S-8

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Registration No. 33-............

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-8
 
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933

STEWART & STEVENSON SERVICES, INC.
(Exact name of registrant as specified in its charter)

Texas (State or other jurisdiction of incorporation or organization)	74-1051605 (I.R.S. Employer Identification Number)
2707 North Loop West Houston, Texas (Address of Principal Executive Offices)	77008 (Zip Code)

STEWART & STEVENSON SERVICES, INC.
AMENDED AND RESTATED
1996 DIRECTOR STOCK PLAN, AS AMENDED
(Full title of the plan)

Carl B. King
P. O. Box 1637
Houston, Texas 77251-1637
(Name and address of agent for service)

(713) 868-7700
(Telephone number, including area code, of agent for service)

CALCULATION OF REGISTRATION FEE

Title of Securities to be registered	Amount to be registered(1)	Proposed maximum offering price per share(2)	Proposed maximum aggregate offering price(2)	Amount of registration fee
Common Stock, without par value per share	300,000	$16.34	$4,902,000	$621.08

(1)

Pursuant to Rule 416(a) of the Securities Act of 1933, as amended, this Registration Statement shall also cover any additional shares of the registrant's common stock, no par value ("Common Stock") that become issuable under the Stewart & Stevenson Services, Inc. Amended and Restated 1996 Director Stock Plan, as amended, by reason of any stock dividend, stock split, recapitalization or other similar transaction affected without the receipt of consideration that increases the number of the registrant's outstanding shares of Common Stock. The number of shares of Common Stock stated above includes Common Share Purchase Rights which, prior to the occurrence of certain events, will not be exercisable or evidenced separately from the Common Stock.

(2)

The Proposed Maximum Offering Price Per Share is estimated in accordance with Rules 457(c) and 457(h) under the Securities Act of 1933, as amended, solely for the purpose of computing the amount of the registration fee and is based the average of the high and low sales price of a share of the registrant's Common Stock as reported by the New York Stock Exchange on August 26, 2004.

PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

        This Registration Statement registers additional securities of the same class as other securities for which registration statements on this Form (Registration Statement 333-15271 and 333-86144, the "Earlier Registration Statements") relating to the Stewart & Stevenson Services, Inc. Amended and Restated 1996 Director Stock Plan (the "Earlier Plan") is effective. Pursuant to Instruction E to Form S-8, the contents of the Earlier Registration Statements are incorporated herein by reference, except to the extent such contents are superseded by the contents of this Registration Statement.

        Amendment No. 1 to the Stewart & Stevenson Services, Inc. Amended and Restated 1996 Director Stock Plan (which amended the Earlier Plan) was adopted and approved by the Board of Directors of Stewart & Stevenson Services, Inc., a Texas corporation (the "Company"), on March 31, 2004, and was adopted and approved by the shareholders of the Company on July 9, 2004.

Item 3. Incorporation of Documents by Reference.

        The following documents are hereby incorporated by reference in this Registration Statement:

        (a)   The Annual Report on Form 10-K of the Company for the fiscal year ended January 31, 2004, as filed on April 15, 2004, as amended on May 27, 2004.

        (b)   The Quarterly Report on Form 10-Q of the Company for the quarter ended May 1, 2004, as filed on May 25, 2004.

        (c)   The Quarterly Report on Form 10-Q of the Company for the quarter ended July 31, 2004, as filed on August 26, 2004.

        (d)   The description of the Company's Common Stock included in the Company's registration statement on Form 8-A, filed on May 31, 1977.

        (e)   The description of the Rights to Purchase Shares of the Company's Common Stock that are attached to the Common Stock, included in the Company's registration statement on Form 8-A, filed on March 16, 1995.

        All documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, prior to the filing of a post-effective amendment which indicates that all securities have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference herein and to be a part hereof from the date of filing of such documents.

Item 4. Description of Securities.

        Not applicable.

Item 5. Interests of Named Experts and Counsel.

        The validity of the issuance of the shares of Common Stock registered hereby will be passed upon by William L. Moll, Jr., Managing Attorney for the Company. Mr. Moll beneficially owns 9,375 shares of Common Stock, including 9,375 shares which Mr. Moll has the right to acquire within 60 days.

Item 6. Indemnification of Directors and Officers.

        Article 2.02-1 of the Texas Business Corporation Act provides in relevant part that:

1)

A corporation may indemnify any officer or director from and against any judgments, penalties, fines, settlements and reasonable expenses actually incurred by him in connection with a threatened, pending or completed action, suit, investigation or other proceeding to which he is, was or is threatened to be a party; provided that it is determined by the Board of Directors, a committee thereof, special legal counsel or a majority of the stockholders that

2

such officer or director: (a) acted in good faith; (b) reasonably believed that his conduct was in the best interest of the corporation or was, in some circumstances, at least not opposed to the corporation's interest and (c) in a criminal case, had no reasonable cause to believe his conduct was unlawful. Such indemnity is limited to the reasonable expenses actually incurred in matters as to which the officer or director is found liable to the corporation or is found liable on the basis that a personal benefit was improperly received by him. No indemnification is permitted with respect to any proceeding in which the officer or director is found liable for willful or intentional misconduct in the performance of his duty to the corporation.

2)

A corporation shall indemnify a director against reasonable expenses incurred by him in connection with a threatened, pending or completed action, suit, investigation or other proceeding to which he is, was or was threatened to be a party if he has been wholly successful in its defense.



3)

A corporation may advance an officer or director the reasonable costs of defending an action, suit, investigation or other proceeding in certain cases.



4)

A corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article.

        The bylaws of the Company provide in relevant part:

        "Section 6.9. Indemnification of Officers and Directors. The Corporation shall indemnify any person against any judgment, penalty, fine, settlement and reasonable expenses incurred by him in connection with any threatened, pending or completed action, suit or proceeding in which such person is or is threatened to be made a party because he is or was serving as an officer or director of the Corporation or at the request of the Corporation as an officer, director, partner, venturer, proprietor, trustee, employee, agent or other functionary of another entity and (i) such person is wholly successful in the defense thereof, or (ii) it is determined in the manner required by law that such person conducted himself in good faith, reasonably believed that his conduct was in the best interest of the Corporation and had no reasonable cause to believe that his conduct was unlawful; provided, however, that no person shall be indemnified if such indemnity is prohibited by applicable law. Any such indemnification shall be reported in writing to the shareholders of the Corporation on or before the notice or waiver of notice of the next shareholders' meeting and in any event within twelve (12) months of the indemnification. The right of indemnification under this Section 6.9 shall be in addition to any other rights to which such persons may be entitled and is intended to provide the broadest benefits permitted by law."

        The Company has entered into indemnification agreements with each officer and director under which the Company has agreed to indemnify such persons to the fullest extent permitted by applicable laws and the bylaws of the Company. The Company has also purchased directors and officers liability and corporation reimbursement policies in the aggregate amount of $50,000,000, which, subject to certain exceptions, protect the officers and directors of the Company against liabilities arising from any claim for breach of duty, neglect, error, misstatement, misleading statement, omission or other act attempted, committed or allegedly committed by reason of the director or officer acting in such capacity.

Item 7. Exemption from Registration Claimed.

        Not applicable.

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Item 8. Exhibits.

        The following exhibits are filed as a part of this Registration Statement pursuant to Item 601 of Regulation S-K.

4.1

Stewart & Stevenson Services, Inc. Amended and Restated 1996 Director Stock Plan, as amended.



5.1

Opinion of William L. Moll, Jr., Managing Attorney for the Company.



23.1

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.



23.2

Consent of William L. Moll, Jr., Managing Attorney for the Company.

Item 9. Undertakings.

        The undersigned registrant hereby undertakes:

(1)

To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

(i)

To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

(ii)

To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement;

(iii)

To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

Provided, however, That paragraph (1)(i) and (1)(ii) of this section do not apply if the registration statement is on Form S-3, Form S-8 or Form F-3, and the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.

(2)

That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3)

To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

        The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

        Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, and the State of Texas, on the 30th day of August, 2004.

STEWART & STEVENSON SERVICES, INC.
By:	/s/  MAX L. LUKENS Max L. Lukens President and Chief Executive Officer
By:	/s/  JOHN B. SIMMONS John B. Simmons Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer)
By:	/s/  L. SCOTT BIAR L. Scott Biar Controller and Chief Accounting Officer (Principal Accounting Officer)

5

        Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities indicated on the 30th day of August, 2004.

/s/  HOWARD WOLF Howard Wolf Director	/s/  ROBERT S. SULLIVAN Robert S. Sullivan Director
/s/  MAX L. LUKENS Max L. Lukens Director	/s/  KHLEBER V. ATTWELL Khleber V. Attwell Director
/s/  CHARLES R. OFNER Charles R. Ofner Director	/s/  DARVIN M. WINICK Darvin M. Winick Director
/s/  MONROE M. LUTHER Monroe M. Luther Director	/s/  JAMES M. TIDWELL James M. Tidwell Director

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EXHIBIT INDEX

4.1

Stewart & Stevenson Services, Inc. Amended and Restated 1996 Director Stock Plan, as amended

5.1

Opinion of William L. Moll, Jr., Managing Attorney for the Company

23.1

Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm

23.2

Consent of William L. Moll, Jr., Managing Attorney for the Company

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PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents by Reference.
Item 4. Description of Securities.
Item 5. Interests of Named Experts and Counsel.
Item 6. Indemnification of Directors and Officers.
Item 7. Exemption from Registration Claimed.
Item 8. Exhibits.
Item 9. Undertakings.

SIGNATURES
EXHIBIT INDEX

EX-4.1

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EXHIBIT 4.1

STEWART & STEVENSON SERVICES, INC.

AMENDED AND RESTATED
1996 DIRECTOR STOCK PLAN

April 8, 2002

TABLE OF CONTENTS

		Page
ARTICLE I. PURPOSE		B-3
ARTICLE II. ELIGIBILITY		B-3
ARTICLE III. STOCK SUBJECT TO THE PLAN		B-3
ARTICLE IV. DIRECTOR STOCK AWARDS		B-3
ARTICLE V. TERMS, CONDITIONS AND FORM OF OPTIONS		B-4
	Section 5.1 Non-Statutory Stock Options	B-4
	Section 5.2 Option Grant Dates	B-4
	Section 5.3 Transferability	B-4
	Section 5.4 Vesting and Term of Option	B-4
	Section 5.5 Change of Control	B-4
	Section 5.6 Manner of Exercise	B-5
	Section 5.7 Termination of Directorship	B-5
ARTICLE VI. OPTION PRICE		B-5
ARTICLE VII. VALUATION OF STOCK		B-5
ARTICLE VIII. NO RIGHT TO CONTINUE AS A DIRECTOR		B-6
ARTICLE IX. ADJUSTMENT TO STOCK		B-6
ARTICLE X. EFFECTIVE DATE		B-6
ARTICLE XI. AMENDMENT OF THE PLAN		B-6
ARTICLE XII. USE OF PROCEEDS		B-6
ARTICLE XIII. COMPLIANCE WITH APPLICABLE LAWS		B-6
ARTICLE XIV. GOVERNING LAW		B-6
ARTICLE XV. SUCCESSORS		B-6

STEWART & STEVENSON SERVICES, INC.
AMENDED AND RESTATED 1996 DIRECTOR STOCK PLAN

ARTICLE I. PURPOSE

        The purpose of this Amended and Restated 1996 Director Stock Plan (the "Plan") of Stewart & Stevenson Services, Inc. (the "Company") is to encourage ownership in the Company by outside directors of the Company whose continued services are considered essential to the Company's continued progress, to provide them with a further incentive to continue as directors of the Company, and to increase the value of the Company.

ARTICLE II. ELIGIBILITY

        Each director of the Company is eligible to participate in the Plan, unless he or she is an officer or employee of the Company or any subsidiary of the Company ("Eligible Director").

ARTICLE III. STOCK SUBJECT TO THE PLAN

        The total number of the Company's authorized but unissued shares of common stock, without par value, ("Stock") with respect to which Director Stock Awards and options may be granted shall not exceed in the aggregate 350,000 shares. The class and aggregate number of shares of Stock that may be subject to Director Stock Awards and options granted under the Plan shall be subject to adjustment in accordance with Article IX. In connection with the issuance of shares of Stock under the Plan, the Company may utilize treasury shares or authorized but unissued shares. If any Director Stock Award or option under the Plan shall expire or terminate for any reason without having been exercised in full or if any Director Stock Award or option shall be forfeited, the shares subject to the unexercised or forfeited portion of such award or option shall again be available for purposes of the Plan.

ARTICLE IV. DIRECTOR STOCK AWARDS

        On the date of each annual meeting of the Company's shareholders ("Annual Meeting") after the Effective Date (within the meaning of Article X), the Company will, without cost to the grantee and without the exercise of the discretion of any person or persons, award and issue to each Eligible Director who is elected to serve a term as a director at each such meeting and to each Eligible Director who is serving as a director for a term that continues after such meeting, that number of shares of Stock (rounded down to the nearest whole share) determined by dividing (i) the sum of $15,000 by (ii) the fair market value (as determined in Article VII) of a share of Stock on the date of such meeting. If an Eligible Director is elected or appointed to serve a term as a director on a date other than the date of the Company's Annual Meeting and has not otherwise received a Director Stock Award for such year, the Company will, without cost to the grantee and without the exercise of the discretion of any person or persons, award and issue to such Eligible Director a prorated Director Stock Award equal to the product of (X) the quotient of $15,000 divided by the fair market value (as determined in Article VII) of a share of Stock on the date of such election or appointment, multiplied by (Y) the quotient of the number of days remaining until the Company's next Annual Meeting divided by 365 days. With respect to each Director Stock Award, the Eligible Director shall pay to the Company all amounts, if any, that the Company is required to collect and remit to the Internal Revenue Service or any other taxing authority as a result of such award.

ARTICLE V. TERMS, CONDITIONS AND FORM OF OPTIONS

        Each option granted under this Plan shall be evidenced by a written agreement that shall be subject to the following terms and conditions:

        Section 5.1    Non-Statutory Stock Options.    All options granted under the Plan shall be nonstatutory options, not entitled to special tax treatment under Section 422 of the Internal Revenue Code of 1986, as amended to date and as may be further amended from time to time (the "Code").

        Section 5.2    Option Grant Dates.    On the date of each Annual Meeting after the Effective Date of the Plan, the Company will, without cost to the grantee and without the exercise of the discretion of any person or persons, grant to each Eligible Director who is elected to serve a term as a director at such meeting and to each Eligible Director who is serving as a director for a term that continues after such meeting, an option to acquire 5,000 shares of Stock at an exercise price determined in accordance with Article VI and subject to adjustment under Article IX; provided, that the Board of Directors may, in its discretion by majority vote, increase or decrease the number of shares subject to the aforementioned option. If an Eligible Director is elected or appointed to serve a term as a director on a date other than the date of the Company's Annual Meeting and has not otherwise received an option to acquire shares of Stock for such year, the Company will, without cost to the grantee and without the exercise of the discretion of any person or persons, on the date of such election or appointment, grant to such Eligible Director an option to acquire 5,000 shares of Stock at an exercise price determined in accordance with Article VI and subject to adjustment under Article IX; provided, that the Board of Directors may, in its discretion by majority vote, increase or decrease the number of shares subject to such option.

        Furthermore, the Board of Directors of the Company may, from time to time, deem it appropriate and may provide certain Eligible Directors with additional options to acquire Stock at an exercise price determined in accordance with Article VI and subject to adjustment under Article IX.

        Section 5.3    Transferability.    Each option granted under the Plan by its terms shall not be transferable by the grantee otherwise than by will or by the laws of descent and distribution or pursuant to a domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act, or the rules thereunder.

        Section 5.4    Vesting and Term of Option.    Options become exercisable on the first anniversary date after the date upon which the options were granted. When an option becomes exercisable, the shares may be purchased at any time, or from time to time, in whole or in part, until the option term expires; provided, however, that any option granted pursuant to the Plan shall become exercisable in full upon the death of the grantee, the failure of such grantee to stand for re-election or be re-elected, or the retirement of such grantee after serving at least 60 consecutive months on the Board of Directors. Unless terminated earlier in accordance with the terms of the Plan, each option shall terminate upon the expiration of ten years after such option was granted.

        Section 5.5    Change of Control.    In the case of any merger, exchange of shares, consolidation or combination of the Company (other than a transaction in which the holders of Stock immediately prior to the consummation thereof own 50% or more of the voting securities eligible to vote for the election of directors of the surviving entity immediately after the consummation of such transaction) all options theretofore granted and not fully exercisable shall become exercisable on the date that is 30 days prior to the record or effective date of such merger, exchange of shares, consolidation or combination.

        If a tender offer or exchange offer for the Stock (other than such an offer by the Company) is commenced or if the Company shall set a record date to approve an agreement providing for a sale or other disposition of all or substantially all of the assets of the Company, all options theretofore granted and not fully exercisable shall become exercisable in full upon the commencement of such tender offer or 30 days prior to such record date and shall remain so exercisable for a period of 60 days following such date after which they shall revert to being exercisable in accordance with their terms.

        If any tender offer, exchange offer, or sale or other disposition of all or substantially all of the assets of the Company results in any grantee ceasing to be a director of the Company, then all options theretofore granted and not fully exercisable shall automatically become exercisable in full upon the termination of such person as a director.

        Section 5.6    Manner of Exercise.    Options may be exercised only by written notice to the Company, which notice must specify the date the stock option is to be exercised (such date must be on or after the date of the notice) and the number of shares of Stock covered by the exercise, accompanied by payment of the full option price of the shares covered by the options being exercised and payment of

all amounts, if any, that the Company is required to collect and remit to the Internal Revenue Service or any other taxing authority as a result of such exercise. Such payment shall be made in one or a combination of the following alternative forms:

          (i)  cash (including check, bank draft or money order);

         (ii)  certificates, duly endorsed or accompanied by appropriate transfer instruments, representing shares of Stock previously acquired and standing in the name of the grantee, with an aggregate fair market value on the date of exercise that is equal to or less than the option price of the shares covered by the options being exercised hereunder; or

        (iii)  by delivering a properly executed exercise notice together with irrevocable instructions to a broker to deliver promptly to the Company the total option price in cash.

        If the grantee desires that the shares of Stock be registered in his or her name and that of another as joint tenants with rights of survivorship, he or she should so state in the notice. In no case may fewer than 100 of such shares be purchased at any one time, except to purchase a residue of fewer than 100 shares. An option may not be exercised for a fractional share.

        Section 5.7    Termination of Directorship.    All rights of a grantee in an option, to the extent that such rights have not been exercised, shall lapse and be forfeited one year after the termination of his or her services as a director of the Company or, if earlier, on the original expiration date of the option. In the case of retirement, whether by reason of disability or age, such grantee's option may be exercised within the period set forth in the preceding sentence by such grantee or his or her legal representative. In the case of death, such grantee's option may be exercised within the period set forth in the preceding sentence by the personal representative of the grantee's estate or by the person or persons to whom the option is transferred pursuant to the grantee's will or in accordance with the laws of descent and distribution.

ARTICLE VI. OPTION PRICE

        The option price per share for the shares covered by each option shall be the fair market value (as determined in Article VII) of one share of Stock as of the date of grant of the option; provided, that the Board of Directors may, in its discretion by majority vote, set the option price per share for the shares covered by each option in excess of the fair market value of one share of Stock as of the date of grant of the option.

ARTICLE VII. VALUATION OF STOCK

        For all valuation purposes under the Plan, the fair market value of a share of Stock shall be the last reported sale price as of the close of trading activity on the day for which such fair market value is to be determined, as reported on the Nasdaq National Market system, or any similar system then in use, or the principal securities exchange on which the Stock is listed on such date. If there is no trade on such day, then the last trade price on the next preceding day for which there does exist such a trade shall be determinative of fair market value.

ARTICLE VIII. NO RIGHT TO CONTINUE AS A DIRECTOR

        Neither the Plan nor the granting of a Director Stock Award or an option nor any other action taken pursuant to the Plan shall constitute or be evidence of any agreement or understanding, express or implied, that the Company will retain a director for any period of time or at any particular rate of compensation.

ARTICLE IX. ADJUSTMENT TO STOCK

        In the event any change is made to the Stock subject to the Plan or subject to any outstanding option granted under the Plan (whether by reason of merger, exchange of shares, consolidation, reorganization, recapitalization, stock dividend, stock split, combination of shares, exchange of shares,

change in corporate structure or otherwise), then appropriate adjustments shall be made to the number of shares and option price per share of Stock subject to outstanding options. The grant of Stock or options under the Plan shall not affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

ARTICLE X. EFFECTIVE DATE

        The Plan originally became effective on June 10, 1997, the date of the first Annual Meeting after the adoption of the Plan by the Board of Directors of the Company (the "Effective Date").

ARTICLE XI. AMENDMENT OF THE PLAN

        The Board of Directors of the Company may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided that no such amendment shall adversely affect a grantee's rights under any Director Stock Award previously issued or option previously granted without the grantee's consent.

ARTICLE XII. USE OF PROCEEDS

        The cash proceeds received by the Company from the issuance of shares pursuant to options under the Plan shall be used for general corporate purposes.

ARTICLE XIII. COMPLIANCE WITH APPLICABLE LAWS

        All transactions pursuant to terms of the Plan, including, without limitation, grants of Stock and grants and vesting of options, shall only be effective at such time as counsel to the Company shall have determined that such transaction will not violate federal or state securities or other laws or regulations.

ARTICLE XIV. GOVERNING LAW

        The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of Texas and construed accordingly.

ARTICLE XV. SUCCESSORS

        The Plan shall be binding upon the successors and assigns of the Company.

AMENDMENT NO. 1

TO

STEWART & STEVENSON SERVICES, INC.

AMENDED AND RESTATED
1996 DIRECTOR STOCK PLAN
(the "Plan")

WHEREAS, Stewart & Stevenson Services, Inc., a Texas corporation (the "Company"), previously established the incentive compensation plan known as the "Stewart & Stevenson Services, Inc. 1996 Director Stock Plan" on August 27, 1996 (the "Original Plan"), which Original Plan was approved by the shareholders of the Company;

WHEREAS, the Company filed a registration statement on Form S-8 with the Securities and Exchange Commission on October 31, 1996 to register 150,000 shares of common stock, without par value, of the Company (the "Stock"), to be issued pursuant to stock awards and option grants made under the Original Plan;

WHEREAS, on April 8, 2002, the Company amended and restated the Original Plan (the "Plan") to, among other things, dedicate an additional 350,000 shares for issuance pursuant to stock awards and option grants made under the Plan, which amendment and restatement was approved by the shareholders of the Company;

WHEREAS, the Company has determined that the Plan should be amended to increase the number of shares of Stock available for issuance hereunder from the current 500,000 shares by 300,000, such that the maximum aggregate number of shares of Stock dedicated for issuance under the Plan should be limited to 800,000 shares of Stock;

WHEREAS, the Company has determined that no option issued under the Plan should be repriced, replaced, or regranted through cancellation, or by lowering the option price of a previously granted option, unless such repricing, replacement or regrant is approved by the shareholders of the Company;

NOW, THEREFORE, effective as of July 9, 2004, the Plan is hereby amended as follows:

1)

Article III of the Plan is amended to read in its entirety as follows:

ARTICLE III. STOCK SUBJECT TO THE PLAN

        The total number of the Company's authorized but unissued shares of common stock, without par value, ("Stock") with respect to which Director Stock Awards and options may be granted shall not exceed 800,000 shares. The class and aggregate number of shares of Stock which may be subject to Director Stock Awards and options granted under the Plan shall be subject to adjustment in accordance with Article IX. In connection with the issuance of shares of Stock under the Plan, the Company may utilize treasury shares or authorized but unissued shares. If any Director Stock Award or option under the Plan shall expire or terminate for any reason without having been exercised in full or if any Director Stock Award or option shall be forfeited, the shares subject to the unexercised or forfeited portion of such award or option shall again be available for purposes of the Plan.

2)

Article XI of the Plan is amended to read in its entirety as follows:

ARTICLE XI. AMENDMENT OF THE PLAN

        The Board of Directors of the Company may suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided that no such amendment shall adversely affect a grantee's rights under any Director Stock Award previously issued or option previously granted without the grantee's consent. In addition, without the prior approval of the Company's shareholders, any option previously granted under the Plan will not be repriced, replaced, or regranted through cancellation, or by lowering the Option Price of a previously granted option, except as provided in Article IX.

3)

Article X of the Plan is amended to read in its entirety as follows:

ARTICLE X. EFFECTIVE DATE

        The Plan originally became effective on June 10, 1997, the date of the first Annual Meeting after the adoption of the Plan by the Board of Directors of the Company (the "Effective Date"). No Option shall be granted pursuant to the Plan after July 8, 2014.

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EXHIBIT 4.1

EX-5.1

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EXHIBIT 5.1

LEGAL OPINION

Stewart & Stevenson Services, Inc.
Houston, Texas

As Managing Attorney for Stewart & Stevenson Services, Inc. (the "Company"), a Texas corporation, I have participated in the preparation and adoption of the Stewart & Stevenson Services, Inc. Amended and Restated 1996 Director Stock Plan, as amended (the "Plan") and the preparation of a Registration Statement on Form S-8 (the "Registration Statement") with respect to 300,000 shares (the "Shares") of Common Stock, without par value, of the Company to be offered to directors of the Company pursuant to grants of stock awards and options granted pursuant to the Plan.

It is my opinion that the Shares have been duly authorized and that, when issued either pursuant to a grant of a stock award or upon the exercise of an option granted pursuant to the Plan, the Shares will be validly issued, fully paid and nonassessable.

/s/  WILLIAM L. MOLL, JR. William L. Moll, Jr.
Managing Attorney
August 30, 2004

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EXHIBIT 5.1

EX-23.1

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EXHIBIT 23.1

August 31, 2004

Shareholders and Board of Directors
Stewart & Stevenson Services, Inc.

Consent of Independent Registered Public Accounting Firm

        We consent to the incorporation by reference in the Registration Statement (Form S-8, dated September 1, 2004) pertaining to the Stewart & Stevenson Services, Inc. Amended and Restated 1996 Director Stock Plan As Amended of our report dated March 29, 2004 with respect to the consolidated financial statements of Stewart & Stevenson Services, Inc. included in its Annual Report (Form 10-K) for the year ended January 31, 2004, filed with the Securities and Exchange Commission.

/S/ ERNST & YOUNG LLP

Houston, Texas

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EXHIBIT 23.1

EX-23.2

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EXHIBIT 23.2

CONSENT OF LEGAL COUNSEL

Stewart & Stevenson Services, Inc.
Houston, Texas

I hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of my opinion regarding the legality of 300,000 shares of Stewart & Stevenson Services, Inc. Common Stock, without par value, to be issued upon either the grant of stock awards or the exercise of options granted pursuant to the Stewart & Stevenson Services, Inc. Amended and Restated 1996 Director Stock Plan, as amended.

/s/  WILLIAM L. MOLL, JR. William L. Moll, Jr.
Managing Attorney
August 30, 2004

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EXHIBIT 23.2