Standards of Business Practices

 

Our Basic Principles

 

Our Company is Great Because of its Employees

 

 

WE BELIEVE IN AND ARE PLEDGED TO:

 

 

Do Unto Others As You Would Have Them Do Unto You

There is no greater principle as a keystone to all other principles and implementations than our old Golden Rule. This philosophy must apply in all human relationships, whether it be with our own people, customers, suppliers, or the general public.

Select The Right People For The Right Job

Growth of an organization is dependent on care in selection of people who are physically, mentally and temperamentally suited for the position regardless of how big or how small the job. People should be selected who can develop and grow.

Provide Training And Education For Our Employees

Every possible means for training and education should be provided so that each employee may prepare and qualify for greater responsibilities as the opportunities occur.

Promote Cooperation Between Departments

Keen understanding between the various divisions and departments should be developed. Each individual can and will assist the other for the mutual benefit of all.

Encourage Ideas, Suggestions and Criticism

Provide the means for everyone to freely offer ideas, suggestions, or criticisms for improvement of every aspect of our business.

Provide Means Of Assisting Everyone In Our Organization To Develop Security For Themselves And Their Family

The Company should provide means for the individual to grow and develop and thus create personal and family security through their own efforts. The Company should provide:

Opportunities for promotion and growth of each individual;

Participation in profits due to individual efforts, wherever practicable;

A method for participation in stock ownership; and

Attractive insurance and saving plans to assist in completing their security programs.

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Business Practices Program

The “Standards of Business Practices” (“Standards”) are the focal point of the Company’s Business Practices Program. The purpose of the program is to provide employees, officers, and the Board of Directors (“Directors”) with the necessary information about the Company’s Standards so that they will be able to base their actions on these sound principles.

 

These words alone are not enough to help you in this task. The Business Practices Office was established to ensure that:

 

 

You know and understand the policies and Standards of the Company;

You know and understand the laws and regulations which affect your job;

If you have a question about a law or policy or about what the Company would consider proper business practice, you can get a prompt answer; and/or

If you witness something that appears improper, there is a safe way to inform the Company without fear of retaliation.

The Standards page does not contain an answer to every question and does not explain every law, regulation, or policy that you will need to know in doing your job. In some cases, there may be more detailed policies or guidelines. If you are ever uncertain about a law, regulation, or policy, you should seek clarification and may do so from:

 

Your manager or supervisor:

Name: ____________________     Phone: ____________________

 

Human Resources representative:

Name: ____________________     Phone: ____________________

 

Legal Department (Corporate General Counsel) at 713-868-7700;

Local Business Practices Advisor:

Name: ____________________     Phone: ____________________

 

Corporate Business Practices Office at 713-868-7700;

Stewart & Stevenson’s Business Practices Helpline at 1-800-272-4597; or

Stewart & Stevenson’s Business Practices Internet web site under “Contact Form” (http://www.ssss.com/ssss/bpform.asp).

All employees, officers, and Directors, as well as agents and representatives of the Company, must observe these Standards. You should contact your local Business Practices Advisor and/or the Business Practices Office to report any incidents that appear to violate our Standards.

 

A Simple Test for Proper Conduct

 

If you are not certain that your actions are proper, ask yourself the following questions:

 

 

How would I feel if my family or friends knew of my actions?

Would I behave differently if I knew my actions would be reported on the evening news?

Are my actions legal?

Does this meet the “Golden Rule” test?

Remember: If in doubt, do the right thing. If you don't know what's right, DON’T DO IT. First check with one of the sources of advice listed on this Standards page.

 

IF IN DOUBT, ASK!

 

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Our Commitments

 

Commitment to Shareholders

 

The Board of Directors and management insist upon adherence to all laws, regulations, policies, and the Standards by everyone acting on behalf of the Company. Consistent with the laws and regulations applicable to a company publicly-owned by its shareholders, the Company will present honest, accurate, and timely information about the financial and operating performance of the Company.

Commitment to Employees

 

Stewart & Stevenson depends on its dedicated and dependable employees to provide quality products and services in order to win and retain customers. The Company is committed to providing each employee the opportunity to make a positive contribution to the Company and be rewarded for it. The Company works diligently to:

 

Provide a clean, safe, drug-free work environment where people are challenged and treated with respect;

Promote employee development and equal opportunity;

Provide honest and timely feedback on employee performance; and

Provide competitive salaries and benefits to all employees.

Commitment to Customers

 

The cornerstone of Stewart & Stevenson's long-term success has been our real commitment to our customers. As a Company, we must always remember that our customers come first. We must be honest and open with our customers. We will:

Anticipate and seek innovative solutions to customer needs;

Deliver high quality products and services on time;

Respond to customer needs promptly and courteously without sacrificing quality;

Instill trust in our customers by promising only what we can deliver and honoring our commitments;

Only use approved materials, components, or procedures and always do specified testing requirements;

Only ship products that meet or exceed the customers' requirements; and

View customer relationships as long-term partnerships.

Commitment to Suppliers

 

Our suppliers are a valuable resource to the Company. We will treat them fairly and courteously in order to develop mutual trust. In making a selection of suppliers, we will always be objective and impartial and base buying decisions on objective factors such as price, quality, technical reliability and delivery. We will:

Safeguard suppliers' proprietary and confidential information;

Promote competition among suppliers to ensure value and continued supply;

Use a sole-source supplier only if absolutely necessary and approved by management;

Never expect suppliers to purchase our products as a condition to purchasing their products or solicit suppliers for financial sponsorship for events that are directly or indirectly for the benefit of Stewart & Stevenson;

Never disparage or relate weaknesses of a supplier to other suppliers or anyone outside of Stewart & Stevenson; and

Reward suppliers that have instituted a compliance and values-based ethics program.

Commitment to Community

 

We are committed to producing quality products and services in a safe, efficient, and environmentally sound manner while maintaining a workplace that protects the health and safety of our employees and the communities surrounding our facilities. To carry out this commitment, we will:

Conduct all our operations in compliance with all applicable environmental, health, and safety laws and regulations;

Set Company and employee performance standards that promote positive safety and environmental behavior, and provide resources, training, and incentives to ensure meeting these standards;

Encourage innovation in our processes and products to minimize or prevent the creation of waste and the discharge of contaminants to the air, land, or water;

Establish procedures and programs to implement our Company's environmental, health, and safety policy; and

Cooperate with regulatory agencies to address environmental, health, and safety issues.

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Everyone's Responsibility

 

Creating and maintaining an open and honest workplace is the responsibility of each and every employee at Stewart & Stevenson.

 

The Company

 

The Company has a responsibility to:

 

Implement the Business Practices Program;

Regularly update and distribute the Standards Handbook to all employees;

Make sure that every employee, through training and communications, is aware of and understands the Standards Handbook;

Communicate and apply policies and procedures fairly and consistently;

Provide ongoing training on other relevant laws, regulations, and policies;

Create a work environment that is supportive of the Standards and that promotes honesty and integrity;

Provide employees a way to voice concerns or relate problems in a safe and confidential way; and

Create an environment where employees can relate concerns without fear of retaliation.

Managers and Supervisors

 

Every employee who manages or supervises other employees has a responsibility to ensure that all elements of the Business Practices Program and Standards are implemented. Managers and supervisors will be evaluated on their efforts to:

Ensure that all new and existing employees receive and understand the Standards Handbook and understand its meaning and application;

Provide regular review and retraining of the Standards for each employee;

Demonstrate a commitment to the Standards through their words, deeds, and actions;

Emphasize the importance of following all aspects of the Standards; and

Ensure each employee knows where to report violations and that there will be no retaliation.

Every Employee

 

Each and every employee of this Company has a responsibility to:

Regularly read and understand the Standards Handbook;

Uphold the Standards in their words, deeds, and actions;

Ask a manager/supervisor, a Human Resources representative, the Legal Department, local Business Practices Advisor, or Corporate Business Practices Office if unsure about the proper thing to do;

Help create an environment that supports the Standards;

Advise other employees if they may be violating the Standards;

Be alert to any situations which have the potential to violate the Standards or which may be illegal or improper; and

Report any violations of the Standards to a manager/supervisor, a Human Resources representative, the Legal Department, local Business Practices Advisor, or Corporate Business Practices Office.

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Compliance with Laws and Company Policies

  The Standards establishes a code of ethics for all employees, officers, and Directors of the Company. (This includes, but is not limited to the Chief Executive Officer, the principal financial officer, controller, and/or principal accounting officer or persons performing similar functions.) Every person employed by or representing Stewart & Stevenson must ensure that they and the Company comply with the letter and spirit of all laws and regulations governing its activities. Failure to comply with the laws and regulations can have serious consequences to both the Company and its employees, such as loss of reputation, fines, suspension, debarment, termination, and imprisonment.

 

Antitrust

 

 

 

It is our goal to compete on the basis of free and fair competition and to provide our customers with the best products at a fair price. The antitrust laws of the United States and the trade laws of most countries and states in which we do business, state that in order to make competition free, open, and fair to consumers, we must not:

 

 

Fix or control prices with competitors;

Divide territories or markets;

Block the production or sale of any product or service;

Boycott certain suppliers or customers;

Conspire or plan with others to create a monopoly;

Engage in price discrimination to competing customers; or

Disparage a competitor or mislead a customer.

Employees involved in sales, marketing, and pricing should never discuss such matters, even informally, with competitors. Employees should be careful to protect the Company by not discussing pricing, terms and conditions, products, or markets with competitors. Employees should not attend a meeting where such matters are discussed and if a competitor initiates such a discussion, the employee should immediately leave and promptly report the matter to the Legal Department.

 

Q: At a recent trade show, one of our competitors mentioned that they are considering increasing their prices because of certain market pressures. Everyone in the industry is under the same pressures. Is it okay to discuss price plans?

A: No. You should never discuss our pricing plans even indirectly with anyone outside the Company. Similarly, you should never learn of a competitor's pricing plans from them or from anyone else unless such plans are publicly available. If a competitor begins to discuss pricing plans with you, you must immediately and clearly break off the discussion, even if that means being rude and walking out of a meeting. Any such occurrences should be reported immediately to the Legal Department.

 

 

Books and Records

 

 

Accurate and complete information is important for the efficient and proper management of our business. Many people rely on reports and records in order to do their jobs, including fellow employees, management, suppliers, government regulators, stockholders, investors, and creditors. The law also requires that the Company maintain its books and records to accurately and fairly represent transactions and dispositions of assets. It is a violation of Company policy for anyone to cause Company books and records to be misleading or inaccurate in any way. In particular, transactions must be executed only in accordance with management's authorization, false or misleading entries are strictly prohibited including undisclosed liabilities or assets, all payments of Company funds must be made only for the purpose described and authorized, and administrative and account controls must be maintained to provide reasonable assurance the Company is meeting the above requirements.

 

We expect all employees and agents of this Company to be truthful, honest, and as complete as possible in all records and reports. This includes the full, fair, accurate, timely, and understandable disclosure in the Company's periodic reports filed with the SEC and in other public communications; we must not make false or misleading statements. An employee shall not knowingly destroy or modify any Company document (paper or electronic) that is the subject of any criminal, civil, or administrative investigation or litigation. Any questions regarding the status of a document in connection with an investigation or litigation should be referred to the Legal Department.

 

 

Information should be honest and accurate within the Company so that problems can be identified and solved. Employees should respond completely and truthfully to requests by internal audit, legal, independent accountants, special counsel, and government agents. Such responses should include all relevant information, even if not specifically requested. It is important to know that it is now illegal to mislead any independent public accountant in the performance of a financial audit. Remember also:

 

Follow proper procedures to ensure that all transactions are properly authorized, documented, and recorded;

Payments for services rendered by outside sales representatives, cash disbursements from petty cash funds, and checks payable to cash are subject to close scrutiny;

Anonymous or unauthorized bank accounts, commingling of personal and company funds, off-book assets, and false invoices are strictly prohibited; and

Disbursements of funds from any Company account must reflect the actual recipient as the payee and be supported by adequate documentation showing the business purpose.

The Company maintains a variety of ways to report violations of these Standards, policies, laws, and regulations: to your manager/supervisor, Internal Audit, the Legal Department, your local Business Practices Advisor, the Corporate Business Practices Office, the Business Practices Internet and Intranet contact form, or the confidential "hotline" - the Business Practices Helpline at 1-800-272-4597. If you are aware of a violation concerning accounting or auditing matters, you can report it in confidence or anonymously through the Helpline to the Company's Audit Committee of the Board of Directors.

 

 

Q: I am aware that my manager inaccurately reported the parts sales volume to a major vendor. What should I do?

A: Under the terms of most of our distributor agreements, the Company is obligated to report on a periodic basis the amount of sales to customers located within and outside of the distribution area. Failure to submit accurate reports could subject the Company to penalties and possible loss of distribution rights. If you become aware of false reporting and you cannot go to your manager, then either tell your Division Vice President, Internal Audit, the Legal Department, or the Business Practices Office.

Q: Will I be reimbursed for business expenses, even if I have lost a required receipt?

A: All business-related expenses should be properly recorded. You should always make every effort to keep receipts. In the rare instance where you have lost a cash receipt and have attempted to secure a replacement copy, you must indicate that the receipt was lost and receive the approval of your supervisor.

 

 

Communications

 

The continued success of our Company depends upon open, accurate, and honest communication at all levels in the Company and with all parties outside of the Company while protecting Company sensitive information and documentation. We must always be truthful and accurate in all communications with shareholders, employees, customers, suppliers, and others.

No communication should intentionally mislead or make false or exaggerated claims. Our promotional literature and advertising must protect and enhance our reputation by providing clear and complete information about our own products and not making misleading statements about our competitors' products.

 

Our concern for truth in all communications includes communication between employees. Delivering bad news or making an honest assessment can sometimes be difficult, especially when dealing with your superiors. Sound information is the basis of sound business decisions. We must all work to create an environment where information flows freely and openly.

 

 

Q: A customer has asked me what are the Company's costs for certain parts we have sold to him. I happen to know, should I tell him the truth? 

A: Apart from the Company's obligations to the government and certain prime contractors, there is generally no obligation to disclose costs to customers. You should politely decline from providing such information.

Q: There has been a mistake made in your department that caused the company to miss a critical deadline. Your supervisor has directed everyone in the department not to discuss the matter with anyone. When a project investigative team asks you for your knowledge about the matter, what should you do?

A: Tell them what you know. Problems will not be solved if they are covered up to hide mistakes. If your supervisor threatens retaliation, contact your Human Resources Department or the Business Practices Office.

 

 

Company Assets

 

Protect the Company's assets and property as you would your own. Employees are occasionally permitted to perform routine personal tasks while at work, such as calling home briefly to check on a child, sending a short personal e-mail, briefly accessing a commercial web site, or making a copy of one's tax returns. However, excessive, non-routine, and expensive use of Company time, assets, or equipment is not permitted. Examples of unacceptable personal uses of Company resources that require a supervisor's permission could include:

Personal long-distance calls;

Photocopy tasks of more than 10 pages;

Use of computers, word processors, or printers for more than a few minutes;

Use of tools, equipment, and machines;

Use of Company paper, pens, folders, notebooks, or other assets at home for family members' use; and

Personal use of a Company vehicle.

All Company software must be used in strict accordance with all applicable licensing agreements and copyright laws. Use of Company resources for community or charitable purposes must also receive prior supervisory approval.

 

 

Q: I have some tools and equipment that I use at work. May I take them home to work on my house when no one else will need them?

A: Company tools and equipment are valuable assets and should be used for business purposes only. In certain circumstances, your supervisor may permit personal use.

Q: I would like to use my computer at work to type my son's school paper. Is this okay?

A: This may be okay if done outside of your normal working hours. You should first check with your supervisor. He or she will consider whether anyone else will need access to your computer at that time.

Q: I am responsible for planning a lot of off-site meetings for the Company. Some of the hotels offer to give me free rooms for my personal use. May I accept these offers?

A: You may not accept such offers. This could cause people to wonder if you are favoring the hotels that offer you free rooms. You should decline all such offers.

 

 

Company Confidential Information 

 

Among our Company's biggest assets are our trade secrets and confidential information. We must all take care to protect this information just as we would with any Company asset. Be careful never to discuss with anyone outside the Company any information that is not publicly available. This includes:

 

Unannounced products;

Trade Secrets, intellectual property;

Earnings that are not publicly disclosed;

Procurement plans;

Prices and business volumes;

Personnel information;

 Any classified information;

Capital requirements;

Confidential product performance data;

Marketing and service strategies;

Business plans; and

Business or supplier negotiations.

 

 

Employees should be careful not to inadvertently discuss confidential information with authorized Stewart & Stevenson personnel in the presence of anyone who is not authorized. This also applies to discussions with family members or friends who might unintentionally and innocently pass the information along. Discussions on Internet chat rooms of Company confidential information is also prohibited. Employees have an ongoing obligation to safeguard this information even after they leave Stewart & Stevenson.

 

As a Company that uses the technology of many of our suppliers and customers, we must also be careful to protect their proprietary technology and information. This includes government-classified information and any other information entrusted to us.

 

 

Q: A senior level position in your department is going to be announced in two weeks and your friend is a management recruiter who may know of a solid candidate, can you tell him about it?

A: No. Once the position is announced, refer your friend to the Human Resources Department.

 

 

Competitor's Information

 

In the normal course of business, it is common to obtain information about many companies, including competitors. There are, however, limits to the ways that information should be acquired and used, especially confidential information of the nature described in the preceding section, "Company Confidential Information," about competitors. Employees may learn about competitors' products and services through publicly available information, such as trade journals or published specifications. Under no circumstances should an employee undertake improper means to obtain or be the recipient of competitive information. It is improper for any employee or Company consultant or representative to seek, receive, or possess information other than publicly available information. The employee, consultant, or representative must not initiate contact and seek to acquire confidential information about a competitor through misrepresentation, deceit, or false pretense.

Further, Stewart & Stevenson will not hire competitors' employees in order to get confidential information. If an employee has somebody's trade secrets or proprietary confidential information when they join Stewart & Stevenson, they must not disclose it or cause the Company to make use of it. Legal and ethical requirements are involved and take precedence over gaining a competitive advantage.

 

 

Q: A consultant promises he can obtain, through confidential sources within your competitor's organization, valuable marketing and pricing information. What should you do?

A: Refuse to deal with him further and report the matter to the Legal Department or the Business Practices Office.

Q: We recently hired a person from one of our biggest competitors. She has extremely useful information about her old employer but it is confidential. Is it okay if we ask her to share it with us to help Stewart & Stevenson?

A: No. Even if she volunteers it, you cannot use the information. You should treat her confidential information just as you would want a former Stewart & Stevenson employee to treat our confidential information after leaving. She should be aware that our Company policy prohibits her from disclosing or relying on confidential information about her former company.

 

 

Conflicts of Interest

 

In general, if you think you have a conflict of interest, it is your responsibility to excuse yourself from making any decisions about that issue, disclose in writing the relevant facts, and explain the circumstances that create or could create the conflict of interest or appearance of a conflict of interest to your immediate manager/supervisor, Human Resources representative, the Legal Department, local Business Practices Advisor, Corporate Business Practices Office, or the Business Practices Helpline. Where applicable, contract workers must disclose such information in writing to the manager/supervisor of the business unit or group for whom they are performing work.

Outside Employment and Interests. Employees and officers may not work for or receive compensation from any competitor, customer, distributor, or supplier. Regular full-time employees shall not hold jobs with other employers, or engage in outside business or other interests, including self-employment, that adversely impact their job performance or the Company's interest.

 

Direct or Indirect Financial or Other Participation in Business. If you or any of your immediate family members (spouse, domestic partner, child(ren), parent(s)) have any direct or indirect financial or other participation in any business, which actually or potentially is a: (i) competitor of Stewart & Stevenson, (ii) supplier of goods or services to Stewart & Stevenson (including any company that provides goods or services to such supplier), or (iii) customer of Stewart & Stevenson, then you must disclose it and receive written Company management approval before any business is transacted with such business. (This does not include any equity interests in a publicly traded company that is less than .1% of the company's outstanding market capitalization or less than 1% of the employee and family's total equity holdings.)

 

 

Contractor and Supplier Relations. Any relationship between you and a contractor or supplier must in no way compromise your ability to transact business on a professional, impartial, and competitive basis or influence business decisions made by the Company.

Loans. The extension or arranging for the extension of credit or any renewal thereof to officers or Directors is prohibited.

 

Corporate Opportunities. Employees, officers, and Directors owe a duty to the Company to advance its legitimate interests when the opportunity arises. They may not appropriate to themselves, or to any other person or organization, the benefit of any actual or potential business opportunity that relates to the Company business without first obtaining the Company's consent.

 

Conflicts of interest issues are particularly fact specific and thus it is difficult to define and illustrate every possible fact situation in which a conflict of interest may exist. Accordingly, even if not specifically covered herein, your situation may result in a conflict of interest and it is your responsibility to disclose the facts of the situation.

 

 

Q: My daughter owns a local restaurant. I am responsible for planning a Company dinner. May I select my daughter's restaurant if the price is comparable to other restaurants being considered?

A: No. Although it may seem fair to you, it could seem to others as favoritism. Even the appearance of a conflict of interest should be avoided.

Q: My son was offered a job with one of the Company's suppliers. Is this a conflict?

A: This may be a conflict if you are involved in making any decisions that could affect that supplier. You should contact the Corporate Business Practices Office or the Legal Department about this issue. They may okay the situation or find an acceptable way to remedy the potential conflict.

Q: I have been approached by a friend to invest in a company that will produce a product, which might eventually be sold to Stewart & Stevenson. If my only involvement in the new company is financial, is it still a conflict of interest?

A: This has the potential to be a conflict depending on your position in the Company, the position you have to influence Company purchasing decisions, the amount of your investment, and the importance of Stewart & Stevenson as a future customer. Before investing, you should obtain prior approval from the Company.

Q: A Stewart & Stevenson customer has asked me to work as a consultant to it after business hours to help it develop a product that would not be of interest to Stewart & Stevenson. I deal with this customer fairly often at work. Could this be a conflict?

A: This situation has the potential to create a conflict or the appearance of a conflict of interest. Other employees, suppliers, or customers may wonder, wrongly or rightly, whether you favor the other company because of your special relationship with it. You should seek advice from the Legal Department or the Business Practices Office.

 

 

Discrimination and Harassment

 

The Company believes that the diversity and abilities of its employees are among its greatest assets and that all individuals deserve an equal opportunity on the basis of skill, dedication, knowledge, and experience.

It is the Company policy that the recruiting, hiring, transferring, promoting, compensating, disciplining, and terminating of employees will be without discrimination on the basis of race, sex, religion, age, national origin, handicap, disability, or Vietnam Era Veterans status. All persons will be treated equally and in conformity with the anti-discrimination laws of the jurisdiction where the Company does business.

 

No employee shall engage in, or permit any person that reports to him or her to engage in, slurs, jokes, intimidation, or other conduct that is degrading, demeaning, or offensive.

 

 

The Company has adopted various written policies regarding its employment practices. It is each employee's responsibility to become familiar with the scope and content of such policies and to implement such policies within his or her respective areas of responsibility.

 

Q: What should I do if I feel that I have been discriminated against at work?

A: If you believe that you or any other employee has been discriminated against at Stewart & Stevenson, you should report it immediately to your manager/supervisor, Human Resources representative, local Business Practices Advisor, or the Corporate Business Practices Office.

Q: Some people that I work with have calendars with pictures that are sexually suggestive. These pictures make me uncomfortable. Are they appropriate?

A: Pictures such as these are inappropriate at Stewart & Stevenson. If this or any other sexually suggestive behavior or words make you uncomfortable, they should be brought to the attention of your manager/supervisor.

Q: My manager has instituted policies on such things as maternity leave, sick leave, and comp time that are more restrictive than elsewhere in the Company. What should I do?

A: You should first speak to your manager about these differences. However, if you are uncomfortable talking to your manager, you should contact your Human Resources representative, local Business Practices Advisor, or the Corporate Business Practices Office.

 

 

Electronic Communications

 

All electronic information transmitted, received, or contained in the Company's information systems is the property of the Company and as such is to be used solely for job-related purposes. The use of any software and/or business equipment such as facsimiles, computers, and photocopiers for personal use is strictly limited, unless approved by your supervisor. Employees shall not use a code, access a file, or retrieve any stored communication other than where authorized, unless there has been prior clearance by an authorized Company representative. All pass codes are the property of the Company.

E-Mail. The use of e-mail is for business-related purposes, incidental and limited personal e-mail is permitted, however, extensive use, such as announcements, must be submitted to your local Human Resources representative for review and posting to the e-mail.

 

Internet Access. Internet access is provided for business communications, commerce, and research. The Internet access privilege given to employees is generally limited to legitimate business purposes. An isolated and brief visit to commercial web sites for personal reasons is permitted.

 

Use of the Internet is intended to benefit the Company and improve employee productivity. Visits or participation in web sites, news groups, or chat areas that contain, permit, or promote subjects that are not appropriate for Company use, such as racism, pirated music, videos, gambling, pornography, and/or other inappropriate materials is not permitted and may be illegal. All employees should safeguard their password to prevent unauthorized access.

When you access the Internet, your system is continuously monitored. A complete log of all action is recorded. The web sites you visit, as well as material downloaded, are logged. The duration spent at each web site is tracked, as is total time spent on line. Management can request the information and a report generated for their review.

Violation of this policy can result in revocation of your Internet access privileges and/or disciplinary action. Accidental access to an unauthorized web site may be unavoidable and will be treated as such.

Repeated attempts to access material deemed objectionable or inappropriate will be reported to your immediate supervisor.

Violations of this policy are subject to disciplinary action, up to and including termination.

 

Q: Someone has sent me an off-color joke by e-mail. I accessed it before I knew what it was. What do I do? Can I pass it on?

A: It's recognized that inappropriate e-mail can be accessed unintentionally. You should delete it without printing it or sending it to others.

Q: At lunch and after work, can I send a quick note to my son or access the web to check on the stock market or a flight schedule for personal travel?

A: If the use of the Internet is brief, infrequent, to a reputable web site, and takes place during non-working hours, then it may be permissible. Check with your supervisor if you have questions.

 

 

Export Control

 

Our contacts with foreign parties increase daily due to our growth in international sales, procurement from foreign subcontractors, and the overall global nature of Stewart & Stevenson and its affiliates. We cooperate regularly in research and development with companies in friendly nations. U.S. laws dealing with exports are very extensive and business activity is covered not only for sales to foreign countries but also to activity within the United States. The Company has established procedures to help ensure compliance with the export laws.

Anyone associated with Stewart & Stevenson who is involved with the export or re-export of goods, services, technology, or software is responsible for knowing about and following the U.S. export control regulations that apply to their duties. We expect strict compliance with these regulations and the Company's Export Procedures, including the sale or transfer of goods, services, technology, or software to a Stewart & Stevenson affiliate or to any third party.

 

You are expected to obtain advice from the responsible Export Administrator, the Corporate Export Manager, or the Legal Department before you make any commitments concerning export or re-export of goods, services, technology, or software. A discussion with a foreign person, even someone inside the United States, that discloses technical information may constitute an export. Export Administrators can provide you with training, information, and advice. Remember:

 

You are responsible for knowing with whom you are dealing;

Make sure that you have the appropriate export control authorization;

Marketing presentations and briefings made to foreign persons may be an export of technical data;

Displaying any technical data at both foreign and domestic trade shows may require export authorization;

Sending technical data or hardware, or having technical discussions with employees of Stewart & Stevenson who are in foreign offices may require appropriate export authorization;

You may need to obtain approval before you can send proposal information to a foreign customer; and

You must not do anything that would facilitate business with any sanctioned or embargoed country.

Q: Your supervisor has directed you to send by overnight courier some drawings and instructions marked "PROPRIETARY" to a potential supplier in Germany. What should you do?

A: Determine whether anyone has arranged for an export license or made an informed determination that one is not needed. Contact your Export Administrator to be sure they are aware of the shipment.

Q: A Stewart & Stevenson employee from China is visiting and is scheduled for a tour of the TVS facility. Is this a problem?

A: Whether an employee or not, before any non-U.S. citizen may have access to technical information, an export license must be secured either from the State or Commerce Departments.

 

 

Former Government Employees

 

Federal law prohibits the hiring of former government employees who were recently involved in the award or administration of Stewart & Stevenson government contracts. These laws also limit the assignment of former government employees to specific programs to which they had been exposed. Before any discussions are initiated with a current or recent former government employee regarding employment with the Company, the Stewart & Stevenson Corporate Human Resources Department must be contacted for instructions.

 

 

Gifts and Entertainment

 

The purpose of business gifts, meals, and entertainment expenditures or receipt by employees is to establish and foster business relationships. Some exchanges of gifts and business courtesies are normal and appropriate; we must always be careful about accepting or giving them. Customers should purchase our products because they provide the best quality, service, price, and because we stand behind our products. The sale of Stewart & Stevenson products or services should be free from even the perception that favorable treatment was given in exchange for business courtesies. We do not want to affect our customers' judgment or have suppliers try to affect our judgment based on gifts or entertainment.

For purposes of this policy, "gifts" and "entertainment" have the broadest meanings possible, including gifts, trips, services, entertainment, any other gratuitous item, event, benefit, or thing of value. Only accept or give gifts to business associates of $50 or less in value. Only offer or accept meals, entertainment, or social invitations of nominal value that are deemed to be customary, reasonable, and proper under the business circumstances. Do not accept gifts or entertainment that:

 

Cannot be reciprocated;

Carry any business obligation;

Involve significant or "out of the ordinary" expense; or

Present a potential embarrassment for you or the Company.

Policies Relating to Commercial Customers and Suppliers

 

Gifts. Employees are allowed to infrequently accept or offer gifts valued at $50 or less in connection with business relationships consistent with normal business practices in the industry and geographic area involved.

 

 

Meals and Entertainment. Employees are allowed to infrequently accept or offer meals and entertainment of reasonable value in connection with business relationships, at which both parties are present, and consistent with normal business practices in the industry and geographic area involved.

 

 

Trips. An employee must obtain permission from his or her Senior Vice President or the President prior to the receipt or offer of recreational activity involving travel or overnight lodging with a business associate. Where the employee offers such an activity, he or she should confirm with the anticipated recipient that the planned entertainment does not violate the business standard practices of the recipient's company.

 

Policies Relating to Government Customers/Officials, Government Entities, and Government Contractors/Subcontractors. Employees may not provide any gifts, entertainment, meals, or anything of value to any government customer/official, government entity, or government contractor/subcontractor except minor refreshments in conjunction with business discussions or promotional items with the Company logo of less than $10 in value.

 

Employees are prohibited from engaging in any conduct in violation of the Anti-Kickback Act of 1986. This law prohibits government contractors and subcontractors from providing or receiving anything of value for the purpose of giving or getting favorable treatment, including influencing a procurement action. Employees having influence on procurement decisions must be careful to avoid actual or potential conflicts of interest and may be required to certify from time to time that they have not violated, and do not know of any other employee who has violated, any provisions of the Act.

 

Q: A supplier offered me a discount exceeding $50 on one of their products. May I take advantage of this offer?

A: Unless the discount is offered to all employees, you may not accept it. Discounts are regarded as personal gifts and should be declined.

Q: A supplier sent me a pen and pencil set as a gift of thanks. May I accept it?

A: As long as the item is reasonably valued at $50 or less, you may accept it for personal use.

 

 

Government Contracts

 

The Company will strictly observe the laws, rules, and regulations that govern the acquisition of goods and services by any governmental agency of any country. Stewart & Stevenson employees who deal with any governmental agency are responsible for learning and complying with all rules that apply to acquisitions by the applicable federal, state, and local governments, and by foreign governments.

No employee shall attempt to obtain, from any source, government information that is procurement-sensitive, or any information of a competitor in circumstances where there is reason to believe the release of such information is unauthorized. Employees will strictly observe all laws and regulations regarding classified information.

 

Federal appropriated funds shall not be used to pay anybody to influence, or attempt to influence, anyone employed by the Executive or Legislative Branches, including Members of Congress and their staffs, in connection with the award of government contracts or contract modifications. When other than appropriated funds are used for this purpose to pay non-employees, a special report to the government must be made.

 

Employees will observe all other obligations of government contractors, including:

 

Proper charging of all labor and material costs;

Exclusion of any unallowable costs from charges to the government;

Full compliance with all rules related to the submission of "cost and pricing data" as that term is used in the Truth in Negotiations Act;

Full compliance with contract specifications and requirements, including testing and quality assurance requirements;

Full compliance with government rules governing accounting for independent research and development, as well as bid and proposal expenses; and

Proper treatment of all indirect costs, including any rules of cost allocability or allowability that may apply.

Q: A government contract has testing requirements that seem to overlap and duplicate other testing requirements. It seems like a waste of time and money. Do we have to keep doing both sets of tests?

A: Yes. The government contract requires that both tests be performed. The Company may not change testing requirements without first telling the government and getting their approval.

Q: I received an anonymous package containing a competitor's pricing data and proposal. What should I do?

A: You must immediately give the document to the Legal Department. You should not make any copies of the information.

Q: One of our government customer's regulations does not allow us to purchase a meal for their employees. Can I have them to my home for dinner instead?

A: The rules that prohibit the Company from buying a customer's meal also prohibit us from inviting them for a meal in our homes.

 

 

Inside Information

 

Employees of Stewart & Stevenson have access to information that investors outside the Company do not have. An employee must not use inside information to influence personal or anyone else's investment decisions regarding the Company's stock or the stock of any company with which it does business. The law defines insider trading as decisions about the purchase or sale of stock based on material information about the Company or a company with which it does business and which is not publicly available. "Material information" is information that would be important to a reasonable investor in deciding whether to buy, sell, or hold stock. Everyone should be careful not to disclose, even innocently, any non-public inside information to family members or friends who might innocently or unintentionally pass it along to others.

 

Q: I purchase Stewart & Stevenson stock every pay period as part of my 401K plan. Sometimes I receive information about quarterly earnings before the public does. Are my routine stock purchases illegal?

A: No. Regular purchases of stock that are part of your benefits as an employee are allowed, even if you have inside information at the time. However, you may not adjust your allocation in Company stock based on inside information.

Q: Am I allowed to tell a friend or relative about important Company information so that they can buy or sell stock?

A: No. You will be violating insider-trading laws in this situation. Both you and your friend or relative would be liable under the law.

 

 

International Business

 

Stewart & Stevenson has grown from a small local company to one doing business in countries throughout the world. Our employees and agents are expected to comply with all U.S. and foreign laws while conducting business outside the United States, including the U.S. Foreign Corrupt Practices Act (FCPA).

 

The FCPA and other U.S. laws prohibit the payment or offering of anything of value to foreign government officials, an employee of a foreign government or its instrumentality (including foreign government-owned businesses), an employee of a public international organization, or members of their families, political parties, officials of foreign political parties, or candidates for the purpose of influencing them to misuse their official capacity to obtain, keep, or direct business, or to gain any improper advantage. The acts of foreign agents used to facilitate business are considered the Company's acts. There are specific Company policies and procedures for engaging representatives in foreign countries that you should become familiar with. Any questions should be directed to the Legal Department.

 

Each employee and agent must be alert to the potential for an improper payment or other conveyance of value. He or she should understand the circumstances of the sale and payment for products and services by a foreign customer. Ignoring the possibility of improper payments is not a defense or acceptable. Penalties for violating the FCPA can be severe, including: fines, debarment from government business, and imprisonment.

 

The FCPA also requires the Company to maintain adequate financial records and internal controls to identify such payments: the law prohibits the intentional falsification of a company's books and records to hide payments proscribed under the FCPA.

 

Facilitating payments, which are small payments demanded by low-level government personnel to perform routine clerical functions, are strongly discouraged. Before any such payment is made, obtain the approval of your management and the Legal Department. Also note that for facilitating payments to be legal under U.S. law, they must be documented and reported.

 

Sometimes U.S. and international customs and laws are not the same. If U.S. law or Company policy is more restrictive than local law or custom, observe U.S. law and Company policy. If local law or custom is more restrictive than U.S. law or Company policy, observe local law or custom.

 

Stewart & Stevenson will not participate in foreign boycotts not approved by the U.S. government, nor provide any information that could be construed to further unsanctioned boycotts.

 

Q: We use foreign agents in many countries around the world to help us make sales. One agent asked me to increase his commission and I worry that the extra money may be used to pay or "bribe" local officials. What should I do?

A: If you suspect that the Company's money could be used improperly, you have a responsibility to investigate. No payments should be made to any agent unless you are certain that illegal payments are not being made. With every agent, you have a duty to ask how the Company's money is being spent. If you suspect that illegal payments are being made and do nothing to investigate or halt the practice, you and the Company could be liable under the law.

All contracts that the Company has with foreign agents contain provisions that obligate the agent to agree not to violate any laws, including U.S. anti-bribery laws. However, this alone is not enough to protect you or the Company. You have an obligation to go beyond the contract and make sure that our foreign agents are abiding by the law. This may seem insensitive to the agent; you must explain that this is necessary to do business with a U.S. company.

 

Q: S&S has sold a piece of equipment to Customer A, who intends to resell it to Customer B located in a foreign country. Customer B offers to forward a payment to S&S in excess of the price for which S&S agreed to sell to Customer A. Customer B asks S&S to remit the excess amount to Customer A. Is there a problem?

A: Possibly. You need to know more information. This request raises issues involving FCPA, currency exchange, money laundering, and possible violation of distributor agreements.

 

 

Political Contributions and Activities

 

Stewart & Stevenson believes in the value of democracy and the political process. We encourage employees to become involved in the political process at a local, state, or federal level.

The Company will not make, directly or indirectly, any contributions to a political party, candidate, or public official, except as permitted by law. This applies to local, state, and federal elections. Contributions made by individual employees or agents will not be reimbursed, directly or indirectly, by the Company, even if made in the Company's name.

 

Although the Company does not normally make political contributions, it has created a Political Action Committee (PAC) that can legally receive contributions from selected employees and make contributions to candidates and political organizations in connection with campaigns. Contributions to the PAC are confidential and voluntary. Employees should not use Company time or resources, including telephones and photocopiers, to solicit contributions or any other form of support for political purposes. Under no circumstances should an employee pressure another employee or supplier to make political contributions to, or work for, a candidate or political organization.

 

Q: On my free time, I volunteer for a political candidate. Is it okay for me to use my office to do some of this work?

A: No. You may not use Company time or resources to support any candidate or other political cause.

Q: Can my boss encourage me to contribute to a political campaign?

A: No. Any type of encouragement, no matter how innocent, by a supervisor could be perceived as coercion.

Q: Can the Company require me to contribute to its Political Action Committee (PAC)?

A: No. You may choose to participate in the Company's PAC, but any contributions are completely voluntary and confidential.

 

 

Solicitations

 

The Company limits solicitation and distribution on its premises because such activities left unrestricted can interfere with normal operations of the organization, can be detrimental to employee efficiency, can be annoying to customers, and can pose a threat to security. For details of the Company Policy, see the Human Resources Department.

 

Q: One of our coworker's homes burned to the ground. Is there some way we can collect donations of money and clothing to help this family?

A: Yes. Contact your Human Resources representative for written authorization and instructions on how to go about this collection.

 

 

Waivers

 

The full Board of Directors or a designated committee of independent Directors must approve waivers of the Standards involving any officer or Director. Any such waiver granted an officer or Director must be timely disclosed to the Company's shareholders. Other employees may request a waiver of any Standard from the employee's Division Vice President with approval in advance by the Business Practices Policy Committee. In general, the granting of waivers is discouraged.

 

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Abiding by the Standards

 

Discipline

 

Stewart & Stevenson stands behind the Standards and will fairly enforce them. Violations of the Standards will result in one or more of the following depending on the nature, frequency, and severity of the violation:

 

Warning;

Reprimand (marked in personnel file);

Probation;

Temporary suspension;

Discharge;

Reimbursement of losses or damages; or

Criminal or civil prosecution.

 

How to Get Help

 

The Company maintains a variety of ways to report all violations of these Standards, policies, laws, and regulations including: your manager/supervisor, Human Resources representative, Internal Audit, the Legal Department, your local Business Practices Advisor, the Corporate Business Practices Office, the Business Practices Internet and Intranet contact form, and the confidential "hotline" - the Business Practices Helpline.

Some of the resources where you can feel free to ask questions or raise concerns about the Standards are the: Legal Department or Corporate Business Practices Office (both can be contacted via Corporate's main phone number, 713-868-7700), the Business Practices Helpline at 1-800-272-4597, or the Business Practices Internet web site under "Contact Form" (http://www.ssss.com/ssss/ bpform.asp). If you are aware of a violation concerning accounting or auditing matters, you can report it in confidence or anonymously through the Business Practices Helpline to the Company's Audit Committee of the Board of Directors.

 

 

 

Confidentiality

 

Communications with your Business Practices Advisor or the Corporate Business Practices Office will be treated confidentially in accordance with legal obligations.

 

If your identity is needed to address your question or concern, you will be advised in advance. The Business Practices Office will make every effort to maintain your confidentiality but it cannot guarantee it, particularly in the event of legal proceedings.

 

Anonymous communications are accepted on the Business Practices Helpline. Not knowing who you are can make it very difficult to solve and understand certain problems. If you must remain anonymous, the Helpline can assign you a case number and you may call in later with your number to receive information on your concern. The Business Practices Office cannot discuss any confidential information such as discipline of other employees with you.

 

 

 

Use of the Business Practices Program 

 

Any employee, officer, Director, supplier, contractor, customer, agent, or representative may make use of the Business Practices Office to voice concerns or to receive clarification. However, any attempts to use the Business Practices Office to intentionally harm a person through false accusations or other wrongful actions are prohibited. Employees who report a problem in good faith and believe it to be true will not be reprimanded.

No employee should ever retaliate or threaten retaliation to another employee for raising a concern about the enforcement of the Standards or any other Company policy. This violates Company policy and the law.

 

 

Q: If I have a question about proper business conduct or have witnessed something that may be improper, whom should I contact?

A: While we encourage you to go to your manager/supervisor with your concerns, there may be times when it would be impractical to do so. If this is the case or if your manager/supervisor does not give you a satisfactory response, you can turn to a representative from the Business Practices Office. Most company locations have a designated Business Practices Advisor. The Advisor will usually be an employee who has other job responsibilities and who has been specially trained on how to help other employees who have raised concerns. The Corporate Business Practices Office is responsible for the overall management of the Business Practices Program throughout the corporation. He or she is the person who will ensure that you receive a prompt response and oversee any necessary investigation. The Business Practices Helpline and Intranet site are also available.

Q: Sometimes being ethical means losing business or profit. Does the Company really expect me to be ethical if it means losing business?

A: Yes. Stewart & Stevenson is committed to preserving its reputation for honesty and integrity in the long run. Our long-term profitability depends on your ethical conduct today and every day.

Q: I recently saw something at work that I believe breaks the law but I wasn't completely sure. I am afraid to report it in case I am wrong.

A: Anything that you witness that you honestly believe could be illegal, wrong, or in violation of Company policy should be reported to your manager/supervisor, Human Resources representative, the Legal Department, your local Business Practices Advisor, the Corporate Business Practices Office, the Business Practices Helpline, or the Business Practices Intranet site. As an employee of Stewart & Stevenson, it is your duty and responsibility to report such problems. Employees who report a problem in good faith and believe it to be true will not be reprimanded. The only time employees will be disciplined for contacting the Business Practices Office is when they deliberately report something that they know is false or misleading in order to harm someone else.

Q: What should I do if my supervisor asks me to do something which I think is unethical or illegal?

A: If you are ever asked to do something that you believe is wrong, you should not do it, no matter who asks you. If you are comfortable talking to your supervisor, this should be your first step. If you are not comfortable talking to your supervisor or if you do not receive a satisfactory response, contact your local Business Practices Advisor or the Corporate Business Practices Office.

Q: Do our Standards apply to consultants, agents, or other representatives of the Company?

A: Yes. When the Company hires any representative, agent, or consultant, that person should be given a copy of the Standards Handbook and is expected to abide by it just like employees of Stewart & Stevenson.