SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 1996
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)
(713) 868-7700
(Registrant's telephone number, including area code)
not applicable
(Former name, former address and former fiscal year,
if changed since last report)
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 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 33,064,088 Shares
(Class) (Outstanding at July 31, 1996)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The following information required by Rule 10-01 of Regulation S-X is provided
herein for Stewart & Stevenson Services, Inc. and Subsidiaries (the
"Company"):
Consolidated Condensed Statement of Financial Position -- July 31, 1996 and
January 31, 1996.
Consolidated Condensed Statement of Earnings -- Six Months and Three Months
Ended July 31, 1996 and 1995.
Consolidated Condensed Statement of Cash Flows -- Six Months Ended July
31, 1996 and 1995.
Notes to Consolidated Condensed Financial Statements.
<TABLE>
<CAPTION>
STEWART & STEVENSON SERVICES, INC.
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
(Dollars in thousands)
July 31 January 31
1996 1996
________________ ________________
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalent $ 6,402 $ 6,325
Accounts and notes receivable, net 214,029 196,548
Recoverable costs and accrued profits
not yet billed 326,548 317,855
Inventories:
Engineered Power Systems 299,826 269,119
Distribution 156,172 145,179
Excess of current cost over LIFO values (55,368) (53,580)
________________ ________________
400,630 360,718
Other 1,627 393
________________ ________________
TOTAL CURRENT ASSETS 949,236 881,839
PROPERTY, PLANT AND EQUIPMENT 250,593 243,491
Allowances for depreciation and
amortization (127,587) (116,436)
________________ ________________
123,006 127,055
OTHER ASSETS 37,121 31,689
________________ ________________
$1,109,363 $1,040,583
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 96,000 $ 65,000
Accounts payable 98,306 134,562
Billings on uncompleted contracts in
excess of incurred costs 6,588 14,417
Current income taxes 54,398 68,650
Accrued litigation settlement 20,000 0
Other current liabilities 45,105 47,451
________________ ________________
TOTAL CURRENT LIABILITIES 320,397 330,080
LONG-TERM DEBT 295,750 210,800
DEFERRED INCOME TAXES 6,282 6,794
ACCRUED POSTRETIREMENT BENEFITS 15,510 15,454
DEFERRED COMPENSATION 5,630 5,540
SHAREHOLDERS' EQUITY
Common Stock, without par value, 100,000,000
shares authorized; 33,075,908 and 33,061,908
shares issued at July 31, 1996 and January
31, 1996, respectively, including 11,820
shares held in treasury 163,718 163,409
Retained earnings 302,109 308,539
________________ ________________
465,827 471,948
Less cost of treasury stock (33) (33)
________________ ________________
TOTAL SHAREHOLDERS' EQUITY 465,794 471,915
________________ ________________
$1,109,363 $1,040,583
================ ================
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<TABLE>
<CAPTION>
STEWART & STEVENSON SERVICES, INC.
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
(In thousands, except per share data)
Six Months Ended Three Months Ended
July 31 July 31
_________________________________ _________________________________
1996 1995 1996 1995
_______________ _______________ _______________ _______________
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $ 460,266 $ 608,862 $ 240,726 $ 319,840
Cost of sales 383,652 510,371 202,215 269,891
_______________ _______________ _______________ _______________
Gross profit 76,614 98,491 38,511 49,949
Selling and administrative
expenses 49,458 44,179 25,126 22,518
Interest expense 10,778 6,100 6,033 3,150
Settlement of litigation 20,000 0 20,000 0
Other income, net (1,964) (1,119) (965) (797)
_______________ _______________ _______________ _______________
78,272 49,160 50,194 24,871
_______________ _______________ _______________ _______________
Earnings (loss) before income
taxes (1,658) 49,331 (11,683) 25,078
Income taxes (649) 16,563 (3,928) 8,435
_______________ ______________ _______________ _______________
Earnings (loss) of consolidated
companies (1,009) 32,768 (7,755) 16,643
Equity in net earnings of
unconsolidated affiliates 35 174 68 284
_______________ _______________ _______________ _______________
Net earnings (loss) $ (974) $ 32,942 $ (7,687) $ 16,927
=============== =============== =============== ===============
Weighted average number
of shares of Common Stock
outstanding 33,060 33,022 33,064 33,037
=============== =============== =============== ===============
Net earnings (loss) per share $ (.03) $ 1.00 $ (.23) $ .51
=============== =============== =============== ===============
Cash dividends per share $ .165 $ .15 $ .085 $ .08
=============== =============== =============== ===============
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<TABLE>
<CAPTION>
STEWART & STEVENSON SERVICES, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Six Months Ended
July 31
______________________________________
1996 1995
_______________ _______________
(Unaudited)
<S> <C> <C>
Operating Activities
Net earnings (loss) $ (974) $ 32,942
Adjustments to reconcile net earnings to net cash
used in operating activities:
Accrued postretirement benefits 56 0
Depreciation and amortization 12,830 11,885
Deferred income taxes, net (512) (800)
Change in operating assets and liabilities:
Accounts and notes receivable, net (17,481) (21,470)
Recoverable costs and accrued profits not
yet billed (8,693) (61,058)
Inventories (39,912) 18,412
Accounts payable (36,256) (19,701)
Billings on uncompleted contracts in excess
of incurred costs (7,829) 11,032
Accrued litigation settlement 20,000 0
Current income taxes (14,252) 15,787
Other current liabilities (2,346) (3,999)
Other--principally long-term assets and
liabilities (6,741) 1,354
_______________ _______________
Net Cash Used In Operating Activities (102,110) (15,616)
Investing Activities
Expenditures for property, plant and equipment (9,860) (9,959)
Disposal of property, plant and equipment 1,243 813
_______________ _______________
Net Cash Used In Investing Activities (8,617) (9,146)
Financing Activities
Additions to long-term borrowings 160,000 71
Payments on long-term borrowings (75,050) (42)
Net borrowings and payments on short-term
notes payable 31,000 33,000
Dividends paid (5,455) (4,956)
Exercise of stock options 309 1,195
_______________ ________________
Net Cash Provided By Financing Activities 110,804 29,268
_______________ ________________
Increase in cash and equivalents 77 4,506
Cash and equivalents, February 1 6,325 3,987
_______________ ________________
Cash and equivalents, July 31 $ 6,402 $ 8,493
=============== ================
Supplemental disclosure of cash flow information:
Net cash paid during the period for:
Interest payments $ 9,124 $ 5,542
Income tax payments $ 14,046 $ 6,258
See accompanying notes to consolidated condensed financial statements.
</TABLE>
STEWART & STEVENSON SERVICES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note A--Basis of Presentation and Significant Accounting Policies
The accompanying consolidated condensed financial statements have been
prepared in accordance with Rule 10-01 of Regulation S-X for interim financial
statements required to be filed with the Securities and Exchange Commission
and do not include all information and footnotes required by generally
accepted accounting principles for complete financial statements. However,
the information furnished reflects all normal recurring adjustments which are,
in the opinion of management, necessary for a fair statement of the results
for the interim periods. The results of operations for the six months ended
July 31, 1996 are not necessarily indicative of the results that will be
realized for the fiscal year ending January 31, 1997.
The accounting policies followed by the Company in preparing interim
consolidated financial statements are similar to those described in the "Notes
to Consolidated Financial Statements" in the Company's January 31, 1996 Form
10-K.
The Company's fiscal year begins on February 1 of the year indicated and ends
on January 31 of the following year. For example, "Fiscal 1996" commenced on
February 1, 1996 and ends on January 31, 1997.
Net earnings (loss) per share of Common Stock are computed by dividing net
earnings (loss) 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. The weighted
average number of shares outstanding for the six months ended July 31, 1996
includes 14,000 shares issued pursuant to exercise of stock options.
Note B--Commitments and Contingencies
On May 3, 1995, an indictment was returned by a federal Grand Jury in Houston,
Texas, accusing the Company, a former consultant and four employees, including
the Company's President, of one count of major fraud against the United
States, four counts of false statements and one count of conspiracy to commit
major fraud, make false statements and interfere with the administration of a
foreign military sale. All of the counts arise from a 1987 subcontract to
supply diesel generator sets for installation at long-range radar sites in
Saudi Arabia (the "Peace Shield"). The indictment alleges that a former
employee of the general contractor for the Peace Shield program, who later
became a consultant to the Company, conspired with the Company and the other
defendants to award the subcontract to the Company. The indictment also
alleges that the government was defrauded out of approximately $5 million in
connection with cost savings from a change order under the Peace Shield
contract and that the Company made false statements relating to cost estimates
in connection with such change order. The Company and each individual have
denied all charges under the indictment and the case is pending in the United
States District Court, Southern District of Texas, Houston Division. The
Company is not able to make a reasonable estimate of the fines or penalties
that could be imposed under the Federal Sentencing Guidelines in the event
of a conviction under the indictment. Such fines and penalties could be
substantial and adversely affect the Company's financial position and results
of operations. If the Company or any of the individuals are convicted of any
charges under the indictment, the Company could also be suspended or debarred
from entering into new contracts or subcontracts with agencies of the U.S.
Government or receiving the benefit of federal assistance payments for the
duration of such suspension or debarment. Any such suspension could prevent
the Company from receiving a modification to the Family of Medium Tactical
Vehicle ("FMTV") contract that would fund additional vehicles or extend the
delivery schedule of funded vehicles unless the Secretary of the Army finds a
compelling need to enter into such modification. The Company would also be
unable to sell equipment and services to customers that depend on loans or
financial commitments from the Export Import Bank ("EXIM Bank"), Overseas
Private Investment Corporation ("OPIC") and similar government agencies during
a suspension or debarment. The Engineered Power Systems segment frequently
sells equipment to customers that rely on financial commitments from EXIM Bank
and/or OPIC. Any such suspension or debarment could have a material adverse
impact on the Company's financial condition and results of operations.
Also in connection with the Peace Shield contract, the Company has been
advised that the former consultant of the Company referred to above filed a
suit in the United States District Court, Southern District of Texas, Houston
Division, 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. 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. Proceedings in this case
have been stayed pending resolution of the criminal matter referred to above.
The Company cannot predict the outcome of this action or the likelihood that
substantial damages will result. However, the Company intends to vigorously
defend this case if it is served upon the Company.
On May 16, 1995, C. Daniel Chill filed a purported class action suit in the
United States District Court, Southern District of Texas, Houston Division,
against the Company and three of its officers and directors on behalf of
himself and all persons that purchased shares of Common Stock between May 2,
1994 and May 3, 1995. An amended complaint was filed on June 7, 1995. The
suit alleges that the Company violated various sections of and rules under the
Securities Exchange Act of 1934 and common law by disseminating material false
and misleading information, failing to disclose material information and
failing to correct earlier statements that were no longer true, all relating
to the Peace Shield investigation and indictment. The suit claims unspecified
compensatory and punitive damages. An Agreement to settle this litigation on
terms that would not be material to the Company has been preliminarily
approved by the court, subject to notice to all class members and
determination by the court as to the fairness of the settlement. The Company
has reserved all costs expected to be incurred in connection with the
settlement of this case.
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. Except as set forth above, the Company has not established
any reserves or accruals for any potential liability that may be subsequently
found in any of the foregoing cases.
Note C--Long-Term Debt
On May 30, 1996 the Company completed a $135,000,000 private placement of long-
term debt. The notes are unsecured and were issued pursuant to an agreement
containing a covenant which imposes a maximum debt to total capitalization
requirement. The notes will mature in three, five, seven and ten year
increments with semi-annual interest payments at a weighted average coupon
rate of 7.01%, and have a weighted average life of 5 1/2 years.
The Company elected to reduce the $200,000,000 credit facility with commercial
banks to $150,000,000 in connection with the private placement.
Item #2 Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion contains forward-looking statements which are based
on assumptions such as timing, volume and pricing of customers' orders. These
forward-looking statements are subject to risks and uncertainties that could
cause actual results to differ materially from those outlined in the forward-
looking statements, including the risk of cancellation or adjustment of
specific orders, termination of significant government programs, decrease in
demand in the markets served, or lower-than-anticipated penetration of markets
served.
This discussion should be read in conjunction with the attached condensed
consolidated financial statements and notes thereto, and with the Company's
audited financial statements and notes thereto for the fiscal year ended
January 31, 1996.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
sales represented by certain items reflected in the Company's Consolidated
Condensed Statement of Earnings.
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
July 31 July 31
__________________________________ ___________________________________
1996 1995 1996 1995
________________ ________________ ________________ ________________
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 83.4 83.8 84.0 84.4
________________ ________________ ________________ ________________
Gross profit 16.6 16.2 16.0 15.6
Selling and administrative
expenses 10.7 7.3 10.4 7.0
Interest expense 2.3 1.0 2.5 1.0
Settlement of litigation 4.3 0 8.3 0
Other income, net (0.4) (0.2) (0.4) (0.2)
________________ ________________ ________________ ________________
16.9 8.1 20.8 7.8
________________ ________________ ________________ ________________
Earnings (loss) before income
taxes (0.3) 8.1 (4.8) 7.8
Income taxes (0.1) 2.7 (1.6) 2.6
________________ ________________ ________________ ________________
Earnings (loss) of
consolidated companies (0.2) 5.4 (3.2) 5.2
Equity in net earnings of
unconsolidated affiliates .0 .0 .0 0.1
________________ ________________ ________________ ________________
Net earnings (loss) (0.2)% 5.4% (3.2)% 5.3%
================ ================ ================ ================
</TABLE>
Sales for the first six months of the year ending January 31, 1997 ("Fiscal
1996") decreased 24% to $460,266,000 compared to sales of $608,862,000 for the
same period of the year ended January 31, 1996 ("Fiscal 1995").
The Distribution segment sales increased $41,541,000 (21%) in the first half
of Fiscal 1996 compared to the same period in Fiscal 1995. A strengthening
oil and gas market within the Company's Distribution territory contributed to
the sales improvement particularly among the Company's Detroit Diesel, EMD and
Waukesha product lines.
The Engineered Power Systems (EPS) segment sales was the primary contributor
to the Company's sales decline, decreasing $116,456,000 (36%) for the first
half of Fiscal 1996 compared to the same period in Fiscal 1995. The sales
decrease in the EPS segment is attributed to the gas turbine product line
which produced $154,745,000 in sales during the first half of Fiscal 1996
compared to $279,966,000 for the same period in Fiscal 1995. Turbine-driven
equipment sales decreased $142,532,000 (67%) compared to the first six months
of Fiscal 1995. Such decrease was partially offset by the gas turbine product
support group (consisting of the servicing of customers' equipment and the
long-term contracting for the operation and maintenance of the customers'
power plants) which contributed increased sales of $17,311,000 (26%) in the
first half of Fiscal 1996 compared to the same period in Fiscal 1995.
The Tactical Vehicle Systems (TVS) segment sales decreased $71,135,000 (78%)
for the first half of Fiscal 1996 compared to the same period in Fiscal 1995.
The decrease in TVS segment sales reflects the decrease in truck production
under the "Family of Medium Tactical Vehicles" (FMTV) contract during the
first half of Fiscal 1996 due to the scheduled retrofit program of previously
produced vehicles. See "Government Contract Status" below.
Sales for the second quarter of Fiscal 1996 decreased $79,114,000 (25%) to
$240,726,000 compared to sales of $319,840,000 during the second quarter of
Fiscal 1995. The Distribution segment sales increased $22,671,000 (23%) for
the second quarter of Fiscal 1996 compared to the same period in Fiscal 1995.
The EPS segment sales decreased $55,608,000 (35%) for the second quarter of
Fiscal 1996 compared to the same period in Fiscal 1995. The TVS segment sales
decreased $54,186,000 (90%) for the second quarter of Fiscal 1996 compared to
the same period in Fiscal 1995.
The gross profit margin of 16.6% for the first half of Fiscal 1996 was
comparable to the 16.2% gross profit margin for the same period in Fiscal
1995. Gross profit margins for the second quarter of Fiscal 1996 were 16.0%
compared to 15.6% for the second quarter of Fiscal 1995. This increase in
gross margin reflects the change in sales mix.
Selling and administrative expenses for the first half of Fiscal 1996
increased as a percentage of sales to 10.7% compared to 7.3% for the same
period in Fiscal 1995, due to both the decrease in sales and to the increase
in incurred expenses. Selling and administrative expenses increased 12%
during the current year which included a onetime charge of approximately
$900,000 related to settling a lawsuit as compared to the same period in
Fiscal 1995. Exclusive of the onetime legal expense, selling and
administrative expense grew about 10%, primarily in those business lines
having sales growth.
Interest expense for the first half of Fiscal 1996 increased to $10,778,000,
up from $6,100,000 for the same period in Fiscal 1995 due to an increase in
outstanding debt. The additional borrowings were made in order to finance an
increase by the EPS segment in inventory and an increase in recoverable costs
and accrued profits not yet billed.
On July 25, 1996, a jury in Houston, Texas returned a $43,000,000 verdict
against the Company in a case filed by Serv-Tech, Inc. for breach of a secrecy
agreement. The Company's liability in connection with this matter was limited
pursuant to a pretrial agreement between the Company and Serv-Tech. The
Company recognized a pre-tax charge against earnings of $20,000,000
($13,000,000 or $.39 per share after taxes) relating to this case in the
second quarter of Fiscal 1996. The judgment based on this verdict was paid by
the Company in September 1996.
A net loss of $974,000 ($.03 per share) was recorded for the six months ended
July 31, 1996 as compared to earnings of $32,942,000 ($1.00 per share) for the
six months ended July 31, 1995. Net earnings for the six months, excluding
the litigation charge, would have been $12,026,000 or $.36 per share.
GOVERNMENT CONTRACTS STATUS
The FMTV contract is a firm fixed-price multi-year contract whereby the price
paid to the Company is not subject to adjustment to reflect the Company's
actual costs, except costs incurred as a result of actions or inactions of
the government. The Company has completed approximately 3,000 of
approximately 11,000 trucks. Initial Operational Test and Evaluation under the
FMTV contract was completed in the third quarter of Fiscal 1995 and the
Company received approval for full rate production and type classification of
the FMTV on August 25, 1995.
Under the terms of the FMTV contract, all vehicles produced before the full
rate production decision must be retrofitted with any changes required by test
results or specification changes ordered by the government. The retrofit
began during the fourth quarter of Fiscal 1995 and was substantially completed
in the second quarter of 1996. Actual shipment of the vehicles to combat
troops began in January 1996 at Ft. Bragg, North Carolina and full rate
production commenced in late July 1996.
Revenues and profits realized on the FMTV contract are based on the Company's
estimates of total contract sales value and costs at completion. Stewart &
Stevenson has incurred significant cost overruns and delivery schedule delays
on the FMTV contract which the Company believes are primarily due to the
government's decision to delay the testing of trucks and other government
directed changes to the contract. The Company has and will continue to submit
a series of Requests for Equitable Adjustments, under the FMTV contract,
seeking increases in the FMTV contract price for those additional costs that
relate to government caused delays and changes. Amounts in excess of agreed
upon contract price for government caused delays, disruptions, unpriced change
orders and government caused additional contract costs are recognized in
contract value when the Company believes it is probable that the claim for
such amounts will result in additional contract revenue and the amount can be
reasonably estimated.
At July 31, 1996, the Company's FMTV contract accounting position reflects the
expected recovery of substantial amounts in excess of the contract price for
government caused delays, disruptions, unpriced change orders and other
government caused additional contract costs. These claims are in varying
stages of negotiations. Although management believes that the FMTV contract
provides a legal basis for the claims and that its estimates are based on
reasonable assumptions and on a reasonable analysis of the contract costs, the
ultimate profitability of the FMTV contract will depend not only on the
accuracy of the Company's cost projections but also on the outcome of these
claims and other contractual issues. Due to uncertainties inherent in the
estimation and claim negotiation process, no assurances can be given that
management's estimates will be accurate, and variances between such estimates
and actual results could be material. If the Company is unable to recover a
substantial portion of the additional costs, the Company may suffer a
material adverse effect on its operations during the accounting period in
which such FMTV contract issues are resolved.
The funding of the FMTV contract is subject to the inherent uncertainties of
congressional appropriations. As is typical of multi-year defense contracts,
the FMTV contract must be funded annually by the Department of the Army and
may be terminated at any time for the convenience of the government. The
Company has received full funding for the production of approximately
7,364 vehicles through February 1997. Approximately 3,524 vehicles
scheduled for production after that date have not been funded due to
reductions in the U.S. Army's budget for acquisitions. The Company has entered
into negotiations with the U.S. Army to modify the existing FMTV contract and
on August 26, 1996, the Company received a modification of the FMTV contract
that provides for the production of the 3,524 unfunded vehicles over a two
year period ending December 1998. The modification provides a ceiling of
approximately $107 million relating to the first year of the extension.
However, this funding is a not to exceed amount for the first year of the
extension and the funding for all years of the extension continues to be in
negotiation. The Company is not able to predict whether funding for the
change will be forthcoming on terms acceptable to the Company and production
of vehicles may be interrupted in 1997. If the FMTV contract is terminated
other than for default, the FMTV contract provides for termination
charges that will reimburse the Company for allowable costs, but not
necessarily all costs.
EFFECT OF CERTAIN LITIGATION
On May 3, 1995, the Company and four employees, including the Company's
President, were indicted by a federal Grand Jury on six counts arising out of
a 1987 subcontract to supply diesel generator sets for installation in Saudi
Arabia. On May 12, 1995, the U.S. Air Force suspended the Company from
contracting with any agency of the U.S. Government and from receiving the
benefit of federal assistance programs. This suspension was temporarily
terminated on November 8, 1995, pending the resolution of the charges covered
by the indictment, pursuant to an Interim Administrative Agreement between the
Company and the U.S. Air Force. The Interim Administrative Agreement does not
have any effect on the indictment.
The Interim Administrative Agreement requires the Company to maintain various
internal procedures and policies intended to assure the U.S. Government that
the Company is a responsible contractor. In the event that the Company or any
of the indicted employees are convicted of the charges contained in the
indictment, the U.S. Air Force may re-evaluate whether the Company should be
suspended or debarred based on all of the facts and circumstances then known.
An acquittal of all parties of the charges does not terminate the Interim
Administrative Agreement and any failure by the Company to perform its
obligations thereunder may also be grounds for suspension or debarment.
If the Company is suspended or debarred, either because of a conviction
pursuant to the indictment or as a result of a breach of the Interim
Administrative Agreement, it would be ineligible to enter into new contracts
or subcontracts with agencies of the U.S. Government or receive the benefit of
federal assistance payments for the duration of such suspension or debarment.
Any such suspension could prevent the Company from receiving a modification to
the FMTV contract to fund additional vehicles or extend the delivery schedule
of funded vehicles unless the Secretary of the Army finds a compelling need to
enter into such modification. The Company would also be unable to sell
equipment and services to customers that depend on loans or financial
commitments from the Export Import Bank ("EXIM Bank"), Overseas Private
Investment Corporation ("OPIC") and similar government agencies during a
suspension or debarment. The Engineered Power Systems segment frequently
sells equipment to customers that rely on financial commitments from EXIM
and/or OPIC. Any such suspension or debarment could have a material adverse
impact on the Company's financial condition and results of operations.
UNFILLED ORDERS
The Company's unfilled orders consist of written purchase orders, letters of
intent, and oral commitments. These unfilled orders are generally subject to
cancellation or modification due to customer relationships or other
conditions. Purchase options are not included in unfilled orders until
exercised. Unfilled orders at July 31, 1996 and at the close of Fiscal 1995
were as follows:
<TABLE>
<CAPTION>
__________________________________________________________________________________________________
July 31 January 31
1996 1996
__________________________________________________________________________________________________
(Dollars in millions)
<S> <C> <C>
Engineered Power Systems
Equipment $ 248.9 $ 208.9
Operations and Maintenance 310.7 321.8
______________ ______________
$ 559.6 $ 530.7
Distribution 75.0 50.9
Tactical Vehicle Systems 852.5 862.7
______________ ______________
Total $ 1,487.1 $ 1,444.3
============== ==============
</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 based on the 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, and options under the FMTV
contract that have been exercised by the U.S. Army to purchase additional
vehicles for the National Guard.
CAPITAL EXPENDITURES AND COMMITMENTS
Capital spending for property, plant and equipment of $9,860,000 for the
first half of Fiscal 1996 was comparable to $9,959,000 for the same period in
Fiscal 1995. These amounts are consistent with the historical capital
expenditure levels of the Company.
LIQUIDITY AND SOURCES OF CAPITAL
On May 30, 1996, the Company completed a private placement of $135,000,000
debt securities with an average maturity of 5 1/2 years. The notes are
unsecured and were issued pursuant to an agreement containing a covenant which
imposes a debt to total capitalization requirement. The notes will mature in
three, five, seven and ten years increments with semi-annual interest payments
at a weighted average life and coupon rate of 5 1/2 years and 7.01%,
respectively. The proceeds from the sale of the notes were used to reduce
other outstanding indebtedness of the Company in the amount of $129,000,000
and for general corporate purposes.
Long-term borrowings at July 31, 1996 increased from the end of Fiscal 1995.
Upon completion of the $135,000,000 private placement discussed above, the
Company elected to reduce the fully utilized $200,000,000 credit facility with
commercial banks to $150,000,000 which was fully utilized at July 31, 1996.
The Company has additional banking relationships which provide uncommitted
borrowing arrangements. These short-term borrowings increased to $96,000,000
at July 31, 1996 from $65,000,000 at the end of Fiscal 1995.
The Company's borrowings, both short and long term, increased approximately
$116,000,000 during the first six months of Fiscal 1996. This significant
increase in borrowings was used primarily to fund the working capital needs of
the Company. Borrowings during the third quarter of Fiscal 1996 will be
affected by the payment of $20,000,000 to discharge the judgment in favor of
Serv-Tech, Inc. See Results of Operations.
In the event that any acquisition of additional operations, growth in existing
operations, changes in inventory levels, accounts receivable or other working
capital items 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 or to issue
additional equity securities. Management believes that the Company's current
credit facilities are adequate to meet its foreseeable cash requirements.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
See Note B to the Consolidated Condensed Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders of the Company was held on June 11, 1996.
Set forth below is a brief description of each matter acted upon at the
meeting and the number of votes cast for, against or withheld, and abstaining
or not voting as to each matter. There were no broker non-votes as to any
matter.
Election of Directors
AGAINST OR
FOR WITHHELD
___ __________
Robert L. Hargrave 27,788,932 242,938
Richard R. Stewart 27,788,248 243,622
Orson C Clay 27,881,598 150,272
Brian H. Rowe 27,784,878 246,992
Ratification of Accountants
AGAINST OR ABSTAINED OR
FOR WITHHELD NOT VOTED
___ __________ ____________
27,994,730 15,352 21,788
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as a part of this report pursuant to
Item 601 of Regulation S-K.
4 Note Purchase Agreement effective May 30, 1996, between Stewart &
Stevenson Services, Inc. and the Purchasers named therein.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the three months ended
July 31, 1996.
SIGNATURES
Pursuant to the requirements 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.
STEWART & STEVENSON SERVICES, INC.
Date: September 12, 1996 By: /s/ Robert L. Hargrave
Robert L. Hargrave
Chief Executive Officer
EXHIBIT INDEX
Exhibit Number and Description
4 Note Purchase Agreement effective May 30, 1996, between Stewart &
Stevenson Services, Inc. and the Purchasers named therein.
27 Financial data schedule
STEWART & STEVENSON SERVICES, INC.
$60,000,000 Principal Amount
6.72% Series A Senior Notes
Due May 30, 1999
$20,000,000 Principal Amount
7.03% Series B Senior Notes
Due May 30, 2001
$30,000,000 Principal Amount
7.29% Series C Senior Notes
Due May 30, 2003
$25,000,000 Principal Amount
7.38% Series D Senior Notes
Due May 30, 2006
NOTE PURCHASE AGREEMENT
Dated as of May 30, 1996
Series A PPN: 860342 C@ 1
Series B PPN: 860342 D* 2
Series C PPN: 860342 D@ 0
Series D PPN: 860342 D# 8
TABLE OF CONTENTS
Section Page
1. AUTHORIZATION OF NOTES 1
2. SALE AND PURCHASE OF NOTES 2
3. CLOSING 2
4. CONDITIONS TO CLOSING 2
4.1. Representations and Warranties 2
4.2. Performance; No Default 3
4.3. Compliance Certificates 3
4.4. Opinions of Counsel 3
4.5. Purchase Permitted By Applicable Law, etc 3
4.6. Sale of Other Notes 4
4.7. Payment of Special Counsel Fees 4
4.8. Private Placement Number 4
4.9. Changes in Corporate Structure 4
4.10. Proceedings and Documents 4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 4
5.1. Organization; Power and Authority 4
5.2. Authorization, etc 5
5.3. Disclosure 5
5.4. Organization and Ownership of Shares of Subsidiaries 5
5.5. Financial Statements 6
5.6. Compliance with Laws, Other Instruments, etc 6
5.7. Governmental Authorizations, etc 6
5.8. Litigation; Observance of Statutes and Orders 7
5.9. Taxes 7
5.10. Title to Property; Leases 7
5.11. Licenses, Permits, etc 7
5.12. Compliance with ERISA 8
5.13. Private Offering by the Company 8
5.14. Use of Proceeds; Margin Regulations 9
5.15. Existing Indebtedness; Future Liens 9
5.16. Foreign Assets Control Regulations, etc 9
5.17. Status under Certain Statutes 10
5.18. Environmental Matters 10
6. REPRESENTATIONS OF THE PURCHASER 10
6.1. Purchase for Investment 10
6.2. Source of Funds 11
7. INFORMATION AS TO COMPANY 12
7.1. Financial and Business Information 12
7.2. Officer's Certificate 14
7.3. Inspection. 15
8. PREPAYMENT OF THE NOTES 16
8.1. Required Prepayments 16
8.2. Optional Prepayments with Make-Whole Amount 16
8.3. Allocation of Partial Prepayments 16
8.4. Maturity; Surrender, etc 16
8.5. Purchase of Notes 17
8.6. Make-Whole Amount 17
9. AFFIRMATIVE COVENANTS 18
9.1. Compliance with Law 18
9.2. Insurance 19
9.3. Maintenance of Properties 19
9.4. Payment of Taxes and Claims 19
9.5. Corporate Existence, etc 19
10. NEGATIVE COVENANTS 20
10.1. Transactions with Affiliates 20
10.2. Merger, Consolidation, etc 20
10.3. Indebtedness Ratio. 21
10.4. Indebtedness of Restricted Subsidiaries. 21
10.5. Liens 21
10.6. Sale of Assets. 22
10.7. Disposition of Stock of Restricted Subsidiaries. 23
10.8. Designation of Unrestricted Subsidiaries. 23
11. EVENTS OF DEFAULT 23
12. REMEDIES ON DEFAULT, ETC 25
12.1. Acceleration 25
12.2. Other Remedies 26
12.3. Rescission 26
12.4. No Waivers or Election of Remedies, Expenses, etc 26
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES 27
13.1. Registration of Notes 27
13.2. Transfer and Exchange of Notes 27
13.3. Replacement of Notes 27
14. PAYMENTS ON NOTES 28
14.1. Place of Payment 28
14.2. Home Office Payment 28
15. EXPENSES, ETC 29
15.1. Transaction Expenses 29
15.2. Survival 29
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT 29
17. AMENDMENT AND WAIVER 30
17.1. Requirements 30
17.2. Solicitation of Holders of Notes 30
17.3. Binding Effect, etc 30
17.4. Notes held by Company, etc 31
18. NOTICES 31
19. REPRODUCTION OF DOCUMENTS 31
20. CONFIDENTIAL INFORMATION 32
21. SUBSTITUTION OF PURCHASERS 33
22. MISCELLANEOUS 33
22.1. Successors and Assigns 33
22.2. Payments Due on Non-Business Days 33
22.3. Severability 33
22.4. Construction 33
22.5. Counterparts 34
22.6. Governing Law. 34
SCHEDULE A -- Information Relating to Purchasers
SCHEDULE B -- Defined Terms
SCHEDULE B-1 -- Investments
SCHEDULE 4.9 -- Changes in Corporate Structure
SCHEDULE 5.3 -- Disclosure Materials
SCHEDULE 5.4 -- Organization and Ownership of
Shares of Subsidiaries
SCHEDULE 5.8 -- Certain Litigation
SCHEDULE 5.15 -- Existing Indebtedness
EXHIBIT 1-A -- Form of Series A Senior Note
EXHIBIT 1-B -- Form of Series B Senior Note
EXHIBIT 1-C -- Form of Series C Senior Note
EXHIBIT 1-D -- Form of Series D Senior Note
EXHIBIT 4.4(a) -- Form of Opinion of Special
Counsel to the Company
EXHIBIT 4.4(b) -- Form of Opinion of Special
Counsel to the Purchasers
STEWART & STEVENSON SERVICES, INC.
2707 North Loop West
Houston, Texas 77008
Telephone (713) 868-7700
Facsimile (713) 868-0225
6.72% Series A Senior Notes Due May 30, 1999
7.03% Series B Senior Notes Due May 30, 2001
7.29% Series C Senior Notes Due May 30, 2003
7.38% Series D Senior Notes Due May 30, 2006
Dated as May 30, 1996
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
STEWART & STEVENSON SERVICES, INC., a Texas corporation (the
"Company"), agrees with you as follows:
1. AUTHORIZATION OF NOTES .
The Company has authorized the issue and sale of $60,000,000
aggregate principal amount of its 6.72% Series A Senior Notes due May 30,
1999 (the "Series A Notes"), $20,000,000 aggregate principal amount of its
7.03% Series B Senior Notes due May 30, 2001 (the "Series B Notes"),
$30,000,000 aggregate principal amount of its 7.29% Series C Senior Notes due
May 30, 2003 (the "Series C Notes") and $25,000,000 aggregate principal
amount of its 7.38% Series D Senior Notes due May 30, 2006 (the "Series D
Notes") (the Series A Notes, Series B Notes, Series C Notes and Series D
Notes are collectively referred to as the "Notes", such term to include any
such notes issued in substitution therefor pursuant to Section 13 of this
Agreement or the Other Agreements (as hereinafter defined)). The Notes shall
be substantially in the form set forth in Exhibit 1 with such changes
therefrom, if any, as may be approved by you and the Company. Certain
capitalized terms used in this Agreement are defined in Schedule B;
references to a "Schedule" or an "Exhibit" are, unless otherwise specified,
to a Schedule or an Exhibit attached to this Agreement.
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the
Company will issue and sell to you and you will purchase from the Company, at
the Closing provided for in Section 3, Notes of the series and in the
principal amount specified opposite your name in Schedule A at the purchase
price of 100% of the principal amount thereof. Contemporaneously with
entering into this Agreement, the Company is entering into separate Note
Purchase Agreements (the "Other Agreements") identical with this Agreement
with each of the other purchasers named in Schedule A (the "Other
Purchasers"), providing for the sale at such Closing to each of the Other
Purchasers of Notes in the principal amount specified opposite its name in
Schedule A. Your obligation hereunder and the obligations of the Other
Purchasers under the Other Agreements are several and not joint obligations
and you shall have no obligation under any Other Agreement and no liability
to any Person for the performance or non-performance by any Other Purchaser
thereunder.
3. CLOSING .
The sale and purchase of the Notes to be purchased by you and
the Other Purchasers shall occur at the offices of Gardner, Carton & Douglas,
Quaker Tower, Suite 3400, 321 North Clark Street, Chicago, Illinois 60610-
4795 at 9:00 a.m., Chicago time, at a closing (the "Closing") on May 30, 1996
or on such other Business Day thereafter on or prior to May 31, 1996 as may
be agreed upon by the Company and you and the Other Purchasers. At the
Closing the Company will deliver to you the Notes of each series to be
purchased by you in the form of a single Note (or such greater number of
Notes in denominations of at least $1,000,000 as you may request) dated the
date of the Closing and registered in your name (or in the name of your
nominee), against delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor by wire transfer
for the account of the Company to account number 00101616119 at Texas
Commerce Bank, 712 Main, P.O. Box 2558, Houston, Texas 77002, ABA number
113000609. If at the Closing the Company shall fail to tender such Notes to
you as provided above in this Section 3, or any of the conditions specified
in Section 4 shall not have been fulfilled to your satisfaction, you shall,
at your election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights you may have by reason of such
failure or such nonfulfillment.
4. CONDITIONS TO CLOSING .
Your obligation to purchase and pay for the Notes to be sold
to you at the Closing is subject to the fulfillment to your satisfaction,
prior to or at the Closing, of the following conditions.
4.1. Representations and Warranties .
The representations and warranties of the Company in this
Agreement shall be correct when made and at the time of the Closing.
4.2. Performance; No Default .
The Company shall have performed and complied with all
agreements and conditions contained in this Agreement required to be
performed or complied with by it prior to or at the Closing, and after giving
effect to the issue and sale of the Notes (and the application of the
proceeds thereof as contemplated by Section 5.14) no Default or Event of
Default shall have occurred and be continuing.
4.3. Compliance Certificates .
(a) Officer's Certificate. The Company shall have
delivered to you an Officer's Certificate, dated the date of the Closing,
certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have
been fulfilled.
(b) Secretary's Certificate. The Company shall have
delivered to you a certificate certifying as to the resolutions attached
thereto and other corporate proceedings relating to the authorization,
execution and delivery of the Notes and the Agreements.
4.4. Opinions of Counsel .
You shall have received opinions in form and substance
satisfactory to you, dated the date of the Closing, (a) from Vinson & Elkins
L.L.P., special counsel for the Company, covering the matters set forth in
Exhibit 4.4(a) and covering such other matters incident to the transactions
contemplated hereby as you or your counsel may reasonably request (and the
Company hereby instructs its counsel to deliver such opinion to you) and
(b) from Gardner, Carton & Douglas, your special counsel in connection with
such transactions, substantially in the form set forth in Exhibit 4.4(b) and
covering such other matters incident to such transactions as you may
reasonably request.
4.5. Purchase Permitted By Applicable Law, etc .
On the date of the Closing your purchase of Notes shall (i) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(a)(8) of the
New York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment,
(ii) not violate any applicable law or regulation (including, without
limitation, Regulation G, T or X of the Board of Governors of the Federal
Reserve System) and (iii) not subject you to any tax, penalty or liability
under or pursuant to any applicable law or regulation, which law or
regulation was not in effect on the date hereof. If requested by you, you
shall have received an Officer's Certificate certifying as to such matters of
fact as you may reasonably specify to enable you to determine whether such
purchase is so permitted.
4.6. Sale of Other Notes .
Contemporaneously with the Closing the Company shall sell to
the Other Purchasers and the Other Purchasers shall purchase the Notes to be
purchased by them at the Closing as specified in Schedule A.
4.7. Payment of Special Counsel Fees .
Without limiting the provisions of Section 15.1, the Company
shall have paid on or before the Closing the reasonable fees, charges and
disbursements of your special counsel referred to in Section 4.4 to the
extent reflected in a statement of such counsel furnished to the Company at
least one Business Day prior to the Closing.
4.8. Private Placement Number .
Private Placement numbers issued by Standard & Poor's CUSIP
Service Bureau (in cooperation with the Securities Valuation Office of the
National Association of Insurance Commissioners) shall have been obtained for
the Notes.
4.9. Changes in Corporate Structure .
Except as specified in Schedule 4.9, the Company shall not
have changed its jurisdiction of incorporation or been a party to any merger
or consolidation and shall not have succeeded to all or any substantial part
of the liabilities of any other entity, at any time following the date of the
most recent financial statements referred to in Section 5.5.
4.10. Proceedings and Documents .
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and instruments
incident to such transactions shall be satisfactory to you and your special
counsel, and you and your special counsel shall have received all such
counterpart originals or certified or other copies of such documents as you
or they may reasonably request.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY .
The Company represents and warrants to you that:
5.1. Organization; Power and Authority .
The Company is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation, and
is duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The Company has the corporate power and authority
to own or hold under lease the properties it purports to own or hold under
lease, to transact the business it transacts and proposes to transact, to
execute and deliver this Agreement and the Other Agreements and the Notes and
to perform the provisions hereof and thereof.
5.2. Authorization, etc .
This Agreement and the Other Agreements and the Notes have
been duly authorized by all necessary corporate action on the part of the
Company, and this Agreement constitutes, and upon execution and delivery
thereof each Note will constitute, a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with its terms,
except as such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
5.3. Disclosure .
The Company, through its agent, BA Securities, Inc., has
delivered to you and each Other Purchaser a copy of a Private Placement
Memorandum, dated April 1996 (the "Memorandum"), relating to the transactions
contemplated hereby, and a copy of the Company's Annual Report on Form 10-K
for the year ended January 31, 1996 in the form filed with the Securities and
Exchange Commission (the "Annual Report"). This Agreement, the Memorandum,
the Annual Report, the documents, certificates or other writings identified
in Schedule 5.3 and the financial statements listed in Section 5.5, taken as
a whole, do not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading in light of the circumstances under which they were made. Except
as disclosed in the Memorandum or the Annual Report or as expressly described
in Schedule 5.3, or in one of the documents, certificates or other writings
identified therein, or in the financial statements listed in Section 5.5,
since January 31, 1996, there has been no change in the financial condition,
operations, business or properties of the Company or any of its Subsidiaries
except changes that individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect.
5.4. Organization and Ownership of Shares of Subsidiaries .
(a) Schedule 5.4 is (except as noted therein) a complete
and correct list of the Company's Subsidiaries, showing, as to each
Subsidiary, the correct name thereof, the jurisdiction of its organization,
the percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other Subsidiary and
whether such Subsidiary is designated a Restricted Subsidiary.
(b) All of the outstanding shares of capital stock or
similar equity interests of each Subsidiary shown in Schedule 5.4 as being
owned by the Company and its Subsidiaries have been validly issued, are fully
paid and nonassessable and are owned by the Company or another Subsidiary
free and clear of any Lien (except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a
corporation or other legal entity duly organized, validly existing and in
good standing under the laws of its jurisdiction of organization, and is duly
qualified as a foreign corporation or other legal entity and is in good
standing in each jurisdiction in which such qualification is required by law,
other than those jurisdictions as to which the failure to be so qualified or
in good standing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Each such Subsidiary has the
corporate or other power and authority to own or hold under lease the
properties it purports to own or hold under lease and to transact the
business it transacts and proposes to transact.
5.5. Financial Statements .
The Company has delivered to each Purchaser copies of the
consolidated balance sheet of the Company and its Subsidiaries as of January
31, 1996, 1995, 1994, 1993, 1992 and 1991, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the six
years in the period ended January 31, 1996. All of such financial statements
(including in each case the related schedules and notes) fairly present in
all material respects the consolidated financial position of the Company and
its Subsidiaries as of such dates and the consolidated results of their
operations and cash flows for the respective periods ended on such dates and
have been prepared in accordance with GAAP consistently applied throughout
the periods involved except as set forth in the notes thereto.
5.6. Compliance with Laws, Other Instruments, etc .
The execution, delivery and performance by the Company of this
Agreement and the Notes will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect
of any property of the Company or any Subsidiary under, any indenture,
mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate
charter or by-laws, or any other Material agreement or instrument to which
the Company or any Subsidiary is bound or by which the Company or any
Subsidiary or any of their respective properties may be bound or affected,
(ii) conflict with or result in a breach of any of the terms, conditions or
provisions of any order, judgment, decree, or ruling of any court, arbitrator
or Governmental Authority applicable to the Company or any Subsidiary or
(iii) violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary.
5.7. Governmental Authorizations, etc .
No consent, approval or authorization of, or registration,
filing or declaration with, any Governmental Authority is required in
connection with the execution, delivery or performance by the Company of this
Agreement or the Notes.
5.8. Litigation; Observance of Statutes and Orders .
(a) Except as disclosed in Schedule 5.8, there are no
actions, suits or proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary or any property
of the Company or any Subsidiary in any court or before any arbitrator of any
kind or before or by any Governmental Authority that, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect.
(b) Except as disclosed in Schedule 5.8, neither the
Company nor any Subsidiary is in default under any order, judgment, decree or
ruling of any court, arbitrator or Governmental Authority or is in violation
of any applicable law, ordinance, rule or regulation (including without
limitation Environmental Laws) of any Governmental Authority, which default
or violation, individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect.
5.9. Taxes .
The Company and its Subsidiaries have filed all income tax
returns that are required to have been filed in any jurisdiction, and have
paid all taxes shown to be due and payable on such returns and all other
taxes and assessments payable by them, to the extent such taxes and
assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (i) the amount of which is
not individually or in the aggregate Material or (ii) the amount,
applicability or validity of which is currently being contested in good faith
by appropriate proceedings and with respect to which the Company or a
Subsidiary, as the case may be, has established adequate reserves in
accordance with GAAP. The Federal income tax liabilities of the Company and
its Subsidiaries have been determined by the Internal Revenue Service and
paid for all fiscal years up to and including the fiscal year ended January
31, 1989.
5.10. Title to Property; Leases .
The Company and its Subsidiaries have good and sufficient
title to their respective Material properties, including all such properties
reflected in the most recent audited balance sheet referred to in Section 5.5
or purported to have been acquired by the Company or any Subsidiary after
said date (except as sold or otherwise disposed of in the ordinary course of
business), in each case free and clear of Liens prohibited by this Agreement,
except for those defects in title and Liens that, individually or in the
aggregate, would not have a Material Adverse Effect. All Material leases are
valid and subsisting and are in full force and effect in all material
respects.
5.11. Licenses, Permits, etc .
The Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that are Material, without
known conflict with the rights of others, except for those conflicts that,
individually or in the aggregate, would not have a Material Adverse Effect.
5.12. Compliance with ERISA .
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for such
instances of noncompliance as have not resulted in and could not reasonably
be expected to result in a Material Adverse Effect. Neither the Company nor
any ERISA Affiliate has incurred any liability pursuant to Title I or IV of
ERISA or the penalty or excise tax provisions of the Code relating to
employee benefit plans (as defined in Section 3 of ERISA), and no event,
transaction or condition has occurred or exists that would reasonably be
expected to result in the incurrence of any such liability by the Company or
any ERISA Affiliate, or in the imposition of any Lien on any of the rights,
properties or assets of the Company or any ERISA Affiliate, in either case
pursuant to Title I or IV of ERISA or to such penalty or excise tax
provisions or to Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the aggregate
Material.
(b) The present value of the aggregate benefit liabilities
under each of the Plans (other than Multiemployer Plans), determined as of
the end of such Plan's most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan's most
recent actuarial valuation report, did not exceed the aggregate current value
of the assets of such Plan allocable to such benefit liabilities. The term
"benefit liabilities" has the meaning specified in section 4001 of ERISA and
the terms "current value" and "present value" have the meaning specified in
section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred
withdrawal liabilities (and are not subject to contingent withdrawal
liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer
Plans that individually or in the aggregate are Material.
(d) The accumulated postretirement benefit obligation
(determined as of the last day of the Company's most recently ended fiscal
year in accordance with Financial Accounting Standards Board Statement No.
106, without regard to liabilities attributable to continuation coverage
mandated by section 4980B of the Code) of the Company and its Subsidiaries
did not exceed $7,000,000.
(e) The execution and delivery of this Agreement and the
issuance and sale of the Notes hereunder will not involve any transaction
that is subject to the prohibitions of section 406 of ERISA or in connection
with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of
the Code. The representation by the Company in the first sentence of this
Section 5.12(e) is made in reliance upon and subject to the accuracy of your
representation in Section 6.2 as to the sources of the funds to be used to
pay the purchase price of the Notes to be purchased by you.
5.13. Private Offering by the Company .
Neither the Company nor anyone acting on its behalf has
offered the Notes or any similar securities for sale to, or solicited any
offer to buy any of the same from, or otherwise approached or negotiated in
respect thereof with, any person other than 70 Institutional Investors,
including you and the Other Purchasers, each of which has been offered the
Notes at a private sale for investment. Neither the Company nor anyone
acting on its behalf has taken, or will take, any action that would subject
the issuance or sale of the Notes to the registration requirements of Section
5 of the Securities Act.
5.14. Use of Proceeds; Margin Regulations .
The Company will apply the proceeds of the sale of the Notes
to refinance certain existing Indebtedness and for general working capital
purposes. No part of the proceeds from the sale of the Notes hereunder will
be used, directly or indirectly, for the purpose of buying or carrying any
margin stock within the meaning of Regulation G of the Board of Governors of
the Federal Reserve System (12 CFR 207), or for the purpose of buying or
carrying or trading in any securities under such circumstances as to involve
the Company in a violation of Regulation X of said Board (12 CFR 224) or to
involve any broker or dealer in a violation of Regulation T of said Board (12
CFR 220). Margin stock does not constitute more than 5% of the value of the
consolidated assets of the Company and its Subsidiaries and the Company does
not have any present intention that margin stock will constitute more than 5%
of the value of such assets. As used in this Section, the terms "margin
stock" and "purpose of buying or carrying" shall have the meanings assigned
to them in said Regulation G.
5.15. Existing Indebtedness; Future Liens .
(a) Except as described therein, Schedule 5.15 sets forth
a complete and correct list of all outstanding Indebtedness of the Company
and its Subsidiaries as of January 31, 1996, since which date there has been
no Material change in the amounts, interest rates, sinking funds, installment
payments or maturities of the Indebtedness of the Company or its
Subsidiaries. Neither the Company nor any Subsidiary is in default, and no
waiver of default is currently in effect, in the payment of any principal or
interest on any Indebtedness of the Company or such Subsidiary and no event
or condition exists with respect to any Indebtedness of the Company or any
Subsidiary the outstanding aggregate principal amount of which exceeds
$20,000,000 that would permit (or that with notice or the lapse of time, or
both, would permit) one or more Persons to cause such Indebtedness to become
due and payable before its stated maturity or before its regularly scheduled
dates of payment.
(b) Except as disclosed in Schedule 5.15, neither the
Company nor any Subsidiary has agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to a Lien.
5.16. Foreign Assets Control Regulations, etc .
Neither the sale of the Notes by the Company hereunder nor its
use of the proceeds thereof will violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United
States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any
enabling legislation or executive order relating thereto.
5.17. Status under Certain Statutes .
Neither the Company nor any Subsidiary is subject to
regulation under the Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act,
as amended, or the Federal Power Act, as amended.
5.18. Environmental Matters .
Neither the Company nor any Subsidiary has knowledge of any
claim or has received any notice of any claim, and no proceeding has been
instituted raising any claim against the Company or any of its Subsidiaries
or any of their respective real properties now or formerly owned, leased or
operated by any of them or other assets, alleging any damage to the
environment or violation of any Environmental Laws, except, in each case,
such as could not reasonably be expected to result in a Material Adverse
Effect. Except as otherwise disclosed to you in writing,
(a) neither the Company nor any Subsidiary has knowledge
of any facts which would give rise to any claim, public or private, of
violation of Environmental Laws or damage to the environment emanating from,
occurring on or in any way related to real properties now or formerly owned,
leased or operated by any of them or to other assets or their use, except, in
each case, such as could not reasonably be expected to result in a Material
Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has
stored any Hazardous Materials on real properties now or formerly owned,
leased or operated by any of them and has not disposed of any Hazardous
Materials in a manner contrary to any Environmental Laws in each case in any
manner that could reasonably be expected to result in a Material Adverse
Effect; and
(c) all buildings on all real properties now owned, leased
or operated by the Company or any of its Subsidiaries are in compliance with
applicable Environmental Laws, except where failure to comply could not
reasonably be expected to result in a Material Adverse Effect.
6. REPRESENTATIONS OF THE PURCHASER .
6.1. Purchase for Investment .
You represent that you are purchasing the Notes for your own
account or for one or more separate accounts maintained by you or for the
account of one or more pension or trust funds and not with a view to the
distribution thereof, provided that the disposition of your or their property
shall at all times be within your or their control. You understand that the
Notes have not been registered under the Securities Act and may be resold
only if registered pursuant to the provisions of the Securities Act or if an
exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law, and that
the Company is not required to register the Notes.
6.2. Source of Funds .
You represent that at least one of the following statements is
an accurate representation as to each source of funds (a "Source") to be used
by you to pay the purchase price of the Notes to be purchased by you
hereunder:
(a) if you are an insurance company, the Source does not
include assets allocated to any separate account maintained by you in which
any employee benefit plan (or its related trust) has any interest, other than
a separate account that is maintained solely in connection with your fixed
contractual obligations under which the amounts payable, or credited, to such
plan and to any participant or beneficiary of such plan (including any
annuitant) are not affected in any manner by the investment performance of
the separate account; or
(b) the Source is either (i) an insurance company pooled
separate account, within the meaning of Prohibited Transaction Exemption
("PTE") 90-1 (issued January 29, 1990), or (ii) a bank collective investment
fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except
as you have disclosed to the Company in writing pursuant to this paragraph
(b), no employee benefit plan or group of plans maintained by the same
employer or employee organization beneficially owns more than 10% of all
assets allocated to such pooled separate account or collective investment
fund; or
(c) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption), no employee benefit plan's assets that are included in such
investment fund, when combined with the assets of all other employee benefit
plans established or maintained by the same employer or by an affiliate
(within the meaning of Section V(c)(1) of the QPAM Exemption) of such
employer or by the same employee organization and managed by such QPAM,
exceed 20% of the total client assets managed by such QPAM, the conditions of
Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a
person controlling or controlled by the QPAM (applying the definition of
"control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest
in the Company and (i) the identity of such QPAM and (ii) the names of all
employee benefit plans whose assets are included in such investment fund have
been disclosed to the Company in writing pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee benefit
plans, each of which has been identified to the Company in writing pursuant
to this paragraph (e); or
(f) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA; or
(g) the Source is an "insurance company general account"
as such term is defined in the Department of Labor Prohibited Transaction
Class Exemption 95-60 (issued July 12, 1995) ("PTE 95-60") and as of the date
of this Agreement there is no "employee benefit plan" with respect to which
the aggregate amount of such general account's reserves and liabilities for
the contracts held by or on behalf of such employee benefit plan and all
other employee benefit plans maintained by the same employer (and affiliates
thereof as defined in Section V(a)(1) of PTE 95-60) or by the same employee
organization (in each case determined in accordance with the provisions of
PTE 95-60) exceeeds 10% of the total reserves and liabilities of such general
account (as determined under PTE 95-60) (exclusive of separate account
liabilities) plus surplus as set forth in the National Association of
Insurance Commissioners Annual Statement filed with the state of domicle of
such Purchaser.
As used in this Section 6.2, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
7. INFORMATION AS TO COMPANY .
7.1. Financial and Business Information .
The Company will deliver to each holder of Notes that is an
Institutional Investor:
(a) Quarterly Statements -- within 60 days after the end
of each quarterly fiscal period in each fiscal year of the Company (other
than the last quarterly fiscal period of each such fiscal year), duplicate
copies of,
(i) a consolidated balance sheet of the Company and
its Restricted Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its Restricted
Subsidiaries, for such quarter and (in the case of the second and
third quarters) for the portion of the fiscal year ending with such
quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable detail,
prepared in accordance with GAAP applicable to quarterly financial statements
generally, and certified by a Senior Financial Officer as fairly presenting,
in all material respects, the financial position of the companies being
reported on and their results of operations and cash flows, subject to
changes resulting from year-end adjustments, provided that, until such time
as the total assets of Unrestricted Subsidiaries represent 10% or more of the
consolidated total assets of the Company and its Subsidiaries determined in
accordance with GAAP, delivery within the time period specified above of
copies of the Company's Quarterly Report on Form 10-Q prepared in compliance
with the requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this Section 7.1(a)
so long as such Quarterly Report on Form 10-Q includes a consolidated balance
sheet and consolidated statements of income, changes in stockholders' equity
and cash flows of the Company and its Subsidiaries and the substance of the
officer's certification otherwise required hereby;
(b) Annual Statements -- within 120 days after the end of
each fiscal year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and
its Restricted Subsidiaries, as at the end of such year, and
(ii) consolidated statements of income, changes in
shareholders' equity and cash flows of the Company and its Restricted
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail, prepared in accordance with GAAP, and
accompanied
(A) by an opinion thereon of independent certified
public accountants of recognized national standing, which opinion
shall state that such financial statements present fairly, in all
material respects, the financial position of the companies being
reported upon and their results of operations and cash flows and have
been prepared in conformity with GAAP, and that the examination of
such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards,
and that such audit provides a reasonable basis for such opinion in
the circumstances; and
(B) a certificate of such accountants stating
whether, in making their audit, they have become aware of any
accounting matter that then constitutes a Default or an Event of
Default, and, if they are aware that any such accounting matter then
exists, specifying the nature and period of the existence thereof (it
being understood that such accountants shall not be liable, directly
or indirectly, for any failure to obtain knowledge of any Default or
Event of Default unless such accountants should have obtained
knowledge thereof in making an audit in accordance with generally
accepted auditing standards);
provided that, until such time as the total assets of Unrestricted
Subsidiaries represent 10% or more of the consolidated total assets of the
Company and its Subsidiaries determined in accordance with GAAP, the delivery
within the time period specified above of the Company's Annual Report on Form
10-K for such fiscal year (together with the Company's annual report to
shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act)
prepared in accordance with the requirements therefor and filed with the
Securities and Exchange Commission and accompanied by the opinion referred to
in clause (A) and the certificate referred to in clause (B) shall be deemed
to satisfy the requirements of this Section 7.1(b) so long as such Annual
Report on Form 10-K includes a consolidated balance sheet and consolidated
statements of income, changes in stockholders' equity and cash flows of the
Company and its Subsidiaries;
(c) SEC and Other Reports -- (i) promptly upon their
becoming available, one copy of each financial statement, report, notice or
proxy statement sent by the Company or any Restricted Subsidiary to public
securities holders generally, and (ii) within 15 days of its filing or
effective date, as the case may be, one copy of each regular or periodic
report, each registration statement (other than in respect of employee
benefit plans) that shall have become effective (without exhibits except as
expressly requested by such holder), and each final prospectus (other than in
respect of employee benefit plans) and all amendments thereto filed by the
Company or any Subsidiary with the Securities and Exchange Commission;
(d) Notice of Default or Event of Default -- promptly, and
in any event within 10 days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default, a written notice specifying the
nature and period of existence thereof and what action the Company is taking
or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within 10
days after a Responsible Officer becoming aware of any of the following, a
written notice setting forth the nature thereof and the action, if any, that
the Company or an ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event,
as defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived pursuant to
such regulations as in effect on the date hereof; or
(ii) the taking by the PBGC of steps to institute,
or the threatening by the PBGC of the institution of, proceedings
under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the receipt by
the Company or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by the PBGC with respect to such
Multiemployer Plan; or
(iii) any event, transaction or condition that could
result in the incurrence of any liability by the Company or any ERISA
Affiliate pursuant to Title I or IV of ERISA or the penalty or excise
tax provisions of the Code relating to employee benefit plans, or in
the imposition of any Lien on any of the rights, properties or assets
of the Company or any ERISA Affiliate pursuant to Title I or IV of
ERISA or such penalty or excise tax provisions, if such liability or
Lien, taken together with any other such liabilities or Liens then
existing, would reasonably be expected to have a Material Adverse
Effect; and
(f) Requested Information -- with reasonable promptness,
such other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company or any of
its Restricted Subsidiaries or relating to the ability of the Company to
perform its obligations hereunder and under the Notes as from time to time
may be reasonably requested by any such holder of Notes.
7.2. Officer's Certificate .
Each set of financial statements delivered to a holder of
Notes pursuant to Section 7.1(a) or (b) hereof shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including
detailed calculations) required in order to establish whether the Company was
in compliance with the requirements of Section 10.2 through Section 10.6,
inclusive, during the quarterly or annual period covered by the statements
then being furnished (including with respect to each such Section, where
applicable, the calculations of the maximum or minimum amount, ratio or
percentage, as the case may be, permissible under the terms of such Sections,
and the calculation of the amount, ratio or percentage then in existence);
(b) Event of Default -- a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be made, under
his or her supervision, a review of the transactions and conditions of the
Company and its Subsidiaries from the beginning of the quarterly or annual
period covered by the statements then being furnished to the date of the
certificate and that such review shall not have disclosed the existence
during such period of any condition or event that constitutes a Default or an
Event of Default or, if any such condition or event existed or exists
(including, without limitation, any such event or condition resulting from
the failure of the Company or any Subsidiary to comply with any Environmental
Law), specifying the nature and period of existence thereof and what action
the Company shall have taken or proposes to take with respect thereto; and
(c) Unrestricted Subsidiaries -- if such financial
statements include financial results of Unrestricted Subsidiaries as
permitted by the provisos to Sections 7.1(a) and 7.1(b), a calculation
showing satisfaction of the condition contained in such provisos.
7.3. Inspection.
The Company will permit the representatives of each holder of
Notes that is an Institutional Investor:
(a) No Default -- if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior notice to the
Company, to visit the principal executive office of the Company, to discuss
the affairs, finances and accounts of the Company and its Subsidiaries with
the Company's officers, and, with the consent of the Company (which consent
will not be unreasonably withheld) to visit the other offices and properties
of the Company and each Subsidiary, all at such reasonable times and as often
as may be reasonably requested in writing; and
(b) Default -- if a Default or Event of Default then
exists, at the expense of the Company to visit and inspect any of the offices
or properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers and independent public
accountants (and by this provision the Company authorizes said accountants to
discuss the affairs, finances and accounts of the Company and its
Subsidiaries), all at such times and as often as may be requested.
8. PREPAYMENT OF THE NOTES .
8.1. Required Prepayments .
The Notes are not subject to required prepayments.
8.2. Optional Prepayments with Make-Whole Amount .
The Company may, at its option, upon notice as provided below,
prepay at any time all, or from time to time any part of, the Notes, in an
amount not less than $1,000,000 in aggregate principal amount of the Notes
then outstanding in the case of a partial prepayment, at 100% of the
principal amount so prepaid, plus the Make-Whole Amount if any, determined
for the prepayment date with respect to such principal amount. The Company
will give each holder of Notes written notice of each optional prepayment
under this Section 8.2 not less than 30 days and not more than 60 days prior
to the date fixed for such prepayment. Each such notice shall specify such
date, the aggregate principal amount of the Notes to be prepaid on such date,
the principal amount of each Note held by such holder to be prepaid
(determined in accordance with Section 8.3), and the interest to be paid on
the prepayment date with respect to such principal amount being prepaid, and
shall be accompanied by a certificate of a Senior Financial Officer as to the
estimated Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the prepayment),
setting forth the details of such computation. Two Business Days prior to
such prepayment, the Company shall deliver to each holder of Notes a
certificate of a Senior Financial Officer specifying the calculation of such
Make-Whole Amount as of the specified prepayment date.
8.3. Allocation of Partial Prepayments .
In the case of each partial prepayment of the Notes, the
principal amount of the Notes to be prepaid shall be allocated among all of
the Notes at the time outstanding in proportion, as nearly as practicable, to
the respective unpaid principal amounts thereof not theretofore called for
prepayment.
8.4. Maturity; Surrender, etc .
In the case of each prepayment of Notes pursuant to this
Section 8, the principal amount of each Note to be prepaid shall mature and
become due and payable on the date fixed for such prepayment, together with
interest on such principal amount accrued to such date and the applicable
Make-Whole Amount, if any. From and after such date, unless the Company
shall fail to pay such principal amount when so due and payable, together
with the interest and Make-Whole Amount, if any, as aforesaid, interest on
such principal amount shall cease to accrue. Any Note paid or prepaid in
full shall be surrendered to the Company and canceled and shall not be
reissued, and no Note shall be issued in lieu of any prepaid principal amount
of any Note.
8.5. Purchase of Notes .
The Company will not and will not permit any Subsidiary or
Affiliate to purchase, redeem, prepay or otherwise acquire, directly or
indirectly, any of the outstanding Notes except (a) upon the payment or
prepayment of the Notes in accordance with the terms of this Agreement and
the Notes or (b) pursuant to an offer to purchase made by the Company, a
Subsidiary or an Affiliate pro rata to the holders of all Notes at the time
outstanding upon the same terms and conditions. Any such offer shall provide
each holder with sufficient information to enable it to make an informed
decision with respect to such offer, and shall remain open for at least 20
Business Days. If the holders of more than 25% of the principal amount of
the Notes then outstanding accept such offer, the Company shall promptly
notify the remaining holders of such fact and the expiration date for the
acceptance by holders of Notes of such offer shall be extended by the number
of days necessary to give each such remaining holder at least ten Business
Days from its receipt of such notice to accept such offer. The Company will
promptly cancel all Notes acquired by it, a Subsidiary or any Affiliate
pursuant to any payment, prepayment or purchase of Notes pursuant to any
provision of this Agreement and no Notes may be issued in substitution or
exchange for any such Notes.
8.6. Make-Whole Amount .
The term "Make-Whole Amount" means, with respect to any Note,
an amount equal to the excess, if any, of the Discounted Value of the
Remaining Scheduled Payments with respect to the Called Principal of such
Note over the amount of such Called Principal, provided that the Make-Whole
Amount may in no event be less than zero. For the purposes of determining
the Make-Whole Amount, the following terms have the following meanings:
"Called Principal" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section 8.2
or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.
"Discounted Value" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their
respective scheduled due dates to the Settlement Date with respect to
such Called Principal, in accordance with accepted financial practice
and at a discount factor (applied on the same periodic basis as that
on which interest on the Notes is payable) equal to the Reinvestment
Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called
Principal of any Note, the yield to maturity implied by 0.50% plus
(i) the yields reported, as of 10:00 A.M. (New York City time) on the
second Business Day preceding the Settlement Date with respect to such
Called Principal, on the display designated as "Page 678" on the
Telerate Access Service (or such other display as may replace Page 678
on Telerate Access Service) for actively traded U.S. Treasury
securities having a maturity equal to the Remaining Average Life of
such Called Principal as of such Settlement Date, or (ii) if such
yields are not reported as of such time or the yields reported as of
such time are not ascertainable, the Treasury Constant Maturity Series
Yields reported, for the latest day for which such yields have been so
reported as of the second Business Day preceding the Settlement Date
with respect to such Called Principal, in Federal Reserve Statistical
Release H.15 (519) (or any comparable successor publication) for
actively traded U.S. Treasury securities having a constant maturity
equal to the Remaining Average Life of such Called Principal as of
such Settlement Date. Such implied yield will be determined, if
necessary, by (a) converting U.S. Treasury bill quotations to bond-
equivalent yields in accordance with accepted financial practice and
(b) interpolating linearly between (1) the actively traded U.S.
Treasury security with the final maturity closest to and greater than
the Remaining Average Life and (2) the actively traded U.S. Treasury
security with the final maturity closest to and less than the
Remaining Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest one-twelfth
year) obtained by dividing (i) such Called Principal into (ii) the
sum of the products obtained by multiplying (a) the principal
component of each Remaining Scheduled Payment with respect to such
Called Principal by (b) the number of years (calculated to the
nearest one-twelfth year) that will elapse between the Settlement
Date with respect to such Called Principal and the scheduled due date
of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the
Called Principal of any Note, all payments of such Called Principal
and interest thereon that would be due after the Settlement Date with
respect to such Called Principal if no payment of such Called
Principal were made prior to its scheduled due date, provided that if
such Settlement Date is not a date on which interest payments are due
to be made under the terms of the Notes, then the amount of the next
succeeding scheduled interest payment will be reduced by the amount
of interest accrued to such Settlement Date and required to be paid
on such Settlement Date pursuant to Section 8.2 or 12.1.
"Settlement Date" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be prepaid
pursuant to Section 8.2 or has become or is declared to be
immediately due and payable pursuant to Section 12.1, as the context
requires.
9. AFFIRMATIVE COVENANTS .
The Company covenants that so long as any of the Notes are
outstanding:
9.1. Compliance with Law .
The Company will and will cause each Subsidiary to comply with
all laws, ordinances or governmental rules or regulations to which each of
them is subject, including, without limitation, Environmental Laws, and will
obtain and maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of their
respective properties or to the conduct of their respective businesses, in
each case to the extent necessary to ensure that non-compliance with such
laws, ordinances or governmental rules or regulations or failures to obtain
or maintain in effect such licenses, certificates, permits, franchises and
other governmental authorizations would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
9.2. Insurance .
The Company will and will cause each Subsidiary to maintain,
with financially sound and reputable insurers, insurance with respect to
their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance, if adequate reserves are
maintained with respect thereto) as is customary in the case of entities of
established reputations engaged in the same or a similar business and
similarly situated.
9.3. Maintenance of Properties .
The Company will and will cause each Restricted Subsidiary to
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary
wear and tear), so that the business carried on in connection therewith may
be properly conducted at all times, provided that this Section shall not
prevent the Company or any Restricted Subsidiary from discontinuing the
operation and the maintenance of any of its properties if such discontinuance
is desirable in the conduct of its business and the Company has concluded
that such discontinuance would not, individually or in the aggregate, have a
Material Adverse Effect.
9.4. Payment of Taxes and Claims.
The Company will and will cause each Subsidiary to file all
income tax or similar tax returns required to be filed in any jurisdiction
and to pay and discharge all taxes shown to be due and payable on such
returns and all other taxes, assessments, governmental charges, or levies
(collectively, "Taxes") payable by any of them, to the extent such taxes and
assessments have become due and payable and before they have become
delinquent, and all claims for which sums have become due and payable that
have or might become a Lien on properties or assets of the Company or any
Subsidiary, provided that neither the Company nor any Subsidiary need pay any
Taxes or claims if (i) the amount, applicability or validity thereof is
contested by the Company or such Subsidiary on a timely basis in good faith
and in appropriate proceedings, and the Company or a Subsidiary has
established adequate reserves therefor in accordance with GAAP on the books
of the Company or such Subsidiary or (ii) the nonpayment of all such taxes
and assessments in the aggregate would not reasonably be expected to have a
Material Adverse Effect.
9.5. Corporate Existence, etc .
Subject to Section 10.2, the Company will at all times
preserve and keep in full force and effect its corporate existence. Subject
to Sections 10.2 and 10.6, the Company will at all times preserve and keep in
full force and effect the corporate existence of each Restricted Subsidiary
(unless merged into the Company or a Restricted Subsidiary) and all rights
and franchises of the Company and each Restricted Subsidiary unless, in the
good faith judgment of the Company, the termination of or failure to preserve
and keep in full force and effect such corporate existence, right or
franchise would not, individually or in the aggregate, have a Material
Adverse Effect.
10. NEGATIVE COVENANTS .
The Company covenants that so long as any of the Notes are
outstanding:
10.1. Transactions with Affiliates .
The Company will not, and will not permit any Restricted
Subsidiary to, enter into directly or indirectly any Material transaction or
Material group of related transactions (including without limitation the
purchase, lease, sale or exchange of properties of any kind or the rendering
of any service) with any Affiliate (other than the Company), except pursuant
to the reasonable requirements of the Company's or such Restricted
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Restricted Subsidiary than would be obtainable in a
comparable arm's-length transaction with a Person not an Affiliate.
10.2. Merger, Consolidation, etc .
The Company will not, and will not permit any Restricted
Subsidiary to, consolidate or merge with any other corporation or Person or
convey, transfer or lease substantially all of its assets in a single
transaction or series of transactions to any Person, except that:
(a) The Company may merge or consolidate with, or convey,
transfer or lease substantially all of its assets to, another Person, if
(i) the successor formed by such consolidation or the survivor of such merger
or the Person that acquires by conveyance, transfer or lease substantially
all of the assets of the Company as an entirety, as the case may be, shall be
a solvent corporation organized and existing under the laws of the United
States or any State thereof (including the District of Columbia), and, if the
Company is not such corporation, such corporation shall have executed and
delivered to each holder of any Notes its assumption of the due and punctual
performance and observance of each covenant and condition of this Agreement,
the Other Agreements and the Notes together with an opinion of nationally
recognized independent counsel in form and substance satisfactory to the
holders of the Notes to the effect that the instrument of assumption has been
duly authorized, executed and delivered and constitutes the legal, value and
binding agreement of such corporation enforceable in accordance with its
terms; and (ii) immediately after giving effect to such transaction, (A) no
Default or Event of Default shall have occurred and (B) such corporation
could incur $1.00 of additional Indebtedness.
(b) any Restricted Subsidiary may merge into, or convey,
transfer or lease substantially all of its assets to, the Company or another
Wholly-Owned Restricted Subsidiary.
10.3. Indebtedness Ratio.
The Company will not permit Consolidated Indebtedness to
exceed 65% of Consolidated Total Capitalization at any time.
10.4. Indebtedness of Restricted Subsidiaries.
The Company will not permit any Restricted Subsidiary to
create, assume, incur or otherwise become liable for, directly or indirectly,
any Indebtedness other than:
(a) Indebtedness owed to the Company or another Restricted
Subsidiary; and
(b) Additional Indebtedness, provided that at the time of
incurrence thereof and after giving effect thereto and to the application of
the proceeds therefrom, the sum (without duplication) of outstanding
(i) Indebtedness of Restricted Subsidiaries (other than Indebtedness referred
to in paragraph (a) of this Section 10.4), and (ii) Consolidated Indebtedness
secured by Liens permitted by Section 10.5(g), does not at any time exceed
20% of Adjusted Consolidated Net Worth.
10.5. Liens .
The Company will not, and will not permit any Restricted Subsidiary
to, permit to exist, create, assume or incur, directly or indirectly, any
Lien securing Indebtedness on its properties or assets, whether now owned or
hereafter acquired, except:
(a) Liens existing on property or assets of the Company or
any Restricted Subsidiary as of the date of this Agreement that are described
in Schedule 10.5 and Liens provided for in agreements described in Schedule
5.15;
(b) Liens securing Indebtedness of a Restricted Subsidiary
to the Company or to another Wholly-Owned Restricted Subsidiary;
(c) Liens (i) existing on property at the time of its
acquisition (including by way of merger or consolidation) by the Company or a
Restricted Subsidiary and not created in contemplation thereof; (ii) existing
on property of a Person at the time such Person becomes a Restricted
Subsidiary and not created in contemplation thereof; and (iii) on property
acquired, constructed or improved by the Company or any Restricted Subsidiary
after the date of this Agreement that are created, incurred or assumed (or
with respect to which legally binding contracts to provide such financing
have been obtained) contemporaneously with or within 180 days after the
acquisition or, in the case or property constructed or improved, after
completion of construction or improvement thereof, to secure all or any
portion of the purchase price thereof; provided, that at the time such Liens
described in foregoing clauses (i), (ii) and (iii) are created, incurred or
assumed, such Liens do not extend to any other property of the Company or any
Restricted Subsidiary, other than unimproved real property on which the
property so constructed or improved is located;
(d) Liens in favor of any Governmental Authority to secure
payments pursuant to any contract or statute or to secure any Indebtedness
incurred for the purpose of financing all or any portion of the purchase
price or cost of construction or improvement of the property subject to such
Lien, including Liens securing Indebtedness evidenced by pollution control or
industrial revenue bonds; provided that the property and improvements subject
thereto were acquired or constructed after the date of Closing;
(e) Liens on floor plan inventory of the Company securing
Floor Plan Debt of up to $30,000,000;
(f) Liens resulting from extensions, renewals or
replacements of Indebtedness secured by any Lien referred to in foregoing
clauses (a) through (e), provided that there is no increase in the principal
amount of Indebtedness (including the amount of any reasonable premium, fees
and expenses, if any) secured thereby at the time of such extension, renewal
or replacement and that such Liens do not extend to any property not subject
thereto at the time of such extension, renewal or replacement;
(g) Liens not otherwise permitted by paragraphs (a)
through (f) above incurred subsequent to the date of Closing to secure
Indebtedness, provided that at the time of incurring such additional
Indebtedness and after giving effect thereto and to the application of the
proceeds therefrom, the sum (without duplication) of such additional
Indebtedness and Indebtedness of Restricted Subsidiaries does not exceed 20%
of Adjusted Consolidated Net Worth.
10.6. Sale of Assets.
Except as permitted by Section 10.2 hereof, the Company will not, and
will not permit any Restricted Subsidiary to, sell, lease, transfer or
otherwise dispose of, including by way of merger (collectively a
"Disposition"), any assets, including capital stock of Subsidiaries, in one
or a series of transactions, to any Person, other than in the ordinary course
of business, except to the Company or, in the case of a Restricted
Subsidiary, to a Wholly-Owned Restricted Subsidiary, (i) if, in any fiscal
year, after giving effect to such Disposition, the aggregate net book value
of assets subject to Dispositions during such fiscal year would exceed 10% of
Consolidated Total Assets as of the end of the immediately preceding fiscal
year or (ii) if a Default or Event of Default exists or would exist.
Notwithstanding the foregoing, the Company may, or may permit a Restricted
Subsidiary to, make a Disposition and the assets subject to such Disposition
shall not be subject to or included in the foregoing limitation and
computation contained in clause (i) of the preceding sentence to the extent
that (x) such assets are leased back by the Company or any Restricted
Subsidiary, as lessee, within 180 days of the acquisition or construction
thereof by the Company or such Restricted Subsidiary and payments with
respect thereto are Capitalized Lease Obligations or (y) the net proceeds
from such Disposition are within 180 days of such Disposition (1) reinvested
in productive assets of the Company or a Restricted Subsidiary of at least
equivalent value or (2) applied to the payment or prepayment of outstanding
Indebtedness. Any prepayment of Notes pursuant to this Section 10.6 shall be
in accordance with Section 8.2.
10.7. Disposition of Stock of Restricted Subsidiaries.
The Company will not permit any Restricted Subsidiary to issue
its capital stock, or any warrants, rights or options to purchase, or
securities convertible into or exchangeable for, such capital stock, to any
Person other than the Company or a Wholly-Owned Restricted Subsidiary. The
Company will not, and will not permit any Restricted Subsidiary to, sell,
transfer or otherwise dispose of (other than to the Company or a Wholly-Owned
Restricted Subsidiary) any capital stock (including any warrants, rights or
options to purchase, or securities convertible into or exchangeable for,
capital stock) or Indebtedness of any Restricted Subsidiary, unless such
sale, transfer or other disposition is permitted by Section 10.6.
10.8. Designation of Unrestricted Subsidiaries.
The Company will not designate any Restricted Subsidiary as an
Unrestricted Subsidiary if such Subsidiary has been designated an
Unrestricted Subsidiary more than once previously and unless immediately
before and after such designation:
(a) such Subsidiary does not own any Investment in the
Company or any Restricted Subsidiary; and
(b) there exists no Default or Event of Default.
11. EVENTS OF DEFAULT .
An "Event of Default" shall exist if any of the following
conditions or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal
or Make-Whole Amount, if any, on any Note when the same becomes due and
payable, whether at maturity or at a date fixed for prepayment or by
declaration or otherwise; or
(b) the Company defaults in the payment of any interest on
any Note for more than five Business Days after the same becomes due and
payable; or
(c) the Company defaults in the performance of or
compliance with any term contained herein (other than those referred to in
paragraphs (a), and (b) of this Section 11) and such default is not remedied
within 30 days after the earlier of (i) a Responsible Officer obtaining
actual knowledge of such default and (ii) the Company receiving written
notice of such default from any holder of a Note; or
(d) any representation or warranty made in writing by or
on behalf of the Company or by any officer of the Company in this Agreement
or in any writing furnished in connection with the transactions contemplated
hereby proves to have been false or incorrect in any material respect on the
date as of which made; or
(e) the Company or any Restricted Subsidiary is (i) in
default (as principal or as guarantor or other surety) in the payment of any
principal of or premium or make-whole amount or interest on any Indebtedness
that is outstanding in an aggregate principal amount of at least $20,000,000
or (ii) in default in the performance of or compliance with any term of any
evidence of any Indebtedness in an aggregate outstanding principal amount of
at least $20,000,000 or of any mortgage, indenture or other agreement
relating thereto or any other condition exists, and as a consequence of such
default or condition described in clauses (i) and (ii) such Indebtedness has
become, or has been declared due and payable before its stated maturity or
before its regularly scheduled dates of payment; or
(f) the Company or any Restricted Subsidiary (i) is
generally not paying, or admits in writing its inability to pay, its debts as
they become due, (ii) files, or consents by answer or otherwise to the filing
against it of, a petition for relief or reorganization or arrangement or any
other petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy, insolvency, reorganization, moratorium or other similar law of
any jurisdiction, (iii) makes an assignment for the benefit of its creditors,
(iv) consents to the appointment of a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, (v) is adjudicated as insolvent or to be
liquidated, or (vi) takes corporate action for the purpose of any of the
foregoing; or
(g) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the Company or
any Restricted Subsidiary, a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial
part of its property, or constituting an order for relief or approving a
petition for relief or reorganization or any other petition in bankruptcy or
for liquidation or to take advantage of any bankruptcy or insolvency law of
any jurisdiction, or ordering the dissolution, winding-up or liquidation of
the Company or any Restricted Subsidiary, or any such petition shall be filed
against the Company or any Restricted Subsidiary and such petition shall not
be dismissed within 90 days; or
(h) a final judgment or judgments for the payment of money
aggregating in excess of $10,000,000 are rendered against one or more of the
Company and its Restricted Subsidiaries and such judgments are not, within 45
days after entry thereof, bonded, discharged or stayed pending appeal, or are
not discharged within 45 days after the expiration of such stay; or
(i) if (i) any Plan shall fail to satisfy the minimum
funding standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought or
granted under section 412 of the Code, (ii) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed with
the PBGC or the PBGC shall have instituted proceedings under ERISA section
4042 to terminate or appoint a trustee to administer any Plan or the PBGC
shall have notified the Company or any ERISA Affiliate that a Plan may become
a subject of any such proceedings, (iii) the aggregate "amount of unfunded
benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA)
under all Plans, determined in accordance with Title IV of ERISA, shall
exceed $20,000,000, (iv) the Company or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability pursuant to Title I
or IV of ERISA or the penalty or excise tax provisions of the Code relating
to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws
from any Multiemployer Plan, or (vi) the Company or any Subsidiary
establishes or amends any employee welfare benefit plan that provides post-
employment welfare benefits in a manner that would increase the liability of
the Company or any Subsidiary thereunder; and any such event or events
described in clauses (i) through (vi) above, either individually or together
with any other such event or events, would reasonably be expected to have a
Material Adverse Effect.
As used in Section 11(i), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such
terms in Section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC .
12.1. Acceleration .
(a) If an Event of Default with respect to the Company
described in paragraph (f) or (g) of Section 11 (other than an Event of
Default described in clause (i) of paragraph (f) or described in clause (vi)
of paragraph (f) by virtue of the fact that such clause encompasses clause
(i) of paragraph (f)) has occurred, all the Notes then outstanding shall
automatically become immediately due and payable.
(b) If any other Event of Default has occurred and is
continuing, any holder or holders of 29% or more in the aggregate in
principal amount of the Notes at the time outstanding may at any time at its
or their option, by notice or notices to the Company, declare all the Notes
then outstanding to be immediately due and payable.
(c) If any Event of Default described in paragraph (a) or
(b) of Section 11 has occurred and is continuing, any holder or holders of
Notes at the time outstanding affected by such Event of Default may at any
time, at its or their option, by notice or notices to the Company, declare
all the Notes held by it or them to be immediately due and payable.
Upon any Notes becoming due and payable under this
Section 12.1, whether automatically or by declaration, such Notes will
forthwith mature and the entire unpaid principal amount of such Notes, plus
(x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount
determined in respect of such principal amount (to the full extent permitted
by applicable law and provided that such amount does not exceed the maximum
nonusurious interest rate, if any, that at any time or from time to time may
be contracted for, taken, charged or received on the Notes under the law of
any jurisdiction whose laws may be mandatorily applicable to the holder of a
Note), shall all be immediately due and payable, in each and every case
without presentment, demand, protest or further notice, all of which are
hereby waived. The Company acknowledges, and the parties hereto agree, that
each holder of a Note has the right to maintain its investment in the Notes
free from repayment by the Company (except as herein specifically provided
for) and that the provision for payment of a Make-Whole Amount by the Company
in the event that the Notes are prepaid or are accelerated as a result of an
Event of Default, is intended to provide compensation for the deprivation of
such right under such circumstances.
12.2. Other Remedies .
If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 12.1, the holder of any
Note at the time outstanding may proceed to protect and enforce the rights of
such holder by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in any Note, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by law or otherwise.
12.3. Rescission .
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 12.1, the holders of not less than
72% in principal amount of the Notes then outstanding, by written notice to
the Company, may rescind and annul any such declaration and its consequences
if (a) the Company has paid all overdue interest on the Notes, all principal
of and Make-Whole Amount, if any, on any Notes that are due and payable and
are unpaid other than by reason of such declaration, and all interest on such
overdue principal and Make-Whole Amount, if any, and (to the extent permitted
by applicable law) any overdue interest in respect of the Notes, at the
Default Rate, (b) all Events of Default and Defaults, other than non-payment
of amounts that have become due solely by reason of such declaration, have
been cured or have been waived pursuant to Section 17, and (c) no judgment or
decree has been entered for the payment of any monies due pursuant hereto or
to the Notes. No rescission and annulment under this Section 12.3 will
extend to or affect any subsequent Event of Default or Default or impair any
right consequent thereon.
12.4. No Waivers or Election of Remedies, Expenses, etc .
No course of dealing and no delay on the part of any holder of
any Note in exercising any right, power or remedy shall operate as a waiver
thereof or otherwise prejudice such holder's rights, powers or remedies. No
right, power or remedy conferred by this Agreement or by any Note upon any
holder thereof shall be exclusive of any other right, power or remedy
referred to herein or therein or now or hereafter available at law, in
equity, by statute or otherwise. Without limiting the obligations of the
Company under Section 15, the Company will pay to the holder of each Note on
demand such further amount as shall be sufficient to cover all costs and
expenses of such holder incurred in any enforcement or collection under this
Section 12, including, without limitation, reasonable attorneys' fees,
expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES .
13.1. Registration of Notes .
The Company shall keep at its principal executive office a
register for the registration and registration of transfers of Notes. The
name and address of each holder of one or more Notes, each transfer thereof
and the name and address of each transferee of one or more Notes shall be
registered in such register. Prior to due presentment for registration of
transfer, the Person in whose name any Note shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes hereof,
and the Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete and correct
copy of the names and addresses of all registered holders of Notes.
13.2. Transfer and Exchange of Notes .
Upon surrender of any Note at the principal executive office
of the Company for registration of transfer or exchange (and in the case of a
surrender for registration of transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered holder of such
Note or his attorney duly authorized in writing and accompanied by the
address for notices of each transferee of such Note or part thereof), the
Company shall execute and deliver, at the Company's expense (except as
provided below), one or more new Notes of the same series (as requested by
the holder thereof) in exchange therefor, in an aggregate principal amount
equal to the unpaid principal amount of the surrendered Note. Each such new
Note shall be payable to such Person as such holder may request and shall be
substantially in the form of Exhibit 1-A, 1-B, 1-C or 1-D, as appropriate.
Each such new Note shall be dated and bear interest from the date to which
interest shall have been paid on the surrendered Note or dated the date of
the surrendered Note if no interest shall have been paid thereon. The
Company may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Notes. Notes
shall not be transferred in denominations of less than $1,000,000, provided
that if necessary to enable the registration of transfer by a holder of its
entire holding of Notes, one Note may be in a denomination of less than
$1,000,000. Any transferee, by its acceptance of a Note registered in its
name (or the name of its nominee), shall be deemed to have made the
representation set forth in Section 6.2.
13.3. Replacement of Notes .
Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of any Note (which evidence shall be, in the case of an
Institutional Investor, notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and
(a) in the case of loss, theft or destruction, of
indemnity reasonably satisfactory to it (provided that if the holder of such
Note is, or is a nominee for, an original Purchaser or another holder of a
Note with a minimum net worth of at least $50,000,000, such Person's own
unsecured agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu thereof, a
new Note of the same series, dated and bearing interest from the date to
which interest shall have been paid on such lost, stolen, destroyed or
mutilated Note or dated the date of such lost, stolen, destroyed or mutilated
Note if no interest shall have been paid thereon.
14. PAYMENTS ON NOTES .
14.1. Place of Payment .
Subject to Section 14.2, payments of principal, Make-Whole
Amount, if any, and interest becoming due and payable on the Notes shall be
made in Houston, Texas at the principal office of the Company in such
jurisdiction. The Company may at any time, by notice to each holder of a
Note, change the place of payment of the Notes so long as such place of
payment shall be either the principal office of the Company in such
jurisdiction or the principal office of a bank or trust company in such
jurisdiction.
14.2. Home Office Payment .
So long as you or your nominee shall be the holder of any
Note, and notwithstanding anything contained in Section 14.1 or in such Note
to the contrary, the Company will pay all sums becoming due on such Note for
principal, Make-Whole Amount, if any, and interest by the method and at the
address specified for such purpose below your name in Schedule A, or by such
other method or at such other address as you shall have from time to time
specified to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of any Note, you
shall surrender such Note for cancellation, reasonably promptly after any
such request, to the Company at its principal executive office or at the
place of payment most recently designated by the Company pursuant to Section
14.1. Prior to any sale or other disposition of any Note held by you or your
nominee you will, at your election, either endorse thereon the amount of
principal paid thereon and the last date to which interest has been paid
thereon or surrender such Note to the Company in exchange for a new Note or
Notes pursuant to Section 13.2. The Company will afford the benefits of this
Section 14.2 to any Institutional Investor that is the direct or indirect
transferee of any Note purchased by you under this Agreement and that has
made the same agreement relating to such Note as you have made in this
Section 14.2.
15. EXPENSES, ETC .
15.1. Transaction Expenses .
Whether or not the transactions contemplated hereby are
consummated, the Company will pay all costs and expenses (including
reasonable attorneys' fees of a special counsel and, if reasonably required,
local or other counsel, provided that the Company shall only be obligated to
pay for a single special counsel for you and the Other Purchasers in
connection with the transactions contemplated hereby) incurred by you and
each Other Purchaser or holder of a Note in connection with such transactions
and in connection with any amendments, waivers or consents under or in
respect of this Agreement or the Notes (whether or not such amendment, waiver
or consent becomes effective), including, without limitation: (a) the costs
and expenses incurred in enforcing or defending (or determining whether or
how to enforce or defend) any rights under this Agreement or the Notes or in
responding to any subpoena or other legal process or informal investigative
demand issued in connection with this Agreement or the Notes, or by reason of
being a holder of any Note, and (b) the costs and expenses, including
financial advisors' fees (provided that the Company shall only be obligated
to pay for a single financial advisor of any specific type for you and the
Other Purchasers), incurred in connection with the insolvency or bankruptcy
of the Company or any Subsidiary or in connection with any work-out or
restructuring of the transactions contemplated hereby and by the Notes. The
Company will pay, and will save you and each other holder of a Note harmless
from, all claims in respect of any fees, costs or expenses if any, of brokers
and finders (other than those retained by you).
15.2. Survival .
The obligations of the Company under this Section 15 will
survive the payment or transfer of any Note, the enforcement, amendment or
waiver of any provision of this Agreement or the Notes, and the termination
of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT .
All representations and warranties contained herein shall
survive the execution and delivery of this Agreement and the Notes, the
purchase or transfer by you of any Note or portion thereof or interest
therein and the payment of any Note, and may be relied upon by any subsequent
holder of a Note, regardless of any investigation made at any time by or on
behalf of you or any other holder of a Note. All statements contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant to this Agreement shall be deemed representations and warranties of
the Company under this Agreement. Subject to the preceding sentence, this
Agreement and the Notes embody the entire agreement and understanding between
you and the Company and supersede all prior agreements and understandings
relating to the subject matter hereof.
17. AMENDMENT AND WAIVER .
17.1. Requirements .
This Agreement and the Notes may be amended, and the
observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written consent of
the Company and the Required Holders, except that (a) no amendment or waiver
of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any
defined term (as it is used therein), will be effective as to you unless
consented to by you in writing, and (b) no such amendment or waiver may,
without the written consent of the holder of each Note at the time
outstanding affected thereby, (i) subject to the provisions of Section 12
relating to acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or change the time
of payment or method of computation of interest or of the Make-Whole Amount
on, the Notes, (ii) change the percentage of the principal amount of the
Notes the holders of which are required to consent to any such amendment or
waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20.
17.2. Solicitation of Holders of Notes .
(a) Solicitation. The Company will provide each holder of
the Notes (irrespective of the amount of Notes then owned by it) with
sufficient information, sufficiently far in advance of the date a decision is
required, to enable such holder to make an informed and considered decision
with respect to any proposed amendment, waiver or consent in respect of any
of the provisions hereof or of the Notes. The Company will deliver executed
or true and correct copies of each amendment, waiver or consent effected
pursuant to the provisions of this Section 17 to each holder of outstanding
Notes promptly following the date on which it is executed and delivered by,
or receives the consent or approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly
pay or cause to be paid any remuneration, whether by way of supplemental or
additional interest, fee or otherwise, or grant any security, to any holder
of Notes as consideration for or as an inducement to the entering into by any
holder of Notes or any waiver or amendment of any of the terms and provisions
hereof unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each holder of Notes then
outstanding even if such holder did not consent to such waiver or amendment.
17.3. Binding Effect, etc .
Any amendment or waiver consented to as provided in this
Section 17 applies equally to all holders of Notes and is binding upon them
and upon each future holder of any Note and upon the Company without regard
to whether such Note has been marked to indicate such amendment or waiver.
No such amendment or waiver will extend to or affect any obligation,
covenant, agreement, Default or Event of Default not expressly amended or
waived or impair any right consequent thereon. No course of dealing between
the Company and the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any rights of any
holder of such Note. As used herein, the term "this Agreement" and
references thereto shall mean this Agreement as it may from time to time be
amended or supplemented.
17.4. Notes held by Company, etc .
Solely for the purpose of determining whether the holders of
the requisite percentage of the aggregate principal amount of Notes then
outstanding approved or consented to any amendment, waiver or consent to be
given under this Agreement or the Notes, or have directed the taking of any
action provided herein or in the Notes to be taken upon the direction of the
holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the Company or any of
its Subsidiaries or Affiliates shall be deemed not to be outstanding.
18. NOTICES .
All notices and communications provided for hereunder shall be
in writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery
service (with charges prepaid). Any such notice must be sent:
(a) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other address as
you or it shall have specified to the Company in writing,
(b) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the Company in
writing, or
(c) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of Robert L. Hargrave, or at
such other address as the Company shall have specified to the holder of each
Note in writing.
Notices under this Section 18 will be deemed given only when actually
received.
19. REPRODUCTION OF DOCUMENTS .
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that may
hereafter be executed, (b) documents received by you at the Closing (except
the Notes themselves), and (c) financial statements, certificates and other
information previously or hereafter furnished to you, may be reproduced by
you by any photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and you may destroy any original
document so reproduced. The Company agrees and stipulates that, to the
extent permitted by applicable law, any such reproduction shall be admissible
in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not
such reproduction was made by you in the regular course of business) and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not prohibit the
Company or any other holder of Notes from contesting any such reproduction to
the same extent that it could contest the original, or from introducing
evidence to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION .
For the purposes of this Section 20, "Confidential
Information" means information delivered to you by or on behalf of the
Company or any Subsidiary in connection with the transactions contemplated by
or otherwise pursuant to this Agreement that is proprietary in nature and
that was clearly marked or labeled or otherwise adequately identified when
received by you as being confidential information of the Company or such
Subsidiary, provided that such term does not include information that (a) was
publicly known or otherwise known to you prior to the time of such
disclosure, (b) subsequently becomes publicly known through no act or
omission by you or any person acting on your behalf, (c) otherwise becomes
known to you other than through disclosure by the Company or any Subsidiary
or (d) constitutes financial statements delivered to you under Section 7.1
that are otherwise publicly available. You will maintain the confidentiality
of such Confidential Information in accordance with procedures adopted by you
in good faith to protect confidential information of third parties delivered
to you, provided that you may deliver or disclose Confidential Information to
(i) your directors, officers, employees, agents, attorneys and affiliates (to
the extent such disclosure reasonably relates to the administration of the
investment represented by your Notes), (ii) your financial advisors and other
professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this Section 20,
(iii) any other holder of any Note, (iv) any Institutional Investor to which
you sell or offer to sell such Note or any part thereof or any participation
therein (if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 20),
(v) any Person from which you offer to purchase any security of the Company
(if such Person has agreed in writing prior to its receipt of such
Confidential Information to be bound by the provisions of this Section 20),
(vi) any federal or state regulatory authority having jurisdiction over you,
(vii) the National Association of Insurance Commissioners or any similar
organization, or any nationally recognized rating agency that requires access
to information about your investment portfolio, or (viii) any other Person to
which such delivery or disclosure may be necessary or appropriate (w) to
effect compliance with any law, rule, regulation or order applicable to you,
(x) in response to any subpoena or other legal process, (y) in connection
with any litigation to which you are a party or (z) if an Event of Default
has occurred and is continuing, to the extent you may reasonably determine
such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under your Notes
and this Agreement. Each holder of a Note, by its acceptance of a Note, will
be deemed to have agreed to be bound by and to be entitled to the benefits of
this Section 20 as though it were a party to this Agreement. On reasonable
request by the Company in connection with the delivery to any holder of a
Note of information required to be delivered to such holder under this
Agreement or requested by such holder (other than a holder that is a party to
this Agreement or its nominee), such holder will enter into an agreement with
the Company embodying the provisions of this Section 20.
21. SUBSTITUTION OF PURCHASERS.
You shall have the right to substitute any one of your
Affiliates as the purchaser of the Notes that you have agreed to purchase
hereunder, by written notice to the Company, which notice shall be signed by
both you and such Affiliate, shall contain such Affiliate's agreement to be
bound by this Agreement and shall contain a confirmation by such Affiliate of
the accuracy with respect to it of the representations set forth in Section
6. Upon receipt of such notice, wherever the word "you" is used in this
Agreement (other than in this Section 21), such word shall be deemed to refer
to such Affiliate in lieu of you. In the event that such Affiliate is so
substituted as a purchaser hereunder and such Affiliate thereafter transfers
to you all of the Notes then held by such Affiliate, upon receipt by the
Company of notice of such transfer, wherever the word "you" is used in this
Agreement (other than in this Section 21), such word shall no longer be
deemed to refer to such Affiliate, but shall refer to you, and you shall have
all the rights of an original holder of the Notes under this Agreement.
22. MISCELLANEOUS .
22.1. Successors and Assigns .
All covenants and other agreements contained in this Agreement
by or on behalf of any of the parties hereto bind and inure to the benefit of
their respective successors and assigns (including, without limitation, any
subsequent holder of a Note) whether so expressed or not.
22.2. Payments Due on Non-Business Days .
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-whole Amount or interest
on any Note that is due on a date other than a Business Day shall be made on
the next succeeding Business Day without including the additional days
elapsed in the computation of the interest payable on such next succeeding
Business Day.
22.3. Severability .
Any provision of this Agreement that 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 provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall (to the full extent permitted by
law) not invalidate or render unenforceable such provision in any other
jurisdiction.
22.4. Construction .
Each covenant contained herein shall be construed (absent
express provision to the contrary) as being independent of each other
covenant contained herein, so that compliance with any one covenant shall not
(absent such an express contrary provision) be deemed to excuse compliance
with any other covenant. Where any provision herein refers to action to be
taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person.
22.5. Counterparts .
This Agreement may be executed in any number of counterparts,
each of which shall be an original but all of which together shall constitute
one instrument. Each counterpart may consist of a number of copies hereof,
each signed by less than all, but together signed by all, of the parties
hereto. Each of the Purchasers are identified on the signature pages hereto
as a matter of convenience but such identification shall not diminish the
concept of separate Agreements or imply any joint and several liability on
the part of the Purchasers.
22.6. Governing Law.
This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the law of the
State of New York excluding choice-of-law principles of the law of such State
that would require the application of the laws of a jurisdiction other than
such State.
If you are in agreement with the foregoing, please sign the
form of Agreement on the accompanying counterpart of this Note Purchase
Agreement and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
STEWART & STEVENSON
SERVICES, INC.
By: /s/Robert L. Hargrave, Chief Executive Officer
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By: /s/ Fredrick A. Bell
Title: Second Vice President-Securities Investment
By: /s/ Warren Shank
Title: Counsel
AMERICAN UNITED LIFE INSURANCE
COMPANY
By: /s/ Kent R. Adams
Title: Vice President
NATIONWIDE LIFE INSURANCE COMPANY
By: /s/ Michael D. Groseclose
Title: Associate Vice President
Corporate Fixed-Income Securities
EMPLOYERS LIFE INSURANCE COMPANY
OF WAUSAU
By: /s/ Michael D. Groseclose
Title: Attorney-In-Fact
NATIONWIDE LIFE AND ANNUITY
INSURANCE COMPANY
By: /s/ Michael D. Groseclose
Title: Associate Vice President
Corporate Fixed-Income Securities
NATIONWIDE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT OH
By: /s/ Michael D. Groseclose
Title: Associate Vice President
Corporate Fixed-Income Securities
WEST COAST LIFE INSURANCE COMPANY
By: /s/ Michael D. Groseclose
Title: Attorney-In-Fact
THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
By: /s/ Ina Lane
Title: Investment Officer
INDIANAPOLIS LIFE INSURANCE COMPANY
By: /s/ Gene E. Trueblood
Title: Vice President, C.I.O. and Treasurer
AMERITAS LIFE INSURANCE CORP.
By: Ameritas Investment Advisors, Inc., as Agent
By:
Name: Patrick J. Henry
Title: Vice President-Fixed Income Securities
MODERN WOODMEN OF AMERICA
By: /s/ W. B. Foster
Title: President, W.B. Foster
UNITED OF OMAHA LIFE INSURANCE
COMPANY
By: /s/ Edwin H. Garrison, Jr.
Title: First Vice President
UNUM LIFE INSURANCE COMPANY
OF AMERICA
By: /s/ Daniel E. Gass
Title: Second Vice President
PAN-AMERICAN LIFE INSURANCE COMPANY
By: /s/ F. Anderson Stone
Title: Vice Presdient Corporate Securities
THE HARVEST LIFE INSURANCE COMPANY
By: /s/ Charles Kaminski
Title: Senior Vice President - Investments
UNION FIDELITY LIFE INSURANCE COMPANY
By: /s/ Charles Kaminski
Title: Senior Vice President - Investments
GNA Corporation as Advisor
COLONIAL LIFE & ACCIDENT INSURANCE COMPANY
By: /s/ Daniel E. Gass
Title: Assistant Vice President
COMMERCIAL LIFE INSURANCE COMPANY
By: /s/ Daniel E. Gass
Title: Assistant Vice President
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series A
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY $25,000,000
711 High Street
Des Moines, IA 50392-0800
Attention: Investment Department-Securities Division
(1) All payments on or in respect of the Notes to be made
by bank wire transfer of Federal or other
immediately available funds to:
ABA #073 000 228
Norwest Bank Iowa, N.A.
7th & Walnut Street
Des Moines, IA 50309
Account No. 014752
OBI PFGSE (S) B60750
Each wire transfer shall identify such payment as
"Stewart & Stevenson Services, Inc., 6.72% Series A
Senior Notes due 1999"
(2) All notices concerning payment on or in respect
of the Notes, to:
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0960
Attention: Investment Accounting and Treasury-Securities
Telefacsimile: (515) 248-2643
Confirmation: (515) 248-8301
All notices and communications, other than those in respect to payments to be
addressed as provided above.
Tax ID#: 42-0127290
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series A
AMERICAN UNITED LIFE INSURANCE COMPANY $5,000,000
One American Square
Indianapolis, IN 46204
(1) All payments on or in respect of the Notes to be made
by bank wire transfer of Federal or other
immediately available funds to:
Bank of New York
One Wall Street, 3rd Floor
Window A
New York, NY 10286
ABA# 021000018
Account # 186683/AUL
Each wire transfer shall identify such payment as
"Stewart & Stevenson Services, Inc., 6.72% Series A
Senior Notes due 1999"
(2) All notices concerning payment on or in respect
of the Notes, to:
American United Life Insurance Company
Attn: Jean Jones, Law Department
One American Squarre
Indianapolis, IN 46204
The Note should be sent to:
Bank of New York
One Wall Street, 3rd Floor
Window A
Account #186683/American United Life Ins. Co.
New York, NY 10286
Tax ID#: 35-0145825
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series A
NATIONWIDE LIFE INSURANCE COMPANY $18,000,000
One Nationwide Plaza
Columbus, Ohio 43215-2220
(1) Send notices and communications to:
Nationwide Life Insurance Company
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities
(2) All payments by wire transfer or automatic clearing house
of immediately available funds to:
Morgan Guaranty Trust Company of New York
ABA # 021-000-238
JOURNAL # 999-99-024
F/A/O Nationwide Life Insurance Company, Custody A/C # 71615
Attention: Custody Service Department
Each wire transfer shall identify such payment as
"Stewart & Stevenson 6.72% Senior Notes, Series A,
due 1999, PPN 860342 C@ 1"
(3) All notices of payments and written confirmations
of such wire transfers to:
Nationwide Life Insurance Company
One Nationwide Plaza (1-32-09)
Columbus, Ohio 43215-2220
Attention: Corporate Money Management
(4) Deliver Note to:
Morgan Guaranty Trust Company of New York
Safekeeping Incoming
55 Exchange Place - A Level
New York, NY 10260-0023
F/A/O Nationwide Life Insurance Company
Custody Account #71615
Tax ID #31-4156830
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series A
WEST COAST LIFE INSURANCE COMPANY $2,000,000
343 Sansome Street
San Francisco, CA 94104
(1) Send notices and communications to:
West Coast Life Insurance Company
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities
(2) All payments by wire transfer or automatic clearing house
of immediately available funds to:
Morgan Guaranty Trust Company of New York
ABA #021-000-238
JOURNAL #999-99-024
F/A/O West Coast Life Custody A/C #73290
Attention: Custody Service Department
Each wire transfer shall identify such payment as "Stewart
& Stevenson, 6.72% Senior Notes, Series A, due 1999,
PPN 860342 C@ 1"
(3) All notices of payments and written
confirmations of such wire transfers to:
West Coast Life Insurance Company
343 Sansome Street
San Francisco, CA 94104
Attention: Karl Snover
(4) Deliver Note to:
Morgan Guaranty Trust Company of New York
Safekeeping Incoming
55 Exchange Place - A Level
New York, NY 10260-0023
F/A/O West Coast Life Insurance Company
Custody Account #73290
A copy of the Note should be mailed directly to:
Mr. Karl Snover
West Coast Life Insurance Company
343 Sansome Street
San Francisco, CA 94104
Tax ID # 94-0971150
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series A
THE HARVEST LIFE INSURANCE COMPANY $5,000,000
c/o GNA Corporation
Two Union Square
601 Union Street
Attention Investment Department
Seattle, WA 98101
Name of Nominee in which Notes are to be issued: SALKELD & CO.
(1) All payments on or in respect of the Notes shall be
made by wire transfer of Federal or other immediately
available funds to:
Bankers Trust Company
16 Wall Street
New York, NY 10015
ABA #021001033
Attention: 99-911-145
Account #097870
Ref: Security description, coupon, maturity, PPN, identify
principal or interest.
(2) Address for all notices in respect of payment:
The Harvest Life Insurance Company
c/o GNA Corporation
Two Union Square
601 Union Street
Seattle, WA 98101
Attention: Investment Accounting, 14th Floor
Telephone: (206) 516-2871
Fax: (206) 516-4740
(3) Address for all other communications is as first stated above.
(4) Deliver Note to:
Bankers Trust Co.
16 Wall Street
4th Floor, Window 44
New York, NY 10005
Account #097870
Attention: George Flores (212) 618-2207
Tax ID #34-1099737
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series A
UNION FIDELITY LIFE INSURANCE COMPANY $5,000,000
c/o GNA Corporation
Two Union Square
601 Union Street
Seattle, WA 98101
Attention: Investment Department
Name of Nominee in which Notes are to be issued: OLEN & CO.
(1) All payments on or in respect of the Notes shall be
made by wire transfer of Federal or other immediately
available funds to:
First National Bank of Chicago
ABA #071000013
for credit to clearing account #7521-7651
further credit #10122164FUF2
Ref: Security description, coupon, maturity, PPN,
identify principal or interest
(2) Address for all notices in respect of payment:
Union Fidelity Life Insurance Company
c/o GNA Corporation
Two Union Square
601 Union Street
Seattle, WA 98101
Attention: Investment Accounting, 14th Floor
Telephone: (206) 516-2871
Fax: (206) 516-4740
(3) Address for all other communications is as first stated above.
(4) Deliver Note to:
First Chicago Trust Company
14 Wall Street, 8th Floor
New York, NY 10005
Account #10122164FUF2/UFLIC
Tax ID#: 31-0252460
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series B
NATIONWIDE LIFE INSURANCE COMPANY $4,000,000
One Nationwide Plaza
Columbus, Ohio 43215-2220
(1) Send notices and communications to:
Nationwide Life Insurance Company
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities
(2) All payments by wire transfer or automatic clearing house
of immediately available funds to:
Morgan Guaranty Trust Company of New York
ABA # 021-000-238
JOURNAL # 999-99-024
F/A/O Nationwide Life Insurance Company, Custody A/C # 71615
Attention: Custody Service Department
Each wire transfer shall identify such payment as
"Stewart & Stevenson 7.03% Senior Notes, Series B,
due 2001, PPN 860342 D* 2"
(3) All notices of payments and written confirmations
of such wire transfers to:
Nationwide Life Insurance Company
One Nationwide Plaza (1-32-09)
Columbus, Ohio 43215-2220
Attention: Corporate Money Management
(4) Deliver Note to:
Morgan Guaranty Trust Company of New York
Safekeeping Incoming
55 Exchange Place - A Level
New York, NY 10260-0023
F/A/O Nationwide Life Insurance Company
Custody Account #71615
Tax ID #31-4156830
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series B
EMPLOYERS LIFE INSURANCE COMPANY $2,000,000
OF WAUSAU
2000 Westwood Drive
Wausau, Wisconsin 54401
(1) Send notices and communications to:
Employers Life Insurance Company of Wausau
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities
(2) All payments by wire transfer to:
The Bank of New York
ABA # 021-000-018
BNF: 10C566
F/A/O Employers Life Custody A/C #267827
Attention: P&I Dept.
PPN # 860342 D* 2
Security Description________________________________
(3) All notices of payments to:
Employers Life Insurance Company of Wausau
2000 Westwood Drive
Wausau, Wisconsin 54401
(4) The Note should be registered in the name of
Employers Life Insurance Company of Wausau
and delivered to:
The Bank of of New York
Attn: Free Receive Dept.
One Wall Street 3rd Floor
New York, NY 10286
A copy of the Note should be mailed directly to:
Ms. Cindy Peterson
Employers Life Insurance Company of Wausau
2000 Westwood Drive
Wausau, Wisconsin 54401
Tax ID #39-1049873
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series B
NATIONWIDE LIFE AND ANNUITY INSURANCE $2,000,000
COMPANY
One Nationwide Plaza
Columbus, OH 43215-2220
(1) Send notices and communications to:
Nationwide Life and Annuity Insurance Company
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities
(2) All payments by wire transfer or automatic clearing house
of immediately available funds to:
Morgan Guaranty Trust Company of New York
ABA # 021-000-238
JOURNAL # 999-99-024
F/A/O Nationwide Life and Annuity Insurance Company,
Custody A/C # 71620
Attention: Custody Service Department
Each wire transfer shall identify such payment as
"Stewart & Stevenson 7.03% Senior Notes, Series B,
due 2001, PPN 860342 D* 2"
(3) All notices of payments and written confirmations
of such wire transfers to:
Nationwide Life and Annuity Insurance Company
One Nationwide Plaza (1-32-09)
Columbus, Ohio 43215-2220
Attention: Corporate Money Management
(4) Deliver Notes to:
Morgan Guaranty Trust Company of New York
Safekeeping Incoming
55 Exchange Place - A Level
New York, NY 10260-0023
F/A/O Nationwide Life and Annuity Insurance Company
Custody Account #71620
Tax ID #31-1000740
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series B
NATIONWIDE LIFE INSURANCE COMPANY $2,000,000
SEPARATE ACCOUNT OH
One Nationwide Plaza
Columbus, OH 43215-2220
(1) Send notices and communications to:
Nationwide Life Insurance Company Separate Account OH
One Nationwide Plaza (1-33-07)
Columbus, Ohio 43215-2220
Attention: Corporate Fixed-Income Securities
(2) All payments by wire transfer or automatic clearing house
of immediately available funds to:
Morgan Guaranty Trust Company of New York
ABA # 021-000-238
JOURNAL # 999-99-024
F/A/O Nationwide Life Insurance Company Separate Acct. OH
Custody A/C # 74605
Attention: Custody Service Department
Each wire transfer shall identify such payment as
"Stewart & Stevenson 7.03% Senior Notes, Series B,
due 2001, PPN 860342 D* 2"
(3) All notices of payments and written confirmations
of such wire transfers to:
Nationwide Life Insurance Company Separate Account OH
One Nationwide Plaza (1-32-09)
Columbus, Ohio 43215-2220
Attention: Corporate Money Management
(4) Deliver Notes to:
Morgan Guaranty Trust Company of New York
Safekeeping Incoming
55 Exchange Place - A Level
New York, NY 10260-0023
F/A/O Nationwide Life Insurance Company Separate Account OH
Custody Account #74605
Tax ID #31-4156830
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series B
AMERICAN UNITED LIFE INSURANCE COMPANY $5,000,000
One American Square
Indianapolis, IN 46204
(1) All payments on or in respect of the Notes to be made
my bank wire transfer of Federal or other
immediately available funds to:
Bank of New York
One Wall Street, 3rd Floor
Window A
New York, NY 10286
ABA# 021000018
Account # 186683/AUL
Each wire transfer shall identify such payment as
"Stewart & Stevenson Services, Inc., 7.03% Series B
Senior Notes due 2001"
(2) All notices concerning payment on or in respect
of the Notes, to:
American United Life Insurance Company
Attn: Jean Jones, Law Department
One American Squarre
Indianapolis, IN 46204
The Note should be sent to:
Bank of New York
One Wall Street, 3rd Floor
Window A
Account #186683/American United Life Ins. Co.
New York, NY 10286
Tax ID#: 35-0145825
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series B
INDIANAPOLIS LIFE INSURANCE COMPANY $5,000,000
2960 North Meridian Street
Indianapolis, IN 46208
Attention: Securities Department
(1) All principal and interest payments on the Notes
shall be made by wire transfer of immediately
available funds to:
NBD Bank, NA
One Indiana Square
Indianapolis, IN 46266
ABA#074000052
(With sufficient information to identify payment as to
principal and interest, issue identification and PPN#.)
For credit to: Indianapolis Life Insurance Company
Account No. 700035001852
(2) Address for all notices in respect of payment and other
communications via courier:
Indianapolis Life Insurance Company
P.O. Box 1230
Indianapolis, IN 46206
Attention: Securities Department
(3) Address for delivery of Note and communications via U.S. mail:
Indianapolis Life Insurance Company
P.O. Box 1230
Indianapolis, IN 46206
Attention: Securities Department
Tax ID#: 35-0413330
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series C
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY $4,000,000
711 High Street
Des Moines, IA 50392-0800
Attention: Investment Department-Securities Division
(1) All payments on or in respect of the Notes to be made
by bank wire transfer of Federal or other
immediately available funds to:
ABA #073 000 228
Norwest Bank Iowa, N.A.
7th & Walnut Street
Des Moines, IA 50309
Account No. 032395
OBI PFGSE (S) B60751
Each wire transfer shall identify such payment as
"Stewart & Stevenson Services, Inc., 7.29% Series C
Senior Notes due 2003"
(2) All notices concerning payment on or in respect
of the Notes, to:
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0960
Attention: Investment Accounting and Treasury-Securities
Telefacsimile: (515) 248-2643
Confirmation: (515) 248-8301
All notices and communications, other than those in respect to payments to be
addressed as provided above.
Tax ID#: 42-0127290
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series C
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY $5,000,000
711 High Street
Des Moines, IA 50392-0800
Attention: Investment Department-Securities Division
(1) All payments on or in respect of the Notes to be made
by bank wire transfer of Federal or other
immediately available funds to:
ABA #073 000 228
Norwest Bank Iowa, N.A.
7th & Walnut Street
Des Moines, IA 50309
Account No. 014752
OBI PFGSE (S) B60751
Each wire transfer shall identify such payment as
"Stewart & Stevenson Services, Inc., 7.29% Series C
Senior Notes due 2003"
(2) All notices concerning payment on or in respect
of the Notes, to:
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0960
Attention: Investment Accounting and Treasury-Securities
Telefacsimile: (515) 248-2643
Confirmation: (515) 248-8301
All notices and communications, other than those in respect to payments to be
addressed as provided above.
Tax ID#: 42-0127290
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series C
MODERN WOODMEN OF AMERICA $2,000,000
1701 1st Avenue
Rock Island, IL 61201
Attention: Investment Department
(1) All payments on account of Notes held by such purchaser
shall be made by wire transfer of immediately available
for credit to:
Account No. 347-904-5
Harris Trust & Savings Bank
111 West Monroe Street
Chicago, IL 60690
ABA No. 071-000-288
For the account of Modern Woodmen of America
Each wire transfer shall set forth the name of the Company, the full
title (including the applicable coupon rate and final maturity date)
of the Notes, a reference to PPN No. 860342 D@0 and the
due date and application (as among principal, premium and interest)
of the payment being made.
(2) Address for all notices relating to payments:
Modern Woodmen of America
1701 1st Avenue
Rock Island, IL 61201
Attention: Investment Department
All notices and communications, other than those in respect to payments to be
addressed as provided above.
Tax ID#: 36-1493430
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series C
THE EQUITABLE LIFE ASSURANCE SOCIETY $15,000,000
OF THE UNITED STATES
c/o Alliance Capital Management, L.P.
1345 Avenue of the Americas
New York, NY 10105
(1) All payments on account of Notes shall be made by bank
wire transfer of immediately available funds for credit to:
The Chase Manhattan Bank, N.A.
110 West 52nd Street
New York, NY 10019
ABA# 021-00-0021
Account of: The Equitable Life Assurance Society of the United
States
Account Number: 037-2-409417
On Order of: _________________________________________________
PPN: 860342 D@ 0
(2) Contemporaneous with the above wire transfer, advice setting forth:
(1) the full name, interest rate and maturity date of the Notes;
(2) allocation and payment between principal and any special payment;
and
(3) name and address of Bank (or Trustee) from which wire transfer
was sent
Shall be delivered to:
The Equitable Life Assurance Society of the United States
c/o Alliance Capital Management, L.P.
135 West 50th Street, 5th Floor
New York, NY 10020
Attention: Treasury Services
(3) All other communications which shall include, but not be limited to,
financial statements and certificates of compliance with financial
covenants, as well as notices of unscheduled prepayments shall be
delivered or mailed to:
The Equitable Life Assurance Society of the United States
c/o Alliance Capital Management, L.P.
1345 Avenue of the Americas
New York, NY 10105
Attention: Fixed Income Credit, Research Division
(212) 969-1350 (Phone)
(212) 969-1466 (Fax)
(4) Deliver Note to:
The Equitable Life Assurance Society of the United States
787 7th Avenue 37th Floor
New York, NY 10019
Attention: Lydia Pitts
(212) 554-4880
Tax ID#: 13-5570651
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series C
AMERITAS LIFE INSURANCE CORP. $2,000,000
One Ameritas Way, P.O. Box 81889
Lincoln NE 68501-1889
(1) All payments by wire transfer of immediately available funds to:
First Bank Nebraska, NA
ABA # 104-000-029
Ameritas Life Insurance Corp.
Acct# 1-494-0070-0188
Re: Description of Note; Principal & Interest Breakdown with
sufficient information to identify the source and
application of such funds
(2) All notices of payments and written confirmations of such wire
transfers and all other communications:
Ameritas Life Insurance Corp
5900 "O" Street
Lincoln, NE 68510-2234
Attn: James Mikus
Tax ID#: 47-0098400
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series C
UNITED OF OMAHA LIFE INSURANCE COMPANY $2,000,000
Attention: Investment Division
Mutual of Omaha Plaza
Omaha, NE 68175
(1) All principal and interest payments on the Notes shall be
made by wire transfer of immediately available funds to:
First Bank, N.A.
ABA# 1040-0002-9
17th & Farnam Street
Omaha, NE
For Credit to: United of Omaha Life Insurance Company
Account # 1-487-1447-0769
For payment on: _____________________________________
___________________________________________________
Interest Amount:
Principal Amount:
(2) Address for all notices in respect of payment:
United of Omaha Life Insurance Company
Attention: Investments/Securities Accounting
Mutual of Omaha Plaza
Omaha, NE 68175
(3) Address for all other communications is as first stated above.
(4) Deliver Note to:
United of Omaha Life Insurance Company
Attention: Investments/Securities Accounting
Mutual of Omaha Plaza
Omaha, NE 68175
Tax ID#: 47-0322111
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series D
UNUM LIFE INSURANCE COMPANY OF AMERICA $9,500,000
2211 Congress Street
Portland, Maine 04122-0590
(1) All principal and interest payments on the Notes shall be
made by wire transfer of immediately available funds,
providing sufficient information to identify the source and
application of each payment, including breakdown of
principal and/or interest, to:
Mellon Bank
Pittsburgh, PA
ABA# 043000261
For the account of: UNUM Life Insurance Company of America/
SEC Acct. # 117-4176
(2) Address for all notices in respect of payment:
UNUM Life Insurance Company of America
2211 Congress Street
Portland, Maine 04122-0590
Attention: Bond Investment Accounting
Fax: (207) 770-4000
(3) Address for all other communications is as first stated above.
With - Attention: Bond Investment Division
Tax ID#: 01-0278678
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series D
COLONIAL LIFE & ACCIDENT INSURANCE COMPANY $7,500,000
2211 Congress Street
Portland, Maine 04122-0590
(1) All principal and interest payments on the Notes shall be
made by wire transfer of immediately available funds,
providing sufficient information to identify the source and
application of each payment, including breakdown of
principal and/or interest, to:
Mellon Bank
Pittsburgh, PA
ABA# 043000261
For the account of: Colonial Life & Accident Insurance Company -
Private Placements
Acct. # 0940967
(2) Address for all notices in respect of payment:
Colonial Life & Accident Insurance Company
2211 Congress Street
Portland, Maine 04122-0590
Attention: Bond Investment Accounting
(3) Address for all other communications is as first stated above.
With - Attention: Bond Investment Division
Tax ID#: 57-0144607
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series D
COMMERCIAL LIFE INSURANCE COMPANY $3,000,000
2211 Congress Street
Portland, Maine 04122-0590
(1) All principal and interest payments on the Notes shall be
made by wire transfer of immediately available funds,
providing sufficient information to identify the source and
application of each payment, including breakdown of
principal and/or interest, to:
Mellon Bank N.A.
Pittsburgh, PA
ABA#031000037
For the account of: Commercial Life Insurance Company
Acct. # 2-244-341
(2) Address for all notices in respect of payment:
Commercial Life Insurance Company
2211 Congress Street
Portland, Maine 04122-0590
Attention: Bond Investment Accounting
(3) Address for all other communications is as first stated above.
With - Attention: Bond Investment Division
Tax ID#: 22-1721966
SCHEDULE A
INFORMATION RELATING TO PURCHASERS
Principal Amount and Series of
Name and Address of Purchaser Notes to be Purchased
Series D
PAN-AMERICAN LIFE INSURANCE COMPANY $5,000,000
Attention: Investment Department - 28th Floor
601 Poydras Street
New Orleans, LA 70130
(1) All payments on the Notes shall be
made by immediately available funds to:
The Account of Pan-American Life Insurance Company
Account #1100-29496
First National Bank of Commerce
ABA #065000029
210 Baronne Street
New Orleans, LA 70112
identifying the issue by its PPN and description of
security, and providing complete details including
breakdown of interest and principal.
(2) All notices and information with regard to payments to:
Pan-American Life Insurance Company
Attention: Bond & Stock Accounting - 28th Floor
601 Poydras Street
New Orleans, LA 70130
Fax: (504) 566-3459
(3) Deliver Note to:
Pan-American Life Insurance Company
Attention: Marylyn Andree - 28th Floor
601 Poydras Street
New Orleans, LA 70130
All notices and communications, other than those in respect to payments to be
addressed as provided above.
Tax ID#: 01-0278678
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective
meanings set forth below or set forth in the Section hereof following such
term:
"Adjusted Consolidated Net Worth" means the consolidated
stockholders' equity of the Company and its Restricted Subsidiaries,
determined in accordance with GAAP, less the amount by which Restricted
Investments incurred after the date of Closing exceed 20% of consolidated
stockholders' equity as so determined.
"Affiliate" means any Person (other than a Restricted
Subsidiary or an original Purchaser) (i) who is a director or executive
officer of the Company or any Restricted Subsidiary, (ii) which directly or
indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, the Company, (iii) which beneficially owns
or holds securities representing 10% or more of the combined voting power of
the Voting Stock of the Company or any Subsidiary, or (iv) of which
securities representing 10% or more of the combined voting power of its
Voting Stock (or in the case of a Person not a corporation, 10% or more of
its equity) is beneficially owned or held by the Company or any Subsidiary.
The term "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"Annual Report" is defined in Section 5.3.
"Business Day" means (a) for the purposes of Section 8.6 only,
any day other than a Saturday, a Sunday or a day on which commercial banks in
New York City are required or authorized to be closed, and (b) for the
purposes of any other provision of this Agreement, any day other than a
Saturday, a Sunday or a day on which commercial banks in Houston, Texas,
Chicago, Illinois or New York City are required or authorized to be closed.
"Capital Lease" means, at any time, a lease with respect to
which the lessee is required concurrently to recognize the acquisition of an
asset and the incurrence of a liability in accordance with GAAP.
"Capitalized Lease Obligation" means any amounts required to
be capitalized under any Capital Lease.
"Closing" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations promulgated thereunder from
time to time.
"Company" means Stewart & Stevenson Services, Inc., a Texas
corporation.
"Confidential Information" is defined in Section 20.
"Consolidated Indebtedness" means Indebtedness of the Company
and its Restricted Subsidiaries determined on a consolidated basis in
accordance with GAAP.
"Consolidated Total Assets" means the assets and properties of
the Company and its Restricted Subsidiaries determined on a consolidated
basis in accordance with GAAP.
"Consolidated Total Capitalization" means the sum of Adjusted
Consolidated Net Worth and Consolidated Indebtedness.
"Current Debt" means Consolidated Indebtedness with a maturity
at the time of issuance or incurrence of one year or less.
"Default" means an event or condition the occurrence or
existence of which would, with the lapse of time or the giving of notice or
both, become an Event of Default.
"Default Rate" means that rate of interest that is the greater
of (i) 2% per annum above the rate of interest stated in clause (a) of the
first paragraph of the subject Note or (ii) 2% over the rate of interest
publicly announced by Bank of America Illinois in Chicago, Illinois as its
"base" or "prime" rate, but in no event shall such rate exceed the maximum
nonusurious interest rate, if any, that at any time or from time to time may
be contracted for, taken, charged or received on such Note under the law of
any jurisdiction whose laws may be mandatorily applicable to the holder of a
Note.
"Disposition" is defined in Section 10.6.
"Environmental Laws" means any and all Federal, state, local,
and foreign statutes, laws, regulations, ordinances, rules, judgments,
orders, decrees, permits, concessions, grants, franchises, licenses,
agreements or governmental restrictions relating to pollution and the
protection of the environment or the release of any materials into the
environment, including but not limited to those related to hazardous
substances or wastes, air emissions and discharges to waste or public
systems.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the rules and regulations promulgated
thereunder from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
"Event of Default" is defined in Section 11.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Floor Plan Debt" means Indebtedness with a maturity not in
excess of two years incurred by the Company in connection with floor plan
inventory held by the Company in the ordinary course of its business.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America.
"Governmental Authority" means
(a) the government of
(i) the United States of America or any
State or other political subdivision thereof, or
(ii) any jurisdiction in which the Company
or any Subsidiary conducts all or any part of its business, or
which asserts jurisdiction over any properties of the Company
or any Subsidiary, or
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or pertaining
to, any such government.
"Guaranty" means, with respect to any Person, any obligation
(except the endorsement in the ordinary course of business of negotiable
instruments for deposit or collection) of such Person guaranteeing or in
effect guaranteeing any indebtedness, dividend or other obligation of any
other Person in any manner, whether directly or indirectly, including
(without limitation) obligations incurred through an agreement, contingent or
otherwise, by such Person:
(a) to purchase such indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or
payment of such indebtedness or obligation, or (ii) to maintain any
working capital or other balance sheet condition or any income
statement condition of any other Person or otherwise to advance or
make available funds for the purchase or payment of such indebtedness
or obligation;
(c) to lease properties or to purchase properties or
services primarily for the purpose of assuring the owner of such
indebtedness or obligation of the ability of any other Person to make
payment of the indebtedness or obligation; or
(d) otherwise to assure the owner of such indebtedness or
obligation against loss in respect thereof.
In any computation of the indebtedness or other liabilities of the obligor
under any Guaranty, the indebtedness or other obligations that are the
subject of such Guaranty shall be assumed to be direct obligations of such
obligor.
"Hazardous Material" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health
or safety, the removal of which may be required or the generation,
manufacture, refining, production, processing, treatment, storage, handling,
transportation, transfer, use, disposal, release, discharge, spillage,
seepage, or filtration of which is or shall be restricted, prohibited or
penalized by any applicable law (including, without limitation, asbestos,
urea formaldehyde foam insulation and polycholorinated biphenyls).
"holder" means, with respect to any Note, the Person in whose
name such Note is registered in the register maintained by the Company
pursuant to Section 13.1.
"Indebtedness" means, for any Person (without duplication),
all (i) obligations for borrowed money or to pay the deferred purchase price
of property or assets (except trade account payables), (ii) obligations for
borrowed money secured by any Lien upon property or assets owned by such
Person, even though such Person has not assumed or become liable for the
payment of such obligations, (iii) obligations created or arising under any
conditional sale or other title retention agreement with respect to property
acquired, notwithstanding the fact that the rights and remedies of the
seller, lender or lessor under such agreement in the event of default are
limited to repossession or sale of property, (iv) Capitalized Lease
Obligations, and (v) Guaranties by a Person of obligations or Indebtedness of
others except those incurred in the ordinary course of business and related
to the manufacture and/or sale of products or the provision of services.
Notwithstanding the exception in clause (v) of the preceding sentence,
Indebtedness of a Person shall include Guaranties of Indebtedness of others
for which, at the date of determination, a payment is required to be made
thereon, but then, only in the amount of the required payment.
"Institutional Investor" means any original purchaser of a
Note and any bank, trust company, savings and loan association or other
financial institution, any pension plan, any investment company, any
insurance company, any broker or dealer, or any other similar financial
institution or entity, regardless of legal form.
"Investments" means all investments made, in cash or by
delivery of property, directly or indirectly, by any Person, in any other
Person, whether by acquisition of shares of capital stock, indebtedness or
other obligations or securities or by loan, advance, capital contribution or
otherwise; provided, however, that "Investments" shall not mean or include
investments in property to be used or consumed in the ordinary course of
business.
"Lien" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any interest or
title of any vendor, lessor, lender or other secured party to or of such
Person under any conditional sale or other title retention agreement or
Capital Lease, upon or with respect to any property or asset of such Person
(including in the case of stock, stockholder agreements, voting trust
agreements and all similar arrangements).
"Make-Whole Amount" is defined in Section 8.6.
"Material" means material in relation to the business,
operations, affairs, financial condition, assets, or properties of the
Company and its Restricted Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, affairs, financial condition, assets or
properties of the Company and its Restricted Subsidiaries taken as a whole,
or (b) the ability of the Company to perform its obligations under this
Agreement and the Notes, or (c) the validity or enforceability of this
Agreement or the Notes.
"Memorandum" is defined in Section 5.3.
"Multiemployer Plan" means any Plan that is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"Notes" is defined in Section 1.
"Officer's Certificate" means a certificate of a Senior
Financial Officer or of any other officer of the Company whose
responsibilities extend to the subject matter of such certificate.
"Other Agreements" is defined in Section 2.
"Other Purchasers" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
"Person" means an individual, partnership, corporation,
limited liability company, association, trust, unincorporated organization,
or a government or agency or political subdivision thereof.
"Plan" means an "employee benefit plan" (as defined in section
3(3) of ERISA) that is or, within the preceding five years, has been
established or maintained, or to which contributions are or, within the
preceding five years, have been made or required to be made, by the Company
or any ERISA Affiliate or with respect to which the Company or any ERISA
Affiliate may have any liability.
"property" or "properties" means, unless otherwise
specifically limited, real or personal property of any kind, tangible or
intangible, choate or inchoate.
"QPAM Exemption" means Prohibited Transaction Class Exemption
84-14 issued by the United States Department of Labor.
"Required Holders" means, at any time, the holders of at least
51% in principal amount of the Notes at the time outstanding (exclusive of
Notes then owned by the Company or any of its Subsidiaries or Affiliates).
"Responsible Officer" means any Senior Financial Officer and
any other officer of the Company with responsibility for the administration
of the relevant portion of this agreement.
"Restricted Investments" means any Investment of the Company
and its Restricted Subsidiaries other than:
(i) Investments in Restricted Subsidiaries;
(ii) Investments in a Person which, as a result
thereof, becomes a Restricted Subsidiary;
(iii) Investments in notes receivable maturing in
three years or less (or notes receivable maturing in five years or
less in an aggregate amount not to exceed $20,000,000) from the date
of issuance and arising in connection with sales of products by the
Company and its Restricted Subsidiaries in the ordinary course of
business;
(iv) Investments in:
(A) commercial paper maturing in 270 days
or less from the date of issuance which is rated in one of the
top two rating classifications by at least one nationally
recognized rating agency, or certificates of participation in
loans maturing within one year to issuers whose commercial
paper is so rated;
(B) certificates of deposit or banker's
acceptances maturing within one year from the date of issuance
issued by commercial banks whose long-term debt is rated in
one of the top two rating classifications by at least one
nationally recognized rating agency,
(C) obligations of or fully guaranteed by
the United States of America or an agency thereof maturing
within three years from the date of issuance,
(D) municipal securities maturing within
three years of the date of acquisition that are backed by
letters of credit issued by commercial banks whose long-term
debt is rated in one of the top two rating classifications by
at least one nationally recognized rating agency;
(G) money market instrument programs which
are rated in one of the top two rating classifications by at
least one nationally recognized rating agency and that are
properly classified as current assets in accordance with GAAP;
and
(vi) Investments existing as of the date of
this Agreement which are listed in the attached Schedule B-1.
"Restricted Subsidiary" means any Subsidiary which the Company
has not designated an Unrestricted Subsidiary by notice (including
designation in Schedule 5.4) to the holders of the Notes and which has not
been designated an Unrestricted Subsidiary more than once previously.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Senior Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the Company.
"Subsidiary" means, as to any Person, any corporation,
association or other business entity in which such Person or one or more of
its Subsidiaries or such Person and one or more of its Subsidiaries owns
sufficient equity or voting interests to enable it or them (as a group)
ordinarily, in the absence of contingencies, to elect a majority of the
directors (or Persons performing similar functions) of such entity, and any
partnership or joint venture if more than a 50% interest in the profits or
capital thereof is owned by such Person or one or more of its Subsidiaries or
such Person and one or more of its Subsidiaries (unless such partnership or
joint venture can and does ordinarily take major business actions without the
prior approval of such Person or one or more of its Subsidiaries). Unless
the context otherwise clearly requires, any reference to a "Subsidiary" is a
reference to a Subsidiary of the Company.
"Unrestricted Subsidiary" means any Subsidiary other than a
Restricted Subsidiary.
"Wholly-Owned Restricted Subsidiary" or "Wholly-Owned
Subsidiary" means, at any time, any Restricted Subsidiary or Subsidiary, as
the case may be, one hundred percent (100%) of all of the equity interests
(except directors' qualifying shares) and voting interests of which are owned
by any one or more of the Company and the Company's other Wholly-Owned
Subsidiaries at such time.
SCHEDULE B-1
INVESTMENTS
SEE ATTACHED
SCHEDULE B-1
STEWART & STEVENSON SERVICES, INC. AND SUBSIDIARIES
Investments at Cost as of January 31, 1996
(Dollars in thousands)
Capital Investments
GFI Control Systems, Inc. $1,201
Stewart & Stevenson de Venezuela, S.A. 46
Thomassen Stewart & Stevenson International B.V. 96
Pow-R-Quik 520
Thore, Inc. 1
Project Orange 2,803
2707 North Loop West, Ltd. 1,423
Notes Receivable, not from sales of products 5,980
SCHEDULE 4.9
CHANGES IN CORPORATE STRUCTURE
NONE
SCHEDULE 5.3
DISCLOSURE MATERIALS
NONE
SCHEDULE 5.4
ORGANIZATION AND OWNERSHIP OF
SHARES OF SUBSIDIARIES
SEE ATTACHED
SCHEDULE 5.4
<TABLE>
<CAPTION>
Jurisdiction of Type of
Subsidiary Name Incorporation Ownership Subsidiary
______________ ___________ ________ ________
<S> <C> <C> <C>
C. Jim Stewart & Stevenson, Inc. Delaware 100% by the Company Restricted
Creole Stewart & Stevenson, Inc. Delaware 100% by the Company Restricted
Cypress Acquisition, Inc. Delaware 100% by the Company Restricted
Cypress Cogeneration Company California 100% by Cypress Acquisition, Inc. Restricted
Diboll Cogeneration Associates, Limited Texas Sole General Partner-Stewart Restricted
& Stevenson (Diboll)
Cogeneration, Inc.
Machinery Acceptance Corporation Texas 100% by the Company Restricted
S&S Domestic International Sales Corp. Delaware 100% by the Company Restricted
S&S (Diboll) Cogeneration Inc. Delaware 100% by the Company Restricted
S&S Trust Pennsylvania 100% by Stewart & Restricted
Stevenson Holdings, Inc.
Stewart & Stevenson de las Americas, Inc. Delaware 100% by the Company Restricted
Stewart & Stevenson Holdings, Inc. Delaware 100% by the Company Restricted
Stewart & Stevenson International, Inc. Delaware 100% by the Company Restricted
Stewart & Stevenson, Ltd. Texas Sole General Partner--C. Jim Restricted
Stewart & Stevenson, Inc.
Stewart & Stevenson Operations, Inc. Delaware 100% by the Company Restricted
Stewart & Stevenson Overseas, Inc. Texas 100% by the Company Restricted
Stewart & Stevenson Power, Inc. Delaware 100% by the Company Restricted
Stewart & Stevenson Realty Corporation Texas 100% by the Company Restricted
Stewart & Stevenson Technical Services, Delaware 100% by the Company Restricted
Inc.
Stewart & Stevenson Transportation, Inc. Texas 100% by the Company Restricted
Stewart & Stevenson Vehicle Services, Delaware 100% by the Company Restricted
Inc.
Tokumei Kumiai Holdings, Inc. Delaware 100% by the Company Restricted
FOREIGN SUBSIDIARIES:
_______________________
CPS International, Inc. Panama 100% by Creole Stewart & Restricted
Stevenson, Inc.
Creole (Nigeria) Limited Nigeria Class A and Class B - 100% Restricted
by CPS International, Inc.
GFI Control Systems, Inc. Ontario 50% by the Company Unrestricted
50% by Devtek Corporation
(Canada)
Proluz de Honduras, S.A. Honduras 100% by Stewart & Stevenson Restricted
Operations, Inc.
Proluz Sociedad Anonima Guatemala 1 share - Mike Kalmes Restricted
4,999 shares - Stewart &
Stevenson Operations, Inc.
Stewart & Stevenson International Sales, Barbados 100% by the Company Restricted
Inc.
Stewart & Stevenson de Venezuela, S.A. Venezuela 17% by Investors Invegg Unrestricted
C.A.--5.7% by
Representaciones 4003,C.A.--
16^ by Marlago--61.25% by
S&S--.05% by Aura Alacayo
Stewart & Stevenson Operations Nigeria 100% by Stewart & Restricted
(Nigeria) Ltd. Stevenson Operations, Inc.
Stewart & Stevenson Technical Services Japan 51% by Stewart & Stevenson Restricted
Japan, Ltd. Technical Services, Inc.--49%
by Sumitomo
Stewart & Stevenson (U.K.) Limited Scotland 100% by the Company Restricted
Thomassen Stewart & Stevenson Rheden, The 50% by the Company--50% Unrestricted
International B.V. Netherlands by Thomassen International
</TABLE>
SCHEDULE 5.8
CERTAIN LITIGATION
See Attached
SCHEDULE 5.8
STEWART & STEVENSON SERVICES, INC. AND SUBSIDIARIES
Certain Litigation
The following cases relate to the "Peace Shield" litigation:
Cause No. 01-91-693-CV John Runion v. Stewart & Stevenson Services,
Inc., CRS Sirrine, Inc., Metcalf & Eddy, Inc., and CRSS + Metcalf &
Eddy Joint Venture.
Cause No. H-93-0021 United States of America ex rel John Runion v.
Stewart & Stevenson Services, Inc.
Cause No. H-95-1491 C. Daniel Chill v. Stewart & Stevenson Services,
Inc., et al.
Criminal No. H-95-93 United States of America v. Stewart & Stevenson
Services, Inc., Bob H. O'Neal, William "Bill" McFarland, Paul Edson,
Lyman Hardy and John Runion.
Additional disclosed cases are included on the following pages.
Cause No., 9004285; Serv-Tech, Inc. V. Stewart & Stevenson, Inc., Ohmstede,
Inc., Ohmstede Mechanical Services, Inc., Robert G. Wetzel, Gene P.
Livingston, James B. Jeffrey and Thomas B. Boisture; In the District Court of
Harris County, Texas, 125th Judicial District
______________________________________________________________________________
Suit for breach of a secrecy agreement, misappropriation of trade secrets and
misappropriation of confidential information. After trial to a jury, a
verdict was returned finding that S&S breached the secrecy agreement,
misappropriated confidential information and conspired to misappropriate
confidential information. Judgment for $17.5 million against S&S and $12.5
million against OMSI and Ohmstede was signed on August 21, 1991. OMSI and
Ohmstede entered into a settlement agreement with Serv-Tech that provided for
the payment of at least $3.0 million in damages and $1.25 million in legal
fees and additional payments of up to $3.25 million depending on the outcome
of the appeal. The Fourteenth Court of Appeals reversed and remanded because
the damages submission failed to segregate past from future and contract from
tort damages. Petition for Writ of Certiori was denied.
______________________________________________________________________________
Cause No. 93-1090-CIV-ORL-18 National Railroad Passenger Corporation, et al.
V. Rountree Transport and Rigging, Inc., et al. In the United States District
Court, Middle District of Florida, Orlando Division
______________________________________________________________________________
This case consolidates the claims of the passengers, railroad employees and
others arising from the collision between a train operated by National over
tracks owned by CSX that and a turbine generator set owned by Kissimmee that
was being transported under a contract between S&S and Woko over a railroad
crossing owned by FMPA, designed by Black and under the control of FHP by a
truck owned by Rountree and driven by Crain. Each of the plaintiffs allege
that the defendants were negligent in the transportation of the turbine
generator. The cases consolidated with this case are: Bedgood (94-506-CIV-
ORL-18); American Home (94-976-CIV-ORL-18); Thomas (95-252-CIV-ORL-18);
Ebinger (95-1347-CIV-ORL-18); Bratt (95-361-ORL-18); Caming (95-241-CIV-ORL-
18); Manning (95-436-CIV-ORL-18); Gumina (95-723-CIV-ORL-18); and Mango (95-
742-CIV-ORL-18).
______________________________________________________________________________
Case No. 6655436; Gilfred J. Vickers v. Stewart & Stevenson Services, Inc.,
Ronald Stutesman, Charles Upton, Pete Watson, et al.; In the Court of Appeal,
State of California, Fourth Appellate District, Division One
______________________________________________________________________________
Vickers was terminated for insubordination when he refused to attend a meeting
in Bakersfield. Vickers sued for age discrimination, disability
discrimination and breach of implied and oral contracts of employment. S&S
and the individuals counter-claimed for invasion of privacy in connection with
the unauthorized taping of a telephone call. Judgment for $3.45 million was
entered on , 1994. The counter-claim was dismissed on motion for
directed verdict. S&S filed its notice of appeal on September 9, 1994.
Vickers filed a cross-appeal on September 27, 1994.
______________________________________________________________________________
Cause No. 95-39494; Jesus Herrera v. Exel Logistics, Inc., Wingfoot
Enterprises, Inc. D/b/a Labor World of Houston and Stewart & Stevenson
Services, Inc.; In the District Court of Harris County, Texas, 215th Judicial
District.
______________________________________________________________________________
Herrera was working between two rail cars. Herrera claims that a RailKing
unexpectedly moved causing his right arm to be caught between the couplings
and resulting in a traumatic amputation. Herrera alleges that the RailKing
moved because of a defective condition, design, manufacture or assembly by
S&S. Herrera further alleges that his injuries were caused by the negligent
and grossly negligent acts of all defendants.
______________________________________________________________________________
Cause No. 95-158-CIV-ORL-22; Stephen Snell v. Stant Manufacturing Inc.,
Aluminum Specialty Company of Louisiana, Inc., Stewart & Stevenson Services,
Inc., Swift Ships, Inc. And Joseph L. Dombrowski; In the United States
District Court, Middle District of Florida, Orlando Division
______________________________________________________________________________
Snell was a crewman on the M/V Viper, a yatch manufactured by Swift with S&S
engines. After running aground, the captain sent Snell to the engine room to
clean the raw water strainers. While in the engine room, the expansion tank
exploded burning Snell over 80% of his body. Snell sues Stant (manufacturer
of the expansion tank cap), Aluminum Specialty (manufacturer of the expansion
tank), S&S (manufacturer of the marine engines) and Swift (manufacturer of the
vessel) for stict liability in tort, failure to warn and negligence. Snell
sues Dombrowski for maintenance and cure, unseaworthiness and failure to
exercise reasonable care under the Jones Act.
______________________________________________________________________________
Cause No. 3:95-CV-344-D; John D. Stephens, Inc. V. Trencor-Jetco, Inc. V.
Caterpillar, Inc., Smith Detroit Diesel/Allison, Inc., Stewart & Stevenson
Power, Inc. and Darr Equipment Company; In the United States District Court,
Northern District of Texas, Dallas Division
______________________________________________________________________________
Stephens purchased a specialized trencher from Trencor to perform a pipe line
project. Trenco designed the equipment using an Allison transmission that was
acquired from S&S (probably not from Power) after GM and S&S reviewed the
application. Stephens has sued Trencor for breach of express and implied
warranties. Trencor has emplead S&S and others for breach of express and
implied warranties and negligent misrepresentation.
SCHEDULE 5.15
EXISTING INDEBTEDNESS
SEE ATTACHED
SCHEDULE 5.15
STEWART & STEVENSON SERVICES, INC. AND SUBSIDIARIES
Outstanding Indebtedness as of January 31, 1996
(Dollars in thousands)
Revolving credit Notes due December 31, 2000 at various
rates based on a spread over Eurodollar rates payable to
Texas Commerce Bank, National Association, NationsBank of
Texas, National Association, ABN AMRO Bank, N.V., Houston
Agency, Bank of America Illinois, The Bank of New York and
PNC Bank, National Association
$200,000
Senior Note at 10.2% due in annual installments of $1,000
payable to the Variable Annuity Life Insurance Company 3,000
Short-term notes payable at various money market rates to
commerical banks ($185,000 in uncommitted facilities of
which $153,000 was outstanding as of April 10, 1996) 65,000
Note payable due monthly to 1988 by 2707 North Loop
West, Ltd to Chemical Bank secured by an office
building and parking garage (nonrecourse to Stewart &
Stevenson Services, Inc. And Subsidiaries) 8,900
EXHIBIT 1-A
[FORM OF SERIES A NOTE]
STEWART & STEVENSON SERVICES, INC.
6.72% SERIES A SENIOR NOTE
DUE MAY 30, 1999
No. A-[__] [Date]
$[_______] PPN 860342 C@ 1
FOR VALUE RECEIVED, the undersigned, STEWART & STEVENSON
SERVICES, INC. (herein called the "Company"), a corporation organized and
existing under the laws of the State of Texas, promises to pay to [
], or registered assigns, the principal sum of ____________ Dollars ($[
]) on May 30, 1999, with interest (computed on the basis of a 360-day year of
twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.72%
per annum from the date hereof, payable semiannually on November 30 and May
30 in each year, commencing with the November 30 next succeeding the date
hereof, until the principal hereof shall have become due and payable, and
(b) to the extent permitted by law on any overdue payment (including any
overdue prepayment) of principal, any overdue payment of interest and any
overdue payment of any Make-Whole Amount (as defined in the Note Purchase
Agreements referred to below), payable semiannually as aforesaid (or, at the
option of the registered holder hereof, on demand), at a rate per annum from
time to time equal to the greater of (i) 8.72% or (ii) 2% over the rate of
interest publicly announced by Bank of America Illinois from time to time in
Chicago, Illinois as its "base" or "prime" rate, but in no event shall such
rate exceed the maximum nonusurious interest rate, if any, that at any time
or from time to time may be contracted for, taken, charged or received on the
Notes under the law of any jurisdiction whose laws may be mandatorily
applicable to the holder of a Note.
Payments of principal of, interest on and any Make-Whole
Amount with respect to this Note are to be made in lawful money of the United
States of America at the principal office of the Company in Houston, Texas or
at such other place as the Company shall have designated by written notice to
the holder of this Note as provided in the Note Purchase Agreements referred
to below.
This Note is one of a series of Senior Notes (herein called
the "Notes") issued pursuant to separate Note Purchase Agreements, dated as
of May 30, 1996 (as from time to time amended, the "Note Purchase
Agreements"), between the Company and the respective Purchasers named therein
and is entitled to the benefits thereof. Each holder of this Note will be
deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase Agreements and (ii)
to have made the representation set forth in Section 6.2 of the Note Purchase
Agreements.
This Note is a registered Note and, as provided in the Note
Purchase Agreements, upon surrender of this Note for registration of
transfer, duly endorsed, or accompanied by a written instrument of transfer
duly executed, by the registered holder hereof or such holder's attorney duly
authorized in writing, a new Note for a like principal amount will be issued
to, and registered in the name of, the transferee. Prior to due presentment
for registration of transfer, the Company may treat the person in whose name
this Note is registered as the owner hereof for the purpose of receiving
payment and for all other purposes, and the Company will not be affected by
any notice to the contrary.
This Note is subject to optional prepayment, in whole or from
time to time in part, at the times and on the terms specified in the Note
Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase
Agreements, occurs and is continuing, the principal of this Note may be
declared or otherwise become due and payable in the manner, at the price
(including any applicable Make-Whole Amount to the extent permitted by
applicable law and provided such amount does not exceed the maximum
nonusurious interest rate, if any, that at any time or from time to time may
be contracted for, taken, charged or received on the Notes under the law of
any jurisdiction whose laws may be mandatorily applicable to the holder of a
Note) and with the effect provided in the Note Purchase Agreements.
This Note shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the law of the State of
New York excluding choice-of-law principles of the law of such State that
would require the application of the laws of a jurisdiction other than such
State.
STEWART & STEVENSON
SERVICES, INC.
By:
Robert L. Hargrave, Chief Executive Officer
EXHIBIT 1-B
[FORM OF SERIES B NOTE]
STEWART & STEVENSON SERVICES, INC.
7.03% SERIES B SENIOR NOTE
DUE MAY 30, 2001
No. B-[__] [Date]
$[______] PPN 860342 D* 2
FOR VALUE RECEIVED, the undersigned, STEWART & STEVENSON
SERVICES, INC. (herein called the "Company"), a corporation organized and
existing under the laws of the State of Texas, promises to pay to [
], or registered assigns, the principal sum of ____________ Dollars ($[
]) on May 30, 2001, with interest (computed on the basis of a 360-day year of
twelve 30-day months) (a) on the unpaid balance thereof at the rate of 7.03%
per annum from the date hereof, payable semiannually on November 30 and May
30 in each year, commencing with the November 30 next succeeding the date
hereof, until the principal hereof shall have become due and payable, and
(b) to the extent permitted by law on any overdue payment (including any
overdue prepayment) of principal, any overdue payment of interest and any
overdue payment of any Make-Whole Amount (as defined in the Note Purchase
Agreements referred to below), payable semiannually as aforesaid (or, at the
option of the registered holder hereof, on demand), at a rate per annum from
time to time equal to the greater of (i) 9.03% or (ii) 2% over the rate of
interest publicly announced by Bank of America Illinois from time to time in
Chicago, Illinois as its "base" or "prime" rate, but in no event shall such
rate exceed the maximum nonusurious interest rate, if any, that at any time
or from time to time may be contracted for, taken, charged or received on the
Notes under the law of any jurisdiction whose laws may be mandatorily
applicable to the holder of a Note.
Payments of principal of, interest on and any Make-Whole
Amount with respect to this Note are to be made in lawful money of the United
States of America at the principal office of the Company in Houston, Texas or
at such other place as the Company shall have designated by written notice to
the holder of this Note as provided in the Note Purchase Agreements referred
to below.
This Note is one of a series of Senior Notes (herein called
the "Notes") issued pursuant to separate Note Purchase Agreements, dated as
of May 30, 1996 (as from time to time amended, the "Note Purchase
Agreements"), between the Company and the respective Purchasers named therein
and is entitled to the benefits thereof. Each holder of this Note will be
deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase Agreements and (ii)
to have made the representation set forth in Section 6.2 of the Note Purchase
Agreements.
This Note is a registered Note and, as provided in the Note
Purchase Agreements, upon surrender of this Note for registration of
transfer, duly endorsed, or accompanied by a written instrument of transfer
duly executed, by the registered holder hereof or such holder's attorney duly
authorized in writing, a new Note for a like principal amount will be issued
to, and registered in the name of, the transferee. Prior to due presentment
for registration of transfer, the Company may treat the person in whose name
this Note is registered as the owner hereof for the purpose of receiving
payment and for all other purposes, and the Company will not be affected by
any notice to the contrary.
This Note is subject to optional prepayment, in whole or from
time to time in part, at the times and on the terms specified in the Note
Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase
Agreements, occurs and is continuing, the principal of this Note may be
declared or otherwise become due and payable in the manner, at the price
(including any applicable Make-Whole Amount to the extent permitted by
applicable law and provided such amount does not exceed the maximum
nonusurious interest rate, if any, that at any time or from time to time may
be contracted for, taken, charged or received on the Notes under the law of
any jurisdiction whose laws may be mandatorily applicable to the holder of a
Note) and with the effect provided in the Note Purchase Agreements.
This Note shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the law of the State of
New York excluding choice-of-law principles of the law of such State that
would require the application of the laws of a jurisdiction other than such
State.
STEWART & STEVENSON
SERVICES, INC.
By:
Robert L. Hargrave, Chief Executive Officer
EXHIBIT 1-C
[FORM OF SERIES C NOTE]
STEWART & STEVENSON SERVICES, INC.
7.29% SERIES C SENIOR NOTE
DUE MAY 30, 2003
No. C-[__] Date]
$[_______] PPN 860342 D@ 0
FOR VALUE RECEIVED, the undersigned, STEWART & STEVENSON
SERVICES, INC. (herein called the "Company"), a corporation organized and
existing under the laws of the State of Texas, promises to pay to [
], or registered assigns, the principal sum of ____________ Dollars ($[
]) on May 30, 2003, with interest (computed on the basis of a 360-day year of
twelve 30-day months) (a) on the unpaid balance thereof at the rate of 7.29%
per annum from the date hereof, payable semiannually on November 30 and May
30 in each year, commencing with the November 30 next succeeding the date
hereof, until the principal hereof shall have become due and payable, and
(b) to the extent permitted by law on any overdue payment (including any
overdue prepayment) of principal, any overdue payment of interest and any
overdue payment of any Make-Whole Amount (as defined in the Note Purchase
Agreements referred to below), payable semiannually as aforesaid (or, at the
option of the registered holder hereof, on demand), at a rate per annum from
time to time equal to the greater of (i) 9.29% or (ii) 2% over the rate of
interest publicly announced by Bank of America Illinois from time to time in
Chicago, Illinois as its "base" or "prime" rate, but in no event shall such
rate exceed the maximum nonusurious interest rate, if any, that at any time
or from time to time may be contracted for, taken, charged or received on the
Notes under the law of any jurisdiction whose laws may be mandatorily
applicable to the holder of a Note.
Payments of principal of, interest on and any Make-Whole
Amount with respect to this Note are to be made in lawful money of the United
States of America at the principal office of the Company in Houston, Texas or
at such other place as the Company shall have designated by written notice to
the holder of this Note as provided in the Note Purchase Agreements referred
to below.
This Note is one of a series of Senior Notes (herein called
the "Notes") issued pursuant to separate Note Purchase Agreements, dated as
of May 30, 1996 (as from time to time amended, the "Note Purchase
Agreements"), between the Company and the respective Purchasers named therein
and is entitled to the benefits thereof. Each holder of this Note will be
deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase Agreements and (ii)
to have made the representation set forth in Section 6.2 of the Note Purchase
Agreements.
This Note is a registered Note and, as provided in the Note
Purchase Agreements, upon surrender of this Note for registration of
transfer, duly endorsed, or accompanied by a written instrument of transfer
duly executed, by the registered holder hereof or such holder's attorney duly
authorized in writing, a new Note for a like principal amount will be issued
to, and registered in the name of, the transferee. Prior to due presentment
for registration of transfer, the Company may treat the person in whose name
this Note is registered as the owner hereof for the purpose of receiving
payment and for all other purposes, and the Company will not be affected by
any notice to the contrary.
This Note is subject to optional prepayment, in whole or from
time to time in part, at the times and on the terms specified in the Note
Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase
Agreements, occurs and is continuing, the principal of this Note may be
declared or otherwise become due and payable in the manner, at the price
(including any applicable Make-Whole Amount to the extent permitted by
applicable law and provided such amount does not exceed the maximum
nonusurious interest rate, if any, that at any time or from time to time may
be contracted for, taken, charged or received on the Notes under the law of
any jurisdiction whose laws may be mandatorily applicable to the holder of a
Note) and with the effect provided in the Note Purchase Agreements.
This Note shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the law of the State of
New York excluding choice-of-law principles of the law of such State that
would require the application of the laws of a jurisdiction other than such
State.
STEWART & STEVENSON
SERVICES, INC.
By:
Robert L. Hargrave, Chief Executive Officer
EXHIBIT 1-D
[FORM OF SERIES D NOTE]
STEWART & STEVENSON SERVICES, INC.
7.38% SERIES D SENIOR NOTE
DUE MAY 30, 2006
No. D-[__] [Date]
$[_______] PPN 860342 D# 8
FOR VALUE RECEIVED, the undersigned, STEWART & STEVENSON
SERVICES, INC. (herein called the "Company"), a corporation organized and
existing under the laws of the State of Texas, promises to pay to [
], or registered assigns, the principal sum of ___________ Dollars ($[
]) on May 30, 2006, with interest (computed on the basis of a 360-day year of
twelve 30-day months) (a) on the unpaid balance thereof at the rate of 7.38%
per annum from the date hereof, payable semiannually on November 30 and May
30 in each year, commencing with the November 30 next succeeding the date
hereof, until the principal hereof shall have become due and payable, and
(b) to the extent permitted by law on any overdue payment (including any
overdue prepayment) of principal, any overdue payment of interest and any
overdue payment of any Make-Whole Amount (as defined in the Note Purchase
Agreements referred to below), payable semiannually as aforesaid (or, at the
option of the registered holder hereof, on demand), at a rate per annum from
time to time equal to the greater of (i) 9.38% or (ii) 2% over the rate of
interest publicly announced by Bank of America Illinois from time to time in
Chicago, Illinois as its "base" or "prime" rate, but in no event shall such
rate exceed the maximum nonusurious interest rate, if any, that at any time
or from time to time may be contracted for, taken, charged or received on the
Notes under the law of any jurisdiction whose laws may be mandatorily
applicable to the holder of a Note.
Payments of principal of, interest on and any Make-Whole
Amount with respect to this Note are to be made in lawful money of the United
States of America at the principal office of the Company in Houston, Texas or
at such other place as the Company shall have designated by written notice to
the holder of this Note as provided in the Note Purchase Agreements referred
to below.
This Note is one of a series of Senior Notes (herein called
the "Notes") issued pursuant to separate Note Purchase Agreements, dated as
of May 30, 1996 (as from time to time amended, the "Note Purchase
Agreements"), between the Company and the respective Purchasers named therein
and is entitled to the benefits thereof. Each holder of this Note will be
deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase Agreements and (ii)
to have made the representation set forth in Section 6.2 of the Note Purchase
Agreements.
This Note is a registered Note and, as provided in the Note
Purchase Agreements, upon surrender of this Note for registration of
transfer, duly endorsed, or accompanied by a written instrument of transfer
duly executed, by the registered holder hereof or such holder's attorney duly
authorized in writing, a new Note for a like principal amount will be issued
to, and registered in the name of, the transferee. Prior to due presentment
for registration of transfer, the Company may treat the person in whose name
this Note is registered as the owner hereof for the purpose of receiving
payment and for all other purposes, and the Company will not be affected by
any notice to the contrary.
This Note is subject to optional prepayment, in whole or from
time to time in part, at the times and on the terms specified in the Note
Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase
Agreements, occurs and is continuing, the principal of this Note may be
declared or otherwise become due and payable in the manner, at the price
(including any applicable Make-Whole Amount to the extent permitted by
applicable law and provided such amount does not exceed the maximum
nonusurious interest rate, if any, that at any time or from time to time may
be contracted for, taken, charged or received on the Notes under the law of
any jurisdiction whose laws may be mandatorily applicable to the holder of a
Note) and with the effect provided in the Note Purchase Agreements.
This Note shall be construed and enforced in accordance with,
and the rights of the parties shall be governed by, the law of the State of
New York excluding choice-of-law principles of the law of such State that
would require the application of the laws of a jurisdiction other than such
State.
STEWART & STEVENSON
SERVICES, INC.
By: Robert L. Hargrave, Chief Executive Officer
EXHIBIT 4.4(a)
FORM OF OPINION OF SPECIAL COUNSEL
TO THE COMPANY
The opinion of Vinson & Elkins, counsel for the Company, shall be to the
effect that:
1. Each of the Company and each Subsidiary is a corporation duly
incorporated, validly existing in good standing under the laws of its
jurisdiction of incorporation, and each has all requisite corporate power and
authority to own and operate its properties, to carry on its business as now
conducted, and, in the case of the Company, to enter into and perform under
the Agreement and the Other Agreements and to issue and sell the Notes.
2. The Agreement, the Other Agreements and the Notes have been
duly authorized by proper corporate action on the part of the Company, have
been duly executed and delivered by an authorized officer of the Company, and
constitute the legal, valid and binding agreements of the Company,
enforceable in accordance with their terms, except to the extent that
enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws of general application relating to
or affecting the enforcement of the rights of creditors or by equitable
principles, regardless of whether enforcement is sought in a proceeding in
equity or at law.
3. The offering, sale and delivery of the Notes do not require
the registration of the Notes under the Securities Act of 1933, as amended,
or the qualification of an indenture under the Trust Indenture Act of 1939,
as amended.
4. No authorization, approval or consent of any governmental or
regulatory body is necessary or required in connection with the execution and
delivery by the Company of the Agreement, the Other Agreements or the
offering, issuance and sale by the Company of the Notes, and no designation,
filing, declaration, registration and/or qualification with any governmental
or regulatory body is required in connection with the offer, issuance and
sale of the Notes by the Company.
5. The issuance and sale of the Notes by the Company, the
performance of the terms and conditions of the Notes and the Agreement and
the Other Agreements and the execution and delivery of the Agreement and the
Other Agreements do not conflict with, or result in any breach or violation
of any of the provisions of, or constitute a default under, or result in the
creation or imposition of any Lien upon the property of the Company or any
Subsidiary pursuant to the provisions of (i) the Certificate of Incorporation
or By-laws of the Company or any Subsidiary, (ii) any loan agreement to which
the Company or any Subsidiary is a party or by which any of them or their
property is bound, (iii) any other agreement or instrument known to such
counsel to which the Company or any Subsidiary is a party or by which any of
them or their property is bound, (iv) any law (including specifically, Texas
usury laws) or regulation applicable to the Company, or (v) any order, writ,
injunction or decree of any court or governmental authority applicable to the
Company.
6. All of the issued and outstanding shares of capital stock of
each Restricted Subsidiary have been duly and validly issued, are fully paid
and nonassessable and, except as set forth in Schedule 5.4 are owned by the
Company free and clear of any pledge or, to the knowledge of such counsel,
any other Lien.
7. Neither the Company nor any Subsidiary is (i) a "public
utility company" or a "holding company," or an "affiliate" or a "subsidiary
company" of a "holding company," or an "affiliate" of such a "subsidiary
company," as such terms are defined in the Public Utility Holding Company Act
of 1935, as amended, (ii) a "public utility" as defined in the Federal Power
Act, as amended, or (iii) an "investment company" or an "affiliated person"
thereof, as such terms are defined in the Investment Company Act of 1940, as
amended.
8. The issuance of the Notes and the intended use of the proceeds
of the sale of the Notes do not violate or conflict with Regulation G, T, U
or X of the Board of Governors of the Federal Reserve System.
9. Except as disclosed in Schedule 5.8, there are no actions,
suits or proceedings pending or, to the best of such counsel's knowledge,
threatened against, or affecting the Company or any Subsidiary, at law or in
equity or before or by any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, which are likely to have a Material Adverse Effect.
10. The choice of law made in the Agreement, the Other Agreements
and the Notes is enforceable under New York and Texas law.
With respect to matters of fact on which such opinion is based,
Vinson & Elkins shall be entitled to rely on appropriate certificates of
public officials and officers of the Company and with respect to matters
governed by the laws of any jurisdiction other than the United States of
America and the laws of the States of Delaware, New York and Texas, such
counsel may rely upon the opinions of counsel deemed (and stated in their
opinion to be deemed) by them to be competent and reliable.
EXHIBIT 4.4(b)
FORM OF OPINION OF SPECIAL COUNSEL
TO THE PURCHASERS
The opinion of Gardner, Carton & Douglas, special counsel for the
Purchasers, shall be to the effect that:
1. The Company is a corporation organized and validly existing in
good standing under the laws of the State of Texas, with all requisite
corporate power and authority to enter into the Agreement and to issue and
sell the Notes.
2. The Agreement and the Notes have been duly authorized by
proper corporate action on the part of the Company, have been duly executed
and delivered by an authorized officer of the Company, and constitute the
legal, valid and binding agreements of the Company, enforceable in accordance
with their terms, except to the extent that enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws of general application relating to or affecting the enforcement
of the rights of creditors or by equitable principles, regardless of whether
enforcement is sought in a proceeding in equity or at law.
3. Based upon the representations set forth in the Agreement, the
offering, sale and delivery of the Notes do not require the registration of
the Notes under the Securities Act of 1933, as amended, nor the qualification
of an indenture under the Trust Indenture Act of 1939, as amended.
4. The issuance and sale of the Notes and compliance with the
terms and provisions of the Notes and the Agreement will not conflict with or
result in any breach of any of the provisions of the Certificate of
Incorporation or By-Laws of the Company.
5. No approval, consent or withholding of objection on the part
of, or filing, registration or qualification with, any governmental body,
Federal or state, is necessary in connection with the execution and delivery
of the Note Agreement or the Notes.
The opinion of Gardner, Carton & Douglas also shall state that the legal
opinion of Vinson & Elkins, counsel for the Company, delivered to you
pursuant to the Agreement, is satisfactory in form and scope to Gardner,
Carton & Douglas, and, in its opinion, the Purchasers and it are justified in
relying thereon. Gardner, Carton & Douglas may rely as to matters of New
York and Texas law on the opinion of Vinson & Elkins.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTANS 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> 6-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-END> JUL-31-1996
<CASH> 6,402
<SECURITIES> 0
<RECEIVABLES> 215,915
<ALLOWANCES> (1,886)
<INVENTORY> 727,178
<CURRENT-ASSETS> 949,236
<PP&E> 250,593
<DEPRECIATION> (127,587)
<TOTAL-ASSETS> 1,109,363
<CURRENT-LIABILITIES> 320,397
<BONDS> 295,750
<COMMON> 163,718
0
0
<OTHER-SE> 302,076
<TOTAL-LIABILITY-AND-EQUITY> 1,109,363
<SALES> 460,266
<TOTAL-REVENUES> 460,266
<CGS> 383,652
<TOTAL-COSTS> 383,652
<OTHER-EXPENSES> 78,272
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,778
<INCOME-PRETAX> (1,658)
<INCOME-TAX> (649)
<INCOME-CONTINUING> (974)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (974)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
