EXHIBIT 10.4

 

 

STEWART & STEVENSON

 

SUPPLEMENTAL RETIREMENT PLAN

 

 

Effective as of July 1, 2003

 

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TABLE OF CONTENTS

 

ARTICLE

 

I.

Definitions and Construction

 

 

 

 

II.

Participation

 

 

 

 

III.

Benefits

 

 

 

 

IV.

Deemed Investment of Accounts

 

 

 

 

V.

Determination of Vested Interest and Forfeitures

 

 

 

 

VI.

Benefit Payments

 

 

 

 

VII.

Administration of the Plan

 

 

 

 

VIII.

Nature of the Plan

 

 

 

 

IX.

Miscellaneous

 

 

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STEWART & STEVENSON

 

SUPPLEMENTAL RETIREMENT PLAN

 

W I T N E S S E T H :

 

WHEREAS, Stewart & Stevenson Services, Inc. (the “Company”) desires to establish
the Stewart & Stevenson Supplemental Retirement Plan (the “Plan”) to help
provide a more adequate retirement benefit for certain key employees of the
Company and its Affiliates;

 

NOW, THEREFORE, the Plan is hereby adopted effective as of July 1, 2003.

 

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I.

 

Definitions and Construction

 

1.1          Definitions.  Where the following words and phrases appear in the
Plan, they shall have the respective meanings set forth below, unless their
context clearly indicates to the contrary.

 

Account:  A Member’s bookkeeping account and the amounts credited thereto from
time to time.

 

Administrative Committee:  The Administrative Committee appointed by the Board
of Directors of the Company to administer the Company’s benefit plans.

 

Affiliate:  Any entity that is treated as being one employer with the Company
under section 414 of the Code.

 

Change of Control:  A Change of Control as defined in the Company’s stock option
plan.

 

Code:  The Internal Revenue Code of 1986, as amended.

 

Company: Stewart & Stevenson Services, Inc.

 

Compensation:  With respect to a Member, compensation as defined in the Savings
Plan, but including any elective deferrals made under a nonqualified deferred
compensation plan and determined without regard to any limits on such
compensation pursuant to Code section 401(a)(17); provided, however, in no event
shall Compensation include any amount payable prior to the effective date of the
Plan or for any period thereafter during which the Member either is not an
Eligible Employee or an active Member.

 

Compensation Committee:  The Compensation Committee of the Board of Directors of
the Company.

 

Disability:   A Member shall be considered totally and permanently disabled if
such Member is eligible for and receiving Social Security disability under the
federal Social Security Act.

 

Eligible Employee:  An employee of an Employer who is a member of a select group
of management or highly compensated employees.

 

Employer:  The Company and any other Affiliate that adopts the Plan pursuant to
the provisions of Section 2.3.

 

Employer Contributions:  Notional contributions “made” by the Employer on a
Member’s behalf pursuant to Section 3.1.

 

Funds:  The investment fund(s) designated from time to time for the deemed
investment of Accounts pursuant to Article IV.

 

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Member:  Each Eligible Employee who has become a Member pursuant to Article II
of this Plan.

 

Plan:  The Stewart & Stevenson Supplemental Retirement Plan, as amended from
time to time.

 

Plan Year:  The calendar year, however, the first year shall be a partial year
beginning July 1, 2003.

 

Retirement:  The Member’s Termination of Service, other than due to death or
Disability, (i) on or after age 65, or (ii) with the express written consent of
the Administrative Committee, on or after age 55 and the completion of five
years of Vesting Service.

 

Savings Plan:  The Stewart & Stevenson 401(k) Savings Plan, as amended from time
to time.

 

Termination of Service:  The termination of a Member’s employment with the
Employer and all Affiliates for any reason whatsoever.

 

Trust:  The trust, if any, established under the Trust Agreement.

 

Trust Agreement:  The agreement, if any, entered into between the Company and
the Trustee pursuant to Article X.

 

Trust Fund:  The funds and properties held pursuant to the provisions of the
Trust Agreement, together with all income, profits and increments thereto.

 

Trustee:  The trustee or trustees qualified and acting under the Trust Agreement
at any time.

 

Vested Interest:  The portion of a Member’s Account which, pursuant to the Plan,
is nonforfeitable.

 

Vesting Service:  The Vesting Service such Member has or would have under the
Savings Plan.

 

1.2          Number and Gender.  Wherever appropriate herein, words used in the
singular shall be considered to include the plural and words used in the plural
shall be considered to include the singular.  The masculine gender, where
appearing in the Plan, shall be deemed to include the feminine gender.

 

1.3          Headings.  The headings of Articles and Sections herein are
included solely for convenience, and if there is any conflict between such
headings and the text of the Plan, the text shall control.

 

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II.

Participation

 

2.1          Participation.

 

(a)           The Compensation Committee, in its sole discretion, shall select
and notify those Eligible Employees who shall be Members; provided, however,
Eligible Employees who were members of the Company’s Supplemental Executive
Retirement Plan on June 30, 2003 automatically shall be Members on the Plan’s
effective date.

 

(b)           Subject to the provisions of Section 2.2, a Member shall remain
eligible to receive an allocation of Employer Contributions for each Plan Year
following his commencement of participation in the Plan so long as the Member
remains an Eligible Employee.

 

2.2          Cessation of Active Participation.  Notwithstanding any provision
herein to the contrary, an Eligible Employee who has become a Member of the Plan
shall cease to receive an allocation of Employer Contributions effective as of
any date designated by the Compensation Committee or the date he ceases to be an
Eligible Employee.  Any such Compensation Committee action shall be communicated
to the affected Member prior to the effective date of such action.  Such an
individual may again become an active Member beginning as of any date selected
by the Compensation Committee in its sole discretion, provided he is an Eligible
Employee on such date.

 

2.3          Adopting Affiliates.  It is contemplated that other entities may
adopt this Plan in the future and thereby become an Employer.  Any such entity,
whether or not presently existing, may become a party hereto by appropriate
action of its officers and the approval of the Administrative Committee;
provided, however, that such entity must be an Affiliate.  The provisions of the
Plan shall apply separately and equally to each Employer and its employees in
the same manner as is expressly provided for the Company and its employees,
except that the power to appoint or otherwise affect the Administrative
Committee and the Trustee and the power to amend or terminate the Plan or amend
the Trust Agreement shall be exercised by the Board of Directors of the Company
alone.  Any Employer may, by appropriate action of its officers without the need
for approval of its board of directors (or noncorporate counterpart), terminate
its participation in the Plan.  Moreover, the Administrative Committee may, in
its discretion, terminate an Employer’s Plan participation at any time.  Any
Employer that ceases to be an Affiliate shall automatically terminate its
participation on such date.

 

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III.

Benefits

 

3.1          Employer Contributions for Members.

 

(a)           As of the end of each Plan Year, the Employers shall credit an
eligible Member’s Account with an Employer Contribution in an amount determined
by the following formula:

 

Member’s Age as of Applicable Plan Year End

 

Percentage of Compensation

 

 

 

 

 

under age 30

 

0

%

30-39

 

1.5

%

40-49

 

3.5

%

50-59

 

7.0

%

60 and older

 

15.0

%

 

(b)           Subject to Paragraphs (c) and (d) below, a Member shall be
eligible for the Employer Contribution credited with respect to a Plan Year if
such Member (i) is an employee of the Employers or an Affiliate as of such Plan
Year end or (ii) terminated employment with the Employers and the Affiliates
during such year due to his death, Disability or Retirement.

 

(c)           Notwithstanding Paragraph (a), if a Member’s Termination of
Service is due to his death, Disability or Retirement, the Employer Contribution
on behalf of such Member for such Plan Year shall be made as soon as practical
following the Member’s Termination of Service and be based on his age at such
time.

 

(d)           Notwithstanding Paragraph (a), the Employer Contribution on behalf
of a Member for the Plan Year in which a Change of Control occurs shall be made
on the earliest of (i) the end of such Plan Year, (ii) the date the Plan is
terminated or (iii) the date of the Member’s Termination of Service, and shall
be based on the formula in Section 3.1(a) as in effect immediately prior to such
Change of Control and using the Member’s age at the end of such Plan Year.

 

3.2          Valuation of Accounts.  All amounts credited to a Member’s Account
shall be deemed invested as soon as administratively feasible following the date
upon which such credit occurs in the Fund(s) maintained under the Plan as
provided in Article IV.  The balance of each Account shall reflect the result of
daily pricing of the assets in which such Account is deemed invested from time
to time until the time of distribution.

 

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IV.

Deemed Investment of Accounts

 

Each Member shall designate, in accordance with the procedures established from
time to time by the Administrative Committee, the manner in which the amounts
allocated to his Account shall be deemed to be invested from among the Funds
made available from time to time for such purpose by the Administrative
Committee.  Such Member may designate one of such Funds for the deemed
investment of all the amounts allocated to his Account or he may split the
deemed investment of the amounts allocated to his Account between such Funds in
such increments as the Administrative Committee may prescribe.  If a Member
fails to make a proper designation, then his Account shall be deemed to be
invested in the default Fund or Funds designated by the Administrative Committee
from time to time in a uniform and nondiscriminatory manner.

 

A Member may change his deemed investment designation for future Employer
Contributions to be allocated to his Account.  Any such change shall be made in
accordance with the procedures established by the Administrative Committee, and
the frequency of such changes may be limited by the Administrative Committee.

 

A Member may also elect to convert his deemed investment designation with
respect to the amounts already allocated to his Account.  Any such conversion
shall be made in accordance with the procedures established by the
Administrative Committee, and the frequency of such conversions may be limited
by the Administrative Committee.

 

Notwithstanding the foregoing or any Member election to the contrary, the
Administrative Committee may, in its sole discretion, provide for only one Fund
under the Plan, in which event all amounts shall be credited as if invested in
such Fund.

 

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V.

Determination of Vested Interest and Forfeitures

 

5.1          Vesting.

 

(a)           Subject to Paragraphs (b) and (c) below, a Member shall become
vested in his Account as follows:

 

Years of Vesting Service

 

Vested Interest

 

 

 

 

 

less than 1

 

0

%

1

 

20

%

2

 

40

%

3

 

60

%

4

 

80

%

5 or more

 

100

%

 

(b)           Regardless of his years of Vesting Service, a Member shall have a
100% Vested Interest in his Account if his Termination of Service is due to his
death, Disability or Retirement.

 

(c)           A Member who is employed by an Employer or an Affiliate
immediately prior to a Change of Control shall have a 100% Vested Interest in
his Account upon the occurrence of such Change of Control.

 

5.2          Forfeitures.  A Member who has a Vested Interest in his Account
that is less than 100% as of the date of his Termination of Service shall
forfeit to the Employer the nonvested portion of such Account as of the date of
such termination.

 

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VI.

Benefit Payments

 

6.1          Payment of Accounts.

 

(a)           Upon a Member’s Termination of Service, the Member, or, in the
event of his death, the Member’s designated beneficiary (as determined below),
shall become entitled to receive a lump sum cash payment equal in value to the
Member’s Vested Interest in the balance of his Account.  The value of a Member’s
Vested Interest in his Account shall be determined as of the payment date.

 

(b)           Payment of a Member’s Account shall be made as soon as
administratively practicable after the date of his Termination of Service.

 

(c)           Each Member shall have the right to designate the beneficiary or
beneficiaries to receive payment of his Account in the event of his death.  Each
such designation shall be made by executing the beneficiary designation form
prescribed by the Administrative Committee and filing same with the
Administrative Committee.  Any such designation may be changed at any time by
execution of a new designation in accordance with this Section.  If no such
designation is on file with the Administrative Committee at the time of the
death of the Member or such designation is not effective for any reason as
determined by the Administrative Committee, then the designated beneficiary or
beneficiaries to receive such benefit shall be as follows: (i) if a Member
leaves a surviving spouse, his benefit shall be paid to such surviving spouse;
or (ii) if a Member leaves no surviving spouse, his benefit shall be paid to
such Member’s executor or administrator, or to his heirs at law if there is no
administration of such Member’s estate.

 

6.2          Unclaimed Benefits.  In the case of a benefit payable on behalf of
a Member, if the Administrative Committee is unable to locate the Member or
beneficiary to whom such benefit is payable, upon the Administrative Committee’s
determination thereof, such benefit shall be forfeited to the Employer. 
Notwithstanding the foregoing, if subsequent to any such forfeiture the Member
or beneficiary to whom such benefit is payable makes a valid claim for such
benefit, such forfeited benefit (without any adjustment for earnings or loss
after the time of such forfeiture is an Account) shall be restored to the Plan
by the Employer and paid in accordance with the Plan.

 

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VII.

Administration of the Plan

 

7.1          The Administrative Committee.  The general administration of the
Plan shall be vested in the Administrative Committee.

 

7.2          Self-Interest of Members.  No member of the Administrative
Committee shall have any right to vote or decide upon any matter relating solely
to himself under the Plan or to vote in any case in which his individual right
to claim any benefit under the Plan is particularly involved.  In any case in
which a Administrative Committee member is so disqualified to act and the
remaining members cannot agree, the Company shall appoint a temporary substitute
member to exercise all the powers of the disqualified member concerning the
matter in which he is disqualified.

 

7.3          Administrative Committee Powers and Duties.  The Administrative
Committee shall supervise the administration and enforcement of the Plan
according to the terms and provisions hereof and shall have all powers necessary
to accomplish these purposes, including, but not by way of limitation, the
right, power, and authority:

 

(a)           To make rules, regulations, and bylaws for the administration of
the Plan that are not inconsistent with the terms and provisions hereof, and to
enforce the terms of the Plan and the rules and regulations promulgated
thereunder by the Administrative Committee;

 

(b)           To construe in its discretion all terms, provisions, conditions,
and limitations of the Plan;

 

(c)           To correct any defect or to supply any omission or to reconcile
any inconsistency that may appear in the Plan in such manner and to such extent
as it shall deem in its discretion expedient to effectuate the purposes of the
Plan;

 

(d)           To employ and compensate such accountants, attorneys, investment
advisors, and other agents, employees, and independent contractors as the
Administrative Committee may deem necessary or advisable for the proper and
efficient administration of the Plan;

 

(e)           To determine in its discretion all questions relating to
eligibility;

 

(f)            To determine whether and when a Member has incurred a Termination
of Service;

 

(g)           To make a determination in its discretion as to the right of any
person to a benefit under the Plan, the amount of such benefit and to prescribe
procedures to be followed by payees in obtaining benefits hereunder;

 

(h)           To receive and review reports from the Trustee as to the financial
condition of the Trust Fund, including its receipts and disbursements; and

 

(i)            To establish or designate Funds as investment options as provided
in Article IV.

 

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7.4          Claims Procedures.  The same procedures applicable for claims for
benefits under the Stewart & Stevenson 401(k) Savings Plan shall be applicable
to this Plan.

 

7.5          Employer to Supply Information.  The Employer shall supply full and
timely information to the Administrative Committee and Compensation Committee,
including, but not limited to, information relating to each Member’s
Compensation, Termination of Service and such other pertinent facts as the
Administrative Committee and Compensation Committee may require.  The Employer
shall advise the Trustee of such of the foregoing facts as are deemed necessary
for the Trustee to carry out the Trustee’s duties under the Plan and the Trust
Agreement.  When making a determination in connection with the Plan, the
Administrative Committee and Compensation Committee shall be entitled to rely
upon the aforesaid information furnished by the Employer.

 

7.6          Indemnity.  To the extent permitted by applicable law, the
Employers shall indemnify and save harmless each member of the Administrative
Committee and the Compensation Committee against any and all expenses,
liabilities and claims (including legal fees incurred to defend against such
liabilities and claims) arising out of their discharge in good faith of
responsibilities under or incident to the Plan.  Expenses and liabilities
arising out of willful misconduct shall not be covered under this indemnity. 
This indemnity shall not preclude such further indemnities as may be available
under insurance purchased by the Employers or provided by the Employers under
any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, as such indemnities are permitted under applicable law.

 

7.7          Payment of Plan Expenses.  All expenses incident to the
administration of the Plan and Trust, including but not limited to, legal,
accounting, Trustee fees, and expenses of the Administrative Committee, may be
paid by the Employer and, if not paid by the Employer, shall be paid by the
Trustee from the Trust Fund.

 

7.8          Trust Fund Property.  All income, profits, recoveries,
contributions, forfeitures and any and all moneys, securities and properties of
any kind at any time received or held by the Trustee shall be held for
investment purposes as a commingled Trust Fund pursuant to the terms of the
Trust Agreement.  No Member shall have any title to any specific asset in the
Trust Fund.

 

7.9          Investment of the Trust Fund.  The Administrative Committee shall
have the right, power, authority, and duty to instruct the Trustee as to the
management, investment, and reinvestment of the Trust Fund.

 

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VIII.

Nature of the Plan

 

The Employer intends and desires by the adoption of the Plan to recognize the
value to the Employer of the services of Eligible Employees covered by the Plan
and to encourage their continued service with the Employer by making more
adequate provision for their future retirement security.  The Plan is intended
to constitute an unfunded, unsecured plan of deferred compensation for a select
group of management or highly compensated employees of the Employer and shall be
construed and operated consistent with the same.  Plan benefits herein provided
are a contractual obligation of the Employer which shall be paid out of the
Employer’s general assets, which shall include the assets of any Trust Fund.

 

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IX.

Miscellaneous

 

9.1          Not Contract of Employment.  The adoption and maintenance of the
Plan shall not be deemed to be a contract between the Employer and any person or
to be consideration for the employment of any person.  Nothing herein contained
shall be deemed to (a) give any person the right to be retained in the employ of
the Employer, (b) restrict the right of the Employer to discharge any person at
any time, (c) give the Employer the right to require any person to remain in the
employ of the Employer, or (d) restrict any person’s right to terminate his
employment at any time.

 

9.2          Alienation of Interest Forbidden.  The interest of a Member or his
beneficiary or beneficiaries hereunder may not be sold, transferred, assigned,
or encumbered in any manner, either voluntarily or involuntarily, and any
attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or
charge the same shall be null and void; neither shall the benefits hereunder be
liable for or subject to the debts, contracts, liabilities, engagements or torts
of any person to whom such benefits or funds are payable, nor shall they be an
asset in bankruptcy or subject to garnishment, attachment or other legal or
equitable proceedings.

 

9.3          Tax Withholding.  All payments provided for hereunder shall be
subject to applicable withholding and other deductions as shall be required of
the Employer under any applicable law.  In addition, the Employer may reduce a
Member’s Account for any applicable FICA taxes the Employer is required to
withhold or make other arrangements for the payment of the same, in its sole
discretion.

 

9.4          Amendment and Termination. The Board of Directors of the Company
may from time to time, in its discretion, amend, in whole or in part, any or all
of the provisions of the Plan; provided, however, that no amendment may be made
that would adversely affect the rights of a Member with respect to amounts
already allocated to his Account.  On and following a Change of Control, no
amendment may be made that would adversely affect a Member’s rights under the
Plan from those in effect if the Plan had been terminated immediately prior to
such amendment.  The Board of Directors may terminate or freeze the Plan at any
time.  In the event that the Plan is terminated, the Vested Interest in the
balance in a Member’s Account shall be paid to such Member in a lump sum
investment.  In addition, the Administrative Committee may make any amendment of
an administrative nature that would not materially increase the Employers’
liability under the Plan.

 

9.5          Severability.  If any provision of this Plan shall be held illegal
or invalid for any reason, said illegality or invalidity shall not affect the
remaining provisions hereof; instead, each provision shall be fully severable
and the Plan shall be construed and enforced as if said illegal or invalid
provision had never been included herein.

 

9.6          Guaranty.  Notwithstanding any provisions of the Plan to the
contrary, in the event any Affiliate that adopts the Plan pursuant to Section
2.3 hereof fails to make payment of the benefits due under the Plan on behalf of
its Members, the Company shall be liable for and shall make payment of such
benefits due as a guarantor of such entity’s obligations hereunder.

 

9.7          Governing Laws.  All provisions of the Plan shall be construed in
accordance with the laws of Texas except to the extent preempted by applicable
federal law.

 

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EXECUTED this April 5, 2005.

 

 

STEWART & STEVENSON SERVICES, INC.

 

 

 

 

 

By:

/S/ Stephen A. Hines

 

 

 

Name:

Stephen A. Hines

 

 

 

Title:

Vice President

 

 

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