| Time: | | 8:30 a.m., local time | | | | Place: | | 1800 Hughes Landing Boulevard The Woodlands, Texas 77380
|
Purpose: • To elect the seven director nominees named in the accompanying proxy statement;
To approve, on an advisory basis, the compensation of our named executive officers;
To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2018;
To adopt the 2018 stock incentive plan; and
To transact such other business as may properly come before the annual meeting.
| | | Purpose: | | (1) To elect the eight director nominees named in the accompanying proxy statement; | | | | | (2) To approve, on an advisory basis, the compensation of our named executive officers; | | | | | (3) To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2019; | | | | | (4) To adopt the 2019 Employee Stock Purchase Plan; and | | | | | (5) To transact such other business as may properly come before the annual meeting. | | | | Record Date: | | Only stockholders of record as of the close of business on March 13, 201819, 2019 are entitled to notice ofnoticeof and to attend or vote at the annual meeting. |
| | | Proxy Voting: | | It is important that your shares be represented at the annual meeting whether or not you are personally able to attend. Accordingly, after reading the accompanying proxy statement, please promptly submit your proxy and voting instructions via internet or mail as described on the proxy card. |
By Order of the Board of Directors.
Richard E. Chandler, Jr.
Executive Vice President,
General Counsel & Secretary
March 20, 2018
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON May 2, 2018.
This proxy statement and the company’s 2017 annual report to stockholders are available at
http://www.astproxyportal/com/ast/04770
Table of Contents
| | | | | By Order of the Board of Directors. | | |  | | | Richard E. Chandler, Jr. | | | Executive Vice President, | | | General Counsel & Secretary | | | | Page | March 26, 2019 |
| IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 8, 2019. This proxy statement and the Company’s 2018 annual report to stockholders are available at http://www.astproxyportal.com/ast/04770/ |
Table of Contents Sterling Construction |2019 Proxy Statement |i |
|Sterling Construction Company, Inc. |
1800 Hughes Landing Boulevard Suite 250
The Woodlands, Texas 77380
2019 Proxy Statement
This summary highlights selected information contained elsewhere in this proxy statement. This summary does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.submitting voting instructions for your shares. For more information regarding our 20172018 financial and operational performance, please review our 20172018 annual report to stockholders (2017(“2018 annual report)report”). The 20172018 annual report, including financial statements, is first being made available to stockholders together with this proxy statement and form of proxy on or about March 20, 2018. 20182019 Annual Meeting of Stockholders
Time and Date:8:30 a.m., local time, Wednesday, May 2, 2018
| | | Time and Date: | | 8:30 a.m., local time, Wednesday, May 8, 2019 | | | | Place: | | 1800 Hughes Landing Boulevard The Woodlands, Texas 77380 |
Record Date:March 13, 2018
Voting:Stockholders as of the record date are entitled to vote. Each share of common stock is entitled to
one vote for each director position and one vote for each of the other proposals to be voted on at the annual meeting.
Agenda and Voting Recommendations
| | | | | | | | | Item | | Description | | Board Vote Recommendation | | Page | | 1 | | Election of seven director nominees | | FOR each nominee | | | | 2 | | Advisory vote to approve the compensation of our named executive officers | | FOR | | | | 3 | | Ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2018 | | FOR | | | | 4 | | Adoption of the 2018 stock incentive plan | | FOR | | |
| | | Director HighlightsRecord Date: | |
| | | | | | | | | | | | | Name | | Age | | Director Since | | Principal Occupation | | Independent | | Board Committees | | Joseph A. Cutillo | | 52 | | 2017 | | Chief Executive Officer of Sterling Construction Company, Inc. | | No | | None | | Marian M. Davenport | | 64 | | 2014 | | Executive Director of Genesys Works – Houston | | Yes | | Compensation Corporate Governance and Nominating*
| | Maarten D. Hemsley | | 68 | | 1998 | | Founder, Chairman and President of New England Center for Arts & Technology, Inc. | | Yes | | Audit Corporate Governance and Nominating
| | Raymond F. Messer | | 70 | | 2017 | | Chairman Emeritus of Walter P Moore | | Yes | | Audit Compensation
| | Charles R. Patton | | 58 | | 2013 | | Executive Vice President — External Affairs American Electric Power Company, Inc. | | Yes | | Compensation
| | Richard O. Schaum | | 71 | | 2010 | | General Manager, 3rd Horizon Associates LLC | | Yes | | Audit Compensation*
| | Milton L. Scott** | | 61 | | 2005 | | Chairman and Chief Executive Officer of the Tagos Group, LLC | | Yes | | Audit* Corporate Governance and Nominating | | | | | | | | | | | | |
* Committee Chairman
** Board Chairman
| March 19, 2019 | | | 2017 Performance HighlightsVoting: | (page 22)
| Stockholders as of the record date are entitled to vote. Each share of common stock is entitled to one vote for each director position and one vote for each of the other proposals to be voted on at the annual meeting. |
Revenues increased 38.8%, from $690.1 million in 2016 to $958.0 million in 2017
Operating income for 2017 was $26.2 million, compared to an operating loss of $4.7 million in 2016
Gross margins increased by 52.5%, from 6.1% in 2016 to 9.3% in 2017
Stock price growth of 92%, from $8.46 per share at year end 2016 to $16.28 per share at year end 2017
Diluted net earnings per share attributable to common stockholders for 2017 was $0.43, compared to a net loss per share of $0.40 for 2016
Completed the transformative acquisition of Tealstone Residential Concrete, Inc.Agenda and Tealstone Commercial, Inc.Voting Recommendations | | | | | | | | | Item | | Description | | Board Vote Recommendation | | Page | | | | | | | | 1 | | Election of eight director nominees | | FOR each nominee | | 14 | | | | | | | | 2 | | Advisory vote to approve the compensation of our named executive officers | | FOR | | 37 | | | | | | | | 3 | | Ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2019 | | FOR | | 40 | | | | | | | | 4 | | Adoption of the 2019 Employee Stock Purchase Plan | | FOR | | 41 | | |
Secured new $85 million credit facility
Relisted on the Russell 3000
| | | Executive Compensation Highlights | |
Awards under our annual incentive program are based on Corporate Governance Highlightsachievement of performance metrics.
Annual awards tied to continued service, as 50% of annual incentive awards are paid in shares of restricted stock units vesting over three years.
Clawback policy applicable to incentive awards.
Anti-hedging and anti-pledging policies applicable to our executive officers.
Retention of an independent compensation consultant as necessary.
Stock ownership guidelines applicable to executive officers.
| | | Corporate Governance Highlights | |
We are committed to strong and effective governance practices that promote and protect the interests of our stockholders. Our commitment to good corporate governance is illustrated by the following practices:highlights: 
Sterling Construction |2019 Proxy Statement |1 |
•Director Nominees Overview
| | | | | | | | | | | | | | Name | | Age | | Director Since | | Independent | | Principal Occupation | Roger A. Cregg | | 62 | | N/A | | ✓ | | Director of Comerica Incorporated | Joseph A. Cutillo | | 53 | | 2017 | | X | | Chief Executive Officer of Sterling Construction Company, Inc. | Marian M. Davenport | | 65 | | 2014 | | ✓ | | Director of Genesys Works – Houston | Raymond F. Messer | | 71 | | 2017 | | ✓ | | Chairman Emeritus of Walter P Moore | Dana C. O’Brien | | 51 | | 2019 | | ✓ | | Senior Vice President and General Counsel of CenterPoint Energy(*) | Charles R. Patton | | 59 | | 2013 | | ✓ | | Executive Vice President — External Affairs of American Electric Power Company, Inc. | Milton L. Scott | | 62 | | 2005 | | ✓ | | Chairman of the Board of Sterling Construction Company, Inc. & Chairman of the Board of Directors and Chief Executive Officer of Tagos Group, LLC | Thomas M. White | | 61 | | 2018 | | ✓ | | Executive Chairman of Cardinal Logistics Management Corporation |
| (*) | As publicly-announced, effective April 2, 2019, Ms. O’Brien will resign from her positions with CenterPoint Energy and will join The Brinks Company (NYSE: BCO) as Senior Vice President and General Counsel effective April 15, 2019. |
|Board independence2 | (allSterling Construction |2019 Proxy Statement
2018 Performance Highlights 
The financial improvements reflect progress in delivering our multi-year strategy to solidify the base, grow high margin products and expand into adjacent markets. Our strategic element to solidify the base of the heavy civil construction business focuses on cost reductions, remaining disciplined at the bid table, monitoring pricing at the time of bid, and executing the projects to expectations. The strategy element to grow high margin products is reflected in the increasing percentage of backlog ofnon-heavy highway projects. Finally, expansion of the residential business, as well as other acquisition opportunities will lead to further expansion into adjacent markets. Overall, the execution of our non-employee director nomineesstrategy led to improved operating income of $42.6 million in 2018 compared to operating income of $26.2 million in 2017. Executive Compensation Highlights During the last few years, we have made several key enhancements to our executive compensation programs: 
We are independent, which is 6 out of our 7 director nominees).
•100% independent audit,committed to developing and maintaining executive compensation and corporate governance and nominating committees.
•The roles of Chairman and Chief Executive Officer are separate.
•Directors elected annually.
•Directors in an uncontested election are elected by a majority vote.
•No stockholders rights plan (poison pill).
•Stock ownership guidelines for directors and executive officers.
•Annualpractices that enhance the performance evaluations of the board overseen by the corporate governanceCompany and long-term value for its stockholders. | | | | | | | | | | What WeDo: | | | | What WeDon’t Do: | | | | | | | ✓ | | Executive Incentive Program contains both short term and long term incentive awards. | | | | X | | No TaxGross-Ups: We do not provide any tax gross ups to our executive officers. | | | | | | | ✓ | | Executive Incentive Program Awards based on performance: Awards under our executive incentive programs are based on the achievement of specific performance metrics. | | | | X | | Anti-Hedging Policy: We prohibit our executive officers from entering into hedging arrangements with respect to our securities. | | | | | | | ✓ | | Retention of Independent Compensation Consultant as Necessary. | | | | X | | Anti-Pledging Policy: We prohibit our executive officers from pledging our securities. | | | | | | | ✓ | | Stock Ownership Guidelines applicable to executive officers. | | | | X | | No Guaranteed Bonuses: We do not guarantee bonus payments to our executive officers. | | | | | | | ✓ | | Clawback Policy: The Company has a clawback policy applicable to awards under our cash and equity incentive programs. | | | | X | | No Credit for Unvested Performance Shares under our stock ownership guidelines applicable to executive officers. |
Sterling Construction |2019 Proxy Statement |3 |
nominating committee.
•Independent directors regularly meet in executive sessions without management present.
•Robust board governance guidelines and code of business conduct.
•Continued focus on board diversity.
Corporate Governance Board Governance Guidelines; Ethics and Business Conduct Policy We are committed to strong and effective governance practices that promote and protect the interests of our stockholders. Our board governance guidelines, along with the charters of the standing committees of our board, provide the framework for the governance of the companyCompany and reflect the board’s commitment to monitor the effectiveness of policy and decision making at both the board and management levels. Our board governance guidelines and our code of business conduct are available atwww.strlco.com under Investor Relations–Corporate Governance.Relations-Board Governance and –Code of Business Conduct, respectively. Both are available in print to any stockholder who requests a copy. Amendments to or waivers of our code of business conduct granted to any of our directors or executive officers will be published promptly on our website. Such information will remain on our website for at least 12 months. Board Composition and Leadership Structure Our board has the primary responsibility of oversight of the management of our business and affairs. Our current board of directors consists of seveneight members, sixseven of whom have been determined by our board to be independent, specifically Ms. Davenport and Messrs. Hemsley, Messer, Patton, Schaum and Scott.independent. Mr. Cutillo, our chief executive officer, is our onlynon-independent director. Our board of directors recognizes the importance of having a strong independent board leadership structure to ensure accountability and to provide effective oversight of management. Milton L. Scott serves as our chairman of the board of directors with responsibilities that include: (1) presiding at meetings of the board and executive sessions of its independent directors; (2) presiding at the annual meeting of stockholders; (2)(3) serving as a liaison between the independent directors and senior management; and (3)(4) approving the agendas for board meetings.meetings; and (5) calling meetings of the independent directors. The board of directors believes that the separation of the roles of chairman and chief executive officer, as required by our board governance guidelines, continues to be the appropriate leadership structure for the companyCompany at this time. The board believes this structure provides an effective balance between strong company leadership and appropriate safeguards and oversight by independent directors. Board and Committee Independence; Financial Experts On the basis of information solicited from each director, and upon the advice and recommendation of the corporate governance and nominating committee, our board of directors annually determines the independence of each of our then-current directors in connection with the nomination process. Further, in connection with the appointment of any new director to the board during the year, our board of directors makes the same determination. In making these determinations, our board, with assistance from the Company’s legal counsel, evaluated responses to a questionnaire completed annually by each director regarding relationships and possible conflicts of interest between each director, the Company and management. In its review of director independence, our board and legal counsel considered all commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships any director may have with the Company or management. Our board of directors has determined that each of our director nominees (other than Mr. Cutillo) has no material relationship with the Company and is independent as defined in the director independence standards of NASDAQ listing standards, as currently in effect. Further, our board of directors has determined that each of the members of the audit, compensation and talent development and corporate governance and nominating committees has no material relationship with the Company and satisfies the independence criteria (including the enhanced criteria with respect to members of the audit and compensation and talent development committees) set forth in the applicable NASDAQ listing standards and SEC rules. In addition, our board of directors has determined that each of Messrs. Scott and White qualifies as an “audit committee financial expert,” as such term is defined by the rules of the SEC. Director Nominees Experience and Skills Matrix The following table notes the breadth and variety of experience and skills that each of our director nominees brings to the Company and which enable the board to provide insightful leadership to the Company to advance its strategies: |4 | Sterling Construction |2019 Proxy Statement
| | | | | Director Nominees Experience and Skills Matrix | CEO or other Senior Executive Experience | | Experience in senior leadership positions provides our board with practical insights in developing and implementing business strategies, maintaining effective operations and driving growth, so that we may achieve our strategic goals. | | 8 of 8
director
nominees | Construction Industry Experience | | Industry expertise and experience in construction allows the board to develop a deeper understanding of our key business, its operations and key performance indicators in a competitive environment. | | 3 of 8
director
nominees | Financial, Accounting or Financial Reporting | | Experience as an accountant, auditor, financial expert or other relevant experience is critical to allowing the board to oversee the preparation and audit of our financial statements and comply with various regulatory requirements and standards. | | 5 of 8
director
nominees | Other Public Company Board Experience | | Directors who serve or have served on the boards of other public companies understand the responsibilities of a public company and board and can provide insight on issues commonly faced by public companies gained from this experience. | | 4 of 8
director
nominees | Capital Markets & Banking Experience | | Experience overseeing investments and capital market transactions provides the board with critical background, knowledge and skills that enhance the Company’s ability to raise capital to fund its business. | | 3 of 8
director
nominees | Legal & Regulatory Compliance Experience | | Experience in the legal field or in regulated industries provides the board with knowledge and insights in complying with government regulations and legal obligations, as well as identifying and mitigating legal and compliance risks. | | 4 of 8
director
nominees | Human Resource Management | | Experience in human resources and executive compensation helps the board and the Company identify, recruit, retain and develop key talent and to grow diversity of personnel at all levels throughout the Company. | | 6 of 8
director
nominees | Risk Management & Oversight | | Experience overseeing complex risk management allows the board to pre-emptively identify, assess and mitigate key risks and to design and implement risk management practices to protect shareholder value. | | 3 of 8
director
nominees | Corporate Strategy & Business Development | | Corporate strategy and business development experience enhances the board’s ability to develop innovative solutions, including our business and strategic plans, and to drive growth in our competitive industry. | | 8 of 8
director
nominees | Corporate Governance & Ethics | | Directors with experience implementing governance structures and policies provide an understanding of best practices and key issues, enhancing our ability to maintain good governance and to execute new key governance initiatives. | | 6 of 8
director
nominees | | Independence | | Directors who are “independent” under the rules of the SEC, listing exchanges and other entities allow the board to provide unbiased oversight over the Company and to implement governance practices with integrity and transparency. | | 7 of 8
director
nominees |
Board Diversity, Tenure and Refreshment We believe the Company’s director recruitment and nominations process demonstrates its continued focus on gender and racial diversity, as well as helps to ensure a diversity of skills, experience and tenure on our board, which further promotes and supports the Company’s long-term strategic goals. Board Diversity Although we do not have a formal diversity policy, we continue to focus on diversity as an important factor in determining the composition andmake-up of the board and board diversity is a consideration in making nominee recommendations and filling board vacancies. During the recruitment and evaluation of the suitability of current directors and potential director-nominees, the corporate governance and nominating committee considers the diversity of directors and nominees as one consideration among many. To achieve diversity among directors, the corporate governance and nominating committee considers a number of demographics, including, but not limited to, race, gender, ethnicity, culture, nationality and age to continue developing a board that reflects diverse backgrounds, viewpoints, experience, skills and expertise. The addition of new directors over the past two years (as discussed in more detail below under “—Board Tenure and Refreshment”) has increased the diversity of our board, including the gender, experience and skills diversity of our board. Sterling Construction |2019 Proxy Statement |5 |
Board Tenure and Refreshment Since 2017, we have added four new directors, all of whom are standing for reelection at the meeting. Specifically, we have added two independent directors to our board since our last annual meeting of stockholders. On July 31, 2018, the board appointed Thomas M. White to serve as a director effective immediately. On December 12, 2018, the board appointed Dana C. O’Brien to serve as a director effective January 1, 2019. In addition, at this year’s annual meeting of stockholders, we have included Roger A. Cregg as a director nominee. If elected to the board, Mr. Cregg will bring experience in residential housing construction, as well as other additive skills to the board, including but not limited to, financial and accounting expertise, and public company executive management and leadership experience. The average tenure of our director nominees is approximately 4 years and the average age is approximately 61. As part of its board recruitment and refreshment process, the board will continue to seek to appoint new directors who complement the diversity, skills and expertise of the board. As mentioned above, gender and racial/ethnic diversity will remain an important factor for the board in its director recruitment and refreshment efforts. 
Board and Committee Meeting Attendance Our board of directors held a total of nineseven meetings during 2017.2018. During 2017,2018, each director participated in more than 75% or more of the total number of meetings of our board and meetings of each committee on which such director served. Messrs. Cutillo and Messer did not joinMr. White joined our board of directors until April of 2017. effective July 2018 and Ms. O’Brien joined our board effective January 2019.We expect our directors to attend the annual meetings of our stockholders. Our company policy is to schedule a regular meeting of the board of directors on the same day as the annual meeting of stockholders so that directors can attend the annual meeting without the companyCompany incurring the extra travel and related expenses of a separate meeting. All of our directors attended our 20172018 annual meeting of stockholders. |6 | Sterling Construction |2019 Proxy Statement
Board Committees To provide for effective direction and management of our business, our board has established three standing committees: an audit committee, a compensation and talent development committee (referred to as the “compensation committee” in most instances hereinafter) and a corporate governance and nominating committee.committee (referred to as the “governance/nominating committee” in most instances hereinafter). Each of the audit, compensation and corporate governance and governance/nominating committees are composed entirely of independent directors. Each committee operates under a written charter adopted by our board. All of the committee charters are available on our website atwww.strlco.com under Investor Relations–Corporate Governance and are available in print upon request. The following table identifies the current committee members.
| | | | | | | | | |
Name of Director*(1) | |
(2) | |
and Talent Development Committee | | Corporate Governance and Nominating Committee(2) | | | | | Marian M. Davenport | | — | | X | | Chair | Maarten D. Hemsley | | X | | — | | X | Raymond F. Messer | | X | | X | | — | Charles R. Patton | | — | | X | | — | Richard O. Schaum | | X✓ | | Chair | | —-- | | | | | Raymond F. Messer | | -- | | ✓ | | Chair | | | | | Dana C. O’Brien(3) | | ✓ | | -- | | ✓ | | | | | Charles R. Patton | | -- | | ✓ | | ✓ | | | | | Richard O. Schaum(4) | | ✓ | | ✓ | | -- | | | | | Milton L. Scott | | Chair | | —-- | | X✓ | | | | | Thomas M. White | | ✓ | | ✓ | | ✓ |
* As a non-independent director, Mr. Cutillo does not serve as a member of any committee of the board, all of which are composed entirely of independent directors.
| (1) | As anon-independent director, Mr. Cutillo does not serve as a member of any committee of the board, all of which are composed entirely of independent directors. | |
| (2) | Maarten D. Hemsley served as a member of the audit and governance/nominating committees during 2018 until his retirement on July 31, 2018. | |
| (3) | Dana C. O’Brien joined the audit and governance/nominating committees effective January 2019 in connection with her appointment to the board. | |
| (4) | Richard O. Schaum will retire as a director in conjunction with the annual meeting. | |
Audit Committee. CommitteeThe audit committee assists the board in fulfilling its oversight responsibilities related to (1) the effectiveness of the company’sCompany’s internal control over financial reporting; (2) the integrity of the company’sCompany’s financial statements; (3) the qualifications and independence of the company’sCompany’s independent registered public accounting firm; (4) the evaluation of the performance of the company’sCompany’s independent registered public accounting firm; and (5) the review and approval or ratification of any transaction that would require disclosure under Item 404(a) of RegulationS-K of the Securities Exchange Act of 1934 (the Exchange Act). Please refer to the “Audit Committee Report” included in this proxy statement for more information. The audit committee held sixfive meetings in 2017.
Compensation Committee. and Talent Development CommitteeThe compensation committee assists the board in fulfilling its oversight responsibilities by (1) discharging the board’s responsibilities relating to the compensation of our executive officers, andofficers; (2) administering our cash-based and equity-based incentive compensation plans.plans; and (3) overseeing the Company’s talent development strategy. Please refer to “Compensation and Talent Development Committee Procedures” included in this proxy statement for more information. The compensation committee held ten14 meetings in 2017.
Corporate Governance and Nominating Committee. CommitteeThe corporate governance and governance/nominating committee assists the board in fulfilling its oversight responsibilities by (1) identifying, considering and recommending to the board qualified candidates for directorship; (2) monitoring the composition of the board and its committees and making recommendations to the board on the membership of the committees; (3) maintaining our board governance guidelines and recommending to the board any desirable changes; (4) evaluating the effectiveness of the board and its committees; (5) with input from the chair of our compensation committee, determining Sterling Construction |2019 Proxy Statement |7 |
the compensation of our directors; and (6) addressing any related matters required by the federal securities laws or theThe NASDAQ Stock Market (NASDAQ)LLC (“NASDAQ”). The corporate governance and governance/nominating committee held sixfour meetings in 2017.
Special Committee. During 2017, the board of directors authorized a special committee of independent directors, comprised of Ms. DavenportCompensation and Messrs. Hemsley, Patton, Schaum and Scott, with the power and authority to oversee the company’s efforts to evaluate potential strategic alternatives, including the acquisition of Tealstone and related financing. As previously disclosed, on March 8, 2017, we entered into a stock purchase agreement with the sellers named therein to acquire 100% of the outstanding stock of Tealstone Residential Concrete, Inc. and Tealstone Commercial, Inc. (collectively, Tealstone) for cash, shares of our common stock and promissory notes. The company completed its acquisition of Tealstone on April 3, 2017. The special committee held two meetings in 2017.
Board and Committee Independence; Financial Experts
On the basis of information solicited from each director, and upon the advice and recommendation of the corporate governance and nominating committee, our board of directors has determined that Ms. Davenport and Messrs. Hemsley, Messer, Patton, Schaum and Scott each have no material relationship with the company and are independent as defined in the director independence standards of NASDAQ listing standards, as currently in effect. In making these determinations, our board, with assistance from the company’s legal counsel, evaluated responses to a questionnaire completed annually by each director
regarding relationships and possible conflicts of interest between each director, the company and management. In its review of director independence, our board and legal counsel considered all commercial, industrial, banking, consulting, legal, accounting, charitable, and familial relationships any director may have with the company or management.
Our board of directors has determined that each of the members of the audit, compensation and corporate governance and nominating committees has no material relationship with the company and satisfies the independence criteria (including the enhanced criteria with respect to members of the audit and compensation committees) set forth in the applicable NASDAQ listing standards and SEC rules. In addition, our board of directors has determined that each of Messrs. Hemsley and Scott qualifies as an “audit committee financial expert,” as such term is defined by the rules of the SEC.
CompensationTalent Development Committee Procedures
The compensation committee has the sole authority to set annual compensation amounts and annual incentive plan criteria for our executive officers, evaluate the performance of our executive officers, and make awards to our executive officers under our incentive plans and programs. The compensation committee also has authorityreviews, and when appropriate, recommends to approvethe board any proposed plan or arrangement, including employment agreements, providing for incentive, severance, retirement,change-in-control or other compensation to our executive officers. The compensation committee oversees our assessment of whether our compensation policies and practices are likely to expose the companyCompany to material risks. In exercising its authority and carrying out its responsibilities, the compensation committee meets to discuss the structure of executive compensation, proposed employment agreements, severance arrangements, salaries, cash and equity incentive awards, and the achievement and the setting of financial and individual performance goals on which executive incentive compensation is based, using information circulated in advance of the meeting by the chair of the compensation committee. The compensation committee may delegate any of its responsibilities to one or more members of the committee, except to the extent such delegation is prohibited by law, rules and regulations of the SEC or the listing standards of NASDAQ. When the compensation committee discusses an executive officer'sofficer’s compensation, he or she is not permitted to be present. The compensation committee engaged an independent executive compensation consultant to advise the compensation committee on matters related to executive compensation. Please refer to the section titled “Executive Officer Compensation—Compensation Discussion and Analysis” for more information related to the independent executive compensation consultant.
Compensation and Talent Development Committee Interlocks and Insider Participation During 2017,2018, Ms. Davenport and Messrs. Messer, Patton, Schaum and PattonWhite served as members of our compensation committee. None of the members of the compensation committee is or has been an executive officer of our company. None of our executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, an executive officer of which served as one of our directors or as a member of our compensation committee during 2017.
Board Evaluation Process The corporate governance and governance/nominating committee is responsible for overseeing the annual performance evaluation of the board. Annually, each director completes an evaluation of the full board and each committee upon which the director serves, whichserves. This board evaluation process is intended to provide each director with an opportunity to evaluate performance for the purpose of improving board and committee processes and effectiveness. The detailed questionnaire seeks quantitative ratings and subjective comments in key areas of board practices, and asks each director to evaluate how well the board or the committee, as applicable, operates and to make suggestions for improvements. Replies are anonymous and are collected and summarized by the chair of the corporate governance and governance/nominating committee. The summary is then discussed by the independent directors in an executive session held for such purpose. In addition, the chair of the corporate governance and governance/nominating committee conductsone-on-one interviews with each director to solicit additional feedback on the overall operation of the board and its committees, as well as specific feedback on the effectiveness of individual directors. The board chair or the chair of the corporate governance and governance/nominating committee
discusses the individual feedback with each board member. Any areas of board or committee performance that are identified as needing improvement or change are considered by the corporate governance and governance/nominating committee, which then makes a recommendation to the board on the matter.
Board’s Role in Oversight of Risk Management Our board of directors as a whole is responsible for risk oversight, with reviews of certain areas being conducted by the relevant board committees that report to the full board. In its risk oversight role, our board focuses on understanding the nature of directors reviews, evaluatesour enterprise risks, including our operations and discusses with appropriate membersstrategic direction, as well as the adequacy of management whether theour risk management processes designedprocess and implemented byoverall risk management system. There are adequatea number of ways our board performs this function, including (i) receiving management updates on our business operations, financial results and strategy and discussing risks related to the business at each regular board meeting, (ii) receiving reports on all significant committee activities at each regular board meeting and (iii) evaluating the risks inherent in identifying, assessing, managing and mitigating material risks facing the company. significant transactions as applicable. |8 | Sterling Construction |2019 Proxy Statement
Throughout the year, the board of directors receives briefings and assessments of the company'sCompany’s risks as they relate to:
safety
crisis management
information technology
compensation
talent
| | | | | | | | | · safety | | · crisis management | | · cybersecurity/information technology | | | | | | | · compensation | | · strategic planning | | · succession planning | | | | | | | · talent development and management | | · enterprise risk assessment | | |
Our board believes that full and open communication between executive management and our board is essential to effective risk oversight. Our chairman meets regularly with executive management to discuss a variety of matters including business strategies, opportunities, key challenges and risks facing the company,Company, as well as enterprise risk assessment and risk mitigation strategies. Executive management attends all regularly scheduled board meetings where they make presentations to our board on various strategic matters involving our operations and are available to address any questions or concerns raised by our board on risk management or any other matters. Our board of directors oversees the strategic direction of the company,Company, and in doing so considers the potential rewards and risks of the company’sCompany’s business opportunities and challenges, and monitors the development and management of risks that impact our strategic goals.
The board’s involvement in the strategic planning process is a critical part of the assessment of the risks that impact our strategic goals and the management of those risks as they develop. The board holds annual strategic and succession planning sessions to discuss, among other things, the utilization and development of talent and management succession. In 2018, this process led to our hiring a chief talent officer, effective January 2019, to assist the board and the compensation committee in their oversight over the development and management of the Company’s key talent and senior management.Each standing committee of the board of directors assists the board in fulfilling its risk oversight responsibility with respect toresponsibility. The chart below provides an overview of the following: | | | | | | Audit Committee | | Compensation Committee | | Corporate Governance and Nominating Committee | •Financial liquidity
| | •Executive compensation
| | •Board organization
| •Covenant compliance
•Financial reporting
| | •Incentive compensation(cash and equity)
| | •Board membership
•Board self-evaluations
| •Independent registered public accounting firm
•Internal controls
| | | | •Board governance
| •Related-party transactions
| | | | |
allocation of risk oversight responsibilities among the board committees.
The audit committee assists our board in fulfilling its oversight responsibilities with respect to certain areas of risk. The audit committee is responsible for reviewing and discussing with management and our independent registered public accounting firm any guidelines and policies relating to risk assessment and risk management, and the measures management has taken to monitor, control and minimize the company’sCompany’s major financial risk exposures. The audit committee also discusses with our independent registered public accounting firm the results of their processes to assess risk in the context of its audit engagement. The audit committee also assists our board in fulfilling its oversight responsibilities by monitoring the effectiveness of the company’sCompany’s internal control over financial reporting and legal and regulatory compliance. Our independent registered public accounting firm meets regularly in executive session with the audit committee. The audit committee regularly reports on these matters to the full board. Finally, in furtherance of its risk oversight responsibility, the audit committee provides for the confidential, anonymous submission by employees and others of concerns regarding questionable accounting, auditing and any other matters. These submissions are collected by an independent organization specializing in those services, and are conveyed to the chair of the audit committee, our chief compliance officer, and our general counsel.
The compensation committee assists our board in fulfilling its oversight responsibilities with respect to the company’sCompany’s assessment of whether its compensation policies and practices are likely to expose the companyCompany to material risks, including the company’sCompany’s compensation of executives and incentive compensation awarded to officers. Also,In addition, in consultation with management, the compensation committee is responsible for overseeing the company’sCompany’s compliance with regulations governing executive compensation.
The corporate governancecompensation committee also oversees the management and Sterling Construction |2019 Proxy Statement |9 |
development of the Company’s talent and the succession plan for key senior management positions, which we consider a critical asset of the Company. In 2018, we hired a chief talent officer, effective January 2019, who reports directly to the Company’s chief executive officer, and assists the compensation committee with managing and developing the Company’s talent. The chief talent officer will provide valuable assistance to the compensation committee and the board in its oversight of our strategy to recruit, train and retain a world-class workforce. The governance/nominating committee assists our board in fulfilling its oversight responsibilities with respect to the management of risks associated with our board leadership structure, including committee appointments, size of board and nomination of board members, and corporate governance matters. The corporate governance and governance/nominating committee addresses some of its risk oversight responsibilities by identifying and recommending for nomination well-qualified independent directors, periodically reviewing of our board governance guidelines, and conducting annual board self-evaluations and individual director evaluations (through the chair of the committee).
In addition, the governance/nominating committee reviews and discusses with management and the board the CEO succession plan. The governance/nominating committee, in consultation with management and the board periodically reviews and updates its CEO succession plan. Furthermore, the committee is responsible for developing and maintaining procedures to address emergency CEO succession planning in extraordinary circumstances, which mitigates the disruption and loss of continuity to our business and operations during a transition period.
Director and Executive Officer Stock Ownership Guidelines In January 2018, our board of directors revised the stock ownership guidelines applicable to ournon-employee directors and our executive officers. The board of directors believes that it is in the best interests of the companyCompany and its stockholders that directors and executive officers have a meaningful proprietary stake in the companyCompany so that their interests are aligned with the interests of stockholders. The stock ownership guidelines are administered by the corporate governance and governance/nominating committee. Under our stock ownership guidelines, (i) eachnon-employee director is expected to acquire and maintain ownership of our common stock valued at five times his or her annual cash retainer, which is currently $50,000,$75,000, (ii) our chief executive officer is expected to acquire and maintain ownership of our common stock valued at five times his or her base salary, and (iii) each of our other executive officers is expected to acquire and maintain ownership of our common stock valued at three times his or her base salary. The value of the shares is based on the greater of the then current market price or the grant date fair value. Shares of our common stock owned individually or jointly, shares held by members of the director or executive’s immediate family or by a trust for the director or executive or his or her immediate family, as well as shares subject to unvested restricted stock and restricted stock units are counted for purposes of the stock ownership guidelines. As of March 13, 2018,19, 2019, all of our currentnon-employee directors except Mr.Ms. O’Brien and Messrs. Messer and White exceeded their target ownership levels. Under the stock ownership guidelines, directors have five years from the date of appointment or election to comply with the stock ownership guidelines. Mr. Messer who was first elected to the board at the 2017 annual meeting, Mr. White was first appointed to the board in July 2018 and Ms. O’Brien was first appointed to the board effective January 2019. Since each of Ms. O’Brien and Messrs. Messer and White is required to reach histheir stock ownership target within five years from the date of election, and, thus,each of these directors is currently in compliance with the guidelines. Our executive officers have five years from the date of their respective appointments (oror from January 17, 2018, the date upon which the guidelines were revised, whichever is later)later, to attain their required ownership levels. AllSince all of our executive officers have all been in their respective positions with the companyCompany for less than threefive years, so each has until January 17, 2023 to reach his target ownership level and, thus, each of our executive officers is currently in compliance with the guidelines. For more information regarding the stock ownership guidelines applicable to our executive officers, see “Compensation Discussion and Analysis.”
Consideration of Director Nominees In evaluating nominees for membership on our board of directors, the corporate governance and governance/nominating committee has not specified any minimum qualifications for serving on the board, but seeks to achieve a board that is composed of individuals who have experience that is relevant to the needs of the company,Company, who have a high level of professional and personal integrity, who have the ability and willingness to work cooperatively with other members of our board and with senior management, and who contribute to the cognitive diversity of the board taking into account many factors, including business experience, public sector experience, professional training, public and private offices held, geographical representation, race, gender and age, among other considerations. Experience in the construction industry and in one or more of engineering, transportation, finance and accounting, corporate governance, senior management, and public sector matters are considered particularly valuable. An independent director candidate is expected to be committed to |10 | Sterling Construction |2019 Proxy Statement
enhancing stockholder value, and to have sufficient time to carry out the duties of a director,
both on the full board and on one or more of its standing committees. In selecting nominees, the corporate governance and governance/nominating committee will seek to have a board of directors that represents a diverse range of perspectives and experience relevant to the company.Company. The corporate governance and governance/nominating committee will also evaluate each individual in the context of our board as a whole, with the objective of recommending nominees who can best perpetuate the success of the business, be an effective director in conjunction with the full board, and represent stockholder interests through the exercise of sound judgment using his or her diversity of experience in these various areas. In determining whether to recommend a director forre-election, the corporate governance and governance/nominating committee will also consider the director’s age, tenure, past attendance at meetings and participation in and contributions to the activities of our board. The corporate governance and governance/nominating committee will regularly assess whether the size of our board is appropriate, and whether any vacancies on our board are expected due to retirement or otherwise. In addition, the corporate governance and governance/nominating committee periodically assesses the experience, qualifications, attributes and skills of the independent directors to determine if there are gaps that the board should seek to fill. In the event that vacancies are anticipated, or otherwise arise, the corporate governance and governance/nominating committee will consider various potential candidates, who may come to the corporate governance and governance/nominating committee’s attention through professional search firms, stockholders or other persons. Alternatively, the corporate governance and governance/nominating committee may recommend a reduction in the size of the board. Each candidate brought to the attention of the corporate governance and governance/nominating committee, regardless of who recommended such candidate, will be considered on the basis of the criteria set forth above.
The corporate governance and In accordance with its charter, the governance/nominating committee will consider candidates proposed for nomination by our stockholders. Stockholders may propose candidates for consideration by the corporate governance and governance/nominating committee by submitting the names and supporting information to: c/c⁄o Corporate Secretary, Sterling Construction Company, Inc., 1800 Hughes Landing Blvd. — Suite 250, The Woodlands, Texas 77380.
In addition, our bylaws permit stockholders to nominate candidates for consideration at next year’s annual stockholder meeting. Any nomination must be in writing and received by our corporate secretary at our principal executive offices no later than February 1, 2019.8, 2020. If the date of next year’s annual meeting is moved to a date more than 30 days before or 90 days after the anniversary of this year’s annual meeting, the nomination must be received no later than 90 days prior to the date of the 20192020 annual meeting or 10 days following the public announcement of the date of the 20192020 annual meeting. Any stockholder submitting a nomination under our bylaws must comply with the requirement provided in the bylaws including providing: (a) all information relating to the nominee that is required to be disclosed in solicitations of proxies for election of directors pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such nominee’s written consent to being named in the proxy statement as a nominee and to serve as a director if elected); and (b) the name and address (as they appear on the company’sCompany’s books) of the nominating stockholder and the class and number of shares beneficially owned by such stockholder.
Communications with the Board Stockholders or other interested parties may communicate directly with one or more members of our board, or thenon-employee directors as a group, by writing to the director or directors at the following address: c/c⁄o Corporate Secretary, Sterling Construction Company, Inc., 1800 Hughes Landing Blvd. — Suite 250, The Woodlands, Texas 77380; or bye-mail to the corporate secretary at: Reports@Lighthouse-Services.com. Each communication should specify the addressee as well as the general topic of the communication. The communication will be forwarded to the appropriate director or directors, unless it is frivolous. If the communication is voluminous, the corporate secretary will summarize it and furnish a summary to the appropriate director or directors. Sterling Construction |2019 Proxy Statement |11 |
Director Compensation In setting director compensation, we consider the significant amount of time directors dedicate in fulfilling their duties as directors, as well as the skill-level required to be an effective member of our board. We also seek to align the directors’ compensation with our stockholders’ interest by delivering a substantial portion of that compensation in the form of equity-based compensation. The corporate governance and governance/nominating committee reviews the form and amount of director compensation and, with the advice of the chair of the compensation committee, makes recommendations to the full board. We use a combination of cash and equity-based incentive compensation to compensate ournon-employee directors, as described below.
In early 2018, the governance/nominating committee engaged Meridian Compensation Partners, LLC (“Meridian”), the board’s independent compensation consultant, to conduct a competitive analysis ofnon-employee director compensation and evaluate our program in light of the results of its analysis. Meridian analyzed thenon-employee director compensation programs of three comparator groups: the Company’s full peer group used to evaluate executive officer compensation (see page 24 for a list of those companies), a subset of the full peer group comprised of peers with revenues below $3 billion, and a general industry survey data for companies with revenues between $500 million and $1 billion. Meridian’s findings indicated that our per director average compensation was below the 25th percentile of the full peer group and approximated the 25th percentile of the general industry survey, noting that the largest discrepancy was the level of equity-based compensation. Following the governance/nominating committee’s review of the report and discussions with Meridian, the committee recommended and the board approved the following changes to our program effective May 1, 2018: a $25,000 increase in the annual board retainer and the elimination of all meeting fees, and a $35,000 increase in the annual target equity award.
Cash Compensation Effective May 1, 2017,2018, eachnon-employee director receives an annual fee paid monthly consisting of, as applicable: $50,000 for serving on our board (including the chairman of the board of directors), increased from $30,000;
$25,000 for serving as chair of the audit committee (including if performed by the chairman of the board of directors);
$15,000 for serving as chair of the compensation committee (unless performed by the chairman of the board of directors);
$10,000 for serving as chair of the corporate governance and nominating committee (unless performed by the chairman of the board of directors); and
$100,000 for serving as chairman of the board of directors.
| · | | $75,000 for serving on our board (including the chairman of the board of directors), increased from $50,000; |
| · | | $25,000 for serving as chair of the audit committee (including if performed by the chairman of the board of directors); |
| · | | $15,000 for serving as chair of the compensation committee (unless performed by the chairman of the board of directors); |
| · | | $10,000 for serving as chair of the governance/nominating committee (unless performed by the chairman of the board of directors); and |
| · | | $100,000 for serving as chairman of the board of directors. |
Also, each director receives reimbursement for reasonable out of pocket expenses incurred in attending board and committee meetings, as well as investor conferences and education programs attended at the request of the company. In additionCompany. Effective May 1, 2018, we no longer pay meeting fees to the annual director fees, each non-employee-director (other than the chairman) receives a fee of $1,500 for attending each board meeting in person, and a fee for attending any committee meeting (of which he or she is a member) in person:
$1,000 per audit committee meeting (in connection with a board meeting) or $1,500 per audit committee meeting (not in connection with a board meeting); and
$500 per compensation or corporate governance and nominating committee meeting (in connection with a board meeting) or $750 per compensation or corporate governance and nominating committee meeting (not in connection with a board meeting).
For participation at a board or committee meeting by telephone, each non-employee director (other than the chairman) instead receives $500 (if less than an hour) or $750 (if over an hour) per meeting attended by telephone. In connection with their service on the special committee of the board in 2017, Ms. Davenport and each of Messrs. Hemsley, Patton, Schaum and Scott received additional fees in the amount of $1,500.
Equity-Based Compensation Eachnon-employee director also receives equity-based compensation under our stockholder-approved stock incentive plan consisting of annual grants of restricted stock. Each year on the day of the annual meeting of stockholders, eachnon-employee director is awarded shares of restricted stock with an aggregate grant date value of $50,000.$85,000. The restricted stock vests the day prior to the following year’s annual meeting of stockholders, with potential accelerated vesting in the event that thenon-employee director dies or becomes
permanently disabled, or in the event there is a qualifying change of control of the company. TheCompany. Unless otherwise determined by the Board, the restricted stock is forfeited if prior to vesting, the director ceases to be a director for any other reason. 20172018 Director Compensation
The table below summarizes the total compensation paid to or earned by ournon-employee directors during 2017.2018. The amount included in the “Stock Awards” column reflects the aggregate grant date fair value of the restricted stock, and does not necessarily reflect the income that will ultimately be realized by the director for these stock awards. Mr. Cutillo did not receive any compensation for his service on our board of directors, and Mr. Varello did not begin receiving compensation for service on our board of directors until April 28, 2017, when he ceased serving as an officer of the company.directors. The compensation paid to Messrs. Mr. |12 | Sterling Construction |2019 Proxy Statement
Cutillo and Varello, including compensation received in Mr. Varello’s capacity as a director, during 20172018 is reflected in the "2017“2018 Summary Compensation"Compensation” table on page 29. | | | | | | | | | Name of Director | | Fees Earned or Paid in Cash | | Stock Awards (1) | | Total | | Marian M. Davenport | | $72,083 | | $49,994 | | $122,077 | | Maarten D. Hemsley | | $70,167 | | $49,994 | | $120,161 | Raymond F. Messer (2) | | $43,833 | | $49,994 | | $93,827 | | Charles R. Patton | | $56,583 | | $49,994 | | $106,577 | | Richard O. Schaum | | $79,083 | | $49,994 | | $129,077 | | Milton L. Scott | | $168,333 | | $49,994 | | $218,327 |
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30. | | | | | | | | | | | | | | | | | Name of Director | | Fees Earned or Paid in
Cash | | Stock Awards(1) | | Total | Marian M. Davenport | | | $ | 86,750 | | | | $ | 84,998 | | | | $ | 171,748 | | Maarten D. Hemsley(2) | | | | 49,833 | | | | | 84,998 | | | | | 134,831 | | Raymond F. Messer | | | | 78,417 | | | | | 84,998 | | | | | 163,415 | | Dana C. O’Brien(3) | | | | n/a | | | | | n/a | | | | | n/a | | Charles R. Patton | | | | 71,583 | | | | | 84,998 | | | | | 156,581 | | Richard O. Schaum(4) | | | | 81,083 | | | | | 84,998 | | | | | 166,081 | | Milton L. Scott | | | | 189,583 | | | | | 84,998 | | | | | 274,581 | | Thomas M. White(5) | | | | 25,000 | | | | | 65,350 | | | | | 90,350 | |
| | (1) | Amounts reflect the aggregate grant date fair value of the restricted stock, which is valued on the date of grant at the closing sale price per share of our common stock in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC) Topic 718, disregarding the effect of forfeitures. On April 28, 2017,May 2, 2018, the Board approved the award to eachnon-employee director of restricted shares valued at $85,000 based on the closing price of our common stock on May 2, 2018, the date of the annual meeting. The awards were not effective until May 8, 2018, following the effectiveness of our FormS-8 registering the shares issuable under our new stock incentive plan. Eachnon-employee director was granted 5,2577,404 shares of restricted stock, which had a grant date fair value of $9.51$11.48 per share. As of December 31, 2017,2018, eachnon-employee director, except Mr. White, had 5,2577,404 shares of restricted stock outstanding. On July 31, 2018, in connection with his appointment to the board, Mr. White was granted 4,866 shares of restricted stock, which had a grant date fair value of $13.43 per share. As of December 31, 2018, Mr. White had 4,866 shares of restricted stock outstanding. | |
| (2) | Maarten D. Hemsley retired from the board effective July 31, 2018. | |
(2)
| Mr. Messer(3) | Dana C. O’Brien joined our board effective January 1, 2019, thus she did not receive any compensation for 2018. | |
| (4) | Richard O. Schaum will retire as a director in conjunction with the annual meeting. | |
| (5) | Thomas M. White was first elected as a director atof the 2017 annual meeting, and was appointed to the audit and compensation committeesCompany on April 28, 2017.July 31, 2018. | |
Sterling Construction |2019 Proxy Statement |13 |
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Proposal No. 1: Election of Directors In accordance with our bylaws, effective as of the annual meeting, our board of directors has fixed the current number of directors at seven.eight. Upon recommendation of our corporate governancegovernance/nominating committee, and nominating committee,in furtherance of our board refreshment efforts, our board of directors has nominated Roger A. Cregg, Joseph A. Cutillo, Marian M. Davenport, Maarten D. Hemsley, Raymond F. Messer, Dana C. O’Brien, Charles R. Patton, Richard O. Schaum and Milton L. Scott and Thomas M. White to serve as our directors, each until the next annual meeting and election of their successor. All of the nominees are current directors.directors, except for Mr. Cregg. Each nominee has consented to being named as a nominee in this proxy statement and to serve as a director if elected. The persons named as proxies intend to vote your shares of our common stock for the election of each of the director nominees, unless otherwise directed. If, contrary to our present expectations, any of the nominees is unable to serve, the proxy holders may vote for a substitute nominee. The board has no reason to believe that any of the nominees will be unable to serve. Our board and the corporate governance and nominating committee are considering the expansion of our board and are in the process of identifying qualified candidates with highly additive skills and relevant experience to maximize the Board’s effectiveness. We believe that nominating a director to serve the company is a significant undertaking that requires a thoughtful and diligent process, both in the identification of a pool of potential candidates and in determining which specific candidate will best serve the company. Although this process was not completed in time to nominate a new director at the annual meeting, we hope to select a candidate soon, and will follow the election procedures set forth in our bylaws. In selecting a nominee to serve as a member of our board, the corporate governance and nominating committee will adhere to the principles outlined in our board governance guidelines and will be mindful of the Board’s desire to increase Board diversity. See “Consideration of Director Nominees” for more information.
Vote Required to Elect Director Nominees Under our bylaws, in an uncontested election, our directors are elected by a majority of the votes cast.cast, with the directors receiving more for than against votes being elected. In contested elections where the number of nominees exceeds the number of directors to be elected, directors are elected by a plurality vote, with the director nominees who receive the most votes being elected. As a condition to nomination for election or reelection to the Board,board in an uncontested election, each incumbent director or director nominee submits to the board in advance of the annual meeting an executed irrevocable letter of resignation that is deemed tendered if the director fails to receive the votes required for election or reelection. Such resignation shall only be effective upon acceptance by the board of directors, which effective time may be deferred until a replacement director is identified and appointed to the board. If an incumbent director fails to achieve a majority of the votes cast in an uncontested election, the corporate governance and governance/nominating committee will make a recommendation to the board of directors on whether to accept or reject the resignation, or whether other action should be taken. The board of directors will act promptly on the corporate governance and governance/nominating committee'scommittee’s recommendation, considering all factors that the Boardboard of Directorsdirectors believes to be relevant, and will publicly disclose its decision and the rationale behind it within 90 days from the date of the certification of the election results. For more information on the voting requirements, see “Questions and Answers about the Proxy Materials, Annual Meeting and Voting.” Recommendation of ourthe Board of Directors | | | ✔ | | OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTEFOR EACH OF THE EIGHT DIRECTOR NOMINEES LISTED BELOW. |
|14 | Sterling Construction |2019 Proxy Statement
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
EACH OF THE SEVEN DIRECTOR NOMINEES.
Information about Director Nominees and Continuing Directors The table below provides certain information as of March 13, 2018,19, 2019, with respect to the director nominees. The biography of each of the directorsdirector nominees contains information regarding the person’s business experience, director positions with other public companies held currently or at any time during the last five years, and the experiences, qualifications, attributes and skills that caused our board to determine that the person should be nominated to serve as a director of the company.Company. Unless otherwise indicated, each person has been engaged in the principal occupation shown for the past five years.
The table below shows certain information about the nominees.
| | | | | | | | | Name of Director | | Age | | Principal Occupation, Business Experience and Other Public Company Directorships | | Director Since | | | | | | | | | | Joseph A. Cutillo | | 52 | | Mr. Cutillo has served as the Chief Executive Officer of the company since 2017. He joined the company in October 2015 as Vice President, Strategy & Business Development. In May 2016, he was promoted to Executive Vice President and Chief Business Development Officer. In February 2017, he was promoted to President of the company and in April 2017 he was promoted to Chief Executive Officer. Prior to joining the company, Mr. Cutillo was President and Chief Executive Officer of Inland Pipe Rehabilitation LLC, a $200 million private equity-backed trenchless pipe rehabilitation company, from August 2008 to October 2015.
Experience, Qualifications, Attributes & Skills. Mr. Cutillo brings to the board his thirty years of managerial experience and a deep understanding of emerging opportunities in heavy civil construction, industrial, and water infrastructure markets. In addition, Mr. Cutillo’s knowledge and understanding of the Company’s operational strategy and organizational structure, together with his operational and leadership experience at various levels of management contribute to the breadth and depth of the board’s deliberations. Mr. Cutillo holds a Bachelor of Science in Mechanical Engineering from Northeastern University. | | 2017 | | | | | | | | Chief Executive Officer of Sterling Construction Company, Inc. | | | | | | | | | | | | | | Marian M. Davenport (Independent) | | 64 | | Ms. Davenport has served on the Board of Directors and as Executive Director of Genesys Works - Houston, a nationally-recognized nonprofit organization that trains and employs high school seniors from underserved communities to work as professionals in major corporations, since April 2013. Ms. Davenport was associated with Big Brothers Big Sisters, a non-profit organization that provides one-to-one mentoring for children from September 2004 to April 2013. During this period, she held various positions in its affiliated organizations, including serving as President & Chief Executive Officer of Big Brothers Big Sisters of Greater Houston from September 2004 to June 2010, and Senior Vice President, Operations and Capacity Building of Big Brothers Big Sisters Lone Star from June 2010 to March 2013. Ms. Davenport was employed by Dynegy Inc., a publicly-traded company in the business of power distribution, marketing and trading of gas, power and other commodities, midstream services and electric distribution from April 1997 to December 2013. She joined Dynegy as General Counsel, Commercial Development and rose to the position of Senior Vice President, Legislative and Regulatory Affairs.
| | 2014 | | | | | | | Executive Director, Genesys Works - Houston
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| | | | | | | | | Name of Director | | Age | | Principal Occupation, Business Experience and Other Public Company Directorships | | Director Since | Ms. Davenport (cont.) Committees: Corporate Governance and Nominating (Chair) Compensation | | | | Experience, Qualifications, Attributes & Skills. Ms. Davenport brings to the board her background as a lawyer, with experience in corporate governance and securities compliance, having served as general counsel of a public company. Ms. Davenport gained extensive leadership and managerial experience as an executive in the energy industry while employed with Dynegy, where she managed the development of large natural gas-fired power plants and played a pivotal role in improving the performance of critical company functions, including human resources. Ms. Davenport's more recent career in the non-profit sector providing mentoring and workforce development opportunities for disadvantaged youth brings a new perspective and expertise to the Company, which operates in an industry where finding competent candidates for employment at all levels is more and more competitive. In sum, Ms. Davenport's extensive background in both the for-profit and non-profit sectors brings cognitive diversity to the board and the committees on which she serves. Ms. Davenport holds a Bachelor of Arts degree, Liberal Arts and Sciences, from The Colorado College, of Colorado Springs, Colorado, and a Juris Doctorate from the University of Denver, College of Law, in Denver, Colorado. Ms. Davenport is a member of the Texas State Bar. | | | | | | | | | | | Maarten D. Hemsley (Independent)
| | 68 | | Mr. Hemsley founded New England Center for Arts & Technology, Inc. (NECAT), a career-directed educational non-profit serving resource-limited adults in Boston, Massachusetts, in 2010 and currently serves as its Chairman and President. Prior to founding NECAT, he served as the Company's President and Chief Operating Officer from 1988 until 2001, and its Chief Financial Officer from 1998 until 2007. From 2001 until retiring in March 2012, Mr. Hemsley was engaged by Harwood Capital LLP (Harwood) (formerly JO Hambro Capital Management Limited), an investment management company based in the United Kingdom. During that period, Mr. Hemsley served as a Fund Manager, Senior Fund Manager and Senior Advisor to several investment funds managed by Harwood. Other Directorships. From 2003 until February 2016, Mr. Hemsley was a director of Sevcon, Inc., a public company (during his term) that manufactures electronic controls for electric vehicles and other equipment. He has also served on the boards of a number of privately-held companies in the United Kingdom. Experience, Qualifications, Attributes & Skills. Mr. Hemsley has extensive financial experience and managerial skills gained over many years managing investment funds, serving the Company, including nine years as Chief Financial Officer and thirteen years as President, and serving as the chief financial officer of several medium-sized public and private companies in a variety of business sectors in the U.S. and Europe. His knowledge of the Company, derived from more than twenty-five years of service, as well as his analytical skills honed as a fund manager responsible for making investment decisions and overseeing the management of a wide range of portfolio companies, enable him to contribute to the board's oversight of the Company's business, its financial risks, its executive compensation arrangements, the risks inherent in its acquisition program and in post-acquisition integration issues. Mr. Hemsley is a Fellow of the Institute of Chartered Accountants in England and Wales.
| | 1998 | | | | | | | Founder, Chairman and President of New England Center for Arts & Technology, Inc.
Committees: Audit Corporate Governance and Nominating
| | | | | |
| | | | | | | | | Name of Director | | Age | | Principal Occupation, Business Experience and Other Public Company Directorships | | Director Since | | | | | | | | | Raymond F. Messer (Independent)
| | 70 | | Mr. Messer is Chairman Emeritus of Walter P Moore, a private international company that provides structural, diagnostic, civil, traffic, parking, transportation, water resources and Intelligent Transportation Systems (ITS) engineering services. Mr. Messer served as the Director of Design-Build and Senior Principal of from January 2015 until his retirement in June 2017. Mr. Messer served as President and Chief Executive Officer of Walter P Moore from July 1993 until January 2015, when he implemented the company’s leadership transition plan and assumed the position of Director of Design-Build, both to remain available for consultation with his successor and to establish a better presence for the firm in the design-build construction market. Mr. Messer joined Walter P. Moore in November 1981 as the Director of Pre-stressed Concrete Design. In February 1984, he was named the Manager of Walter P Moore’s Tampa, Florida office, and held that position until assuming the role of President and Chief Executive Officer. Mr. Messer served on Walter P Moore's board of directors from April 1986, until April 2015, and served as chairman of the board from June 1998 to April 2015 Prior to joining Walter P Moore, Mr. Messer served in various roles of increasing responsibility at Exxon Research and Engineering, HNTB Corporation, Bechtel Corporation, and VSL International Ltd.
Other Directorships. Mr. Messer serves on the board of Kennedy/Jenks Consultants, a private environmental and water resources engineering company, where he chairs the nominating and compensation committees. He also serves on the board of Braun Intertec, a private materials testing and geotechnical engineering firm, where he serves on the compensation/human resources and nominating committees. He serves on the boards of not-for-profits Texas Higher Education Foundation, Stages Theatre, Genesys Works. He has also served on the national executive committee of the American Council of Engineering Companies.
Experience, Qualifications, Attributes & Skills. In addition to his engineering degrees, Mr. Messer brings to the board over 40 years of practical experience in engineering design, project management and construction, all matters that relate directly to the Company's construction businesses. During his tenure as President and Chief Executive Officer of Walter P. Moore, he acquired leadership, managerial and corporate governance skills that contribute to the board’s industry-specific expertise and ability to fulfill its responsibilities. In addition, the variety of his private and not-for-profit board experience enables him to bring to the Company valuable strategic insights into board matters generally. Mr. Messer is a Licensed Professional Engineer in Texas, Florida and New York. He holds a Bachelor of Arts in Mathematics from Carroll College, Helena Montana and a Bachelor of Science in Civil Engineering and a Master of Science in Engineering Mechanics from Columbia University.
| | 2017 | | | | | | | Chairman Emeritus, Walter P Moore
Committees: Audit Compensation
| | | | | |
| | | | | | | | | Name of Director | | Age | | Principal Occupation, Business Experience and Other Public Company Directorships | | Director Since | | | | | | | | | Charles R. Patton (Independent)
| | 58 | | Mr. Patton has served as the Executive Vice President, External Affairs, of American Electric Power Company, Inc. (AEP) one of the largest electric utilities in the U.S., serving nearly 5.4 million customers in 11 states, since January 2017. In this role, Mr. Patton is responsible for leading AEP's customer services, regulatory, communications, federal public policy and corporate sustainability initiatives. Mr. Patton served as President and Chief Operating Officer of Appalachian Power Company, an electric utility serving approximately one million customers in West Virginia, Virginia and Tennessee from June 2010 until January 2017, As President and Chief Operating Officer of Appalachian Power Company, a unit of AEP, Mr. Patton was responsible for distribution operations and a wide range of customer and regulatory relationships. From June 2008 to June 2010, Mr. Patton served as Senior Vice President of Regulatory Policy before transitioning to the role of Executive Vice President of AEP's Western Utilities where he was responsible for oversight of utilities in Texas, Louisiana, Arkansas and Oklahoma. From May 2004 to June 2008, Mr. Patton held various executive positions with AEP, including the position of President and Chief Operating Officer of AEP Texas, where he was responsible for external affairs in Texas and in the Southwestern region of AEP. Before joining AEP in December 1995, Mr. Patton spent nearly 11 years in the energy and telecommunications business with Houston Lighting & Power Company. Other Directorships. Mr. Patton served as a director of the Richmond Federal Reserve Bank from January 2014 through 2016. Experience, Qualifications, Attributes & Skills. Mr. Patton brings to the board his extensive experience in the utilities industry considerable high-level management experience, both of which benefit the board in its deliberations by bringing a different perspective than any other director. Mr. Patton received a bachelor’s degree (cum laude) from Bowdoin College in Brunswick, Maine, and a master’s degree from the LBJ School of Public Policy at the University of Texas in Austin.
| | 2013 | | | | | | | Executive Vice President - External Affairs American Electric Power Company, Inc.
Committee: Compensation
| | | | | |
| | | | | | | | | Name of Director | | Age | | Principal Occupation, Business Experience and Other Public Company Directorships | | Director Since | Richard O. Schaum (Independent)
| | 71 | | Mr. Schaum has served as the General Manager of 3rd Horizon Associates LLC, a technology assessment and development company since May 2003. From October 2003 until June 2005, he was also Vice President and General Manager of Vehicle Systems for WaveCrest Laboratories, Inc., where he led the company’s vehicle systems development group. Prior to that, Mr. Schaum spent more than thirty years with DaimlerChrysler Corporation, and its predecessor, Chrysler Corporation, where he served as Executive Vice President, Product Development from January 2000 until his retirement in March 2003. Other Directorships. Mr. Schaum is currently a director of BorgWarner Inc., a publicly-traded company that manufactures and sells technologies for automotive propulsion systems, and Gentex Corporation, a publicly-traded company that manufactures and sells automotive electro-chromic dimming mirrors, windows, camera-based driver assist systems, and commercial fire protection products. Experience, Qualifications, Attributes & Skills. Mr. Schaum brings to the board his extensive executive and management experience at all levels in a Fortune 100 company, and knowledge of, and interest in, corporate governance matters, gained while on the board of a Fortune 500 company. In addition, his technical background and his operating experience at all levels of management contribute to the breadth and depth of the board's deliberations. Mr. Schaum is a fellow of the Society of Automotive Engineers and served as its President from 2007 to 2008. He earned a B.S. in Mechanical Engineering from Drexel University and an M.S. in Mechanical Engineering from the University of Michigan.
| | 2010 | | | | | | | General Manager, 3rd Horizon Associates LLC
Committees: Audit Compensation (Chair)
| | | | | | | | | | | | | | Milton L. Scott (Independent) Chairman of the Board of Directors of Sterling Construction Company, Inc.
| | 61 | | Mr. Scott has served as the Chairman and Chief Executive Officer of the Tagos Group, LLC (Tagos), which holds an investment in cement technology and provides expertise in Supply Chain Advisory Services and Anti-Corrosion Technology, since April 2007. From October 2012 to November 2013, Mr. Scott was also the Chairman and Chief Executive Officer of CorrLine International, LLC (CorrLine), a private company that manufactured CorrX, a surface decontamination product that treats and destroys the primary cause of premature coating failures. CorrLine was placed into involuntary Chapter 7 bankruptcy in August 2014, and in October 2014, Tagos purchased the assets of CorrLine and placed them in a subsidiary of Tagos, TGS Solutions, LLC, of which Mr. Scott is Chairman and Chief Executive Officer. Mr. Scott was previously associated with Complete Energy Holdings, LLC, a company of which he was Managing Director until January 2006, and which he co-founded in January 2004 to acquire, own and operate power generation assets in the United States. From March 2003 to January 2004, Mr. Scott was a Managing Director of The StoneCap Group, an entity formed to acquire, own and operate power generation assets. From October 1999 to November 2002, Mr. Scott served as Executive Vice President and Chief Administrative Officer at Dynegy Inc., a public company in the business of power distribution, marketing and trading of gas, power and other commodities, midstream services and electric distribution. From July 1977 to October 1999,
| | 2005 | | | | | | | | Chairman and Chief Executive Officer of the Tagos Group, LLC | | | | | |
| | | | | | | | Name of DirectorRoger A. Cregg(Independent) | | AgeAge:62 Director Since:N/A | 
Director of Comerica Incorporated Board Committees: N/A Other Directorships: • Comerica Incorporated (2006–present) • AV Homes, Inc. (2012-2018) | | Principal Occupation, Business Mr. Cregg currently serves as a member of the board of directors of Comerica Incorporated, a position he has held since 2006. Mr. Cregg previously served as President and Chief Executive Officer of AV Homes, Inc., a NASDAQ-listed company, from 2012 to 2018, one of the largest premier public homebuilders focused on the development of active adult communities and sales of residences within those communities, in addition to the sale of primary residential communities serving first-time and move-up buyers, prior to it being sold to Taylor Morrison Homes in 2018. Prior to that, Mr. Cregg served as a senior executive and Chief Financial Officer to The Servicemaster Company from 2011 to 2012, PulteGroup, Inc. (NYSE) from 1998 to 2011, the Zenith Electronics Corporation (NYSE) from 1996 to 1998 and Sweetheart Cup Company, Inc. from 1990 to 1996. Mr. Cregg also served on the board of directors of the Federal Reserve Bank of Chicago, Detroit Branch, from 2004 to 2009, including serving as the Chairman of the board in 2006.
| | Experience, Qualifications, Attributes & Skills | | Mr. Cregg is an accomplished and Other Public Company Directorships
operationally oriented executive who has had a broad range of responsibilities, including having served as a Chief Executive Officer and Chief Financial Officer of public and private companies, along with having served on numerous boards of directors. Mr. Cregg’s public and private company executive management and leadership experience provides the board with demonstrated leadership capability and extensive knowledge of complex financial and operational issues. |
| | | | | Joseph A. Cutillo(Chief Executive Officer) | | Age:53Director SinceSince: 2017 | 
Chief Executive Officer of Sterling Construction Company, Inc. Board Committees: N/A Other Directorships: N/A | | Mr. Scott (cont.Cutillo has served as the Chief Executive Officer of the Company since 2017. He joined the Company in October 2015 as Vice President, Strategy & Business Development. In May 2016, he was promoted to Executive Vice President and Chief Business Development Officer. In February 2017, he was promoted to President of the Company and in April 2017 he was promoted to Chief Executive Officer. Prior to joining the Company, Mr. Cutillo was President and Chief Executive Officer of Inland Pipe Rehabilitation LLC, a $200 million private equity-backed trenchless pipe rehabilitation company, from August 2008 to October 2015. Mr. Cutillo also currently serves as a director on the Advisory Board of Commonwealth LNG, LLC, a private, project development company specializing in the development of a liquefied gas facility in Cameron, Louisiana. | | Experience, Qualifications, Attributes & Skills | | Mr. Cutillo brings to the board his thirty years of managerial experience and a deep understanding of emerging opportunities in heavy civil construction, industrial, and water infrastructure markets. In addition, Mr. Cutillo’s knowledge and understanding of the Company’s operational strategy and organizational structure, together with his operational and leadership experience at various levels of management contribute to the breadth and depth of the board’s deliberations. |
Sterling Construction |2019 Proxy Statement |15 |
| | | | | Marian M. Davenport(Independent) | | Age:65 Director Since:2014 | 
Director, Genesys Works – Houston Board Committees: ✓ Audit (Chair) ✓ Compensation (Chair) Other Directorships: N/A | | Ms. Davenport currently serves on the Board of Directors of Genesys Works – Houston, a nationally-recognized nonprofit organization that trains and employs high school seniors from underserved communities to work as professionals in major corporations, where she has served in such capacity since April 2013. Ms. Davenport was appointed by the Mayor of the City of Houston to the Board of Directors of the Fourth Ward Redevelopment Authority in 2011, where she continues to serve and chairs the Infrastructure Committee. Ms. Davenport served as Executive Director of Genesys Works – Houston, from April 2013 until her retirement in September 2018. Previously, Ms. Davenport served in various executive roles with Big Brothers Big Sisters, a nonprofit organization that provides one-to-one mentoring for children from September 2004 to April 2013. Ms. Davenport was employed by Dynegy Inc., a publicly-traded company in the business of power distribution, marketing and trading of gas, power and other commodities, midstream services and electric distribution from April 1997 to December 2013. She joined Dynegy as Vice President and General Counsel, Commercial Development and rose to the position of Senior Vice President, Legislative and Regulatory Affairs. Ms. Davenport also served as General Counsel to Destec Energy, Inc., a publicly traded electric power supplier, prior to its sale to National Gas Clearing House, the predecessor company to Dynegy. | | Experience, Qualifications, Attributes & Skills | | Ms. Davenport has 40 years experience in numerous executive level roles and brings to the board her background as a lawyer, with experience in corporate governance and securities compliance, having served as general counsel of a public company. Ms. Davenport gained extensive leadership and managerial experience as an executive in the energy industry while employed with Dynegy, a Fortune 500 company, where she managed the development of large natural gas-fired power plants and played a pivotal role in improving the performance of critical company functions, including human resources. Ms. Davenport’s more recent career in the non-profit sector providing mentoring and workforce development opportunities for disadvantaged youth brings a new perspective and expertise to the Company, which operates in an industry where finding competent candidates for employment at all levels is more and more competitive. In sum, Ms. Davenport’s extensive background in both the for-profit and non-profit sectors brings cognitive diversity to the board and the committees on which she serves. |
| | | | | Raymond F. Messer(Independent) | | Age:71 Director Since:2017 | 
Chairman Emeritus, Walter P Moore Board Committees: ✓ Compensation ✓Corporate Governance and Nominating
(Chair)Other Directorships: N/A | | Mr. Messer is Chairman Emeritus of Walter P Moore, a private international company that provides structural, diagnostic, civil, traffic, parking, transportation, water resources and Intelligent Transportation Systems engineering services, where he previously served as the Director of Design-Build from January 2015 until June 2017 and as President and Chief Executive Officer from 1993 through January 2015. Mr. Messer served on Walter P Moore’s board between April 1986 and April 2015, and served as chairman from June 1998 to April 2015. Prior to that, he served as Manager of Walter P Moore’s Tampa, Florida office from 1984 until he was named President and Chief Executive Officer in 1993. Mr. Messer joined Walter P Moore in November 1981 as the Director of Pre-stressed Concrete Design. In addition, Mr. Messer serves on the boards of Kennedy/Jenks Consultants, a private environmental and water resources engineering company, where he chairs the nominating and compensation committees, and Braun Intertec, a private materials testing and geotechnical engineering firm, where he serves on the compensation/human resources and nominating committees. Mr. Messer has also served in various roles at Exxon Research and Engineering, HNTB Corporation, Bechtel Corporation, and VSL International Ltd. | | Experience, Qualifications, Attributes & Skills | | Mr. Messer brings to the board over 40 years of practical experience in engineering design, project management and construction, all matters that relate directly to the Company’s construction businesses. During his tenure as President and Chief Executive Officer of Walter P Moore, he acquired leadership, managerial and corporate governance skills that contribute to the board’s industry-specific expertise and ability to fulfill its responsibilities. In addition, the variety of his private and not-for-profit board experience enables him to bring to the Company valuable strategic insights into board matters generally. In October 2018, Mr. Messer was inducted into the National Academy of Construction in recognition of his work advancing design-build construction procedures. Mr. Messer is a Licensed Professional Engineer in Texas, Florida and New York. |
|16 | Sterling Construction |2019 Proxy Statement
| | | | | Dana C. O’Brien(Independent) | | Age:51 Director Since:2019 | 
Senior Vice President and General Counsel of CenterPoint Energy (until April 2019) Board Committees: ✓ Audit ✓ Corporate Governance and Nominating Other Directorships: N/A | | Ms. O’Brien has served as the Senior Vice President and General Counsel of CenterPoint Energy since May 2014. CenterPoint Energy is a Fortune 500 Company that includes electric transmission and distribution, natural gas distribution, and energy services operations. At CenterPoint, Ms. O’Brien and her team oversees the company’s legal, regulatory and government affairs, as well as audit services, ethics and compliance, and records management. As publicly-announced, effective April 2, 2019, Ms. O’Brien will resign from her positions with CenterPoint Energy and will join The Brinks Company as Senior Vice President and General Counsel effective April 15, 2019. The Brinks Company is a publicly traded (NYSE: BCO) cash management, secure route-based logistics and payment solutions company. From 2007 to 2014, Ms. O’Brien served as Chief Legal Officer and Chief Compliance Officer for CEVA Logistics, plc., a global provider of contract logistics and freight forwarding services located in the Netherlands and publicly traded on the SIX Swiss Exchange in Switzerland. Prior to that, between 2005 and 2007, she served as General Counsel, Chief Compliance Officer and Secretary of EGL, Inc., which was acquired by CEVA Logistics. Ms. O’Brien also previously served as Associate General Counsel, from 1999 to 2000, and as Vice President, Secretary and General Counsel, from 2001 to 2005 of Quanta Services, Inc., a leading construction and service provider to the energy and utility industries. | | Experience, Qualifications, Attributes & Skills | | Ms. O’Brien brings to the board her background as a lawyer, with experience in corporate governance and compliance. Ms. O’Brien’s background brings a breadth of leadership, knowledge and legal experience, serving as general counsel of a public company. In 2013, Ms. O’Brien received the Texas General Counsel Forum’s Magna Stella Award for Outstanding General Counsel of a large company. In 2016, Ms. O’Brien was named Best General Counsel of a Large Legal Department and was honored at the Women in Energy Leadership Awards, by the Houston Business Journal. She was also named one of the 50 Most Powerful Women in Oil and Gas by the Oil and Gas Diversity Counsel. |
| | | | | Charles R. Patton(Independent) | | Age:59 Director Since:2013 | 
Executive Vice President — External Affairs American Electric Power Company, Inc. Board Committees: ✓ Compensation ✓ Corporate Governance and Nominating Other Directorships: N/A | | Mr. Patton has served as the Executive Vice President, External Affairs, of American Electric Power Company, Inc., one of the largest electric utilities in the U.S., serving nearly 5.4 million customers in 11 states, since January 2017. In this role, Mr. Patton is responsible for leading American Electric’s customer services, regulatory, communications, federal public policy, North American Electric Reliability Corporation (NERC) compliance and corporate sustainability initiatives. Mr. Patton served as President and Chief Operating Officer of Appalachian Power Company, an electric utility serving approximately one million customers in West Virginia, Virginia and Tennessee from June 2010 until January 2017, As President and Chief Operating Officer of Appalachian Power Company, a unit of American Electric, Mr. Patton was responsible for distribution operations and a wide range of customer and regulatory relationships. From January 2014 through 2016, Mr. Patton served as a director of the Richmond Federal Reserve Bank. From June 2008 to June 2010, Mr. Patton served as Senior Vice President of Regulatory Policy before transitioning to the role of Executive Vice President of American Electric’s Western utilities where he was responsible for oversight of utilities in Texas, Louisiana, Arkansas and Oklahoma. From May 2004 to June 2008, Mr. Patton served as the President and Chied Operating Officer for AEP Texas, serving over one million customers in South and West Texas. From December 1996 to May 2004, Mr. Patton held leadership and executive roles responsible for external affairs in Texas and in the Southwestern region of American Electric Power. Before joining American Electric in December 1995, Mr. Patton spent nearly 11 years in the energy and telecommunications business with Houston Lighting & Power Company and its parent Houston Industries, Inc. | | Experience, Qualifications, Attributes & Skills | | Mr. Patton brings to the board his extensive experience in the utilities industry and considerable high-level executive and management experience. He has extensive operational experience leading large AEP subsidiaries in all manner of electric utility service delivery and operations, including safety, training and culture. Additionally, Mr. Patton was responsible for the financial performance of each unit that he led. Mr. Patton also has considerable experience in strategic planning, regulatory compliance, communications and government affairs. The breadth of his experiences benefit the board in its deliberations by bringing a unique perspective to the board, its committees and the Company. |
Sterling Construction |2019 Proxy Statement |17 |
| | | | | Milton L. Scott(Independent) | | Age:62 Director Since:2005 | 
Chairman of the Board of Directors of Sterling Construction Company, Inc. & Chairman and Chief Executive Officer of the Tagos Group, LLC Board Committees: ✓ Audit (Chair) ✓ Corporate Governance and Nominating Other Directorships: • W-H Energy Services, Inc. (2000-2008) | | Since 2007, Mr. Scott has served as the Chairman and Chief Executive Officer of the Tagos Group, LLC, which provides expertise in Supply Chain Advisory Services and Anti-Corrosion Technology. Mr. Scott is also Chairman and Chief Executive Officer of TGS Solutions, LLC, a private company that manufactures Corrx, a surface decontamination product that treats and destroys the primary cause of premature coating failures. He is also Chairman of Inea International, Ltd., a private company that manufactures cement products. From October 2012 to November 2013, Mr. Scott served as Chairman and Chief Executive Officer of CorrLine International, LLC, a private company that manufactured CorrX, which was purchased during Chapter 7 bankruptcy proceedings by Tagos in October 2014. Mr. Scott previously served as Managing Director of Complete Energy Holdings, LLC from January 2004 through 2006, a company which heco-founded in 2004 to acquire and operate domestic power generation assets. From March 2003 to January 2004, Mr. Scott served as a Managing Director of The StoneCap Group, an entity formed to acquire and operate power generation assets. From October 1999 to November 2002, he served as Executive Vice President and Chief Administrative Officer at Dynegy Inc., a public company in the business of power distribution, marketing and trading of gas, power and other commodities, midstream services and electric distribution. From July 1977 to October 1999, he was a partner with the Houston office of Arthur Andersen LLP, a public accounting firm, where from 1996 to 1999, he served as partner in charge of the Southwest Region Technology and Communications practice. Mr. Scott was elected chairman of the Company’scompany’s board of directors in March 2015. Other Directorships. Mr. Scott is Chairman and Chief Executive Officer of TGS Solutions, LLC, a private company that manufactures Corrx, a surface decontamination product that treats and destroys the primary cause of premature coating failures. He is also Chairman of Inea International, Ltd. (Inea), a private company that through its wholly-owned subsidiary, VHSC Cement, LLC, has developed a technology that enables the creation of a product that competes with Portland Cement. Tagos has an equity investment in Inea.
Past Directorships. Mr. Scott was lead director of W-H Energy Services, Inc. (then a publicly-traded company in the oilfield services industry) from October 2000 until the company was sold in August 2008.
| | Experience, Qualifications, Attributes & Skills. Skills | | Mr. Scottbrings to the board hismany years of experience as an audit partner at a large public accounting firm as well as leadership, managerial and corporate governance skills acquired during his tenure as a senior executive at a Fortune 500 company, and entrepreneurial skills developed through the founding of several companies in the energy service and technology sectors. He has also served as a chief executive officer of private companies and as the lead director at a public company. Mr. Scott'sScott’s background and experience enable him to bring to the board and its deliberations a broad range and combination of valuable insights as well as leadership skills, particularly in his role as chairman of the board. Mr. Scott holds a Bachelor of Science in Accounting from Southern University. |
| | | | | Thomas M. White(Independent) | | Age:61 Director Since:2018 | 
Executive Chairman of Cardinal Logistics Management Corporation Board Committees: ✓ Audit ✓ Compensation ✓ Corporate Governance and Nominating Other Directorships: • Landauer, Inc. (2004-2017) • Quality Distribution, Inc. (2007-2013) • FTD Group, Inc. (2006-2008) | | Since January 2015, Mr. White has served as the Executive Chairman of Cardinal Logistics Holdings, LLC, which provides dedicated transportation and logistics services, a Centerbridge Partners, LP owned company. From 2007 until 2014, Mr. White served as an Operating Partner for Apollo Global Management L.P., an alternative asset management firm, serving in a variety of interim operating roles (COO and CFO) and board of director positions for its portfolio companies. From 2002 to 2007, Mr. White served as Chief Financial Officer of Hub Group, Inc., a NASDAQ listed company which provides logistics services. Prior to joining Hub Group, Mr. White was an audit partner with Arthur Andersen, which he joined in 1979. Currently Mr. White sits on the privately held boards of JPW Holdings GP LLC, a wholesale distributor of machine tools and equipment and Reddy Ice Holdings, Inc., a manufacturer and distributor of packaged ice products. Previously Mr. White served on the then publicly held boards of Landauer, Inc. (NYSE), FTD Group, Inc. (NASDAQ) and Quality Distribution, Inc. (NASDAQ) in a variety of roles, including Board Chairman and Committee Chairman of audit and compensation committees. In addition he served on the audit committees of the then privately held boards of CEVA Logistics, plc (now listed on the SIX Swiss Exchange) and EVERTEC, Inc., (now listed on the NYSE). Mr. White is anon-practicing Certified Public Accountant. | | Experience, Qualifications, Attributes & Skills | | Mr. White brings to the board over 35 years of experience in financial and operational management expertise. Mr. White’s high-level management experience provides considerable knowledge and benefits to corporate governance matters and board deliberations. In addition, Mr. White is also a Certified Public Accountant. His extensive background in accounting, finance, operations and strategy experience provides the board with extensive insight as well as leadership skills and provides the board committees with valuable insight, leadership and expertise. |
|18 | Sterling Construction |2019 Proxy Statement
Stock Ownership of Directors, Director Nominees and Executive Officers We believe that it is important for our directors and executive officers to align their interests with the long-term interests of our stockholders. We encourage stock accumulation through the grant of equity incentives to our directors and executive officers and through our stock ownership guidelines applicable to our directors and executive officers. See “Corporate Governance—Director and Executive Officer Stock Ownership Guidelines.”The table below shows the amount of our common stock beneficially owned as of the record date, March 13, 2018,19, 2019, by each of our director nominees, our named executive officers and our current directors and executive officers as a group. Unless otherwise indicated, all shares shown are held with sole voting and investment power. | | | | | | | | | | | | | | | Name of Beneficial Owner | | Number of Shares Not Subject to Unvested Awards | | Number of Unvested Shares of Restricted Stock (1) | | Total Number of Shares Beneficially Owned | | Percent of Outstanding Shares(2) | | Marian M. Davenport | | 30,186 | | | 5,257 | | | 35,443 |
| | | * | | Maarten D. Hemsley | | 175,969 | | | 5,257 | | | 181,226 |
| | | * | | Raymond F. Messer | | — | | | 5,257 | | | 5,257 |
| | | * | | Charles R. Patton | | 35,161 | | | 5,257 | | | 40,418 |
| | | * | | Richard O. Schaum | | 46,881 | | | 5,257 | | | 52,138 |
| | | * | | Milton L. Scott | | 40,050 | | | 5,257 | | | 45,307 |
| | | * | | Joseph A. Cutillo | | 46,586 | | | 56,848 | | | 103,434 |
| | | * | | Ronald A. Ballschmiede | | 68,287 | | | 10,614 | | | 78,901 |
| | | * | | Con L. Wadsworth | | 31,869 | | | — | | | 31,869 |
| | | * | | Richard E. Chandler, Jr. | | — | | | 25,000 | | | 25,000 |
| | | * | Paul J. Varello (3) | | 731,946 | | | — | | | 731,946 |
| | | 2.7% | Roger M. Barzun (4) | | 18,000 | | | — | | | 18,000 |
| | | * | All directors and executive officers as a group (10 persons) | | 474,989 | | | 124,004 | | | 598,993 |
| | | 2.2% |
_________________
| | | | | | | | | | | | | | | | | | Name of Beneficial Owner | | Number of Shares Not Subject to Unvested Awards | | | Number of Unvested Shares of Restricted Stock(1) | | | Total Number of Shares Beneficially Owned | | | Percent of Outstanding Shares(2) | | | | | | | Roger A. Cregg | | | -- | | | | -- | | | | -- | | | | * | | | | | | | Marian M. Davenport | | | 27,443 | | | | 7,404(3) | | | | 34,847 | | | | * | | | | | | | Raymond F. Messer | | | 5,257 | | | | 7,404(3) | | | | 12,661 | | | | * | | | | | | | Dana C. O’Brien(4) | | | -- | | | | 2,716(3) | | | | 2,716 | | | | * | | | | | | | Charles R. Patton | | | 40,418 | | | | 7,404(3) | | | | 47,822 | | | | * | | | | | | | Richard O. Schaum(5) | | | 52,138 | | | | 7,404(3) | | | | 59,542 | | | | * | | | | | | | Milton L. Scott | | | 45,307 | | | | 7,404(3) | | | | 52,711 | | | | * | | | | | | | Thomas M. White(6) | | | 16,200 | | | | 4,866(3) | | | | 21,066 | | | | * | | | | | | | Joseph A. Cutillo | | | 97,689 | | | | 28,424 | | | | 126,113 | | | | * | | | | | | | Ronald A. Ballschmiede | | | 85,452 | | | | 5,307 | | | | 90,759 | | | | * | | | | | | | Con L. Wadsworth | | | 43,603 | | | | -- | | | | 43,603 | | | | * | | | | | | | Richard E. Chandler, Jr. | | | 8,344 | | | | 16,667 | | | | 25,011 | | | | * | | | | | | | Craig B. Allen | | | 17,248 | | | | 728 | | | | 17,976 | | | | * | | | | | | | All directors and executive officers as a group (12 persons) | | | 439,099 | | | | 95,728 | | | | 534,827 | | | | 2.0% | | | | | | | | | | | | | | | | | | | |
* Ownership is less than one percent. | | (1) | These shares are considered outstanding but are subject to restrictions on their sale or other transfer. For more information regarding the restricted stock, see “Director Compensation—Equity-Based Compensation” and “Executive Officer Compensation—Compensation Discussion and Analysis—Components of Executive Compensation—Long-Term Incentive Awards.” | |
| | (2) | Based on 27,034,575 26,423,827 shares of our common stock outstanding as of March 13, 2018. | |
| | (3) | Mr. Varello resignedThe restricted shares were awarded to thenon-employee directors as our chief executive officercompensation — see the section above entitled “Board Operations—Director Compensation.” The restrictions expire on April 28, 2017, but continuedthe day before the annual meeting, or earlier if the director dies or becomes disabled, or if there is a change in control of the Company. The restricted shares are forfeited if the director ceases to serve as a director until Decemberother than as a result of his or her death or disability before the expiration of the restrictions. | |
| (4) | Dana C. O’Brien was elected to serve as a director beginning on January 1, 2019. In connection with her appointment to the board, Ms. O’Brien was awarded shares of restricted stock valued at $29,577, representing a pro rata award for 2018, which was effective January 1, 2019. | |
| (5) | Richard O. Schaum will retire as a director in conjunction with the annual meeting. | |
| (6) | Thomas M. White was elected to serve as a director on July 31, 2017.2018. | |
| | (4)
| Mr. Barzun resigned on October 27, 2017. |
Sterling Construction |2019 Proxy Statement |19 |
Stock Ownership of Certain Beneficial Owners The table below shows persons known to us, as of March 13, 2018,19, 2019, to be the beneficial owner of more than 5% of our outstanding shares of common stock. | | | | | | | Name and Address of Beneficial Owner | | Number of Shares Beneficially Owned | | Percent of Outstanding Shares(1) |
| | 1,779,2412,020,647(2)
| | 6.6%7.7% |
Dimensional Fund Advisors LP
Building One
6300 Bee Cave Road
Austin, TX 78746
| | 1,566,403(3)
| | 5.8% |
Renaissance Technologies LLC | | 1,924,7001,943,800(4)(3)
| | 7.1%7.4% |
______________________
(1) Based on 27,034,575shares of our common stock outstanding as of March 13, 2018.
| | | (2)
Dimensional Fund Advisors LP Building One 6300 Bee Cave Road Austin, TX 78746 | | 1,634,897(4)
| | 6.2% |
| (1) | Based on 26,423,827 shares of our common stock outstanding as of March 19, 2019. | |
| (2) | Based on a Schedule 13G13G/A filed with the SEC on February 1, 2018,6, 2019, by BlackRock, Inc. on its own behalf and on behalf of its subsidiaries identified therein, reflecting beneficial ownership as of December 31, 2017.2018. The Schedule 13G13G/A reflects 1,779,2412,020,647 shares held with sole dispositive power and 1,729,4681,971,314 shares held with sole voting power. | |
| | (3) | Based on a Schedule 13G13G/A filed with the SEC on February 9, 2018,13, 2019, by Renaissance Technologies LLC, reflecting beneficial ownership as of December 31, 2018. The Schedule 13G/A reflects: (i) 1,941,092 shares held with sole dispositive power and 2,708 shares held with shared dispositive power; and (ii) 1,932,800 shares held with sole voting power. | |
| (4) | Based on a Schedule 13G/A filed with the SEC on February 8, 2019, by Dimensional Fund Advisors LP, reflecting beneficial ownership as of December 31, 2017.2018. The Schedule 13G13G/A reflects 1,566,4031,634,897 shares held with sole dispositive power and 1,480,1521,545,849 shares held with sole voting power. | |
| | (4)
| Based on Schedule 13G filed with the SEC on February 14, 2018, by Renaissance Technologies LLC, reflecting beneficial ownership as of December 31, 2017. The Schedule 13G reflects: (i) 1,811,731 share held with sole dispositive power and 112,969 shares held with shared dispositive power; and (ii) 1,749,481 shares held with sole voting power. |
Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and persons who own more than 10 percent10% of our common stock to file reports of ownership and changes in ownership with the SEC. Based solely upon our review of such reports and amendments thereto filed during 2017,2018, and written representations from our directors and executive officers, we believe that all required reports were timely filed.filed except for Form 4s related to the grant of the 2018 LTI awards for each of Messrs. Cutillo, Ballschmiede, Wadsworth and Chandler, which were inadvertently filed three days after the filing deadline. |20 | Sterling Construction |2019 Proxy Statement
Executive Officer Compensation Compensation Discussion and Analysis This Compensation Discussion and Analysis, or CD&A, describes and analyzes our executive compensation philosophy and program in the context of the compensation paid during the last fiscal year to our current chief executive officer, our former chief executive officer, our chief financial officer and the each of our other three executive officers during 20172018 (collectively referred to as our named“named executive officersofficers” or NEOs)“NEOs”). Our named executive officers for 20172018 are:
| | | |
| | TitleTitle(s) | | | | Joseph A. Cutillo | | Chief Executive Officer | | | | Ronald A. Ballschmiede | | Executive Vice President & Chief Financial Officer, Chief Accounting Officer, Treasurer | | | | Con L. Wadsworth | | Executive Vice President & Chief Operating Officer | | | | Richard E. Chandler, Jr. | | Executive Vice President, General Counsel & Secretary | Paul J. Varello | | | Craig B. Allen | | former Chief Executive Officer | Roger M. Barzun | | former Senior Vice President, Chief Compliance & General Counsel; SecretaryAdministration Officer |
We are a construction company that specializes in (1) the heavy civil infrastructure construction industry and (2)infrastructure rehabilitation as well as residential concrete projects,construction projects. We operate primarily in Arizona, California, Colorado, Hawaii, Nevada, Texas and Utah, andas well as other states in which there are feasible construction opportunities. Our heavyHeavy civil construction projects include highways, roads, bridges, airfields, ports, light rail, water, wastewater and storm drainage systems, foundations for multi-family homes, commercial concrete projects and parking structures. Our residentialResidential construction projects include concrete foundations for single-family homes. 2018 Business Highlights | · | | Revenues increased to $1,037.7 million, from $958.0 million in 2017. |
| · | | Operating income for 2018 totaled $42.6 million and net income attributable to Sterling common stockholders was $25.2 million compared to an operating income of $26.2 million and a net income of $11.6 million in 2017. |
| · | | Gross margins have increased to 10.6% in 2018 from 9.3% in 2017. |
| · | | We generated $39.5 of cash from operations, repaid $10.4 million of debt and repurchased $4.7 million of common stock in 2018. |
Sterling Construction |2019 Proxy Statement |21 |
During 2017, we implementedThe financial improvements reflect progress in delivering our multi-year strategy to solidify the final phasebase, grow high margin products and expand into adjacent markets. Our strategic element to solidify the base of the heavy civil construction business focuses on cost reductions, remaining disciplined at the bid table, monitoring pricing at the time of bid, and executing the projects to expectations. The strategy element to grow high margin products is reflected in the increasing percentage of backlog ofnon-heavy highway projects. Finally, expansion of the residential business, as well as other acquisition opportunities will lead to further expansion into adjacent markets. Overall, the execution of our recent management succession plan. Mr. Varello, our former chairmanstrategy led to improved operating income of the board, assumed the role of chief executive officer in February 2015, when our former chief executive officer left the company. He served in that role pursuant to an employment agreement until April 2017, when the board appointed Mr. Cutillo as our new chief executive officer. Mr. Varello remained a member of our board through the end of 2017. In addition, in October 2017, Mr. Barzun, our former senior vice president and general counsel, resigned from the company and Mr. Chandler was appointed to fill that role.
2017Business Highlights.
Revenues increased 38.8%, from $690.1$42.6 million in 20162018 compared to $958.0operating income of $26.2 million in 2017
Operating income for 2017 was $26.2 million, compared to an operating loss of $4.7 million in 2016
Gross margins increased by 52.5%, from 6.1% in 2016 to 9.3% in 2017
Stock price growth of 92%, from $8.46 per share at year end 2016 to $16.28 per share at year end 2017
Diluted net earnings per share attributable to common stockholders for 2017 was $0.43, compared to a net loss per share of $0.40 for 2016
Completed the transformative acquisition of Tealstone Residential Concrete, Inc. and Tealstone Commercial, Inc.
Secured new $85 million credit facility
Relisted on the Russell 3000
2017.Compensation Governance and Best Practices . Our executive compensation program is designed and managed by the independent compensation and talent development committee of our board.board, referred to in this CD&A as the “committee.” The committee annually reviews the components and structure of our compensation program to ensure that the program supports our business objectives and is aligned with the interests of our stockholders. As part of this review, the committee seeks input from its independent compensation consultant as it deems necessary to provide an outside perspective and evaluation of our program. The committee also values our stockholders’ views on our program. Based on last year’s annual stockholder advisory vote on executive compensation(say-on-pay), more than 90%95% of our stockholders indicated their support for our program.
We believe the following compensation governance practices and policies promote the accountability of our executives and strengthen the alignment of our executive and stockholder interests:
| | | | | Compensation Best Practices | Compensation Best Practices:
| | | | | Ø✓ | | Incentives Based on Performance– awards under our annualshort-term and long-term incentive programprograms are based on the achievement of companyperformance objectives and individualthe performance goals.Ø50% of Annual Awards Paid in Restricted Stock Units – our annual incentive program provides that 50% ofobjectives differ under the award is paid in cash and 50% of the award is paid in restricted stock units, that vest over a three-year period, thus aligning with our stockholders’ interests.two programs.
| | | | | | ✓ | | ØClawback Policy– cash and equity awards under our annual incentive programprograms are subject to clawback. | | | | | | ✓
| | ØAnti-Hedging Policy– we prohibit our executive officers and directors from entering into hedging arrangements with respect to our securities. | | | | | | ✓ | | ØAnti-Pledging Policy– beginning in 2018, we prohibit our executive officers and directors from pledging our securities. | | | | | | ✓ | | ØExecutives Subject to Stock Ownership Guidelines– although we have required our executive officers to maintain certain levels of ownership in our company, in In January 2018, we strengthened our stock ownership guidelines requiring eachby increasing the level of ownership required of our executive officerofficers to acquire and maintain ownership of shares equal to a certain multiple of his5 times base salary (5x for our CEO 3xand 3 times base salary for our other executive officers).officers. See “Stock Ownership Guidelines” below for more information. | | | | | | ✓ | | ØEngagement of Independent Compensation Consultant– as necessary, the compensation committee retains an independent compensation consultant to evaluate our compensation programs. | | | | | | ✓ | | ØNo Tax Gross-Ups– we do not provide our NEOs with any taxgross-ups.
| | | | | |
2018 Changes to Executive Compensation Program New Structure to Executive Compensation Program:Effective January 2018, our new senior executiveincentive compensation plan consists of base salaries, an annual incentive program, which is referred to as the Short-Term Incentive, or STI, and a three-year incentive program, which is referred to as the Long-Term Incentive, or LTI. The STI and the LTI are performance driven programs, and reflect thepay-for-performance philosophy of the Company by linking the opportunity to earn additional compensation to the achievement of short-term and long-term company financial and strategic goals. This new program differs from the Company’s prior program in the following ways: |22 | Sterling Construction |2019 Proxy Statement
| · | | It provides that payout of the STI award will be made solely in cash, earned based on achievement of (a) financial goals (which for 2018 were based on EBITDA targets) and (b) specified strategic goals achieved over the year. |
| · | | It establishes a separate LTI program with a three-year performance cycle. |
| · | | The LTI awards will be delivered in the form of a performance share unit, or PSU, grant (representing 50% of the target value), which will be earned based on achievement of an EPS goal over the performance cycle, and a time-based restricted stock unit, or RSU, grant (representing 50% of the target value). |
Executive Employment Agreements: Effective December 12, 2018, we entered into executive employmentagreements with our CEO, Mr. Cutillo, our CFO, Mr. Ballschmiede, and our General Counsel, Mr. Chandler (the “Executive Employment Agreements”). The board believes that Messrs. Cutillo, Ballschmiede and Chandler have been instrumental in the financial performance of the Company and that their retention is important to the execution of the Company’s multi-year strategy. Accordingly, the board believes the Executive Employment Agreements are in the best interests of the Company and its stockholders and will encourage long-term retention and stability of the Company’s key executive officers and reduce distractions that could result from employment on anon-contractual basis. Further, the severance protections provided under the Executive Employment Agreements are consistent with those commonly found in the market. In approving the Executive Employment Agreements, the board, following the recommendation of the committee, considered advice, information and analysis provided by the committee’s independent legal counsel and compensation consultant, including general industry and peer group compensation information. See the “Cash Severance and Change of Control Benefits” section below and the description under “Executive Compensation Tables” for more information regarding the Executive Employment Agreements. How We Determine and Assess Executive Compensation
Role of Independent Compensation Consultant .
To assist in evaluating our compensation practices and the level of compensation provided to our executives, the compensation committee from time to time retains an independent compensation consultant to provide advice and ongoing recommendations on these matters that are consistent with our business goals and pay philosophy. We believe that this input and advice produces more informed decision-making and assures that an objective perspective is considered in this important governance process. The compensation committee has retained Meridian Compensation Partners, LLC (Meridian)(“Meridian”) as its executive compensation consultant. The compensation committee assessed Meridian’s independence and concluded that Meridian’s work does not raise any conflicts of interest. For 2017,2018, the scope of Meridian’s engagement included providing market data which the committee referenced in evaluating 20172018 compensation levels and assisting within entering into the redesign of our compensation program structure for 2018.
Executive Employment Agreements.Market Data and Peer Group .
In December 2016,late 2017, Meridian was asked to benchmark the compensation of our executive officers as a reference for our committee to determine 20172018 compensation levels. In seeking a useful peer group, the compensation committee and Meridian recognized that there are few publicly-traded companies in the heavy civil construction business that are close to the company'sCompany’s size. Most other publicly-traded heavy civil construction companies are much larger than the companyCompany and are companies with which we rarely compete. Accordingly, we use a number of comparative factors incorporating financial, industry-specific, and both objective
and subjective elements to determine a group of appropriate firms for executive compensation benchmarking. The most common criterion for peer group inclusion is industry similarity. Other criterion includes similar business model, competition for business or executive talent and size (including revenue, market capitalization, assets, and geographic presence.presence). Following this analysis, the compensation committee decided to useselected the following peer group, which reflects companiesthe committee referred to with a median revenue that approximated our own (based on the trailing four quarter revenue as of November 2016):respect to 2018 compensation:Sterling Construction |2019 Proxy Statement |23 |
| | | | | | | | Company | | | | Revenue – trailing 12- month as of 12/31/2017 ($ in millions) | | | | MasTec, Inc. | | | | | $6,607 | | | | | Tutor Perini Corporation | | | | | 4,757 | | | | | Dycom Industries, Inc. | | | | | 3,024 | | | | | Granite Construction Incorporated | | | | | 2,990 | | | | | Primoris Services Corporation | | | | | 2,380 | | | | | U.S. Concrete, Inc. |
| $1,113 |
| | 1,336 | | | | | Argan, Inc. | | | | | 930 | | | | | Willbros Group, Inc. |
| $785 |
| | 850 | | | | | IES Holdings, Inc. | | | | | 817 | | | | | Great Lakes Dredge & Dock Corporation |
| $777 |
| | 703 | | | | | Layne Christensen Company |
| $632 |
| | 602 | | IES Holdings, Inc. |
| $696 |
| Orion Group Holdings, Inc. |
| $596 |
| | 579 | | Argan, Inc. |
| $585 |
| 25th Percentile |
| $614 |
| | 788 | | 50th Percentile |
| $696 |
| 75th50th Percentile |
| $781 |
| | 1,133 | | STERLING CONSTRUCTION CO INC |
| $674 |
| 75th Percentile | | | | | 2,998 | | Sterling Construction Company, Inc. | | | | | 958 | | Estimated Percentile Rank | 44 | | | | 46 | % | | | | | | | |
Additionally,In late 2018, the committee once again worked with Meridian provided supplemental market data from Equilar’s Top 25 Executive Compensation Survey forto update its peer group in order to better reflect the Company’s size and to remove outliers and companies across a variety of industries with revenues between $500 millionthat have been acquired and $900 million (median of $692 million).are no longer public. This new15-company peer group, identified below, was used by the committee to determine 2019 compensation. | | | | | | | | Company | | | | Revenue – trailing 12- months for most recent quarter end as of 10/31/2018 ($ in millions) | | | | Primoris Services Corporation | | | | | $2,641 | | | | | Comfort Systems USA, Inc. | | | | | 2,056 | | | | | HC2 Holdings, Inc. | | | | | 1,910 | | | | | U.S. Concrete, Inc. | | | | | 1,478 | | | | | MYR Group Inc. | | | | | 1,458 | | | | | Eagle Materials Inc. | | | | | 1,419 | | | | | Aegion Corporation | | | | | 1,337 | | | | | Chart Industries, Inc. | | | | | 1,210 | | | | | IES Holdings, Inc. | | | | | 877 | | | | | Standex International Corporation | | | | | 872 | | | | | Columbus McKinnon Corporation | | | | | 865 | | | | | Great Lakes Dredge & Dock Corporation | | | | | 693 | | | | | L.B. Foster Company | | | | | 604 | | | | | Orion Group Holdings, Inc. | | | | | 584 | | | | | Argan, Inc. | | | | | 564 | | | | | 25th Percentile | | | | | $779 | | | | | 50th Percentile | | | | | 1,210 | | | | | 75th Percentile | | | | | 1,468 | | Sterling Construction Company, Inc. | | | | | $1,036 | | | | | Estimated Percentile Rank | | | | | 46 | % | | | | | | | |
|24 | Sterling Construction |2019 Proxy Statement
Role of Chief Executive Officer
Our chief executive officer makes recommendations to the compensation committee regarding the base salary and incentive compensation awards for our other executive officers, based on his qualitative judgment regarding each officer’s individual performance, although the compensation committee makes all final compensation decisions regarding our executive officers. Our chief executive officer is not present when the compensation committee discusses or determines any aspect of his compensation.
Objectives of Our Compensation Program
The compensation committee is responsible for designing, implementing, and administering our executive compensation program. The compensation committee seeks to increase stockholder value by: •rewarding past performance and incentivizing future performance;
•fostering a culture of ownership;
•providing a level of total compensation that will enable the company to attract and retain
talented executive officers; and
•promoting sound compensation governance practices that encourage prudent decision-
making.
| · | | rewarding past performance and incentivizing future performance; |
| · | | fostering a culture of ownership; |
| · | | providing a level of total compensation that will enable the Company to attract and retain talented executive officers; and |
| · | | promoting sound compensation governance practices that encourage prudent decision-making. |
The compensation committee believes compensation should reward achievement of business performance goals, recognize individual initiative and leadership and link the interests of the executives and stockholders.
20172018 Executive Compensation Program
During 2017,2018, our executive compensation program included twothree primary components: base salary, and annual incentive awardsa Short Term Incentive award payable in a combination of cash and equity.
Long-Term Incentive awards in the form of time-based restricted stock units and performance share units.After reviewing these components of our compensation program, the compensation committee believes that the risks arising from our compensation policies and practices for our employees, including our executive officers, are not reasonably likely to have a material adverse effect on the company.Company. Further, the compensation committee believes that certain features of our compensation program, including our clawback, anti-hedging and anti-pledging policies, our stock ownership guidelines and our use of both cash- and equity-based awards, help to manage any compensation-related risks.
Our philosophy is that base salaries, which provide fixed compensation, should meet the objective of attracting and retaining the executive officers needed to manage our business successfully. Actual individual salary amounts reflect the compensation committee’s judgment with respect to each executive officer’s responsibility, performance, work experience and the individual’s historical salary level. As noted previously, during 2017 the company appointed During 2018, based on a new chief executive officer and a new executive vice president & general counsel, and the compensation committee reviewed benchmarking data previouslyreview of base salary levels of our peer companies provided by Meridian, to establish the appropriate levels of compensation for Messrs. Cutillo and Chandler. The compensation committee also approved a modest increaseincreases to the base salarysalaries of Mr. Ballschmiede during 2017. These changes are reflected in the table below:
| | | | | | | | | Name | | Base Salary as of December 31, 2016(1) | | Base Salary as of December 31, 2017(1) | | Percent Increase | Mr. Cutillo(2).............. | | $325,000 | | $550,000 | | 69% | | Mr. Ballschmiede...... | | $414,874 | | $439,874 | | 6% | | Mr. Wadsworth......... | | $425,000 | | $425,000 | | —% | Mr. Chandler(3).......... | | n/a | | $325,000 | | n/a |
_______________________
(1) Base salary amounts reflect each executive's designated base salary levelour executive officers as of the last day of the relevant calendar year, and include adjustments made during the calendar year. Amounts shown do not reflect the total base salary paid for such calendar year. The actual amount of base salary paid to each NEO during each relevant calendar year is listed on the "2017 Summary Compensation" table on page 29.follows: | | | | | | | | | | | | | | Name | | Base Salary as of December 31, 2017 | | | Base Salary as of December 31, 2018(1) | | | Percent
Increase | Mr. Cutillo | | | $550,000 | | | | $650,000 | | | | 18.2% | | Mr. Ballschmiede | | | 439,874 | | | | 465,000 | | | | 5.7% | | Mr. Wadsworth | | | 425,000 | | | | 450,000 | | | | 5.8% | | Mr. Chandler | | | 325,000 | | | | 340,000 | | | | 4.6% | | Mr. Allen | | | 250,000 | | | | 260,000 | | | | 4.0% | | | | | | | | | | | | | | | | (1) These increases were effective January 1, 2018, except for Mr. Chandler, whose increase was effective October 12, 2018, the anniversary of the day he joined the Company. Mr. Cutillo received a base salary increase to $600,000 effective January 1, 2018, and then a subsequent increase to $650,000 effective April 28, 2018. The actual amount of base salary paid to each NEO during 2018 is listed in the “2018 Summary Compensation” table below. | |
Sterling Construction |2019 Proxy Statement |25 |
(2) Mr. Cutillo’s base salary was increased twice during 2017. Effective February 13, 2017, his base salary was increased to $450,000 upon his promotion to President of the company, and then effective April 28, 2017, his base salary was increased to $550,000 in recognition of his promotion to chief executive officer.
(3) Mr. Chandler joined the company on October 12, 2017.
Short-Term Incentive Compensation Program .
AnnualOur annual incentive, or STI, program awards represent variable components of compensation designed to reward our executive officers if the companyCompany achieves the established performance goal and if the executive achieves his or her individualpre-established performance goals as applicable.approved by the committee for the applicable year. In February 2017,January 2018, the compensation committee established the framework for the 2017 executive incentive compensation program.2018 STI awards. Under the program, each executive officer was assigned a target STI award based on a percentage of his base salary. For 2018, the incentiveSTI awards for our NEOs could be earned based on the following:financial and strategic goals, as follows: 75% of the award iswas based on the company’s achievement of
Company’s EBITDA for 2018 (the financial goal), and 25% was based on the Company’s income from expanding Tealstone Residential into new markets during 2018 (the strategic goal). These measures differ from the measures used in previous years, which focused on earnings per share (EPS) of $0.18 (the target), and 25%individual performance. The committee believes incorporating EBITDA as the financial measure is based onappropriate because it is directly tied to management’s success in growing our business and will drive our executives to improve operational execution, efficiencies and profitability. In addition, because earnings per share is now the executive’s attainment of pre-established individual performance goals. Ofmeasure used in our NEOs, only Messrs. Cutillo, Ballschmiede and Wadsworth participated innew LTI program, the programcommittee believes that EBITDA is a complementary financial measure for 2017, andthe STI program.The chart below describes the 2018 target STI awards for each was assigned a target award level based on a percentage of his base salary received during 2017, as described below:
| | | | | | | | | | | | | | | Name | | Annual Base Salary | | Target Incentive Compensation as a % of Base Salary | | % Based on EPS Goal | | Target Award (EPS) | | % Based on Individual Performance Goals | | Target Award (Individual) | | Mr. Cutillo................. | | $503,274 | | 195% | | 75% | | $736,038 | | 25% | | $245,346 | | Mr. Ballschmiede...... | | $439,874 | | 170% | | 75% | | $560,839 | | 25% | | $186,946 | | Mr. Wadsworth......... | | $425,000 | | 170% | | 75% | | $541,875 | | 25% | | $180,625 |
executive: | | | | | | | | | | | | | | | | | | | | Name | | Annual Base
Salary | | | Target STI
Award as a % of Base Salary | | % Based on EBITDA
Goal | | Target
Award
(EBITDA) | | | % Based on
Strategic
Goal | | Target
Award
(Strategic) | | Mr. Cutillo | | | $633,333 | | | 95% | | 75% | | | $451,250 | | | 25% | | | $150,416 | | Mr. Ballschmiede | | | 465,000 | | | 65% | | 75% | | | 226,688 | | | 25% | | | 75,562 | | Mr. Wadsworth | | | 450,000 | | | 80% | | 75% | | | 270,000 | | | 25% | | | 90,000 | | Mr. Chandler | | | 328,125 | | | 40% | | 75% | | | 98,438 | | | 25% | | | 32,812 | | Mr. Allen | | | 260,000 | | | 35% | | 75% | | | 68,250 | | | 25% | | | 22,750 | |
 
With respect to the EPS goal,performance goals, the committee established threshold (80% of target) and maximum (120% of target) goals as well, and executives could earn between 80%50% and 120%200% of the applicable target STI award based on the level of achievement of the EPS goal. WithThe chart below summarizes these goals and also the Company’s actual performance during 2018 with respect to the individualeach performance goals, the executives could earn no more than 100% of the applicable target award based on performance. The pre-established individual performance goals, which represented 25% of the target award, varied by executive,measure. 2018 STI Program Structure and included the following: completion of strategic acquisitions, ensuring that the company’s strategic plan and budget are fully developed, presented and implemented, cost reductions, and succession planning.
Payment of one-half of any incentive compensation earned under the program is made in cash, and one-half is made in the form of an award of time-based restricted stock units (RSUs) that are subject to a three-year vesting period, with one-third of the RSUs vesting on January 1, 2019 and on each of the next two anniversaries thereof. The number of RSUs is determined using the simple average of the closing prices of the common stock in December 2017.
In March 2018, the compensation committee met and determined that the Company had achieved EPS in the amount of $0.43, which resulted in 120% payout of this EPS component. In addition, the compensation committee evaluated the performance of each of the NEOs relative to the individual performance goals set for each, and determined that each executive had achieved the individual goals as reflected in the table below. Results | | | | | | | | | | | | | | | Performance Measure | | Weighting | | Threshold
Performance | | Target
Performance | | Maximum
Performance | | Actual
Performance | | | Payout | | | | | | (in thousands, except percentage data) | | | | | | EBITDA(1) | | 75% | | $47,400 | | $52,400 | | $55,000 | | | $55,030 | | | 200% | Strategic | | 25% | | $550 | | $1,000 | | $1,500 | | | <$550 | | | 0% |
| (1) | EBITDA is anon-GAAP measure. Our calculation of EBITDA for purposes of establishing our EBITDA target and determining the actual EBITDA amount is detailed below (in thousands). |
| | | | | | | | 2018 | Net income | | $ | 25,187 | | Add: interest, net | | | 11,334 | | Add: income tax expense | | | 1,738 | | Add: depreciation and amortization | | | 16,771 | | | | | | | EBITDA | | $ | 55,030 | | | | | | |
As a result, in March 2018,2019, the compensation committee approved the following payoutsannual STI awards to the NEOs:
| | | | | | | | | | | | | | | | | | | | | | | Name | | % of Target Earned (EPS) | | Award Based on EPS | | % of Target Earned (Individual) | | Award Based on Individual | | Total 2017 Award Earned | | Value Paid in Cash | | Value Paid in RSUs | | No. of RSUs Granted(1) | | Mr. Cutillo............ | | 120% | |
| $883,246 |
| | 100% | |
| $245,346 |
| | $1,128,592 | | $564,296 | | $564,296 | | 32,904 | | Mr. Ballschmiede | | 120% | | $673,007 | | 100% | | $186,946 | | $859,954 | | $429,977 | | $429,977 | | 25,072 | | Mr. Wadsworth.... | | 120% | | $650,250 | | 85% | | $153,531 | | $803,781 | | $401,891 | | $401,891 | | 23,434 |
| | | | | | | | | | | | | | | | | | Name | | % of Target Earned
(EBITDA) | | STI Award
Based on
EBITDA | | | % of Target Earned
(Strategic) | | STI Award
Based on
Strategic | | | Total 2018
STI Award
Earned | Mr. Cutillo | | 200% | | | $902,500 | | | 0% | | | $0 | | | | $902,500 | | Mr. Ballschmiede | | 200% | | | 453,375 | | | 0% | | | 0 | | | | 453,375 | | Mr. Wadsworth | | 200% | | | 540,000 | | | 0% | | | 0 | | | | 540,000 | | Mr. Chandler | | 200% | | | 196,875 | | | 0% | | | 0 | | | | 196,875 | | Mr. Allen | | 200% | | | 136,500 | | | 0% | | | 0 | | | | 136,500 | |
|(1)26 | Sterling Construction |2019 Proxy Statement
Long-Term Incentive Program Under our new long-term incentive, or LTI, program, our NEOs receive a combination of RSUs, which are a time-based award designed to promote retention and stock ownership, and PSUs, designed to reward increased earnings per share (“EPS”). In January 2018, the committee assigned each executive officer an LTI Target Amount, which was expressed as a percentage of his annual base salary at the time. The LTI awards vest over a three-year performance period and, except for limited circumstances, require continued employment in order to earn the award. Both awards are settled in shares of our common stock. The terms of the LTI awards are summarized as follows: | · | | PSUs– vest in three substantially equal annual installments based on the Company’s achievement ofannual threshold, target or maximum EPS goals established for each year in the performance period. |
| · | | RSUs– vest in three substantially equal annual installments during the performance period. |
In 2018, the number of RSUs and PSUs granted to each executive other than Mr. Wadsworth was determinedcomputed by multiplying the executive’s LTI Target Amount by 50% and then dividing the award value paid in RSUsresult by $17.15,$15.15, which was the simple averageclosing price per share of the closing pricesCommon Stock on January 16, 2018, the trading day prior to the grant date. With respect to Mr. Wadsworth, in connection with his promotion to chief operating officer in 2017, his incentive compensation package has gradually been realigned to be consistent with the other executive officers. As part of thisphase-in, his 2018 LTI Target Amount was split 70% RSUs and 30% PSUs. Thisphase-in ended in 2018, and his 2019 LTI awards were made consistent with the other executive officers. | | | | | | | | | | | | | | | | | | | | | | | | Name | | Annual
Base Salary | | | LTI Target as a % of Base
Salary | | LTI Target
Value | | Target
Value
(RSUs) | | | # of RSUs | | Target
Value
(PSUs) | | | Target # of PSUs | | Mr. Cutillo(1) | | $ | 600,000 | | | 190% | | $1,140,000 | | $ | 570,000 | | | 37,624 | | $ | 570,000 | | | | 37,624 | | Mr. Ballschmiede | | | 465,000 | | | 105% | | 488,250 | | | 244,125 | | | 16,114 | | | 244,125 | | | | 16,114 | | Mr. Wadsworth | | | 450,000 | | | 90% | | 405,000 | | | 284,436 | | | 18,775 | | | 120,564 | | | | 7,958 | | Mr. Chandler | | | 328,125 | | | 70% | | 229,688 | | | 114,844 | | | 7,581 | | | 114,844 | | | | 7,581 | | Mr. Allen | | | 260,000 | | | 35% | | 91,000 | | | 45,500 | | | 3,004 | | | 45,500 | | | | 3,004 | |
| (1) | Reflects Mr. Cutillo’s base salary as of January 1, 2018, which was used to calculate his LTI awards. As noted under “Base Salaries,” Mr. Cutillo’s base salary was subsequently increased to $650,000. |
For the PSUs granted in January 2018,one-third of the common stock in December 2017.
Changes to Incentive Compensation Program for 2018
In January 2018,award vested based on the compensation committee approved a new senior executive incentive compensation plan. The plan, which is effectiveCompany’s adjusted EPS performance for fiscal years beginning inyear 2018, consistswhich was calculated as our GAAP EPS of $0.93, plusnon-cash federal tax expense of $0.05 (“Adjusted EPS”). Based on an annual incentive program,Adjusted EPS of $0.98, which is referredfell between the target and maximum EPS goals, in 2019, our NEOs received a payout equal to as the Short-Term Incentive, or STI, and a three-year incentive program, which is referred to as the Long-Term Incentive, or LTI. The STI and the LTI are performance driven programs, and reflect the pay-for-performance philosophy185% of the company by linkingfirst installment of the opportunity to earn additional compensation toaward.Supplemental PSU Awards. In connection with the achievementexecution of short-termthe Executive Employment Agreements and long-term company financial and strategic goals.
This new program differs frominrecognition of the company’s prior programsignificant improvement in the following ways:
It provides that payoutCompany’s financial position over the last three years (see page 21), each of Messrs. Cutillo, Ballschmiede and Chandler received aone-time supplemental award of additional PSUs (the “Supplemental PSUs”) as follows: Mr. Cutillo - 500,000, Mr. Ballschmiede - 200,000 and Mr. Chandler - 80,000. The Supplemental PSUs expire in four equal tranches beginning December 31, 2020 through 2023, and each tranche will vest if aggressive EPS targets are achieved on or before the expiration date for such tranche. These targets would require an annualized earnings growth of over 20% per year over a two to five year period to receive any vesting of the short-term incentive award will be made solelyand total earnings growth in cash.
It establishes a separate long-term incentive program with a three-year performance cycle.
The long-term incentive awards will be delivered inexcess of 3 times our 2018 EPS to receive full vesting. See the form“Executive Compensation Tables—Grants of a time-based RSU grant (representing 50% of the target value) and a performance share unit (representing 50% of the target value), which will be earned based on achievement of an EPS goal over the performance cycle.
Plan-Based Awards” table for more information regarding these awards.Clawback Policy The company'sCompany’s clawback policy applies to all incentive compensation paid to an employee, including our executive officers (whether paid in cash or in equity) that was based on financial statements that are subsequently restated. Following such a restatement, the compensation shall be adjusted, if necessary, so that the employee will have received no more and no less than the amount that he or she would have received had the incentive award been calculated based on the restated financial results. The policy applies regardless of the employee’s culpability or fault with respect to the error, event, act or omission that caused the restatement. Sterling Construction |2019 Proxy Statement |27 |
Stock Ownership Guidelines
We encourage stock accumulation because we believe that it is important for our executive officers to align their interests with the long-term interests of our stockholders. Accordingly, our board of directors adopted stock ownership guidelines applicable to our executive officers. Under the guidelines, each of our executive officers is encouraged to maintain ownership of shares of our common stock valued at five times (for our CEO) or three times (for our other executive officers) his or her base salary. Shares of our common stock owned individually or jointly, shares held by members of the executive’s immediate family or by a trust for the executive or his immediate family, as well as shares subject to unvested restricted stock and RSUs are counted for purposes of the stock ownership guidelines.
Our executive officers have five years from the date of their respective appointments (or from January 17, 2018, the date upon which the guidelines were revised, whichever is later) to attain these ownership levels. Until the specified ownership levels are met, our executive officers are expected to retain 75% of the net shares issued upon the vesting of equity awards granted by the company,Company, after deducting any shares used to pay applicable taxes. AllMr. Ballschmiede currently exceeds his target ownership level, and each of our other executive officers areis currently in compliance with the guidelines, and as they have all been in their respective positions with the company for lessguidelines. Each of our executive officers (other than three years, eachMr. Allen) has until January 17, 2023 to reach his target ownership level.
level, and Mr. Allen has until May 2023.Limited Executive Perquisites and No Special Retirement Benefits We seek to maintain a cost conscious culture in connection with the benefits provided to our executive officers. As a result, we provide limited perquisites to our executive officers. Please see “Executive Compensation Tables—20172018 Summary Compensation Table” for a description of the perquisites provided in 2017.
2018.Retirement benefits fulfill an important role within our overall executive compensation objectives by providing a financial security component, which in turn promotes retention. However, our executive officers do not receive any retirement benefits that are not generally available to our other full-time employees. We maintain a 401(k) plan, atax-qualified defined contribution retirement plan in which our executive officers are eligible to participate, which currently provides a 5% employer match. We do not maintain any excess benefit plans, defined benefit or pension plans, or any deferred compensation plans.
No Cash Severance and Change of Control Benefits
We currently do not haveBeginning in December 2018, we provide Messrs. Cutillo, Ballschmiede and Chandler with contractual protections in the event of certain terminations of employment agreements with anyoutside of our executive officers, nor do we have any agreements or plans in place providing for cash paymentsthe change of control context, as well as in connection with a terminationchange of employment orcontrol. We believe that severance protections, particularly in connection with a change of control transaction, can play a valuable role in attracting and retaining key executive officers by providing protections commonly provided in the market. In addition, we believe these benefits also serve the company’s interest by promoting a continuity of management in the context of an actual or threatened change of control transaction. However, Specifically, these executives are entitled to severance benefits under their Executive Employment Agreements in the event of a termination of employment by the company without cause or by the executive for good reason. The board determined that it is appropriate to provide these executives with severance benefits under these circumstances in light of their respective critical positions with the company and as part of their overall compensation package. In addition, we believe that the occurrence, or potential occurrence, of a change of control transaction would create uncertainty regarding the continued employment of our executive officers. This uncertainty results from the fact that many change of control transactions result in significant organizational changes, particularly at the senior executive level. In order to encourage these executive officers to remain employed with the company during an important time when their prospects for continued employment following a transaction are often uncertain, the Executive Employment Agreements provide these executive officers with enhanced severance benefits if their employment is terminated by the company without cause or by the executive for good reason in connection with a change of control. Because we believe that a termination by the executive for good reason may be conceptually the same as a termination by the company without cause, and because we believe that in the context of a change of control, potential acquirers would otherwise have an incentive to constructively terminate the executive’s employment to avoid paying severance, we believe it is appropriate to provide severance benefits in these circumstances. We do not provide excise taxgross-up protections under any change of control arrangements with our executive officers. In addition, the terms of our outstanding restricted stock, RSU and PSU awards provide thatfor accelerated vesting of the award will be accelerated in connection withunder certain terminationscircumstances related to a termination of employment and also upon the occurrence of a qualifying change of control. |28 | Sterling Construction |2019 Proxy Statement
The valueFor more information regarding all of these benefits, see the potential acceleration of outstanding restricted stock awards as of December 31, 2017 under these scenarios is more fully described in “Potentialsection titled “Executive Compensation Tables – Potential Payments uponUpon Termination or Change in Control” on page 33.
of Control.”Tax and Accounting Considerations
The accounting and tax treatment of compensation generally has not been a factor in determining the amounts of compensation awarded to our executive officers. However, the compensation committee and management have considered the accounting and tax impact of various program designs to balance the potential cost to the companyCompany with the benefit or value to the executive officer.
Compensation and Talent Development Committee Report The compensation and talent development committee of the board has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of RegulationS-K, and based on such review and discussion, the compensation and talent development committee recommended to the board that the Compensation Discussion and Analysis be included in this proxy statement.
Submitted by the Compensation Committeecompensation and talent development committee on March 1, 2018: 5, 2019:Marian M. Davenport, Chair Raymond F. Messer Charles R. Patton Richard O. Schaum Chair MarianThomas M. DavenportWhite Sterling Construction |2019 Proxy Statement |29 |
Raymond F. Messer
Charles R. Patton
Executive Compensation Tables
The table below summarizes the total compensation paid to or earned by our named executive officers for the fiscal years ended December 31, 2018, 2017 2016 and 2015.
2017 Summary Compensation Table | | | | | | | | | | | | | | | | | |
Name and Principal Position |
Year | |
Salary | |
Bonus | | Stock Awards(1) | | Non-Equity Incentive Plan Compensation | | All Other Compensation(2) | |
Total | Joseph A. Cutillo……….......……
| 2017
| | $503,274 | | — | | $1,039,796 | | $564,296 | | $27,327 | | $2,134,693 | Chief Executive Officer (3)
| 2016 | | $314,423 | | — | | $87,750 | | $87,750 | | $13,250 | | $503,173 | | | | | | | | | | | | | | |
| Ronald A. Ballschmiede…........... | 2017
| | $439,874 | | — | | $429,977 | | $429,977 | | $13,500 | | $1,313,328 | | Executive Vice President & | 2016
| | $403,420 | | — | | $136,000 | | $136,000 | | $27,551 | | $702,971 | | Chief Financial Officer, Chief | 2015
| | $60,000 | | — | | $467,000 | | — |
| | $97,809 | | $624,809 | | Accounting Officer, Treasurer | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Con L. Wadsworth………….….… | 2017 | | $425,000 | | — | | — | | — |
| | $28,257 | | $453,257 | Executive Vice President &
| 2016 | | $420,482 | | — |
| — | | — |
| | $26,450 | | $446,932 | | Chief Operating Officer | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Richard E. Chandler, Jr................ | 2017 | | $65,000 | | — | | $386,250 | | — |
| | — | | $451,250 | | Executive Vice President, | | | | | | | | | | | | |
| General Counsel & Secretary (4) | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
| Paul J. Varello…...…………....….. | 2017 | | $1 | | — | | $53,148 | | — |
| | $43,497 | | $96,646 | Former Chief Executive Officer (5)
| 2016 | | $1 | | — | | — |
| | — |
| | $26,155 | | $26,156 | | | 2015 | | $1 | | — | | $1,932,000 | | — |
| | $27,342 | | $1,959,343 | | | | | | | | | | | | | | |
| Roger M. Barzun…………....……. | 2017 | | $96,914 | | $150,000 | | — | | — |
| | $115,770 | | $362,684 | | Former Senior Vice President & | 2016 | | $250,000 | | — | | — | | — |
| | — |
| | $250,000 | General Counsel; Secretary (4)
| 2015 | | $250,000 | | — | | — | | — |
| | — |
| | $250,000 |
________________ | | (1)2018 Summary Compensation Table
|
| | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Year | | Salary | | | Stock
Awards(1) | | | Non-Equity
Incentive Plan
Compensation | | All Other
Compensation(2) | | | Total(3) | Joseph A. Cutillo | | 2018 | | | $631,731 | | | | $6,710,008 | | | | $902,500 | | | | $64,222 | | | | $8,308,461 | | Chief Executive Officer | | 2017 | | | 503,274 | | | | 1,039,796 | | | | 564,296 | | | | 27,327 | | | | 2,134,693 | | | | 2016 | | | 314,423 | | | | 87,750 | | | | 87,750 | | | | 13,250 | | | | 503,173 | | | | | | | | | Ronald A. Ballschmiede | | 2018 | | | 464,517 | | | | 2,716,254 | | | | 453,375 | | | | 13,772 | | | | 3,647,918 | | Executive Vice President & Chief | | 2017 | | | 439,874 | | | | 429,977 | | | | 429,977 | | | | 13,500 | | | | 1,313,328 | | Financial Officer, Chief Accounting | | 2016 | | | 403,420 | | | | 136,000 | | | | 136,000 | | | | 27,551 | | | | 702,971 | | Officer, Treasurer | | | | | | | | | | | | | | | | | | | | | | | Con L. Wadsworth(4) | | 2018 | | | 449,519 | | | | 405,005 | | | | 540,000 | | | | 26,965 | | | | 1,421,489 | | Executive Vice President & Chief | | 2017 | | | 425,000 | | | | 241,134 | | | | 562,647 | | | | 28,257 | | | | 1,257,038 | | Operating Officer | | 2016 | | | 420,482 | | | | -- | | | | 160,650 | | | | 26,450 | | | | 607,582 | | | | | | | | | Richard E. Chandler, Jr. | | 2018 | | | 327,885 | | | | 1,120,904 | | | | 196,875 | | | | 22 | | | | 1,645,686 | | Executive Vice President, General | | 2017 | | | 65,000 | | | | 386,250 | | | | -- | | | | -- | | | | 451,250 | | Counsel & Secretary | | | | | | | | | | | | | | | | | | | | | | | Craig B. Allen | | 2018 | | | 259,808 | | | | 91,022 | | | | 136,500 | | | | 12,282 | | | | 499,612 | | Senior Vice President, Chief | | | | | | | | | | | | | | | | | | | | | | | Compliance & Administration | | | | | | | | | | | | | | | | | | | | | | | Officer | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Amounts included for 20172018 reflect the aggregate grant date value of restricted stockRSUs and PSUs awarded in 2017,as part of the LTI program for 2018, as well as RSUs awardedtheone-time Supplemental PSUs granted to certain NEOs in December 2018 in payment of 50%connection with the execution of the 2017 executive incentive compensation award.Executive Employment Agreements. See the table below for more information regarding these amounts. The grant date fair value of the restricted stockRSUs, PSUs and RSUs isSupplemental PSUs are computed in accordance with Financial Accounting Standards Board Accounting Standards Codification (ASC)(“ASC”) Topic 718. The maximum aggregate grant date value of the PSUs, assuming maximum performance, is as follows: Mr. Cutillo - $1,140,007, Mr. Ballschmiede - $488,254, Mr. Wadsworth - $241,127, Mr. Chandler - $229,704, and Mr. Allen - $91,021. The Supplemental PSUs are reflected at maximum potential payout. See the “Grants of Plan-Based Awards” table for more information regarding the RSU awards granted as part of our executive incentive compensation program. For Mr. Varello, represents a grant of 5,257 shares of restricted stock received on June 8, 2017 for compensation as a director of the company, which award was forfeited upon his retirement from the board on December 31, 2017.these awards. | |
| | | | | | | | | | | | | | | | 2018 LTI Program Awards | | | | | Name | | RSUs | | | PSUs | | | Supplemental PSUs | Mr. Cutillo | | | $570,004 | | | | $570,004 | | | | $5,570,000 | | Mr. Ballschmiede | | | 244,127 | | | | 244,127 | | | | 2,228,000 | | Mr. Wadsworth | | | 284,442 | | | | 120,564 | | | | -- | | Mr. Chandler | | | 114,852 | | | | 114,852 | | | | 891,200 | | Mr. Allen | | | 45,511 | | | | 45,511 | | | | -- | |
| | (2) | The amounts reported in the “All Other Compensation” column for 2017reflect,2018 reflect, for each named executive officer as applicable, the sum of the incremental cost to the companyCompany of all perquisites and other personal benefits and all other additional compensation required by SEC rules to be separately quantified, including (a) personal use of company-owned vehicles, (b) health insurance reimbursements,payment of legal fees on behalf of Mr. Cutillo in consideration with the execution of an executive employment agreement, (c) amounts contributed by the companyCompany to defined contribution plans and (d) director fees, and (e) paid or accrued severance payments.life insurance premiums. |
| | | | | | | | | | | | | | | | | | | | Perquisites and Other Personal Benefits | | Additional All Other Compensation | | Name | | Use of Company-
Owned Vehicles | | Payment of Legal Fees | | Plan Contributions | | Life Insurance
Premiums | Mr. Cutillo | | | $16,313 | | | | $34,137 | | | | $13,750 | | | | $22 | | Mr. Ballschmiede | | | -- | | | | -- | | | | 13,750 | | | | 22 | | Mr. Wadsworth | | | 13,200 | | | | -- | | | | 13,750 | | | | 14 | | Mr. Chandler | | | -- | | | | -- | | | | -- | | | | 22 | | Mr. Allen | | | -- | | | | -- | | | | 12,260 | | | | 22 | |
|30 | Sterling Construction |2019 Proxy Statement
| | | | | | | | | | | | | | | | | | | | | Perquisites and Other Personal Benefits | | Additional All Other Compensation | | Name | | Use of Company-Owned Vehicles | | | Health Insurance Reimbursements | | Plan Contributions | | Director Fees | | Severance Payments | | Mr. Cutillo | | $13,737 | | | — |
| | $13,500 | | — |
| | — |
| | Mr. Ballschmiede | | — |
| | | — |
| | $13,500 | | — |
| | — |
| | Mr. Wadsworth | | $15,027 | | | — |
| | $13,500 | | — |
| | — |
| | Mr. Chandler | | — |
| | | — |
| | — |
| | — |
| | — |
| | Mr. Varello | | $5,092 | | | $1,322(a) |
| | — |
| | $37,083 | | — |
| | Mr. Barzun | | — |
| | | — |
| | — |
| | — |
| | $115,770(b) |
|
| | (a)(3) | Mr. Varello's employment agreement provided thatAs noted, the Supplemental PSUs granted to three of our executive officers representone-time, special awards granted in placeconnection with the Executive Employment Agreements and providing additional incentive opportunities for achieving aggressive EPS goals. The table below summarizes the total compensation paid to or earned by our named executive officers for 2018 under our normal executive compensation program without the inclusion of his participationthese special awards. As required by SEC rules, the Supplemental PSUs are reflected in the Company's health plan,Summary Compensation Table above. |
Normalized 2018 Summary Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Year | | | Salary | | | Stock Awards | | | Non-Equity Incentive Plan Compensation | | | All Other Compensation | | | Total | | Joseph A. Cutillo | | | 2018 | | | | $631,731 | | | | $1,140,008 | | | | $902,500 | | | | $64,222 | | | | $2,738,461 | | Ronald A. Ballschmiede | | | 2018 | | | | 464,517 | | | | 488,254 | | | | 453,375 | | | | 13,772 | | | | 1,419,918 | | Richard E. Chandler, Jr. | | | 2018 | | | | 327,885 | | | | 229,704 | | | | 196,875 | | | | 22 | | | | 754,486 | |
| (4) | In connection with Mr. Wadsworth’s promotion to chief operating officer in 2017, his STI and LTI compensation packages have gradually been realigned to be consistent with the Company would reimburse him forother executive officers. Thisphase-in ended in 2018, and his out-of-pocket costs of maintaining2019 STI and LTI awards were made consistent with the family health insurance coverage that he was maintaining prior to becoming Chief Executiveother executive officers. For more information, see the section titled “Executive Officer or any replacement coverage that he may elect to obtain from time to time.Compensation – Compensation Discussion and Analysis.” |
(b) Represents amounts paid or accrued toExecutive Employment Agreements. Under the agreements, Mr. Barzun in connection with his departure from the Company in October 2017, including (i) $100,000, representing continuation of Mr. Barzun’sCutillo will receive an annual base salary of$650,000; Mr. Ballschmiede will receive an annual base salary of $465,000; and Mr. Chandler will receive an annual base salary of $340,000, which amounts reflect the annual base salary of each executive at the time the agreements were executed and which are subject to adjustment as provided in the agreements. During the term of the agreements, each executive is eligible to receive short-term and long-term incentive compensation and to receive equity-based long-term incentive awards under the Company’s applicable plans and programs (on terms no less favorable to awards made to the Company’s other senior executive employees), in each case based upon the achievement of applicable performance standards. In addition, Mr. Cutillo will be entitled to use of a Company-provided vehicle and related costs. Each agreement also containsnon-compete andnon-solicitation covenants that apply during the term of the agreement and for 12 months,the12-month period following termination of the executive’s employment, as well as standard confidentiality and (ii) $15,770, representingmutualnon-disparagement covenants that apply during the valueterm of reimbursementthe Agreement and continue indefinitely after termination of COBRA premiums for 12 months. ________________
| | (3)
| In April 2017, Mr. Cutillo was appointed Chief Executive Officer of the Company. |
| | (4)
| In October 2017, Mr. Chandler was appointed Executive Vice President & General Counsel, Secretary of the Company following Mr. Barzun’s resignation. |
| | (5)
| In April 2017, Mr. Varello resigned as Chief Executive Officer of the Company, although he remained a director of the Company until December 31, 2017. |
the Executive’s employment.
Grants of Plan-Based Awards in 20172018 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | | Estimated Future Payouts Under Equity Incentive Plan Awards | | | All other
Stock
Awards:
Number
of Shares
of Stock or Units(2) | | | Grant
Date Fair Value of Stock Awards | | | Name | | Grant Date | | Threshold | | Target | | Maximum | | | | Threshold | | | Target | | | Maximum | | Joseph A. Cutillo | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | STI Award | | | | $285,000 | | $570,000 | | $1,140,000 | | | | | - | | | | - | | | | - | | | | - | | | | - | | LTI - RSU | | 01/17/2018 | | - | | - | | - | | | | | - | | | | - | | | | - | | | | 37,624 | | | $ | 570,004 | | LTI - PSU(3) | | 01/17/2018 | | - | | - | | - | | | | | 18,812 | | | | 37,624 | | | | 75,248 | | | | - | | | | 570,004 | | Supplemental PSU Award(4) | | 12/12/2018 | | - | | - | | - | | | | | - | | | | 500,000 | | | | - | | | | - | | | | 5,570,000 | | Ronald A. Ballschmiede | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | STI Award | | | | 151,125 | | 302,250 | | 604,500 | | | | | - | | | | - | | | | - | | | | - | | | | - | | LTI - RSU | | 01/17/2018 | | - | | - | | - | | | | | - | | | | - | | | | - | | | | 16,114 | | | $ | 244,127 | | LTI - PSU(3) | | 01/17/2018 | | - | | - | | - | | | | | 8,057 | | | | 16,114 | | | | 32,228 | | | | - | | | | 244,127 | | Supplemental PSU Award(4) | | 12/12/2018 | | - | | - | | - | | | | | - | | | | 200,000 | | | | - | | | | - | | | | 2,228,000 | | Con L. Wadsworth | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | STI Award | | | | 180,000 | | 360,000 | | 720,000 | | | | | - | | | | - | | | | - | | | | - | | | | - | | LTI - RSU | | 01/17/2018 | | - | | - | | - | | | | | - | | | | - | | | | - | | | | 18,775 | | | $ | 284,442 | | LTI - PSU(3) | | 01/17/2018 | | - | | - | | - | | | | | 3,979 | | | | 7,958 | | | | 15,916 | | | | - | | | | 120,564 | | Richard E. Chandler, Jr. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | STI Award | | | | 65,625 | | 131,250 | | 262,500 | | | | | - | | | | - | | | | - | | | | - | | | | - | | LTI - RSU | | 01/17/2018 | | - | | - | | - | | | | | - | | | | - | | | | - | | | | 7,581 | | | $ | 114,852 | | LTI - PSU(3) | | 01/17/2018 | | - | | - | | - | | | | | 3,791 | | | | 7,581 | | | | 15,162 | | | | - | | | | 114,852 | | Supplemental PSU Award(4) | | 12/12/2018 | | - | | - | | - | | | | | - | | | | 80,000 | | | | - | | | | - | | | | 891,200 | | Craig B. Allen | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | STI Award | | | | 45,500 | | 91,000 | | 182,000 | | | | | - | | | | - | | | | - | | | | - | | | | - | | LTI - RSU | | 01/17/2018 | | - | | - | | - | | | | | - | | | | - | | | | - | | | | 3,004 | | | $ | 45,511 | | LTI - PSU(3) | | 01/17/2018 | | - | | - | | - | | | | | 1,502 | | | | 3,004 | | | | 6,008 | | | | - | | | | 45,511 | |
Sterling Construction |2019 Proxy Statement |31 |
| | | | | | | | | | | | | | | | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)
| | | | | | Name | | Grant Date | | Threshold | | Target | | Maximum | | All Other Stock Awards: Number of Shares of Stock or Units(2) | | Grant Date Fair Value of Stock and Option Awards | Joseph A. Cutillo | | | | | | | | | |
| | | Incentive Compensation
| | 4/28/2017 | | $588,830 | | $981,384 | | $1,128,592 | | — | | — | Restricted Stock Grant
| | 4/28/2017 | | — | | — | | — | | 50,000 | | $475,500 | | | | | | | | | | | | | | | Ronald A. Ballschmiede
| | | | | | | | | | | | | Incentive Compensation
| | 2/10/2017 | | $448,671 | | $747,786 | | $859,954 | | — | | — | | | | | | | | | | | | | | | Con L. Wadsworth | | | | | | | | | | | | | Incentive Compensation
| | 2/10/2017 |
| $433,500 | | $722,500 | | $830,875 | | — | | — | | | | | | | | | | | | | | | | Richard E. Chandler, Jr. | | | | | | | | | | | | | Restricted Stock Grant
| | 10/27/2017 | | — | | — | | — | | 25,000 | | $386,250 | | | | | | | | | | | | | | | | Paul J. Varello | | | | | | | | | | | | | Restricted Stock Grant
| | 06/08/2017 | | — | | — | | — | | 5,257 | | $53,148 | | | | | | | | | | | | | | | | Roger M. Barzun | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A |
________________
| (1) | | (1)
| For 2017,2018, under our incentive compensationSTI program, Messrs. Cutillo, Ballschmiede and Wadswortheach of our named executive officers had a target award based on a multiplepercentage of salary, with the amount to be earned based on (a) the company’sCompany’s performance relative to apre-established EPS EBITDA target (representing 75% of the target award), and (b) the executive’s performance relative to pre-established individual goalsa strategic target (representing 25% of the target award). The amounts reported represent the estimated threshold, target and maximum possible incentive payments that could have been received by each named executive officer pursuant to the program for 2017. The estimated amounts in the “Target” column were approved by the compensation committee and reflect 195% of base salary for Mr. Cutillo, and 170% of base salary for each of Mr. Ballschmiede and Mr. Wadsworth.2018. The estimated amounts in the “Threshold” column reflect achievement of the threshold level of performance relative to the EPS target,targets, resulting in a payout of 80%50% of the target award for that component, and 0% achievement on the individual component, as there is no minimum level required for payout.each component. The estimated amounts in the “Maximum” column reflect achievement of the maximum level of performance relative to the EPS target,targets, resulting in a payout of 120%200% of the target award for that component,each component. For more information, see the section titled “Executive Officer Compensation – Compensation Discussion and a payout of 100% of target award onAnalysis.” |
| (2) | These awards represent RSUs awarded to the individual component,executive officers as that is the maximum that can be earned under that component. Under the termspart of the program as approved by the compensation committee in February 2017, any earned award will be paid 50% in cash and 50% in RSUs that will vest in one-third increments on the first three anniversaries2018 LTI Program. Each of the grant date, withnamed executive officers received a portion of his 2018 target LTI Program award in the numberform of RSUs determined using the simple average of the closing pricesRSUs. Each RSU represents a contingent right to receive a shares of our common stock on the vesting date, provided the executive remains employed with us throughout the vesting period, subject to certain exceptions. The RSUs will vest inone-third installments on each of December 2017.31, 2018, 2019 and 2020. For more information regarding the RSUs granted to the named executive officers under our 2018 LTI Program, see the section titled “Executive Officer Compensation – Compensation Discussion and Analysis.” |
For more information, see the section titled “Executive Officer Compensation – Compensation Discussion and Analysis” beginning on page 21.
| (3) | These awards represent PSUs awarded to the executive officers as part of the 2018 LTI Program. Each of the named executive officers received a portion of his 2018 target LTI Program award in the form of PSUs. Each PSU represents a contingent right to receive shares of our common stock, with the final number of shares to be issued to our named executive officers based on the company’s achievement of applicable EPS threshold, target and maximum goals for each year in the three-year performance cycle ending December 31, 2020. Achievement of the threshold level of performance will result in a payout of 50% of the target award, and a maximum performance would result in 200% of target. The award will vest inone-third installments after the end of each year in the performance cycle. For more information regarding the PSUs granted to the named executive officers under our 2018 LTI Program, see the section titled “Executive Officer Compensation – Compensation Discussion and Analysis.” |
(2)
(4) | Awards in this columnThese awards represent (a) special grants of restricted stockone-time supplemental PSU awards granted to Messrs. Cutillo, Ballschmiede and Chandler in connection with Mr. Cutillo’s promotioneach officer’s Executive Employment Agreement with the company. The supplemental PSUs represent the contingent right to chief executive officerreceive shares of our common stock, and will expire in April 2017,four equal tranches beginning December 31, 2020 through December 31, 2023, and Mr. Chandler’s appointment as executive vice president, general counseleach tranche will vest ifpre-determined EPS targets are achieved on or before the expiration date for such tranche. For more information regarding the supplemental PSUs, see the section titled “Executive Officer Compensation – Compensation Discussion and secretary in October 2017, and (b) the grant of restricted stock to Mr. Varello in June 2017 as part of his non-employee director compensation package. As noted above, Mr. Varello forfeited this award when he retired from our board in December 2017.Analysis.” |
Outstanding Equity Awards at December 31, 2017 | | | | | | | | | | | | Stock Awards | | | Name | | Number of Shares or Units of Stock That Have Not Vested (1) |
| Market Value of Shares or Units of Stock That Have Not Vested (2) | | Joseph A. Cutillo | | 60,272 |
| | $981,228 | | | Ronald A. Ballschmiede | | 15,921 |
| | $259,194 | | | Con L. Wadsworth | | — |
| | — |
| | | Richard E. Chandler, Jr. | | 25,000 |
| | $407,000 | | | Paul J. Varello | | — |
| | — |
| | | Roger M. Barzun | | — |
| | — |
| |
________________
2018 | | | | | | | | | | | | | | | | | | | | Stock Awards | | | Name | | Number of Shares or Units of Stock That
Have Not Vested(1) | | | Market Value of Shares or Units of Stock That Have Not Vested(2) | | | Equity Incentive
Plan Awards:
Number of
Unearned Shares, Units or Other Rights That Have Not Vested(3) | | | Equity Incentive
Plan Awards:
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That
Have Not Vested(2)
| | Joseph A. Cutillo | | | 89,835 | | | | $978,303 | | | | 537,624 | | | | $5,854,725 | | | | | | | Ronald A. Ballschmiede | | | 46,429 | | | | 505,612 | | | | 216,114 | | | | 2,353,481 | | | | | | | Con L. Wadsworth | | | 26,938 | | | | 293,355 | | | | 7,958 | | | | 86,663 | | | | | | | Richard E. Chandler, Jr. | | | 21,721 | | | | 236,542 | | | | 87,581 | | | | 953,757 | | | | | | | Craig B. Allen | | | 8,562 | | | | 93,240 | | | | 3,004 | | | | 32,714 | |
| | (1) | Unless the award is forfeited or vesting is accelerated because of a termination of employment or change of control as described below under “Potential Payments upon Termination or Change in Control,” the restrictions on the restricted stock held by the NEOsand RSUs will lapse and the awards will vest as follows: |
| | | | | | | | Name | | Restricted Stock / RSUs | | Vesting Date | Mr. Cutillo | | 10,272
| 6,848
25,000
32,904
25,083 |
| | 1/31⁄2 on each of February 10, 2018, 2019 and 2020 | | | 50,000 | | 1/2On April 28, 2019 1⁄3 on each of April 28, 2018January 1, 2019, 2020 and 2021 1⁄2 on each of December 31, 2019 and 2020 | Mr. Ballschmiede | | 15,921
| 10,614
25,072
10,743 |
| | 1/31⁄2 on each of February 10, 2018, 2019 and 2020 1⁄3 on each of January 1, 2019, 2020 and 2021 1⁄2 on each of December 31, 2019 and 2020 | Mr. ChandlerWadsworth | | 25,000
| 23,434
3,504 |
| | 1/1⁄3 on each of January 1, 2019, 2020 and 2021 1⁄2 on each of December 31, 2019 and 2020 | Mr. Chandler | |
| 16,667
5,054 |
| | 1⁄2 on each of October 27, 20182019 and 2020 1⁄2 on each of December 31, 2019 |
| and 2020 | (2)
Mr. Allen | |
| 1,457
5,102
2,003 |
| | 1⁄2 on each of February 10, 2019 and 2020 1⁄3 on each of January 1, 2019, 2020 and 2021 1⁄2 on each of December 31, 2019 and 2020 |
(2) The market value of the awards as reflected in this table was based on the $10.89 closing market price per share of our common stock on |32 | Sterling Construction |2019 Proxy Statement
December 31, 2018. | (3) | Unless the award is forfeited or vesting is accelerated because of a termination of employment or change of control as described below under “Potential Payments upon Termination or Change in Control,” the restrictions on the target PSUs granted as part of our LTI program will lapse inone-third increments at the end of each year in the three-year performance period as set forth in the table below based on achievement of the awards as reflectedapplicable EPS targets for the year. With respect to the PSUs granted on January 17, 2018, 185% of the first tranche vested and paid out in this table wasearly 2019 based on our Adjusted EPS results (see page 27 for more information). With respect to the $16.28 closing market price per share of our common stockSupplemental PSUs awarded to certain NEOs in December 2018, the awards expire in four equal tranches beginning December 31, 2020 through 2023, with each tranche vesting if aggressive EPS targets are achieved on December 29, 2017.or before the expiration date for such tranche. |
————————
| | | | | | | | | | | | | | | | | | | PSUs | | | | Name | | Grant Date | | | Threshold | | Target | | Maximum | | Last Day of Performance Period | Mr. Cutillo | | | 1/17/2018 | | | 18,812 | | 37,624 | | 75,248 | | 12/31/2020 | | | | 12/12/2018 | | | N/A | | 500,000 | | N/A | | 12/31/2023 | Mr. Ballschmiede | | | 1/17/2018 | | | 8,057 | | 16,114 | | 32,228 | | 12/31/2020 | | | | 12/12/2018 | | | N/A | | 200,000 | | N/A | | 12/31/2023 | Mr. Wadsworth | | | 1/17/2018 | | | 3,979 | | 7,958 | | 15,916 | | 12/31/2020 | Mr. Chandler | | | 1/17/2018 | | | 3,791 | | 7,581 | | 15,162 | | 12/31/2020 | | | | 12/12/2018 | | | N/A | | 80,000 | | N/A | | 12/31/2023 | Mr. Allen | | | 1/17/2018 | | | 1,502 | | 3,004 | | 6,008 | | 12/31/2020 |
20172018 Stock Vested(1)
| | | | | | | | | | | | | Stock Awards | | | Name | | Number of Shares Acquired on Vesting | | Value Realized on Vesting (2) | | Joseph A. Cutillo | | 25,000 |
| | | $427,500 | | | Ronald A. Ballschmiede | | 50,000 |
| | | $855,000 | | | Con L. Wadsworth | | — |
| | | — |
| | | Richard E. Chandler, Jr. | | — |
| | | — |
| | | Paul J. Varello | | 400,000 |
| | | $3,788,000 | | | Roger M. Barzun | | — |
| | | — |
| |
________________
| | | | | | | | | | | | Stock Awards | | | Name | | Number of Shares Acquired on Vesting | | | Value Realized on Vesting(2) | | Joseph A. Cutillo | | | 40,965 | | | | $460,152 | | Ronald A. Ballschmiede | | | 10,678 | | | | 123,713 | | Con L. Wadsworth | | | 4,455 | | | | 48,515 | | Richard E. Chandler, Jr | | | 10,860 | | | | 123,599 | | Craig B. Allen | | | 4,827 | | | | 63,807 | |
(1)
| No named executive officer exercised options during 2017 and there(1) | There are no outstanding option awards. | |
| | (2) | The value realized on vesting of restricted stock and RSUs is based on the closing sale price on the date of vesting of the restricted stockaward or, if there were no reported sales on such date, on the last preceding date on which any reported sale occurred. | |
Potential Payments upon Termination or Change in Control We doExecutive Employment Agreements In December 2018, we entered into the Executive Employment Agreements with Messrs. Cutillo, Ballschmiede and Chandler that will expire on December 11, 2021, subject to additionalone-year periods unless either party elects not have any employmentto renew. These agreements or changeentitle each executive to receive certain benefits in the event of control plans or agreements with any of our current executive officers that provide for payments or benefits upon athe termination of his employment under certain circumstances in addition to any accrued obligations due at the time of termination. Termination without Cause or a change of control. Pursuant towith Good Reason Each Executive Employment Agreement provides that if the terms of our stock incentive plan and the restricted stock agreements thereunder, upon a (i) termination ofexecutive officer’s employment as a result of death, permanent disability, oris terminated by the company without cause or (ii) a change of control ofby the company, all outstanding restricted stock awards vest. For purposes ofexecutive with good reason, and the restricted stock awards, “cause” is generally defined as (i) gross negligenceexecutive complies with the restrictive covenants set forth in the agreement, the executive will be entitled to: | · | | a cash severance payment equal to the sum of two times (for Mr. Cutillo) and one times (for Messrs. Ballschmiede and Chandler) the executive’s base salary at the time of termination, plus an amount equal to the executive’s COBRA premium for the 18 months following the date of termination; |
| · | | payment or reimbursement of up to $50,000 (for Mr. Cutillo) and $25,000 (for Messrs. Ballschmiede and Chandler) for post-termination outplacement services costs; |
Sterling Construction |2019 Proxy Statement |33 |
| · | | with respect to Supplemental PSUs, vesting shall occur only for any outstanding tranche that achieves the applicable performance goal as of December 31 of the year in which the executive’s employment is terminated; and |
| · | | with respect to all other equity awards, vesting will be accelerated if provided for in the applicable award agreement. |
Termination without Cause or with Good Reason in connection with a Change of Control Each employment agreement provides that if the executive’s duties, (ii) commission of an act of theft or other dishonesty, (iii) conviction of any other criminal activity (other than a traffic violation or minor misdemeanor), (iv) participation in any activity involving moral turpitude thatexecutive officer’s employment is or could reasonably be expected to be, injurious to the business or reputation of the company, (v) use of alcohol immoderately and/or use of non-prescribed narcotics that have the effect of adversely and materially affecting the performance of the executive’s duties, or (vi) a material breach of company policy. The following table sets forth the restricted stock awards for each of our named executive officers (other than Messrs. Varello and Barzun) that would vest as a result of a change of control, or due to a termination of employment due to death, permanent disability, or a terminationterminated by the company without cause occurringor by the executive with good reason, and such termination occurs six (6) months prior to or twenty-four (24) months following a change of control (as defined in the agreement), and the executive complies with the restrictive covenants set forth in the agreement, the executive will be entitled to: | · | | a cash severance payment equal to two times (for Mr. Cutillo) and one andone-half times (for Messrs. Ballschmiede and Chandler) the executive’s base salary and target STI award for the year in which the termination occurs, plus an amount equal to the executive’s COBRA premium for the 18 months following the date of termination; |
| · | | a cash payment of $50,000 (for Mr. Cutillo) and $25,000 (for Messrs. Ballschmiede and Chandler) in lieu of the post-termination outplacement benefits or reimbursements described above; and |
| · | | with respect to the Supplemental PSUs, all outstanding tranches of Supplemental PSUs will become immediately vested and exercisable upon the occurrence of the change of control. |
If any part of the payments or benefits received by the executive in connection with a termination following a change of control constitutes an excess parachute payment under Section 4999 of the Internal Revenue Code (the “Code”), the executive will receive the greater of (1) the amount of such payments and benefits reduced so that none of the amount constitutes an excess parachute payment, net of income taxes, or (2) the amount of such payments and benefits, net of income taxes and net of excise taxes under Section 4999 of the Code. Equity-Based Awards The terms of our outstanding equity-based award agreements (which include restricted stock, RSUs and PSUs) generally provide that the subject award will be forfeited if the award recipient terminates employment prior to the vesting of the award, except under certain circumstances described below. | · | | Restricted Stock/RSUs – Upon a (i) recipient’s termination due to death, permanent disability, or by the Company without cause, or (ii) a change of control of the Company, any outstanding restricted stock and RSUs will vest in full. In connection with a retirement, provided six months has elapsed since the start of the three-year performance period and the executive executes aone-yearnon-competition andnon-solicitation agreement, all restricted stock and RSUs will vest in full. For purposes of the equity awards, retirement is defined as termination of employment with 6 months written notice on or after attaining age 60 with a minimum of 10 years of service, or age 65 with a minimum of 5 years of service. |
| · | | PSUs – If, during the performance period of a PSU award (other than the Supplemental PSUs), (i) a recipient’s employment terminates due to death or permanent disability, or (ii) a change of control of the Company occurs, any PSUs for years in which the recipient was an employee will vest based on actual performance and PSUs for the remaining years will vest assuming target performance. If a recipient retires, and provided the recipient executes aone-yearnon-competition andnon-solicitation agreement with the Company, all outstanding PSUs will remain outstanding and vest based on actual performance. |
STI Awards The terms of our STI program provide that participants must generally be employed through the end of the program year in order to earn the award, except under the following circumstances: | · | | Death or Permanent Disability – Upon a participant’s termination due to death or permanent disability, or in the event of a change of control of the Company during a program year, the participant will receive a prorated payout of his or her target STI award. |
|34 | Sterling Construction |2019 Proxy Statement
| · | | Retirement or Termination without Cause – Upon a participant’s retirement (as defined above) or termination by the Company without cause the participant will receive a prorated payout of his or her STI award based on the actual level of performance for the program year. |
The following table quantifies the potential payments to our NEOs under the contracts, arrangements, plans and scenarios discussed above, assuming a December 31, 2017.2018 termination date. To calculate the value of the awards, we have used the closing price of our
common stock of $16.28$10.89 on December 29, 2017,31, 2018, as reported on NASDAQ. The table does not include amounts that may be payable under our 401(k) plan or other benefits payable to all company employees.
employees, nor does it include payouts under our STI program, which would have been earned by the executive as of December 31, 2018.Potential Payments Upon Termination or Change of Control as of December 31, 20172018
| | | | | | | | | |
Name | | Restricted Stock (Unvested and Accelerated)
| | Value of Restricted Stock (Unvested and Accelerated)
| | Joseph A. Cutillo | | 60,272 |
| | | $981,228 | | | Ronald A. Ballschmiede | | 15,921 |
| | | $259,194 | | | Con L. Wadsworth | | — |
| | | — |
| | | Richard E. Chandler, Jr. | | 25,000 |
| | | $407,000 | |
Separation of Mr. Varello
Mr. Varello was chief executive officer of the company until April 28, 2017. In connection with Mr. Varello’s resignation as an officer, 200,000 shares of unvested restricted stock vested. These shares are reflected in the "2017 Stock Vested" table on page 32. Upon his retirement from our board on December 31, 2017, 5,257 shares of restricted stock granted in 2017 as part of his compensation as a director were forfeited.
Separation of Mr. Barzun
Mr. Barzun was senior vice president and general counsel, secretary of the company until October 27, 2017. Based on the circumstances of his departure, Mr. Barzun was entitled to receive the payments and benefits due to him upon a termination of employment without cause under his employment agreement with the company. These benefits include (i) continuation of his annual salary for a period of 12 months and (ii) reimbursement of COBRA premiums for a period of 12 months. Mr. Barzun also received a bonus of $150,000 for 2017, $125,000 of which was paid within 30 days of termination, with the balance of $25,000 payable on or before May 2, 2018, provided Mr. Barzun complies with certain restrictive covenants. These amounts are reflected in the "2017 Summary Compensation" table on page 29.
| | | | | | | | | | | | | | | | | | | | | | Name | | Lump Sum Severance Payment | | | Restricted Stock / RSUs (Unvested & Accelerated)(1) | | | PSUs (Unvested & Accelerated / Retained)(2) | | | Outplacement Assistance | | | Total(3) | | Joseph A. Cutillo | | | | | | | | | | | | | | | | | | | | | Death, Disability or Retirement | | | -- | | | | $978,303 | | | | $409,725 | | | | -- | | | | $1,388,028 | | Termination without Cause or with Good Reason | | | $1,329,167 | | | | 978,303 | | | | 409,725 | | | | $50,000 | | | | 2,767,195 | | Change of Control | | | -- | | | | 978,303 | | | | 5,854,725 | | | | -- | | | | 6,833,028 | | Qualifying Termination i/c/w | | | | | | | | | | | | | | | | | | | | | Change of Control | | | 2,519,167 | | | | -- | | | | -- | | | | -- | | | | 2,519,167 | | Ronald A. Ballschmiede | | | | | | | | | | | | | | | | | | | | | Death, Disability or Retirement | | | -- | | | | $505,612 | | | | $175,481 | | | | -- | | | | $681,093 | | Termination without Cause or with Good Reason | | | $485,821 | | | | 505,612 | | | | 175,481 | | | | $25,000 | | | | 1,191,914 | | Change of Control | | | -- | | | | 505,612 | | | | 2,353,481 | | | | -- | | | | 2,859,093 | | Qualifying Termination i/c/w | | | | | | | | | | | | | | | | | | | | | Change of Control | | | 1,196,696 | | | | -- | | | | -- | | | | -- | | | | 1,196,696 | | Con L. Wadsworth | | | | | | | | | | | | | | | | | | | | | Death, Disability or Retirement | | | -- | | | | $293,355 | | | | $86,663 | | | | -- | | | | $380,018 | | Termination without Cause | | | -- | | | | 293,355 | | | | 86,663 | | | | -- | | | | 380,018 | | Change of Control | | | -- | | | | 293,355 | | | | 86,663 | | | | -- | | | | 380,018 | | Qualifying Termination i/c/w | | | | | | | | | | | | | | | | | | | | | Change of Control | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | | Richard E. Chandler, Jr. | | | | | | | | | | | | | | | | | | | | | Death, Disability or Retirement | | | -- | | | | $236,542 | | | | $82,557 | | | | -- | | | | $319,099 | | Termination without Cause or with Good Reason | | | $360,821 | | | | 236,542 | | | | 82,557 | | | | $25,000 | | | | 704,920 | | Change of Control | | | -- | | | | 236,542 | | | | 953,757 | | | | -- | | | | 1,190,299 | | Qualifying Termination i/c/w | | | | | | | | | | | | | | | | | | | | | Change of Control | | | 752,696 | | | | -- | | | | -- | | | | -- | | | | 752,696 | | Craig B. Allen | | | | | | | | | | | | | | | | | | | | | Death, Disability or Retirement | | | -- | | | | $93,240 | | | | $32,714 | | | | -- | | | | $125,954 | | Termination without Cause | | | -- | | | | 93,240 | | | | 32,714 | | | | -- | | | | 125,954 | | Change of Control | | | -- | | | | 93,240 | | | | 32,714 | | | | -- | | | | 125,924 | | Qualifying Termination i/c/w | | | | | | | | | | | | | | | | | | | | | Change of Control | | | -- | | | | -- | | | | -- | | | | -- | | | | -- | |
| (1) | The value of the restricted stock and RSUs that would have vested for each NEO is based on $10.89, the closing price of our common stock on December 31, 2018. |
| (2) | Assumes PSUs vest at target level of performance. The value of the PSUs that would have vested or been retained for each NEO is based on $10.89, the closing price of our common stock on December 31, 2018. |
| (3) | Pursuant to the Executive Employment Agreements, the total payments may be subject to reduction if such payments result in the imposition of an excise tax under Section 280G of the Code, but for purposes of this table we have not reflected any modifications that could occur as a result of Section 280G of the Code. |
Pay Ratio
The following is a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of Mr. Cutillo, our current chief executive officer, to the median of the annual total compensation of our other employees. We determined our median employee based onW-2 earnings for 20172018 (annualized in the case of full- andfull-and part-time employees who joined the Company during 2017)2018) of each of our 1,6841,935 employees (excluding the chief executive officer) as of December 18, 2017.31, 2018. The annual total compensation of our median employee for 20172018 was $48,625.$42,480. As Sterling Construction |2019 Proxy Statement |35 |
disclosed in the "2017 Summary Compensation" tableCompensation Table appearing on page 29,30, Mr. Cutillo’s annual total compensation for 20172018 was $2,134,693. However, as Mr. Cutillo became our chief executive officer on April 28, 2017, for purposes of calculating$8,308,461, which includes the CEO pay ratio we annualized Mr. Cutillo’s base salary as chief executive officer for the full year in accordance with SEC rules, resulting in annual total compensation of $2,181,419.one-time Supplemental PSU award. Based on the foregoing, our estimate of the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all other employees was 45196 to 1. If theone-time Supplemental PSU award, which is not part of our normal executive compensation program, were removed from the calculation, the estimated ratio would have been 64 to 1. Given the different methodologies that various public companies will use to determine an estimate of their pay ratio, the estimated ratio reported above should not be used as a basis for comparison between companies. |36 | Sterling Construction |2019 Proxy Statement
Proposal No. 2: Advisory Vote on the Compensation of Our Named Executive Officers
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), enacted in July 2010, requires that we provide our stockholders with the opportunity to vote to approve, on anon-binding, advisory basis, the compensation of our NEOs as disclosed in this proxy statement in accordance with Section 14A of the Securities Exchange Act of 1934. This vote (commonly referred to as a “say-on-pay”“say-on-pay” vote) is advisory, which means that it is not binding on the company,Company, the board of directors or the compensation committee of the board of directors. However, our board and the compensation committee value the opinion of our stockholders and will consider the outcome of the vote when evaluating our executive compensation program. The vote is not intended to address any specific compensation arrangement or amount, but rather the overall compensation of our NEOs and our compensation philosophy and practices as disclosed under the “Executive Officer Compensation” section of this proxy statement. This disclosure includes the compensation tables and narrative discussion following the compensation tables.
At last year’s annual meeting, we provided our stockholders with the opportunity to cast anon-binding advisory vote regarding the compensation of our named executive officers as disclosed in our proxy statement for the 20172018 annual meeting of stockholders. Our stockholders approved the “say-on-pay”“say-on-pay” proposal by greater than 90%95% of the voting power of the outstanding shares of our common stock present, in person or by proxy, at the 20172018 annual meeting and entitled to vote. Last year, we also asked our stockholders to vote on whether we should hold a “say-on-pay” vote every one, two or three years. Consistent with the recommendation of our board, our stockholders voted to hold the “say-on-pay” vote every year, with over 75% of the total votes cast voting in favor of holding an annual “say-on-pay” vote. After consideration of the 2017 voting results, and based upon its prior recommendation, our board elected to hold “say-on-pay” votes on an annual basis until the next advisory vote on the frequency of future “say-on-pay” votes, which will be held no later than our 2023 annual meeting of stockholders. Accordingly, thisThis year we are again asking our stockholders to vote on the following resolution:
RESOLVED, that the stockholders of Sterling Construction Company, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in the Company’s proxy statement for the 20182019 annual meeting of stockholders pursuant to Item 402 of RegulationS-K of the rules of the Securities and Exchange Commission.
In considering how to vote on this proposal, we encourage you to review the relevant disclosures in this proxy statement, especially the Compensation Discussion and Analysis, which contain detailed information about our executive compensation program.
Vote Required to Approve, on an Advisory Basis, the Compensation of Our Named Executive Officers
Approval of this proposal requires the affirmative vote of a majority of the shares of our common stock present in person or represented by proxy and entitled to vote on the proposal.proposal. For more information on the voting requirements, see “Questions and Answers about the Proxy Materials, Annual Meeting and Voting.”
Recommendation of the Board of Directors | | | | ✔ | | OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTEFOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT. |
Sterling Construction |2019 Proxy Statement |37 |
OUR BOARD RECOMMENDS THAT YOU VOTE FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.
Audit Committee Report
The audit committee is currently composed of fourfive directors, Marian M. Davenport, Dana C. O’Brien, Milton L. Scott (chairman), Maarten D. Hemsley, Raymond F. Messer and Richard O. Schaum and Thomas M. White all of whom are independent, as defined by SEC rules and in the NASDAQ listing standards. In addition, the board has determined that each of Messrs. HemsleyScott and ScottWhite qualifies as an “audit committee financial expert,” as such term is defined by the rules of the SEC. We operate under a written charter approved by us and adopted by the board of directors. Our primary function is to assist the board of directors in fulfilling the board’s oversight responsibilities relating to (1) the effectiveness of the company’sCompany’s internal control over financial reporting, (2) the integrity of the company’sCompany’s financial statements, (3) the company’sCompany’s compliance with legal and regulatory requirements, (4) the qualifications and independence of the company’sCompany’s independent registered public accounting firm, (5) the performance of the company’sCompany’s independent registered public accounting firm and (6) the review and approval or ratification of any transaction that would require disclosure under Item 404(a) of RegulationS-K of the Exchange Act. We oversee the company’sCompany’s financial reporting process on behalf of the board. Our responsibility is to monitor and review this process, but we are not responsible for developing and consistently applying the company’sCompany’s accounting principles and practices, preparing and maintaining the integrity of the company’sCompany’s financial statements and maintaining an appropriate system of internal controls, auditing the company’sCompany’s financial statements and the effectiveness of internal control over financial reporting, or reviewing the company’sCompany’s unaudited interim financial statements. Those are the responsibilities of management and the company’sCompany’s independent registered public accounting firm, respectively. During 20172018, management assessed the effectiveness of the company’sCompany’s system of internal control over financial reporting in connection with the company’sCompany’s compliance with Section 404 of the Sarbanes-Oxley Act of 2002. We reviewed and discussed with management and Grant Thornton LLP (“Grant Thornton”), the company’sCompany’s independent registered public accounting firm, management’s report on internal control over financial reporting and Grant Thornton’s report on their audit of the company’sCompany’s internal control over financial reporting as of December 31, 2017,2018, both of which are included in our 20172018 annual report.
Appointment of Independent Registered Public Accounting Firm; Financial Statement Review In March 2017,2018, in accordance with our charter, we appointed Grant Thornton as the company’sCompany’s independent registered public accounting firm for 2017.2018. We have reviewed and discussed the company’sCompany’s audited financial statements for 20172018 with management and Grant Thornton. Management represented to us that the audited financial statements fairly present, in all material respects, the financial condition, results of operations and cash flows of the companyCompany as of and for the periods presented in the financial statements in accordance with accounting principles generally accepted in the United States, and Grant Thornton provided an opinion to the same effect. We have received from Grant Thornton the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board (PCAOB)(“PCAOB”) regarding the independent accountant’s communications with the audit committee concerning independence, and we have discussed with Grant Thornton their independence from the companyCompany and management. We have also discussed with Grant Thornton the matters required to be discussed by PCAOB Auditing Standard No. 1301 – —Communications with Audit Committees (PCAOB ReleaseNo. 2012-004, August 15, 2012), effective pursuant to SEC ReleaseNo. 34-68453 (December 17, 2012).In addition, we have discussed with Grant Thornton the overall scope and plans for their audit, and have met with them and management to discuss the results of their examination, their understanding and evaluation of the company’sCompany’s internal controls as they considered necessary to support their opinion on the financial statements for the year 2017,2018, and various factors affecting the overall quality of accounting principles applied in the company’sCompany’s financial reporting. Grant Thornton also met with us without management being present to discuss these matters.
In reliance on these reviews and discussions, we recommended to the board of directors, and the board of directors approved, the inclusion of the audited financial statements referred to above in the 20172018 annual report. 5, 2019:Milton L. Scott (chairman) Maarten D. Hemsley
Raymond F. Messer
Marian M. Davenport Dana C. O’Brien Richard O. Schaum Thomas M. White |38 | Sterling Construction |2019 Proxy Statement
Independent Registered Public Accounting Firm
Fees and Related Disclosures for Accounting Services The following table discloses the aggregate fees billed for professional services rendered by Grant Thornton in 20172018 and 2016: | | | | | | | | | 2017 | | 2016 | Audit Fees (1) | $870,589 | | $900,946 | Audit-Related Fees (2) | $1,590 | | $158,978 | | Tax Fees | — |
| | — |
| | All Other Fees | — |
| | — |
|
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2017: | | | | | | | | | | | | | | | | 2018 | | | 2017 | | | | | Audit Fees(1) | | $ | 835,283 | | | $ | 870,589 | | | | | | Audit-Related Fees | | | — | | | | 1,590 | | | | | | Tax Fees | | | — | | | | — | | | | | | All Other Fees | | | — | | | | — | | | | | |
(1)
| (1) | Audit Fees were primarily for professional services rendered to comply with all statutory and financial audit requirements for the companyCompany and its subsidiaries including audit services rendered related to the accounting or disclosure treatment of transaction or events and the impact of final or proposed rules, standards or interpretations by regulatory and standard setting bodies. In 2016, a portion of the audit fees related to our May 2016 public offering of common stock. | |
| | (2)
| We incurred these audit-related fees for a due diligence project on a target company in 2016, and for due diligence related to our new credit facility in 2017. |
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The audit committee has determined that the provision of the services described above is compatible with maintaining the independence of our independent registered public accounting firm.
Pre-Approval Policies and Procedures The audit committee’s policy is topre-approve all audit services, audit-related services and otherpermittednon-audit services provided by our independent registered public accounting firm. In accordance with that policy, the committee annuallypre-approves a list of specific services and categories of services, including audit audit-related and otherpermittednon-audit services, for the upcoming or current fiscal year, subject to specified cost levels. All requests for services to be provided by the Company’s independent registered public accounting firm must be submitted to the Company’s chief financial officer and the chair of the audit committee, together with a detailed description of the services to be rendered. The chief financial officer may authorize any services that have beenpre-approved by the audit committee. Any service that is not included in the approved list of services must be separatelypre-approved by the audit committee. In addition, if fees for any service exceed the amount that has beenpre-approved, then payment of additional fees for such service must be specificallypre-approved by the audit committee. During 2017,2018, none of the services provided by our independent registered public accounting firm required use of thede minimis exception topre-approval contained in the SEC’s rules. Sterling Construction |2019 Proxy Statement |39 |
Proposal No. 3: Ratification of the Appointment of Our Independent Registered Public Accounting Firm
In March 2018,2019, in accordance with our charter, we appointed Grant Thornton as the company’sCompany’s independent registered public accounting firm for 2018.2019. Our board and the audit committee seek stockholder ratification of the audit committee’s appointment of Grant Thornton as our independent registered public accounting firm to audit our and our subsidiaries’ financial statements for the year 2018.2019. If our stockholders do not ratify the appointment of Grant Thornton, the audit committee will reconsider this appointment. Representatives of Grant Thornton are expected to be present at the meeting to respond to appropriate questions, and those representatives will also have an opportunity to make a statement if they desire to do so. Vote Required to Ratify the Appointment of ourOur Independent Registered Public Accounting Firm Approval of this proposal requires the affirmative vote of a majority of the shares of our common stock present in person or by proxy and entitled to vote on the proposal. For more information on the voting requirements, see “Questions and Answers about the Proxy Materials, Annual Meeting and Voting.” Recommendation of the Board of Directors | | | | | ✔ | | OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTEFOR THE RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. |
|40 | Sterling Construction |2019 Proxy Statement
OUR BOARD RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
Proposal No. 4: Adoption of the 20182019 Employee Stock IncentivePurchase Plan
Our board of directors unanimously approved, and recommends that our stockholders adopt, the 20182019 Employee Stock IncentivePurchase Plan (the Plan)“Plan”), to provide our employees with the opportunity to acquire a proprietary interest in our growth and performance, to generate an increased incentive for employees to contribute to our future success and to enhance our ability to attract and retain qualified individuals. The Plan is intended to be a qualified employee stock purchase plan under Section 423 of the Code. The principal features of the Plan are summarized below. The following summary does not purport to be a complete description of all of the provisions of the Plan and is qualified in its entirety by reference to the complete text of the Plan, which is summarized below and attached as Annex Ato this proxy statement. Because this is a summary, it does not contain all of the information that may be important to you. You should read Annex Acarefully before you decide how tohowto vote. Why Stockholders Should Vote to Adopt the Plan:
EquityPlanIncentiveAwardsAreAnImportantPartOfOurCompensationPhilosophy
The company believes that the adoption of the Plan is essential to our success. The Plan is intendedprovides our employees, including employees of our designated subsidiaries, the opportunity to increase stockholder value and advance the interests of the company and its subsidiaries by furnishing a variety of equity incentives designed to (a) attract, retain, and motivate key employees, officers, and directors of the company and consultants and advisers to the company and (b) strengthen the mutuality of interests among such persons and the company’s stockholders. The board and company management believe that equity incentives are necessary to remain competitive in the industry.
OurCurrent Plan Has Insufficient SharesAvailableForGrant
There are currently less than 20,000 shares remaining available for future grants to our officers, employees and non-employee directors under our current stock incentive plan. As such, we will not have sufficient shares available to make long-term incentive grants to our executive officers and key employees in the future, nor do we have sufficient shares to make our annual equity grant to our non-employee directors in May 2018. While the company could increase cash compensation if it is unable to grant equity incentives, replacing equity awards with cash awards would not only misalign our executive and stockholder interests, it would also increase cash compensation expense and divert cash that could otherwise be reinvestedacquire an ownership interest in our business.
We have a Historycompany through the grant of Prudent Use of Shares
In determiningoptions to adopt the Plan, we considered the following:
• Share Reserve. The board has approved the reservation of 1,800,000 shares under the Plan. If the Plan is approved by our stockholders, no new grants will be made under our current stock incentive plan.
• Burn Rate. Our annual burn rate for each of calendar years 2015, 2016 and 2017 was 5.1%, 0.3% and 0.8%, respectively, resulting in a three-year average burn rate of 2.1%. Annual equity burn rate is calculated by dividing (1) the number of shares subject to equity awards granted during the year by (2) the weighted-average number of shares outstanding at the end of the applicable year.
• Expected Duration of the Plan. The company expects the share reserve under the Plan to provide the company with enough shares for awards for approximately four to five years, assuming the company continues to grant awards consistent with its current practices and historical usage, as reflected in its average three-year burn rate, and noting that future circumstances may require the company to change its current equity grant practices. As the company cannot predict its future equity grant practices with any degree of certainty at this time, the share reserve under the Plan could last for a shorter or longer time.
• Dilution. In calendar years 2015, 2016 and 2017, the end of year overhang rate (calculated by dividing (1) the sum of the number of shares issuable pursuant to equity awards outstanding at the end of the calendar year plus shares remaining available for issuance for future awards at the end of the calendar year by (2) the sum of the number of shares outstanding at the end of the calendar year plus the sum of (1) above) was 3.2%, 2.2% and 1.5%, respectively. Upon adoption of the Plan, the company expects its overhang to be approximately 7.3%.
In light of the factors described above, the board has determined that the size of the share reserve under the Plan is reasonable and appropriate at this time.
Equity Compensation Best Practices Reflected in the Plan
The Plan has a number of provisions that the company believes are consistent with best practices in equity compensation, protect stockholder interests and promote effective corporate governance, including the following:
Stockholder Approval is Required for Additional Shares and Other Material Amendments. The Plan does not contain an annual “evergreen” provision. The Plan authorizes a limited number of shares, and stockholder approval is required to increase the maximum number of sharespurchase of common stock which may be issued underat a price below the Plan. In addition, other material amendments to thecurrent market price. The Plan require stockholder approval.
No Discount Stock Options or Stock Appreciation Rights. All stock options and stock appreciation rights will have an exercisecurrently provides for a purchase price equal to or greater than85% of the fair market value of the company’s common stock on the date the stock option or stock appreciation right is granted; although discount stock options and SARs may be granted in the event such awards are assumed or substituted in connection with certain corporate transactions. For purposes of equity awards, we generally define fair market value as the closing sale price of a share of our common stock on the stock exchange or national market system on which our common stock is listed on such date or, if no sale occurred on the date in question, the closing sale price for a share of our common stock on the last preceding date for which such quotation exists. trading day of an offering period.Summary of the 2019 Employee Stock Purchase Plan Administration The closing sale price for a sharecompensation committee has authority to administer, interpret and implement the terms of our common stock on the NASDAQ, on March 13, 2018 was $13.01. Administration by Independent Directors. AwardsPlan. The compensation committee may delegate its powers under the Plan are administered byto any person or persons, such as a third party administrator, as necessary or appropriate to administer and operate the Plan. References to the compensation committee which is an independent committee of our board.
• Limitations on Dividend Payments. Dividends and dividend equivalents may accrue on awards, but will only pay out if the applicable vesting conditions are met. Further, participants holding stock optionsbelow include any appointed delegee or stock appreciation rights do not receive dividend equivalents for any period prior to the exercise of the award.
• Limitations on Grants. Individual limits on awards granted to any participant pursuant to the Plan during any calendar year applythird party administrator as follows: (a) except for non-employee directors, a maximum of 500,000 shares of common stock may be subject to awards granted to a participant; and (b) with respect to non-employee directors, the aggregate grant date fair value of awards under the Plan granted to a director in a calendar year may not exceed $300,000. These amounts may be adjusted to take into account equity restructurings and certain other corporate transactions as described below.
• No Repricing of Awards. Awards may not be repriced, replaced or regranted through cancellation or modification without stockholder approval if the effect would be to reduce the exercise price for the shares under the award.
• No Tax Gross-Ups. The Plan does not provide for any tax gross-ups.
No Liberal Share Counting. Shares of common stock delivered or withheld in payment of the exercise price of a stock option or SAR, delivered or withheld to satisfy tax obligations in respect of an award, or repurchased with the proceeds of an option exercise may not be re-issued under the Plan.
Minimum Vesting Conditions. All awards are subject to a minimum one-year vesting requirement, except that up to 90,000 shares (5% of the shares available under the Plan) may be granted without compliance with this minimum vesting condition.
Clawback of Awards. All Awards (including any proceeds, gains or other economic benefit the Participant actually or constructively receives upon receipt or exercise of any Award or the receipt or resale of any Shares underlying the Award) will be subject to the company clawback policy implemented to comply with Applicable Laws, including any clawback policy adopted to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, as set forth in such a clawback policy or the Award Agreement.
Other company policies that help align the interests of our directors and executive officers with those of our stockholders include our policies that prohibit our directors and executive officers from hedging our common stock, and our minimum stock ownership guidelines for our directors and executive officers. See
“Board Governance – Director and Executive Officer Stock Ownership Guidelines” and “Executive Officer Compensation – Compensation Discussion and Analysis.”
Summary of the 2018 Stock Incentive Plan
Administration. well. The compensation committee of our board of directors will have plenary authority to administer the Plan and has authority to make awards under the Plan anddiscretion to set the terms of each offering in accordance with the awards.
References hereinprovisions of the Plan, to the “committee” referdesignate any subsidiaries of our company to the compensation committee. Subject to the limitations specifiedparticipate in the Plan, to make all determinations regarding the Plan, including eligibility, and to otherwise administer the Plan.Number of Authorized Shares A total of 800,000 shares of common stock have been reserved under the Plan, subject to adjustment in the event of any significant change in our capitalization, such as a stock split, a combination or exchange of shares, or a stock dividend or other distribution. Eligibility and Participation Unless otherwise determined by the compensation committee, our employees and the employees of our designated subsidiaries are eligible to participate in the Plan, other than employees (i) employed for less than six (6) months, or (ii) whose customary employment is less than 20 hours per week or less than five months in any calendar year. The compensation committee may delegate its authority to appropriate officers of the companyalso provide with respect to grants toany offering that employees or consultants who arewill not subject to Section 16 of the Securities Exchange Act of 1934. Eligible Participants. Our officers, directors and employees and our consultants and advisors will be eligible to receive awards, or incentives, underparticipate in the Plan when designated as Plan participants. We currently have fouroffering if they are “highly compensated employees” within the meaning of Section 414(q) of the Code. As of March 19, 2019, 1,958 employees, including five executive officers, and six non-management directorswould have been eligible to receive awards underparticipate in the Plan. In addition, six other employees currently participate in our long-term incentive program, and a total of 533 other employees wouldan employee may not be eligiblegranted rights to receive awards under the Plan.
Awards. Awardspurchase stock under the Plan if the employee would: | · | | immediately after any grant of purchase rights, own stock possessing five percent or more of the total combined voting power or value of all classes of our capital stock; or |
| · | | hold rights to purchase stock under all of our employee stock purchase plans that would accrue at a rate that exceeds $25,000 worth of stock for each calendar year. |
Offering Periods The Plan will be implemented by consecutive offering periods. The first offering period will begin on a date to be determined by the compensation committee, with subsequent offering periods commencing on or about the beginning of each fiscal quarter thereafter. The compensation committee may change the duration, frequency, start date and end date of offering periods, provided that offering periods may not exceed 27 months. Sterling Construction |2019 Proxy Statement |41 |
Payroll Deductions Except as otherwise provided by the compensation committee, a maximum of 15% of a participant’s eligible “compensation” (as defined in the Plan) may be granted in any one orcontributed by payroll deductions toward the purchase of shares during each offering period, provided that a combination of the following forms: for officers and employees only, incentive stock options under Section 422 of the Internal Revenue Code (ISOs);
non-qualified stock options;
stock appreciation rights (SARs);
restricted stock;
restricted stock units (RSUs); and
other stock-based awards.
Authorized Shares. The Plan authorizes the issuance of up to 1,800,000participant may not purchase more than 3,000 shares of common stock allduring an offering period, subject to adjustment in the event of which can be issued pursuantcertain changes in our capitalization. A participant may elect to increase or decrease the exerciserate of ISOs undercontributions during any offering period by properly completing a new Enrollment Form (as defined in the Plan during its ten-year term. Shares issued underPlan) at least 30 days before the plan may be authorized but unissued shares, shares purchased onpurchase date for that offering period or by other procedures prescribed by the open market or treasury shares.
Limitationscompensation committee. Payroll deductions are held by us and Adjustmentsdo not accrue interest for the benefit of a participant.Exercise of Purchase Rights Amounts deducted and accumulated by the participant are used to Shares Issuable Through the Plan. Awards for no more than 500,000 shares may be granted to a participant in a single year, however, with respect to non-employee directors, the aggregate grant date fair value of awards under the Plan granted to a director in a calendar year may not exceed $300,000.Generally, for purposes of determining the maximum number ofpurchase whole shares of our common stock availableat the end of each offering period. Amounts remaining for delivery under the Plan, sharesany fractional share that cannot be purchased are not delivered because an award is forfeited, cancelled, or settled in cash will not be deemed to have been delivered under the Plan. With respect to SARs paid in shares, all shares to which the SARs relate are counted against the Plan limits rather than the net number of shares delivered upon exercise. If shares are withheld to satisfy the exercise price of a stock option or SAR or the tax withholding obligation associated with any award, those withheld shares will not be available for reissuance under the Plan. In addition, shares purchased on the open market with the proceeds of an option exercise will not be available for reissuance under the Plan.
Proportionate adjustments will be made to all of the share limitations provided in the Plan, including shares subject to outstanding awards, in the event of any recapitalization, reclassification, stock dividend, stock split, combination of shares or other change in the shares of our common stock. Further, the committee may adjust the terms of any awardcarried forward to the extent appropriate to provide participants withnext offering period (if the same relative rights before and after the occurrence of any such event.
Minimum Vesting Requirements. All awards granted under the Plan must be made subject to a one-year vesting period, although this minimum vesting requirement doesparticipant has not apply to awards with respect to five percentwithdrawn from participation). The purchase price of the shares authorized underwill be 85% (or such higher percentage determined by the Plan.
Amendments to the Plan. The board may amend or discontinue the Plan at any time. However, our stockholders must approve any amendment that would:
materially increase the benefits accruing to participants under the Plan;
increase the numbercompensation committee) of shares of common stock that may be issued under the Plan;
materially expand the classes of persons eligible to participate in the Plan;
expand the types of awards available for grant under the Plan;
materially extend the term of the Plan;
materially change the method for determining the exercise price of a stock option or SAR; or
permit the re-pricing of a stock option or SAR.
No amendment or discontinuance of the Plan may materially impair any previously granted award without the consent of the recipient.
Term of the Plan. No awards may be granted under the Plan after May 2, 2028.
Types of Incentives. Each of the types of incentives that may be granted under the Plan is described below:
Stock Options. The committee may grant non-qualified stock options or ISOs to purchase shares of our common stock. The committee will determine the number and exercise price of the options, provided that the option exercise price may not be less than the fair market value of a share of common stock on the date of grant, except for an option granted in substitution of an outstanding award in an acquisition transaction. In addition, the committee will determine the time or times that the options become exercisable, provided that options are subject to the minimum vesting requirement and exception described above. The term of an option will also be determined by the committee, but may not exceed ten years from the datelast trading day of the grant. As noted above,offering period. On March 19, 2019, the committee may not, withoutrecord date for the prior approvalannual meeting of our stockholders, decrease the exerciseclosing sales price for any outstanding option after the date of grant. In addition, an outstanding option may not, as of any date that the option has a per share exercise price that is greater than the then current fair market value of a share of common stock as reported on the NASDAQ Global Select Market under the symbol STRL was $13.14 per share. The compensation committee may require that shares purchased under the Plan be surrendered to us as consideration forheld in an ESPP Share Account (as defined in the grant of a new optionPlan) with a lower exercise price, another incentive,broker designated by the compensation committee for a cash paymentcertain period of time following the purchase date.Withdrawals Under procedures established by the compensation committee, a participant may withdraw from the Plan during an offering period at least 30 days before the purchase date, and his or her accumulated payroll deductions that have not been used to purchase shares of common stock unless approved by our stockholders. ISOs will be subject to certain additional requirements necessary in order to qualify as incentive stock options under Section 422 of the Internal Revenue Code. In addition, participants holding stock options will not be entitled to any dividend equivalent rights for any period of time prior to exercise of the stock option. Stock Appreciation Rights. A stock appreciation right is a right to receive, without payment to us, a number of shares of common stock or an amount of cash determined by dividing the product of the number of shares as to which the SAR is exercised and the amount of the appreciation in each share by the fair market value of a share on the date of exercise of the right. The committee will determine the exercise price used to measure share appreciation, provided that the exercise price may not be less than the fair market value of a share of common stock on the date of grant, except for a SAR granted in substitution of an outstanding award in an acquisition transaction. In addition, the committee will determine whether the right may be paid in cash, shares of common stock, or a combination of the two, and the number and term of SARs, provided that the term of a SAR may not exceed ten years from the date of grant. SARs are subject to the minimum vesting requirement and exception described above. The Plan restricts decreases in the exercise price and certain exchanges of SARs on terms similar to the restrictions described above for stock options. Participants holding SARs will not be entitled to any dividend equivalent rights for any period of time prior to exercise of the SAR.
Restricted Stock. Shares of common stock may be granted by the committee and made subject to restrictions on sale, pledge or other transfer by the recipient for a certain restricted period. All shares of restricted stock will be subject to such restrictions as the committee may provide in an agreement with the participant, provided that the minimum vesting requirements described above are satisfied. Subject to the restrictions provided in the agreement and the Plan, a participant receiving restricted stock shall have all of the rights of a stockholder as to such shares, including the right to accrue dividends if provided for in the agreement. Notwithstanding the previous sentence, any and all cash and stock dividends paid with respect to the shares of restricted stock will be subject to the same
vesting and forfeitability conditions, including attainment of any performance goals, as are applicable to the underlying shares of restricted stock.
Restricted Stock Units. A restricted stock unit represents the right to receive from the company on the scheduled vesting date or other specified payment date one share of common stock. All RSUs will be subject to such restrictions as the committee may provide in an agreement with the participant, provided that the minimum vesting requirements described above are satisfied. Subject to the restrictions provided in the agreement and the Plan, a participant receiving RSUs shall have no rights of a stockholder as to such units until such time as shares of common stock are issued to the participant. RSUs may be granted with dividend equivalent rights; provided, however, that any and all dividend equivalent rights with respect to the RSUsIf a participant withdraws from an offering, no payroll deductions will be subject tomade for any subsequent offering period unless the same vesting and forfeitability conditions, including attainment of any performance goals, as are applicable to the underlying RSUs.participantre-enrolls.
Other Stock-Based Awards. The Plan also permits the committee to grant participants awards of shares of common stock and other awards that are denominated in, payable in, valued in whole or in part by reference to, or are otherwise based on the value of, or the appreciation in value of, shares of common stock (other stock-based awards). The committee has discretion to determine the times at which such awards are to be made, the size of such awards, the form of payment, and all other conditions of such awards, including any restrictions, deferral periods or performance requirements, provided that the minimum vesting requirements described above are satisfied. Other stock-based awards may be granted with dividend equivalent rights; provided, however, that any and all dividend equivalent rights with respect to the award will be subject to the same vesting and forfeitability conditions, including attainment of any performance goals, as are applicable to the underlying award.
Clawback. The Plan also provides that all Awards (including any proceeds, gains or other economic benefit the Participant actually or constructively receives upon receipt or exercise of any Award or the receipt or resale of any Shares underlying the Award) will be subject to the company clawback policy implemented to comply with Applicable Laws, including any clawback policy adopted to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, as set forth in such a clawback policy or the Award Agreement.
Termination of Employment;or Change of Control. Employment StatusIf a participant ceases to be an eligible employee more than 30 days prior to a purchase date, all accumulated payroll deductions for the participant will be discontinued and any amounts credited to the participant’s account will be promptly refunded, without interest. If a participant ceases to be an eligible employee within 30 days of the company orpurchase date, the accumulated payroll deductions shall be used to provide services to us forpurchase shares on such purchase date, and any reason, including death, disability, or retirement, the participant’s outstanding awards may be exercised, shall vest or shall expire at such time or times as may be determined by the committee and described in the award agreement. Unless otherwise provided in an award agreement, upon a change of control: (a) all options and SARs will become immediately exercisable, (b) all time-vested restrictions on restricted stock, RSUs or other stock-based awards will lapse, and (c) all performance measures applicable to awardsaccumulated payroll deductions remaining will be disregarded and the award will vest at the target payout level. Further, in the event of a change of control, the committee may, in its sole and absolute discretion and authority,refunded, without obtaining the approval or consent of the company’s stockholders or any participant with respect to his or her outstanding awards, take one or more of the following actions:
arrange for or otherwise provide that each outstanding award shall be assumed or a substantially similar award shall be substituted by a successor corporation or a parent or subsidiary of such successor corporation;
require that all outstanding options and SARs be exercised on or before a specified date (before or after such change of control) fixed by the committee, after which specified date all unexercised options and SARs shall terminate;
arrange or otherwise provide for payment of cash or other consideration to participants representing the value of such awards, if any, in exchange for the satisfaction and cancellation of outstanding awards, or cancel any outstanding awards for no payment if the award has no value; or
make other appropriate adjustments or modifications.
interest.Transferability of Awards . AwardsPurchase rights granted under the Plan mayare not be transferred except: transferable by will; a participant other than by will or by the laws of descent and distribution; if permitteddistribution, and are exercisable during the participant’s lifetime only by the participant.Amendment and Termination The compensation committee and so provided in its discretion may amend, suspend or terminate the award agreement, pursuant to a domestic relations order; or inPlan at any time. Unless sooner terminated, the casePlan will terminate at the earlier of stock options only, if permitted by the committee and if so provided intime that all of the award agreement, to immediate family members or to a partnership, limited liability company or trust for which the sole owners, members or beneficiaries are the participant or immediate family members.
Payment of Withholding Taxes. We may withhold from any payments or stock issuancesshares reserved under the Plan have been issued under the terms of the Plan and March 6, 2029, the tenth anniversary of the date the board approved the Plan, subject to obtaining stockholder approval. The Plan also includes provisions related to the impact on the Plan in case of a dissolution of our company or collect as a condition of payment, any taxes required by lawcertain other corporate transactions.Benefits Benefits to be withheld. The participant may, butreceived by participants under the Plan, including our executive officers, are not currently determinable because participation in the Plan is not requiredvoluntary and the benefits are subject to satisfy his or her withholding tax obligation by electing to deliver currently owned sharesthe market price of common stock or to have the company withhold, from the shares the participant would otherwise receive, shares, in each case having a value at least equal to the minimum amount required to be withheld and not in excess of the applicable estimated incremental tax rate approved by the committee. This election must be made prior to the date on which the amount of tax to be withheld is determined.future dates. |42 Prohibition of Repricing. | Under the Plan, the committee may not, without the approval of the company’s stockholders, authorize the repricing of any outstanding option or SAR to reduce its exercise price, cancel any option or SAR in exchange for cash or another award when the exercise price exceeds the fair market value of the underlying shares, or take any other action with respect to an option or SAR that the company determines would be treated as a repricing.Sterling Construction |2019 Proxy Statement
Federal Income Tax Consequences The following is a general, brief summary of Awards Thethe principal federal income tax consequences relatedof certain awards and transactions under the Plan. The following summary is based upon an interpretation of current federal tax laws and regulations and may be inapplicable if such laws and regulations are changed. This summary is not intended to be exhaustive or constitute tax advice and does not describe state, local or foreign tax consequences, nor does it describe the consequences to any particular participant.It is our intention that the Plan will qualify as an employee stock purchase plan under Section 423 of the Code. The provisions of the Plan, accordingly, will be construed so as to extend and limit participation in a manner consistent with the requirements of that Section 423 of the Code. We believe the following federal income consequences normally will apply with respect to the issuance of the different types of awards that may be grantedPlan. The payroll deductions withheld from a participant’s pay under the Plan are summarized below. Participants who are granted awards underwill be taxable income to the Plan should consult their own tax advisors to determineparticipant and must be included in the tax consequences based on their particular circumstances. Stock Options. A participant who is granted a stock option normally will not realize anyparticipant’s gross income nor will our company normally receive any deduction for federal income tax purposes in the year which such amounts otherwise would have been received.A participant will not be required to recognize any income for federal income tax purposes either at the time the participant is granted an option (which will be on the first day of the offering period) or by virtue of the exercise of the option is granted. When(which will take place on the last day of such offering period). The federal income tax consequences of a non-qualified stock option granted throughsale or disposition of shares acquired under the Plan is exercised,depend in part on the length of time the shares are held by a participant before such sale or disposition. If a participant sells or otherwise disposes of shares acquired under the Plan (other than any transfer resulting from death) within two years after the first day of the applicable offering period or one year after the shares are acquired, which we refer to as the Holding Period, the participant will realizemust recognize ordinary compensation income measured byin the difference betweenyear of such disposition in an amount equal to the aggregate purchase priceexcess of (a) the shares acquired and the aggregate fair market value of the shares acquired on the exercise date. An employee generallydate they were acquired over (b) the price paid for the shares by the participant. The amount of “ordinary” compensation income recognized by the participant will not recognizebe added to the participant’s basis in the shares for purposes of determining any additional gain or loss realized on the sale of the shares. Any such additional gain or loss will be taxed as long-term or short-term capital gain or loss, depending on how long the participant held the shares. If a participant sells shares acquired under the Plan after the Holding Period or if the participant dies, the participant or the participant’s estate must include as ordinary compensation income in the year of sale (or the taxable year ending upon death) an amount equal to the exerciselesser of any ISO, but(a) the excess of the fair market value of the shares on the first day of the offering period over the purchase price (determined as if the option had been exercised on the first day of the offering period) and (b) the excess of the fair market value of the shares at the time of exercise over the option price will be an item of tax preference, which may, depending on particular factors relating to the employee, subject the employee to the alternative minimum tax imposed by Section 55sale of the Internal Revenue Code. The alternative minimum tax is imposed in addition to the federal individual income tax, and it is intended to ensure that individual taxpayers do not completely avoid federal income tax by using preference items. An employee will recognize capital gainshares or loss in the amount of the difference between the exercise price and the sale price on the sale or exchange of stock acquired pursuant to the exercise of an ISO, provided the employee does not dispose of such stock within two years from the date of grant and one year from the date of exercise of the ISO (the holding periods). An employee disposing of such shares before the expiration of the holding periods will recognize ordinary income generally equal to the difference between the option price and the fair market value of the stock on the date of exercise. The remaining gain, if any, will be capital gain. Ifdeath over the exercise price paid for the shares by the participant. Except in the case of a non-qualified option is paid by the surrendertransfer as a result of previously owned shares, the basis and the holding period of the previously owned shares carry over to the same number of shares received in exchange for the previously owned shares. The compensation income recognized on exercise of these options is added to the basis of the shares received. If the exercised option is an ISO and the shares surrendered were acquired through the exercise of an ISO and have not been held for the holding periods, the optionee will recognize income on such exchange, and the basis of the shares received will be equal to the fair market value of the shares surrendered. If the applicable holding period has been met on the date of exercise, there will be no income recognition and the basis and the holding period of the previously owned
shares will carry over to the same number of shares received in exchange, and the remaining shares will begin a new holding period and have a zero basis.
Stock Appreciation Rights. Generally, a participant who is granted a SAR under the Plan will not recognize any taxable income at the time of the grant. The participant will recognize ordinary income upon exercise equal todeath, the amount of cash or the fair market value of the stock received on the day it is received.
Restricted Stock. Unless the participant makes an election to accelerate recognition of the income to the date of grant (as described below), the participant will generally not recognize income at the time the restricted stock award is granted. When the restrictions lapse, the participant will recognize ordinary income equal to the fair market value of the shares as of that date. If the participant files an election under Section 83(b) of the Internal Revenue Code within 30 days of the date of grant of restricted stock, the participant will recognize ordinary income as of the date of the grant equal to the fair market value of the stock as of that date. Any future appreciation in the stock will be taxable to the participant at capital gains rates. If the stock is later forfeited, however, the participant will not be able to recover the tax previously paid pursuant to a Section 83(b) election.
Restricted Stock Units. A participant will not be deemed to have received taxable income upon the grant of RSUs. The participant will be deemed to have received taxable ordinary income at such time as shares are distributed with respect to the RSUs in an amount equal to the fair market value of the shares distributed to the participant. The basis of the shares received will equal the amount of taxable ordinary income recognized by the participant will be added to the participant’s basis in such shares. Any gain realized upon receiptthe sale in excess of such shares.
Other Stock-Based Awards. Generally,basis will be taxed as a participant who is grantedlong-term capital gain. Any loss realized will be treated as long-term capital loss.We will not receive any other stock-based award underincome tax deduction as a result of issuing shares pursuant to the Plan, will recognize ordinary income at the time the cash or shares of common stock associated with the award are received. If stock is received, the ordinary income will be equalexcept to the excess of the fair market value of the stock received over any amount paid by the participant in exchange for the stock. Tax Impact on the Company. We will generally be entitledextent that a to a deduction equal to the amount of ordinary income that the participant is required to recognizeinclude as a result ofordinary income amounts arising upon the exercisesale or vesting of an Award, provided that the deduction is not otherwise disallowed under Section 162(m) of the Internal Revenue Code.
Section 409A. If any incentive constitutes non-qualified deferred compensation under Section 409A of the Internal Revenue Code, it will be necessary that the award be structured to comply with Section 409A of the Internal Revenue Code to avoid the imposition of additional tax, penalties and interest on the participant.
Tax Consequences of a Change of Control. If, upon a change of control of the company, the exercisability, vesting or payout of an award is accelerated, any excess on the date of the change of control of the fair market valuedisposition of the shares or cash issued under accelerated awards over the purchase price of such shares, if any, may be characterized as “parachute payments” (within the meaning of Section 280G of the Internal Revenue Code) if the sum of such amounts and any other such contingent payments received by the employee exceeds an amount equal to three times the “base amount” for such employee. The base amount generally is the average of the annual compensation of the employee for the five years preceding such change in ownership or control. An “excess parachute payment” with respect to any employee is the excess of the parachute payments to such person, in the aggregate, over and above such person’s base amount. If the amounts received by an employee upon a change of control are characterized as parachute payments, the employee will be subject to a 20% excise tax on the excess parachute payment and we will be denied any deduction with respect to such excess parachute payment.discussed above.Sterling Construction |2019 Proxy Statement |43 |
The foregoing discussion summarizes the federal income tax consequences of awards that may be granted under the Plan based on current provisions of the Internal Revenue Code, which are subject to change. This summary does not cover any foreign, state or local tax consequences.
Plan Benefits
Awards under the Plan are subject to the discretion of the committee and no determinations have been made by the committee as to any awards that may be granted pursuant to the Plan. Therefore, it is not possible to determine the benefits that will be received in the future by participants in the Plan or the benefits that would
have been received by such participants if the Plan had been in effect in the fiscal year ended December 31, 2017. No awards have been issued under the Plan as it is not yet effective.
Certain tables above, under “Executive Compensation – Executive Compensation Tables,” including the 2017 Summary Compensation Table, Grants of Plan-Based Awards table, Outstanding Equity Awards at December 31, 2017, and Stock Vested table and the Director Compensation table under “Director Compensation” set forth information with respect to prior awards granted to our NEOs and directors under our current stock incentive plan.
Equity Compensation Plan Information
The following table presents information as of December 31, 2017,2018, regarding our incentive compensation plan under which common stock may be issued to employees andnon-employees as compensation. | | | | | | | | | | | | | | Plan Category | | Number of Securities To be Issued Upon Exercise of Outstanding Options,
Warrants and Rights(a) (1) | | | Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights(b) | | | Number of Securities
Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) (2) | | Equity compensation plans approved by security holders | | | 1,168,520 | (1) | | | n/a | | | | 957,392 | | | | | | | | | | | | | | | Equity compensation plans not approved by security holders | | | n/a | | | | n/a | | | | n/a | | | | | | | | | | | | | | | Total | | | 1,168,520 | (1) | | | n/a | | | | 957,392 | |
| | | | | | | | | | | | | | | Plan Category | | Number(1)
| In addition, as of Securities
To be Issued Upon
ExerciseDecember 31, 2018, there were 147,139 unvested shares of
Outstanding Options,
Warrants restricted stock, which represent issued shares and Rights
are thus not included in table above. The shares represented in column (a) | | | Weighted-Average
Exercise Price of
Outstanding Options,
Warrants represent unvested RSU and Rights
(b) | | | Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
ReflectedPSUs. These awards are not reflected in Column (a))
(c)
column (b) as they do not have an exercise price. | |
Equity compensation plans approved by security holders | | (2) | — |
| (1)
| | | n/a | | | | 400,289 | (2)
| Equity compensation plans not approved by security holders | | | n/a |
| | | | n/a | | | | n/aRepresents shares remaining available for future issuance under the 2018 Stock Incentive Plan, all of which could be issued pursuant to awards of stock options, restricted stock, or “other stock-based compensation.” | | Total | | | — |
| (1)
| | | n/a | | | | 400,289 | (2)
|
(1) The only outstanding equity awards as of December 31, 2017 were unvested shares of restricted stock, which represent issued shares. These awards are not reflected in column (b) as they do not have an exercise price.
(2) As of December 31, 2017, there were 400,289 shares remaining available for future
issuance under the Stock Incentive Plan, all of which could be issued pursuant to awards of stock options, restricted stock, or “other stock-based compensation.”
In early 2018, the compensation committee granted equity awards to employees, including 249,759 RSUs and 77,690 performance share units (representing the target award). Following these grants and the return of 22,153 shares to the pool as a result of withholdings and forfeitures, there are currently less than 20,000 shares remaining available for future grant under our current plan.
Vote Required to Adopt the 20182019 Employee Stock IncentivePurchase Plan
Approval of this proposal requires the affirmative vote of a majority of the common stock present in person or by proxy and entitled to vote on the proposal. For more information on the voting requirements, see “Questions and Answers about the Proxy Materials, Annual Meeting and Voting.”
Recommendation of the Board of Directors | | | | ✔ | | OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTEFOR THE ADOPTION OF THE 2019 EMPLOYEE STOCK PURCHASE PLAN. |
|44 | Sterling Construction |2019 Proxy Statement
OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE 2018 STOCK INCENTIVE PLAN.
Certain Transactions Our audit committee charter provides that any transactionAll transactions between the companyCompany (including its subsidiaries) and a director, executive officer, nominee for election as a director or stockholder and any of their affiliates or immediate family members that involvesinvolve more than $100,000 must be reviewed and approved in advance and reviewed periodically by the audit committee to ensure, among other considerations, that such transactions are in compliance with Delaware law and are on terms that are no less favorable to the companyCompany (including its subsidiaries) than could be obtained from unrelated third parties. Mr. Wadsworth is the executive vice president and chief operating officer of the company.Company. Mr. Wadsworth and some of his immediate family members are part owners of the following companies. | | | | | | | | | Name (Relationship) | | W&S LLC | | W&S II, LLC | | W&S III, LLC | | Con L. Wadsworth | | 32.45% | | 24.38% | | 31.80% | | Kip L. Wadsworth (brother) | | 32.45% | | 24.38% | | 36.40% | | Tod L. Wadsworth (brother) | | 32.45% | | 24.38% | | 31.80% | | Nic L. Wadsworth (brother) | | — | | 24.38% | | — | | Ralph L. Wadsworth (father) | | 1.325% | | 1.24% | | — | | Peggy Wadsworth (mother) | | 1.325% | | 1.24% | | — |
| | | | | | | Name (Relationship) | | W&S LLC | | W&S II, LLC | | W&S III, LLC | Con L. Wadsworth | | 32.45% | | 24.38% | | 31.80% | Kip L. Wadsworth (brother) | | 32.45% | | 24.38% | | 36.40% | Tod L. Wadsworth (brother) | | 32.45% | | 24.38% | | 31.80% | Nic L. Wadsworth (brother) | | — | | 24.38% | | — | Ralph L. Wadsworth (father) | | 1.325% | | 1.24% | | — | Peggy Wadsworth (mother) | | 1.325% | | 1.24% | | — |
Each of these companies had a business relationship with Ralph L. Wadsworth Construction Company, LLC (RLW)(“RLW”), a subsidiary of the company,Company, in 2017. Wadsworth & Sons II (W&S II, LLC). RLW is the general contractor on four projects totaling $6.9 million, the largest being a $6.2 million project designated as Exchange Building "F" in Draper, Utah, which is owned by W&S II, LLC.
W&S II, LLC & Wadsworth Corporate Center Building A, LLC (WCC). RLW leases its primary office space from W&S II, LLC through WCC, an entity owned and managed by W&S II, LLC, at an annual rent of $461,289, and common area maintenance charges of $122,279. This lease expires in 2022.
Wadsworth Dannon Way, LLC (WDW) which is part of Wadsworth & Sons LLC and Wadsworth & Sons III, LLC (W&S III, LLC). In 2017, RLW leased:
| · | | Wadsworth & Sons II (“W&S II, LLC”). RLW is the general contractor on four projects totaling $6.9 million, thelargest being a $6.2 million project designated as Exchange Building “F” in Draper, Utah, which is owned by W&S II, LLC. |
| · | | W&S II, LLC & Wadsworth Corporate Center Building A, LLC (“WCC”). RLW leased its primary office spacefrom W&S II, LLC through WCC, an entity owned and managed by W&S II, LLC, at an annual rent of $475,331. This lease expires in 2022. |
| · | | Wadsworth Dannon Way, LLC (“WDW”)which is part of Wadsworth & Sons LLC and Wadsworth & Sons III,LLC (“W&S III, LLC”). In 2018, RLW leased: |
| o | a facility for RLW'sRLW’s equipment maintenance shop from WDW at an annual rent of $281,437 plus common area maintenance charges of $76,307; and$292,215. This lease expires in 2022. |
| | o | a facility to provide temporary living quarters for field employees from W&S III, LLC on a month-to-month basis for total 2017 rent of $22,500. |
As part of its due diligence review prior to the acquisition of an 80% interest in RLW in December 2009, the company reviewed the relationships and transactions between RLW, Mr. Wadsworth and Mr. Wadsworth's family members, and concluded that the prices being charged to RLW or by RLW, as the case may be, are competitive and no less favorable to RLW than could be obtained from unrelated third parties.
The transactions described above have been reviewed annually and approved by the audit committee. The audit committee reviews quarterly, approves and oversees any transaction between the Company and any related party and discusses with management the business rationale for the transaction or transactions and the appropriateness of any disclosure related thereto. Sterling Construction |2019 Proxy Statement |45 |
Questions and Answers about the Proxy Materials, Annual Meeting and Voting Why am I receiving these proxy materials? Our board of directors is soliciting your proxy to vote at our 20182019 annual meeting of stockholders because you owned shares of our common stock at the close of business on March 13, 2018,19, 2019, the record date for the annual meeting, and, therefore, are entitled to vote at the annual meeting. You do not need to attend the annual meeting in person to vote your shares of our common stock. This proxy statement, along with the 20172018 annual report, have been made available to stockholders on or about March 20, 2018.26, 2019. We have made these materials available to you on the internet and, in some cases, we have delivered printed proxy materials to you. This proxy statement summarizes the information that you need to know in order to cast your vote at the annual meeting or submittingsubmit your proxy and voting instructions prior to the annual meeting. Why did I receive a notice of internet availability of proxy materials instead of a full set of proxy materials? In accordance with the rules of the SEC, we are permitted to furnish proxy materials, including this proxy statement and our 20172018 annual report, to stockholders by providing access to these documents on the internet instead of mailing printed copies. Most stockholdersStockholders will not receive printed copies of the proxy materials unless requested. Instead, the notice of internet availability provides instructions on how to access and review the proxy materials on the internet. The notice also provides instructions on how to submit your proxy and voting instructions via the internet. If you would like to receive a printed or email copy of our proxy materials, please follow the instructions for requesting the materials in the notice. When and where will the annual meeting be held? The annual meeting will be held at 8:30 a.m., local time, on Wednesday, May 2, 2018,8, 2019, at our headquarters located at 1800 Hughes Landing Boulevard—Suite 250, The Woodlands, Texas 77380. You can obtain directions to the annual meeting by contacting our corporate secretary at (281)214-0800. What should I bring if I plan to attend the annual meeting in person? If you plan to attend the annual meeting in person, please bring proper identification and, if your shares of our common stock are held in “street name,” meaning a bank, broker, trustee or other nominee is the stockholder of record of your shares, please bring acceptable proof of ownership, which is either an account statement or a letter from your bank, broker, trustee or other nominee confirming that you beneficially owned shares of Sterling Construction Company, Inc. common stock on the record date. Who is soliciting my proxy? Our board of directors, on behalf of the company,Company, is soliciting your proxy to vote your shares of our common stock on all matters scheduled to come before the 20182019 annual meeting of stockholders, whether or not you attend in person. By completing, signing, dating and returning the proxy card or voting instruction form, or by submitting your proxy and voting instructions via the internet, you are authorizing the proxy holders to vote your shares of our common stock at the annual meeting as you have instructed (or in their best judgement as provided below). On what matters will I be voting? How does the board recommend that I cast my vote? At the annual meeting, you will be asked to (1) elect the seveneight director nominees; (2) approve, on an advisory basis, the compensation of our named executive officers; (3) ratify the appointment of our independent registered public accounting firm; (4) adopt the 2018 stock incentive plan;2019 Employee Stock Purchase Plan; and (5) consider any other matter that properly comes before the annual meeting. Our board of directors recommends that you vote: | | | | | | | Item | | Description | | Board Vote Recommendation | | Page | 1 | | Election of eight director nominees | | FOReach nominee | | 14 | 2 | | Advisory vote to approve the compensation of our | | FOR | | 37 |
|FOR46 | the election of each of the seven director nominees;Sterling Construction |2019 Proxy Statement
FOR the approval, on an advisory basis, of the compensation of our named executive officers;
FOR the ratification of the appointment of our independent registered public accounting firm; and
FOR the adoption of the 2018 stock incentive plan.
| | | | | | | | | | named executive officers | | | | | 3 | | Ratification of the appointment of Grant Thornton LLP As our independent registered public accounting firm for 2019 | | FOR | | 40 | 4 | | Adoption of the 2019 Employee Stock Purchase Plan | | FOR | | 41 |
We do not expect any matters to be presented for action at the annual meeting other than the matters described in this proxy statement. However, by signing, dating and returning a proxy card or submitting your proxy and voting instructions via the internet, you will give to the persons named as proxies discretionary voting authority with respect to any matter that may properly come before the annual meeting. The proxies will vote on any such matter in accordance with their best judgment. How many votes may I cast ?cast?You may cast one vote for every share of our common stock that you owned on March 13, 2018,19, 2019, the record date for the annual meeting. How many shares of common stock are eligible to be voted? As of March 13, 2018,19, 2019, we had 27,034,575 26,423,827 shares of common stock outstanding. Each share of common stock outstanding as of the record date for the annual meeting will entitle the holder thereof to one vote.How many shares of common stock must be present to hold the annual meeting? Under Delaware law and our bylaws, a majority of the shares our common stock issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, will constitute a quorum at the annual meeting. The inspector of election will determine whether a quorum is present at the annual meeting. Stockholders of record who are present at the annual meeting in person or by proxy will be counted as present at the annual meeting for purposes of determining whether a quorum exists, whether or not such holder of record abstains from voting on any or all of the proposals. If you are a beneficial owner (as defined below) of shares of our common stock, even if you do not instruct your bank, broker, trustee or other nominee how to vote your shares on any of the proposals, if your bank, broker, trustee or other nominee submits a proxy as the record holder with respect to your shares on a matter with respect to which discretionary voting is permitted, your shares will be counted as present at the annual meeting for purposes of determining whether a quorum exists. If your shares of our common stock are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, you are the stockholder of record of those shares and these proxy materials have been made available to you by us. You may submit your proxy and voting instructions via the internet or mail as further described below. Your proxy, whether submitted via the internet or mail, authorizes each of Milton L. Scott, the chairman of the board of directors, Ronald A. Ballschmiede, our chief financial officer, and Richard E. Chandler, Jr., our general counsel and secretary to act as your proxies at the annual meeting and at any adjournment of the meeting, each with the power to appoint his substitute, and to represent and vote your shares of our common stock as you directed, if applicable. Submit Your Proxy and Voting Instructions via the Internet at: http://www.astproxyportal/com/ast/04770
| · | | Submit Your Proxy and Voting Instructions via the Internet at: http://www.astproxyportal.com/ast/04770/ |
▪ | ∎ | | Use the internet to submit your proxy and voting instructions 24 hours a day, seven days a week until 11:59 p.m., Central Time, on May 1, 2018.7, 2019. |
| | ▪∎ | | Please have your proxy card available and follow the instructions on the proxy card. |
Submit Your Proxy and Voting Instructions by Mail
| · | | Submit Your Proxy and Voting Instructions by Mail |
▪ | ∎ | | Obtain a printed copy of the proxy card in the manner described in the notice of internet availability. |
| | ▪∎ | | Complete, date and sign your proxy card and return it in the postage-paid envelope provided. |
Sterling Construction |2019 Proxy Statement |47 |
If you submit your proxy and voting instructions via the internet, you do not need to mail a proxy card. The proxies will vote your shares of our common stock at the annual meeting as instructed by the latest dated proxy received from you, whether submitted via the internet or mail. You may also vote in person at the annual meeting.
For a discussion of the treatment of a properly signed and dated proxy card without voting instructions on any or all of the proposals, please see the question below titled “ What“What happens if I do not submit voting instructions for a proposal? What is discretionary voting? What is a brokernon-vote?”If your shares of our common stock are held in a stock brokerage account by a bank, broker, trustee or other nominee, you are considered the beneficial owner of shares held in street name and these proxy materials are being forwarded to you by your bank, broker, trustee or other nominee that is considered the stockholder of record of those shares. As the beneficial owner, you have the right to direct your bank, broker, trustee or other nominee on how to vote your shares of our common stock via the internet or telephone, if the bank, broker, trustee or other nominee offers these options or by completing, signing, dating and returning a voting instruction form provided. Your bank, broker, trustee or other nominee will send you instructions on how to submit your voting instructions for your shares of our common stock. What happens if I do not submit voting instructions for a proposal? What is discretionary voting? What is a brokernon-vote? If you are a stockholder of record and you properly complete, sign, date and return a proxy card or voting instruction form, your shares of our common stock will be voted as you specify. If you are a stockholder of record and you sign, date and return a proxy card but make no specifications on yourproxy card, your shares of our common stock will be voted in accordance with the recommendations of our board of directors, as provided above. If you are a beneficial owner and you do not provide voting instructions to your bank, broker, trustee or other nominee holding shares of our common stock for you, your shares of our common stock will not be voted with respect to any proposal for which the stockholder of record does not have discretionary authority to vote. Rules of the New York Stock Exchange (NYSE) determine whether proposals presented at stockholder meetings are “discretionary” or “non-discretionary.” If a proposal is determinedUnder applicable rules, if you do not provide voting instructions to be discretionary, your bank, broker, trustee or other nominee is permitted underin advance of the NYSE rulesmeeting, your bank, broker, trustee or other nominee will have discretionary authority to vote on “routine” proposals. When a proposal isnotroutine (e.g., the election of directors, related to executive compensation or any other significant matter), your bank,broker, trustee or other nominee willnot be able to vote on the proposal without receiving voting instructions from you. IfUnder applicable rules, the proposal relating to the ratification of the appointment of our independent registered public accounting firm is the onlyroutine proposal being presented at the meeting. Thus, if you are a proposal is determinedbeneficial owner and you do not provide voting instructions to be non-discretionary, the NYSE rules prohibit your bank, broker, trustee or other nominee holding shares for you, your shares may be voted by the record holder only with respect to vote on the proposal without receivingratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2019.As noted above, the proposals relating to the election of directors, the compensation of our named executive officers, and the adoption of the 2019 Employee Stock Purchase Plan are notroutine proposals. Accordingly, if you are a beneficial owner and you do not provide voting instructions from you.to your bank, broker, trustee or other nominee holding shares for you, your shares willnot be voted with respect to these proposals. Without your voting instructions, a brokernon-vote will occur with respect to your shares on eachnon-discretionary proposal for which you have not provided voting instructions. A “brokernon-vote” occurs when a bank, broker, trustee or other nominee holding shares for a beneficial owner returns a valid proxy, but does not vote on a particular proposal because it does not have discretionary authority to vote on the matter and has not received voting instructions from the stockholder for whom it is holding shares. Under the NYSE rules, the proposal relating to the ratification of the appointment of our independent registered public accounting firm is the only discretionary proposal being presented at the meeting. Thus, if you are a beneficial owner and you do not provide voting instructions to your bank, broker, trustee or other nominee holding shares for you, your shares may be voted by the record holder with respect to the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2018.
As noted above, the proposals relating to the election of directors, the compensation of our named executive officers, and the adoption of the 2018 stock incentive plan are non-discretionary proposals. Accordingly, if you are a beneficial owner and you do not provide voting instructions to your bank, broker, trustee or other nominee holding shares for you, your shares will not be voted with respect to these proposals. Without your voting instructions, a broker non-vote will occur with respect to your shares on each non-discretionary proposal for which you have not provided voting instructions.
What vote is required, and how will my votes be counted, to elect the director nominees and to approve each of the other proposals discussed in this proxy statement? | | | | | | | | | | |
Proposal | |
| | Vote Required
to Adopt the Proposal
Board Voting Recommendation | |
Effect of Abstentions
Vote Required for Approval | |
Broker Non-Votes
| No. 1: Election of the seven director nomineesAbstentions | | Effect of Broker Non-Votes | | | | | | | Election of eight director nominees (Item 1, page 14) | | For, against or abstain for each nominee | | FOReach nominee | | Majority of the votes cast* | | No effect | | No effect | No. 2: Approval, on an advisory basis, of | | | | | | | Advisory vote to approve the compensation of our named executive officers | | For, against | | FOR | | Affirmative vote of a majority of the | | Treated as | | No effect |
|48 | Sterling Construction |2019 Proxy Statement
| | | | | | | | | | | | (Item 2, page 37) | | or abstain | | | | shares of common stock present in person or by proxy and entitled to vote on the proposal | | vote against | | | | | | | | | Ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2019 (Item 3, page 40) | | For, against or abstain | | FOR | | Affirmative vote of a majority of the shares of common stock present in person or by proxy and entitled to vote on the proposal | | Treated as votesvote against | | No effectN/A | No. 3: Ratification
| | | | | | Adoption of the appointment of Grant Thornton LLP as our independent registered public accounting firm
2019 Employee Stock Purchase Plan(Item 4, page 41) | | For, against or abstain | | FOR | | Affirmative vote of a majority of the shares of common stock present in person or by proxy and entitled to vote on the proposal | | Treated as votes against | | N/A | No. 4: Adoption of the 2018 stock incentive plan | | For, against or abstain | | Affirmative vote of a majority of the shares of common stock present in person or by proxy and entitled to vote on the proposal | | Treated as votes against | | No effect |
* In uncontested elections, our directors are elected by the affirmative vote of the holders of a majority of the votes cast. If a nominee for director does not receive a majority of votes cast, he or she shall promptly tender his or her resignation to the board. In contested elections (where the number of nominees exceeds the number of directors to be elected), our directors are elected by a plurality of shares of our common stock voted.
Can I revoke or change my voting instructions after I deliver my proxy? Yes. Your proxy can be revoked or changed at any time before it is used to vote your shares of our common stock if you: (1) provide notice in writing to our corporate secretary before the annual meeting; (2) timely provide to us another proxy with a later date; or (3) are present at the annual meeting and either vote in person or notify the corporate secretary in writing at the annual meeting of your wish to revoke your proxy. Your attendance alone at the annual meeting will not be enough to revoke your proxy. How will we solicit proxies and who pays for soliciting proxies? We pay all expenses incurred in connection with this solicitation of proxies to vote at the annual meeting. We will also request banks, brokers, trustees and other nominees holding shares of our common stock beneficially owned by others to send this proxy statement and the 20172018 annual report to, and obtain voting instructions from, the beneficial owners and will reimburse such stockholders of record for their reasonable expenses in so doing. Solicitation of proxies by notice of internet availability or mail, as applicable, may be supplemented by telephone, email, facsimile transmission, other electronic means, and personal solicitation by our directors, officers and employees. No additional compensation will be paid to directors, officers or employees for such solicitation efforts.
Could other matters be considered and voted upon at the annual meeting? Our board does not expect to bring any other matter before the annual meeting, and it is not aware of any other matter that may be considered at the annual meeting. However, if any other matter does properly come before the annual meeting, each of the proxy holders will vote any shares of our common stock, for which he holds a proxy to vote at the annual meeting, in his discretion. What happens if the annual meeting is postponed or adjourned? Unless a new record date is fixed, your proxy will still be valid and may be used to vote shares of our common stock at the postponed or adjourned annual meeting. You will still be able to change or revoke your proxy until it is used to vote your shares. Sterling Construction |2019 Proxy Statement |49 |
20192020 Stockholder Proposals
If you want us to consider including a proposal in next year’s proxy statement, pursuant to Rule14a-8 of the Securities Exchange Act of 1934, you must deliver it in writing to: c/c⁄o Corporate Secretary, Sterling Construction Company, Inc., 1800 Hughes Landing Blvd. — Suite 250, The Woodlands, Texas 77380 by November 20, 2018. 27, 2019.If you want to present a proposal at the next annual meeting but do not wish to have it included in our proxy statement, you must submit it in writing to our corporate secretary, at the above address, by February 1, 2019,8, 2020, in accordance with the specific procedural requirements in our bylaws. If the date of next year’s annual meeting is moved to a date more than 30 days before or 90 days after the anniversary of this year’s annual meeting, the proposal must be received no later than 90 days prior to the date of the 20192020 annual meeting or 10 days following the public announcement of the date of the 20192020 annual meeting. If you would like a copy of these procedures, please contact our corporate secretary as provided above. Failure to comply with the procedures and deadlines in our bylaws may preclude the presentation of your proposal at our 20192020 annual meeting. If a stockholder does not provide such notice timely, proxies solicited on behalf of our board of directors for the next annual meeting will confer discretionary authority to vote with respect to any such matter. |50 | Sterling Construction |2019 Proxy Statement
Annex A
STERLING CONSTRUCTION COMPANY, INC.
2018 STOCK INCENTIVE PLAN
– 2019 Employee Stock Purchase PlanSterling Construction Company, Inc. 2019 Employee Stock Purchase Plan 1.Purpose. The purpose of the 2018Sterling Construction Company, Inc. 2019 Employee Stock IncentivePurchase Plan (the “Plan”) is intended to increase stockholder value and advance the interestsprovide employees of the Company and its Participating Subsidiaries by furnishing a variety of equity incentives designedwith an opportunity to (a) attract, retain, and motivate key employees, officers, and directorsbecome shareholders of the Company through the purchase of shares of Common Stock. The Company intends that the Plan qualify as an “employee stock purchase plan” under Section 423 of the Code, and consultantsthe Plan shall be interpreted in a manner that is consistent with that intent. 2. Definitions. For purposes of the Plan, the following terms shall be defined as set forth below: “Board” means the Board of Directors of the Company, as constituted from time to time. “Change in Control” has the same meaning set forth in the Company’s 2018 Stock Incentive Plan, as may be hereafter amended from time to time. “Code” means the U.S. Internal Revenue Code of 1986, as amended from time to time, and advisersthe rules and regulations promulgated thereunder. “Committee” means the Compensation and Talent Development Committee of the Board. “Common Stock” means shares of the common stock, par value $.01 per share, of the Company. “Company” means Sterling Construction Company, Inc., a corporation organized under the laws of the State of Delaware, or any successor corporation. “Compensation” means all of each Eligible Employee’s regular or base salary or wages (excluding overtime and commissions) paid to such Eligible Employee by the Company or a Subsidiary. Compensation shall not include annual bonus payments, incentive payments, stock option payments or other income in connection with equity-based awards, severance pay, payments under short-term and long-term disability plans, allowances or reimbursements such as car allowances, per diem payments, relocation expenses or any other forms of compensation other than base salary or wages. Compensation shall include only that compensation which is actually paid to the Eligible Employee during the calendar year. Notwithstanding the foregoing, Compensation shall include any amount which is contributed by the Company pursuant to a salary reduction agreement and which is not includable in the gross income of the Eligible Employee under Code Sections 125, 132(f) (4), 402(e)(3), 402(h), 403(b) or 451. The Committee will have discretion to determine the application of this definition under the Plan. “Designated Broker” means the financial services firm or other agent designated by the Company to maintain ESPP Share Accounts on behalf of Participants who have purchased shares of Common Stock under the Plan. “Effective Date” means the date as of which this Plan is adopted by the Board, subject to the Plan obtaining shareholder approval in accordance with Section 20.10 hereof. “Employee” means any person who renders services to the Company and (b) strengthen the mutuality of interests amongor a Subsidiary as an employee pursuant to an employment relationship with such persons and the Company’s stockholders. 2.Definitions. As used in the Plan, capitalized terms not otherwise defined herein shall have the meanings set forth in Appendix A.
3.Administration.
3.1Committee. The Plan shall generally be administered by the Committee. Subject to the termsemployer. For purposes of the Plan, the employment relationship in the United States shall be treated as continuing intact while the individual is on military leave, sick leave or other leave of absence approved by the Company or a Participating Subsidiary that meets the requirements of Treasury RegulationSection 1.421-1(h)(2). Where the period of leave exceeds three (3) months, or such other period of time specified in Treasury RegulationSection 1.421-1(h)(2),and applicable law, and in additionthe individual’s right to other express powers and authorizations conferredre-employment is not guaranteed by statute or contract, the employment relationship shall be deemed to have terminated on the Committeefirst day immediately following such three-month period, or such other period specified in Treasury RegulationSection 1.421-1(h)(2).“Eligible Employee” means, unless otherwise determined by the Plan,Committee in a manner that is consistent with Section 423 of the Code, an Employee of the Company or a Participating Subsidiary, excluding any Employee (i) who is Sterling Construction |2019 Proxy Statement |A-1 |
Annex A employed for less than six (6) months (or such other period of time as the Committee shall have plenary authoritymay determine in is discretion, which in no event may exceed two (2) years) prior to administer the Plan, including full power and authority to: | | (a) | designate Participants; |
| | (b) | determine the type or types of Awards to be granted to an Eligible Individual; |
| | (c) | determine the number of Shares to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; |
| | (d) | determine the terms and conditions of any Award; |
| | (e) | cancel, modify, or waive rights with respect to, or to alter, discontinue, suspend, or terminate Awards; |
| | (f) | determine whether, to what extent, and under what circumstances an Award may be settled or exercised in cash, whole Shares, other whole securities, other Awards, other property, or other cash amounts payable by the Company upon the exercise of that or other Awards, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended;
|
| | (g) | determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable by the Company with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee; |
| | (h) | interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; |
| | (i) | establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and |
| | (j) | make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. |
3.2Effect of Committee's Determinations. Unless otherwise expressly providedenrollment in the Plan, all designations, determinations, interpretations, and other decisions underESPP, (ii) whose customary employment is less than twenty (20) hours per week, or with respect to(iii) whose customary employment is for not more than five (5) months per calendar year. Notwithstanding the foregoing, the Committee may exclude from participation in the Plan or any AwardOffering Employees who are “highly compensated employees” of the Company or a Participating Subsidiary (within the meaning of Section 414(q) of the Code) or asub-set of such highly compensated employees.“Enrollment Form” means an agreement pursuant to which an Eligible Employee may elect to enroll in the Plan, to authorize a new level of payroll deductions, or to stop payroll deductions and withdraw from an Offering Period. “ESPP Share Account” means an account into which Common Stock purchased with accumulated payroll deductions at the end of an Offering Period are held on behalf of a Participant. “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder. “Fair Market Value” means, as of any date, including for purposes of this Plan any Purchase Date, unless otherwise required by applicable law, the closing price of Common Stock as reported on NASDAQ. Notwithstanding the foregoing, if at the Purchase Date or any other applicable date, the Common Stock is not then listed on a national securities exchange, “Fair Market Value” shall be withinmean, (i) if the shares of Common Stock are then traded in anover-the-counter market, the average of the bid and ask price for shares of Common Stock in suchover-the-counter market on such date, and (ii) if the shares of Common Stock are not then listed on a national securities exchange or traded in anover-the-counter market, or the value of such shares is not otherwise determinable, such value as determined by the Committee in its sole discretiondiscretion. “Offering Date” means the first Trading Day of each Offering Period. “Offering or Offering Period” means a period of three months beginning each January 1st, April 1st, July 1st and October 1st of each year following commencement of the Plan; provided, that, pursuant to Section 5, the Committee may be made at any timechange the duration of future Offering Periods (subject to a maximum Offering Period of twenty-seven (27) months) and/or the start and shall be final, conclusive, and binding upon all Persons, including the Company, any Subsidiary, any Participant, any holder or beneficiaryend dates of any Award, any stockholderfuture Offering Periods. “Officer” means an “officer” of the Company and anyas such term is defined in Rule16a-1(f) under the Exchange Act. “Participant” means an Eligible Individual.
3.3Delegation. SubjectEmployee who is actively participating in the Plan.“Participating Subsidiaries” means the Subsidiaries that have been designated as eligible to the terms ofparticipate in the Plan, and applicable law,such other Subsidiaries that may be designated by the Committee may delegatefrom time to one or more officers or directorstime in its sole discretion. “Plan” means the Sterling Construction Company, Inc. 2019 Employee Stock Purchase Plan, as set forth herein, and as amended from time to time. “Purchase Date” means the last Trading Day of each Offering Period. “Purchase Price” means, unless otherwise provided by the Committee, an amount equal to eighty-five percent (85%) of the Company the authority, subject to such terms and limitations as the Committee shall determine, to grant and set the terms of, to cancel, modify, or waive rights with respect to, or to alter, discontinue, suspend, or terminate Awards held by Eligible Individuals who are not officers or directors of the Company for purposes of Section 16 of the Exchange Act, or any successor section thereto; provided, however, that the per share exercise price of any Option or SAR granted under this delegated authority by such officer or director shall be equal to or greater than the fair market valueFair Market Value of a share of Common Stock on the laterPurchase Date; provided, that, the Purchase Price per share of Common Stock will in no event be less than 85% of the dateFair Market Value of granta share of Common Stock on the Purchase Date.“Securities Act” means the U.S. Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder. “Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the dateCode. |A-2 | Sterling Construction|2019 Proxy Statement
Annex A “Trading Day” means any day on which the Participant's employment withstock exchange upon which the Common Stock is listed is open for trading or, serviceif the Common Stock is not listed on an established stock exchange or national market system, a business day. 3.1 Authority. The Plan shall be administered by the Committee, which shall have the authority to construe and interpret the Plan, prescribe, amend and rescind rules relating to the Plan’s administration and take any other actions necessary or desirable for the administration of the Plan including, without limitation, (a) determining when and how rights to purchase Common Stock will be granted and the terms of each Offering (which need not be identical); (b) designating from time to time which Subsidiaries will be Participating Subsidiaries, which designation may be made without the approval of the Company’s stockholders, and adoptingsub-plans applicable to particular Participating Subsidiaries or locations, whichsub-plans may be designed to be outside the scope of Section 423 of the Code; (c) changing the duration, frequency, and start and end dates of Offering Periods, and (d) making all determinations it deems advisable for the administration of the Plan or anysub-plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency or ambiguity in the Plan. The decisions of the Committee shall be final and binding on all persons. All expenses of administering the Plan shall be borne by the Company. 3.2 Delegation of Authority. To the extent permitted by applicable law, the Committee may from time to time delegate some or all of its authority under the Plan to a subcommittee or subcommittees of the Committee, one or more of the Company’s officers or management team, or other persons or groups of persons as it deems necessary, appropriate or advisable under conditions or limitations that it may set at or after the time of the delegation. For purposes of this Plan, reference to the “Committee” will be deemed to refer to any subcommittee, subcommittees, or other persons or groups of persons to whom the Committee delegates authority pursuant to this Section 3.2. 3.3 Indemnification. The Company commences.
3.4 Indemnification. In additionagrees to such other rights of indemnification as they may have asindemnify and to defend to the fullest extent permitted by law the members of the Board, or officersincluding members of the Company, and to the extent allowed by Applicable Laws, the Committee, and any officer(s) or employee(s) to whom the Committee has delegated its delegees shall be indemnifiedauthority under the Plan pursuant to Section 3.2 (including any such individual who formerly served as such a delegee) against all liabilities, damages, costs and expenses (including attorneys’ fees and amounts paid in settlement of any claims approved by the Company against the reasonable expenses, including attorney's fees, actually incurred in connection withCompany) occasioned by any action, suitact or proceeding or in connection with any appeal therein,omission to which they may be party by reason of any action taken or failure to act under or in connection with the Plan, if such act or omission is in good faith.4.1 General. Any individual who is an Eligible Employee as of the first day of an Offering Period shall be eligible to participate in such Offering Period, subject to the requirements of Section 423 of the Code. 4.2 Limits on Participation. Notwithstanding any Awardprovision of the Plan to the contrary, no Eligible Employee shall be granted an option under the Plan and against all amounts paid byif: (a) immediately after the Committee or its delegees in settlement thereof (provided, however, thatgrant of the settlement has been approved byoption, such Eligible Employee (or any other person whose stock would be attributed to such Eligible Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company which approval shall not be unreasonably withheld) and/or paid byhold outstanding options to purchase stock possessing five percent (5%) or more of the Committeetotal combined voting power or its delegee in satisfactionvalue of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee or delegee did not act in good faith and in a manner which such person reasonably believed to be in the best interestsall classes of stock of the Company or any Subsidiary, or (b) such option would permit his or her rights to purchase stock under all employee stock purchase plans (described in Section 423 of the Code) of the Company and its Subsidiaries to accrue at a rate that exceeds $25,000 (or such other amount as the Committee may determine in its discretion, which amount may in no event exceed $25,000) of the Fair Market Value of such stock (determined at the time the option is granted) for each calendar year in which such option is outstanding at any time. 5. Offering Periods. The Plan shall be implemented by a series of Offering Periods. The first Offering Period shall commence on a date to be determined by the Committee, with subsequent Offering Periods commencing on or about the beginning of each fiscal quarter thereafter. |A-3 | Sterling Construction |2019 Proxy Statement
Annex A 6.1 Enrollment; Payroll Deductions. An Eligible Employee may elect to participate in the casePlan by properly completing an Enrollment Form and submitting it to the Company, in accordance with the enrollment procedures and deadlines established by the Committee. Such Enrollment Form may be an electronic document completed by the Eligible Employee or generated by the Eligible Employee via participation in an interactive voice response system. Participation in the Plan is entirely voluntary. By submitting an Enrollment Form, the Eligible Employee authorizes payroll deductions from his or her pay check in an amount equal to at least two percent (2%), but not more than fifteen percent (15%) (only in whole percentages) of his or her Compensation on each pay day occurring during an Offering Period. A Participant may not make any additional contributions to his or her Plan notional account. Payroll deductions shall commence on the first payroll date following the Offering Date and end on the last payroll date on or before the Purchase Date. The Company shall maintain records of all payroll deductions but shall have no obligation to pay interest on payroll deductions or to hold such amounts in a criminal proceeding, had no reasontrust or in any segregated account. 6.2 Election Changes. During an Offering Period, a Participant may elect to believe thatdecrease or increase his or her rate of payroll deductions applicable to such Offering Period only once. To make such a change, the conduct complainedParticipant must submit a new Enrollment Form authorizing the new rate of was unlawful; provided, however, that within 60payroll deductions, which Enrollment Form must be submitted at least thirty (30) days prior to the Purchase Date. Any such election to increase or decrease payroll deductions will be effective as soon as reasonably practicable after the institutionCompany’s receipt of the new Enrollment Form. A Participant may decrease or increase his or her rate of payroll deductions for any such action, suit or proceeding, such Committee or delegee shall, in writing, offerfuture Offering Period by submitting a new Enrollment Form authorizing the Companynew rate of payroll deductions during the opportunity at its own expenseenrollment period established pursuant to handle and defend such action, suit or proceeding.Section 6.1 for that Offering Period. 6.3 AutomaticRe-enrollment
4. Eligibility. The Committee,deduction rate selected in the Enrollment Form shall remain in effect for subsequent Offering Periods unless the Participant (a) submits a new Enrollment Form authorizing a new level of payroll deductions in accordance with Section 3.1, may grant an Award under6.2, (b) withdraws from the Plan in accordance with Section 10, or (c) terminates employment or otherwise ceases to anybe an Eligible Individual.
5.Shares SubjectEmployee in accordance with Section 11.6.4 Automatic Decrease. Notwithstanding the foregoing, to the Plan .
5.1Shares Available for Grant. Subjectextent necessary to adjustment as provided incomply with Section 5.4, the maximum number of Shares reserved for issuance under the Plan shall be 1,800,000. Upon approval of this Plan by the Company's stockholders, the Company will cease making new Awards under any Prior Plan.
5.2Share Counting.
(a) To the extent any Shares covered by an Option or SAR or other Award granted under the Plan are not delivered to a Participant or permitted transferee because the Award is forfeited or canceled, or Shares are not delivered because an Award is paid or settled in cash, such Shares shall not be deemed to have been delivered for purposes of determining the maximum number of Shares available for delivery under this Plan and such shares may again be
issued under the Plan. Awards that by their terms may only be settled in cash shall have no effect on the Plan limit in Section 5.1.
(b) In the event that Shares issued as an Award under the Plan are forfeited or reacquired by the Company pursuant to rights reserved upon issuance thereof, such forfeited or reacquired Shares may again be issued under the Plan.
(c) The following Shares may not again be made available for issuance as Awards under the Plan: (i) Shares delivered or withheld in payment of the exercise of an Option or SAR, (ii) Shares delivered or withheld from payment of an Award to satisfy tax obligations with respect to the Award, and (iii) Shares repurchased on the open market with the proceeds of the exercise price of an Option.
(d) With respect to SARs, if the SAR is payable in Shares, all Shares to which the SARs relate are counted against the Plan limits, rather than the net number of Shares delivered upon exercise of the SAR.
5.3Limitations on Awards. Subject to adjustments as provided in Section 5.4, the following additional limitations are imposed under the Plan:
(a) The maximum number of Shares that may be issued upon exercise of Options intended to qualify as incentive stock options under Section 422423(b)(8) of the Code and Section 4 above, a Participant’s payroll deductions will be decreased to zero percent (0%). Payroll deductions will recommence at the rate provided in such Participant’s Enrollment Form when permitted under Section 423(b)(8) of the Code and Section 4 unless the Participant sooner withdraws from the Plan in accordance with Section 10 or terminates employment or otherwise ceases to be an Eligible Employee in accordance with Section 11.7. Grant of Option. On each Offering Date, each Participant in the applicable Offering Period shall be 1,800,000.
(b) Except with respectgranted an option to Outside Directors,purchase, on the maximumPurchase Date, a number of shares of Common Stock covereddetermined by dividing the Participant’s accumulated payroll deductions by the applicable Purchase Price, subject to the terms and conditions of this Plan. Notwithstanding the above, in no event shall any Participant purchase more than 3,000 shares of Common Stock during an AwardOffering Period.8. Exercise of Option/Purchase of Shares. A Participant’s option to purchase shares of Common Stock will be exercised automatically on the Purchase Date of each Offering Period, subject to the terms and conditions of this Plan. The Participant’s accumulated payroll deductions will be used to purchase the maximum number of whole shares that can be purchased with the amounts in the Participant’s notional account. No fractional shares may be grantedpurchased under the Plan. Any cash in lieu of fractional shares remaining after the purchase of whole shares upon exercise of the option will be credited to a Participant’s notional account and carried forward and applied toward the purchase of whole shares for the next following Offering Period, subject to earlier withdrawal by the Participant in accordance with Section 10 or termination of employment or cessation as an Eligible Employee in accordance with Section 11. Shares issued pursuant to the Plan may be evidenced in such manner as the Company may determine and may be issued in certificated form or issued pursuant to book-entry procedures. 9. Transfer of Shares. The Company will arrange for the delivery to each Participant of the shares of Common Stock purchased upon exercise of his or her option as soon as reasonably practicable. The shares of Common Stock shall be deposited directly into an ESPP Share Account established in the name of the Participant with a Designated Broker and the Committee may require that the shares be retained with such Designated Broker for a specified period of time. Participants will not have any voting, dividend or other rights of a shareholder with respect to the |A-4 | Sterling Construction|2019 Proxy Statement
Annex A shares of Common Stock subject to any oneoption granted hereunder until such shares have been delivered pursuant to this Section 9. 10.1 Withdrawal Procedure. A Participant may withdraw from an Offering by submitting a revised Enrollment Form indicating his or her election to withdraw more than thirty (30) days prior to the Purchase Date. All (but not less than all) of the accumulated payroll deductions held on behalf of a Participant in any single fiscal yearhis or her notional account (that have not been used to purchase shares of Common Stock) shall be 500,000 Shares, paid to the Participant as soon as administratively practicable following receipt of the Participant’s Enrollment Form indicating his or her election to withdraw, and the Participant’s option shall be automatically terminated. If a Participant submits a revised Enrollment Form indicating his or her election to withdraw within the thirty (30) day period prior to the Purchase Date, the accumulated payroll deductions shall be used to purchase shares on such Purchase Date, the Participant’s participation in the Plan shall thereafter be automatically terminated, and any payroll deductions remaining in the Participant’s notional account shall be returned to the Participant as soon as administratively practicable following such Purchase Date. If a Participant withdraws from an Offering Period, no payroll deductions will be made during any succeeding Offering Period, unless the Participantre-enrollsprovided, however, in accordance with Section 6.1 of the Plan. 10.2 Effect on Succeeding Offering Periods. A Participant’s election to withdraw from an Offering Period will not have any effect upon his or her eligibility to participate in succeeding Offering Periods that commence following the completion of the Offering Period from which the Participant withdraws subject to eligibility and compliance with Section 6.1 and other requirements set forth in this Plan. 11. Termination of Employment; Change in Employment Status. Upon termination of a Participant’s employment for any reason, or a change in the Participant’s employment status following which the Participant is no longer an Eligible Employee, which in either case occurs more than thirty (30) days prior to the Purchase Date, the Participant will be deemed to have withdrawn from the Plan, the Participant’s option shall be automatically terminated, and the payroll deductions in the Participant’s notional account (that have not been used to purchase shares of Common Stock) shall be returned to the Participant, or in the case of the Participant’s death, to any person(s) entitled to such limit is multiplied by two (2) for Awards grantedamounts under Section 17, as soon as administratively practicable following such termination or change in status . If the Participant’s termination of employment or change in status occurs within the thirty (30) days prior to a Purchase Date, the accumulated payroll deductions shall be used to purchase shares on such Purchase Date, the Participant’s participation in the Plan shall thereafter be automatically terminated, and any payroll deductions remaining in the Participant’s notional account shall be returned to the Participant, or in the case of the Participant’s death, to any person(s) entitled to such amounts under Section 17, as soon as administratively practicable following such Purchase Date. 12. Interest. No interest shall accrue on or be payable with respect to the payroll deductions of a Participant in the year employment commences.
(c) With respect to Outside Directors,Plan. | 13. | Shares Reserved for Plan. |
13.1 Number of Shares. A total of 800,000 shares of Common Stock have been reserved as authorized for the aggregate grant date fair value of Awardsoptions under the Plan. The shares of Common Stock may be newly issued shares, treasury shares or shares acquired on the open market. 13.2 Over-subscribed Offerings. The number of shares of Common Stock that a Participant may purchase in an Offering under the Plan that may be reduced if the Offering is over-subscribed. No option granted under the Plan shall permit a Participant to any one Outside Directorpurchase shares of Common Stock which, if added together with the total number of shares of Common Stock purchased by all other Participants in any single fiscal year shall notsuch Offering would exceed $300,000.
(d) Participants who are granted Awards will be required to continue to provide services to the Company (or an Affiliate) for not less than one-year followingtotal number of shares of Common Stock remaining available under the datePlan. If the Committee determines that, on a particular Purchase Date, the number of grant in order for any such Awards to fully or partially vest or be exercisable, provided that no installment may vest or become exercisable earlier than one-year following the dateshares of grant (subject to the Committee's discretion to accelerate the exercisability of such Awards as provided herein). Notwithstanding the foregoing, AwardsCommon Stock with respect to an aggregatewhich options are to be exercised exceeds the number of up to 90,000shares of the Shares reserved for issuanceCommon Stock then available under the Plan, pursuantthe Company shall make an allocation of the shares of Common Stock remaining available for purchase in as uniform a manner as practicable and as the Committee determines to be equitable.14. Transferability. No payroll deductions credited to a Participant, nor any rights with respect to the exercise of an option or any rights to receive Common Stock hereunder may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution, or as provided in Section 5.1 may provide for vesting, partially17 hereof) by the Participant. Any attempt to assign, transfer, pledge or in full, in less than one-year.
(e) Any Shares delivered pursuant to an Award may consistotherwise dispose of authorized and unissued Sharessuch rights or amounts shall be without effect.|A-5 | Sterling Construction |2019 Proxy Statement
Annex A 15. Application of treasury Shares, including SharesFunds. All payroll deductions received or held by the Company or a Subsidiary and Shares acquired inunder the open market or otherwise obtainedPlan may be used by the Company or a Subsidiary. The issuance of Shares may be effected on a non-certificated basis,for any corporate purpose to the extent not prohibitedpermitted by applicable law, orand the applicable rulesCompany shall not be required to segregate such payroll deductions. 16. Statements. Participants will be provided with statements at least annually and shall have electronic access to account information, including the Participant’s payroll deduction amounts under the Plan, the Purchase Price of any stock exchange.
(f) Subjectshares of Common Stock purchased with accumulated funds, the number of shares of Common Stock purchased, and any payroll deduction amounts remaining in the Participant’s notional account.17. Designation of Beneficiary. A Participant may file, on a form supplied by the Designated Broker, a written designation of beneficiary who, in the event of such Participant’s death, is to receive, as applicable (i) any shares of Common Stock and cash in respect of any fractional shares of Common Stock, if any, from the Participant’s ESPP Share Account under the Plan and (ii) in the event of the Participant’s death more than thirty (30) days prior to the termsPurchase Date of the Plan, including the limitations contained in this Section 5.3, the Committee may use available Shares as the form of payment for compensation, grants, or rights earned or due underan Offering Period, any other compensation plans or arrangements of the Company or a Subsidiary, including, but not limitedcash withheld through payroll deductions and credited to the Company's annual incentive plan and the plansParticipant’s notional account. 18. Adjustments Upon Changes in Capitalization; Dissolution or arrangementsLiquidation; Change of the Company or a Subsidiary assumed in business combinations.
5.4Control.18.1 Adjustments . In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, Subsidiary securities, other securities,Common Stock, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,split-up,spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase SharesCommon Stock or other securities of the Company, or other similar corporate transaction or event affectschange in the Shares such that an adjustment is determined byCompany’s structure affecting the Committee to be appropriateCommon Stock occurs, then in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall,will, in such manner as it may deemdeems equitable, adjust any or all of (a) the number and type of Shares (or other securities or property) with respect to which Awards may be granted, (b) the number and type of Shares (or other securities or property) subject to outstanding Awards, and (c) the grant or exercise price with respect to any Award and, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award and, if deemed appropriate, adjust outstanding Awards to provide the rights contemplated by Section 11.2 hereof; provided, in each case, that with respect to Awards of Incentive Stock Options no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b)(1) of the Code or any successor provision thereto; and provided further that the number of Shares subject to any Award denominated in Shares shall alwaysshares and class of Common Stock that may be a whole number and any fractional Share resulting from the adjustment will be deleted.
6.Stock Options. An Option is a right to purchase Shares from the Company. Options granteddelivered under the Plan, may be Incentive Stock Options or Nonqualified Stock Options. Any Option that is designated as a Nonqualified Stock Option shall not be treated as an Incentive Stock Option. Each Option granted by the Committee under this Plan shall be subject to the following terms and conditions.
6.1ExercisePurchase Price. The exercise price per Share shall be determined by the Committee, subject to adjustment under Section 5.4; provided that in no event shall the exercise price be less than the fair market value of a Share on the date of grant, except in the case of an Option granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines in accordance with the requirements of Section 409A.
6.2Number. The number of Shares subject to the Option shall be determined by the Committee, subject to Section 5.3 and subject to adjustment as provided in Section 5.4.
6.3Duration and Time for Exercise. The term of each Option shall be determined by the Committee, but shall not exceed a maximum term of ten years. Each Option shall become exercisable at such time or times during its term as shall be determined by the Committee, subject to Section 5.3(d). Notwithstanding the foregoing, the Committee may at any time in its discretion accelerate the exercisability of any Option.
6.4Repurchase. Upon approval of the Committee, the Company may repurchase a previously granted Option from a Participant by mutual agreement before such Option has been exercised by payment to the Participant of the amount per Share by which: (i) the fair market value of the Common Stock subject to the Option on the business day immediately preceding the date of purchase exceeds (ii) the exercise price provided, however, that no such repurchase shall be permitted if prohibited by Section 6.6.
6.5Manner of Exercise. An Option may be exercised, in whole or in part, by giving notice of exercise to the Company (in such form and manner as approved by the Company, which may be electronic), specifying the number of Shares to be purchased, together with payment in full of the exercise price for the number of Shares for which the Option is exercised and all applicable taxes. The Option price shall be payable in United States dollars and may be paid (a) in cash; (b) by check; (c) if approved by the Committee by delivery or attestation of ownership of Shares, which Shares shall be valued for this purpose at the fair market value on the business day that such Option is exercised; (d) by delivery of irrevocable written instructions to a broker approved by the Company (with a copy to the Company) to
immediately sell a portion of the Shares, issuable under the Option and to deliver promptly to the Company the amount of sale proceeds to pay the exercise price; (e) if approved by the Committee, through a net exercise procedure whereby the Participant surrenders the Option in exchange for that number of Shares with an aggregate fair market value equal to the difference between the aggregate exercise price of the Options being surrenderedshare and the aggregate fair market value of the Shares subject to the Option, or (f) in such other manner as may be authorized from time to time by the Committee.
6.6Repricing. Except for adjustments pursuant to Section 5.4 or actions permitted to be taken by the Committee under Section 11.4 in the event of a Change of Control, unless approved by the stockholders of the Company, (a) the exercise or base price for any outstanding Option or SAR granted under this Plan may not be decreased after the date of grant and (b) an outstanding Option or SAR that has been granted under this Plan may not, as of any date that such Option or SAR has a per share exercise or base price that is greater than the then current fair market value of a Share, be surrendered to the Company as consideration for the grant of a new Option or SAR with a lower exercise or base price, shares of Restricted Stock, Restricted Stock Units, an Other Stock-Based Award, a cash payment or Common Stock.
6.7No Dividend Equivalent Rights. Participants holding Options shall not be entitled to any dividend equivalent rights for any period of time prior to exercise of the Option.
6.8Incentive Stock Options. Notwithstanding anything in the Plan to the contrary, Options intending to qualify as Incentive Stock Options must comply with the requirements of Section 422.
7.Stock Appreciation Rights. A Stock Appreciation Right, or SAR, is a right to receive, without payment to the Company, a number of Shares, cash or any combination thereof, the number or amount of which is determined pursuant to the formula set forth in Section 7.5. Each SAR granted by the Committee under the Plan shall be subject to the terms and conditions provided herein.
7.1Number. Each SAR granted to any Participant shall relate to such number of shares of Common Stock as shall becovered by each outstanding option under the Plan, and the numerical limits of Section 7 and Section 13.18.2 Dissolution or Liquidation. Unless otherwise determined by the Committee, subjectin the event of a proposed dissolution or liquidation of the Company, any Offering Period then in progress will be shortened by setting a new Purchase Date on which the Offering Period will end. The new Purchase Date will occur before the date of the dissolution or liquidation. The Committee shall notify each Participant in writing, prior to adjustmentthe new Purchase Date, that the Purchase Date for the Participant’s option has been changed to the new Purchase Date and that the Participant’s option shall be exercised automatically on the new Purchase Date, unless prior to such date the Participant has withdrawn from an Offering then in progress or the Plan as provided in Section 5.4. 7.2Exercise Price10.18.3 Change in Control. The exercise price per ShareIn the event of a SARChange in Control, any Offering then in progress shall be determinedshortened by the Committee, subject to adjustment under Section 5.4; provided that in no event shall the exercise price be less than the fair market value ofsetting a Share onnew Purchase Date specified before the date of grant, exceptthe Change in the case of a SAR granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines in accordance with the requirements of Section 409A.
7.3Duration and Time for Exercise. The term of each SAR shall be determined by the Committee, but shall not exceed a maximum term of ten years. Each SAR shall become exercisable at such time or times during its term as shall be determined by the Committee, subject to Section 5.3(d). Notwithstanding the foregoing, the Committee may at any time in its discretion accelerate the exercisability of any SAR.
7.4Exercise and Payment. A SAR may be exercised, in whole or in part, by giving written notice to the Company, specifying the number of SARs that the holder wishes to exercise. The date that the Company receives such written notice shall be referred to herein as the “exercise date.” Upon exercise of a SAR, the holder shall be entitled to receive from the Company an amount equal to the number of Shares subject to the SAR that are being exercised multiplied by the excess of (a) the fair market value of a Share on the exercise date, over (b) the exercise price specified of the SAR. Payment shall be made in the form of Shares, cash or a combination thereof, as determined by the Committee.
7.5No Dividend Equivalent Rights. Participants holding SARs shall not be entitled to any dividend equivalent rights for any period of time prior to exercise of the SAR.
8.Restricted Stock. An award of Restricted Stock shall be subject to such restrictions on transfer and forfeitability provisions and such other terms and conditions, including the attainment of specified performance goals, as the Committee may determine, subject to the provisions of the Plan.
8.1The Restricted Period. At the time an award of Restricted Stock is made,Control, unless the Committee shall, establish, subject toin its sole discretion, provide for the assumption or substitution of outstanding options in a manner complying with Section 5.3(d), a period of time during which the transfer424(a) of the shares of Restricted StockCode. The Company shall notify each Participant in writing, prior to any new Purchase Date, that the Purchase Date for the Participant’s option has been changed to the new Purchase Date and that the Participant’s option shall be restrictedexercised automatically on the new Purchase Date, unless prior to such date the Participant has withdrawn from an Offering then in progress or the Plan as provided in Section 10.19. General Provisions. 19.1 Equal Rights and after whichPrivileges. In accordance with Section 423 of the shares of Restricted StockCode, all Eligible Employees who are granted options under the Plan shall have the same rights and privileges. 19.2 No Right to Continued Service. Neither the Plan nor any compensation paid hereunder shall be vested (the “ Restricted Period”). Each award of Restricted Stock may havedeemed to constitute a different Restricted Period. The expiration of the Restricted Period shall also occur in the event of terminationcontract of employment under the circumstances provided in the Award Agreement.
8.2Escrow. The Participant receiving Restricted Stock shall enter into an Award Agreement withbetween the Company setting forth the conditions of the grant. Any certificates representing shares of Restricted Stock shall be registered in the name ofand the Participant and deposited withnor confer on any Participant the Company, together withright to continue as an Employee or in any other capacity.19.3 Rights as Shareholder. A Participant will become a stock power endorsed in blank by the Participant. Each such certificate shall bear a legend in substantially the following form:
The transferability of this certificate and the shares of Common Stock represented by it are subject to the terms and conditions (including conditions of forfeiture) contained in the Sterling Construction Company, Inc. 2018 Stock Incentive Plan, as it may be amended (the “Plan”), and an agreement entered into between the registered owner and Sterling Construction Company, Inc. thereunder. Copies of the Plan and the agreement are on file at the principal office of the Company.
Alternatively, in the discretion of the Company, ownership of the shares of Restricted Stock and the appropriate restrictions shall be reflected in the records of the Company's transfer agent and no physical certificates shall be issued.
8.3Dividends on Restricted Stock. Any and all cash and stock dividends paidshareholder with respect to the shares of RestrictedCommon Stock may accrue duringthat are purchased pursuant to options granted under the Restricted Period ifPlan when the Committee, in its discretion, so prescribes in the Award Agreement. Payment of such accrued dividends will be subject to such restrictions on transfer and forfeitability and such other terms and conditions, including attainment of specified performance goals, asshares are applicabletransferred to the underlying shares of Restricted Stock.
8.4Forfeiture. In the event of the forfeiture of any shares of Restricted Stock under the terms provided in the Award Agreement (including any additional shares of Restricted Stock that may result from the reinvestment of cash and stock dividends, if so provided in the Award Agreement), such forfeited shares shall be surrendered and any certificates cancelled. The Participants shallParticipant’s ESPP Share Account. A Participant will have the sameno rights and privileges, and be subject to the same forfeiture provisions, with respect to any additional Shares received pursuant to Section 5.4 due to a recapitalization or other change in capitalization.
8.5Expiration of Restricted Period. Upon the expiration or termination of the Restricted Period and the satisfaction of any other conditions prescribed by the Committee, the restrictions applicable to the Restricted Stock shall lapse and the number of shares of Restricted Stock with respect to which the restrictions have lapsed shall be delivered, free of all such restrictions and legends, except any that may be imposed by law, to the Participant.
8.6Rights as a Stockholder. Subject to the terms and conditions of the Plan and subject to any restrictions on the receipt of dividends that may be imposed in the Award Agreement, each
Participant receiving Restricted Stock shall have all the rights of a stockholdershareholder with respect to shares of stock duringCommon Stock for which an election to participate in an Offering Period has been made until such Participant becomes a shareholder as provided in Section 9 above.|A-6 | Sterling Construction|2019 Proxy Statement
Annex A 19.4 Successors and Assigns. The Plan shall be binding on the Restricted Period,Company and its successors and assigns. 19.5 Entire Plan. This Plan constitutes the entire plan with respect to the subject matter hereof and supersedes all prior plans with respect to the subject matter hereof. 19.6 Compliance with Law. The obligations of the Company with respect to payments under the Plan are subject to compliance with all applicable laws and regulations. Common Stock shall not be issued with respect to an option granted under the Plan unless the exercise of such option and the issuance and delivery of the shares of Common Stock pursuant thereto shall comply with all applicable provisions of law, including, without limitation, the right to voteSecurities Act, the Exchange Act, and the requirements of any Shares.
9.Restricted Stock Unitsstock exchange upon which the shares may then be listed.19.7 Term of Plan. A Restricted Stock Unit, or RSU, represents the right to receive from the CompanyThe Plan shall become effective on the respective scheduled vesting or payment date for such RSU, one share of Common Stock. An award of RSUs may be subject to the attainment of specified performance goals or targets, forfeitability provisionsEffective Date and, such other terms and conditions as the Committee may determine, subject to the provisions of the Plan.
9.1Vesting Period. At the time an award of RSUs is made, the Committee shall establish, subjectunless terminated earlier pursuant to Section 5.3(d), a period of time during which the RSUs20.8, shall vest (the “Vesting Period”). Each award of RSUs may have a different Vesting Period. The accelerationterm of the expiration of the Vesting Period shall occur in the event of termination of employment under the circumstances provided in the Award Agreement.
9.2Dividend Equivalent Accounts. Subject to the terms and conditions of this Plan and the applicable Award Agreement, as well as any procedures established by the Committee, the Committee may determine to accrue dividend equivalent rights with respect to RSUs and the Company shall establish an account for the Participant and reflect in that account any securities, cash or other property comprising any dividend or property distribution with respect to the Share underlying each RSU. Any and all dividend equivalent rights with respect to the RSUs shall be subject to the same vesting and forfeitability conditions, including attainment of any performance goals, applicable to the underlying RSUs.
9.3Rights as a Stockholder. Subject to the restrictions imposed under the terms and conditions of this Plan and subject to any other restrictions that may be imposed in the Award Agreement, each Participant receiving RSUs shall have no rights as a stockholder with respect to such RSUs until such time as Shares are issued to the Participant.
10.Other Stock-Based Awards. The Committee is hereby authorized to grant to Eligible Individuals an “Other Stock-Based Award,” which shall consist of an Award that is not an instrument or Award specified in Sections 6 through 9 of this Plan, the value of which is based in whole or in part on the value of Shares. Other Stock-Based Awards may be awards of Shares or may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible or exchangeable into or exercisable for Shares), as deemed by the Committee consistent with the purposes of the Plan. The Committee shall determine the terms and conditions of any such Other Stock-Based Award and may provide that such awards would be payable in whole or in part in cash.
10.1 Vesting Period. At the time an award of an Other Stock-Based Award is made, the Committee shall establish, subject to Section 5.3(d), a period of time during which the Other Stock-Based Award shall vest (the “Vesting Period”). Each award of an Other Stock-Based Award may have a different Vesting Period. The acceleration of the expiration of the Vesting Period shall occur in the event of termination of employment under the circumstances provided in the Award Agreement.
10.2Dividend Equivalent Accounts. Subject to the terms and conditions of this Plan and the applicable Award Agreement, as well as any procedures established by the Committee, the Committee may determine to accrue dividend equivalent rights with respect to an Other Stock-Based Award and the Company shall establish an account for the Participant and reflect in that account any securities, cash or other property comprising any dividend or property distribution with respect to the Share underlying each such Award. Any and all dividend equivalent rights with respect to the Award shall be subject to the same vesting and forfeitability conditions, including attainment of any performance goals, applicable to the underlying Award.
11.General.
11.1ten (10) years.19.8 Amendment or Discontinuance of the Plan Termination. The Board may amend or discontinue the Plan at any time; provided, however, that no such amendment may
(a) without the approval of the stockholders, (i) increase, subject to adjustments permitted herein, the maximum number of shares of Common Stock that may be issued through the Plan, (ii) materially increase the benefits accruing to Participants under the Plan, (iii) materially expand the classes of persons eligible to participate in the Plan, (iv) expand the types of Awards available for grant under the Plan, (v) materially extend the term of the Plan, (vi) materially change the method of determining the exercise price of Options or SARs, or (vii) amend Section 6.6 to permit a reduction in the exercise price of Options or SARs; or
(b) materially impair, without the consent of the recipient, an Award previously granted.
11.2Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee is hereby authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 5.4 hereof) affecting the Company, or the financial statements of the Company or any Subsidiary, or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.
11.3Cancellation. Any provision of this Plan or any Award Agreement to the contrary notwithstanding, if permitted by Section 409A, the Committee may cause any Award granted hereunder to be canceled in consideration of a cash payment or alternative Award made to the holder of such canceled Award equal in value to such canceled Award. Notwithstanding the foregoing, except for adjustments permitted under Sections 5.4 and 11.2, no action by the Committee shall, unless approved by the stockholders of the Company, (a) cause a reduction in the exercise price of Options or SARs granted under the Plan or (b) permit an outstanding Option or SAR with an exercise price greater than the current fair market value of a Share to be surrendered as consideration for a new Option or SAR with a lower exercise price, shares of Restricted Stock, Restricted Stock Units, and Other Stock-Based Award, or Common Stock.
11.4Change of Control.
(a) Unless otherwise provided in an Award Agreement, upon a Change of Control: (i) all Options and SARs shall become immediately exercisable with respect to 100% of the Shares subject to such Options or SARS, (ii) all time-vesting restrictions on other Awards shall lapse, and (iii) all performance measures applicable to outstanding Awards subject to performance conditions will be disregarded and the Award will vest at the target payout level.
(b) In addition, in the event of a Change of Control, the Committee may, in its sole discretion, amend, suspend or terminate the Plan at any time and absolute discretion and authority, without obtainingfor any reason. If the approval or consent of the Company's stockholders or any Participant with respect to his or her outstanding Awards, take one or more of the following actions:
(i) arrange for or otherwise provide that each outstanding Award shall be assumed or a substantially similar award shall be substituted by a successor corporation or a parent or subsidiary of such successor corporation;
(ii) require that all outstanding Options and SARs be exercised on or before a specified date (before or after such Change of Control) fixed by the Committee, after which specified date all unexercised Options and SARs shall terminate;
(iii) arrange or otherwise provide for the payment of cash or other consideration to Participants representing the value of such Awards in exchange for the satisfaction and cancellation of outstanding Awards; provided, however, that the case of any Option or SAR with an exercise price that equals or exceeds the price paid for a Share in connection with the Change of Control,Plan is terminated, the Committee may cancelelect to terminate all outstanding Offering Periods either immediately or once shares of Common Stock have been purchased on the Option or SAR withoutnext Purchase Date (which may, in the paymentdiscretion of consideration therefor; or
(iv) make such other modifications, adjustments or amendments to outstanding Awards or this Plan as the Committee, deems necessarybe accelerated) or appropriate, subject howeverpermit Offering Periods to the terms of Section 5.4.
11.5Withholding.
(a) A Participant shall be required to pay to the Company, and the Company shall have the right to deduct from all amounts paid to a Participant (whether under the Plan or otherwise), any taxes required by law to be paid or withheld in respect of Awards hereunder to such Participant.
(b) At any time that a Participant is required to pay to the Company an amount required to be withheld under the applicable tax laws in connection with the issuance of Shares under the Plan, the Participant may, if permitted by the Committee, satisfy this obligation in whole or in part by delivering currently owned Shares or by electing (the “Election”) to have the Company withhold from the issuance Shares, which Shares shall have a value at least equal to the minimum amount required to be withheld for federal and state tax purposes, including payroll taxes, and not in excess of the applicable estimated incremental tax rate, provided such rate will not cause adverse accounting consequences and is permitted under applicable IRS withholding rules. The value of the Shares delivered or withheld shall be based on the fair market value of the Shares on the date as of which the amount of tax to be withheld shall be determinedexpire in accordance with applicable tax laws (the “Tax Date”).
(c) Each Electiontheir terms (and subject to any adjustment in accordance with Section 18). If any Offering Period is terminated before its scheduled expiration, all amounts that have Shares withheldnot been used to purchase shares of Common Stock will be returned to Participants (without interest, except as otherwise required by law) as soon as administratively practicable.(b) An amendment to the Plan must be made prior toapproved by stockholders within twelve (12) months of being adopted by the Tax Date. If a Participant wishes to deliver Shares in paymentBoard if such amendment would increase the number of taxes, the Participant must so notify the Company prior to the Tax Date. If a Participant makes an electionshares reserved for issuance under Section 83(b)13.1 above (other than any increase under Section 18.1) or if the amendment involves any change that would be considered the adoption of a new plan under Section 423 of the Code with respect to shares of Restricted Stock, an Election to have Shares withheld is not permitted; and Treas. Reg. Sect.1.423-2(c)(4).provided, however, that no election under Section 83(b) of the Code may be 19.9 Governing Law. The Plan and all determinations made unless permitted by the terms of the applicable Award Agreement or by written consent of the Committee.
11.6Transferability.
(a) No Awards granted hereunder may be sold, transferred, pledged, assigned, or otherwise encumbered by a Participant except:
(i) by will;
(ii) by the laws of descent and distribution;
(iii)actions taken pursuant to a domestic relations order, as defined in the Code, if permitted by the Committee and so provided in the Award Agreement or an amendment thereto; or
(iv) if permitted by the Committee and so provided in the Award Agreement or an amendment thereto, Options may be transferred or assigned (A) to Immediate
Family Members, (B) to a partnership in which Immediate Family Members, or entities in which Immediate Family Members are the owners, members or beneficiaries, as appropriate, are the partners, (C) to a limited liability company in which Immediate Family Members, or entities in which Immediate Family Members are the owners, members or beneficiaries, as appropriate, are the members, or (D) to a trust for the benefit of Immediate Family Members; provided, however, that no more than a de minimis beneficial interest in a partnership, limited liability company, or trust described in (B), (C) or (D) above may be owned by a person who is not an Immediate Family Member or by an entity that is not beneficially owned solely by Immediate Family Members.
(b) To the extent that an Incentive Stock Option is permitted to be transferred during the lifetime of the Participant, ithereto shall be treated thereafter as a Nonqualified Stock Option. Any attempted assignment, transfer, pledge, hypothecation, or other disposition of Awards, or levy of attachment or similar process upon Awards not specifically permitted herein, shall be null and void and without effect. The designation of a Designated Beneficiary shall not be a violation of this Section 11.6(b).
11.7Share Certificates. Any certificates or book or electronic entry ownership evidence for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares or other securities are then listed, and any applicable federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
11.8No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of options, stock appreciation rights, restricted stock, and other types of Awards provided for hereunder (subject to stockholder approval of any such arrangement if approval is required), and such arrangements may be either generally applicable or applicable only in specific cases.
11.9No Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of or as a consultant or adviser to the Company or any Subsidiary or in the employ of or as a consultant or adviser to any other entity providing services to the Company. The Company or any Subsidiary or any such other entity may at any time dismiss a Participant from employment, or terminate any arrangement pursuant to which the Participant provides services to the Company or a Subsidiary, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. No Eligible Individual or other person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Eligible Individuals, Participants or holders or beneficiaries of Awards.
11.10Effect of Termination of Continuous Service. In the event of a Participant's termination of Continuous Service for any reason, any Awards may be exercised, shall vest or shall expire at such times as may be determinedgoverned by the Committee and provided for in the Award Agreement or an amendment thereto.
11.11Governing Law. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Delaware.
11.12 Delaware without giving effect to the conflict of laws principles thereof.19.10 Shareholder Approval. The Plan shall be subject to approval by the shareholders of the Company within twelve (12) months before or after the date the Plan is adopted by the Board. 19.11 Section 423. The Plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code. Any provision of the Plan that is inconsistent with Section 423 of the Code shall be reformed to comply with Section 423 of the Code. 19.12 Withholding. To the extent required by applicable Federal, state or local law, a Participant must make arrangements satisfactory to the Company for the payment of any withholding or similar tax obligations that arise in connection with the Plan. 19.13 Tax Qualification. Although the Company may endeavor to (a) qualify an option for specific tax treatment under the laws of the U.S. or (b) avoid adverse tax treatment, the Company makes no representation to that effect and expressly disavows any covenant to maintain favorable or avoid unfavorable tax treatment, notwithstanding anything contrary in the Plan. 19.14 Notification Upon Sale of Shares. Each Participant who is a U.S. taxpayer agrees, by enrolling in the Plan, to give the Company prompt notice of any disposition of shares of Common Stock purchased under the Plan where such disposition occurs within two (2) years after the date of grant of the option pursuant to which such shares were purchased. 19.15 Severability . If any provision of the Plan orshall for any Award is or becomes or is deemedreason be held to be invalid illegal, or unenforceable, in any jurisdictionsuch invalidity or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provisionunenforceability shall be construed or deemed amended to conform to applicable laws, or if it cannot be construed or deemed amended
without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.
11.13No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant ornot affect any other Person. To the extent that any Person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company.
11.14No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award,provision hereof, and the Committee shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated.
11.15Compliance with Law.
(a) U.S. Securities Laws. This Plan, the grant of Awards, the exercise of Options and SARs under this Plan, and the obligation of the Company to sell or deliver any of its securities pursuant to Awards under this Plan shall be subject to all Applicable Laws. In the event that the Shares are not registered under the Securities Act, or any applicable state securities laws prior to the delivery of such Shares, the Company may require, as a condition to the issuance thereof, that the persons to whom Shares are to be issued represent and warrant in writing to the Company that such Shares are being acquired by him or her for investment for his or her own account and not with a view to, for resale in connection with, or with an intent of participating directly or indirectly in, any distribution of such Shares within the meaning of the Securities Act, and a legend to that effect may be placed on the certificates representing the Shares.
(b) Other Jurisdictions. To facilitate the making of any grant of an Award under this Plan, the Committee may provide for such special terms for Awards to Participants who are foreign nationals or who are employed by the Company or any Affiliate outside of the United States of America as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. The Company may adopt rules and procedures relating to the operation and administration of this Plan to accommodate the specific requirements of local laws and procedures of particular countries. Without limiting the foregoing, the Company is specifically authorized to adopt rules and procedures regarding the conversion of local currency, taxes, withholding procedures and handling of stock certificates which vary with the customs and requirements of particular countries. The Company may adopt sub-plans and establish escrow accounts and trusts as may be appropriate or applicable to particular locations and countries.
11.16Section 409A of the Code. The Plan is intended to comply with Section 409A to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpretedconstrued as if such invalid or unenforceable provision were omitted.|A-7 | Sterling Construction |2019 Proxy Statement
Annex A 19.16 Headings. The headings of sections herein are included solely for convenience and administered to be in compliance therewith. Any payments describedshall not affect the meaning of any of the provisions of the Plan. 19.17 Data Privacy. By participating in the Plan, that are due within the “short-term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless any Applicable Law requires otherwise. Notwithstanding anythingeach Participant agrees to the contrary incollection, processing, use and transfer of personal information by the Plan, toParticipating Subsidiary that employs the extent required to avoid accelerated taxation and tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following a Participant's termination of Continuous Service shall instead be paid on the first payroll date after the six-month anniversary of the Participant's separation from service (or the Participant's death, if earlier). Notwithstanding the foregoing, neitherParticipant, the Company norand its designees in order to administer the Committee shall have any obligation to take any action to prevent the assessment of any excise tax or penalty on any Participant under Section 409A and neither the Company nor the Committee will have any liability to any Participant for such tax or penalty.
11.17 Deferral Permitted. Payment of cash or distribution of any Shares to which a Participant is entitled under any Award shall be made as provided in the Award Agreement. Payment may be deferred at the option of the Participant if provided in the Award Agreement.
11.18Clawback ProvisionsPlan.19.18 Insider Trading. All Awards (including any proceeds, gainstransfers or other economic benefit the Participant actually or constructively receives upon receipt or exercisedispositions of any Award or the receipt or resale of any Shares underlying the Award) will be subject to any Company clawback policy implemented to comply with Applicable Laws, including any clawback policy adopted to comply with the Dodd-Frank Wall Street ReformCommon Stock and Consumer Protection Act and any rules or regulations promulgated thereunder, as set forth in such a clawback policy or the Award Agreement.
11.19Headings. Headings are given to the subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.
12.Term of the Plan. Subject to Section 11.1, no Awards may be grantedelections under the Plan after May 2, 2028, which is ten years aftershall be executed by Participants in accordance with the date the Plan was last approved by the Company's stockholders; Company’s insider trading policy.|A-8 | providedSterling Construction|, 2019 Proxy Statementhowever, that Awards granted prior to such date shall remain in effect until such Awards have either been satisfied, expired or canceled under the terms of the Plan, and any restrictions imposed on Shares in connection with their issuance under the Plan have lapsed.
0 STERLING CONSTRUCTION COMPANY, INC. 2018 STOCK INCENTIVE PLAN
APPENDIX A: DEFINITIONS
As used inANNUAL MEETING OF STOCKHOLDERS MAY 8, 2019 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned, having received a Notice of the Plan,Annual Meeting of Stockholders of Sterling Construction Company, Inc. (the Company) to be held on Wednesday, May 8, 2019 at 8:30 a.m., local time, at the following definitions shall apply:
“Award” shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, or Other Stock-Based Award.
“Award Agreement” shall mean any written or electronic noticeCompany’s headquarters located at 1800 Hughes Landing Blvd., Suite 250, The Woodlands, Texas (the Annual Meeting) and revoking all prior proxies, hereby appoint(s) Milton L. Scott, Chairman of grant, agreement, contract or other instrument or document evidencing any Award, which the Company may, but need not, require a Participant to execute, acknowledge, or accept.
“Applicable Law” means the legal requirements relating to the administration of options and share-based plans under applicable U.S. federal and state laws, the Code, any applicable stock exchange or automated quotation system rules or regulations, and the applicable laws of any other country or jurisdiction where Awards are granted, as such laws, rules, regulations and requirements shall be in place from time to time.
“Board” shall mean the Board of Directors, Ronald A. Ballschmiede, Chief Financial Officer, and Richard E. Chandler, Jr., General Counsel and Secretary, and each of them (with full power of substitution) as proxies of the Company.
“Changeundersigned to attend the Annual Meeting and any adjourned sessions thereof to vote and act upon the matters listed on the reverse side of Control” shall mean the occurrencethis proxy card in respect of anyall shares of common stock of the following events: a “Change in Ownership”, a “Change in Effective Control,” Company which the undersigned would be entitled to vote or a“Change in Ownership Assets,” as those terms are defined below.
(i) A “Change in Ownership.”
(A) A Change in Ownership shall act upon, with all powers the undersigned would possess, if personally present.Attendance of the undersigned at the Annual Meeting or at any adjourned session thereof will not be deemed to occurrevoke this proxy unless the undersigned affirmatively indicates at the Annual Meeting the intention of the undersigned to vote said shares in person. If the undersigned holds any shares in a fiduciary, custodial or joint capacity or capacities, this proxy is signed by the undersigned in every one of those capacities as well as individually. (Continued and to be signed on the reverse side) 1.1 14475
ANNUAL MEETING OF STOCKHOLDERS OF STERLING CONSTRUCTION COMPANY, INC. May 8, 2019 NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The notice of meeting, proxy statement, proxy card and 2018 Annual Report are available at http://www.astproxyportal.com/ast/04770/ Please sign, date that any Personand return your proxy card in the envelope provided as soon as possible. Please detach along perforated line and mail in the envelope provided. 00003333333333300000 2 050819 THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” EACH OF THE DIRECTOR NOMINEES IN PROPOSAL 1; AND FOR EACH OF PROPOSALS 2, 3, AND 4. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE X The shares represented by this proxy will be voted as directed by the undersigned. If no direction is given with respect to the election of directors or Group (as those termsproposals 2, 3, or 4, specified above, this proxy will be voted FOR the election of each director; and FOR proposals 2 through 4. All proposals are defined below) acquires ownershipmade by the Board of Common Stock that, together with stock held by that Person or Group, constitutes more than fifty percent (50%)Directors. None of the total fair market valuematters to be voted on are conditioned on, or total votingrelated to, the approval of any other matter. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS, YOU NEED ONLY SIGN, DATE AND RETURN THIS PROXY. YOU DO NOT NEED TO MARK ANY BOXES. 1. Election of Directors: Nominees FOR AGAINST ABSTAIN Roger A. Cregg Joseph A. Cutillo Marian M. Davenport Raymond F. Messer Dana C. O’Brien Charles R. Patton Milton L. Scott Thomas M. White 2. To approve, on an advisory basis, the compensation of our named executive officers; 3. To ratify the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2019; 4. To adopt the 2019 Employee Stock Purchase Plan; and 5. To transact such other business as may properly come before the annual meeting. To change the address on your account, please check the box at right and indicate your new address in the space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. Election of three Signature of Stockholder Date: Signature of Stockholder Date: Note: Please sign exactly as your name(s) appear on this proxy card. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. Note: Please sign exactly as your name(s) appear on this proxy card. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
0 STERLING CONSTRUCTION COMPANY, INC. ANNUAL MEETING OF STOCKHOLDERS MAY 8, 2019 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned, having received a Notice of the Annual Meeting of Stockholders of Sterling Construction Company, Inc. (the Company) to be held on Wednesday, May 8, 2019 at 8:30 a.m., local time, at the Company’s headquarters located at 1800 Hughes Landing Blvd., Suite 250, The Woodlands, Texas (the Annual Meeting) and revoking all prior proxies, hereby appoint(s) Milton L. Scott, Chairman of the Board of Directors, Ronald A. Ballschmiede, Chief Financial Officer, and Richard E. Chandler, Jr., General Counsel and Secretary, and each of them (with full power of the Common Stock.
(B) If any Person or Group is considered to own more than fifty percent (50%)substitution) as proxies of the total fair market value or total voting powerundersigned to attend the Annual Meeting and any adjourned sessions thereof to vote and act upon the matters listed on the reverse side of this proxy card in respect of all shares of common stock of the Common Stock, the acquisition of additional stock by the same Person or Group is not considered to cause a Change in Ownership or to cause a Change in Effective Control.
(C) An increase in the percentage of Common Stock owned by any Person or Group as a result of a transaction inCompany which the Company acquires its own stock in exchange for property (butundersigned would be entitled to vote or act upon, with all powers the undersigned would possess, if personally present.Attendance of the undersigned at the Annual Meeting or at any adjourned session thereof will not when the Company acquires its own stock for cash) will be treated as an acquisition of stock for purposes of this Plan. (ii) A “Change in Effective Control.” A Change in Effective Control shall be deemed to occurrevoke this proxy unless the undersigned affirmatively indicates at the Annual Meeting the intention of the undersigned to vote said shares in person. If the undersigned holds any shares in a fiduciary, custodial or joint capacity or capacities, this proxy is signed by the undersigned in every one of those capacities as well as individually.(Continued and to be signed on the date on which a majority ofreverse side) 1.1 14475
ANNUAL MEETING OF STOCKHOLDERS OF STERLING CONSTRUCTION COMPANY, INC. May 8, 2019 PROXY VOTING INSTRUCTIONS INTERNET - Access “www.voteproxy.com” and follow the Board is replaced during any twelve-month period by directors whose appointmenton-screen instructions or election is not endorsed by a majority ofscan the members ofQR code to the Boardright with your smartphone. Have your proxy card available when you access the web page. Submit voting instructions and proxy online until 11:59 PM Central Time the day before the appointment or election.
(iii) A “Changemeeting. MAIL - Sign, date and return your proxy card in Ownershipthe envelope provided as soon as possible. IN PERSON - You may vote your shares in person by attending the Annual Meeting. Please bring proper identification. If you plan to attend the annual meeting in person, you can obtain directions to our headquarters located at 1800 Hughes Landing Boulevard, Suite 250, The Woodlands, Texas by contacting our corporate secretary at (281) 214-0800. COMPANY NUMBER ACCOUNT NUMBER NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL: The notice of Assets.”
(A) A Changemeeting, proxy statement, proxy card and 2018 Annual Report are available at http://www.astproxyportal.com/ast/04770/ Please detach along perforated line and mail in Ownership of Assets shallthe envelope provided IF you are not submitting voting instructions and proxy via the Internet. 00003333333333300000 2 050819 THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE “FOR” EACH OF THE DIRECTOR NOMINEES IN PROPOSAL 1; AND FOR EACH OF PROPOSALS 2, 3, AND 4. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x The shares represented by this proxy will be deemed to occur on the date that any Person or Group acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition by such Person or Group) assets from the Company that have a total gross fair market value equal to or more than fifty percent
(50%) of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions. For purposes of this Section (iii) –
(I) the Company means and includes its consolidated subsidiaries; and
(II) gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
(B) There is no change of control event under this Section (iii) when there is a transfer to an entity that is controlledvoted as directed by the stockholders of the Company immediately after the transfer.
(C) A transfer of assets by the Companyundersigned. If no direction is not treated as a change in the ownership of such assets if the assets are transferred to –
(I) a stockholder of the Company (immediately before the asset transfer) in exchange for orgiven with respect to its Common Stock;
(II) an entity, fifty percent (50%)the election of directors or moreproposals 2, 3, or 4, specified above, this proxy will be voted FOR the election of the total value or voting power of which is owned, directly or indirectly, by the Company;
(III) a Person or Group that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company; or
(IV) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person or Group described in the immediately preceding Subsection (III).
(D) Except as otherwise provided above in Section (iii)(C)(III), a person’s status is determined immediately after the transfer of the assets. For example, a transfer to a corporation in which the Company has no ownership interest before the transaction, but that is a majority-owned subsidiary of the Company after the transaction, is not a Change in Ownership of Assets.
Notwithstanding the aboveeach director; and solely with respect to any Award that constitutes “deferred compensation” subject to Section 409A and that is payable on account of a Change of Control (including any installments or stream of payments thatFOR proposals 2 through 4. All proposals are accelerated on account of a Change of Control), a Change of Control shall occur only if such event also constitutes a “change in the ownership”, “change in effective control”, and/or a “change in the ownership of a substantial portion of assets” of the Company as those terms are defined under Treasury Regulation §1.409A-3(i)(5), but only to the extent necessary to establish a time or form of payment that complies with Section 409A, without altering the definition of Change of Control for purposes of determining whether a Participant's rights to such Award become vested or otherwise unconditional upon the Change of Control.
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
“Committee” means one or more committees or subcommittees of the Board appointedmade by the Board to administer the Plan in accordance with Section 3.1of Directors. None of the Plan. With respectmatters to any decision relatingbe voted on are conditioned on, or related to, a Reporting Person, the Committee shall consist of two or more Outside Directors who are disinterested within the meaning of Rule 16b-3. Unless and until determined otherwise by the Board, the Committee shall be the Compensation Committee of the Board.
“Common Stock” shall mean the Company's common stock, $0.01 par value per share.
“Company” shall mean Sterling Construction Company, Inc.
“Continuous Service” means the absenceapproval of any interruption or terminationother matter. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS, YOU NEED ONLY SIGN, DATE AND RETURN THIS PROXY. YOU DO NOT NEED TO MARK ANY BOXES. 1. Election of serviceDirectors: Nominees FOR AGAINST ABSTAIN Roger A. Cregg Joseph A. Cutillo Marian M. Davenport Raymond F. Messer Dana C. O’Brien Charles R. Patton Milton L. Scott Thomas M. White 2. To approve, on an advisory basis, the compensation of our named executive officers; 3. To ratify the appointment of Grant Thornton LLP as an Eligible Individual. Continuous Service shallour independent registered public accounting firm for 2019; 4. To adopt the 2019 Employee Stock Purchase Plan; and 5. To transact such other business as may properly come before the annual meeting. To change the address on your account, please check the box at right and indicate your new address in the space above. Please note that changes to the registered name(s) on the account may not be considered interruptedsubmitted via this method. Signature of Stockholder Date: Signature of Stockholder Date: Note: Please sign exactly as your name(s) appear on this proxy card. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in the case of: (i) sick leave; (ii) military leave; or (iii) any other leave of absence approvedpartnership name by the Committee, provided that such leave is for a period of not more than 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time.authorized person.
“Designated Beneficiary” shall mean the beneficiary designated by the Participant, in a manner determined by the Committee, to receive the benefits due the Participant under the Plan in the event of the Participant's death. In the absence of an effective designation by the Participant, Designated Beneficiary shall mean the Participant's estate.
“Effective Date” shall mean the date this Plan is approved by the Company's stockholders.
“Eligible Individual” shall mean (i) any person providing services as an officer of the Company or a Subsidiary, whether or not employed by such entity, including any such person who is also a director of the Company; (ii) any employee of the Company or a Subsidiary, including any director who is also an employee of the Company or a Subsidiary; (iii) Outside Directors; (iv) any officer or employee of an entity with which the Company has contracted to receive executive, management, or legal services who provides services to the Company or a Subsidiary through such arrangement; and (v) any consultant or adviser to the Company, a Subsidiary, or to an entity described in clause (iv) hereof who provides services to the Company or a Subsidiary through such arrangement.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.
“Fair Market Value” shall mean, except as provided below in connection with a cashless exercise through a broker: (i) if the Common Stock is listed on an established stock exchange or any automated quotation system that provides sale quotations, the closing sale price for a share of the Common Stock on such exchange or quotation system on the date as of which fair market value is to be determined; (ii) if the Common Stock is not listed on any exchange or quotation system, but bid and asked prices are quoted and published, the mean between the quoted bid and asked prices on the date as of which fair market value is to be determined, and if bid and asked prices are not available on such day, on the next preceding day on which such prices were available; and (iii) if the Common Stock is not regularly quoted, the fair market value of a share of Common Stock on the date as of which fair market value is to be determined, as established by the Committee in good faith. In the context of a cashless exercise through a broker, the Fair Market Value shall be the price at which the Common Stock subject to the stock option is actually sold in the market to pay the option exercise price.
“Immediate Family Members” shall mean the spouse and natural or adopted children or grandchildren of the Participant and his or her spouse.
“Incentive Stock Option” shall mean an option granted under Section 6 of the Plan that is intended to meet the requirements of Section 422 or any successor provision thereto.
“Nonqualified Stock Option” shall mean an option granted under Section 6 of the Plan that is not intended to be an Incentive Stock Option.
“Option” shall mean an Incentive Stock Option or a Nonqualified Stock Option.
“Other Stock-Based Award” shall mean any right or award granted under Section 10 of the Plan.
“Outside Directors” shall mean members of the Board who are not employees of the Company.
“Participant” shall mean any Eligible Individual granted an Award under the Plan.
“Person” shall mean any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof, or other entity.
“Reporting Person” means an officer, director, or greater than ten percent shareholder of the Company within the meaning of Rule 16a-2 under the Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the Exchange Act.
“Restricted Stock” shall mean any restricted stock granted under Section 8 of the Plan.
“Restricted Stock Unit” or “RSU” shall mean any restricted stock unit granted under Section 9 of the Plan.
“Section 409A” shall mean Section 409A of the Code and all regulations and guidance promulgated thereunder as in effect from time to time.
“Section 422” shall mean Section 422 of the Code and all regulations and guidance promulgated thereunder as in effect from time to time.
“Securities Act” means of the Securities Act of 1933, as amended.
“Shares” shall mean the shares of Common Stock and such other securities of the Company or a Subsidiary as the Committee may from time to time designate.
“Stock Appreciation Right” or “SAR” shall mean any right granted under Section 7 of the Plan.
“Subsidiary” shall mean (i) any corporation or other entity in which the Company possesses directly or indirectly equity interests representing at least 50% of the total ordinary voting power or at least 50% of the total value of all classes of equity interests of such corporation or other entity and (ii) any other entity in which the Company has a direct or indirect economic interest that is designated as a Subsidiary by the Committee.
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