Document:

EX-10.5

 

Exhibit 10.5

REGISTRATION RIGHTS AGREEMENT

dated as of

                    , 2007

by and among

Stewart & Stevenson LLC,

and

the Holders identified herein

 

 

Table of Contents

	 	 	 	 	 
	 	 	Page
	ARTICLE I. DEFINITIONS AND CERTAIN INTERPRETATIVE MATTERS
	 	 	1	 
	 
	 	 	 	 
	1.1 Definitions
	 	 	1	 
	 
	 	 	 	 
	ARTICLE II. DEMAND REGISTRATION
	 	 	5	 
	 
	 	 	 	 
	2.1 Right to Demand Registration
	 	 	5	 
	 
	 	 	 	 
	2.2 Blackout Period
	 	 	6	 
	 
	 	 	 	 
	2.3 Effective Demand Registrations
	 	 	6	 
	 
	 	 	 	 
	2.4 Revocation of Demand Registration
	 	 	7	 
	 
	 	 	 	 
	2.5 Continuous Effectiveness of Registration Statement
	 	 	7	 
	 
	 	 	 	 
	2.6 Underwritten Demand Registration
	 	 	7	 
	 
	 	 	 	 
	ARTICLE III. PIGGYBACK REGISTRATION
	 	 	8	 
	 
	 	 	 	 
	3.1 Right to Piggyback
	 	 	8	 
	 
	 	 	 	 
	3.2 Priority on Piggyback Registrations
	 	 	8	 
	 
	 	 	 	 
	3.3 Withdrawal of Piggyback Registration
	 	 	9	 
	 
	 	 	 	 
	ARTICLE IV. PROCEDURES AND EXPENSES
	 	 	10	 
	 
	 	 	 	 
	4.1 Registration Procedures
	 	 	10	 
	 
	 	 	 	 
	4.2 Information from Holders
	 	 	13	 
	 
	 	 	 	 
	4.3 Suspension of Disposition
	 	 	13	 
	 
	 	 	 	 
	4.4 Registration Expenses
	 	 	14	 
	 
	 	 	 	 
	ARTICLE V. INDEMNIFICATION
	 	 	15	 
	 
	 	 	 	 
	5.1 Indemnification by the Company
	 	 	15	 
	 
	 	 	 	 
	5.2 Indemnification by Holders
	 	 	15	 
	 
	 	 	 	 
	5.3 Conduct of Indemnification Proceedings
	 	 	16	 
	 
	 	 	 	 
	5.4 Contribution
	 	 	17	 
	 
	 	 	 	 
	ARTICLE VI. RULE 144
	 	 	18	 
	 
	 	 	 	 
	ARTICLE VII. PARTICIPATION IN UNDERWRITTEN OFFERINGS
	 	 	18	 
	 
	 	 	 	 
	ARTICLE VIII. MISCELLANEOUS
	 	 	18	 
	 
	 	 	 	 
	8.1 Notices
	 	 	18	 
	 
	 	 	 	 
	8.2 Confidentiality
	 	 	19	 
	 
	 	 	 	 
	8.3 Assignment
	 	 	19	 
	 
	 	 	 	 
	8.4 No Third-Party Beneficiaries
	 	 	19	 

  -i-

 

 

Table of Contents

(continued)

	 	 	 	 	 
	 	 	Page
	8.5 Entire Agreement
	 	 	19	 
	 
	 	 	 	 
	8.6 Amendment and Waiver
	 	 	19	 
	 
	 	 	 	 
	8.7 Counterparts
	 	 	19	 
	 
	 	 	 	 
	8.8 Severability
	 	 	19	 
	 
	 	 	 	 
	8.9 Governing Law
	 	 	20	 
	 
	 	 	 	 
	8.10 Specific Performance
	 	 	20	 
	 
	 	 	 	 
	8.11 Further Assurances
	 	 	20	 

 -ii-

 

 

REGISTRATION RIGHTS AGREEMENT

     This REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of ____________,
2007, is made by and among Stewart & Stevenson LLC, a Delaware limited liability company, and the
signatories hereto.

RECITALS

     WHEREAS, the Company was acquired on January 23, 2006, pursuant to an acquisition agreement by
and between Parman Capital Group LLC (“Parman Capital Group”) and Stewart & Stevenson
Services Inc. and its affiliates; and

     WHEREAS, the Company currently contemplates completing an initial public offering
(“IPO”) of its Common Stock; and

     WHEREAS, the Company has filed a Registration Statement (File No. 333-138952) with the
Securities and Exchange Commission on Form S-1 (the “Registration Statement”) in connection
with the IPO of shares of its Common Stock; and

     WHEREAS, prior to the consummation of the IPO, the Company will, pursuant to Delaware law,
convert into a Delaware corporation (the “Corporate Conversion”) upon which, among other
things, the existing common units of Parman Capital Group will convert to the Company’s Class B
Common Stock, par value $0.01 per share (“Class B Common Stock”) and the remainder of the
existing common units will convert into Common Stock, par value $0.01 per share (“Common
Stock”); and

     WHEREAS, the Company has agreed to provide Parman Capital Group, EC Investments B.V., Frank C.
Carlucci III Revocable Trust and Ms. Nina Ansary with the registration rights specified in this
Agreement following the IPO, on the terms and subject to the conditions set forth herein.

AGREEMENTS

     NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements contained
herein and intending to be legally bound hereby, the parties hereto hereby agree as follows:

Article I. Definitions and Certain Interpretative Matters

     1.1 Definitions. For purposes of this Agreement, the following terms have the
following meanings:

          (a) “Advice”: As defined in Section 4.3.

          (b) “Affiliate”: As defined in Rule 12b-2 under the Exchange Act and the rules and
regulations promulgated thereunder.

          (c) “Agreement”: As defined in the introductory paragraph hereof.

 

 

          (d) “Blackout Period”: Any period during which, in accordance with
Section 2.2, the Company is not required to effect the filing of a Registration Statement
or is entitled to postpone the preparation, filing or effectiveness or suspend the effectiveness of
a Registration Statement.

          (e) “Business Day”: Any day, other than a Saturday or Sunday, on which national
banking institutions in New York, New York, are authorized or required by law or executive order to
remain closed.

          (f) “Certificate of Incorporation”: The Certificate of Incorporation of the Company
after giving effect to the Corporate Conversion, as amended from time to time.

          (g) “Class B Common Stock”: means the Company’s Class B Common Stock, par value $0.01
per share..

          (h) “Common Stock”: means the Company’s Common Stock, par value $0.01 per share.

          (i) “Company”: means Stewart & Stevenson LLC and, from and after the effective time
of the Corporate Conversion, Stewart & Stevenson Inc.

          (j) “Demand Notice”: As defined in Section 2.1.

          (k) “Demand Registration”: means any registration of the Company’s securities
pursuant to Article II hereof.

          (l) “Demand Registration Statement”: means a Registration Statement effected pursuant
to a Demand Registration under Article II hereof.

          (m) “EC Investments”: means BC Investments B.V., a Netherlands Antilles company
(including one or more of its Affiliates that has become the owner of Registrable Securities and
has become a party to this Agreement).

          (n) “EC Registrable Securities”: means Registrable Securities held by EC Investments.

          (o) “EC Shares”: means the Common Shares held by EC Investments.

          (p) “Exchange Act”: The Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

          (q) “Filing Date”: (i) With respect to a Registration Statement to be filed on Form
S-1 (or any applicable successor form) in connection with a Public Offering or on Form S-3 (or any
applicable successor form), not later than 90 days after receipt by the Company of a request for
such Registration Statement and (ii) with respect to a Registration Statement to be filed other
than on Form S-1 or Form S-3 (or any applicable successor form), not later than 120 days after
receipt by the Company of a request for such Registration Statement.

2

 

          (r) “Free Writing Prospectus”: means a “written communication” (as defined in Rule
405 under the Securities Act) constituting an offer to sell or a solicitation of an offer to buy
securities related to a registered offering of which a registration statement has been file as
defined in the Securities Act.

          (s) “Holders”: Parman Capital Group, EC Investments B.V., Frank C. Carlucci III
Revocable Trust and Ms. Nina Ansary.

          (t) “IPO”: As defined in the Recitals.

          (u) “Indemnified Party”: As defined in Section 5.3.

          (v) “Indemnifying Party”: As defined in Section 5.3.

          (w) “Losses”: As defined in Section 5.1.

          (x) “NASD”: means the National Association of Securities Dealers, Inc.

          (y) “NASD Regulations”: means the rules and regulations promulgated by the National
Association of Securities Dealers, Inc.

          (z) “NYSE”: The New York Stock Exchange

          (aa) “Parman Capital Group”: means Parman Capital Group LLC (including one or more of
its Affiliates that has become the owner of Registrable Securities and has become a party to this
Agreement).

          (bb) “Parman Capital Group Registrable Securities”: means Registrable Securities held
by Parman Capital Group.

          (cc) “Parman Shares”: means the Class B Common Shares held by Parman Capital Group
LLC.

          (dd) “Person”: Any individual, corporation, general or limited partnership, limited
liability company, joint venture, trust or other entity or association, including without
limitation any governmental authority.

          (ee) “Piggyback Notice”: As defined in Section 3.1.

          (ff) “Piggyback Registration”: As defined in Section 3.1.

          (gg) “Piggyback Request”: means a request made pursuant to Section 3.1.

          (hh) “Prospectus”: The prospectus included in the applicable Registration Statement,
as supplemented by any and all prospectus supplements and as amended by any and all amendments
(including post-effective amendments) and including all material incorporated by reference or
deemed to be incorporated by reference in such prospectus.

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          (ii) “Public Offering”: means any primary public offering of Common Stock by the
Company pursuant to an effective Registration Statement under the Securities Act, other than
pursuant to a registration statement on Form S-4 or S-8 or, in each case, any successor or similar
form.

          (jj) “Registrable Securities”: (i) the Parman Shares, the EC Shares and the shares of
Common Stock of each of the Holders and (ii) any securities paid, issued or distributed in respect
of any such shares by way of stock dividend, stock split or distribution, or in connection with a
combination of shares, recapitalization, reorganization, merger or consolidation, or otherwise;
provided, however, that as to any Registrable Securities, such securities will irrevocably cease to
constitute “Registrable Securities” upon the earliest to occur of: (A) the date on which the
securities are disposed of pursuant to an effective registration statement under the Securities
Act; (B)  the date on which the securities may be freely sold publicly without either registration
under the Securities Act or compliance with any restrictions, including without limitation
restrictions as to volume or manner of sales, under Rule 144(k) (or any successor provision);
(C) the date on which the securities have been transferred to any Person other than a Holder; or
(D) the date on which the securities cease to be outstanding.

          (kk) “Registration Expenses”: As defined in Section 4.4.

          (ll) “Registration Statement”: Any registration statement of the Company under the
Securities Act that covers any of the Registrable Securities pursuant to the provisions of this
Agreement, including the related Prospectus, all amendments and supplements to such registration
statement (including post-effective amendments), and all exhibits and all materials incorporated by
reference or deemed to be incorporated by reference in such registration statement.

          (mm) “Required Period”: With respect to a “shelf registration” requested pursuant to
Section 2.1(b), two years following the first day of effectiveness of such Registration
Statement, and with respect to any other Registration Statement, 180 days following the first day
of effectiveness of such Registration Statement.

          (nn) “Rule 144”: Rule 144 promulgated under the Securities Act, as such Rule may be
amended from time to time, or any similar rule or regulation hereafter adopted by the SEC.

          (oo) “SEC”: The Securities and Exchange Commission.

          (pp) “Securities Act”: The Securities Act of 1933, as amended and the rules and
regulations promulgated thereunder.

          (qq) “Underwritten Registration” or “Underwritten Offering”: A registration
in which securities of the Company are sold to an underwriter for reoffering to the public.

          (rr) Certain Interpretative Matters. Unless the context otherwise requires, (a) all
references to Articles or Sections are to Articles or Sections of this Agreement, (b) each term
defined in this Agreement has the meaning assigned to it, (c) all uses of “herein,” “hereto,”
“hereof” and words similar thereto in this Agreement refer to this Agreement in its entirety, and

4

 

not solely to the Article, Section or provision in which it appears, (d) ”or” is disjunctive
but not necessarily exclusive, and (e) words in the singular include the plural and vice versa.
Unless otherwise specified, the use of the term “day” will be deemed to be a calendar day and not a
Business Day.

Article II. Demand Registration

     2.1 Right to Demand Registration.

          (a) At any time and from time to time, Parman Capital Group or EC Investments may request in
writing that the Company effect the registration of all or part of Parman Capital Group’s
Registrable Securities or EC Investments’ Registrable Securities, respectively, with the SEC under
and in accordance with the provisions of the Securities Act (which written request will specify (i)
its then current name and address, (ii) the aggregate number of shares of Registrable Securities
requested to be registered, (iii) the total number of shares of Class B Common Stock then held by
Parman Capital Group, or Common Stock then held by EC Investments, as appropriate, and (iv) the
means of distribution) (a “Demand Notice”). The Company will file a Registration Statement
covering Parman Capital Group’s or EC Investments’ Registrable Securities requested to be
registered as promptly as practicable (and, in any event, by the applicable Filing Date) after
receipt of such request and shall use reasonable best efforts to cause the same to be declared
effective by the SEC as promptly as practicable after such filing; provided, however, that the
Company will not be required to take any action pursuant to this Article II:

          (A) if such request is made by Parman Capital Group or EC Investments and,
prior to the date of such request, the Company has effected ___Demand
Registrations, or, has effected one Demand Registration in the twelve-month period
immediately preceding the Demand Notice;

          (B) if such request is made by Parman Capital Group or EC Investments within
180 days after the effective date of consummation of the IPO;

          (C) if the Company has effected a registration of its Common Stock within the
90-day period preceding such request;

          (D) if a Registration Statement is effective at the time such request is made
pursuant to which Parman Capital Group or EC Investments could effect the
disposition of Parman Capital Group’s or EC Investments’ Registrable Securities as
described in the Demand Notice;

          (E) in the case of an Underwritten Offering, if the Registrable Securities
requested to be included in such Demand Registration have an aggregate then-current
market value of less than $[25] million (before deducting underwriting discounts and
commission); or

          (F) during any Blackout Period.

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          (b) If Parman Capital Group or EC Investments requests that the Company effect a registration
pursuant to this Section 2.1 and the Company is at such time eligible to use Form S-3,
Parman Capital Group or EC Investments may specify that the requested registration be a “shelf
registration” for an offering on a delayed or continuous basis pursuant to Rule 415 of the
Securities Act.

     2.2 Blackout Period.

          (a) The Company may defer the filing (but not the preparation) of a registration statement
required by Section 2.1 until a date not later than ninety (90) days after the Filing Date, if (i)
prior to receiving the Demand Notice, the Company has determined to effect an offering of equity
securities of the Company for the Company’s account and the Company has taken substantial steps and
is proceeding with reasonable diligence to effect such offering, (ii) the Company files or proposes
to file a registration statement with respect to an offering of equity securities of the Company
for its own account and (iii) with reasonable prior notice (A) the Company (in the case of an
offering that is not an Underwritten Offering) advises Parman Capital Group or EC Investments that
the Board of Directors of the Company has determined, in the good faith exercise of its reasonable
business judgment, that such Demand Registration would adversely affect such offering or (B) in the
case of an Underwritten Offering, the managing underwriter, if any, advises the Company in writing
(in which case the Company will promptly notify Parman Capital Group or EC Investments, as the case
may be), that a sale or distribution of Registrable Securities would adversely affect such offering
by the Company.

          (b) Notwithstanding anything contained in Section 2.1 to the contrary, if the Board of
Directors of the Company determines, in the good faith exercise of its reasonable business
judgment, that the registration and distribution of Registrable Securities (i) would materially
impede, delay or interfere with any financing, acquisition, corporate reorganization or other
significant transaction, or any negotiations, discussions or pending proposals with respect
thereto, involving the Company or any of its subsidiaries or (ii) would require disclosure of
non-public material information, the disclosure of which would materially and adversely affect the
Company, the Company will promptly give the Parman Capital Group or EC Investments, as the case may
be, written notice of such determination and will be entitled to postpone the preparation, filing
or effectiveness or suspend the effectiveness of an effective Demand Registration Statement for a
reasonable period of time not to exceed 90 days.

          (c) Notwithstanding anything contained in this Section 2.2 to the contrary, there will
be no more than [two] Blackout Periods during any consecutive 12-month period during the time in
which Parman Capital Group or EC Investments may request a registration pursuant to Section
2.1.

     2.3 Effective Demand Registrations.

          (a) The Company may satisfy its obligations under Section 2.1 by amending or
supplementing (including, if permitted, through incorporation by reference) (in each case to the
extent permitted by applicable law) any registration statement previously filed by the Company
under the Securities Act so that such amended or supplemented registration statement will permit
the disposition (in accordance with the intended methods of disposition specified in

6

 

the applicable Demand Notice) of all of the Registrable Securities for which a Demand
Registration has been properly made under Section 2.1. If the Company so amends or
supplements a previously filed registration statement, it will be deemed to have effected a
registration for purposes of Section 2.1.

          (b) Except as provided in Section 2.4, a registration requested pursuant to
Section 2.1 will not be deemed to be effected for purposes of Section 2.1 if it
(including any post-effective amendment) has not been declared effective by the SEC or become
effective in accordance with the Securities Act and the rules and regulations thereunder and kept
effective as contemplated by Section 2.5.

     2.4 Revocation of Demand Registration. Parman Capital Group or EC Investments, as a
holder of Registrable Securities to be included in a Registration Statement pursuant to Section
2.1 may, at any time prior to the effective date (or, if the Company relies on Section
2.3 to comply with such Demand Registration, prior to the inclusion of such Registrable
securities in such previously filed registration statement) of the Registration Statement relating
to such registration, revoke its request to have its Registrable Securities included therein by
providing a written notice to the Company. In the event Parman Capital Group or EC Investments
revokes such request, either (i) Parman Capital Group or EC Investments, as the case may be, shall
reimburse the Company for all its out-of-pocket expenses incurred in the preparation, filing and
processing of the Registration Statement and no Demand Registration will be deemed to have been
effected or (ii) such Demand Registration that has been revoked will be deemed to have been
effected for purposes of Section 2.1; provided, however, that, if such revocation was based
on the Company’s failure to comply in any material respect with its obligations hereunder, such
reimbursement will not be required and such Demand Registration that has been revoked will not be
deemed to have been effected for purposes of Section 2.1.

     2.5 Continuous Effectiveness of Registration Statement. The Company will use its
reasonable best efforts to keep a Registration Statement that has become effective as contemplated
by this Article II continuously effective for (a) at least the Required Period (subject to
extension pursuant to Section 4.3) or (b) such shorter period that will terminate when all
Registrable Securities covered by such Registration Statement (i) have been sold pursuant to such
Registration Statement or (ii) cease to be Registrable Securities; provided, however, that in no
event will such period expire prior to the expiration of the applicable period referred to in
Section 4(3) of the Securities Act and Rule 174 promulgated thereunder.

     2.6 Underwritten Demand Registration. In the event that a registration requested
pursuant to Section 2.1 is to be an Underwritten Registration, the managing underwriter of
the Underwritten Offering relating thereto will be selected, after consultation with the Company,
by Parman Capital Group or EC Investments, as the case may be. If Parman Capital Group or EC
Investments proposes to distribute its securities through an Underwritten Offering, it agrees to
enter into an underwriting agreement with the underwriters, provided that the underwriting
agreement is in customary form and reasonably acceptable to Holders of the Registrable Securities
to be included in the Underwritten Offering. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such Underwritten Offering advise the Company and Parman Capital
Group or EC Investments that, in its good faith determination, the total amount of securities that
Parman Capital Group or EC Investments proposes to register is such as to

7

 

materially and adversely affect the success of such Underwritten Offering or that if the
managing underwriter of an underwritten offering under this Section 2.6 advises the Company
and Parman Capital Group or EC Investments in writing that the total number of shares requested to
be included in such registration exceeds the number of shares of Common Stock which can be sold in
such offering or that the success or pricing of the offering would be materially and adversely
affected by the inclusion of all of the shares of Common Stock requested to be included, then the
Company may either request that Parman Capital Group or EC Investments, as the case may be,
decrease the number of shares it proposes to be included in such Underwritten Registration or
invoke Section 2.2.

Article III. Piggyback Registration

     3.1 Right to Piggyback. If at any time, and from time to time, the Company proposes
to file a registration statement under the Securities Act with respect to an offering of any class
of equity securities (other than a registration statement (a) on Form S-4, Form S-8 or in each case
any successor forms thereto, or (b) filed solely in connection with an offering made solely to
existing stockholders or employees of the Company), whether or not for its own account, then the
Company will give written notice (the “Piggyback Notice”) of such proposed filing to the
Holders at least 45 days before the anticipated filing date. Such notice will offer the Holders
the opportunity to register such amount of Registrable Securities as each Holder may request on the
same terms and conditions as the registration of the Company’s securities, as the case may be (a
“Piggyback Registration”). The Company will include in each Piggyback Registration all
Registrable Securities for which the Company has received written requests for inclusion within 15
days after delivery of the Piggyback Notice, subject to Section 3.2.

     3.2 Priority on Piggyback Registrations. If the Piggyback Registration is an
Underwritten Offering, the Company will cause the managing underwriter of that proposed offering to
permit the Holders that have requested Registrable Securities to be included in the Piggyback
Registration to include all such Registrable Securities on the same terms and conditions as any
similar securities, if any, of the Company. Notwithstanding the foregoing, if the managing
underwriter or underwriters of such Underwritten Offering advises the Company and the selling
Holders in writing that, in its good faith determination, the total amount of securities that the
Company and the Holders propose to include in such offering is such as to materially and adversely
affect the success of such Underwritten Offering or that if the managing underwriter of an
underwritten offering under this Section 3.2 advises the Company and such Holders in
writing that the total number of shares requested to be included in such registration exceeds the
number of shares of Common Stock which can be sold in such offering or that the success or pricing
of the offering would be materially and adversely affected by the inclusion of all of the shares of
Common Stock requested to be included, then:

          (a) if such Piggyback Registration is a primary registration by the Company for its own
account, the Company will include in such Piggyback Registration: (i) first, all securities to be
offered by the Company; (ii) second, up to the full amount of securities requested to be included
in such Piggyback Registration by the Holders making such Piggyback Request, allocated pro rata
among such Holders, on the basis of the amount of securities requested to be included therein by
each such Holder; and (iii)  any other securities requested to be included in such registration so
that the total amount of securities to be included in such Underwritten

8

 

Offering is the full amount that, in the opinion of such managing underwriter, can be sold
without materially and adversely affecting the success of such Underwritten Offering; and

          (b) if such Piggyback Registration is an underwritten secondary registration for the account
of holders of securities of the Company, the Company will include in such registration: (i) first,
all securities of the Persons exercising “demand” registration rights requested to be included
therein; (ii) second, up to the full amount securities proposed to be included in the registration
by the Company, and (iii) third, up to the full amount of securities requested to be included in
such Piggyback Registration by the Holders, on a pro rata basis, in accordance with the priorities,
if any, then existing among the Company and the Holders so that the total amount of securities to
be included in such Underwritten Offering is the full amount that, in the written opinion of such
managing underwriter, can be sold without materially and adversely affecting the success of such
Underwritten Offering.

          (c) If so requested (pursuant to a timely written notice) by the managing underwriter in any
Underwritten Offering the Holders participating in such Underwritten Offering will agree not to
effect any public sale or distribution (or any other type of sale as the managing underwriter
reasonably determines is necessary in order to effect the Underwritten Offering) of any such
Registrable Securities, including a sale pursuant to Rule 144 (but excluding any Registrable
Securities included in such Underwritten Offering), during the 10 days prior to, and during the 90
days (or such additional period as the managing underwriter reasonably determines is necessary in
order to effect the Underwritten Offering) following, the closing date of such Underwritten
Offering (or such longer period as may be required by the applicable underwriting agreement solely
to comply with NASD Regulations). In the event of such a request, the Company may impose, during
such period, appropriate stop-transfer instructions with respect to the Registrable Securities
subject to such restrictions.

     3.3 Withdrawal of Piggyback Registration.

          (a) If at any time after giving the Piggyback Notice and prior to the effective date of the
Registration Statement filed in connection with the Piggyback Registration, the Company determines
for any reason not to register or to delay the Piggyback Registration, the Company may, at its
election, give written notice of its determination to all Holders, and (i) in the case of a
determination not to register, will be relieved of its obligation to register any Registrable
Securities in connection with the abandoned Piggyback Registration, without prejudice, and (ii) in
the case of a determination to delay the Piggyback Registration, will be permitted to delay the
registration for a period not exceeding 180 days.

          (b) Any Holder of Registrable Securities requesting to be included in a Piggyback Registration
may withdraw its request for inclusion by giving written notice to the Company of its intention to
withdraw from that registration, provided, however, (i) the Holder’s request must be made in
writing, in the case of an Underwritten Registration, at least five Business Days prior to the
anticipated effective date of the Registration Statement, or if the registration is not an
Underwritten Registration, at least five Business Days prior to the anticipated filing date of the
Registration Statement covering the Piggyback Registration, and (ii) the withdrawal will be
irrevocable and, after making the withdrawal, a Holder will no longer have any right to include its
Registrable Securities in that Piggyback Registration.

9

 

          (c) The Company shall be deemed to have satisfied its obligations with respect to any
Piggyback Registration to any Holder under this Article III notwithstanding an election to withdraw
under this Section 3.3.

Article IV. Procedures and Expenses

     4.1 Registration Procedures. In connection with the Company’s registration
obligations pursuant to Articles II and III, the Company will effect such
registrations to permit the sale of Registrable Securities by a Holder in accordance with the
intended method or methods of disposition thereof, and pursuant thereto the Company will as
promptly as reasonably practicable:

          (a) pursuant to Section 2.1, prepare and file with the SEC a Registration Statement on
an appropriate form under the Securities Act available for the sale of the Registrable Securities
by Parman Capital Group or EC Investments, in accordance with the intended method or methods of
distribution thereof; provided, however, that the Company will, before filing, furnish to Parman
Capital Group or EC Investments, as the case may be, and the managing underwriter, if any, copies
of the Registration Statement or Prospectus proposed to be filed;

          (b) pursuant to Section 2.5, prepare and file with the SEC any amendments and
post-effective amendments to the Registration Statement as may be necessary and any supplements to
the Prospectus as may be required, in the opinion of the Company and its counsel, by the rules,
regulations or instructions applicable to the registration form used by the Company or by the
Securities Act or rules and regulations thereunder to keep the Registration Statement effective
until the earlier of (i) all Registrable Securities covered by the Registration Statement are sold
in accordance with the intended plan of distribution set forth in the Registration Statement or
supplement to the Prospectus or (ii) the termination of the Required Period;

          (c) promptly following its actual knowledge thereof, notify the selling Holders and the
managing underwriter, if any,

          (i) when a Prospectus or any prospectus supplement or amendment or Free Writing
Prospectus has been filed and, with respect to a Registration Statement or any
post-effective amendment, when the Registration Statement has become effective,

          (ii) of any request by the SEC or any other governmental authority for amendments or
supplements to a Registration Statement or related Prospectus or for additional information,

          (iii) of the issuance by the SEC or any other governmental authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose,

          (iv) of the receipt by the Company of any written notification with respect to the
suspension of the qualification or exemption from qualification of any of

10

 

the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose,

          (v) of the occurrence of any event which makes any statement made in the Registration
Statement or Prospectus untrue in any material respect or which requires the making of any
changes in a Registration Statement or Prospectus or other documents so that it will not
contain any untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading, and

          (vi) of the Company’s reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate;

          (d) use its reasonable best efforts to obtain the withdrawal of any order suspending the
effectiveness of a Registration Statement, or the lifting of any suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, at
the earliest practicable date;

          (e) furnish to each selling Holder and the managing underwriter, if any, at least one
conformed copy of the Registration Statement and any post-effective amendment thereto, including
financial statements (but excluding all schedules, all documents incorporated or deemed
incorporated therein by reference and all exhibits);

          (f) prior to any public offering of Registrable Securities, register or qualify or cooperate
with the selling Holders, the managing underwriter, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the securities or blue sky
laws of such jurisdictions within the United States as the selling Holders or the managing
underwriter reasonably request in writing and maintain each registration or qualification (or
exemption therefrom) effective during the period such Registration Statement is required to be kept
effective; provided, however, the Company will not be required to qualify generally to do business
in any jurisdiction in which it is not then so qualified or take any action which would subject it
to general service of process or taxation in any jurisdiction in which it is not then so subject;

          (g) as promptly as practicable upon the occurrence of any event contemplated by Section
4.1(c)(v) or 4.1(c)(vi) hereof, prepare a supplement or post-effective amendment to
each Registration Statement or a supplement to the related Prospectus, or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable Securities being
sold thereunder, such Prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the statements therein
not misleading;

          (h) in the case of an Underwritten Offering, enter into customary and reasonable agreements
(including an underwriting agreement) and take all other actions reasonably necessary or desirable
to expedite or facilitate the disposition of the Registrable Securities, and in connection
therewith:

11

 

          (i) use its reasonable best efforts to obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope and substance) are reasonably
satisfactory to the managing underwriter, if any, and each selling Holder addressed to each
selling Holder and the managing underwriter covering the matters customarily covered in
opinions requested in Underwritten Offerings and such other matters as may be reasonably
requested by any selling Holder or any underwriter, and

          (ii) use its reasonable best efforts to obtain “comfort” letters and updates thereof
from the independent certified public accountants of the Company addressed to each selling
Holder and the managing underwriter covering the matters customarily covered in “comfort”
letters in connection with Underwritten Offerings;

          (i) upon reasonable notice and at reasonable times during normal business hours, make
available for inspection by a representative of each selling Holder and any underwriter
participating in any disposition of Registrable Securities and any attorney or accountant retained
by any selling Holder or any underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the officers, directors and employees of the
Company to supply all information reasonably requested by any such representative, underwriter,
attorney or accountant in connection with the Registration Statement; and

          (j) otherwise use its reasonable best efforts to comply with all applicable rules and
regulations of the SEC, including the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder, and make generally available to the Company’s securityholders
an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later
than thirty (30) days after the end of the twelve (12) month period beginning with the first day of
the Company’s first fiscal quarter commencing after the effective date of a registration statement,
which earnings statement shall cover said twelve (12) month period, and which requirement will be
deemed to be satisfied if the Company timely files complete and accurate information on Forms 10-Q,
10-K and 8-K under the Exchange Act and otherwise complies with Rule 158 under the Securities Act;

          (k) if requested by the managing underwriter or any selling Holder, promptly incorporate in a
prospectus supplement or post-effective amendment such information as the managing underwriter or
any selling Holder reasonably requests to be included therein, including, without limitation, with
respect to the Registrable Securities being sold by such selling Holder, the purchase price being
paid therefor by the underwriters and with respect to any other terms of the underwritten offering
of the Registrable Securities to be sold in such offering, and promptly make all required filings
of such prospectus supplement or post-effective amendment;

          (l) cause the Registrable Securities included in any registration statement to be (A) listed
on each securities exchange, if any, on which similar securities issued by the Company are then
listed, or (B) quoted on the NASD’s Automated Quotation System or the Nasdaq National Market if
similar securities issued by the Company are quoted thereon;

12

 

          (m) provide a transfer agent and registrar for all Registrable Securities registered
hereunder;

          (n) cooperate with each selling Holder and each underwriter participating in the disposition
of such Registrable Securities and their respective counsel in connection with any filings required
to be made with the NASD;

          (o) during the period when the prospectus is required to be delivered under the Securities
Act, promptly file all documents required to be filed with the SEC pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act;

          (p) cooperate with the Selling Holders and the managing underwriter to facilitate the timely
preparation and delivery of certificates (which shall not bear any restrictive legends unless
required under applicable law) representing securities sold under any registration statement, and
enable such securities to be in such denominations and registered in such names as the managing
underwriter or such Selling Holders may request and keep available and make available to the
Company’s transfer agent prior to the effectiveness of such registration statement a supply of such
certificates;

     4.2 Information from Holders.

          (a) The Company may require each selling Holder that has requested inclusion of its
Registrable Securities in any Registration Statement to furnish to the Company such information
regarding such Holder and its plan and method of distribution of such Registrable Securities as the
Company may, from time to time, reasonably request in writing. The Company may refuse to proceed
with the registration of such Holder’s Registrable Securities if such Holder unreasonably fails to
furnish such information within a reasonable time after receiving such request.

          (b) Each selling Holder will as expeditiously as possible (i) notify the Company of the
occurrence of any event that makes any statement made in a Registration Statement or Prospectus
regarding such selling Holder untrue in any material respect or that requires the making of any
changes in a Registration Statement or Prospectus so that, in such regard, it will not contain any
untrue statement of a material fact or omit any material fact required to be stated therein or
necessary to make the statements not misleading and (ii) provide the Company with such information
as may be required to enable the Company to prepare a supplement or post-effective amendment to any
such Registration Statement or a supplement to such Prospectus.

          (c) With respect to any Registration Statement for an Underwritten Offering, the inclusion of
a Holder’s Registrable Securities therein will be conditioned upon such Holder’s participation in
such Underwritten Offering and the execution and delivery by such Holder of an underwriting
agreement in form, scope and substance as is customary in Underwritten Offerings and performance of
such Holder’s obligations under such underwriting agreement.

     4.3 Suspension of Disposition.

13

 

          (a) Each selling Holder will be deemed to have agreed that, upon receipt of any notice from
the Company of the occurrence of any event of the kind described in Section 4.1(c)(ii),
4.1(c)(iii), 4.1(c)(iv), 4.1(c)(v) or 4.1(c)(vi), such Holder will
discontinue disposition of Registrable Securities covered by a Registration Statement or Prospectus
until such Holder’s receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 4.1(g) or until it is advised in writing (the “Advice”) by the Company that
the use of the applicable Prospectus may be resumed and have received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by reference in such
Prospectus. In the event the Company shall give any such notice, the period of time for which a
Registration Statement must remain effective as set forth in Section 2.5 will be extended
by the number of days during the time period from and including the date of the giving of such
notice to and including the date when each seller of Registrable Securities covered by such
Registration Statement has received (i) the copies of the supplemented or amended Prospectus
contemplated by Section 4.1(g) or (ii) the Advice.

          (b) Parman Capital Group or EC Investments will be deemed to have agreed that, upon receipt of
any notice from the Company of the happening of an event specified in Section 2.2(b), disclosure of
which would be required in the Registration Statement and the Board of Directors of the Company has
determined in the good faith exercise of its reasonable business judgment that disclosure would
adversely affect the Company, Parman Capital Group or EC Investments, as the case may be, will
discontinue disposition of Registrable Securities covered by a Registration Statement or Prospectus
until the earlier to occur of Parman Capital Group or EC Investments receiving (i) copies of a
supplemented or amended Prospectus describing the event giving rise to the aforementioned
suspension or (ii) (A) notice in writing from the Company that the use of the applicable Prospectus
may be resumed and (B) copies of any additional or supplemental filings that are incorporated or
deemed to be incorporated by reference in such Prospectus; provided, however, that the periods
during which the offer and sale of Registrable Securities is discontinued shall not exceed two
90-day periods during any 12-month period. In the event the Company gives any such notice, the
period of time for which a Registration Statement must remain effective as set forth in Section
2.1 will be extended by the number of days during the time period from and including the date
of giving of such notice to and including the date when each seller of Registrable Securities
covered by such Registration Statement receives (i) a supplemented or amended Prospectus describing
the event giving rise to the aforementioned suspension or (ii) notice from the Company that use of
the applicable Prospectus may resume.

     4.4 Registration Expenses.

          (a) Subject to Section 2.4, all fees and expenses incurred by the Company in complying
with Articles II, III and Section 4.1 (“Registration Expenses”)
will be borne by the Company. These fees and expenses will include without limitation (i) all
registration and filing fees (including without limitation fees and expenses (x) with respect to
filings required to be made with the NASD and (y) of compliance with securities or blue sky laws
(including without limitation reasonable fees and disbursements of counsel for the underwriters and
selling Holders in connection with blue sky qualifications of the Registrable Securities and
determination of the eligibility of the Registrable Securities for investment under the laws of
such jurisdictions as the managing underwriter or underwriters, if any, or the selling Holders may
designate)), (ii) printing

14

 

expenses (including without limitation the expenses of printing certificates for securities in
a form eligible for deposit with The Depository Trust Company and of printing Prospectuses if the
printing of Prospectuses is requested by the selling Holders), (iii) fees and disbursements of
counsel for the Company, (iv) reasonable fees and disbursements of one counsel for all selling
Holders collectively (which counsel will be selected by the Holders seeking to be included in the
Registration Statement), (v) fees and disbursements of all independent certified public accountants
referred to in Section 4.1(h)(iii) (including the expenses of any special audit and
“comfort” letters required by or incident to such performance) and (vi) fees and expenses of all
other Persons retained by the Company. In addition, the Company will pay its internal expenses
(including without limitation all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit, and the fees and expenses incurred in
connection with the listing of the securities to be registered on each securities exchange, if any,
on which similar securities issued by the Company are then listed or the quotation of such
securities on NYSE if similar securities issued by the Company are then quoted on NYSE.

          (b) Notwithstanding anything contained herein to the contrary, (i) all costs and fees of
counsel (except as specifically set forth in Section 4.4(a)) and experts retained by the
selling Holders and (ii) all underwriting fees, discounts, selling commissions and stock transfer
taxes applicable to the sale of Registrable Securities will be borne by the Holder owning such
Registrable Securities.

          (c) Notwithstanding anything contained herein to the contrary, each selling Holder may have
its own separate counsel in connection with the registration of any of its Registrable Securities,
which counsel may participate therein to the full extent provided herein; provided, however, that
all fees and expenses of such separate counsel will be paid for by such selling Holder.

Article V. Indemnification

     5.1 Indemnification by the Company. The Company will indemnify and hold harmless, to
the fullest extent permitted by law, each Holder owning Registrable Securities registered pursuant
to this Agreement, its officers, directors, agents and employees, each Person who controls such
Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, owners, agents and employees of any such controlling Person, from and
against all losses, claims, damages, liabilities, costs (including without limitation reasonable
attorneys’ fees and disbursements) and expenses (collectively, “Losses”) arising out of or
based upon any untrue or alleged untrue statement of a material fact contained or incorporated by
reference in any Registration Statement, Prospectus, Free Writing Prospectus or preliminary
prospectus (including any term sheet or other information provided to purchasers at or prior to the
time of sale), or arising out of or based upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are based solely upon information furnished in writing to
the Company by or on behalf of such Holder expressly for use therein.

     5.2 Indemnification by Holders. Each Holder (severally and not jointly) will
indemnify and hold harmless, to the fullest extent permitted by law, the Company, its officers,
directors, agents and employees, each Person who controls the Company (within the meaning of

15

 

Section 15 of the Securities Act or Section 20 of the Exchange Act), and the directors,
officers, owners, agents and employees of any such controlling Person, from and against all Losses,
as incurred, arising out of or based upon any untrue or alleged untrue statement of a material fact
contained or incorporated by reference in any Registration Statement, Prospectus, Free Writing
Prospectus or preliminary prospectus (including any term sheet or other information provided to
purchasers at or prior to the time of sale), or arising out of or based upon any omission or
alleged omission of a material fact required to be stated therein or necessary to make the
statements therein not misleading, to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made in reliance upon and
in conformity with information so furnished in writing by or on behalf of such Holder to the
Company expressly for use in such Registration Statement, Prospectus or preliminary prospectus. In
no event will the liability of any Holder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.

     5.3 Conduct of Indemnification Proceedings. If any Person becomes entitled to
indemnity hereunder (an “Indemnified Party”), such Indemnified Party will give prompt
notice to the party from which indemnity is sought (the “Indemnifying Party”) of any claim
or of the commencement of any action or proceeding with respect to which the Indemnified Party
seeks indemnification or contribution pursuant hereto; provided, however, that the failure to so
notify the Indemnifying Party will not relieve the Indemnifying Party from any obligation or
liability except to the extent that the Indemnifying Party has been prejudiced materially by such
failure. If such an action or proceeding is brought against the Indemnified Party, the
Indemnifying Party will be entitled to participate therein and, to the extent it may elect by
written notice delivered to the Indemnified Party promptly after receiving the notice referred to
in the immediately preceding sentence, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. Notwithstanding the foregoing, the Indemnified Party will
have the right to employ its own counsel in any such case, but the fees and expenses of that
counsel will be at the expense of the Indemnified Party unless (i) the employment of the counsel
has been authorized in writing by the Indemnifying Party, (ii) the Indemnifying Party has not
employed counsel (reasonably satisfactory to the Indemnified Party) to take charge of such action
or proceeding within a reasonable time after notice of commencement thereof, or (iii) the
Indemnified Party reasonably concludes, based upon the opinion of counsel, that there may be
defenses or actions available to it which are different from or in addition to those available to
the Indemnifying Party which, if the Indemnifying Party and the Indemnified Party were to be
represented by the same counsel, could result in a conflict of interest for such counsel or
materially prejudice the prosecution of defenses or actions available to the Indemnified Party. If
any of the events specified in clause (i), (ii) or (iii) of the immediately preceding sentence are
applicable, then the reasonable fees and expenses of separate counsel for the Indemnified Party
will be borne by the Indemnifying Party; provided, however, that in no event will the Indemnifying
Party be liable for the fees and expenses of more than one separate firm for all Indemnified
Parties. If, in any case, the Indemnified Party employs separate counsel, the Indemnifying Party
will not have the right to direct the defense of the action or proceeding on behalf of the
Indemnified Party. All fees and expenses required to be paid to the Indemnified Party pursuant to
this Article V will be paid periodically during the course of the investigation or defense,
as and when reasonably itemized bills therefor are delivered to the Indemnifying Party in respect
of any particular Loss that is incurred. Notwithstanding anything contained in this
Section 5.3 to the contrary, an

16

 

Indemnifying Party will not be liable for the settlement of any action or proceeding effected
without its prior written consent. The Indemnifying Party will not, without the consent of the
Indemnified Party (which consent will not be unreasonably withheld), consent to entry of any
judgment or enter into any settlement or otherwise seek to terminate any action or proceeding in
which any Indemnified Party is or could be a party and as to which indemnification or contribution
could be sought by such Indemnified Party under this Article V, unless such judgment,
settlement or other termination provides solely for the payment of money and includes as an
unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release, in form and substance reasonably satisfactory to the Indemnified Party, from all liability
in respect of such claim or litigation for which such Indemnified Party would be entitled to
indemnification hereunder.

     5.4 Contribution

          (a) If the indemnification provided for in this Article V is unavailable to an
Indemnified Party under Section 5.1 or 5.2 in respect of any Losses or is
insufficient to hold the Indemnified Party harmless, then each applicable Indemnifying Party
(severally and not jointly), in lieu of indemnifying the Indemnified Party, will contribute to the
amount paid or payable by the Indemnified Party as a result of the Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party or Indemnifying Parties, on the
one hand, and the Indemnified Party, on the other hand, in connection with the actions, statements
or omissions that resulted in the Losses as well as any other relevant equitable considerations.
The relative fault of the Indemnifying Party or Indemnifying Parties, on the one hand, and the
Indemnified Party, on the other hand, will be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission of a material fact, has been taken or made by, or related to
information supplied by, the Indemnifying Party or Indemnifying Parties or the Indemnified Party,
and the parties’ relative intent, knowledge, access to information and opportunity to correct or
prevent such action, statement or omission. The amount paid or payable by a party as a result of
any Losses will be deemed to include any legal or other fees or expenses incurred by such party in
connection with any action or proceeding.

          (b) The parties hereto agree that it would not be just and equitable if contribution pursuant
to this Section 5.4 were determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding anything contained in this Section 5.4 to
the contrary, an Indemnifying Party that is a selling Holder will not be required to contribute any
amount in excess of the amount by which the total price at which the Registrable Securities were
sold by the selling Holder to the public exceeds the amount of any damages which such selling
Holder has, in the aggregate, otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.

17

 

Article VI. Rule 144

     Upon consummation of a Public Offering, the Company will file all reports required to be filed
by it under the Securities Act and the Exchange Act and will cooperate with any Holder to the
extent required from time to time to enable such Holder to sell its Registrable Securities without
registration under the Securities Act within the limitations of the exemptions provided by Rule 144
(or any successor provision). Upon the request of any Holder, the Company will deliver to such
Holder a written statement as to whether it has complied with such filing requirements.
Notwithstanding the foregoing, nothing in this Article VI will require the Company to
register any securities, or file any reports, under the Exchange Act if such registration or filing
is not required under the Exchange Act.

Article VII. Participation in Underwritten Offerings

     Notwithstanding anything contained herein to the contrary, no Person may participate in any
Underwritten Offering pursuant to a registration hereunder unless that Person (a) agrees to sell
its securities on the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.

Article VIII. Miscellaneous

     8.1 Notices. All notices, requests, claims, demands and other communications
hereunder will be in writing and will be given or made by delivery in person, by overnight courier,
by facsimile transmission, by electronic transmission or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following addresses (or at such
other address for a party specified in a notice given in accordance with this Section 8.1):

          (a) If to the Company:

Stewart & Stevenson LLC

1000 Louisiana Street, Suite 5900

Houston, Texas 77007

Facsimile: 713-751-xxxx

Attention: Chief Financial Officer

with a copy to:

Jones Day

222 E. 41st Street

New York, New York 10017

Facsimile: 212-755-7306

Attention: William F. Henze

          (b) If to a Holder, to such Holder’s address on file with the Company’s transfer agent.

18

 

All such notices and communications will be deemed to have been delivered or given upon receipt, if
delivered personally, by electronic transmission or by overnight courier; when receipt is
acknowledged, if sent by facsimile transmission and three Business Days after being deposited in
the mail, if mailed.

     8.2 Confidentiality. Each Holder will, and will cause its officers, directors,
employees, legal counsel, accountants, financial advisors and other representatives to, hold in
confidence any material nonpublic information received by them pursuant to this Agreement,
including without limitation any material nonpublic information included in any Registration
Statement or Prospectus proposed to be filed with the SEC or provided pursuant to Section
4.1(i). This Section 8.2 shall not apply to any information which (a) is or becomes
generally available to the public, (b) was already in the Holder’s possession from a
non-confidential source prior to its disclosure by the Company, or (c) is or becomes available to
the Holder on a non-confidential basis from a source other than the Company, provided that such
source is not known by the Holder to be bound by confidentiality obligations.

     8.3 Assignment. None of the parties to this Agreement may assign or delegate any of
its rights or obligations under this Agreement without the prior written consent of each of the
other parties hereto. Notwithstanding the foregoing, any Affiliate of a Holder that becomes a
record owner of Parman Capital Group Shares or Class B Shares, or of EC Shares, as the case may be,
shall become a Holder hereunder upon its delivery to the Company of its executed joinder hereto.

     8.4 No Third-Party Beneficiaries. Except as expressly set forth herein, this
Agreement will be binding upon and inure solely to the benefit of the parties hereto and their
respective successors and permitted assigns and nothing herein, express or implied, is intended to
or will confer upon any other Person any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.

     8.5 Entire Agreement. This Agreement constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, among the parties with respect to the subject matter hereof.

     8.6 Amendment and Waiver. This Agreement may not be amended or modified or any
provision hereof waived except by an instrument in writing signed by all of the parties to this
Agreement.

     8.7 Counterparts. This Agreement may be executed by facsimile signature and in any
number of counterparts, each such counterpart to be deemed an original and all such counterparts,
taken together, to constitute one instrument.

     8.8 Severability. If any term or other provision of this Agreement is invalid,
illegal or unenforceable under any law or public policy, all other terms and provisions of this
Agreement will nevertheless remain in full force and effect. Upon a determination that any term or
other provision is invalid, illegal or unenforceable, the parties hereto will endeavor in good
faith to replace the invalid, illegal or unenforceable provisions with valid, legal and enforceable

19

 

provisions the effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.

     8.9 Governing Law. This Agreement will be governed by, and construed in accordance
with, the laws of the State of New York, without giving effect to the principles of conflict of
laws thereof.

     8.10 Specific Performance. The parties hereto agree that irreparable damage would
occur in the event any provision of this Agreement was not performed in accordance with the terms
hereof and that the parties will be entitled to specify performance of the terms hereof, in
addition to any other remedy at law or equity.

     8.11 Further Assurances. The parties hereto will do such further acts and things
necessary to ensure that the terms of this Agreement are carried out and observed.

20

 

     IN WITNESS WHEREOF, each of the parties has executed this Agreement as of the date first
written above.

	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	STEWART & STEVENSON LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	HOLDERS:	 	 
	 
	 	 	 	 	 	 
	 	 	PARMAN CAPITAL GROUP LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	EC INVESTMENTS B.V.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	FRANK C. CARLUCCI III REVOCABLE TRUST	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	NINA ANSARY	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 	 	Nina AnsaryEX-10.7

 

Exhibit 10.7

STEWART & STEVENSON LLC

2007 INCENTIVE COMPENSATION PLAN

 

 

STEWART & STEVENSON LLC

2007 INCENTIVE COMPENSATION PLAN

	 	 	 	 	 
	SECTION	 	PAGE	 
	1. Purpose
	 	 	1	 
	 
	 	 	 	 
	2. Term
	 	 	1	 
	 
	 	 	 	 
	3. Definitions
	 	 	1	 
	 
	 	 	 	 
	4. Shares Available Under Plan
	 	 	5	 
	 
	 	 	 	 
	5. Limitations on Awards
	 	 	5	 
	 
	 	 	 	 
	6. Stock Options
	 	 	6	 
	 
	 	 	 	 
	7. Appreciation Rights
	 	 	7	 
	 
	 	 	 	 
	8. Restricted Shares
	 	 	8	 
	 
	 	 	 	 
	9. Restricted Stock Units
	 	 	9	 
	 
	 	 	 	 
	10. Performance Shares and Performance Units
	 	 	10	 
	 
	 	 	 	 
	11. Senior Executive Plan Bonuses
	 	 	11	 
	 
	 	 	 	 
	12. Transferability
	 	 	12	 
	 
	 	 	 	 
	13. Adjustments
	 	 	12	 
	 
	 	 	 	 
	14. Fractional Shares
	 	 	13	 
	 
	 	 	 	 
	15. Withholding Taxes
	 	 	13	 
	 
	 	 	 	 
	16. Administration of the Plan
	 	 	13	 
	 
	 	 	 	 
	17. Amendments and Other Matters
	 	 	14	 
	 
	 	 	 	 
	18. Governing Law
	 	 	14	 

 

 

STEWART & STEVENSON LLC

2007 INCENTIVE COMPENSATION PLAN

     Stewart & Stevenson LLC, a Delaware limited liability company (the “Company”), establishes the
Stewart & Stevenson LLC 2007 Incentive Compensation Plan (the “Plan”), effective as of September 5,
2007, subject to the approval of the Common Equity (as defined below) holders.

     1. Purpose. The purpose of the Plan is to attract and retain the best available talent and
encourage the highest level of performance by directors, executive officers and selected employees,
and to provide them incentives to put forth maximum efforts for the success of the Company’s
business, in order to serve the best interests of the Company and its Common Equity holders.

     2. Term. The Plan will expire on the tenth anniversary of the date on which it is approved by
the holders of the Common Equity (as defined below) of the Company. No further Awards will be made
under the Plan on or after such tenth anniversary. Awards that are outstanding on the date the
Plan terminates will remain in effect according to their terms and the provisions of the Plan.

     3. Definitions. The following terms, when used in the Plan with initial capital letters, will
have the following meanings:

     (a)
Appreciation Right means a right granted pursuant to Section 7.

     (b) Award means the award of a Senior Executive Plan Bonus; the grant of Appreciation
Rights, Stock Options, Performance Shares, Performance Units or Restricted Stock Units; or
the grant or sale of Restricted Shares.

     (c) Board means the Board of Directors of the Company.

     (d) Code means the Internal Revenue Code of 1986, as in effect from time to time.

     (e) Committee means:

     (i) with respect to any matter arising under the Plan that relates to a
Participant who is subject to Section 16 of the Exchange Act, the Incentive
Compensation Plan Subcommittee of the Compensation Committee of the Board, which
subcommittee at all times will consist of two or more members of the Compensation
Committee of the Board, all of whom are intended (A) to meet all applicable
independence requirements of the New York Stock Exchange or the principal national
securities exchange or principal market on or in which the Common Equity is traded
and (B) to qualify as “non-employee directors” as defined in Rule 16b-3 and as
“outside directors” as defined in regulations adopted under Section 162(m) of the
Code, as such terms may be amended from time to

 

 

time, provided, however, that the failure of a member of the Subcommittee to so
qualify will not invalidate any Award granted to such Participant under the Plan;

     (ii) with respect to any matter arising under the Plan that relates to any
other Participant, the Compensation Committee of the Board; and

     (iii) to the extent the administration of the Plan has been assumed by the
Board pursuant to Section 16, the Board.

     (f) Common Equity means the common units, or if the Company shall be converted to a
corporation the common stock, par value $.01 per share, of the Company or any security into
which such Common Equity may be changed by reason of any transaction or event of the type
described in Section 13.

     (g) Date of Grant means the date specified by the Committee on which an Award will
become effective.

     (h) Deferral Period means the period of time during which Restricted Stock Units are
subject to deferral limitations under Section 9.

     (i) Eligible Director means a member of the Board who is not an employee of the Company
or any Subsidiary.

     (j) Evidence of Award means an agreement, certificate, resolution or other type or form
of writing or other evidence approved by the Committee which sets forth the terms and
conditions of an Award. An Evidence of Award may be in any electronic medium, may be
limited to a notation on the books and records of the Company and need not be signed by a
representative of the Company or a Participant.

     (k) Exchange Act means the Securities Exchange Act of 1934, as amended.

     (l) Grant Price means the price per share of Common Equity at which an Appreciation
Right is granted.

     (m) Management Objectives means the measurable performance objectives, if any,
established by the Committee for a Performance Period that are to be achieved with respect
to an Award. Management Objectives may be described in terms of company-wide objectives
(i.e., the performance of the Company and all of its Subsidiaries) or in terms of objectives
that are related to the performance of the individual Participant or of the division,
Subsidiary, department, region or function within the Company or a Subsidiary in which the
Participant receiving the Award is employed or on which the Participant’s efforts have the
most influence. The achievement of the Management Objectives established by the Committee
for any Performance Period will be determined without regard to any change in accounting
standards by the Financial Accounting Standards Board or any successor entity.

     The Management Objectives applicable to any Award to a Participant who is, or is
determined by the Committee to be likely to become, a “covered employee” within the

2

 

meaning of Section 162(m) of the Code (or any successor provision) will be limited to
specified levels of, growth in, or performance relative to peer company or peer company
group performance in, one or more of the following performance measures (excluding the
effect of extraordinary or nonrecurring items unless the Committee specifically includes any
such extraordinary or nonrecurring item at the time such Award is granted):

	 	(i)	 	profitability measures;
	 
	 	(ii)	 	revenue or sales measures;
	 
	 	(iii)	 	business unit performance;
	 
	 	(iv)	 	leverage measures;
	 
	 	(v)	 	stockholder return;
	 
	 	(vi)	 	expense management;
	 
	 	(vii)	 	asset and liability measures;
	 
	 	(viii)	 	individual performance;
	 
	 	(ix)	 	supply chain efficiency;
	 
	 	(x)	 	customer satisfaction;
	 
	 	(xi)	 	productivity measures;
	 
	 	(xii)	 	cash flow measures;
	 
	 	(xiii)	 	return measures; and

(xiv) product development and/or performance

     If the Committee determines that, as a result of a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which the Company
conducts its business, or any other events or circumstances, the Management Objectives are
no longer suitable, the Committee may in its discretion modify such Management Objectives or
the related minimum acceptable level of achievement, in whole or in part, with respect to a
Performance Period as the Committee deems appropriate and equitable.

     (n) Market Value per Share means, at any date, the closing sale price of the Common
Equity on that date (or, if there are no sales on that date, the last preceding date on
which there was a sale) on the principal national securities exchange or in the principal
market on or in which the Common Equity is traded, or if not so traded, as reasonably
determined by the Committee.

3

 

     (o) Option Price means the purchase price per share payable on exercise of a Stock
Option.

     (p) Participant means a person who is selected by the Committee to receive an Award
under the Plan and who at that time is an executive officer or other employee of the Company
or any Subsidiary or an Eligible Director.

     (q) Performance Share means a bookkeeping entry that records the equivalent of one unit
or share of Common Equity awarded pursuant to Section 10.

     (r) Performance Period means, with respect to an Award, a period of time within which
the Management Objectives relating to such Award are to be measured. The Performance Period
for a Senior Executive Plan Bonus will be the fiscal year of the Company, and, unless
otherwise expressly provided in the Plan, the Performance Period for all other Awards will
be established by the Committee at the time of the Award.

     (s) Performance Unit means a unit equivalent to $1.00 (or such other value as the
Committee determines) granted pursuant to Section 10.

     (t) Restricted Shares means units or shares of Common Equity granted or sold pursuant
to Section 8 as to which neither the ownership restrictions nor the restrictions on transfer
have expired.

     (u) Restricted Stock Units means an Award pursuant to Section 9 of the right to receive
units or shares of Common Equity at the end of a specified Deferral Period.

     (v) Rule 16b-3 means Rule 16b-3 under Section 16 of the Exchange Act as amended (or any
successor rule to the same effect), as in effect from time to time.

     (w) Senior Executive Plan Bonus means an Award of annual incentive compensation made
pursuant to and subject to the conditions set forth in Section 11.

     (x) Spread means the excess of the Market Value per Share on the date an Appreciation
Right is exercised over (i) the Option Price provided for in the Stock Option granted in
tandem with the Appreciation Right or (ii) if there is no tandem Stock Option, the Grant
Price provided for in the Appreciation Right, in either case multiplied by the number of
units or shares of Common Equity in respect of which the Appreciation Right is exercised.

     (y) Stock Option means the right to purchase units or shares of Common Equity upon
exercise of an option granted pursuant to Section 6.

     (z) Subsidiary means (i) any corporation of which at least 50% of the combined voting
power of the then outstanding units or shares of Voting Stock is owned directly or
indirectly by the Company, (ii) any partnership of which at least 50% of the profits
interest or capital interest is owned directly or indirectly by the Company and (iii) any
other entity of which at least 50% of the total equity interest is owned directly or
indirectly by the Company.

4

 

     (aa) Voting Stock means the securities entitled to vote generally in the election of
directors or persons who serve similar functions.

     4. Shares Available Under Plan. The aggregate number of units or shares of Common Equity that
may be (i) subject to an Award of Appreciation Rights or Stock Options or (ii) issued or
transferred as Restricted Shares and released from all restrictions or in payment of Performance
Shares, Performance Units, Restricted Stock Units or Senior Executive Plan Bonuses will not exceed
in the aggregate 2.5 million units or shares. Such units or shares may be units or shares of
original issuance or treasury units or shares or a combination of the foregoing. The number of
units or shares of Common Equity available under this Section 4 will be subject to adjustment as
provided in Section 13 and will be further adjusted to include units or shares that relate to Awards
that expire or are forfeited. The number of units or shares of Common Equity available under this
Section 4 will not be adjusted to include (i) any units or shares withheld by, or tendered to, the
Company in payment of the Option Price with respect to a Stock Option or in satisfaction of the
taxes required to be withheld in connection with any Award granted under the Plan or (ii) any units
or shares subject to an Appreciation Right that are not transferred to a Participant upon exercise
of the Appreciation Right.

     5. Limitations on Awards. Awards under the Plan will be subject to the following limitations:

     (a) The maximum number of units or shares of Common Equity that:

     (i) may be subject to Stock Options or Appreciation Rights granted to a
Participant during any calendar year will not exceed 400,000 units or shares plus an
additional 100,000 units or shares with respect to Stock Options or Appreciation
Rights granted a Participant who has not previously been employed by the Company or
any Subsidiary and

     (ii) may be granted to a Participant during any calendar year as Performance
Shares, Restricted Shares or Restricted Stock Units may not exceed
200,000 units or shares plus an additional 50,000 units or shares with respect to Performance Shares,
Restricted Shares or Restricted Stock Units granted a Participant who has not
previously been employed by the Company or any Subsidiary.

     The limitations set forth in this Section 5(a) will apply without regard to
whether the applicable Award is settled in cash or in shares of Common Equity.

     (b) The maximum aggregate cash value of payments to any Participant for any Performance
Period pursuant to an award of Performance Units will not exceed 2% of such fiscal year’s
EBITDA (not including the effects of discontinued operations or extraordinary or
non-recurring items).

     (c) The payment of a Senior Executive Plan Bonus to any Participant in respect of any
fiscal year will not exceed 2% of such fiscal year’s EBITDA (not including the effects of
discontinued operations or extraordinary or non-recurring items).

5

 

     6. Stock Options. The Committee may from time to time authorize grants of options to any
Participant to purchase units or shares of Common Equity upon such terms and conditions as it may
determine in accordance with this Section 6. Each grant of Stock Options may utilize any or all of
the authorizations, and will be subject to all of the requirements, contained in the following
provisions:

     (a) Each grant will specify the number of units or shares of Common Equity to which it
relates.

     (b) Each grant will specify the Option Price, which will not be less than 100% of the
Market Value per Share on the Date of Grant.

     (c) Each grant will specify whether the Option Price will be payable (i) in cash or by
check acceptable to the Company, (ii) by the actual or constructive transfer to the Company
of units or shares of Common Equity owned by the Participant for at least six months (or,
with the consent of the Committee, for less than six months) having an aggregate Market
Value per Share at the date of exercise equal to the aggregate Option Price, (iii) with the
consent of the Committee, by authorizing the Company to withhold a number of units or shares
of Common Equity otherwise issuable to the Participant having an aggregate Market Value per
Share on the date of exercise equal to the aggregate Option Price or (iv) by a combination
of such methods of payment; provided, however, that the payment methods described in clauses
(ii) and (iii) will not be available at any time that the Company is prohibited from
purchasing or acquiring such units or shares of Common Equity.

     (d) To the extent permitted by law, any grant may provide for deferred payment of the
Option Price from the proceeds of sale through a bank or broker of some or all of the units
or shares to which such exercise relates.

     (e) Successive grants may be made to the same Participant whether or not any Stock
Options or other Awards previously granted to such Participant remain unexercised or
outstanding.

     (f) Each grant will specify the required period or periods of continuous service by the
Participant with the Company or any Subsidiary that are necessary before the Stock Options
or installments thereof will become exercisable.

     (g) Any grant may specify the Management Objectives that must be achieved as a
condition to the exercise of the Stock Options.

     (h) Any grant may provide for the earlier exercise of the Stock Options in the event of
a change in control or other similar transaction or event.

     (i) Stock Options may be (i) options which are intended to qualify under particular
provisions of the Code, (ii) options which are not intended to so qualify or (iii)
combinations of the foregoing.

6

 

     (j) On or after the Date of Grant, the Committee may provide for the payment to the
Participant of dividend equivalents thereon in cash or Common Equity on a current, deferred
or contingent basis.

     (k) The Committee will have the right to substitute Appreciation Rights for outstanding
Options granted to one or more Participants, provided the terms and the economic benefit of
the substituted Appreciation Rights are at least equivalent to the terms and economic
benefit of such Options, as determined by the Committee in its discretion.

     (l) Any grant may provide for the effect on the Stock Options or any units or shares of
Common Equity issued, or other payment made, with respect to the Stock Options of any
conduct of the Participant determined by the Committee to be injurious, detrimental or
prejudicial to any significant interest of the Company or any Subsidiary.

     (m) Each grant will be evidenced by an Evidence of Award, which may contain such terms
and provisions, consistent with the Plan, as the Committee may approve, including without
limitation provisions relating to the Participant’s termination of employment or other
termination of service by reason of retirement, death, disability or otherwise.

     7. Appreciation Rights. The Committee may also from time to time authorize grants to any
Participant of Appreciation Rights upon such terms and conditions as it may determine in accordance
with this Section 7. Appreciation Rights may be granted in tandem with Stock Options or separate
and apart from a grant of Stock Options. An Appreciation Right will be a right of the Participant
to receive from the Company upon exercise an amount which will be determined by the Committee at
the Date of Grant and will be expressed as a percentage of the Spread (not exceeding 100%) at the
time of exercise. An Appreciation Right granted in tandem with a Stock Option may be exercised
only by surrender of the related Stock Option. Each grant of an Appreciation Right may utilize any
or all of the authorizations, and will be subject to all of the requirements, contained in the
following provisions:

     (a) Each grant will state whether it is made in tandem with Stock Options and, if not
made in tandem with any Stock Options, will specify the number of units or shares of Common
Equity in respect of which it is made.

     (b) Each grant made in tandem with Stock Options will specify the Option Price and each
grant not made in tandem with Stock Options will specify the Grant Price, which in either
case will not be less than 100% of the Market Value per Share on the Date of Grant.

     (c) Any grant may provide that the amount payable on exercise of an Appreciation Right
may be paid (i) in cash, (ii) in units or shares of Common Equity having an aggregate Market
Value per Share equal to the Spread (or the designated percentage of the Spread) or (iii) in
a combination thereof, as determined by the Committee in its discretion.

7

 

     (d) Any grant may specify that the amount payable to the Participant on exercise of an
Appreciation Right may not exceed a maximum amount specified by the Committee at the Date of
Grant.

     (e) Successive grants may be made to the same Participant whether or not any
Appreciation Rights or other Awards previously granted to such Participant remain
unexercised or outstanding.

     (f) Each grant will specify the required period or periods of continuous service by the
Participant with the Company or any Subsidiary that are necessary before the Appreciation
Rights or installments thereof will become exercisable, and will provide that no
Appreciation Rights may be exercised except at a time when the Spread is positive and, with
respect to any grant made in tandem with Stock Options, when the related Stock Options are
also exercisable.

     (g) Any grant may specify the Management Objectives that must be achieved as a
condition to the exercise of the Appreciation Rights.

     (h) Any grant may provide for the earlier exercise of the Appreciation Rights in the
event of a change in control or other similar transaction or event.

     (i) On or after the Date of Grant, the Committee may provide for the payment to the
Participant of dividend equivalents thereon in cash or Common Equity on a current, deferred
or contingent basis.

     (j) Any grant may provide for the effect on the Appreciation Rights or any units or shares of Common Equity issued, or other payment made, with respect to the Appreciation
Rights of any conduct of the Participant determined by the Committee to be injurious,
detrimental or prejudicial to any significant interest of the Company or any Subsidiary.

     (k) Each grant will be evidenced by an Evidence of Award, which may contain such terms
and provisions, consistent with the Plan, as the Committee may approve, including without
limitation provisions relating to the Participant’s termination of employment or other
termination of service by reason of retirement, death, disability or otherwise.

     8. Restricted Shares. The Committee may also from time to time authorize grants or sales to
any Participant of Restricted Shares upon such terms and conditions as it may determine in
accordance with this Section 8. Each grant or sale will constitute an immediate transfer of the
ownership of units or shares of Common Equity to the Participant in consideration of the
performance of services, entitling such Participant to voting and other ownership rights, but
subject to the restrictions set forth in this Section 8. Each such grant or sale may utilize any
or all of the authorizations, and will be subject to all of the requirements, contained in the
following provisions:

     (a) Each grant or sale may be made without additional consideration or in consideration
of a payment by the Participant that is less than the Market Value per Share

8

 

at the Date of Grant, except as may otherwise be required by the Delaware General
Corporation Law.

     (b) Each grant or sale may limit the Participant’s dividend rights during the period in
which the units or shares of Restricted Shares are subject to any such restrictions.

     (c) Each grant or sale may provide that the Restricted Shares will be subject, for a
period to be determined by the Committee at the Date of Grant, to one or more restrictions,
including without limitation a restriction that constitutes a “substantial risk of
forfeiture” within the meaning of Section 83 of the Code and the regulations of the Internal
Revenue Service under such section.

     (d) Any grant or sale may specify the Management Objectives that, if achieved, will
result in the termination or early termination of the restrictions applicable to the units
or shares.

     (e) Any grant or sale may provide for the early termination of any such restrictions in
the event of a change in control or other similar transaction or event.

     (f) Each grant or sale will provide that during the period for which such restriction
or restrictions are to continue, the transferability of the Restricted Shares will be
prohibited or restricted in a manner and to the extent prescribed by the Committee at the
Date of Grant (which restrictions may include without limitation rights of repurchase or
first refusal in favor of the Company or provisions subjecting the Restricted Shares to
continuing restrictions in the hands of any transferee).

     (g) Any grant or sale may provide for the effect on the Restricted Shares or any units
or shares of Common Equity issued free of restrictions, or other payment made, with respect
to the Restricted Shares of any conduct of the Participant determined by the Committee to be
injurious, detrimental or prejudicial to any significant interest of the Company or any
Subsidiary.

     (h) Each grant or sale will be evidenced by an Evidence of Award, which may contain
such terms and provisions, consistent with the Plan, as the Committee may approve, including
without limitation provisions relating to the Participant’s termination of employment or
other termination of service by reason of retirement, death, disability or otherwise.

     9. Restricted Stock Units. The Committee may also from time to time authorize grants or sales
to any Participant of Restricted Stock Units upon such terms and conditions as it may determine in
accordance with this Section 9. Each grant or sale will constitute the agreement by the Company to
issue or transfer units or shares of Common Equity to the Participant in the future in
consideration of the performance of services, subject to the fulfillment during the Deferral Period
of such conditions as the Committee may specify. Each such grant or sale may utilize any or all of
the authorizations, and will be subject to all of the requirements, contained in the following
provisions:

9

 

     (a) Each grant or sale may be made without additional consideration from the
Participant or in consideration of a payment by the Participant that is less than the Market
Value per Share on the Date of Grant, except as may otherwise be required by the Delaware
General Corporation Law.

     (b) Each grant or sale will provide that the Restricted Stock Units will be subject to
a Deferral Period, which will be fixed by the Committee on the Date of Grant, and any grant
or sale may provide for the earlier termination of such period in the event of a change in
control or other similar transaction or event.

     (c) During the Deferral Period, the Participant will not have any right to transfer any
rights under the Restricted Stock Units, will not have any rights of ownership in the
Restricted Stock Units and will not have any right to vote the Restricted Stock Units, but
the Committee may on or after the Date of Grant authorize the payment of dividend
equivalents on such units or shares in cash or Common Equity on a current, deferred or
contingent basis.

     (d) Any grant or sale may provide for the effect on the Restricted Stock Units or any
units or shares of Common Equity issued free of restrictions, or other payment made, with
respect to the Restricted Stock Units of any conduct of the Participant determined by the
Committee to be injurious, detrimental or prejudicial to any significant interest of the
Company or any Subsidiary.

     (e) Each grant or sale will be evidenced by an Evidence of Award, which will contain
such terms and provisions as the Committee may determine consistent with the Plan, including
without limitation provisions relating to the Participant’s termination of employment or
other termination of service by reason of retirement, death, disability or otherwise.

     10. Performance Shares and Performance Units. The Committee may also from time to time
authorize grants to any Participant of Performance Shares and Performance Units, which will become
payable upon achievement of specified Management Objectives, upon such terms and conditions as it
may determine in accordance with this Section 10. Each such grant may utilize any or all of the
authorizations, and will be subject to all of the requirements, contained in the following
provisions:

     (a) Each grant will specify the number of Performance Shares or Performance Units to
which it relates.

     (b) The Performance Period with respect to each Performance Share and Performance Unit
will be determined by the Committee at the time of grant.

     (c) Each grant will specify the Management Objectives that, if achieved, will result in
the payment of the Performance Shares or Performance Units.

     (d) Each grant will specify the time and manner of payment of Performance Shares or
Performance Units which have become payable, which payment may be made in (i) cash, (ii)
units or shares of Common Equity having an aggregate Market Value per

10

 

Share equal to the aggregate value of the Performance Shares or Performance Units which
have become payable or (iii) any combination thereof, as determined by the Committee in its
discretion at the time of payment.

     (e) Any grant of Performance Shares may specify that the amount payable with respect
thereto may not exceed a maximum specified by the Committee on the Date of Grant. Any grant
of Performance Units may specify that the amount payable, or the number of units or shares
of Common Equity issued, with respect to the Performance Units may not exceed maximums
specified by the Committee on the Date of Grant.

     (f) On or after the Date of Grant, the Committee may provide for the payment to the
Participant of dividend equivalents on Performance Shares in cash or Common Equity on a
current, deferred or contingent basis.

     (g) Any grant may provide for the effect on the Performance Shares or Performance Units
or any units or shares of Common Equity issued, or other payment made, with respect to the
Performance Shares or Performance Units of any conduct of the Participant determined by the
Committee to be injurious, detrimental or prejudicial to any significant interest of the
Company or any Subsidiary.

     (h) Each grant will be evidenced by an Evidence of Award, which will contain such terms
and provisions as the Committee may determine consistent with the Plan, including without
limitation provisions relating to the payment of the Performance Shares or Performance Units
in the event of a change in control or other similar transaction or event and provisions
relating to the Participant’s termination of employment or other termination of service by
reason of retirement, death, disability or otherwise.

     11. Senior Executive Plan Bonuses. The Committee may from time to time authorize the payment
of annual incentive compensation to a Participant who is, or is determined by the Committee to be
likely to become, a “covered employee” within the meaning of Section 162(m) of the Code (or any
successor provision), which incentive compensation will become payable upon achievement of
specified Management Objectives. Subject to Section 5(c), Senior Executive Plan Bonuses will be
payable upon such terms and conditions as the Committee may determine in accordance with the
following provisions:

     (a) No later than 90 days after the first day of the Company’s fiscal year, the
Committee will specify the Management Objectives that, if achieved, will result in the
payment of a Senior Executive Plan Bonus for such year.

     (b) Following the close of the Company’s fiscal year, the Committee will certify in
writing whether the specified Management Objectives have been achieved. Approved minutes of
a meeting of the Committee at which such certification is made will be treated as written
certification for this purpose. The Committee will also specify the time and manner of
payment of a Senior Executive Plan Bonus which becomes payable, which payment may be made in
(i) cash, (ii) units or shares of Common Equity having an aggregate Market Value per Share
equal to the aggregate value of the Senior Executive

11

 

Plan Bonus which has become payable or (iii) any combination thereof, as determined by
the Committee in its discretion at the time of payment.

     (c) If a change in control occurs during a Performance Period, the Senior Executive
Plan Bonus payable to each Participant for the Performance Period will be determined at the
highest level of achievement of the Management Objectives, without regard to actual
performance and without proration for less than a full Performance Period. The Senior
Executive Plan Bonus will be paid at such time following the change in control as the
Committee determines in its discretion, but in no event later than 30 days after the date of
an event which results in a change in control.

     (d) Each grant may be evidenced by an Evidence of Award, which will contain such terms
and provisions as the Committee may determine consistent with the Plan, including without
limitation provisions relating to the Participant’s termination of employment by reason of
retirement, death, disability or otherwise.

     12. Transferability. Except as may be specifically provided therein, no Award may be sold,
pledged, assigned or transferred in any manner other than by will or the laws of descent and
distribution, pursuant to a qualified domestic relations order or, with the consent of the
Committee, by gifts to family members of the Participant, including to trusts in which family
members of the Participant own more than 50% of the beneficial interests, to foundations in which
family members of the Participant or the Participant controls the management of assets and to other
entities in which more than 50% of the voting interests are owned by family members of the
Participant or the Participant. No Stock Option or Appreciation Right granted to a Participant
will be exercisable during the Participant’s lifetime by any person other than the Participant or
the Participant’s guardian or legal representative or any permitted transferee.

     13. Adjustments.

     (a) The Committee will make or provide for such adjustments in (i) the maximum number
of units or shares of Common Equity specified in Sections 4 and 5, (ii) the number of units
or shares of Common Equity covered by outstanding Stock Options, Appreciation Rights,
Performance Shares and Restricted Stock Units granted under the Plan, (iii) the Option Price
or Grant Price applicable to any Stock Options and Appreciation Rights, and (iv) the kind of
units or shares covered by any such Awards (including units or shares of another issuer), as
the Committee in its discretion, exercised in good faith, determines is equitably required
to prevent dilution or enlargement of the rights of Participants that otherwise would result
from (x) any stock dividend, stock split, combination of units or shares, recapitalization
or other change in the capital structure of the Company, or (y) any merger, consolidation,
spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or
other distribution of assets, issuance of rights or warrants to purchase securities, or (z)
any other corporate transaction or event having an effect similar to any of the foregoing.
In the event of any such transaction or event, the Committee, in its discretion, may provide
in substitution for any or all outstanding Awards such alternative consideration as it, in
good faith, may determine to be equitable in the circumstances and may require in connection
with such substitution the surrender of all Awards so replaced.

12

 

     (b) The Committee may accelerate the payment of, or vesting with respect to, any Award
under the Plan upon the occurrence of a transaction or event described in this Section 13;provided, however, that in the case of any Award that constitutes a deferral of compensation
within the meaning of Section 409A of the Code, the Committee will not accelerate the
payment of the Award unless it determines in good faith that such transaction or event
satisfies the requirements of a change in control event under guidance issued by the
Secretary of the Treasury under Section 409A.

     14. Fractional Shares. the Company will not be required to issue any fractional share of
Common Equity pursuant to the Plan. The Committee may provide for the elimination of fractions or
for the settlement of fractions in cash.

     15. Withholding Taxes. To the extent that the Company is required to withhold federal, state,
local or foreign taxes in connection with any payment made or benefit realized by a Participant or
other person under the Plan, and the amounts available to the Company for such withholding are
insufficient, it will be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory to the Company for
payment of the balance of such taxes required to be withheld. In addition, if permitted by the
Committee, the Participant or such other person may elect to have any withholding obligation of the
Company satisfied with units or shares of Common Equity that would otherwise be transferred to the
Participant or such other person in payment of the Participant’s Award. However, without the
consent of the Committee, units or shares of Common Equity will not be withheld in excess of the
minimum number of units or shares required to satisfy the Company’s withholding obligation.

     16. Administration of the Plan.

     (a) Unless the administration of the Plan has been expressly assumed by the Board
pursuant to a resolution of the Board, the Plan will be administered by the Committee. A
majority of the Committee will constitute a quorum, and the action of the members of the
Committee present at any meeting at which a quorum is present, or acts unanimously approved
in writing, will be the acts of the Committee.

     (b) The Committee has the full authority and discretion to administer the Plan and to
take any action that is necessary or advisable in connection with the administration of the
Plan, including without limitation the authority and discretion to interpret and construe
any provision of the Plan or of any agreement, notification or document evidencing an Award.
The interpretation and construction by the Committee of any such provision and any
determination by the Committee pursuant to any provision of the Plan or of any such
agreement, notification or document will be final and conclusive. No member of the
Committee will be liable for any such action or determination made in good faith.

     (c) It is the Company’s intention that any Award granted under the Plan that
constitutes a deferral of compensation within the meaning of Section 409A of the Code and
the guidance issued by the Secretary of the Treasury under Section 409A satisfy the
requirements of Section 409A. In granting such an Award, the Committee will use its

13

 

best efforts to exercise its authority under the Plan with respect to the terms of such
Award in a manner that the Committee determines in good faith will cause the Award to comply
with Section 409A and thereby avoid the imposition of penalty taxes and interest upon the
Participant receiving the Award.

     (d)
If the administration of the Plan is assumed by the Board pursuant to Section 16(a),
the Board will have the same authority, power, duties, responsibilities and discretion given
to the Committee under the terms of the Plan.

     17. Amendments and Other Matters.

     (a) The Plan may be amended from time to time by the Committee or the Board but may not
be amended without further approval by the stockholders of the Company if such amendment
would result in the Plan no longer satisfying any applicable requirements of the New York
Stock Exchange (or the principal national securities exchange on which the Common Equity is
traded), Rule 16b-3 or Section 162(m) of the Code.

     (b) Neither the Committee nor the Board will authorize the amendment of any outstanding
Stock Option to reduce the Option Price without the further approval of the stockholders of
the Company. Furthermore, no Stock Option will be cancelled and replaced with Stock Options
having a lower Option Price without further approval of the stockholders of the Company.
The provisions of this Section 17(b) are intended to prohibit the repricing of “underwater”
Stock Options and will not be construed to prohibit the adjustments provided for in Section 13.

     (c) The Plan may be terminated at any time by action of the Board. The termination of
the Plan will not adversely affect the terms of any outstanding Award.

     (d) The Plan does not confer upon any Participant any right with respect to continuance
of employment or other service with the Company or any Subsidiary, nor will it interfere in
any way with any right the Company or any Subsidiary would otherwise have to terminate such
Participant’s employment or other service at any time.

     (e) If the Committee determines, with the advice of legal counsel, that any provision
of the Plan would prevent the payment of any Award intended to qualify as performance-based
compensation within the meaning of Section 162(m) of the Code from so qualifying, such Plan
provision will be invalid and cease to have any effect without affecting the validity or
effectiveness of any other provision of the Plan. If the Committee determines with the
advice of legal counsel, that compliance with any provision of the Plan is not required in
order for the payment of any Award (i) intended to qualify as performance based compensation
with the meaning of Section 162(m) of the Code to so qualify, or (ii) to be otherwise
deductible for federal income tax purposes, then the Committee may in its discretion not
comply with such Plan provision.

     18. Governing Law. The Plan, all Awards and all actions taken under the Plan and the Awards
will be governed in all respects in accordance with the laws of the State of Delaware,

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     including without limitation, the Delaware statute of limitations, but without giving effect to the principles of conflicts of laws of such State.

15

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