASSOCIATION, a national banking association
domiciled in Houston, Harris County, Texas, acting in its capacity as agent for
the Lenders (in such capacity, the "Agent"). The Borrower, the Lenders and the
Agent are herein sometimes called the "Parties".
Recitals:
1. The Parties have entered into a Loan Agreement dated as of September
3, 1993 (which Loan Agreement, as amended to the date hereof, is herein called
the "Loan Agreement").
2. The Parties desire to amend the Loan Agreement in certain respects to
(a) increase the Maximum Commitment; (b) provide for new financial institutions
to become Lenders; (c) allocate the Percentages of the Lenders; (d) extend the
Maturity Date, and (e) make certain other changes thereto, all as is more fully
described below.
Agreements:
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are acknowledged by
the Parties, the Parties agree as follows:
1. Definitions Corrected. The following changes are made to correct
certain definitions to reflect the original intent of the parties.
(a) The last sentence of the definition of "CD Rate" in Section 1 of the
Loan Agreement is amended to provide in its entirety as follows:
The CD Rate is subject to adjustments for reserves, insurance
assessments and other matters as provided for in Section 3(c).
(b) Clause (c) in the first sentence of "Interest Period" in Section 1 of
the Loan Agreement is amended to provide in its entirety as follows:
(c) for each Negotiated Rate Borrowing, overnight or no less than
seven but no more than 29 days thereafter,
2. Maturity Date Extended. The definition of "Maturity Date" in Section
1 of the Loan Agreement is amended to provide in its entirety as follows:
Maturity Date means the maturity of the Notes, December 31, 1997, as the
same may hereafter be accelerated pursuant to the provisions of any of the
Credit Documents.
3. Maximum Commitment. The definition of "Maximum Commitment" in
Section 1 of the Loan Agreement is amended to provide in its entirety as
follows:
Maximum Commitment means One Hundred Five Million Dollars
($105,000,000).
4. Percentages. The dollar amount of each Lender's interest in the
Maximum Commitment as of the date hereof is set forth opposite such Lender's
name on the signature pages of this Amendment. As defined in the Loan
Agreement, each Lender's Percentage is such Lender's interest in the Maximum
Commitment.
5. Transition.
(a) Certain Alternate Rate Borrowings are outstanding as of the date
hereof, and the Parties do not wish to disturb such Alternate Rate Borrowings.
Notwithstanding anything in the Loan Agreement as amended by this Amendment to
the contrary, (1) a Lender with an Alternate Rate Borrowing (a "Transition
Borrowing") outstanding as of the date hereof shall retain such Transition
Borrowing, with no change in its amount resulting from the change of such
Lender's Percentage or the addition of Bank of America Illinois and PNC Bank,
National Association (collectively, the "New Lenders") effected by this
Amendment, and such Lender shall be entitled to the payment of the principal of
and accrued interest on such Transition Borrowing; (2) new Loans made after the
date hereof (including the renewal of any Transition Borrowing at the end of its
Interest Period, if the Borrower elects to renew such Loan pursuant to the terms
and conditions of the Loan Agreement, or the conversion of any Transition
Borrowing) shall be made in accordance with the Lenders' new Percentages
(provided that in no event shall any Lender have an obligation to make Loans at
any one time outstanding in excess of such Lender's Percentage of the
Commitment); (3) the Agent shall determine the maximum aggregate amount of Loans
which may be outstanding for all of the Lenders and for each Lender--after
giving effect to the proviso of the immediately preceding clause--for each day
while there exists any Transition Borrowing, and such amounts shall be the
"Commitment" and each Lender's interest in the Commitment for purposes of
determining the commitment fee due under Section 2(c) of the Loan Agreement and
for the allocation of that commitment fee; (4) if (A) an Event of Default occurs
while any Transition Borrowing is outstanding and (B) the Agent or any Lender
exercises any of its remedies for such Event of Default, then (but only for the
purposes of allocating payments of principal and interest by or on the account
of the Borrower) the Percentage of a Lender shall be such Lender's interest in
all of the outstanding Loans, and (5) for all other purposes under the Credit
Documents, the Percentages of the Lenders and the Commitment shall be determined
without reference to this Section.
(b) On the date this Amendment becomes effective, (1) each New Lender
shall fund its Percentage of all then-outstanding Base Rate Borrowings to the
Agent and (2) the Agent shall allocate such fundings to all of the Lenders
(including the New Lenders) in accordance with their respective Percentages.
Notwithstanding anything in the Loan Agreement as amended by this Amendment or
the other Credit Documents to the contrary, interest accruing on the Base Rate
Borrowings from October 31, 1994 to the effective date of this Amendment shall
be allocated among the Lenders (other than the New Lenders) in accordance with
their respective Percentages as in effect immediately before the effective date
of this Amendment.
(c) Notwithstanding anything in the Loan Agreement as amended by this
Amendment to the contrary, commitment fees accruing under Section 2(c) of the
Loan Agreement through the effective date of this Amendment shall be allocated
among the Lenders (other than the New Lenders) in accordance with their
respective Percentages as in effect immediately before the effective date of
this Amendment.
6. Conditions Precedent. This Amendment shall be effective December 23,
1994, subject to the satisfaction, in a manner satisfactory to the Agent, of
each of the following conditions precedent:
(a) The Agent shall have received the following, each of which shall be in
form and substance satisfactory to the Agent in its sole discretion and duly and
validly executed:
(1) A certificate of the Secretary or any Assistant Secretary of the
Borrower, dated as of the date hereof, as to (A) the resolutions of the Board of
Directors of the Borrower authorizing the execution, delivery and performance of
this Amendment (a copy of such resolutions to be attached to such certificate),
such certificate to state that said copy is a true and correct copy of such
resolutions and that such resolutions were duly adopted and have not been
amended, superseded, revoked or modified in any respect and remain in full force
and effect as of the date of such certificate and (B) the absence of any change
since September 3, 1993, in any of (x) the incumbency and signatures of the
officer or officers of the Borrower; (y) the Articles of Incorporation of the
Borrower, or (z) the Bylaws of the Borrower; and
(2) this Amendment, duly executed by the Borrower, the Lenders and
the Agent.
(b) Each Lender shall have received a new Note, in the maximum principal
amount of its Percentage of the Maximum Commitment.
(c) The Agent shall have received a legal opinion from the general counsel
for the Borrower acceptable to the Agent and the Majority Lenders.
(d) The Borrower shall have paid all accrued and unpaid fees and other
amounts in connection with this Amendment.
(e) No Default shall have occurred and be continuing.
(f) Such effectiveness shall not violate any legal requirement applicable
to the Agent or any Lender.
7. Representations True; No Default. The Borrower represents and
warrants to the Agent and each Lender that (a) the representations and
warranties contained in the Loan Agreement and in the other Credit Documents are
true and correct on and as of the date hereof as though made on and as of such
date (except to the extent such representations and warranties are expressly
stated to be made solely as of an earlier date) and (b) no event has occurred
and is continuing which constitutes an Event of Default under the Loan Agreement
or any of the other Credit Documents or which upon the giving of notice or the
lapse of time or both would constitute such an Event of Default.
8. Ratification. Except as expressly amended hereby, the Loan Agreement,
as hereby amended, and the other Credit Documents are in all respects ratified
and confirmed and are, and shall continue to be, in full force and effect. The
Borrower hereby agrees and acknowledges that all of its liabilities and
obligations under the Loan Agreement, the other Credit Documents, or otherwise,
remain in full force and effect as of the date of this Amendment. Each of the
New Lenders hereby (a) acknowledges receipt of copies of all of the Credit
Documents (including agreements exclusively among the Agent and the Lenders) and
(b) acknowledges and agrees that (1) it has, independently and without reliance
upon the Agent or any other Lender and based on the financial statements of the
Borrower delivered to such New Lender by the Borrower and such other documents
and information as such New Lender has deemed appropriate, made its own credit
analysis and decision to become a Lender and (2) it is a Lender for all purposes
under the Credit Documents, with all of the liabilities and obligations of a
Lender with its interest in the Maximum Commitment.
9. Definitions and References. Unless otherwise defined herein, terms
used herein which are defined in the Loan Agreement or in the other Credit
Documents shall have the meanings therein ascribed to them. The term
"Agreement" as used in the Loan Agreement and the term "Loan Agreement" as used
in the other Credit Documents or any other instrument, document or writing
furnished to the Agent or any Lender by or on behalf of the Borrower shall mean
the Loan Agreement as hereby amended.
10. Expenses; Additional Information. The Borrower shall pay to the Agent
on demand all expenses (including reasonable counsel's fees) incurred in
connection with the preparation, reproduction, execution and delivery of this
Amendment and with respect to advising the Agent as to its rights and
responsibilities under the Loan Agreement, as hereby amended. In addition, the
Borrower shall pay all costs and expenses of the Agent and each Lender
(including counsel's fees) in connection with the enforcement of this Amendment.
11. Severability. If any term or provision of this Amendment or the
application thereof to any person or circumstances shall, to any extent, be
deemed invalid or unenforceable, the remainder of this Amendment, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and this Amendment shall be valid and enforced to the fullest extent
permitted by applicable law. Any provision of this Amendment which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions thereof or affecting the validity or
enforceability of such provision in any other jurisdiction and, to this end, the
provisions of this Amendment are severable.
12. INDEMNIFICATION. The Borrower shall indemnify the Agent, the Lenders
and each Affiliate thereof and their respective directors, officers, employees
and agents from, and hold each of them harmless against, any and all losses,
liabilities (including Environmental Liabilities), claims (including
Environmental Claims), expenses (including reasonable attorneys' fees) or
damages to which any of them may become subject, insofar as such losses,
liabilities, claims, expenses or damages arise out of or result from (a) any
actual or proposed use by the Borrower of the proceeds of any Loan made or
Letter of Credit issued by any Lender or growing out of or resulting from any
Credit Document or any transaction or event contemplated therein; (b) violation
by the Borrower or any of its Subsidiaries of any law, rule, regulation or order
including those relating to Hazardous Substances, petroleum, petroleum products
or petroleum wastes; (c) any Lender or the Agent being deemed an operator of any
of the Borrower's real or personal Property by a court or other regulatory or
administrative agency or tribunal or other third party, to the extent such
losses, liabilities, claims or damages arise out of or result from any Hazardous
Substance, petroleum, petroleum product or petroleum waste located in on or
under such property, or (d) any investigation, litigation or other proceeding
(including any threatened investigation or proceeding) relating to any of the
foregoing. The obligations of the Borrower under this Section shall survive the
termination of the Loan Agreement (as amended by this Amendment and as it may
otherwise be amended, restated, modified and supplemented from time to time) and
the repayment and expiry of the Loans and all Letter of Credit Liabilities. Any
amount to be paid under this Section by the Borrower to the Agent or any Lender
shall be a demand obligation owing by the Borrower to the Agent or such Lender
and shall bear interest from the date of expenditure until paid at the Past Due
Rate.
13. DTPA WAIVER. The Borrower hereby waives all rights, remedies,
claims, demands and causes of action based upon or related to the Texas
Deceptive Trade Practices Consumer Protection Act as described in Sections 17.41
et seq. of the Texas Business & Commerce Code, as the same pertains or may
pertain to any Credit Document or any of the transactions contemplated therein,
to the maximum extent that such rights, etc. may lawfully and effectively be
waived. In furtherance of this waiver, the Borrower hereby represents and
warrants to the Agent and the Lenders that (a) the Borrower is represented by
legal counsel in connection with the negotiations, execution and delivery of
this Amendment; (b) the Borrower has a choice other than to enter into this
waiver in that it can obtain the Loans from another institution or institutions,
and (c) the Borrower does not consider itself to be in a significantly disparate
bargaining position relative to the Agent and the Lenders with respect to this
Amendment.
14. RELEASE OF CLAIMS. The Borrower hereby releases, discharges and
acquits forever the Agent and the Lenders and their respective officers,
directors, trustees, agents, employees and counsel (in each case, past, present
or future) from any and all Claims existing as of the date hereof (or the date
of actual execution hereof by the Borrower, if later). As used herein, the term
"Claim" shall mean any and all liabilities, claims, defenses, demands, actions,
causes of action, judgments, deficiencies, interest, liens, costs or expenses
(including court costs, penalties, attorneys' fees and disbursements, and
amounts paid in settlement) of any kind and character whatsoever, including
claims for usury, breach of contract, breach of commitment, negligent
misrepresentation or failure to act in good faith, in each case whether now
known or unknown, suspected or unsuspected, asserted or unasserted or primary or
contingent, and whether arising out of written documents, unwritten
undertakings, course of conduct, tort, violations of laws or regulations or
otherwise.
15. Miscellaneous. This Amendment (a) shall be binding upon and inure to
the benefit of the Borrower, the Agent and the Lenders and their respective
successors, assigns, receivers and trustees (however, the Borrower may not
assign its rights hereunder without the express prior written consent of the
Lenders); (b) may be modified or amended only by a writing signed by each party;
(c) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF TEXAS (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES) AND OF THE
UNITED STATES OF AMERICA; (d) may be executed in several counterparts, and
by the Parties on separate counterparts, and each counterpart, when so executed
and delivered, shall constitute an original agreement, and all such separate
counterparts shall constitute but one and the same agreement, and (e) embodies
the entire agreement and understanding between the Parties with respect to the
subject matter hereof and supersedes all prior agreements, consents and
understandings relating to such subject matter. The headings herein shall be
accorded no significance in interpreting this Amendment.
15. THIS AMENDMENT TOGETHER WITH ALL OF THE OTHER CREDIT DOCUMENTS
REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AS TO THE SUBJECT MATTER HEREOF
AND THEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS AMONG THE PARTIES.
IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed
by their respective duly authorized officers effective as of the date written
above.
STEWART & STEVENSON SERVICES, INC.,
a Texas corporation
/s/ Robert L.Hargrave
By:______________________________
Robert L. Hargrave
Vice President & Treasurer
The undersigned legal counsel for the Borrower signs this Amendment not as
a party to it but solely for the purpose of complying with the provisions of
Section 17.42(a)(3) of the Texas Deceptive Trade Practices-Consumer Protection
Act described in Section 11.
/s/ Lawrence E. Wilson
______________________________
Lawrence E. Wilson
Vice President and General Counsel
Texas Bar No.: 21704000
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, a national banking association,
acting in its individual capacity and as the
Agent for the Lenders named herein
/s/ Mona M. Foch
By:______________________________
Mona M. Foch
Vice President
Interest in Maximum Commitment:
$30,000,000
NATIONSBANK OF TEXAS, NATIONAL
ASSOCIATION, a national banking association
/s/ Paula Cizik
By:______________________________
Paula J. Cizik
Senior Vice President
Interest in Maximum Commitment:
$25,000,000
ABN AMRO BANK N.V., HOUSTON AGENCY
/s/ David P. Orr
By:______________________________
David P. Orr
Vice President
/s/ Ronald A. Mahle
By:______________________________
Ronald A. Mahle
Group Vice President
Interest in Maximum Commitment:
$15,000,000
THE BANK OF NEW YORK,
a New York banking corporation
/s/ Alan F. Lyster, Jr.
By:______________________________
Alan F. Lyster, Jr.
Vice President
Interest in Maximum Commitment:
$15,000,000
BANK OF AMERICA ILLINOIS,
an Illinois banking association
/s/ J. Stephen Mernick
By:______________________________
J. Stephen Mernick
Senior Vice President
Address for notices:
Bank of America Illinois
231 S. LaSalle Street
Chicago, Illinois 60697
Attention: Kenneth Bell
Telecopy No. (312) 987-0303
Interest in Maximum Commitment:
$10,000,000
PNC BANK, NATIONAL ASSOCIATION,
a national banking association
/s/ Tamara R. O'Connor
By:______________________________
Tamara R. O'Connor
Vice President
Address for notices:
PNC Bank, National Association
2525 Lincoln Plaza
Dallas, Texas 75201
Attention: Tamara O'Connor
Telecopy No. (214) 740-2525
Interest in Maximum Commitment:
$10,000,000
EXHIBIT 21.1
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:
<TABLE>
Jurisdiction of Names under
Incorporation business is
Or Organization conducted
__________________ _______________
<S> <C> <C>
C. Jim Stewart & Stevenson, Inc. Delaware Stewart & Stevenson
CPS International, Inc. Panama None
Creole Stewart & Stevenson, Inc. Delaware None
Machinery Acceptance Corporation Texas None
S&S International Sales, Inc. Barbados None
Stewart & Stevenson International, Inc. Delaware Stewart & Stevenson
Stewart & Stevenson Operations, Inc. Delaware Stewart & Stevenson
Stewart & Stevenson Overseas, Inc. Texas None
Stewart & Stevenson Power, Inc. Delaware Pamco-Stewart & Stevenson
Stewart & Stevenson Realty Corporation Texas None
Stewart & Stevenson Technical Services, Inc. Delaware Stewart & Stevenson
Stewart & Stevenson Transportation, Inc. Texas None
Stewart & Stevenson (U.K.) Limited Scotland None
The Company has additional subsidiaries which, if considered in the aggregate as
a single subsidiary, would not constitute a significant subsidiary.
</TABLE>
Exhibit 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in Registration Statement No. 33-21515 on Form S-8 dated April 28,
1988, Registration Statement No. 33-22463 on form S-8 dated June 13, 1988,
Registration Statement No. 33-65404 on Form S-8 dated July 1, 1993,
Registration Statement No. 33-52881 on Form S-8 dated March 30, 1994,
Registration Statement No. 33-52903 on Form S-8 dated March 30, 1994, and
Registration Statement No. 33-54389 on Form S-4 dated June 30, 1994 of our
report dated March 13, 1995 included in Stewart & Stevenson Services, Inc.'s
Form 10-K for the fiscal year ended January 31, 1995.
ARTHUR ANDERSEN LLP
Houston, Texas
April 18, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTIANS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1995
<PERIOD-END> JAN-31-1995
<CASH> 3,987
<SECURITIES> 0
<RECEIVABLES> 188,482
<ALLOWANCES> (1,668)
<INVENTORY> 523,334
<CURRENT-ASSETS> 714,499
<PP&E> 230,215
<DEPRECIATION> (98,355)
<TOTAL-ASSETS> 875,616
<CURRENT-LIABILITIES> 311,154
<BONDS> 116,900
<COMMON> 162,057
0
0
<OTHER-SE> 256,946
<TOTAL-LIABILITY-AND-EQUITY> 875,616
<SALES> 1,138,336
<TOTAL-REVENUES> 1,138,336
<CGS> 955,898
<TOTAL-COSTS> 955,898
<OTHER-EXPENSES> 79,586
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,865
<INCOME-PRETAX> 102,852
<INCOME-TAX> 34,520
<INCOME-CONTINUING> 67,558
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67,558
<EPS-PRIMARY> 2.05
<EPS-DILUTED> 2.05
</TABLE>
