o
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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x
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Definitive Proxy Statement
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o
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Definitive Additional Materials
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o
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Soliciting Material Pursuant to §240.14a-12
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x
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No fee required.
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o
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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1)
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Title of each class of securities to which transaction applies:
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2)
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Aggregate number of securities to which transaction applies:
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3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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4)
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Proposed aggregate value of transaction:
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5)
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Total fee paid:
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o
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Fee paid previously with preliminary materials.
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o
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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1)
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Amount previously paid:
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2)
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Form, Schedule or Registration Statement No.:
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3)
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Filing Party:
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4)
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Date Filed:
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Date:
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Tuesday, May 8, 2012
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Place:
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The Buttes, A Marriott Resort
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2000 West Westcourt Way
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Tempe, Arizona 85282
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Time:
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9:00 a.m. local time
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Purposes:
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1.
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To elect three Board nominees as Class II directors, each to serve for a three-year term, and one Board nominee as a Class III director to serve for a one-year term.
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2.
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To consider the approval of an amendment and restatement of the Company's Stock Incentive Plan.
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3.
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To ratify the selection of Grant Thornton LLP as the Company's independent registered public accounting firm for 2012. | ||
4.
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To approve the Company's named executive officer compensation (an advisory vote) for 2011 as set forth in the Proxy Statement. | ||
5.
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To transact any other business that properly comes before the meeting. |
By Order of the Board of Directors
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March 28, 2012
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Roger M. Barzun, Secretary
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Table of Contents | |
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·
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Via the Internet: You can vote via the Internet by accessing the Internet at www.voteproxy.com and following the on-screen instructions, or by following the instructions on the form of proxy sent with the second Availability Notice.
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·
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By telephone: You may call toll-free 1-800-PROXIES (1-800-776-9437) in the United States, or 1-718-921-8500 from foreign countries using a touch-tone telephone and vote by following the instructions given to you. You should have your proxy card with you when you call so that you can input the "Company Number" and the "Account Number" shown on your proxy card when asked to do so.
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·
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By mail: You can obtain a printed copy of the proxy card as described in the Availability Notice; complete, sign, and date it; and then mail it to the Company in the envelope that will be provided to you.
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·
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Your proxy is properly completed;
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·
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Your proxy is received by the Company before the Annual Meeting; and
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·
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Your proxy is not revoked by you before the voting.
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FOR
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the election of three Class II nominees for three-year terms and one Class III nominee for a one-year term (Proposal 1).
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FOR
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the approval of an amendment and restatement of the Company's Stock Incentive Plan (Proposal 2).
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FOR
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the ratification of the selection of Grant Thornton LLP as the Company's independent registered public accounting firm for 2012 (Proposal 3).
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FOR
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the advisory approval of the Company's named executive officer compensation for 2011 as set forth in this Proxy Statement (Proposal 4).
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·
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By sending to the Secretary of the Company, at the Company's address set forth above, a written statement that you wish to revoke your proxy;
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·
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By submitting another proxy dated later than a previous proxy; or
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·
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By attending the Annual Meeting in person and notifying the chairman of the meeting that you wish to vote in person.
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Proposal 1.
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The election of a nominee requires that he receives more votes for his election than against his election.
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Proposal 2.
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The approval of the amendment and restatement of the Company's Stock Incentive Plan requires the affirmative vote of the holders of a majority of the shares of common stock represented and entitled to vote at the meeting.
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Proposal 3.
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The ratification of the selection of Grant Thornton LLP as the Company's independent registered public accounting firm for 2012 requires the affirmative vote of the holders of a majority of the shares of common stock represented and entitled to vote at the meeting. See also the information below under the heading Ratification of the Selection of Independent Registered Public Accounting Firm (Proposal 3) for the effect of your vote.
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Proposal 4.
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The advisory approval of named executive officer compensation requires the affirmative vote of the holders of a majority of the common stock represented and entitled to vote at the meeting.
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Proposal 1.
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The election of a director does not require a minimum number of votes. Therefore, abstentions and broker non-votes will have no effect on the voting for the election of directors.
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Proposals 2, 3 & 4.
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Because the approval of the amendment and restatement of the Company's Stock Incentive Plan; the ratification of the appointment of Grant Thornton LLP; and the advisory approval of named executive officer compensation all require an affirmative vote by the holders of a majority of the shares that make up the meeting's quorum, abstentions and broker non-votes will have the effect of votes against the proposal.
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Independent Directors
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Board Committee Assignments
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John D. Abernathy
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Audit Committee
Compensation Committee
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Robert A. Eckels
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Compensation Committee
Corporate Governance & Nominating Committee (Chairman)
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Maarten D. Hemsley
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Audit Committee
Compensation Committee
Corporate Governance & Nominating Committee
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Richard O. Schaum
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Audit Committee
Compensation Committee (Chairman)
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Milton L. Scott
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Audit Committee (Chairman)
Corporate Governance & Nominating Committee
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David R. A. Steadman
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Corporate Governance & Nominating Committee
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Nominees
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Current Position
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Age
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Class
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Director Since
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Year Term Expires
(If elected)
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John D. Abernathy
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Director
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74
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II
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1994
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2015
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Richard O. Schaum
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Director
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65
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II
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2010
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2015
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Milton L. Scott
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Director
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55
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II
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2005
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2015
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David R. A. Steadman (1)
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Director
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74
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III
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2005
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2013
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(1)
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Because Mr. Steadman was elected by the Board in July 2011 to fill a vacancy in Class III directors, he was elected to serve only until the next (2012) Annual Meeting of Stockholders as provided by Company policy. He has been nominated for re-election as a Class III director, the term of which expires in 2013.
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Continuing Directors
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Age
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Class
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Director
Since
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Current
Term
Expires
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Robert A. Eckels
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Director
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54
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I
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2010
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2014
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Joseph P. Harper, Sr.
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Director, President & Chief Operating Officer, Treasurer
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66
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I
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2001
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2014
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Patrick T. Manning
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Chairman of the Board of Directors, Chief Executive Officer
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66
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I
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2001
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2014
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Maarten D. Hemsley
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Director
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62
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III
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1998
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2013
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Kip L. Wadsworth
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Director
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46
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III
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2010
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2013
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·
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The approximately 1,600 employees of the Company and its subsidiaries, of whom six are officers of the Company and three are directors of the Company;
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·
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The Company's six non-employee directors; and
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·
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Consultants and advisors of the Company.
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·
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The maximum number of shares of the Company's common stock subject to options granted to any one participant in any calendar year was reduced from 350,000 to 100,000.
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·
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The maximum number of shares of the Company's common stock which may be subject to restricted stock awards made to any one participant in any calendar year may not exceed 100,000. This is a limitation not found in the Plan prior to the amendment.
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·
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The Plan provides a new maximum amount of any other compensation that may be paid to any participant pursuant to any grants or awards under the Plan in any calendar year. A grant or award —
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·
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may not exceed the fair market value of 100,000 shares of the Company's common stock if the compensation under the award is denominated under the award agreement only in terms of shares of common stock, or a multiple of the fair market value per share of common stock; or
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·
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in all other cases, may not exceed $1,000,000.
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·
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An employee who receives an award of stock generally will recognize taxable income at the time the stock is received equal to the value of the stock (less the purchase price, if any) and the applicable tax will be withheld by the Company from the employee.
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·
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An employee who receives an award of restricted stock (that is, stock that is subject to one or more restrictions) generally will not recognize taxable income at the time the stock is received, but will recognize taxable income when the restrictions terminate or lapse.
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Board of Directors
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℅ The Secretary
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Sterling Construction Company, Inc.
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20810 Fernbush Lane
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Houston, TX 77073.
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·
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The Audit Committee
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·
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The Compensation Committee
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·
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The Corporate Governance & Nominating Committee
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·
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Review financial reports and other financial information, internal accounting and financial controls, controls and procedures relating to public disclosure of information, and the audit of the Company's financial statements by the Company's independent auditors;
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·
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Appoint independent auditors, approve their compensation, supervise their work, oversee their independence and evaluate their qualifications and performance;
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·
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Review with management and the independent auditors the audited and interim financial statements that are included in filings with the SEC;
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·
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Review the quality of the Company's accounting policies;
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·
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Review with management major financial risk exposures;
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·
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Review and discuss with management the Company’s policies with respect to press releases on earnings and earnings guidance, including the use of pro forma information;
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·
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Review all proposed transactions between the Company and related parties in which the amount involved exceeds $100,000; and
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·
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Provide for the confidential, anonymous submission by employees and others of concerns regarding questionable accounting or auditing matters.
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·
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Reviewed, and met and discussed with management and with the Company's independent registered public accounting firm the Company's 2011 audited consolidated financial statements;
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·
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Discussed with the independent auditors the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU section 380) as adopted by the Public Company Accounting Oversight Board in Rule 3200T;
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·
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Received the written disclosures and the letter from the independent accountant required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the audit committee concerning independence, and has discussed with the independent accountant the independent accountant's independence; and
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·
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Based and in reliance on the foregoing review and discussions, recommended to the Board, and the Board has approved the inclusion of the Company's audited consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 for filing with the SEC.
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Milton L. Scott, Chairman
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John D. Abernathy
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Maarten D. Hemsley
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Richard O. Schaum
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·
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To determine the compensation of the Company's executive officers and other officers elected by the Board and to review their personal goals and objectives.
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·
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To review and make recommendations on the compensation of the officers of the Company's subsidiaries.
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·
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To administer the Company's stock plans, to approve grants of stock options and/or awards of stock under the plans and to make such determinations and decisions on those matters as may be required.
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·
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To review and make recommendations on the Company's benefit plans.
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·
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To evaluate risks that arise from the Company's compensation policies and practices.
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·
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To review and advise the Corporate Governance & Nominating Committee on the compensation of non-employee directors.
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·
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To fix the compensation of non-employee directors who serve on ad hoc committees of the Board.
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·
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To review and discuss with Management the Company's Compensation Discussion and Analysis, and based on that review and those discussions, determine whether to recommend that it be included in the Company's Annual Report on Form 10-K.
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Richard O. Schaum, Chairman
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John D. Abernathy
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Robert A. Eckels
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Maarten D. Hemsley
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·
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Develop and recommend to the Board appropriate corporate governance principles and rules;
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·
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Recommend appropriate policies and procedures to ensure the effective functioning of the Board;
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·
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Identify and recommend to the Board qualified nominees for election by stockholders to the Board;
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·
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Recommend directors for membership on Board committees;
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·
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Develop and make recommendations to the Board regarding standards and processes for determining the independence of directors under applicable laws, rules and regulations;
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·
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Develop and oversee the operation of an orientation program for new directors and determine whether and what form and level of continuing education for directors is appropriate;
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·
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Periodically review the Company's Code of Business Conduct & Ethics and its Insider Trading Policy to ensure that they remain responsive both to legal requirements and to the nature and size of the business; and
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·
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With the advice of the Chairman of the Compensation Committee, make recommendations to the Board for the remuneration of non-employee directors, and of members of the Company's standing committees and their chairpersons.
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Name(1)
|
Fees Earned
or Paid in
Cash
($)
|
Stock
Awards
(3)
($)
|
Total
(4)
($)
|
|||||||||
John D. Abernathy
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54,711 | 50,000 | 104,711 | |||||||||
Robert A. Eckels
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53,483 | 50,000 | 103,483 | |||||||||
Donald P. Fusilli, Jr. (2)
|
1,944 | — | 1,944 | |||||||||
Maarten D. Hemsley
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65,861 | 50,000 | 115,861 | |||||||||
Richard O. Schaum
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57,350 | 50,000 | 107,350 | |||||||||
Milton L. Scott
|
58,605 | 50,000 | 108,605 | |||||||||
David R. A. Steadman
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42,206 | 50,000 | 92,206 |
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*
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Mr. Wadsworth is an employee of the Company's subsidiary, Ralph L. Wadsworth Construction Company, LLC (RLW). In 2011, RLW paid Mr. Wadsworth, under his RLW employment agreement in his capacity as Chief Executive Officer of RLW, a salary of $244,000, and cash incentive compensation of $412,803, and the Company awarded him 2,515 shares of Company common stock that may not be sold or otherwise transferred by him until December 31, 2012.
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(1)
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At the Board's annual meeting in May 2011, Mr. Scott replaced Mr. Abernathy as Chairman of the Audit Committee and Mr. Eckels replaced Mr. Scott as Chairman of the Corporate Governance & Nominating Committee. At that time, Mr. Hemsley was elected Lead Director and under revised director compensation arrangements was paid an additional fee for serving in that capacity.
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(2)
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Mr. Fusilli resigned as a director effective February 9, 2011.
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(3)
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This is the aggregate grant date fair value computed in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718. No amounts earned by a director have been capitalized on the balance sheet for 2011. The cost does not reflect any estimates made for financial statement reporting purposes of future forfeitures related to service-based vesting conditions. The valuation of the awards is described in the Company's Annual Report on Form 10-K in Note 12 of Notes to Consolidated Financial Statements.
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(4)
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The following table shows at December 31, 2011 for each non-employee director the grant date fair value of each outstanding stock award that has been expensed, the aggregate number of shares of stock awarded, and the number of shares underlying outstanding stock options.
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Name
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Grant Date
|
Securities
Underlying
Option Awards
Outstanding
at December 31,
2011
(#)
|
Aggregate
Stock Awards
Outstanding
at December 31,
2011
(#)
|
Grant Date Fair
Value of Stock
and
Option Awards
($)
|
|||||||||
John D. Abernathy
|
5/06/2011
|
— | 3,418 | 50,000 | |||||||||
Robert A. Eckels
|
5/06/2011
|
— | 3,418 | 50,000 | |||||||||
Donald P. Fusilli, Jr.
|
5/06/2011
|
— | 3,418 | 50,000 | |||||||||
Maarten D. Hemsley
|
7/18/2007
5/06/2011
|
2,800 | 3,418 |
27,640
50,000
|
|||||||||
Richard O. Schaum
|
5/06/2011
|
— | 3,418 | 50,000 | |||||||||
Milton L. Scott
|
5/06/2011
|
— | 3,418 | 50,000 | |||||||||
David R. A. Steadman
|
5/06/2011
|
3,418 | 50,000 |
Annual Fees
|
|
Each Non-Employee Director
|
$17,500 (payable in quarterly installments)
An award (on the date of each Annual Meeting of Stockholders) of shares of restricted common stock of the Company that have an accounting income charge of $50,000 per grant.*
|
Additional Annual Fees
(payable in quarterly installments)
|
Lead Director
|
$ | 10,000 | ||
Chairman of the Audit Committee
|
$ | 12,500 | ||
Chairman of the Compensation Committee
|
$ | 7,500 | ||
Chairman of the Corporate Governance & Nominating Committee
|
$ | 7,500 |
Meeting Fees
|
||||
In-Person Meetings
|
Per Director, Per Meeting
|
|||
Board Meetings
|
$ | 1,500 | ||
Committee Meetings
|
||||
Audit Committee Meetings
In connection with a Board meeting
Not in connection with a Board meeting
|
$ | 1,000 $1,500 | ||
Other Committee Meetings
In connection with a Board meeting
Not in connection with a Board meeting
|
$ | 500 $750 | ||
Telephonic Meetings —Board meetings, committee meetings & financial update conference calls
|
||||
One hour or longer
Less than one hour
|
$ | 750 $500 |
|
*
|
The shares are subject to the following basic terms:
|
Name and Address
of Beneficial Owner
|
Number of
Outstanding
Shares of
Common Stock
Owned
|
Shares Subject
to
Purchase*
|
Total
Beneficial
Ownership
|
Percent
of Class
|
||||||||||||
Ameriprise Financial, Inc.
145 Ameriprise Financial Center
Minneapolis, MN 55474
Columbia Management Investment (1) Advisers, LLC
225 Franklin Street
Boston, MA 02110
|
1,595,640 | (1) | — | 1,595,640 | 9.78 | % | ||||||||||
Janus Capital Management LLC
Perkins Small Cap Value Fund
151 Detroit Street
Denver, Colorado 80206
|
1,547,825 | (2) | — | 1,547,825 | 9.48 | % | ||||||||||
Royce & Associates, LLC
745 Fifth Avenue
New York, NY 10151
|
1,267,929 | (3) | — | 1,267,929 | 7.77 | % | ||||||||||
FMR LLC
82 Devonshire Street
Boston, Massachusetts 02109
|
1,055,807 | (4) | — | 1,055,807 | 6.47 | % | ||||||||||
BlackRock, Inc.
40 East 52nd Street
New York, NY 10022
|
908,063 | (5) | — | 908,063 | 5.56 | % | ||||||||||
John D. Abernathy
|
43,896 | (6) | — | 43,896 | † | |||||||||||
Robert A. Eckels
|
6,565 | (6) | — | 6,565 | † | |||||||||||
Joseph P. Harper, Sr.
|
427,748 | (7) | 10,500 | 438,248 | 2.68 | % | ||||||||||
Maarten D. Hemsley
|
165,653 | (6)(8) | 2,800 | 169,953 | 1.03 | % | ||||||||||
Patrick T. Manning
|
24,557 | (9) | — | 24,557 | † | |||||||||||
Richard O. Schaum
|
6,565 | (6) | — | 6,565 | † | |||||||||||
Milton L. Scott
|
14,734 | (6) | — | 14,734 | † | |||||||||||
David R. A. Steadman
|
28,724 | (6) | — | 28,734 | † | |||||||||||
Kip L. Wadsworth
|
1,926 | (10) | — | 1,926 | † | |||||||||||
James H. Allen, Jr. ††
|
— | — | — | — | ||||||||||||
Anthony F. Colombo
|
62,211 | 9,300 | 71,511 | † | ||||||||||||
Joseph P. Harper, Jr.
|
217,796 | 2,000 | 219,796 | 1.35 | % | |||||||||||
Brian R. Manning
|
235,505 | (11) | 9,000 | 244,505 | 1.50 | % | ||||||||||
All directors and executive officers as a group (15 persons)
|
1,092,398 | (11) | 35,600 | 1,127,998 | 7.91 | % |
*
|
These are shares that the entity or person can acquire within sixty days of March 1, 2012.
|
†
|
Less than one percent.
|
††
|
Mr. Allen, who was a former Chief Financial Officer of the Company, retired from the Company in May 2011.
|
Voting Power
|
Dispositive Power
|
||||||
Name
|
Filing Date
|
Sole
|
Shared
|
Sole
|
Shared
|
||
(1) |
Ameriprise Financial, Inc.
|
February 13, 2012
|
—
|
1,247,019
|
—
|
1,595,640
|
|
Columbia Management Investment Advisers, LLC
|
February 13, 2012
|
—
|
1,247,019
|
—
|
1,595,640
|
In its filing, Ameriprise (a parent holding company) states that as the parent company of Columbia Management (an investment advisor) it may be deemed to beneficially own the shares reported by Columbia Management and that accordingly, the shares reported by Ameriprise include those shares separately reported by Columbia Management. Each of Ameriprise and Columbia Management disclaims beneficial ownership of any of the shares reported.
|
Voting Power
|
Dispositive Power
|
||||||
Name
|
Filing Date
|
Sole
|
Shared
|
Sole
|
Shared
|
||
(2) |
Janus Capital Management LLC
|
February 14, 2012
|
—
|
1,547,825
|
—
|
1,547,825
|
|
Perkins Small Cap Value Fund | February 14, 2012 | 1,160,709 |
—
|
1,160,709
|
—
|
In its filing, Janus Capital Management states that it has a direct 94.5% ownership stake in INTECH Investment Management ("INTECH") and a direct 77.8% ownership stake in Perkins Investment Management LLC ("Perkins"). Due to the above ownership structure, holdings for Janus Capital, Perkins and INTECH are aggregated for purposes of this filing. Janus Capital, Perkins and INTECH are registered investment advisers, each furnishing investment advice to various investment companies registered under Section 8 of the Investment Company Act of 1940 and to individual and institutional clients.
|
(3) |
Royce & Associates, LLC
|
January 23, 2012
|
1,267,929
|
—
|
1,267,929
|
—
|
|
(4) |
FMR LLC
|
February 14, 2012
|
—
|
—
|
1,055,807
|
—
|
In its filing, FMR LLC states that Fidelity Low-Priced Stock Fund, an investment company registered under the Investment Company Act of 1940, holds all of these shares, but that various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of these shares.
|
(5) |
BlackRock, Inc.
|
February 8, 2012
|
908,063
|
—
|
908,063
|
—
|
In its filing, BlackRock states that various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of the common stock of the Company and that no one person's interest in the common stock of the Company is more than five percent of the total outstanding common shares.
|
(6)
|
This number includes 3,418 restricted shares of the Company's common stock awarded to this non-employee director as described above in the section entitled Director Compensation under the heading Board Operations. The restrictions expire on May 7, 2012, the day preceding the 2012 Annual Meeting of Stockholders, but earlier if the director dies or becomes disabled or if there is a change in control of the Company. The shares are forfeited before the expiration of the restrictions if the director ceases to be a director other than because of his death or disability or a change in control of the Company.
|
(7)
|
This number includes 12,000 shares held by Mr. Harper as custodian for his grandchildren.
|
(8)
|
This number excludes shares owned by the Maarten and Mavis Hemsley Family Foundation.
|
(9)
|
All of these shares have been pledged as security.
|
(10)
|
These shares are subject to restrictions that prevent their sale or other transfer that lapse on December 31, 2012, but earlier if Mr. Wadsworth dies or becomes disabled, if his employment is terminated without cause, or if there is a change in control of the Company. The restricted shares are forfeited in the event that prior to vesting, Mr. Wadsworth resigns or his employment is terminated for cause.
|
(11)
|
This number includes 6,079 shares that are held in a trust of which Mr. Manning is a trustee and beneficiary.
|
(12)
|
See the footnotes above for a description of certain of the shares included in this total.
|
Patrick T. Manning
|
Chairman & Chief Executive Officer
|
Joseph P. Harper, Sr.
|
President & Chief Operating Officer, Treasurer
|
James H. Allen, Jr.
|
Chief Financial Officer (through May 31, 2011)
|
Joseph P. Harper, Jr.
|
Executive Vice President — Finance
Chief Financial Officer (acting) (June 1 through November 27, 2011)
|
Elizabeth D. Brumley
|
Executive Vice President & Chief Financial Officer (since November 28, 2011) and Controller
|
Anthony F. Colombo
|
Executive Vice President — Operations
|
Brian R. Manning
|
Executive Vice President & Chief Business Development Officer
|
Name/Title
|
Base
Salary
($)
|
Total Incentive
Compensation(1)
($)
|
Incentive Compensation Paid in Cash
($)
|
Incentive Compensation Paid in
Restricted
Stock
(Shares)
|
Discretionary Bonus
($)
|
|||||||||||||||
Patrick T. Manning
|
550,000 | — | — | — | — | |||||||||||||||
Joseph P. Harper, Sr.
|
525,000 | — | — | — | — | |||||||||||||||
James H. Allen, Jr. (2)
|
200,833 | — | — | — | — | |||||||||||||||
Joseph P. Harper, Jr.
|
315,000 | — | — | — | — | |||||||||||||||
Elizabeth D. Brumley
|
315,000 | — | — | — | — | |||||||||||||||
Anthony F. Colombo
|
360,000 | — | — | — | — | |||||||||||||||
Brian R. Manning
|
315,000 | — | — | — | — |
|
(1)
|
Incentive compensation is based on the Company's net income and as a result of the loss in 2011, no incentive compensation was paid.
|
|
(2)
|
Mr. Allen retired effective May 31, 2011. In connection with his retirement, the Company agreed to pay him during 2011 at the annual rate of $482,000 for the first five months of 2011.
|
|
·
|
To provide the employee with a rate of pay for the work he or she does that is appropriate in comparison to similar companies in the industry and that is considered fair by the executive and the Company;
|
|
·
|
To give the executive a significant incentive to make the Company financially successful; and
|
|
·
|
To give the executive an incentive to remain with the Company.
|
|
·
|
The Base Deferred Salary of the prior agreements, which was based on a relatively easily achieved EBITDA target, was eliminated. The deferral of this portion of salary was originally designed to keep base salaries low and thereby conserve cash if financial results fell substantially short of expectations. Because the Company has grown substantially and currently has a strong cash position, it was deemed no longer necessary to have this kind of safety net for the Company. The deferred salary was added to base salary.
|
|
·
|
Members noted that in the current economic climate it is difficult to predict city, county, state and federal funding of highway and infrastructure projects on which the Company's business depends. This in turn makes it difficult to establish a fair and reasonable annual earnings-per-share target, much less a long-term target on which to base incentive compensation as was done in the prior agreements. As a result, the Committee determined to base incentive compensation on a percentage of the Company's net income, but contingent on the Company maintaining at least a three-year average return on equity target, thereby making the annual incentive dependent to a certain extent on prior years' results.
|
|
·
|
The Committee added a long-term element to incentive compensation, which had been absent in the prior agreements, by making a significant portion of any earned incentive compensation payable in the form of a three-year restricted stock award in order to encourage executives to take a long-range perspective in fulfilling their responsibilities.
|
|
·
|
The Committee provided the executives with a change in control agreement providing for a severance payment, but only if the executive's employment is terminated without cause just prior to, or within two years after, the change in control. Members of the Committee believe that it is in the Company's best interests to provide executives with this level of financial assurance in order to preserve their neutrality in negotiating and implementing a transaction that would result in a change in control.
|
|
·
|
50% in the form of a three-year restricted stock award;
|
|
·
|
20% based on the level of achievement of personal goals; and
|
|
·
|
30% in cash without pre-conditions.
|
Argan, Inc.
|
|
Dycom Industries, Inc.
|
|
Granite Construction Incorporated
|
|
Great Lakes Dredge & Dock Corporation
|
|
Insituform Technologies, Inc.
|
|
Layne Christensen Company
|
|
MasTec, Inc.
|
|
Matrix Service Company
|
|
Orion Marine Group, Inc.
|
|
Preformed Line Products Company
|
|
Primoris Services Corporation
|
|
Pure Cycle Corporation
|
|
The Goldfield Corporation
|
|
·
|
Bidding on and performing civil construction projects in which the contract for the project is awarded to the lowest bidder. In low-bid contracts, the prime risk is a failure to accurately estimate the overall risks, requirements and costs involved in the project. If the Company bids too high it will not win the contract; if it bids too low and wins the contract, lower profits than anticipated or a loss can result.
|
|
·
|
Design-build, CM/GC (construction manager/general contractor) and other alternative project delivery methods. These projects are ones in which winning the contract depends not only on the bid price, but also on reputation, marketing efforts, quality of design, and the minimization of public inconvenience. Projects of this kind are often bid and performed by joint ventures in which the Company is only one of two or more participants. This means that the Company is subject not only to the risk of making an inaccurate bid, but also to the additional risk of design errors by the design/engineering firm, as well as liability for the entire contract if other participants in the joint venture fail to carry out their portions of the contract, or fail to do so in conformity with the contract.
|
|
·
|
The Company's strategy of expanding its market, opportunities, competencies and geographic diversification organically and through acquisitions. Growth can require the investment of significant capital, and in the case of an acquisition, if the negotiation of the purchase agreement and the subsequent integration of the acquired entity are not successfully performed, significant losses can result.
|
|
·
|
The percentage-of-completion accounting and revenue recognition rules under which the Company is required to prepare its financial statements. Percentage-of-completion accounting requires management to make quarterly and annual estimates of the cost of completing projects that are on going at the date of the financial statements. These estimates directly affect reported profits, and profits are the basis for the award of much of the Company's incentive compensation.
|
|
·
|
The bid preparation process, whether for a low-bid contract or a design-build contract requires careful, meticulous and diligent estimation and calculation of all aspects of the project.
|
|
·
|
The estimates required for percentage cost-of-completion accounting are subject to review, verification and audit.
|
|
·
|
The incentive compensation for the named executive officers is based on net income, with no floor and no cap, which avoids an all-or-nothing approach to incentive compensation that can have the effect of encouraging excessive risk-taking.
|
|
·
|
No extreme effort or risk-taking by executive officers will necessarily result in a large increase in net income.
|
|
·
|
No incentive pay is awarded for completing a single task, such as winning a contract, making a capital investment or completing an acquisition. The officer only benefits if the contract, investment or acquisition is profitable and thereby contributes to the financial success of the Company. This avoids creating an incentive to achieve short-term results at the expense of longer-term results.
|
Name
|
Annual
Salary
($)
|
Percentage of Annual
Incentive Pool (1)
(%)
|
||||||
Patrick T. Manning
|
550,000 | 22.5 | ||||||
Joseph P. Harper, Sr.
|
525,000 | 22.0 | ||||||
James H. Allen, Jr. (2)
|
482,000 | — | ||||||
Joseph P. Harper, Jr.
|
315,000 | 16.5 | ||||||
Elizabeth D. Brumley
|
315,000 | (3) | ||||||
Anthony F. Colombo
|
360,000 | 16.5 | ||||||
Brian R. Manning
|
315,000 | 16.5 |
|
(1)
|
Incentive compensation is payable 50% in the form of three-year restricted stock awards, up to 20% in cash based on the level of achievement of personal goals, and 30% in cash without pre-conditions.
|
|
(2)
|
Mr. Allen retired effective May 31, 2011. In connection with his retirement, the Committee agreed to pay him during 2011 at the rate of the annual salary indicated above for the first five months of 2011. In June 2011, the Company entered into a consulting agreement with Mr. Allen to assist the Company in making the transition to his replacement.
|
|
(3)
|
Ms. Brumley is eligible to earn the same dollar amount of incentive compensation as Messrs. Harper, Jr., Colombo and Brian Manning.
|
Event | Payment and/or Other Obligations (1) | |
1. |
Termination—
● By the Company without cause. (2)
● Involuntary resignation(2) by the executive.
|
In either event, the Company is obligated —
A. To pay the executive his or her base salary in a lump sum for the balance of the term of the employment agreement or for one year, whichever period is longer;
B. To continue to cover the executive under the Company's medical and dental plans provided the executive reimburses the Company the COBRA cost thereof, in which event, the Company must reimburse the amount of the COBRA payments to the executive; and
C. To pay the executive any incentive compensation that would have been earned had the executive remained an employee of the Company through the end of the calendar year in which his or her employment terminated, and to pay in cash any incentive compensation otherwise payable in restricted stock.
|
Estimated December 31, 2011
termination payments:
|
Under A and B, above, the executive would be entitled to the amounts set forth below. Under C, the executive would be entitled to his or her 2011 incentive compensation, to the extent earned, irrespective of termination.
|
|
Mr. Patrick T. Manning
|
$1,100.000 plus COBRA reimbursement for a two-year period, at a cost of approximately $36,653.
|
|
Mr. Joseph P. Harper, Sr.
|
$525,000 plus COBRA reimbursement for a one-year period, at a cost of approximately $12,027.
|
|
Mr. James H. Allen, Jr.
|
N/A (Mr. Allen retired at the end of May 2011)
|
|
Mr. Joseph P. Harper, Jr.
|
$630,000 plus COBRA reimbursement for a two-year period, at a cost of approximately $36,653.
|
|
Ms. Brumley
|
$630,000 plus COBRA reimbursement for a two-year period, at a cost of approximately $20,617.
|
Event | Payment and/or Other Obligations (1) | |
Mr. Colombo
|
$720,000 plus COBRA reimbursement for a two-year period, at a cost of approximately $11,454.
|
|
Mr. Brian R. Manning
|
$630,000 plus COBRA reimbursement for a two-year period, at a cost of approximately $36,653.
|
|
2. |
Termination by reason of the executive's death or permanent disability.
|
The Company is obligated to pay the executive or his or her personal representative, as the case may be, a portion of any incentive compensation that would have been earned had the executive remained an employee of the Company through the end of the calendar year in which employment terminated, based on the number of days during the year that the executive was an employee of the Company, and to pay in cash any incentive compensation otherwise payable in shares of restricted stock.
|
Estimated December 31, 2011
termination payments:
|
None. The executive would be entitled to his or her 2011 incentive compensation, to the extent earned, irrespective of termination.
|
|
3. |
Termination by the Company for cause:(3)
|
All of the executive's stock options terminate.
|
Estimated December 31, 2011
termination payments:
|
None.
|
|
4. |
Voluntary resignation by the executive:
|
If the resignation occurs during a calendar year, the Company is not obligated to pay the executive any incentive or other compensation. If the resignation occurs at or after the end of a calendar year, the Company is obligated to pay the executive any earned incentive compensation for such year.
|
Estimated December 31, 2011
termination payments:
|
None. The executive would be entitled to his or her 2011 incentive compensation, to the extent earned, irrespective of the resignation.
|
|
5. |
Change-in-control termination without cause or because of a breach by the Company of the executive's employment agreement within period commencing one month before and ending two years after a change in control of the Company.
|
Under a change of control agreement, each named executive officer is entitled to an amount payable in a lump sum equal to three times salary, less any severance payable under any employment agreement then in effect. In addition, un-exercisable but in-the-money stock options become exercisable in full.
|
Estimated December 31, 2011
termination payments:
|
The lump sum amounts payable are set forth below. They reflect the lump sum equal to three times salary reduced by the lump sum equal to two times salary payable under the executives' employment agreements, except for Joseph P. Harper, Sr., for whom the lump sum equal to three times salary is reduced by only one times salary because his employment agreement expires at the end of 2012.
No cost would be incurred by the Company as a result of the acceleration of vesting provision because all of the outstanding stock options of the named executive officers who hold stock options were already vested (exercisable) in full at December 31, 2011.
|
|
Mr. Patrick T. Manning
|
$550,000.
|
|
Mr. Joseph P. Harper, Sr.
|
$1,050,000
|
|
Mr. Allen
|
N/A (Mr. Allen retired at the end of May 2011)
|
|
Mr. Joseph P. Harper, Jr.
|
$315,000
|
|
Ms. Brumley
|
$315,000
|
|
Mr. Colombo
|
$360,000
|
|
Mr. Brian R. Manning
|
$315,000
|
(1)
|
The executives' salary and eligibility for incentive compensation are set forth above in the section entitled Employment Agreements of the Named Executive Officers. For the amount of any incentive compensation paid to the named executive officers for 2011, see the section entitled Summary Compensation Table for 2011, below.
|
(2)
|
A termination without cause is a termination for any reason other than for cause, permanent disability, death or voluntary resignation.
The executive is entitled to "involuntarily" resign in the event that the Company commits a material breach of a material provision of the employment agreement and fails to cure the breach within thirty days, or, if the nature of the breach is one that cannot practicably be cured in thirty days, if the Company fails to diligently and in good faith commence a cure of the breach within the thirty-day period.
|
(3)
|
The term "cause" is defined in the named executive officers' employment agreements and means what is commonly referred to as cause in employment matters, such as gross negligence, dishonesty, insubordination, inadequate performance of responsibilities after notice and the like.
|
|
●
|
Patrick T. Manning, the Company's principal executive officer.
|
|
●
|
James H. Allen, Jr., the Company's principal financial officer from January through May, 2011, when he retired.
|
|
●
|
Joseph P. Harper, Jr., the Company's acting principal financial officer from June through November, 27, 2011.
|
|
●
|
Elizabeth D. Brumley, the Company's principal financial officer since November 28, 2011.
|
|
●
|
The Company's three most highly compensated executive officers (other than the officers listed above) who were serving at the end of 2011.
|
Name
and
Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock Awards
($)
|
Non-Equity
Incentive Plan
Compensation
($)
|
All Other
Compen-
sation
($) (2)
|
Total
($)
|
|||||||||||||||||||||
Patrick T. Manning
Chairman of the Board & Chief Executive Officer (principal executive officer)
|
2009
2010
2011
|
365,000
365,000
550,000
|
-
-
-
|
-
-
-
|
325,000
325,000
-
|
10,000
-
-
|
700,000
690,000
550,000
|
|||||||||||||||||||||
Joseph P. Harper, Sr.
President, & Chief Operating Officer, Treasurer
|
2009
2010
2011
|
365,000
365,000
525,000
|
-
-
-
|
-
-
-
|
325,000
325,000
-
|
7,300
13,020
9,800
|
697,300
703,020
534,800
|
|||||||||||||||||||||
James H. Allen, Jr. (1)
Chief Financial Officer (principal financial officer)
|
2009
2010
2011
|
250,000
250,000
200,833
|
-
-
-
|
-
-
-
|
150,000
150,000
-
|
7,500
10,192
8,333
|
407,500
410,192
209,166
|
|||||||||||||||||||||
Joseph P. Harper, Jr. (1)
Acting Chief Financial Officer (principal financial officer)
|
2010
2011
|
200,000
315,000
|
-
-
|
-
-
|
200,000
-
|
7,993
6,967
|
407,993
321,967
|
|||||||||||||||||||||
Elizabeth D. Brumley (1)
Executive Vice President & Chief Financial Officer (principal financial officer)
|
2011 | 288,750 | - | - | - | - | 288,750 | |||||||||||||||||||||
Anthony F. Colombo
Executive Vice President — Operations
|
2010
2011
|
215,000
360,000
|
-
-
|
-
-
|
260,000
-
|
17,704
9,800
|
492,704
369,800
|
|||||||||||||||||||||
Brian R. Manning
Executive Vice President & Chief Business Development Officer
|
2010
2011
|
200,000
315,000
|
-
-
|
-
-
|
200,000
-
|
15,635
7,792
|
415,635
322,792
|
|
(1)
|
See the information above in the section entitled The Executive Officers for the dates these officers served as principal financial officer.
|
|
(2)
|
A breakdown of the amounts shown in this column is set forth in the table below.
|
Name
|
Year
|
Car
Allowance/Use
of a Company
Car
|
Company
Contribution to
401(k) Plan
Account
|
|||||||||
Patrick T. Manning
|
2009
2010
2011
|
-
-
-
|
$ |
10,000
-
-
|
||||||||
Joseph P. Harper, Sr.
|
2009
2010
2011
|
-
-
-
|
$ |
7,300
13,020
9,800
|
||||||||
James H. Allen, Jr.(1)
|
2009
2010
2011
|
-
-
-
|
$
$
|
7,500
10,192
8,333
|
||||||||
Joseph P. Harper, Jr. |
2010
2011
|
$ |
1,185
-
|
(2) | $ |
6,808
6,967
|
||||||
Elizabeth D. Brumley
|
2011 | — | — | |||||||||
Anthony F. Colombo
|
2010
2011
|
$ |
9,600
-
|
(3) | $ |
8,104
9,800
|
||||||
Brian R. Manning
|
2010
2011
|
$ |
8,250
-
|
(2) | $ |
7,385
7,792
|
|
(1)
|
Mr. Allen retired in May 2011.
|
|
(2)
|
This represents an $800 monthly car allowance.
|
|
(3)
|
This is the cost of the use of a Company-owned vehicle.
|
Option Awards
|
||||||||
Name
|
Number of Shares Acquired
on Exercise
(#)
|
Value Realized on
Exercise(1)
($)
|
||||||
Patrick T. Manning
|
— | — | ||||||
Joseph P. Harper, Sr.
|
3,700 | 45,917 | ||||||
James H. Allen, Jr.
|
— | — | ||||||
Joseph P. Harper, Jr.
|
— | — | ||||||
Elizabeth D. Brumley
|
— | — | ||||||
Anthony F. Colombo
|
2,500 | 29,125 | ||||||
Brian R. Manning
|
2,000 | 23,700 |
|
(1)
|
SEC regulations define the "Value Realized on Exercise" as the difference between the market price of the shares on the date of the option exercise (purchase), and the option exercise price of the shares, whether or not the shares are sold subsequent to the exercise, or if they are sold, whether or not the sale occurred on the same date as the exercise.
|
Option Awards | ||||||||||||||||||
Name
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Un-exercisable
|
Option
Exercise
Price/Share
($)
|
Option
Grant
Date
|
Option
Expiration
Date
|
Vesting
Date
Footnotes
|
||||||||||||
Patrick T. Manning
|
— | — | ||||||||||||||||
Joseph P. Harper, Sr.
|
3,500 | — | 3.10 |
8/12/2004
|
8/12/2014
|
(1) | ||||||||||||
3,500 | — | 3.05 |
8/20/2003
|
8/20/2013
|
(1) | |||||||||||||
3,500 | — | 1.725 |
7/24/2002
|
7/24/2012
|
(1) | |||||||||||||
James H. Allen, Jr.
|
— | — | ||||||||||||||||
Joseph P. Harper, Jr.
|
1,400 | — | 3.10 |
8/12/2004
|
8/12/2014
|
(2) | ||||||||||||
600 | — | 3.05 |
8/20/2003
|
8/20/2013
|
(2) | |||||||||||||
Elizabeth D. Brumley
|
— | — | ||||||||||||||||
Anthony F. Colombo
|
3,500 | — | 3.10 |
8/12/2004
|
8/12/2014
|
(2) | ||||||||||||
3,000 | — | 3.05 |
8/20/2003
|
8/20/2013
|
(2) | |||||||||||||
2,800 | — | 1.725 |
7/24/2002
|
7/24/2012
|
(2) |
Option Awards | ||||||||||||||||||
Name |
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Un-exercisable
|
Option
Exercise
Price/Share
($)
|
Option
Grant
Date
|
Option
Expiration
Date
|
Vesting
Date
Footnotes
|
||||||||||||
Brian R. Manning
|
3,500 | — | 3.10 |
8/12/2004
|
8/12/2014
|
(2) | ||||||||||||
3,000 | — | 3.05 |
8/20/2003
|
8/20/2013
|
(2) | |||||||||||||
2,500 | — | 1.725 |
7/24/2002
|
7/24/2012
|
(2) |
|
(1)
|
This option vested in equal installments on the first three anniversaries of its grant date.
|
|
(2)
|
This option vested in equal installments on the first five anniversaries of its grant date.
|
Plan Category (1)
|
Number of Securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a)
|
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)
|
|||||||||
Equity compensation plans approved by security holders:
|
52,100 | $ | 3.767 | 425,771 | (1) | |||||||
Equity compensation plans not approved by security holders:
|
— | — | — |
(1)
|
The Company has only one outstanding compensation plan under which the Company has authorized the issuance of equity securities, the Stock Incentive Plan. That plan and subsequent amendments to it have been approved by stockholders other than the amendment which is the subject of Proposal 2. The plan would have expired on July 23, 2011 had the Board of Directors not amended the plan, among other things, to extend its term for an additional ten years. The amendment and restatement of the plan is the subject of Proposal 2 and is described in detail above under the heading Amendment and Restatement of the Company's Stock Incentive Plan (Proposal 2).
|
December
2006
($)
|
December
2007
($)
|
December
08
($)
|
December
2009
($)
|
December
2010
($)
|
December
2011
($)
|
|||||||||||||||||||
Sterling Construction Company, Inc.
|
100.00 | 100.28 | 85.16 | 87.96 | 59.93 | 49.49 | ||||||||||||||||||
Dow Jones US Index
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100.00 | 106.01 | 66.61 | 85.79 | 100.08 | 101.42 | ||||||||||||||||||
Dow Jones US Heavy Construction Index
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100.00 | 189.96 | 85.25 | 97.44 | 125.12 | 103.15 |
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Wadsworth Development Group, LLC (WDG). In 2011, as part of a monthly service agreement, RLW provided WDG with office supplies, payroll services, computers, IT services, telephone service and the like on a monthly basis for a total billing to WDG in 2011 of $615,000.
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Wadsworth Corporate Center Building A, LLC (WCC), Wadsworth Dannon Way, LLC (WDW) and Wadsworth & Sons III (W&S3). In 2011, RLW leased —
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its primary office space from WCC at an annual average rent of $228,462 plus common area maintenance charges of $80,776;
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a facility for RLW's equipment maintenance shop from WDW at an annual rent of $178,333 plus common area maintenance charges of $71,675; and
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a facility from W&S3 to provide temporary living quarters for field employees at an annual rent of $47,104.
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Riverwalk Investments, LLC (RWI). In 2011, RLW engaged in contracts to develop RWI site improvements and to build out four of RWI's tenant spaces for a total price of $597,692.
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Wadsworth & Sons LLC (W&S). W&S is an indemnitor of surety bonds issued to Cal Wadsworth Construction Company, which is owned by Kip Wadsworth’s brother, Cal Wadsworth. The potential indemnification exposure to W&S for bonds issued on uncompleted Cal Wadsworth Construction projects is estimated to be less than $1 million.
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Big Sky, LLC. Big Sky, LLC is an entity owned and managed by W&S3. Big Sky owns a plane that RLW rented in 2011 for certain business travel of its employees, including Mr. Wadsworth, and for which RLW paid Big Sky rental fees and expenses totaling $72,259.
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Renewable Energy Development Corporation (REDCO.) REDCO is a privately-held renewable energy development company for which RLW performed construction services. During 2011, REDCO filed for bankruptcy protection and as a result, RLW wrote off a $23,838 account receivable.
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Name (Relationship)
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REDCO
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WDG
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WCC
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WDW
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W&S3
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RWI
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W&S
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Kip L. Wadsworth
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28.25%
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24.50%
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24.50%
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19.60%
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28.25%
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24.50%
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19.60%
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Con L. Wadsworth (brother)
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24.69%
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24.50%
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24.50%
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19.60%
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24.69%
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24.50%
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19.60%
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Tod L. Wadsworth (brother)
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24.69%
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24.50%
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24.50%
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19.60%
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24.69%
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24.50%
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19.60%
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Ty L. Wadsworth (brother)
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22.36%
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24.50%
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24.50%
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19.60%
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22.37%
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24.50%
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19.60%
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Nic L. Wadsworth (brother)
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—
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—
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—
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19.60%
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—
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—
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19.60%
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Ralph L. Wadsworth (father)
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—
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1.00%
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1.00%
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1.00%
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—
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1.00%
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1.00%
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Peggy Wadsworth (mother)
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—
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1.00%
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1.00%
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1.00%
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—
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1.00%
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1.00%
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Fee Category
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2011
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Percentage Approved
by the Audit
Committee
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2010
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Percentage
Approved by the
Audit Committee
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Audit Fees:
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648,143 | 100 | % | 578,000 | 100 | % | ||||||||||
Audit-Related Fees:
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— | N/A | — | N/A | ||||||||||||
Tax Fees:
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— | N/A | — | N/A | ||||||||||||
All Other Fees:
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1,200 | 100 | % | 2,000 | 100 | % |
VOTING ON THE INTERNET - Access “www.voteproxy.com” and follow the on-screen instructions. Have your proxy card available when you access the web page, and use the Company Number and Account Number shown on your proxy card.
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VOTING BY TELEPHONE - Call toll-free 1-800-PROXIES
(1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call and use the Company Number and Account Number shown on your proxy card.
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COMPANY NUMBER | |
ACCOUNT NUMBER
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You may vote online or by telephone until 11:59 PM Eastern Time on the day before the meeting.
VOTING BY MAIL - Sign, date and mail your proxy card in the envelope provided as soon as possible.
VOTING IN PERSON - You may vote your shares in person by attending the Annual Meeting.
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, proxy statement, proxy card and 2011 Annual Report are available at http://www.amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=04770
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Please detach along perforated line and mail the part below in the envelope provided IF you are not voting via telephone or the Internet.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS; AND FOR PROPOSALS 2, 3 and 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
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1.
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Election of Directors:
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For
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Against
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Abstain
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John D. Abernathy
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o | o | o | ||
Richard O. Schaum
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o | o | o | ||
Milton L. Scott
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o | o | o | ||
David R. A. Steadman
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o | o | o | ||
2.
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Approval of the amendment and restatement of the
Company's Stock Incentive Plan.
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o | o | o | |
3.
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Ratification of the selection of Grant Thornton LLP
as the Company's independent registered public
accounting firm for 2012.
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o | o | o | |
4.
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Advisory vote to approve named
executive officer compensation.
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o | o | o |
Signature of Stockholder | Date | Signature of Stockholder | Date |
COMPANY NUMBER
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ACCOUNT NUMBER
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CONTROL NUMBER
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Notice of Annual Meeting of Stockholders
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Proxy Statement
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Form of Electronic Proxy Card
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2011 Annual Report
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TO REQUEST MATERIAL: | Telephone: | 888-776-9962 For international callers: 718-921-8562 |
E-Mail: | info@amstock.com | |
Website: | http://www.amstock.com/proxyservices/requestmaterials.asp |
TO VOTE:
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Online:
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To access your online proxy card, please visit www.voteproxy.com and follow the on-screen instructions. You may enter your voting instructions at www.voteproxy.com up until 11:59 PM Eastern Time on the day before the meeting date.
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In Person:
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You may vote your shares in person by attending the Annual Meeting.
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Telephone:
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To vote by telephone, please visit https://secure.amstock.com/voteproxy/login2.asp to view the materials and to obtain the toll-free number to call.
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Mail:
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You may request a proxy card by following the instructions above for requesting materials, then fill out the card and mail it to the Company.
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1.To elect four (4) directors to the Board of Directors of the Company to serve until their terms expire and until their successors are duly elected and qualified. | 2. | To approve the amendment and restatement of the Company's Stock Incentive Plan. | ||
Nominees: | Name | Term | 3. | To ratify the selection of Grant Thornton LLP as the |
John D. Abernathy | Three-year term | Company's independent registered public accounting firm for 2012. | ||
Richard O. Schaum | Three-year term | |||
Milton L. Scott | Three-year term | 4. | Advisory vote to approve named executive officer | |
David R. A. Steadman | One-year term | compensation. | ||
Please note that you cannot use this notice to vote by mail. | 5. | To transact any other business that properly comes before the meeting. | ||
These items of business are more fully described in the Proxy Statement.
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The record date for the Annual Meeting is Monday, March 12, 2012. Only stockholders of record at the close of business on that date may vote at the meeting or any adjournment thereof. |
1.
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Background. The Board of Directors of Sterling Construction Company, Inc. (the "Company") on July 23, 2001 adopted the 2001 Stock Incentive Plan and the stockholders of the Company on October 16, 2001 approved it. The purpose of this amendment and restatement is to (a) extend its term; (b) to conform it to applicable law; and (c) to change its name to the Sterling Construction Company, Inc. Stock Incentive Plan. As initially adopted and as amended and in effect from time to time therafter, it will be referred to herein as this "Plan.")
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2.
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Purpose. The purpose of this Plan is to advance the interests of the Company's stockholders by enhancing the Company's ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing those persons with opportunities for equity ownership and performance-based incentives, and thereby to better align the interests of those persons with the interests of the Company's stockholders. Except where the context otherwise requires, the term "Company" shall include Sterling Construction Company, Inc. and all its present or future subsidiary corporations as defined in Section 424(f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the "Code.")
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3.
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Eligibility. All of the Company's employees, officers, directors, consultants and advisors are eligible to be granted options, and to be awarded restricted stock and other stock-based compensation (each, an "Award") under this Plan. Any person to whom an Award has been made under this Plan shall be deemed a "Participant."
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4.
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Administration of this Plan & Delegation.
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4.1
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Administration by the Board of Directors.
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(a)
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This Plan will be administered by the Board of Directors of the Company (the "Board.") The Board shall have authority to make Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to this Plan as it shall deem advisable.
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(b)
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The Board shall determine the extent, if any, to which any performance criteria or other conditions applicable to the vesting of an Award have been satisfied or whether such criteria shall be waived or modified.
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(c)
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The Board may interpret this Plan and correct any defect, supply any omission, or reconcile any inconsistency in this Plan or in any Award in the manner and to the extent it shall deem expedient to carry this Plan into effect, and the Board shall be the sole and final judge of such expediency.
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(d)
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No member of the Board shall be liable for any action or determination relating to this Plan, and no director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination under this Plan made in good faith.
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(e)
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All decisions by the Board shall be made in the Board's sole discretion and shall be final and binding on all persons having or claiming any interest in this Plan or in any Award.
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4.2
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Delegation by the Board.
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(a)
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To the extent permitted by applicable law, the Board may delegate any or all of its powers under this Plan to one or more committees or subcommittees of the Board (each a "Committee.") All references in this Plan to the "Board" shall mean the Board or a Committee to the extent that the Board's powers or authority under this Plan have been delegated to the Committee.
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Sterling Construction Company, Inc. Stock Incentive Plan |
Page 1 of 8
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(b)
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So long as the Company’s common stock, par value $0.01 per share (the "Common Stock") is registered under the Securities Exchange Act of 1934 (the "Exchange Act") the Board shall appoint one such Committee and delegate the administration of this Plan to that Committee. The Committee shall consist of not less than three members, each member of which shall —
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1
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be a "non-employee director" as defined in Rule 16b-3 promulgated under the Exchange Act;
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2
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be an "outside director" within the meaning of Section 162(m) of the Code and the Treasury regulations issued thereunder; and
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3
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satisfy the requirements for independence of any exchange or trading system on which the Common Stock is traded.
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5.
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Shares Available for Awards.
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5.1
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Number of Shares. Subject to adjustment under Section 5.4, below, Awards may be made under this Plan covering up to 1,000,000 shares of Common Stock, and the maximum number of shares of Common Stock that may be issued under this Plan pursuant to the exercise of Incentive Stock Options is 1,000,000. Shares issued under this Plan may consist in whole or in part of authorized but un-issued shares or treasury shares.
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5.2
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If any Award (a) expires; (b) is terminated, surrendered or canceled without having been fully exercised; or (c) is forfeited in whole or in part or results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for making Awards under this Plan, subject, however, in the case of Incentive Stock Options to any limitation required under the Code.
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5.3
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Calendar Year Per-Participant Limitation.
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(a)
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The maximum number of shares of Common Stock subject to Options (as defined in Section 6, below) awarded to any one Participant pursuant to this Plan in any calendar year shall not exceed 100,000.
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(b)
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The maximum number of shares of Common Stock which may be subject to Restricted Stock Awards (as defined in Section 7, below) made to any one Participant in any calendar year shall not exceed 100,000.
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(c)
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The maximum amount of any other compensation that may be paid to any Participant pursuant to any Awards under this Plan in any calendar year —
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1
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shall not exceed the fair market value (determined as of the date of payment) of 100,000 shares of Common Stock if the compensation under the Award is denominated under the Award agreement only in terms of shares of Common Stock or a multiple of the fair market value per share of Common Stock; or
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2
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in all other cases, shall not exceed $1,000,000.
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(d)
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This Section 5.3 shall be construed and applied consistently with Section 162(m) of the Code.
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5.4
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Adjustment in the Number of Shares.
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(a)
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In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a normal cash dividend —
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1
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the number and class of securities available under this Plan;
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2
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the number and class of security and the exercise price per share subject to each outstanding Option;
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3
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the repurchase price per security, if any, subject to each outstanding Restricted Stock Award; and
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4
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the terms of each other outstanding stock-based Award, shall be appropriately adjusted by the Company (or substituted Awards may be made, if applicable) to the extent the Board shall determine, in good faith, that such an adjustment (or substitution) is necessary and appropriate.
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Sterling Construction Company, Inc. Stock Incentive Plan |
Page 2 of 8
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(b)
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Notwithstanding the foregoing, all such adjustments, if any, shall be made —
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1
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in a manner consistent with the requirements of Section 409A of the Code in the case of an Award to which Section 409A of the Code is applicable or would be applicable as a result of, or in connection with, any actual or proposed adjustment or adjustments;
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2
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in a manner consistent with the requirements of Section 424(a) of the Code in the case of Incentive Stock Options; and
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3
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in a manner consistent with Section 162(m) of the Code in the case of any Award held by a Participant and intended to constitute performance-based compensation.
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(c)
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The Board’s determinations regarding the foregoing adjustments shall be final, binding and conclusive with respect to the Company and all other interested persons.
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6.
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Stock Options.
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6.1
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General. The Board may grant options to purchase Common Stock (each an "Option") and may determine all of the the terms, conditions and limitations applicable to each Option, including such conditions relating to applicable federal or state securities laws as it considers necessary, appropriate or advisable.
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6.2
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Incentive Stock Options. An Option that the Board intends to be an "incentive stock option" as defined in Section 422 of the Code (an "Incentive Stock Option") shall only be granted to employees of the Company and shall be subject to, and shall be construed consistently with, the requirements of Section 422 of the Code. The Company shall have no liability to a Participant or any other party if an Option (or any part thereof) that is intended to be an Incentive Stock Option is for any reason not an Incentive Stock Option. An Option that is not intended to be an Incentive Stock Option shall be designated a "Non-Statutory Stock Option."
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6.3
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Exercise Price and Other Terms.
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(a)
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At the time each Option is awarded, the Board shall establish and specify the exercise price in accordance with applicable laws, rules and regulations; the time or times at which the Option is exercisable; and the term of the Option.
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(b)
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Options may only be exercised by delivery to the Company of a written notice of exercise signed by the Participant or other person authorized to do so on behalf of the Participant together with payment in full for the number of shares being purchased in the manner set forth in Section 6.4, below.
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6.4
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Methods of Payment.
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(a)
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The purchase price of Common Stock purchased pursuant to the exercise of an Option shall be paid in cash or by check payable to the order of the Company except to the extent that the Board permits any other method of payment in a particular option agreement or generally as to all Options.
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(b)
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If the Common Stock is registered under the Exchange Act, payment of the purchase price may also be made by delivery of an irrevocable and unconditional undertaking by a credit-worthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and/or any applicable withholding tax, or by delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a credit worthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and/or any applicable withholding tax.
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Sterling Construction Company, Inc. Stock Incentive Plan |
Page 3 of 8
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7.
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Restricted Stock Awards.
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7.1
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Grants. The Board may make Awards entitling the recipient to acquire shares of Common Stock subject to the right of the Company to repurchase from the recipient all or some of such shares at their issue price or other stated or formula price, or may make Awards without requiring any payment therefor that are subject to forfeiture of the shares covered by the Award in the event that conditions specified by the Board in the Award agreement are not satisfied prior to the end of a restriction period or periods established by the Board for such Award (each a "Restricted Stock Award.")
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7.2
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Terms and Conditions. The Board shall determine the terms and conditions of any Restricted Stock Award, including the issue price, if any, and the conditions for repurchase or forfeiture. Any one or more stock certificates issued to cover a Restricted Stock Award shall be registered in the name of the Participant. Unless otherwise determined by the Board, the Participant shall deposit or leave each certificate together with a stock power endorsed in blank by the Participant with the Company or its designee. At the expiration of a restriction period, the Company (or such designee) shall deliver to the Participant the certificate representing the shares that are no longer subject to restrictions. If the Participant has died, the certificate shall be delivered to the beneficiary designated by the Participant to receive amounts due to, or to exercise the rights of, the Participant in the event of his or her death (the "Designated Beneficiary.") The manner of such designation shall be determined by the Board. In the absence of an effective designation by a Participant, the Designated Beneficiary shall be the Participant's estate.
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8.
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Other Stock-Based Awards. The Board shall have the right to make any other Awards based upon the Common Stock having such terms and conditions as the Board may determine, including the grant of shares based upon certain conditions, the grant of securities convertible into Common Stock and the grant of stock appreciation rights.
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9.
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General Provisions Applicable to Awards.
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9.1
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Transferability of Options. During the lifetime of a Participant, Options shall be exercisable only by the Participant.
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(a)
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Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except —
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1
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by will or the laws of descent and distribution; or
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2
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to immediate family members to the extent permitted by applicable laws, provided that the transferee delivers to the Company a written instrument agreeing to be bound by all of the terms of the Award as if the transferee were the person to whom it was granted.
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(b)
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"Immediate family members" shall consist only of a person's spouse, parent, issue or any spouse of any such parent or issue (including issue by adoption) or a trust established for the benefit of a person's spouse, parent, issue or any spouse of any such parent or issue (including issue by adoption.)
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(c)
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References to a Participant, to the extent relevant in the context, shall include references to transferees authorized under this Plan; provided however, irrespective of any such transfer or assignment of an Option, the Company shall only be obliged to send notices with respect to that Option to the original grantee thereof, or in the event of the Participant’s death or disability, to his or her personal representative.
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9.2
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Documentation of Awards. Each Award under this Plan shall be evidenced by a written agreement in such form as the Board shall determine. Each Award may contain terms and conditions in addition to, but not inconsistent with, those set forth in this Plan.
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9.3
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Board Discretion as to Awards. Except as otherwise provided by this Plan, each type of Award may be made alone, or in addition to, or in relation to, any other type of Award. The terms of each type of Award need not be identical, and the Board need not treat Participants uniformly.
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Sterling Construction Company, Inc. Stock Incentive Plan |
Page 4 of 8
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9.4
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A Participant's Change of Status. The Board shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant, and the extent to which, and the period during which, the Participant or the Participant's personal representative or Designated Beneficiary may exercise rights under the Award.
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9.5
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Substitute Awards. The Board may make Awards under this Plan in substitution for stock and stock-based awards held by employees of another entity who become employees of the Company as a result of a merger or consolidation of the employing entity with the Company, or the acquisition by the Company of property or stock of the employing entity. Each substitute Award shall be made on such terms and conditions as the Board considers appropriate in the circumstances.
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9.6
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Tax Withholding. Each Participant shall pay to the Company, or make provision satisfactory to the Board for payment of, any taxes required by law to be withheld in connection with Awards to such Participant no later than the date of the event creating the tax liability. The Board may allow Participants to satisfy such tax obligations in whole or in part in shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their fair market value as determined by the Board in good faith. The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to such Participant.
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9.7
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Amendment of Awards. The Board may amend, modify or terminate any outstanding Award, including by —
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(a)
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Substituting therefor another Award of the same or a different type;
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(b)
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Changing the date of exercise or realization; and/or
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(c)
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By converting an Incentive Stock Option into a Non-Statutory Stock Option, provided that the Participant's consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant.
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9.8
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Pre-Conditions to Delivery of Shares. The Company will not be obligated to deliver any shares of Common Stock pursuant to this Plan or to remove restrictions from shares previously delivered under this Plan until —
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(a)
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All conditions of the Award have been met or removed to the satisfaction of the Company;
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(b)
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In the opinion of the Company's counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations; and
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(c)
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The Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules and regulations.
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9.9
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Acceleration of Awards. The Board may at any time provide as follws:
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(a)
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That any Option shall become immediately exercisable in full or in part.
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(b)
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That any Restricted Stock Award shall be free of some or all restrictions.
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(c)
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That any other stock-based Award may become exercisable in full or in part or become free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be.
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Sterling Construction Company, Inc. Stock Incentive Plan |
Page 5 of 8
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10.
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Definition of a Change of Control. A Change of Control of the Company shall be deemed to have occurred upon the occurrence of any of the following events:
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●
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A "Change in Ownership;"
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●
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A "Change in Effective Control;" or
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●
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A "Change in Ownership of Assets"
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as those terms are defined below.
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10.1
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A Change in Ownership.
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(a)
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A Change in Ownership shall be deemed to occur on the date that any Person or Group (as those terms are defined below) acquires ownership of stock of the Company that, together with stock held by that Person or Group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company.
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(b)
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If any Person or Group is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company, 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.
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(c)
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An increase in the percentage of stock owned by any Person or Group as a result of a transaction in which the Company acquires its own stock in exchange for property (but not when the Company acquires its own stock for cash) will be treated as an acquisition of stock for purposes of this Agreement.
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(d)
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This Section 10.1 applies only when there is a transfer of stock of the Company or issuance of stock of the Company, and stock in the Company remains outstanding after the transaction. Section 10.3 below, describes a change in ownership of assets.
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10.2
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A Change in Effective Control. A Change in Effective Control shall be deemed to occur on the date on which a majority of the Company’s board of directors is replaced during any twelve-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s board of directors before the appointment or election.
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10.3
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A Change in Ownership of Assets.
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(a)
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A Change in Ownership of Assets shall 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 10.3 —
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1
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the Company means and includes its consolidated subsidiaries; and
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2
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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.
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(b)
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There is no change in control event under this Section 10.3 when there is a transfer to an entity that is controlled by the stockholders of the Company immediately after the transfer.
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(c)
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A transfer of assets by the Company is not treated as a change in the ownership of such assets if the assets are transferred to —
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1
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a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock;
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2
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an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company;
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3
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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
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4
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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).
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(d)
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Except as otherwise provided above in Section 10.3(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.
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10.4
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Section 409A of the Code. Notwithstanding any provision to the contrary herein, in any circumstance in which the foregoing definition of Change of Control of the Company would be operative and with respect to which the income tax under Section 409A of the Code would apply or be imposed, but where such tax would not apply or be imposed if the meaning of the term "Change of Control of the Company" met the requirements of Section 409A(a)(2)(A)(v) of the Code, then the term "Change of Control of the Company" herein shall mean, but only for the transaction so affected, a "change in control event" within the meaning of Treasury regulation §1.409A-3(i)(5).
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10.5
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Consequences of a Change of Control. Upon the occurrence of a Change of Control of the Company or the execution by the Company of any agreement which results in a Change of Control of the Company, the Board shall take one or more of the following actions with respect to then outstanding Awards:
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(a)
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Provide that such Awards shall be assumed, or equivalent Awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof;) provided however, that any stock options substituted for Incentive Stock Options shall to the extent that it is reasonably practical to do so, be made to satisfy (in the determination of the Board) the requirements of Section 424(a) of the Code, but if a substituted option shall fail for any reason to satisfy such requirements, such option shall become a Non-Statutory Stock Option and provided further, that the substitution shall satisfy the requirements of Treasury regulation Section 1.409A-1(b)(5)(v)(D) so as not to be treated as the grant of a new stock right or change in the form of payment for purposes of Treasury regulation Sections 1.409A-1 through 1.409A-6;
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(b)
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In the event of a transaction resulting in a Change of Control of the Company under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such transaction (the "Acquisition Price") provide that all outstanding Options shall terminate upon consummation of such transaction and that Participants shall receive, in exchange for such Options, a cash payment equal to the amount, if any, by which (i) the Acquisition Price multiplied by the number of shares of Common Stock subject to the outstanding Options (whether or not then exercisable), exceeds (ii) the aggregate exercise price of such Options; and/or
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(c)
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Accelerate in full the vesting of such Awards; and/or
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(d)
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Take any other actions the Board deems appropriate.
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11.
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Other Provisions.
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11.1
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No Right to Employment or Other Status. No person shall have any claim or right to an Award, and the making of an Award to a person shall not be construed as giving such person the right to continued employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under this Plan, except as otherwise expressly provided in the Award.
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11.2
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No Rights as a Stockholder. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed pursuant to an Award until becoming the record holder of such shares.
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11.3
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Effective Date and Term of Plan. The amendment and restatment of this Plan shall become effective on the date on which it is adopted by the Board. No Awards shall be granted under this Plan after the earlier of the tenth anniversary of (a) the date on which the amendment and restatement of this Plan was adopted by the Board; and (b) the date the amendment and restatement of this Plan was approved by the Company's shareholders, but Awards granted within such period may extend beyond the tenth anniversary.
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11.4
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Amendment of Plan. The Board may amend, suspend or terminate this Plan or any portion thereof at any time, provided that no amendment shall be made without subsequent stockholder approval if such approval is necessary to comply with any applicable tax or regulatory requirements. Amendments requiring stockholder approval shall become effective when adopted by the Board.
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11.5
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Governing Law. The provisions of this Plan and all Awards made under this Plan shall be governed by, and interpreted in accordance with, the laws of the State of Delaware, without regard to any of its applicable conflicts of law provisions.
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11.6
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No Guarantee of Tax Consequences. The Participant shall be solely responsible and liable for any tax consequences (including, but not limited to, any interest or penalties) as a result of participation in this Plan. Neither the Board, nor the Company nor any Committee makes any commitment or guarantee that any federal, state or local tax treatment will apply or be available to any person participating or eligible to participate in this Plan and assumes no liability whatsoever for the tax consequences to the Participants.
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11.7
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A Specified Employee Under Section 409A of the Code. Subject to any restrictions or limitations contained herein, in the event that a "specified employee" (as defined under Section 409A of the Code) becomes entitled to a payment under this Plan that is subject to Section 409A of the Code (and which does not qualify for any exceptions or exemption from Section 409A of the Code, such as the short-term deferrals and for separation pay only upon an involuntary separation from service exception) on account of a "separation from service" (as defined under Section 409A of the Code) such payment shall not occur until the date that is six (6) months plus one (1) day from the date of such "separation from service."
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12.
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Compliance with Section 409A of the Code. Certain items of compensation paid pursuant to this Plan are or may be subject to Section 409A of the Code. In such instances, this Plan is intended to comply and shall be administered in a manner that is intended to comply with Section 409A of the Code and shall be construed and interpreted in accordance with such intent.
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