| 34| Sterling Infrastructure |2024 ProxyStatement
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| | | | | | | | | | | | |
| | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)
| | | | |
Name | | Grant Date | | Threshold | | Target | | Maximum | | All Other Stock Awards: Number of Shares of Stock or Units(2) | | Grant Date Fair Value of Stock and Option Awards |
Joseph A. Cutillo | | | | | | | | | |
| | |
Incentive Compensation
| | 4/28/2017 | | $588,830 | | $981,384 | | $1,128,592 | | — | | — |
Restricted Stock Grant
| | 4/28/2017 | | — | | — | | — | | 50,000 | | $475,500 |
| | | | | | | | | | | | |
Ronald A. Ballschmiede
| | | | | | | | | | | | |
Incentive Compensation
| | 2/10/2017 | | $448,671 | | $747,786 | | $859,954 | | — | | — |
| | | | | | | | | | | | |
Con L. Wadsworth | | | | | | | | | | | | |
Incentive Compensation
| | 2/10/2017 |
| $433,500 | | $722,500 | | $830,875 | | — | | — |
| | | | | | | | | | | | |
Richard E. Chandler, Jr. | | | | | | | | | | | | |
Restricted Stock Grant
| | 10/27/2017 | | — | | — | | — | | 25,000 | | $386,250 |
| | | | | | | | | | | | |
Paul J. Varello | | | | | | | | | | | | |
Restricted Stock Grant
| | 06/08/2017 | | — | | — | | — | | 5,257 | | $53,148 |
| | | | | | | | | | | | |
Roger M. Barzun | | N/A | | N/A | | N/A | | N/A | | N/A | | N/A |
________________
| |
(1)
| For 2017, under our incentive compensation program, Messrs. Cutillo, Ballschmiede and Wadsworth(1)For 2023, under our STI program, each of our NEOs had a target award based on a percentage of salary, with the amount to be earned based on the Company’s performance relative to a pre-established adjusted EBITDA target (representing 75% of the target award), timely and successful completion of several company-wide software applications (representing 10% of the target award), safety performance (representing 10% of the target award) and geographical expansion of the E-infrastructure business (representing 5% of the target award). The amounts reported represent the estimated threshold, target and maximum possible incentive payments that could have been received by each NEO pursuant to the program for 2023. The estimated amounts in the “Threshold” column reflect achievement of the threshold level of performance relative to the targets, resulting in a payout of 50% of the target award for each component. The estimated amounts in the “Maximum” column reflect achievement of the maximum level of performance relative to the targets, resulting in a payout of 200% of the target award based on a multiple of salary, with the amount to be earned based on (a) the company’s performance relative to a pre-established EPS target (representing 75% of the target award), and (b) the executive’s performance relative to pre-established individual goals (representing 25% of the target award). The amounts reported represent the estimated threshold, target and maximum possible incentive payments that could have been received by each named executive officer pursuant to the program for 2017. The estimated amounts in the “Target” column were approved by the compensation committee and reflect 195% of base salary for Mr. Cutillo, and 170% of base salary for each of Mr. Ballschmiede and Mr. Wadsworth. The estimated amounts in the “Threshold” column reflect achievement of the threshold level of performance relative to the EPS target, resulting in a payout of 80% of the target award for that component, and 0% achievement on the individual component, as there is no minimum level required for payout. The estimated amounts in the “Maximum” column reflect achievement of the maximum level of performance relative to the EPS target, resulting in a payout of 120% of the target award for that component, and a payout of 100% of target award on the individual component, as that is the maximum that can be earned under that component. Under the terms of the program as approved by the compensation committee in February 2017, any earned award will be paid 50% in cash and 50% in RSUs that will vest in one-third increments on the first three anniversaries of the grant date, with the number of RSUs determined using the simple average of the closing prices of our common stock in December 2017. |
For more information, see the section titled “Executive Officer Compensation – Compensation—Compensation Discussion and Analysis” beginningAnalysis.”
(2)These awards represent RSUs awarded to the executive officers as part of the 2023 LTI Program. Each of the NEOs received a portion of his 2023 target LTI Program award in the form of RSUs. Each RSU represents a contingent right to receive a share of our common stock on page 21.the vesting date, provided the executive remains employed with us throughout the vesting period, subject to certain exceptions. The RSUs will vest in one-third installments on each of December 31, 2023, 2024 and 2025. For more information regarding the RSUs granted to the NEOs under our 2023 LTI Program, see the section titled “Executive Officer Compensation—Compensation Discussion and Analysis.”
| |
(2)
| Awards in this column represent (a) special grants of restricted stock to Messrs. Cutillo and Chandler, in connection with Mr. Cutillo’s promotion to chief executive officer in April 2017, and Mr. Chandler’s appointment as executive vice president, general counsel and secretary in October 2017, and (b) the grant of restricted stock to Mr. Varello in June 2017 as part of his non-employee director compensation package. As noted above, Mr. Varello forfeited this award when he retired from our board in December 2017. |
(3)These awards represent PSUs awarded to the executive officers as part of the 2023 LTI Program. Each of the NEOs received a portion of his 2023 target LTI Program award in the form of PSUs. Each PSU represents a contingent right to receive shares of our common stock, with the final number of shares to be issued to our NEOs based on the Company’s achievement of applicable EPS threshold, target and maximum goals for each year in the three-year performance cycle ending December 31, 2025. Achievement of the threshold level of performance will result in a payout of 50% of the target award, and a maximum performance would result in 200% of target. The award will vest in one-third installments after the end of each year in the performance cycle. For more information regarding the PSUs granted to the NEOs under our 2023 LTI Program, see the section titled “Executive Officer Compensation—Compensation Discussion and Analysis.”
Outstanding Equity Awards at December 31, 20172023
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Stock Awards |
Name | | Number of Shares or Units of Stock That Have Not Vested(1) |
| Market Value of Shares or Units of Stock That Have Not Vested(2) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested(3) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(2) |
Joseph A. Cutillo | | 46,268 | | $4,068,345 | | 352,788 | | $31,020,649 |
Ronald A. Ballschmiede | | 12,517 | | $1,100,620 | | 53,498 | | $4,704,079 |
Mark D. Wolf | | 4,695 | | $412,831 | | 20,012 | | $1,759,655 |
|
| | | | | | | |
| | Stock Awards | |
Name | | Number of Shares or Units of Stock That Have Not Vested (1) |
| Market Value of Shares or Units of Stock That Have Not Vested (2) |
Joseph A. Cutillo | | 60,272 |
| | $981,228 | |
Ronald A. Ballschmiede | | 15,921 |
| | $259,194 | |
Con L. Wadsworth | | — |
| | — |
| |
Richard E. Chandler, Jr. | | 25,000 |
| | $407,000 | |
Paul J. Varello | | — |
| | — |
| |
Roger M. Barzun | | — |
| | — |
| |
________________
| |
(1)
| Unless the award is forfeited or vesting is accelerated because of a termination of employment or change of control as described below under “Potential Payments upon Termination or Change in Control,” the restrictions on the restricted stock held by the NEOs will lapse and the awards will vest as follows: |
(1)Unless the award is forfeited or vesting is accelerated because of a termination of employment, retirement or change of control as described below under “Potential Payments upon Termination or Change in Control,” the restrictions on the restricted stock and RSUs will lapse and the awards will vest as follows: | | | | | | | | | | | | | | |
Name | | RSUs | | Vesting Date |
Mr. Cutillo | | 15,780 | | | On December 31, 2024 |
| Name | 30,488 | | Restricted Stock | | Vesting Date |
Mr. Cutillo | | 10,272 | | 1/3 on each of February 10, 2018, 2019 and 2020 |
| | 50,000 | | 1/2 on each of April 28, 2018December 31, 2024 and 20192025 |
Mr. Ballschmiede | | 4,555 | | 15,921 | 1/3 on each of February 10, 2018, 2019 and 2020On December 31, 2024 |
| Mr. Chandler | 7,962 | | 25,000 | | 1/2 on each of October 27, 2018December 31, 2024 and 20192025 |
Mr. Wolf | | 1,699 | | On December 31, 2024 |
| | 2,996 | | 1/2 on each December 31, 2024 and 2025 |
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(2)
| The market value of the awards as reflected in this table was based on the $16.28 closing market price per share of our common stock on December 29, 2017. |
————————(2)The market value of the awards as reflected in this table was based on the $87.93 closing market price per share of our common stock on December 29, 2023.
(3)The table below sets forth our outstanding PSU awards as of December 31, 2023. Unless the award is forfeited or vesting is accelerated because of a termination of employment, retirement or change of control as described below under “Potential Payments upon Termination or Change in Control,” the restrictions on the target PSUs granted as part of our LTI program will lapse in one-third increments following the end of each year in the three-year performance period as set forth in the table below. The table below includes tranches of awards that paid out in early 2024 based on 2023 adjusted EPS results. The table below also includes the Special Award of 160,000 PSUs as described in the section titled “Potential Payments Upon Termination or Change of Control—Executive Employment Agreement - Mr. Cutillo”.
Sterling Infrastructure |2024 ProxyStatement| 35|
2017 | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Outstanding PSUs | | |
Name | | Grant Date | | Threshold | Target | Maximum | | Last Day of Performance Period |
Mr. Cutillo | | 01/01/2021 | | 9,552 | 19,103 | 38,206 | | 12/31/2023 |
| | 02/19/2022 | | 15,780 | 31,559 | 63,118 | | 12/31/2024 |
| | 01/01/2023 | | 22,866 | 45,732 | 91,464 | | 12/31/2025 |
| | 12/31/2023 | | 32,000 | 160,000 | 160,000 | | 12/31/2026 |
Mr. Ballschmiede | | 01/01/2021 | | 2,848 | 5,696 | 11,392 | | 12/31/2023 |
| | 02/19/2022 | | 4,555 | 9,110 | 18,220 | | 12/31/2024 |
| | 01/01/2023 | | 5,972 | 11,943 | 23,886 | | 12/31/2025 |
Mr. Wolf | | 08/05/2021 | | 1,058 | 2,115 | 4,230 | | 12/31/2023 |
| | 02/19/2022 | | 1,699 | 3,397 | 6,794 | | 12/31/2024 |
| | 01/01/2023 | | 2,247 | 4,494 | 8,988 | | 12/31/2025 |
Stock Vested (1) in 2023
| | | | | | | | | | | | | | |
| | Stock Awards |
Name | | Number of Shares Acquired on Vesting | | Value Realized on Vesting(1) |
Joseph A. Cutillo | | 165,438 | | $10,037,825 |
Ronald A. Ballschmiede | | 48,520 | | 2,580,746 |
Mark D. Wolf | | 14,812 | | 537,658 |
|
| | | | | | | | |
| | Stock Awards | |
Name | | Number of Shares Acquired on Vesting | | Value Realized on Vesting (2) |
Joseph A. Cutillo | | 25,000 |
| | | $427,500 | |
Ronald A. Ballschmiede | | 50,000 |
| | | $855,000 | |
Con L. Wadsworth | | — |
| | | — |
| |
Richard E. Chandler, Jr. | | — |
| | | — |
| |
Paul J. Varello | | 400,000 |
| | | $3,788,000 | |
Roger M. Barzun | | — |
| | | — |
| |
________________(1)The value realized on vesting of restricted stock and RSUs and payout of PSUs is based on the closing sale price on the date of vesting of the award or payout with respect to the PSUs, or, if there were no reported sales on such date, on the last preceding date on which any reported sale occurred.
| |
(1)
| No named executive officer exercised options during 2017 and there are no outstanding option awards. |
| |
(2)
| The value realized on vesting of restricted stock is based on the closing sale price on the date of vesting of the restricted stock or, if there were no reported sales on such date, on the last preceding date on which any reported sale occurred. |
Potential Payments upon Termination or Change in Control
We do not have any employment agreements or changeExecutive Employment Agreement - Mr. Cutillo
In December 2018, we entered into a three year Executive Employment Agreement with Mr. Cutillo (the “2018 Executive Employment Agreement”). In January 2024, we amended and restated the 2018 Executive Employment Agreement with Mr. Cutillo (the “Amended Employment Agreement”). The Amended Employment Agreement has an initial term of control plans or agreements with any of our current executive officers that providethree years and can be extended for payments or benefits upon a termination of employment or a change of control. Pursuant to thefourth year by mutual agreement. The material terms of our stock incentive plan and the restricted stock agreements thereunder, upon aAmended Employment Agreement are generally consistent with the 2018 Executive Employment Agreement, except that (i) termination of employment as a result of death, permanent disability, orMr. Cutillo’s annual base salary was increased to $1,000,000, subject to future annual review (but not reduction) by the company without cause, orboard, (ii) a changethe target value of controlhis annual short-term incentive awards was set at 115% of his annual base salary, subject to future annual review (but not reduction) by the company, all outstanding restricted stockboard; and (iii) the target value of his annual long-term incentive awards vest.
For purposes of the restricted stock awards, “cause” is generally defined as (i) gross negligence in the performance of the executive’s duties, (ii) commission ofwas set at an act of theft or other dishonesty, (iii) conviction of any other criminal activity (otheramount not less than a traffic violation or minor misdemeanor), (iv) participation in any activity involving moral turpitude that is, or could reasonably be expected to be, injurious to the business or reputation of the company, (v)$3,500,000. Mr. Cutillo will have continued use of alcohol immoderately and/or use of non-prescribed narcotics that have the effect of adverselya Company-provided vehicle and materially affecting the performance of the executive’s duties, or (vi) a material breach of company policy.
The following table sets forth the restricted stock awards for each of our named executive officers (other than Messrs. Varello and Barzun) that would vest as a result of a change of control, or due torelated costs. In addition, upon a termination of employment due to death or disability, or by the Company without cause, or by Mr. Cutillo for good reason, or as a result of termination by mutual agreement upon the appointment of a successor, any outstanding PSU awards held by Mr. Cutillo will vest at the greater of (i) the target amount for the applicable performance cycle or (ii) actual performance as of the date of such termination.
The Amended Employment Agreement also updated the enhanced severance payment due Mr. Cutillo if his employment is terminated by the Company without cause or by him for good reason in connection with a change of control. Upon such a termination he will receive (i) a payment equal to three (instead of two) times his base salary and target annual bonus for the year in which the change of control termination occurs, plus an amount equal to his COBRA premium for the 24 (instead of 18) months following his termination date; and (ii) $50,000 (no change) in lieu of the post-termination outplacement benefits or reimbursements. Further, the performance level of any PSUs previously vested in connection with a termination of employment occurring six months prior to the change of control shall be recalculated as of the date of the change of control and Mr. Cutillo will receive any additional shares due. The agreement also contains non-compete, non-solicitation, standard confidentiality and mutual non-disparagement covenants that apply during the term of the agreement and for a period following termination of Mr. Cutillo’s employment.
In connection with the execution of the Amended Employment Agreement, the Company entered into a special PSU agreement with Mr. Cutillo (the “PSU Agreement”). Under the PSU Agreement, Mr. Cutillo received the Special Award of a one-time grant of 160,000 PSUs that will vest on December 31, 2026 (the “Vesting Date”) based on the
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Company’s achievement of the following stock price targets: (a) 20% of the Special Award shall vest upon the achievement of a stock price target of $100 per share; (b) 30% of the Special Award shall vest upon the achievement of a stock price target of $120 per share; and (c) 50% of the Special Award shall vest upon the achievement of a stock price target of $140 per share. The stock price targets are measured by the average closing price over any twenty consecutive trading days between the grant date and the Vesting Date. Mr. Cutillo must remain employed through the Vesting Date to earn the Special Award; provided, however, that 100% of the Special Award shall vest upon Mr. Cutillo’s termination of employment due to death or disability, by the Company without cause, by Mr. Cutillo for good reason, or as a result of termination by mutual agreement upon appointment of a successor. In addition, in the event that the Company and Mr. Cutillo agree to extend the Amended Employment Agreement beyond the initial three-year term for a fourth year, Mr. Cutillo will be eligible for an additional one-time grant of 40,000 PSUs (the “Additional PSUs”) in accordance with the terms and conditions of the PSU Agreement, which will vest upon the achievement of a stock price target of $160 per share and Mr. Cutillo’s continued employment through December 31, 2027. The Special Award and the Additional PSUs, if any, will also vest upon a change of control based on stock price performance prior to the change of control.
Executive Employment Agreement - Mr. Ballschmiede
In December 2018, we entered into a three year executive employment agreement with Mr. Ballschmiede (together with the 2018 Executive Employment Agreement, as amended, the “Executive Employment Agreements”), which provides for automatic one-year extensions unless either party notifies the other of their intention not to extend. The current term of Mr. Ballschmiede’s agreement will expire on December 11, 2024 and he will receive an annual base salary of $626,750 which is unchanged as of January 2023. During the term of his agreement, Mr. Ballschmiede is eligible to receive short-term and long-term incentive compensation and to receive equity-based long-term incentive awards under the Company’s applicable plans and programs (on terms no less favorable to awards made to the Company’s other senior executive employees), in each case based upon the achievement of applicable performance standards. The agreement also contains non-compete, non-solicitation, standard confidentiality and mutual non-disparagement covenants that apply during the term of the agreement and for a period following termination of Mr. Ballschmiede’s employment.
If Mr. Ballschmiede’s employment is terminated by the Company without cause or by him for good reason, and he complies with the restrictive covenants set forth in the agreement, then Mr. Ballschmiede is entitled to (i) a cash severance payment equal to one times his base salary at the time of termination, plus an amount equal to his COBRA premium for the 18 months following the date of termination; (ii) payment or reimbursement of up to $25,000 for post-termination outplacement services costs; and all equity awards will accelerate, become fully vested and be settled in accordance with the terms of the applicable award agreements. If Mr. Ballschmiede’s employment is terminated by the Company without cause or by him for good reason, and such termination occurs six (6) months prior to or twenty-four (24) months following a change of control (as defined in the agreement), and he complies with the restrictive covenants set forth in the agreement, then Mr. Ballschmiede is entitled to (i) a cash severance payment equal to one and one-half times his base salary and target STI award for the year in which the termination occurs, plus an amount equal to his COBRA premium for the 18 months following the date of termination; and (ii) a cash payment of $25,000 in lieu of the post-termination outplacement benefits or reimbursements described above.
Equity-Based Awards
The terms of our outstanding equity-based award agreements with employees (which include RSUs and PSUs) generally provide that the subject award will be forfeited if the award recipient terminates employment prior to the vesting of the award, except under certain circumstances described below.
•RSUs – Upon (i) a recipient’s termination due to death or permanent disability, or by the Company without cause, (ii) a recipient’s termination for good reason (as defined in the recipient’s employment agreement), or (iii) a change of control of the Company, any outstanding RSUs will vest in full. In connection with a retirement, provided six months has elapsed since the start of the three-year performance period and the recipient executes a one-year non-competition and non-solicitation agreement, all RSUs will vest in full. For purposes of the equity awards, retirement is defined as termination of employment with six months written notice on or after attaining age 60 with a minimum of 10 years of service, or age 65 with a minimum of five years of service.
•PSUs – If, during the performance period of a PSU award, a recipient’s employment terminates due to death or permanent disability, or a change of control of the Company occurs, any PSUs will vest at the higher of target or actual performance. If termination of a recipient’s employment is by the Company without cause, by recipient’s termination for good reason (as defined in the recipient’s employment agreement) or if a recipient
Sterling Infrastructure |2024 ProxyStatement| 37|
retires and executes a one-year non-competition and non-solicitation agreement with the Company, all outstanding PSUs will remain outstanding and vest based on actual performance.
STI Awards
The terms of our STI program provide that participants must generally be employed through the end of the program year to earn the award, except under the following circumstances:
•Death or Permanent Disability; Change of Control – Upon a participant’s termination due to death or permanent disability, or in the event of a change of control of the Company before the end of a program year, the participant will receive a prorated payout of his or her target STI award.
•Retirement or Termination without Cause or for Good Reason – Upon a participant’s retirement (as described above) or termination by the companyCompany without cause occurringor by the participant with good reason (as defined in a participant’s employment agreement) before the end of a program year, the participant will receive a prorated payout of his or her STI award based on the actual level of performance for the program year.
If any part of the payments or benefits received by the participant in connection with a termination following a change of control constitutes an excess parachute payment under Section 4999 of the Internal Revenue Code (the “Code”), the participant will receive the greater of (1) the amount of such payments and benefits reduced so that none of the amount constitutes an excess parachute payment, net of income taxes, or (2) the amount of such payments and benefits, net of income taxes and net of excise taxes under Section 4999 of the Code.
The following table quantifies the potential payments to our NEOs under the contracts, arrangements, plans and scenarios discussed above, assuming a December 31, 2017.2023 termination date. To calculate the value of the awards, we have used the closing price of our
common stock of $16.28$87.93 on December 29, 2017,2023, as reported on NASDAQ. The table does not include amounts that may be payable under our 401(k) plan or other benefits payable to all company employees.employees, or payouts under our STI program, which would have been earned by the executive as of December 31, 2023.
Potential Payments Upon Termination or Change of Control as of December 31, 20172023
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | | Lump Sum Severance Payment | | RSUs (Unvested & Accelerated)(1) | | PSUs (Unvested & Accelerated / Retained)(2) | | Outplacement Assistance | | Total(3) |
Joseph A. Cutillo | | | | | | | | | | |
Death, Disability or Retirement | | $— | | $4,068,345 | | 26,952,304 | | $— | | $31,020,649 |
Termination without Cause or with Good Reason | | 3,052,294 | | 4,068,345 | | 26,952,304 | | 50,000 | | 34,122,943 |
Change of Control | | — | | 4,068,345 | | 30,469,504 | | — | | 34,537,849 |
Qualifying Termination i/c/w Change of Control | | 6,352,294 | | — | | — | | — | | 6,352,294 |
Ronald A. Ballschmiede | | | | | | | | | | |
Death, Disability or Retirement | | — | | 1,100,620 | | 3,603,459 | | — | | 4,704,079 |
Termination without Cause or with Good Reason | | 661,938 | | 1,100,620 | | 3,603,459 | | 25,000 | | 5,391,017 |
Change of Control | | — | | 1,100,620 | | 3,603,459 | | — | | 4,704,079 |
Qualifying Termination i/c/w Change of Control | | 1,680,408 | | — | | — | | — | | 1,680,408 |
Mark D. Wolf | | | | | | | | | | |
Death | | — | | 412,831 | | 879,916 | | — | | 1,292,747 |
Disability or Retirement | | — | | 412,831 | | 879,916 | | — | | 1,292,747 |
Termination without Cause or Good Reason | | — | | 412,831 | | 879,916 | | — | | 1,292,747 |
Change of Control | | — | | 412,831 | | 1,347,000 | | — | | 1,759,831 |
Qualifying Termination i/c/w Change of Control | | — | | — | | — | | — | | — |
|
| | | | | | | | |
Name | | Restricted Stock (Unvested and Accelerated)
| | Value of Restricted Stock (Unvested and Accelerated)
|
Joseph A. Cutillo | | 60,272 |
| | | $981,228 | |
Ronald A. Ballschmiede | | 15,921 |
| | | $259,194 | |
Con L. Wadsworth | | — |
| | | — |
| |
Richard E. Chandler, Jr. | | 25,000 |
| | | $407,000 | |
Separation of Mr. Varello
Mr. Varello was chief executive officer(1)The value of the company until April 28, 2017. In connection with Mr. Varello’s resignation as an officer, 200,000 shares of unvested restricted stock vested. Theseand RSUs that would have vested for each NEO is based on $87.93, the closing price of our common stock on December 29, 2023 and assumes all executives are eligible to retire.
(2)Assumes PSUs vest at target level of performance for all PSUs except those subject to 2023 performance. The value of the PSUs that would have vested or been retained for each NEO is based on $87.93, the closing price of our common stock on December 29, 2023. Includes the Special Award of 160,000 PSUs outlined in Mr. Cutillo’s Amended Employment Agreement, as well as the additional 40,000 shares are reflected in the "2017 Stock Vested" table on page 32.event of a Change of Control, as further described in the section titled “Potential Payments Upon his retirement from our board on December 31, 2017, 5,257 sharesTermination or Change of restricted stock grantedControl—Executive Employment Agreement - Mr. Cutillo”.
(3)Pursuant to the Executive Employment Agreements, the total payments may be subject to reduction if such payments result in 2017 as partthe imposition of his compensation as a director were forfeited.
Separation of Mr. Barzun
Mr. Barzun was senior vice president and general counsel, secretaryan excise tax under Section 280G of the company until October 27, 2017. Based on the circumstancesCode, but for purposes of his departure, Mr. Barzun was entitled to receive the payments and benefits due to him upon a termination of employment without cause under his employment agreement with the company. These benefits include (i) continuation of his annual salary for a period of 12 months and (ii) reimbursement of COBRA premiums for a period of 12 months. Mr. Barzun also received a bonus of $150,000 for 2017, $125,000 of which was paid within 30 days of termination, with the balance of $25,000 payable on or before May 2, 2018, provided Mr. Barzun complies with certain restrictive covenants. These amounts arethis table we have not reflected in the "2017 Summary Compensation" table on page 29.any Section 280G modifications.
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Pay Ratio
The following is a reasonable estimate, prepared under applicable SEC rules, of the ratio of the annual total compensation of Mr. Cutillo, our current chief executive officer, to the median of the annual total compensation of our other employees. We determined our median employee based on W-2 earnings for 2017 (annualized in the case of full- and part-time employees who joined the Company during 2017)2023, or annualized earnings for those employed less than one year, of each of our 1,684 2,986 employees (excluding the chief executive officer) as of December 18, 2017.31, 2023. The annual total compensation of our median employee for 20172023 was $48,625.$81,724. As disclosed in the "2017 Summary Compensation" tableCompensation Table appearing on page 29,34, Mr. Cutillo’s annual total compensation for 20172023 was $2,134,693. However, as Mr. Cutillo became our chief executive officer on April 28, 2017, for purposes of calculating the CEO pay ratio we annualized Mr. Cutillo’s base salary as chief executive officer for the full year in accordance with SEC rules, resulting in annual total compensation of $2,181,419.$6,051,580. Based on the foregoing, our estimate of the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all other employees was 4574 to 1. Given the different methodologies that various public companies will use to determine an estimate of their pay ratio, the estimatedestimated ratio reported above should not be used as a basis for comparison between companies.
Pay Versus Performance
The following table shows the past four fiscal years’ total compensation for our NEO’s as set forth in the Summary Compensation Table, the “compensation actually paid” to our NEO’s (as determined under SEC rules), our total shareholder return (“TSR”), the TSR of the Company’s compensation peer group over the same period, and our annual Net Income, Adjusted EBITDA, and EPS. The peer group for each year is noted below in footnote 4.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Year
| Summary Compensation Table total for CEO(1) ($) | Compensation actually paid to CEO (2) ($) | Average Summary Compensation Table total for other NEOs(1) ($) | Average compensation actually paid to other NEOs(2) ($) | TSR(3) ($) | Peer group TSR(4) ($) | Net Income ($ in millions) | Adjusted EBITDA ($ in millions) | Adjusted EPS ($ per share) |
2023 | 6,243,352 | 22,881,676 | 1,767,772 | 5,175,653 | 625 | 250 | 138.7 | 260 | 4.47 |
2022 | 5,194,928 | 11,965,685 | 1,555,949 | 2,883,232 | 233 | 161 | 106.5 | 212 | 3.17 |
2021 | 4,842,276 | 10,996,753 | 1,401,633 | 2,688,652 | 187 | 192 | 62.6 | 143 | 2.25 |
2020 | 3,903,216 | 7,319,491 | 1,240,668 | 1,583,967 | 132 | 128 | 42.3 | 128 | 1.72 |
(1) For each year referenced in the table, Mr. Cutillo served as our CEO. Our other NEO’s for 2020 and 2021 consisted of Messrs. Ballschmiede and Wolf while our other NEOs for 2020 consisted of Messrs. Ballschmiede, Wolf, Chandler and Wadsworth.
(2) SEC rules require certain adjustments be made to the Summary Compensation Table totals to determine “compensation actually paid” as reported in the Pay versus Performance Table. The following table details these adjustments:
| | | | | | | | | | | | | | | | | | | | | | | |
| | | Equity Award Adjustments |
Year | Executive(s) | Summary compensation table total ($) | Deduct stock awards ($) | Include year-end equity value for awards granted during the year ($) | Include Change in value of prior equity awards vesting during year ($) | Deduct value of prior year awards forfeited during year ($) | Include Change in value of prior equity awards not vested during year ($) |
2023 | CEO | 6,243,352 | (3,000,019) | 8,042,430 | 9,077,118 | — | 2,518,796 |
| Other NEOs | 1,767,772 | (539,134) | 1,445,305 | 1,999,902 | — | 501,808 |
2022 | CEO | 5,194,928 | (2,489,979) | 3,622,924 | 3,117,174 | — | 2,520,638 |
| Other NEOs | 1,555,949 | (493,362) | 717,844 | 589,480 | — | 513,319 |
2021 | CEO | 4,842,276 | (2,346,190) | 2,511,992 | 3,381,888 | — | 2,606,787 |
| Other NEOs | 1,401,633 | (479,715) | 513,613 | 684,562 | — | 568,560 |
2020 | CEO | 3,903,216 | (1,924,004) | 2,119,177 | 568,820 | — | 2,652,283 |
| Other NEOs | 1,240,668 | (444,104) | 437,256 | 134,942 | (140,800) | 356,005 |
(3) TSR reflects the value of a $100 investment made on 1/1/2020, as measured at the end of each year shown in the table.
(4) The peer group data reflects our compensation peer group as approved by the Compensation Committee for 2023, with minimal changes from the 2022 peer group to account for merger and acquisition activity and better reflect our increasing size and complexity. Peer group changes are captured in the table below. Cumulative TSR (from 12/31/2019-12/31/2023) for the peer group used in 2022 would be $257. The table below provides a summary of the companies in the peer group by year:
33Sterling Infrastructure |2024 ProxyStatement| 39|
| | | | | | | | |
Company Name | Compensation Peer 2022 | Compensation Peer 2023 |
Chart Industries, Inc. | ü | ü |
Columbus McKinnon Corporation | ü | ü |
Comfort Systems USA, Inc. | ü | ü |
Construction Partners, Inc. |
| ü |
Dycom Industries, Inc. | ü | ü |
Eagle Materials Inc. | ü | ü |
Granite Construction Incorporated | ü | ü |
Great Lakes Dredge & Dock Corporation | ü | ü |
IES Holdings, Inc. | ü | ü |
Infrastructure and Energy Alternatives |
| ü |
INNOVATE Corp | ü | ü |
Matrix Service Company | ü |
|
MYR Group Inc. | ü | ü |
Primoris Services Corporation | ü | ü |
Standex International Corporation | ü |
|
Summit Materials, Inc. | ü | ü |
U.S. Concrete, Inc. | ü | |
Proposal No. 2: Advisory Vote
Relationship Between “Compensation Actually Paid” and Performance Measures
We believe the table above shows the strong link between compensation actually paid to our executives and the Company’s performance, consistent with our compensation philosophy and as described in our Compensation Discussion and Analysis beginning on page 20. Specifically,
•Our cumulative TSR has exceeded or is comparable with the peer group TSR during the past four years, demonstrating outsized value delivered to our shareholders. The CEO and other-NEO “compensation actually paid” each year tracks our TSR performance and only increased when our TSR increased.
•Likewise, the CEO and other-NEO “compensation actually paid” only increased when our Adjusted EBITDA increased; demonstrating strong correlation between pay and performance.
•Moreover, our Net Income and EPS increased in each of the past three years; however, CEO and non-CEO “compensation actually paid” still fluctuated primarily based on the Compensationtiming of Our Named Executive Officersvesting associated with special performance awards granted before the start of the period shown and our compensation committee’s holistic evaluation of executive and company performance during compensation setting.
The Dodd-Frank Wall Street Reform2023 Performance Measures
As noted above, our compensation committee believes in a holistic evaluation of our executives’ and Consumer Protection Act (the “Dodd-Frank Act”), enactedthe Company’s performance and uses a mix of performance measures throughout our annual and long-term incentive programs to align executive pay with shareholder value creation. As required by SEC rules, the performance measures identified as the most important in July 2010, requires that wedetermining our NEOs’ 2023 compensation are listed below.
| | | | | | | | |
| | For performance year 2023, our compensation committee identified the performance measures of EBITDA and EPS as the most important in its compensation-setting process for the NEOs. The importance of Adjusted EBITDA is reflected by our use of this measure when setting performance standards applicable to short-term incentive plans. Our compensation committee utilizes EPS for purposes of setting long-term incentive performance goals. |
EBITDA | |
EPS | |
| |
| 40| Sterling Infrastructure |2024 ProxyStatement
| | |
Proposal No. 2: Advisory Vote on the Compensation of Our Named Executive Officers |
We are required to provide our stockholdersshareholders with the opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our NEOs as disclosed in this proxy statement in accordance with Section 14A of the Securities Exchange Act of 1934.Act. This vote (commonly referred to as a “say-on-pay” vote) is advisory, which means that it is not binding on the company,Company, the board of directors or the compensation committee of the board of directors. However, our board and the compensation committee value the opinion of our stockholdersshareholders and will consider the outcome of the vote when evaluating our executive compensation program. The vote is not intended to address any specific compensation arrangement or amount, but rather the overall compensation of our NEOs and our compensation philosophy and practices as disclosed under the “Executive Officer Compensation” section of this proxy statement. This disclosure includes the compensation tables and a narrative discussion following theregarding our executive compensation tables.
program.
At last year’s annual meeting, we provided our stockholdersshareholders with the opportunity to cast a non-binding advisory vote regarding the compensation of our named executive officersNEOs as disclosed in our proxy statement for the 20172023 annual meeting of stockholders.shareholders. Our stockholdersshareholders approved the “say-on-pay” proposal by greater than 90%95% of the voting power of the outstanding shares of our common stock present, in person or by proxy, at the 20172023 annual meeting and entitled to vote. Last year, we also asked our stockholders to vote on whether we should hold a “say-on-pay” vote every one, two or three years. Consistent with the recommendation of our board, our stockholders voted to hold the “say-on-pay” vote every year, with over 75% of the total votes cast voting in favor of holding an annual “say-on-pay” vote. After consideration of the 2017 voting results, and based upon its prior recommendation, our board elected to hold “say-on-pay” votes on an annual basis until the next advisory vote on the frequency of future “say-on-pay” votes, which will be held no later than our 2023 annual meeting of stockholders. Accordingly, thisThis year we are again asking our stockholdersshareholders to vote on the following resolution:
RESOLVED, that the stockholdersshareholders of Sterling Construction Company,Infrastructure, Inc. (the “Company”)
approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in the Company’s proxy statement for the 20182024 annual meeting of stockholdersshareholders pursuant to Item 402 of Regulation S-K of the rules of the Securities and Exchange Commission.
In considering how to vote on this proposal, we encourage you to review the relevant disclosures in this proxy statement, especially the Compensation Discussion and Analysis, which contain detailed information about our executive compensation program.
Vote Required to Approve, on an Advisory Basis, the Compensation of Our Named Executive Officers
Approval of this proposal requires the affirmative vote of a majority of the shares of our common stock present in person or represented by proxy and entitled to vote on the proposal. For more information on the voting requirements, see “Questions and Answers about the Proxy Materials, Annual Meeting and Voting.”
Recommendation of the Board of Directors
OUR BOARD RECOMMENDS THAT YOU VOTE FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.
| | | | | |
ü | OUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT. |
34Sterling Infrastructure |2024 ProxyStatement| 41|
Audit Committee Report
The audit committee is currently composed of fourthree directors, Milton L. Scott (chairman)Roger A. Cregg (chair), Maarten D. Hemsley, Raymond F. MesserJulie A. Dill, and Richard O. Schaum,Dwayne A. Wilson, all of whom are independent, as defined by SEC rules and in the NASDAQ listing standards. In addition, the board has determined that Mr. Cregg and Ms. Dill each of Messrs. Hemsley and Scott qualifiesqualify as an “audit committee financial expert,” as such term is defined by the rules of the SEC. We operate under a written charter approved by us and adopted by the board of directors. Our primary function is to assist the board of directors in fulfilling the board’s oversight responsibilities relating to (1) the effectiveness of the company’s internal control over financial reporting, (2) the integrity of the company’sCompany’s financial statements, (3)(2) the company’sCompany’s compliance with legal and regulatory requirements, (4)(3) the qualifications, independence and independenceperformance of the company’sCompany’s independent registered public accounting firm, (5)(4) the design and implementation of the Company’s internal audit functions and the performance of the company’s independent registered public accounting firmsuch internal audit functions, and (6)(5) the review and approval or ratification of any transaction that would require disclosure under Item 404(a) of Regulation S-K of the Exchange Act.
We oversee the company’sCompany’s financial reporting process on behalf of the board. Our responsibility is to monitor and review this reporting process, but we are not responsible for developing and consistently applying the company’sCompany’s accounting principles and practices, preparing and maintaining the integrity of the company’sCompany’s financial statements and maintaining an appropriate system of internal controls, auditing the company’sCompany’s financial statements and the effectiveness of internal control over financial reporting, or reviewing the company’sCompany’s unaudited interim financial statements. Those are the responsibilities of management and the company’sCompany’s independent registered public accounting firm, respectively.
During 20172023, management assessed the effectiveness of the company’sCompany’s system of internal control over financial reporting in connection with the company’sCompany’s compliance with Section 404 of the Sarbanes-Oxley Act of 2002. We reviewed and discussed with management and Grant Thornton LLP (“Grant Thornton”), the company’sCompany’s independent registered public accounting firm, management’s report on internal control over financial reporting and Grant Thornton’s report on their audit of the company’sCompany’s internal control over financial reporting as of December 31, 2017,2023, both of which are included in our 20172023 annual report.
Appointment of Independent Registered Public Accounting Firm; Financial Statement Review
In March 2017,2023, in accordance with our charter, we appointed Grant Thornton as the company’sCompany’s independent registered public accounting firm for 2017.2023. We have reviewed and discussed the company’sCompany’s audited financial statements for 20172023 with management and Grant Thornton. Management represented to us that the audited financial statements fairly present, in all material respects, the financial condition, results of operations and cash flows of the companyCompany as of and for the periods presented in the financial statements in accordance with accounting principles generally accepted in the United States, and Grant Thornton provided an opinion to the same effect.
We have received from Grant Thornton the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board (PCAOB)(“PCAOB”) regarding the independent accountant’s communications with the audit committee concerning independence, and we have discussed with Grant Thornton their independence from the companyCompany and management. We have also discussed with Grant Thornton the matters required to be discussed by the applicable requirements of the PCAOB Auditing Standard No. 1301 – Communications with Audit Committees (PCAOB Release No. 2012-004, August 15, 2012), effective pursuant toand the SEC Release No. 34-68453 (December 17, 2012).
In addition, we have discussed with Grant Thornton the overall scope and plans for their audit, and have met with them and management to discuss the results of their examination, their understanding and evaluation of the company’sCompany’s internal controls as they considered necessary to support their opinion on the financial statements for the year 2017,2023, and various factors affecting the overall quality of accounting principles applied in the company’sCompany’s financial reporting. Grant Thornton also met with us without management being present to discuss these matters.
In reliance on these reviews and discussions, we recommended to the board of directors, and the board of directors approved, the inclusion of the audited financial statements referred to above in the 20172023 annual report.
Dated: March 1, 2018:4,2024
Milton L. Scott (chairman)Roger A. Cregg, Chair
Maarten D. HemsleyJulie A. Dill
Raymond F. MesserDwayne A. Wilson
Richard O. Schaum| 42| Sterling Infrastructure |2024 ProxyStatement
| | |
Independent Registered Public Accounting Firm |
Independent Registered Public Accounting Firm
Fees and Related Disclosures for Accounting Services
The following table discloses the aggregate fees billed for professional services rendered by Grant Thornton in 20172023 and 2016:2022:
| | | | | | | | | | | |
| 2023 | | 2022 |
Audit Fees(1) | $945,439 | | $915,029 |
Audit-Related Fees | — | | — |
Tax Fees | — | | — |
All Other Fees | — | | — |
Total | $945,439 | | $915,029 |
|
| | | | | |
| 2017 | | 2016 |
Audit Fees (1) | $870,589 | | $900,946 |
Audit-Related Fees (2) | $1,590 | | $158,978 |
Tax Fees | — |
| | — |
|
All Other Fees | — |
| | — |
|
————————
| |
(1)
| Audit Fees were primarily for professional services rendered to comply with all statutory and financial audit requirements for the company and its subsidiaries including audit services rendered related to the accounting or disclosure treatment of transaction or events and the impact of final or proposed rules, standards or interpretations by regulatory and standard setting bodies. In 2016, a portion of the audit fees related to our May 2016 public offering of common stock. |
| |
(2)
| We incurred these audit-related fees for a due diligence project on a target company in 2016, and for due diligence related to our new credit facility in 2017. |
————————(1)Audit Fees were primarily for professional services rendered to comply with all statutory and financial audit requirements for the Company and its subsidiaries including audit services rendered related to the accounting or disclosure treatment of transaction or events and the impact of final or proposed rules, standards or interpretations by regulatory and standard setting bodies.
The audit committee has determined that the provision of the services described above is compatible with maintaining the independence of our independent registered public accounting firm.
Pre-Approval Policies and Procedures
The audit committee’s policy is to pre-approve all audit services, audit-related services and otherpermitted non-audit services provided by our independent registered public accounting firm. In accordance with that policy, the committee annually pre-approves a list of specific services and categories of services, including audit audit-related and otherpermitted non-audit services, for the upcoming or current fiscal year, subject to specified cost levels. All requests for services to be provided by the Company’s independent registered public accounting firm must be submitted to the Company’s chief financial officer and the chair of the audit committee, together with a detailed description of the services to be rendered. The chief financial officer may authorize any services that have been pre-approved by the audit committee. Any service that is not included in the approved list of services must be separately pre-approved by the audit committee. In addition, if fees for any service exceed the amount that has been pre-approved, then payment of additional fees for such service must be specifically pre-approved by the audit committee. During 2017,2023, none of the services provided by our independent registered public accounting firm required use of the de minimis exception to pre-approval contained in the SEC’s rules.
Proposal No. 3: Ratification of the Appointment of Our Independent Registered Public Accounting Firm
| | |
Proposal No. 3: Ratification of the Appointment of Our Independent Registered Public Accounting Firm |
In March 2018,2024, in accordance with our charter, we appointed Grant Thornton as the company’sCompany’s independent registered public accounting firm for 2018.2024. Our board and the audit committee seek stockholdershareholder ratification of the audit committee’s appointment of Grant Thornton as our independent registered public accounting firm to audit our and our subsidiaries’consolidated financial statements for the year 2018.2024. If our stockholdersshareholders do not ratify the appointment of Grant Thornton, the audit committee will reconsider this appointment. Representatives of Grant Thornton are expected to be present at the meeting to respond to appropriate questions, and those representatives will also have an opportunity to make a statement if they desire to do so.
Vote Required to Ratify the Appointment of ourOur Independent Registered Public Accounting Firm
Approval of this proposal requires the affirmative vote of a majority of the shares of our common stock present in person or represented by proxy and entitled to vote on the proposal. For more information on the voting requirements, see “Questions and Answers about the Proxy Materials, Annual Meeting and Voting.”
Recommendation of the Board of Directors
OUR BOARD RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
| | | | | |
ü | OUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2024. |
37Sterling Infrastructure |2024 ProxyStatement| 43|
| | |
Proposal No. 4: Adoption of the Second Amended and Restated 2018 Stock Incentive Plan |
Proposal No. 4: Adoption of the 2018 Stock Incentive Plan
Our board of directors unanimously approved, and recommends that our stockholdersshareholders adopt, the Second Amended and Restated 2018 Stock Incentive Plan (the Plan)“Plan”), which is summarized below and attached as Annex A to this proxy statement. Because this is a summary, it does not contain all of the information that may be important to you. You should read Annex A carefully before you decide how to vote.
Why StockholdersShareholders Should Vote to Adopt the Plan:
EquityIncentiveAwardsAreAnImportantPartOfOurCompensationPhilosophy
The companyCompany believes that the adoption of the Plan is essential to our success. The Plan is intended to increase stockholdershareholder value and advance theour interests of the company and its subsidiaries by furnishing a variety of equity incentives designed to (a) attract, retain, and motivate key employees, officers, and directors of the companyCompany and consultants and advisers to the companyCompany and (b) strengthen the mutuality of interests among such persons and the company’s stockholders.Company’s shareholders. The board and company management believe that equity incentives are necessary to remain competitive in the industry.
Summary of Material Revisions to the Plan
As compared to the Amended and Restated 2018 Stock Incentive Plan, the proposed Plan:
•increases the authorized shares under the Plan by 1,900,000 from 3,400,000 to 5,300,000;
•increases the number of shares that may be granted without compliance with the minimum vesting requirements by 95,000 from 170,000 to 265,000, which is 5% of the total shares available under the Plan; and
•extends the term of the Plan from May 5, 2031 to May 9, 2034.
OurCurrent Plan Has Insufficient SharesAvailableForGrant
There are currently less than 20,000no shares remaining available for future grants to our officers, employees and non-employee directors under our current stock incentive plan. As such, we will not have sufficient shares available to make long-term incentive grants to our executive officers and key employees in the future, nor do we have sufficient shares available to make our annual equity grant to our non-employee directors in May 2018.2024. While the company could increase cash compensation if it is unable to grant equity incentives, replacing equity awards with cash awards would not only misalign our executive and stockholdershareholder interests, it would also increase cash compensation expense and divert cash that could otherwise be reinvested in our business.
We have a History of Prudent Use of Shares
In determining to adopt the Plan, we considered the following:
•Share Reserve. Reserve.The board has approvedapproved the reservation of 1,800,000an additional 1,900,000 shares under the Plan. If the Plan is approved by our stockholders, no new grants will be made under our current stock incentive plan.
•Burn Rate. Our annual burn rate for each of calendar years 2015, 20162021, 2022 and 20172023 was 5.1%2.02%, 0.3%1.25% and 0.8%0.99%, respectively, resulting in a three-year average burn rate of 2.1%1.42%. Annual equity burn rate is calculated by dividing (1) the number of shares subject to equity awards granted during the year by (2) the weighted-average number of shares outstanding at the end of the applicable year.
•Expected Duration of the Plan. The company expects thethe share reserve under the Plan to provide the company with enough shares for awards for approximately fourthree to five years, assuming the company continues to grant awards consistent with its current practices and historical usage, as reflected in its average three-year burn rate, and noting that future circumstances may require the company to change its current equity grant practices. As the companycompany cannot predict its future equity grant practices with any degree of certainty at this time, the share reserve under the Plan could last for a shorter or longer time.
•Dilution. In calendar years 2015, 2016 and 2017,For 2023, the end of year overhang rate (calculated by dividing (1) the sum of the number of shares issuable pursuant to equity awards outstanding at the end of the calendar year plus shares remaining available for issuance for future awards at the end of the calendar year by (2) the sum of the number of shares outstanding at the end of the calendar year plus the sum of (1) above)above was 3.2%2.83%. The overhang rate would have increased from 2.83% to approximately 9.00%, 2.2% and 1.5%, respectively. Upon adoption ofhad the Plan, the company expects its overhang to be approximately 7.3%.additional 1,900,000 shares been authorized at December 31, 2023.
| 44| Sterling Infrastructure |2024 ProxyStatement
In light of the factors described above, the board has determined that the size of the share reserve under the Plan is reasonable and appropriate at this time.
Equity Compensation Best Practices Reflected in the Plan
The Plan has a number of provisions that the companyCompany believes are consistent with best practices in equity compensation, protect stockholdershareholder interests and promote effective corporate governance, including the following:
Stockholder•Shareholder Approval is Required for Additional Shares and Other Material Amendments. The Plan does not contain an annual “evergreen” provision. The Plan authorizes a limited number of shares, and stockholdershareholder approval is required to increase the maximum number of shares of common stock which may be issued under the Plan. In addition, other material amendments to the Plan require stockholdershareholder approval.
•No Discount Stock Options or Stock Appreciation Rights.All stock options and stock appreciation rights will have an exercise price equal to or greater than the fair market value of the company’s common stock on the date the stock option or stock appreciation right is granted; although discount stock options and SARs may be granted in the event such awards are assumed or substituted in connection with certain corporate transactions. For purposes of equity awards, we generally define fair market value as the closing sale price of a share of our common stock on the stock exchange or national market system on which our common stock is listed on such date or, if no sale occurred on the date in question, the closing sale price for a share of our common stock on the last preceding date for which such quotation exists. The closing sale price for a share of our common stock on the NASDAQ, on March 13, 201811, 2024 was $13.01.
$108.57.•Administration by Independent Directors. Awards under the Plan are administered by the compensation committee which is an independentindependent committee of our board.
•Limitations on Dividend Payments. Dividends and dividend equivalents may accrue on awards, but will only pay out if the applicable vesting conditions are met. Further, participants holding stock options or stock appreciation rights do not receive dividend equivalents for any period prior to the exercise of the award.
•Limitations on Grants. Individual limits on awards granted to any participant pursuant to the Plan during any calendar year apply as follows: (a) except for non-employee directors, a maximum of 500,000 shares of common stock may be subject to awards granted to a participant; and (b) with respect to non-employee directors, the aggregate grant date fair value of awards under the Plan granted to a director in a calendar year may not exceed $300,000. These amounts may be adjusted to take into account equity restructurings and certain other corporate transactions as described below.
•No Repricing of Awards. Awards may not be repriced, replaced or regranted through cancellation or modification without stockholdershareholder approval if the effect would be to reduce the exercise price for the shares under the award.
•No Tax Gross-Ups. The Plan does not provide for any tax gross-ups.
•No Liberal Share Counting. Shares of common stock delivered or withheld in payment of the exercise price of a stock option or SAR, delivered or withheld to satisfy tax obligations in respect of an award, or repurchased with the proceeds of an option exercise may not be re-issued under the Plan.
•Minimum Vesting Conditions. All awards are subject to a minimum one-year vesting requirement,requirement, except that up to 90,000 shares (5%5% of the shares availableauthorized under the Plan)Plan may be granted without compliance with this minimum vesting condition.
•Clawback of Awards. All Awards (including any proceeds, gains or other economic benefit the Participant actually or constructively receives upon receipt or exercise of any Award or the receipt or resale of any Shares underlying the Award) will be subject to the company clawback policy implemented to comply with Applicable Laws, including any clawback policy adopted to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder, as set forth in such a clawback policy or the Award Agreement.
In October 2023, the board of directors approved a clawback policy applicable to our NEOs entitled “Policy for the Recovery of Erroneously Awarded Compensation” to comply with the expanded requirements pursuant to NASDAQ Listing Rule 5608 and Section 10D and Rule 10D-1 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).Other companyCompany policies that help align the interests of our directors and executive officers with those of our stockholdersshareholders include our policies that prohibit our directors and executive officers from hedging our common stock, and our minimum stock ownership guidelines for our directors and executive officers. See
“Board Governance – Director and Executive Officer “Corporate Governance—Stock Ownership Guidelines” and “Executive Officer Compensation – Compensation—Compensation Discussion and Analysis.”
Sterling Infrastructure |2024 ProxyStatement| 45|
Summary of the Second Amended and Restated 2018 Stock Incentive Plan
Administration. The compensation committee of our board of directors will have plenary authority to administer the Plan and has authority to make awards under the Plan and to set the terms of the awards.
References herein to the “committee” refer to the compensation committee. Subject to the limitations specified in the Plan, the compensation committee may delegate its authority to appropriate officers of the company with respect to grants to employees or consultants who are not subject to Section 16 of the Securities Exchange Act of 1934.Act.
Eligible Participants. Our officers, directors and employees and our consultants and advisors will be eligible to receive awards, or incentives, under the Plan when designated as Plan participants. We currently have fourthree executive officers and sixseven non-management directors eligible to receive awards under the Plan. In addition, six61 other employees currently participate in our long-term incentive program, and a total of 5332,986 other employees would be eligible to receive awards under the Plan.
Awards. Awards under the Plan may be granted in any one or a combination of the following forms:
•for officers and employees only, incentive stock options under Section 422 of the Internal Revenue Code (ISOs)(“ISOs”);
•non-qualified stock options;
•stock appreciation rights (SARs)(“SARs”);
•restricted stock;
•restricted stock units (RSUs)(“RSUs”); and
•other stock-based awards.
Authorized Shares. The Plan authorizes the issuance of upup to 1,800,000 shares5,300,000 shares of common stock, all of which can be issued pursuant to the exercise of ISOs under the Plan during its ten-year term. Shares issued under the plan may be authorized but unissued shares, shares purchased on the open market or treasury shares.
Limitations and Adjustments to Shares Issuable Through the Plan. Awards for no more than 500,000 shares may be granted to a participant in a single year, however, with respect to non-employee directors, the aggregate grant date fair value of awards under the Plan granted to a director in a calendar year may not exceed $300,000.
Generally, for purposes of determining the maximum number of shares of our common stock available for delivery under the Plan, shares that are not delivered because an award is forfeited, cancelled, or settled in cash will not be deemed to have been delivered under the Plan. With respect to SARs paid in shares, all shares to which the SARs relate are counted against the Plan limits rather than the net number of shares delivered upon exercise. If shares are withheld to satisfy the exercise price of a stock option or SAR or the tax withholding obligation associated with any award, those withheld shares will not be available for reissuance under the Plan. In addition, shares purchased on the open market with the proceeds of an option exercise will not be available for reissuance under the Plan.
Proportionate adjustments will be made to all of the share limitations provided in the Plan, including shares subject to outstanding awards, in the event of any recapitalization, reclassification, stock dividend, stock split, combination of shares or other change in the shares of our common stock. Further, the committee may adjust the terms of any award to the extent appropriate to provide participants with the same relative rights before and after the occurrence of any such event.
Minimum Vesting Requirements. All awards granted under the Plan must be madeare subject to a minimum one-year vesting period, although this minimum vesting requirement does not apply to awards with respect to five percent of the shares authorized under the Plan.
Amendments to the Plan. The board may amend or discontinue the Plan at any time. However, our stockholdersshareholders must approve any amendment that would:
•materially increase the benefits accruing to participants under the Plan;
•increase the number of shares of common stock that may be issued under the Plan;
•materially expand the classes of persons eligible to participate in the Plan;
•expand the types of awards available for grant under the Plan;
•materially extend the term of the Plan;
•materially change the method for determining the exercise price of a stock option or SAR; or
•permit the re-pricing of a stock option or SAR.
No amendment or discontinuance of the Plan may materially impair any previously granted award without the consent of the recipient.
Term of the Plan. No awards may be granted under the Plan after May 2, 2028.9, 2034.
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Types of Incentives. Each of the types of incentives that may be granted under the Plan is described below:
•Stock Options. The committee may grant non-qualified stock options or ISOs to purchase shares of our common stock. The committee will determine the number and exercise price of the options, provided that the option exercise price may not be less than the fair market value of a share of common stock on the date of grant, except for an option granted in substitution of an outstanding award in an acquisition transaction. In addition, the committee will determine the time or times that the options become exercisable, provided that options are subject to the minimum vesting requirement and exception described above. The term of an option will also be determined by the committee, but may not exceed ten years from the date of the grant. As noted above, the committee may not, without the prior approval of our stockholders,shareholders, decrease the exercise price for any outstanding option after the date of grant. In addition, an outstanding option may not, as of any date that the option has a per share exercise price that is greater than the then current fair market value of a share of common stock, be surrendered to us as consideration for the grant of a new option with a lower exercise price, another incentive, a cash payment or shares of common stock, unless approved by our stockholders.shareholders. ISOs will be subject to certain additional requirements necessary in order to qualify as incentive stock options under Section 422 of the Internal Revenue Code. In addition, participants holding stock options will not be entitled to any dividend equivalent rights for any period of time prior to exercise of the stock option.
•Stock Appreciation Rights. A stock appreciation right is a right to receive, without payment to us, a number of shares of common stock or an amount of cash determined by dividing the product of the number of shares as to which the SAR is exercised and the amount of the appreciation in each share by the fair market value of a share on the date of exercise of the right. The committee will determine the exercise price used to measure share appreciation, provided that the exercise price may not be less than the fair market value of a share of common stock on the date of grant, except for a SAR granted in substitution of an outstanding award in an acquisition transaction. In addition, the committee will determine whether the right may be paid in cash, shares of common stock, or a combination of the two, and the number and term of SARs, provided that the term of a SAR may not exceed ten years from the date of grant. SARs are subject to the minimum vesting requirement and exception described above. The Plan restricts decreases in the exercise price and certain exchanges of SARs on terms similar to the restrictions described above for stock options. Participants holding SARs will not be entitled to any dividend equivalent rights for any period of time prior to exercise of the SAR.
•Restricted Stock. Shares of common stock may be granted by the committee and made subject to restrictions on sale, pledge or other transfer by the recipient for a certain restricted period. All shares of restricted stock will be subject to such restrictions as the committee may provide in an agreement with the participant, provided that the minimum vesting requirements described above are satisfied. Subject to the restrictions provided in the agreement and the Plan, a participant receiving restricted stock shall have all of the rights of a stockholdershareholder as to such shares, including the right to accrue dividends if provided for in the agreement. Notwithstanding the previous sentence, any and all cash and stock dividends paid with respect to the shares of restricted stock will be subject to the same
vesting and forfeitability conditions, including attainment of any performance goals, as are applicable to the underlying shares of restricted stock.
•Restricted Stock Units. A restricted stock unit represents the right to receive from the company on the scheduled vesting date or other specified payment date one share of common stock. All RSUs will be subject to such restrictions as the committee may provide in an agreement with the participant, provided that the minimum vesting requirements described above are satisfied. Subject to the restrictions provided in the agreement and the Plan, a participant receiving RSUs shall have no rights of a stockholdershareholder as to such units until such time as shares of common stock are issued to the participant. RSUs may be granted with dividend equivalent rights; provided, however, that any and all dividend equivalent rights with respect to the RSUs will be subject to the same vesting and forfeitability conditions, including attainment of any performance goals, as are applicable to the underlying RSUs.
•Other Stock-Based Awards. The Plan also permits the committee to grant participants awards of shares of common stock and other awards that are denominated in, payable in, valued in whole or in part by reference to, or are otherwise based on the value of, or the appreciation in value of, shares of common stock (other stock-based awards). The committee has discretion to determine the times at which such awards are to be made, the size of such awards, the form of payment, and all other conditions of such awards, including any restrictions, deferral periods or performance requirements, provided that the minimum vesting requirements described above are satisfied. Other stock-based awards may be granted with dividend equivalent rights; provided, however, that any and all dividend equivalent rights with respect to the award will be subject to the same vesting and forfeitability conditions, including attainment of any performance goals, as are applicable to the underlying award.
Clawback. The Plan also provides that all Awards (including any proceeds, gains or other economic benefit the Participant actually or constructively receives upon receipt or exercise of any Award or the receipt or resale of any Shares underlying the Award) will be subject to the company clawback policy implemented to comply with Applicable Laws, including any clawback policy adopted to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act
Sterling Infrastructure |2024 ProxyStatement| 47|
and any rules or regulations promulgated thereunder, as set forth in such a clawback policy or the Award Agreement. In October 2023, the board of directors approved a clawback policy applicable to our NEOs entitled “Policy for the Recovery of Erroneously Awarded Compensation” to comply with the expanded requirements pursuant to NASDAQ Listing Rule 5608 and Section 10D and Rule 10D-1 of the Exchange Act.
Termination of Employment; Change of Control. If a participant ceases to be an employee of the company or to provide services to us for any reason, including death, disability, or retirement, the participant’s outstanding awards may be exercised, shall vest or shall expire at such time or times as may be determined by the committee and described in the award agreement.
Unless otherwise provided in an award agreement, upon a change of control: (a) all options and SARs will become immediately exercisable, (b) all time-vested restrictions on restricted stock, RSUs or other stock-based awards will lapse, and (c) all performance measures applicable to awards will be disregarded and the award will vest at the target payout level. Further, in the event of a change of control, the committee may, in its sole and absolute discretion and authority, without obtaining the approval or consent of the company’s stockholdersshareholders or any participant with respect to his or her outstanding awards, take one or more of the following actions:
•arrange for or otherwise provide that each outstanding award shall be assumed or a substantially similar award shall be substituted by a successor corporation or a parent or subsidiary of such successor corporation;
•require that all outstanding options and SARs be exercised on or before a specified date (before or after such change of control) fixed by the committee, after which specified date all unexercised options and SARs shall terminate;
•arrange or otherwise provide for payment of cash or other consideration to participants representing the value of such awards, if any, in exchange for the satisfaction and cancellation of outstanding awards, or cancel any outstanding awards for no payment if the award has no value; or
•make other appropriate adjustments or modifications.
Transferability of Awards. Awards under the Plan may not be transferred except:
•by will;
•by the laws of descent and distribution;
•if permitted by the committee and so provided in the award agreement, pursuant to a domestic relations order; or
•in the case of stock options only, if permitted by the committee and if so provided in the award agreement, to immediate family members or to a partnership, limited liability company or trust for which the sole owners, members or beneficiaries are the participant or immediate family members.
Payment of Withholding Taxes. We may withhold from any payments or stock issuances under the Plan, or collect as a condition of payment, any taxes required by law to be withheld. The participant may, but is not required to, satisfy his or her withholding tax obligation by electing to deliver currently owned shares of common stock or to have the company withhold, from the shares the participant would otherwise receive, shares, in each case having a value at least equal to the minimum amount required to be withheld and not in excess of the applicable estimated incremental tax rate approved by the committee. This election must be made prior to the date on which the amount of tax to be withheld is determined.
Prohibition of Repricing. Under the Plan, the committee may not, without the approval of the company’s stockholders,shareholders, authorize the repricing of any outstanding option or SAR to reduce its exercise price, cancel any option or SAR in exchange for cash or another award when the exercise price exceeds the fair market value of the underlying shares, or take any other action with respect to an option or SAR that the company determines would be treated as a repricing.
Federal Income Tax Consequences of Awards
The federal income tax consequences related to the issuance of the different types of awards that may be granted under the Plan are summarized below. Participants who are granted awards under the Plan should consult their own tax advisors to determine the tax consequences based on their particular circumstances.
Stock Options. A participant who is granted a stock option normally will not realize any income, nor will our companythe Company normally receive any deduction for federal income tax purposes, in the year the option is granted. When a non-qualified stock option granted through the Plan is exercised, the participant will realize ordinary income measured by the difference between the aggregate purchase price of the shares acquired and the aggregate fair market value of the shares acquired on the exercise date. An employee generally will not recognize any income upon the exercise of any ISO, but the excess of the fair market value of the shares at the time of exercise over the option price will be an item of tax preference, which may, depending on particular factors relating to the employee, subject the employee to the alternative minimum tax imposed by Section 55 of the Internal Revenue Code. The alternative minimum tax is imposed in addition to the federal individual income tax, and it is intended to ensure that individual taxpayers do not completely avoid federal income tax by using preference items. An employee will recognize capital gain or loss in the amount of the difference between the
| 48| Sterling Infrastructure |2024 ProxyStatement
exercise price and the sale price on the sale or exchange of stock acquired pursuant to the exercise of an ISO, provided the employee does not dispose of such stock within two years from the date of grant and one year from the date of exercise of the ISO (the holding periods). An employee disposing of such shares before the expiration of the holding periods will recognize ordinary income generally equal to the difference between the option price and the fair market value of the stock on the date of exercise. The remaining gain, if any, will be capital gain.
If the exercise price of a non-qualified option is paid by the surrender of previously owned shares, the basis and the holding period of the previously owned shares carry over to the same number of shares received in exchange for the previously owned shares. The compensation income recognized on exercise of these options is added to the basis of the shares received. If the exercised option is an ISO and the shares surrendered were acquired through the exercise of an ISO and have not been held for the holding periods, the optionee will recognize income on such exchange, and the basis of the shares received will be equal to the fair market value of the shares surrendered. If the applicable holding period has been met on the date of exercise, there will be no income recognition and the basis and the holding period of the previously owned
shares will carry over to the same number of shares received in exchange, and the remaining shares will begin a new holding period and have a zero basis.
Stock Appreciation Rights. Generally, a participant who is granted a SAR under the Plan will not recognize any taxable income at the time of the grant. The participant will recognize ordinary income upon exercise equal to the amount of cash or the fair market value of the stock received on the day it is received.
Restricted Stock. Unless the participant makes an election to accelerate recognition of the income to the date of grant (as described below), the participant will generally not recognize income at the time the restricted stock award is granted. When the restrictions lapse, the participant will recognize ordinary income equal to the fair market value of the shares as of that date. If the participant files an election under Section 83(b) of the Internal Revenue Code within 30 days of the date of grant of restricted stock, the participant will recognize ordinary income as of the date of the grant equal to the fair market value of the stock as of that date. Any future appreciation in the stock will be taxable to the participant at capital gains rates. If the stock is later forfeited, however, the participant will not be able to recover the tax previously paid pursuant to a Section 83(b) election.
Restricted Stock Units. A participant will not be deemed to have received taxable income upon the grant of RSUs. The participant will be deemed to have received taxable ordinary income at such time as shares are distributed with respect to the RSUs in an amount equal to the fair market value of the shares distributed to the participant. The basis of the shares received will equal the amount of taxable ordinary income recognized by the participant upon receipt of such shares.
Other Stock-Based Awards. Generally, a participant who is granted any other stock-based award under the Plan will recognize ordinary income at the time the cash or shares of common stock associated with the award are received. If stock is received, the ordinary income will be equal to the excess of the fair market value of the stock received over any amount paid by the participant in exchange for the stock.
Tax Impact on the Company. We will generally be entitled a to a deduction equal to the amount of ordinary income that the participant is required to recognize as a result of the exercise or vesting of an Award, provided that the deduction is not otherwise disallowed under Section 162(m) of the Internal Revenue Code.
Section 409A. If any incentive constitutes non-qualified deferred compensation under Section 409A of the Internal Revenue Code, it will be necessary that the award be structured to comply with Section 409A of the Internal Revenue Code to avoid the imposition of additional tax, penalties and interest on the participant.
Tax Consequences of a Change of Control. If, upon a change of control of the company, the exercisability, vesting or payout of an award is accelerated, any excess on the date of the change of control of the fair market value of the shares or cash issued under accelerated awards over the purchase price of such shares, if any, may be characterized as “parachute payments” (within the meaning of Section 280G of the Internal Revenue Code) if the sum of such amounts and any other such contingent payments received by the employee exceeds an amount equal to three times the “base amount” for such employee. The base amount generally is the average of the annual compensation of the employee for the five years preceding such change in ownership or control. An “excess parachute payment” with respect to any employee is the excess of the parachute payments to such person, in the aggregate, over and above such person’s base amount. If the amounts received by an employee upon a change of control are characterized as parachute payments, the employee will be subject to a 20% excise tax on the excess parachute payment and we will be denied any deduction with respect to such excess parachute payment.
The foregoing discussion summarizes the federal income tax consequences of awards that may be granted under the Plan based on current provisions of the Internal Revenue Code, which are subject to change. This summary does not cover any foreign, state or local tax consequences.
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New Plan Benefits
Awards underExcept as described in the table below, the amount of any future benefits that may be received by any one individual or group of individuals pursuant to the Plan is not presently determinable. Such awards are subject towithin the discretion of the committee, and no determinationsexcept as described in the table below, the committee has not determined future awards or who might receive them. As evidenced by our annual burn rate, the committee and the board have been made byjudicious in granting such awards and have displayed a sensitivity to minimizing the committeeimpact of the potential dilution that such awards could have on our stockholders. However, as to anythe Plan does not contemplate the amount or timing of specific future equity awards, that may be granted pursuant to the Plan. Therefore, it is not possible to determinecalculate the benefitsamount of subsequent dilution that will be receivedmay ultimately result from such awards.
In 2024, the compensation committee granted equity awards to employees totaling 213,159 shares as described in the future by participants intable below. These awards are contingent upon shareholder approval of the Plan orat the benefits that wouldannual meeting.
have been received by such participants if the Plan had been in effect in the fiscal year ended December 31, 2017. No awards have been issued under the Plan as it is not yet effective.
Certain tables above, under “Executive Compensation – Executive Compensation Tables,” including the 2017 Summary Compensation Table, Grants of Plan-Based Awards table, Outstanding Equity Awards at December 31, 2017, and Stock Vested table and the Director Compensation table under “Director Compensation” set forth information with respect to prior awards granted to our NEOs and directors under our current stock incentive plan.
| | | | | | | | |
Second Amended and Restated 2018 Stock Incentive Plan |
Name and Position / Group | Number of PSUs | Number of RSUs |
Joseph A. Cutillo, CEO | 183,883 | 15,922 |
Ronald A. Ballschmiede, CFO | 4,811 | 4,811 |
Mark D. Wolf, General Counsel | 2,239 | 1,493 |
Executive Group | 190,933 | 22,226 |
Non-Executive Director Group | n/a | n/a |
Non-Executive Officer Employee Group | n/a | n/a |
Equity Compensation Plan Information
The following table presents information as of December 31, 2017,2023, regarding our incentive compensation planplans under which common stock may be issued to employees and non-employees as compensation.
| | | | | | | | | | | | | | | | | | | | | | | |
Plan Category | | Number of Securities To be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a) (1) | | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights (b) | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c) (2) |
Equity compensation plans approved by security holders | | 313,972 | | $ | n/a | | 1,744,162 |
Equity compensation plans not approved by security holders | | n/a | | | n/a | | n/a |
Total | | 313,972 | | | n/a | | 1,744,162 |
|
| | | | | | | | | | | | | |
Plan Category | | 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 | | | — |
| (1)
| | | n/a | | | | 400,289 | (2)
|
Equity compensation plans not approved by security holders | | | n/a |
| | | | n/a | | | | n/a | |
Total | | | — |
| (1)
| | | n/a | | | | 400,289 | (2)
|
________________
(1)The onlyshares reflected in column (a) are the amount reserved for issuance under outstanding equity awards as of December 31, 2017 were unvested shares of restricted stock, which represent issued shares.RSUs and PSUs. These awards are not reflected in column (b) as they do not have an exercise price.
(2)As of December 31, 2017, there were 400,289The shares remainingreflected in column (c) are the amount available for future
issuance under theour 2019 Employee Stock Purchase Plan and our 2018 Amended and Restated Stock Incentive Plan, all of which could be issued pursuant to awards of stock options, restricted stock, or “other stock-based compensation.”Plan.
In early 2018, the compensation committee granted equity awards to employees, including 249,759 RSUs and 77,690 performance share units (representing the target award). Following these grants and the return of 22,153 shares to the pool as a result of withholdings and forfeitures, there are currently less than 20,000 shares remaining available for future grant under our current plan.
Vote Required to Adopt the Second Amended and Restated 2018 Stock Incentive Plan
Approval of this proposal requires the affirmative vote of a majority of the shares of our common stock present in person or represented by proxy and entitled to vote on the proposal. For more information on the voting requirements, see “Questions and Answers about the Proxy Materials, Annual Meeting and Voting.”
Recommendation of the Board of Directors
| | | | | |
ü | OUR BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ADOPTION OF THE SECOND AMENDED AND RESTATED 2018 STOCK INCENTIVE PLAN. |
OUR BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ADOPTION OF THE 2018 STOCK INCENTIVE PLAN.
Certain Transactions
Our audit committee charter providesAll transactions that any transaction betweenrequire disclosure under Item 404(a) of Regulation S-K of the company (including its subsidiaries) and a director, executive officer, nominee for election as a director or stockholder and any of their affiliates or immediate family members that involves more than $100,000Exchange Act must be periodically reviewed and approved in advance and reviewed periodically by the audit committee to ensure, among other considerations, that such transactions are in compliance with Delaware law and are on terms that are no less favorable to the companyCompany (including its subsidiaries) than could be obtained from unrelated third parties.
Wadsworth Family
Mr. Wadsworth is the executive vice president No such transactions reportable under Item 404 of Regulation S-K have taken place since January 1, 2023, and chief operating officer of the company. Mr. Wadsworth and some of his immediate family membersnone are part owners of the following companies.currently proposed.
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|
| | | | | | |
Name (Relationship) | | W&S LLC | | W&S II, LLC | | W&S III, LLC |
Con L. Wadsworth | | 32.45% | | 24.38% | | 31.80% |
Kip L. Wadsworth (brother) | | 32.45% | | 24.38% | | 36.40% |
Tod L. Wadsworth (brother) | | 32.45% | | 24.38% | | 31.80% |
Nic L. Wadsworth (brother) | | — | | 24.38% | | — |
Ralph L. Wadsworth (father) | | 1.325% | | 1.24% | | — |
Peggy Wadsworth (mother) | | 1.325% | | 1.24% | | — |
Each of these companies had a business relationship with Ralph L. Wadsworth Construction Company, LLC (RLW), a subsidiary of the company, in 2017.
Wadsworth & Sons II (W&S II, LLC). RLW is the general contractor on four projects totaling $6.9 million, the largest being a $6.2 million project designated as Exchange Building "F" in Draper, Utah, which is owned by W&S II, LLC.
W&S II, LLC & Wadsworth Corporate Center Building A, LLC (WCC). RLW leases its primary office space from W&S II, LLC through WCC, an entity owned and managed by W&S II, LLC, at an annual rent of $461,289, and common area maintenance charges of $122,279. This lease expires in 2022.
Wadsworth Dannon Way, LLC (WDW) which is part of Wadsworth & Sons LLC and Wadsworth & Sons III, LLC (W&S III, LLC). In 2017, RLW leased:
| | |
o | a facility for RLW's equipment maintenance shop from WDW at an annual rent of $281,437 plus common area maintenance charges of $76,307; and |
| |
o | a facility to provide temporary living quarters for field employees from W&S III, LLC on a month-to-month basis for total 2017 rent of $22,500. |
As part of its due diligence review prior to the acquisition of an 80% interest in RLW in December 2009, the company reviewed the relationships and transactions between RLW, Mr. Wadsworth and Mr. Wadsworth's family members, and concluded that the prices being charged to RLW or by RLW, as the case may be, are competitive and no less favorable to RLW than could be obtained from unrelated third parties.
The transactions described above have been reviewed annually and approved by the audit committee.
Questions and Answers about the Proxy Materials, Annual Meeting and Voting
Why am I receiving these proxy materials?
Our board of directors is soliciting your proxy to vote at our 20182024 annual meeting of stockholdersshareholders because you owned shares of our common stock at the close of business on March 13, 2018,11, 2024, the record date for the annual meeting, and, therefore, are entitled to vote at the annual meeting. You do not need to attend the annual meeting in person to vote your shares of our common stock. This proxy statement, along with the 20172023 annual report, have been made available to stockholdersshareholders on or about March 20, 2018.26, 2024. We have made these materials available to you on the internet and, in some cases, we have delivered printed proxy materials to you.at http://www.proxyvote.com. This proxy statement summarizes the information that you need to know in order to cast your vote at the annual meeting or submittingsubmit your proxy and voting instructions prior to the annual meeting.
Why did I receive a notice of internet availability of proxy materials instead of a full set of proxy materials?
In accordance with the rules of the SEC, we are permitted to furnish proxy materials, including this proxy statement and our 20172023 annual report, to stockholdersour shareholders by providing access to these documents on the internet instead of mailing printed copies. Most stockholdersShareholders will not receive printed copies of the proxy materials unless requested. Instead, the notice of internet availability provides instructions on how to access and review the proxy materials on the internet. The notice also provides instructions on how to submit your proxy and voting instructions via the internet. If you would like to receive a printed or email copy of our proxy materials, please follow the instructions for requesting the materials in the notice.
When and where will the annual meeting be held?
The annual meeting will be held at 8:30 a.m., local time, on Wednesday,Thursday, May 2, 2018,9, 2024, at our headquarters located at 1800 Hughes Landing Boulevard—Suite 250, The Woodlands, Texas 77380. You can obtain directions to the annual meeting by contacting our corporate secretary at (281) 214-0800.
What should I bring if I plan to attend the annual meeting in person?
If you plan to attend the annual meeting in person, please bring proper identification, and, if your shares of our common stock are held in “street name,” meaning a bank, broker, trustee or other nominee is the stockholdershareholder of record of your shares, please bring acceptable proof of ownership, which is either an account statement or a letter from your bank, broker, trustee or other nominee confirming that you beneficially owned shares of Sterling Construction Company,Infrastructure, Inc. common stock on the record date.
Who is soliciting my proxy?
Our board of directors, on behalf of the company,Company, is soliciting your proxy to vote your shares of our common stock on all matters scheduled to come before the 20182024 annual meeting of stockholders,shareholders, whether or not you attend in person. By completing, signing, dating and returning the proxy card or voting instruction form, or by submitting your proxy and voting instructions via the internet or by marking, signing, dating and returning the proxy card (if received by mail), you are authorizing the proxy holders to vote your shares of our common stock at the annual meeting as you have instructed (or in their best judgement as provided below).
On what matters will I be voting? How does the board recommend that I cast my vote?
At the annual meeting, you will be asked to (1) elect the seveneight director nominees;nominees named herein; (2) approve, on an advisory basis, the compensation of our named executive officers;NEOs; (3) ratify the appointment of our independent registered public accounting firm; (4) adopt the second amended and restated 2018 stock incentive plan; and (5) consider any other matter that properly comes before the annual meeting.
OurSterling Infrastructure |2024 ProxyStatement| 51|
The following summarizes how the board of directors recommends that you vote:
FOR the election of each of the seven director nominees;
FOR the approval, on an advisory basis, of the compensation of our named executive officers;
FOR the ratification of the appointment of our independent registered public accounting firm; and
FOR the adoption of the 2018 stock incentive plan.
| | | | | | | | | | | |
Proposal | Description | Board Vote Recommendation | Page |
1 | Election of eight director nominees | FOR each nominee | |
2 | Advisory vote to approve the compensation of our named executive officers | FOR | 41 |
3 | Ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2024 | FOR | |
4 | Adoption of the second amended and restated 2018 stock incentive plan | FOR | 50 |
We do not expect any matters to be presented for action at the annual meeting other than the matters described in this proxy statement. However, by signing, dating and returning a proxy card or submitting your proxy and voting instructions via the internet, or by marking, signing, dating and returning a proxy card (if received by mail), you will give to the persons named as proxies discretionary voting authority with respect to any matter that may properly come before the annual meeting. The proxies will vote on any such matter in accordance with their best judgment.
How many votes may I cast?cast?
You may cast one vote for every share of our common stock that you owned on March 13, 2018,11, 2024, the record date for the annual meeting.
How many shares of common stock are eligible to be voted?
As of March 13, 2018,11, 2024, we had 27,034,57531,152,222shares of common stock outstanding. Each share of common stock outstanding as of the record date for the annual meeting will entitle the holder thereof to one vote.
How many shares of common stock must be present to hold the annual meeting?
Under Delaware law and our bylaws, a majority of the shares our common stock issued and outstanding and entitled to vote at the meeting, present in person or represented by proxy, will constitute a quorum at the annual meeting. The inspector of election will determine whether a quorum is present at the annual meeting. StockholdersShareholders of record who are present at the annual meeting in person or by proxy will be counted as present at the annual meeting for purposes of determining whether a quorum exists, whether or not such holder of record abstains from voting on any or all of the proposals. If you are a beneficial owner (as defined below) of shares of our common stock, even if you do not instruct your bank, broker, trustee or other nominee how to vote your shares on any of the proposals, if your bank, broker, trustee or other nominee submits a proxy as the record holder with respect to your shares on a matter with respect to which discretionary voting is permitted, your shares will be counted as present at the annual meeting for purposes of determining whether a quorum exists.exists; however, many banks, brokers, trustees and other nominees do not vote on discretionary items if voting instructions from the beneficial owner have not been received. Beneficial owners are encouraged to submit voting instructions to their banks, brokers, trustees and other nominees so that their shares are counted for purposes of establishing a quorum.
How do I vote?
StockholdersShareholders of Record
If your shares of our common stock are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC,Broadridge Corporate Issuer Solutions, you are the stockholdershareholder of record of those shares and these proxy materials have been made available to you by us. You may submit your proxy and voting instructions via the internet or mail as further described below. Your proxy, whether submitted via the internet or mail, authorizes each of Milton L. Scott, the chairman of the board of directors, Ronald A. Ballschmiede, our chief financial officer, and Richard E. Chandler, Jr.,Mark D. Wolf, our general counsel and secretary to act as your proxies at the annual meeting and at any adjournment of the meeting, each with the power to appoint his substitute, and to represent and vote your shares of our common stock as you directed, if applicable.
•Submit Your Proxy and Voting Instructions via the Internet at: http://www.astproxyportal/com/ast/04770www.proxyvote.com
▪Use the internet to submit your proxy and voting instructions 24 hours a day, seven days a week until 11:59 p.m., Eastern Time, on May 8, 2024.
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▪ | Use the internet to submit your proxy and voting instructions 24 hours a day, seven days a week until 11:59 p.m., Central Time, on May 1, 2018. |
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▪ | Please have your proxy card available and follow the instructions on the proxy card. |
▪Please have your proxy card available and follow the instructions on the proxy card.
•Submit Your Proxy and Voting Instructions by Mail
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▪ | Obtain a printed copy of the proxy card in the manner described in the notice of internet availability. |
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▪ | Complete, date and sign your proxy card and return it in the postage-paid envelope provided. |
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▪Obtain a printed copy of the proxy card in the manner described in the notice of internet availability.
▪Complete, date and sign your proxy card and return it in the postage-paid envelope provided.
If you submit your proxy and voting instructions via the internet, you do not need to mail a proxy card. The proxies will vote your shares of our common stock at the annual meeting as instructed by the latest dated proxy received from you, whether submitted via the internet or mail. You may also vote in person at the annual meeting.
For a discussion of the treatment of a properly signed and dated proxy card without voting instructions on any or all of the proposals, please see the question below titled “What“What happens if I do not submit voting instructions for a proposal? What is discretionary voting? What is a broker non-vote?”
Beneficial Owners
If your shares of our common stock are held in a stock brokerage account by a bank, broker, trustee or other nominee, you are considered the beneficial owner of shares held in street name and these proxy materials are being forwarded to you by your bank, broker, trustee or other nominee that is considered the stockholdershareholder of record of those shares. As the beneficial owner, you have the right to direct your bank, broker, trustee or other nominee on how to vote your shares of our common stock via the internet or telephone, if the bank, broker, trustee or other nominee offers these options or by completing,marking, signing, dating and returning a voting instruction form provided. Your bank, broker, trustee or other nominee will send you instructions on how to submit your voting instructions for your shares of our common stock.stock beneficially owned.
What happens if I do not submit voting instructions for a proposal? What is discretionary voting? What is a broker non-vote?
If you are a stockholdershareholder of record and you properly complete, sign, date and return a proxy card, or voting instruction form, your shares of our common stock will be voted as you specify. If you are a stockholdershareholder of record and you sign, date and return a proxy card but make no specifications on yourproxy card, your shares of our common stock will be voted in accordance with the recommendations of our board of directors, as provided above.
If you are a beneficial owner and you do not provide voting instructions to your bank, broker, trustee or other nominee holding shares of our common stock for you,on your behalf, your beneficially owned shares of our common stock will not be voted with respect to any proposal for which the stockholdershareholder of record does not have discretionary authority to vote. RulesUnder applicable rules, if you do not provide voting instructions to your bank, broker, trustee or other nominee in advance of the New York Stock Exchange (NYSE) determine whether proposals presented at stockholder meetings are “discretionary”meeting, your bank, broker, trustee or “non-discretionary.” Ifother nominee will have discretionary authority to vote on “routine” proposals; however, many banks, brokers, trustees and other nominees do not vote on discretionary items if voting instructions from the beneficial owner have not been received. When a proposal is determined to be discretionarynot routine (e.g., the election of directors, the approval of the compensation of our NEOs, the adoption of the second amended and restated 2018 stock incentive plan or any other significant matter), your bank, broker, trustee or other nominee is permitted under the NYSE ruleswill not be able to vote on the proposal without receiving voting instructions from you. IfUnder applicable rules, the proposal relating to the ratification of the appointment of our independent registered public accounting firm is the only routine proposal being presented at the meeting. Thus, if you are a proposal is determinedbeneficial owner and you do not provide voting instructions to be non-discretionary, the NYSE rules prohibit your bank, broker, trustee or other nominee holding shares on your behalf, your beneficially owned shares may be voted by the record holder only with respect to vote on the proposal without receivingratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2024.
As noted above, the proposals relating to the election of directors, the compensation of our NEOs and the adoption of the second amended and restated 2018 stock incentive plan are not routine proposals. Accordingly, if you are a beneficial owner and you do not provide voting instructions from you.to your bank, broker, trustee or other nominee holding shares on your behalf, your beneficially owned shares will not be voted with respect to these proposals. Without your voting instructions, a broker non-vote will occur with respect to your beneficially owned shares on each non-discretionary proposal for which you have not provided voting instructions. A “broker non-vote” occurs when a bank, broker, trustee or other nominee holding shares for a beneficial owner returns a valid proxy, but does not vote on a particular proposal because it does not have discretionary authority to vote on the matter and has not received voting instructions from the stockholder for whom it is holding shares.
Under the NYSE rules, the proposal relating to the ratificationbeneficial owner of the appointment of our independent registered public accounting firm is the only discretionary proposal being presented at the meeting. Thus, if you are a beneficial owner and you do not provide voting instructions to your bank, broker, trustee or other nominee holding shares for you, your shares may be voted by the record holder with respect to the ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2018.
As noted above, the proposals relating to the election of directors, the compensation of our named executive officers, and the adoption of the 2018 stock incentive plan are non-discretionary proposals. Accordingly, if you are a beneficial owner and you do not provide voting instructions to your bank, broker, trustee or other nominee holding shares for you, your shares will not be voted with respect to these proposals. Without your voting instructions, a broker non-vote will occur with respect to your shares on each non-discretionary proposal for which you have not provided voting instructions.
shares.
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What vote is required, and how will my votes be counted, to elect the director nominees and to approve each of the other proposals discussed in this proxy statement?
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Proposal | | Voting Options | | Vote Required for Approval | | Effect of Abstentions | | | | | Effect of Broker Non-Votes |
Proposal
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Voting Options
| | Vote Required
to Adopt the Proposal
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Effect of Abstentions
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Effect of
Broker Non-Votes
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No. 1: Election of the seveneight director nominees | | For, against or abstain for each nominee | | Majority of the votes cast*cast for each nominee* | | No effect | | No effect |
No. 2: Approval, on an advisory basis, ofAdvisory vote to approve the compensation of our named executive officers | | For, against or abstain | | Affirmative vote of a majority of the shares of common stock present in person or by proxy and entitled to vote on the proposal | | Treated as votesvote against | | No effect |
No. 3: Ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for 2023
| | For, against or abstain | | Affirmative vote of a majority of the shares of common stock present in person or by proxy and entitled to vote on the proposal | | Treated as votesvote against | | N/A |
No. 4: Adoption of the amended and restated 2018 stock incentive plan (Proposal 4, page 50) | | For, against or abstain | | Affirmative vote of a majority of the shares of common stock present in person or by proxy and entitled to vote on the proposal | | Treated as votesvote against | | No effect |
* In uncontested elections, our directors are elected by the affirmative vote of the holders of a majority of the votes cast. If a nominee for director does not receive a majority of votes cast, he or she shall promptly tender his or her resignation to the board. In contested elections (where the number of nominees exceeds the number of directors to be elected), our directors are elected by a plurality of shares of our common stock voted.
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Can I revoke or change my voting instructions after I deliver my proxy?
Yes. YourA proxy submitted by a shareholder of record can be revoked or changed at any time before it is used to vote yourthe shares of our common stock if you:the shareholder of record: (1) provideprovides notice in writing to our corporate secretary before the annual meeting; (2) timely provideprovides to us another proxy with a later date; or (3) areis present at the annual meeting and either votevotes in person or notifynotifies the corporate secretary in writing at the annual meeting of yoursuch shareholder’s wish to revoke yoursuch shareholder’s proxy. Your attendance alone at the annual meeting will not be enough to revoke your proxy. Beneficial owners without a legal proxy must contact their bank, broker, trustee or other nominee for instructions on how to revoke or change their instructions.
How will we solicit proxies and who pays for soliciting proxies?
We pay all expenses incurred in connection with this solicitation of proxies to vote at the annual meeting. We will also request banks, brokers, trustees and other nominees holding shares of our common stock beneficially owned by others to sendmake this proxy statement and the 20172023 annual report available to, and obtain voting instructions from, the beneficial owners and will reimburse such stockholdersshareholders of record for their reasonable expenses in so doing. Solicitation of proxies by notice of internet availability or mail, as applicable, may be supplemented by telephone, email, facsimile transmission, other electronic means, and personal solicitation by our directors, officers and employees. No additional compensation will be paid to directors, officers or employees for such solicitation efforts.
Could other matters be considered and voted upon at the annual meeting?
Our board does not expect to bring any other matter before the annual meeting, and it is not aware of any other matter that may be considered at the annual meeting. However, if any other matter does properly come before the annual meeting, including any adjournment or postponement thereof, each of the proxy holders will vote any shares of our common stock, for which he holds a proxy to vote at the annual meeting, in his discretion.
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What happens if the annual meeting is postponed or adjourned?
Any action on the items of business described in this proxy statement may be considered at the annual meeting at the time and on the date specified herein or at any time and date to which the annual meeting may be properly adjourned or postponed. Unless a new record date is fixed, your proxy will still be valid and may be used to vote shares of our common stock at the postponed or adjourned annual meeting. YouShareholders of record or beneficial owners with a legal proxy will still be able to change or revoke yourtheir proxy until it is used to vote yourtheir shares.
I share an address with another shareholder, and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?
SEC rules permit companies and intermediaries, such as banks, brokers, trustees or other nominees, to deliver a single set of proxy materials to two or more shareholders sharing the same address, a process known as “householding.” Currently, we do not engage in householding for shareholders of record. However, certain brokerage firms with account holders who are beneficial owners of our common stock may have adopted householding procedures. Once a beneficial owner has received notice from his or her bank, broker, trustee or other nominee that the bank, broker, trustee or other nominee will be householding communications to the beneficial owner’s address, householding will continue until the beneficial owner is notified otherwise or until one or more of the beneficial owners revokes his or her consent. 2019 StockholderIf you would like to receive separate copies of our proxy materials in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you may either contact your bank, broker, trustee or other nominee or the Company at the address and telephone number below.
You may also request prompt delivery of additional copies of our proxy materials by contacting the Company at (281) 214-0800 or ℅ Corporate Secretary, Sterling Infrastructure, Inc., 1800 Hughes Landing Blvd. — Suite 250, The Woodlands, Texas 77380.
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2025 Shareholder Proposals |
If you want us to consider including a proposal in next year’s proxy statement, pursuant to Rule 14a-8 of the Securities Exchange Act, of 1934, you must deliver it in writing to: c/o℅ Corporate Secretary, Sterling Construction Company,Infrastructure, Inc., 1800 Hughes Landing Blvd. — Suite 250, The Woodlands, Texas 77380 by November 20, 2018.26, 2024.
If you want to present a proposal at the next annual meeting, but do not wish to have it included in our proxy statement, you must submit it in writing to our corporate secretary, at the above address, bynot later than February 1, 2019,8, 2025 nor earlier than January 9, 2025, in accordance with the specific procedural requirements in our bylaws. If the date of next year’s annual meeting is moved to a date more than 30 days before or 90 days after the anniversary of this year’s annual meeting, the proposal must be received no earlier than 120 days prior to the date of the 2025 annual meeting and no later than 90 days prior to the date of the 20192025 annual meeting or 10 daysthe 10th day following the public announcement of the date of the 20192025 annual meeting. If you would like a copy of these procedures, please contact our corporate secretary as provided above. Failure to comply with the procedures and deadlines in our bylaws may preclude the presentation of your proposal at our 20192025 annual meeting. If a shareholder does not provide such notice timely, proxies solicited on behalf of our board of directors for the next annual meeting will confer discretionary authority to vote with respect to any such matter. Please refer to the section titled “Consideration of Director Nominees” for information related to nominating a director candidate at our 2025 annual meeting.
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Annex A – Second Amended and Restated 2018 Stock Incentive Plan |
Annex A
STERLING CONSTRUCTION COMPANY,INFRASTRUCTURE, INC.
SECOND AMENDED AND RESTATED
2018 STOCK INCENTIVE PLAN
1.Purpose. The purpose of the Second Amended and Restated 2018 Stock Incentive Plan (the “Plan”) is to increase stockholder value and advance the interests of the Company and its Subsidiaries by furnishing a variety of equity incentives designed to (a) attract, retain, and motivate key employees, officers, and directors of the Company and consultants and advisers to the Company and (b) strengthen the mutuality of interests among such persons and the Company’s stockholders.
2.Definitions. As used in the Plan, capitalized terms not otherwise defined herein shall have the meanings set forth in Appendix A.
3.Administration.
3.1Committee. The Plan shall generally be administered by the Committee. Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have plenary authority to administer the Plan, including full power and authority to:
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(a) | designate Participants; |
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(b) | determine the type or types of Awards to be granted to an Eligible Individual; |
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(c) | determine the number of Shares to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards; |
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(d) | determine the terms and conditions of any Award; |
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(e) | cancel, modify, or waive rights with respect to, or to alter, discontinue, suspend, or terminate Awards; |
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(f) | determine whether, to what extent, and under what circumstances an Award may be settled or exercised in cash, whole Shares, other whole securities, other Awards, other property, or other cash amounts payable by the Company upon the exercise of that or other Awards, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended;
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(g) | determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable by the Company with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee; |
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(h) | interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan; |
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(i) | establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and |
A-1(a) designate Participants;
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(j) | make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. |
(b) determine the type or types of Awards to be granted to an Eligible Individual;
(c) determine the number of Shares to be covered by, or with respect to which payments, rights, or other matters are to be calculated in connection with, Awards;
(d) determine the terms and conditions of any Award;
(e) cancel, modify, or waive rights with respect to, or to alter, discontinue, suspend, or terminate Awards;
(f) determine whether, to what extent, and under what circumstances an Award may be settled or exercised in cash, whole Shares, other whole securities, other Awards, other property, or other cash amounts payable by the Company upon the exercise of that or other Awards, or canceled, forfeited, or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended;
(g) determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable by the Company with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee;
(h) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan;
(i) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and
(j) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan.
3.2Effect of Committee's Determinations. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon all Persons, including the Company, any Subsidiary, any Participant, any holder or beneficiary of any Award, any stockholder of the Company, and any Eligible Individual.
3.3Delegation. Subject to the terms of the Plan and applicable law, the Committee may delegate to one or more officers or directors of the Company the authority, subject to such terms and limitations as the Committee shall determine, to grant and set the terms of, to cancel, modify, or waive rights with respect to, or to alter, discontinue, suspend, or terminate Awards held by Eligible Individuals who are not officers or directors of the Company for purposes of
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Section 16 of the Exchange Act, or any successor section thereto; provided, however, that the per share exercise price of any Option or SAR granted under this delegated authority by such officer or director shall be equal to or greater than the fair market value of a share of Common Stock on the later of the date of grant or the date the Participant's employment with or service to the Company commences.
3.4 Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or officers of the Company, and to the extent allowed by Applicable Laws, the Committee and its delegees shall be indemnified by the Company against the reasonable expenses, including attorney's fees, actually incurred in connection with any action, suit or proceeding or in connection with any appeal therein, to which they may be party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted under the Plan, and against all amounts paid by the Committee or its delegees in settlement thereof (provided, however, that the settlement has been approved by the Company, which approval shall not be unreasonably withheld) or paid by the Committee or its delegee in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such Committee or delegee did not act in good faith and in a manner which such person reasonably believed to be in the best interests of the Company, or in the case of a criminal proceeding, had no reason to believe that the conduct complained of was unlawful; provided, however, that within 60 days after the institution of any such action, suit or proceeding, such Committee or delegee shall, in writing, offer the Company the opportunity at its own expense to handle and defend such action, suit or proceeding.
4. Eligibility. The Committee, in accordance with Section 3.1, may grant an Award under the Plan to any Eligible Individual.
5.Shares Subject to the Plan.
5.1Shares Available for Grant. Subject to adjustment as provided in Section 5.4, the maximum number of Shares reserved for issuance under the Plan shall be 1,800,000. Upon approval5,300,000, representing 1,800,000 shares initially authorized under the Plan, plus an additional 1,600,000 shares authorized in connection with the amendment and restatement of thisthe Plan byin 2021 plus an additional 1,900,000 shares authorized in connection with the Company's stockholders,second amendment and restatement of the Company will cease making new Awards under any Prior Plan.Plan in 2024.
5.2Share Counting.
(a) To the extent any Shares covered by an Option or SAR or other Award granted under the Plan are not delivered to a Participant or permitted transferee because the Award is forfeited or canceled, or Shares are not delivered because an Award is paid or settled in cash, such Shares shall not be deemed to have been delivered for purposes of determining the maximum number of Shares available for delivery under this Plan and such shares may again be
issued under the Plan. Awards that by their terms may only be settled in cash shall have no effect on the Plan limit in Section 5.1.
(b) In the event that Shares issued as an Award under the Plan are forfeited or reacquired by the Company pursuant to rights reserved upon issuance thereof, such forfeited or reacquired Shares may again be issued under the Plan.
(c) The following Shares may not again be made available for issuance as Awards under the Plan: (i) Shares delivered or withheld in payment of the exercise of an Option or SAR, (ii) Shares delivered or withheld from payment of an Award to satisfy tax obligations with respect to the Award, and (iii) Shares repurchased on the open market with the proceeds of the exercise price of an Option.
(d) With respect to SARs, if the SAR is payable in Shares, all Shares to which the SARs relate are counted against the Plan limits, rather than the net number of Shares delivered upon exercise of the SAR.
5.3Limitations on Awards. Subject to adjustments as provided in Section 5.4, the following additional limitations are imposed under the Plan:
(a) The maximum number of Shares that may be issued upon exercise of Options intended to qualify as incentive stock options under Section 422 of the Code shall be 1,800,000.5,300,000.
(b) Except with respect to Outside Directors, the maximum number of shares of Common Stock covered by an Award that may be granted to any one Participant in any single fiscal year shall be 500,000 Shares, provided, however,, that such limit is multiplied by two (2) for Awards granted to a Participant in the year employment commences.
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(c) With respect to Outside Directors, the aggregate grant date fair value of Awards under the Plan that may be granted to any one Outside Director in any single fiscal year shall not exceed $300,000.
(d) Participants who are granted Awards will be required to continue to provide services to the Company (or an Affiliate) for not less than one-year following the date of grant in order for any such Awards to fully or partially vest or be exercisable, provided that no installment may vest or become exercisable earlier than one-year following the date of grant (subject to the Committee's discretion to accelerate the exercisability of such Awards as provided herein). Notwithstanding the foregoing, Awards with respect to an aggregate of up to 90,000265,000 of the Shares reserved for issuance under the Plan pursuant to Section 5.1 may provide for vesting, partially or in full, in less than one-year.
(e) Any Shares delivered pursuant to an Award may consist of authorized and unissued Shares or of treasury Shares, including Shares held by the Company or a Subsidiary and Shares acquired in the open market or otherwise obtained by the Company or a Subsidiary. The issuance of Shares may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.
(f) Subject to the terms of the Plan, including the limitations contained in this Section 5.3, the Committee may use available Shares as the form of payment for compensation, grants, or rights earned or due under any other compensation plans or arrangements of the Company or a Subsidiary, including, but not limited to, the Company's annual incentive plan and the plans or arrangements of the Company or a Subsidiary assumed in business combinations.
5.4Adjustments. In the event that the Committee determines that any dividend or other distribution (whether in the form of cash, Shares, Subsidiary securities, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (a) the number and type of Shares (or other securities or property) with respect to which Awards may be granted, (b) the number and type of Shares (or other securities or property) subject to outstanding Awards, and (c) the grant or exercise price with respect to any Award and, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award and, if deemed appropriate, adjust outstanding Awards to provide the rights contemplated by Section 11.2 hereof; provided, in each case, that with respect to Awards of Incentive Stock Options no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b)(1) of the Code or any successor provision thereto; and provided further that the number of Shares subject to any Award denominated in Shares shall always be a whole number and any fractional Share resulting from the adjustment will be deleted.
6.Stock Options. An Option is a right to purchase Shares from the Company. Options granted under the Plan may be Incentive Stock Options or Nonqualified Stock Options. Any Option that is designated as a Nonqualified Stock Option shall not be treated as an Incentive Stock Option. Each Option granted by the Committee under this Plan shall be subject to the following terms and conditions.
6.1Exercise Price. The exercise price per Share shall be determined by the Committee, subject to adjustment under Section 5.4; provided that in no event shall the exercise price be less than the fair market value of a Share on the date of grant, except in the case of an Option granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines in accordance with the requirements of Section 409A.
6.2Number. The number of Shares subject to the Option shall be determined by the Committee, subject to Section 5.3 and subject to adjustment as provided in Section 5.4.
6.3Duration and Time for Exercise. The term of each Option shall be determined by the Committee, but shall not exceed a maximum term of ten years. Each Option shall become exercisable at such time or times during its term as shall be determined by the Committee, subject to Section 5.3(d). Notwithstanding the foregoing, the Committee may at any time in its discretion accelerate the exercisability of any Option.
6.4Repurchase. Upon approval of the Committee, the Company may repurchase a previously granted Option from a Participant by mutual agreement before such Option has been exercised by payment to the Participant of the amount per Share by which: (i) the fair market value of the Common Stock subject to the Option on the business day immediately preceding the date of purchase exceeds (ii) the exercise price provided, however, that no such repurchase shall be permitted if prohibited by Section 6.6.
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6.5Manner of Exercise. An Option may be exercised, in whole or in part, by giving notice of exercise to the Company (in such form and manner as approved by the Company, which may be electronic), specifying the number of Shares to be purchased, together with payment in full of the exercise price for the number of Shares for which the Option is exercised and all applicable taxes. The Option price shall be payable in United States dollars and may be paid (a) in cash; (b) by check; (c) if approved by the Committee by delivery or attestation of ownership of Shares, which Shares shall be valued for this purpose at the fair market value on the business day that such Option is exercised; (d) by delivery of irrevocable written instructions to a broker approved by the Company (with a copy to the Company) to
immediately sell a portion of the Shares, issuable under the Option and to deliver promptly to the Company the amount of sale proceeds to pay the exercise price; (e) if approved by the Committee, through a net exercise procedure whereby the Participant surrenders the Option in exchange for that number of Shares with an aggregate fair market value equal to the difference between the aggregate exercise price of the Options being surrendered and the aggregate fair market value of the Shares subject to the Option, or (f) in such other manner as may be authorized from time to time by the Committee.
6.6Repricing. Except for adjustments pursuant to Section 5.4 or actions permitted to be taken by the Committee under Section 11.4 in the event of a Change of Control, unless approved by the stockholders of the Company, (a) the exercise or base price for any outstanding Option or SAR granted under this Plan may not be decreased after the date of grant and (b) an outstanding Option or SAR that has been granted under this Plan may not, as of any date that such Option or SAR has a per share exercise or base price that is greater than the then current fair market value of a Share, be surrendered to the Company as consideration for the grant of a new Option or SAR with a lower exercise or base price, shares of Restricted Stock, Restricted Stock Units, an Other Stock-Based Award, a cash payment or Common Stock.
6.7No Dividend Equivalent Rights. Participants holding Options shall not be entitled to any dividend equivalent rights for any period of time prior to exercise of the Option.
6.8Incentive Stock Options. Notwithstanding anything in the Plan to the contrary, Options intending to qualify as Incentive Stock Options must comply with the requirements of Section 422.
7.Stock Appreciation Rights. A Stock Appreciation Right, or SAR, is a right to receive, without payment to the Company, a number of Shares, cash or any combination thereof, the number or amount of which is determined pursuant to the formula set forth in Section 7.5. Each SAR granted by the Committee under the Plan shall be subject to the terms and conditions provided herein.
7.1Number. Each SAR granted to any Participant shall relate to such number of shares of Common Stock as shall be determined by the Committee, subject to adjustment as provided in Section 5.4.
7.2Exercise Price. The exercise price per Share of a SAR shall be determined by the Committee, subject to adjustment under Section 5.4; provided that in no event shall the exercise price be less than the fair market value of a Share on the date of grant, except in the case of a SAR granted in assumption of or substitution for an outstanding award of a company acquired by the Company or with which the Company combines in accordance with the requirements of Section 409A.
7.3Duration and Time for Exercise. The term of each SAR shall be determined by the Committee, but shall not exceed a maximum term of ten years. Each SAR shall become exercisable at such time or times during its term as shall be determined by the Committee, subject to Section 5.3(d). Notwithstanding the foregoing, the Committee may at any time in its discretion accelerate the exercisability of any SAR.
7.4Exercise and Payment. A SAR may be exercised, in whole or in part, by giving written notice to the Company, specifying the number of SARs that the holder wishes to exercise. The date that the Company receives such written notice shall be referred to herein as the “exercise date.” Upon exercise of a SAR, the holder shall be entitled to receive from the Company an amount equal to the number of Shares subject to the SAR that are being exercised multiplied by the excess of (a) the fair market value of a Share on the exercise date, over (b) the exercise price specified of the SAR. Payment shall be made in the form of Shares, cash or a combination thereof, as determined by the Committee.
7.5No Dividend Equivalent Rights. Participants holding SARs shall not be entitled to any dividend equivalent rights for any period of time prior to exercise of the SAR.
8.Restricted Stock. An award of Restricted Stock shall be subject to such restrictions on transfer and forfeitability provisions and such other terms and conditions, including the attainment of specified performance goals, as the Committee may determine, subject to the provisions of the Plan.
8.1The Restricted Period. At the time an award of Restricted Stock is made, the Committee shall establish, subject to Section 5.3(d), a period of time during which the transfer of the shares of Restricted Stock shall be restricted
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and after which the shares of Restricted Stock shall be vested (the “Restricted Period”). Each award of Restricted Stock may have a different Restricted Period. The expiration of the Restricted Period shall also occur in the event of termination of employment under the circumstances provided in the Award Agreement.
8.2Escrow. The Participant receiving Restricted Stock shall enter into an Award Agreement with the Company setting forth the conditions of the grant. Any certificates representing shares of Restricted Stock shall be registered in the name of the Participant and deposited with the Company, together with a stock power endorsed in blank by the Participant. Each such certificate shall bear a legend in substantially the following form:
The transferability of this certificate and the shares of Common Stock represented by it are subject to the terms and conditions (including conditions of forfeiture) contained in the Sterling Construction Company,Infrastructure, Inc. Second Amended and Restated 2018 Stock Incentive Plan, as it may be amended (the “Plan”), and an agreement entered into between the registered owner and Sterling Construction Company,Infrastructure, Inc. thereunder. Copies of the Plan and the agreement are on file at the principal office of the Company.
Alternatively, in the discretion of the Company, ownership of the shares of Restricted Stock and the appropriate restrictions shall be reflected in the records of the Company's transfer agent and no physical certificates shall be issued.
8.3Dividends on Restricted Stock. Any and all cash and stock dividends paid with respect to the shares of Restricted Stock may accrue during the Restricted Period if the Committee, in its discretion, so prescribes in the Award Agreement. Payment of such accrued dividends will be subject to such restrictions on transfer and forfeitability and such other terms and conditions, including attainment of specified performance goals, as are applicable to the underlying shares of Restricted Stock.
8.4Forfeiture. In the event of the forfeiture of any shares of Restricted Stock under the terms provided in the Award Agreement (including any additional shares of Restricted Stock that may result from the reinvestment of cash and stock dividends, if so provided in the Award Agreement), such forfeited shares shall be surrendered and any certificates cancelled. The Participants shall have the same rights and privileges, and be subject to the same forfeiture provisions, with respect to any additional Shares received pursuant to Section 5.4 due to a recapitalization or other change in capitalization.
8.5Expiration of Restricted Period. Upon the expiration or termination of the Restricted Period and the satisfaction of any other conditions prescribed by the Committee, the restrictions applicable to the Restricted Stock shall lapse and the number of shares of Restricted Stock with respect to which the restrictions have lapsed shall be delivered, free of all such restrictions and legends, except any that may be imposed by law, to the Participant.
8.6Rights as a Stockholder. Subject to the terms and conditions of the Plan and subject to any restrictions on the receipt of dividends that may be imposed in the Award Agreement, each
Participant receiving Restricted Stock shall have all the rights of a stockholder with respect to shares of stock during the Restricted Period, including without limitation, the right to vote any Shares.
9.Restricted Stock Units. A Restricted Stock Unit, or RSU, represents the right to receive from the Company on the respective scheduled vesting or payment date for such RSU, one share of Common Stock. An award of RSUs may be subject to the attainment of specified performance goals or targets, forfeitability provisions and such other terms and conditions as the Committee may determine, subject to the provisions of the Plan.
9.1Vesting Period. At the time an award of RSUs is made, the Committee shall establish, subject to Section 5.3(d), a period of time during which the RSUs shall vest (the “Vesting Period”). Each award of RSUs may have a different Vesting Period. The acceleration of the expiration of the Vesting Period shall occur in the event of termination of employment under the circumstances provided in the Award Agreement.
9.2Dividend Equivalent Accounts. Subject to the terms and conditions of this Plan and the applicable Award Agreement, as well as any procedures established by the Committee, the Committee may determine to accrue dividend equivalent rights with respect to RSUs and the Company shall establish an account for the Participant and reflect in that account any securities, cash or other property comprising any dividend or property distribution with respect to the Share underlying each RSU. Any and all dividend equivalent rights with respect to the RSUs shall be subject to the same vesting and forfeitability conditions, including attainment of any performance goals, applicable to the underlying RSUs.
9.3Rights as a Stockholder. Subject to the restrictions imposed under the terms and conditions of this Plan and subject to any other restrictions that may be imposed in the Award Agreement, each Participant receiving RSUs shall have no rights as a stockholder with respect to such RSUs until such time as Shares are issued to the Participant.
10.Other Stock-Based Awards. The Committee is hereby authorized to grant to Eligible Individuals an “Other Stock-Based Award,” which shall consist of an Award that is not an instrument or Award specified in Sections 6 through 9
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of this Plan, the value of which is based in whole or in part on the value of Shares. Other Stock-Based Awards may be awards of Shares or may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible or exchangeable into or exercisable for Shares), as deemed by the Committee consistent with the purposes of the Plan. The Committee shall determine the terms and conditions of any such Other Stock-Based Award and may provide that such awards would be payable in whole or in part in cash.
10.1 Vesting Period. At the time an award of an Other Stock-Based Award is made, the Committee shall establish, subject to Section 5.3(d), a period of time during which the Other Stock-Based Award shall vest (the “Vesting Period”). Each award of an Other Stock-Based Award may have a different Vesting Period. The acceleration of the expiration of the Vesting Period shall occur in the event of termination of employment under the circumstances provided in the Award Agreement.
10.2Dividend Equivalent Accounts. Subject to the terms and conditions of this Plan and the applicable Award Agreement, as well as any procedures established by the Committee, the Committee may determine to accrue dividend equivalent rights with respect to an Other Stock-Based Award and the Company shall establish an account for the Participant and reflect in that account any securities, cash or other property comprising any dividend or property distribution with respect to the Share underlying each such Award. Any and all dividend equivalent rights with respect to the Award shall be subject to the same vesting and forfeitability conditions, including attainment of any performance goals, applicable to the underlying Award.
11.General.
11.1Amendment or Discontinuance of the Plan. The Board may amend or discontinue the Plan at any time; provided, however, that no such amendment may
(a) without the approval of the stockholders, (i) increase, subject to adjustments permitted herein, the maximum number of shares of Common Stock that may be issued through the Plan, (ii) materially increase the benefits accruing to Participants under the Plan, (iii) materially expand the classes of persons eligible to participate in the Plan, (iv) expand the types of Awards available for grant under the Plan, (v) materially extend the term of the Plan, (vi) materially change the method of determining the exercise price of Options or SARs, or (vii) amend Section 6.6 to permit a reduction in the exercise price of Options or SARs; or
(b) materially impair, without the consent of the recipient, an Award previously granted.
11.2Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. The Committee is hereby authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in Section 5.4 hereof) affecting the Company, or the financial statements of the Company or any Subsidiary, or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.
11.3Cancellation. Any provision of this Plan or any Award Agreement to the contrary notwithstanding, if permitted by Section 409A, the Committee may cause any Award granted hereunder to be canceled in consideration of a cash payment or alternative Award made to the holder of such canceled Award equal in value to such canceled Award. Notwithstanding the foregoing, except for adjustments permitted under Sections 5.4 and 11.2, no action by the Committee shall, unless approved by the stockholders of the Company, (a) cause a reduction in the exercise price of Options or SARs granted under the Plan or (b) permit an outstanding Option or SAR with an exercise price greater than the current fair market value of a Share to be surrendered as consideration for a new Option or SAR with a lower exercise price, shares of Restricted Stock, Restricted Stock Units, and Other Stock-Based Award, or Common Stock.
11.4Change of Control.
(a) Unless otherwise provided in an Award Agreement, upon a Change of Control: (i) all Options and SARs shall become immediately exercisable with respect to 100% of the Shares subject to such Options or SARS, (ii) all time-vesting restrictions on other Awards shall lapse, and (iii) all performance measures applicable to outstanding Awards subject to performance conditions will be disregarded and the Award will vest at the target payout level.
(b) In addition, in the event of a Change of Control, the Committee may in its sole and absolute discretion and authority, without obtaining the approval or consent of the Company's stockholders or any Participant with respect to his or her outstanding Awards, take one or more of the following actions:
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(i) arrange for or otherwise provide that each outstanding Award shall be assumed or a substantially similar award shall be substituted by a successor corporation or a parent or subsidiary of such successor corporation;
(ii) require that all outstanding Options and SARs be exercised on or before a specified date (before or after such Change of Control) fixed by the Committee, after which specified date all unexercised Options and SARs shall terminate;
(iii) arrange or otherwise provide for the payment of cash or other consideration to Participants representing the value of such Awards in exchange for the satisfaction and cancellation of outstanding Awards; provided, however, that the case of any Option or SAR with an exercise price that equals or exceeds the price paid for a Share in connection with the Change of Control, the Committee may cancel the Option or SAR without the payment of consideration therefor; or
(iv) make such other modifications, adjustments or amendments to outstanding Awards or this Plan as the Committee deems necessary or appropriate, subject however to the terms of Section 5.4.
11.5Withholding.
(a) A Participant shall be required to pay to the Company, and the Company shall have the right to deduct from all amounts paid to a Participant (whether under the Plan or otherwise), any taxes required by law to be paid or withheld in respect of Awards hereunder to such Participant.
(b) At any time that a Participant is required to pay to the Company an amount required to be withheld under the applicable tax laws in connection with the issuance of Shares under the Plan, the Participant may, if permitted by the Committee, satisfy this obligation in whole or in part by delivering currently owned Shares or by electing (the “Election”“Election”) to have the Company withhold from the issuance Shares, which Shares shall have a value at least equal to the minimum amount required to be withheld for federal and state tax purposes, including payroll taxes, and not in excess of the applicable estimated incremental tax rate, provided such rate will not cause adverse accounting consequences and is permitted under applicable IRS withholding rules. The value of the Shares delivered or withheld shall be based on the fair market value of the Shares on the date as of which the amount of tax to be withheld shall be determined in accordance with applicable tax laws (the “Tax Date”“Tax Date”).
(c) Each Election to have Shares withheld must be made prior to the Tax Date. If a Participant wishes to deliver Shares in payment of taxes, the Participant must so notify the Company prior to the Tax Date. If a Participant makes an election under Section 83(b) of the Code with respect to shares of Restricted Stock, an Election to have Shares withheld is not permitted; provided,, however,, that no election under Section 83(b) of the Code may be made unless permitted by the terms of the applicable Award Agreement or by written consent of the Committee.
11.6Transferability.
(a) No Awards granted hereunder may be sold, transferred, pledged, assigned, or otherwise encumbered by a Participant except:
(i) by will;
(ii) by the laws of descent and distribution;
(iii) pursuant to a domestic relations order, as defined in the Code, if permitted by the Committee and so provided in the Award Agreement or an amendment thereto; or
(iv) if permitted by the Committee and so provided in the Award Agreement or an amendment thereto, Options may be transferred or assigned (A) to Immediate
Family Members, (B) to a partnership in which Immediate Family Members, or entities in which Immediate Family Members are the owners, members or beneficiaries, as appropriate, are the partners, (C) to a limited liability company in which Immediate Family Members, or entities in which Immediate Family Members are the owners, members or beneficiaries, as appropriate, are the members, or (D) to a trust for the benefit of Immediate Family Members; provided,, however,, that no more than a de minimis beneficial interest in a partnership, limited liability company, or trust described in (B), (C) or (D) above may be owned by a person who is not an Immediate Family Member or by an entity that is not beneficially owned solely by Immediate Family Members.
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(b) To the extent that an Incentive Stock Option is permitted to be transferred during the lifetime of the Participant, it shall be treated thereafter as a Nonqualified Stock Option. Any attempted assignment, transfer, pledge, hypothecation, or other disposition of Awards, or levy of attachment or similar process upon Awards not specifically permitted herein, shall be null and void and without effect. The designation of a Designated Beneficiary shall not be a violation of this Section 11.6(b).
11.7Share Certificates. Any certificates or book or electronic entry ownership evidence for Shares or other securities delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares or other securities are then listed, and any applicable federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
11.8No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of options, stock appreciation rights, restricted stock, and other types of Awards provided for hereunder (subject to stockholder approval of any such arrangement if approval is required), and such arrangements may be either generally applicable or applicable only in specific cases.
11.9No Right to Employment. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of or as a consultant or adviser to the Company or any Subsidiary or in the employ of or as a consultant or adviser to any other entity providing services to the Company. The Company or any Subsidiary or any such other entity may at any time dismiss a Participant from employment, or terminate any arrangement pursuant to which the Participant provides services to the Company or a Subsidiary, free from any liability or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Award Agreement. No Eligible Individual or other person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Eligible Individuals, Participants or holders or beneficiaries of Awards.
11.10Effect of Termination of Continuous Service. In the event of a Participant's termination of Continuous Service for any reason, any Awards may be exercised, shall vest or shall expire at such times as may be determined by the Committee and provided for in the Award Agreement or an amendment thereto.
11.11Governing Law. The validity, construction, and effect of the Plan, any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Delaware.
11.12 Severability. If any provision of the Plan or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be construed or deemed amended
without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.
11.13No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company.
11.14No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated, or otherwise eliminated.
11.15Compliance with Law.
(a) U.S. Securities Laws.Laws. This Plan, the grant of Awards, the exercise of Options and SARs under this Plan, and the obligation of the Company to sell or deliver any of its securities pursuant to Awards under this Plan shall be subject to all Applicable Laws. In the event that the Shares are not registered under the Securities Act, or any applicable state securities laws prior to the delivery of such Shares, the Company may require, as a condition to the issuance thereof, that the persons to whom Shares are to be issued represent and warrant in writing to the Company that such Shares are being acquired by him or her for investment for his or her own account and not with a view to, for resale in connection with, or with an intent of participating directly or indirectly in, any distribution of such Shares within the meaning of the Securities Act, and a legend to that effect may be placed on the certificates representing the Shares.
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(b) Other Jurisdictions.Jurisdictions. To facilitate the making of any grant of an Award under this Plan, the Committee may provide for such special terms for Awards to Participants who are foreign nationals or who are employed by the Company or any Affiliate outside of the United States of America as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. The Company may adopt rules and procedures relating to the operation and administration of this Plan to accommodate the specific requirements of local laws and procedures of particular countries. Without limiting the foregoing, the Company is specifically authorized to adopt rules and procedures regarding the conversion of local currency, taxes, withholding procedures and handling of stock certificates which vary with the customs and requirements of particular countries. The Company may adopt sub-plans and establish escrow accounts and trusts as may be appropriate or applicable to particular locations and countries.
11.16Section 409A of the Code. The Plan is intended to comply with Section 409A to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless any Applicable Law requires otherwise. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six (6) month period immediately following a Participant's termination of Continuous Service shall instead be paid on the first payroll date after the six-month anniversary of the Participant's separation from service (or the Participant's death, if earlier). Notwithstanding the foregoing, neither the Company nor the Committee shall have any obligation to take any action to prevent the assessment of any excise tax or penalty on any Participant under Section 409A and neither the Company nor the Committee will have any liability to any Participant for such tax or penalty.
11.17 Deferral Permitted. Payment of cash or distribution of any Shares to which a Participant is entitled under any Award shall be made as provided in the Award Agreement. Payment may be deferred at the option of the Participant if provided in the Award Agreement.
11.18Clawback Provisions. All Awards (including any proceeds, gains or other economic benefit the Participant actually or constructively receives upon receipt or exercise of any Award or the receipt or resale of any Shares underlying the Award) will be subject to any Company clawback policy implemented to comply with Applicable Laws, including any clawback policyits Policy for the Recovery of Erroneously Awarded Compensation adopted in accordance with NASDAQ Listing Rule 5608 and Section 10D and Rule 10D-1 of the Exchange Act, as it may be amended from time to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act and any rules or regulations promulgated thereunder,time, as set forth in such a clawback policy or the Award Agreement.
11.19Headings. Headings are given to the subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.
12.Term of the Plan. Subject to Section 11.1, no Awards may be granted under the Plan after May 2, 2028,9, 2034, which is ten years after the date the Plan was last approved by the Company's stockholders; provided, however, that Awards granted prior to such date shall remain in effect until such Awards have either been satisfied, expired or canceled under the terms of the Plan, and any restrictions imposed on Shares in connection with their issuance under the Plan have lapsed.
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STERLING CONSTRUCTION COMPANY,INFRASTRUCTURE, INC.
SECOND AMENDED AND RESTATED
2018 STOCK INCENTIVE PLAN
APPENDIX A: DEFINITIONS
As used in the Plan, the following definitions shall apply:
“Award” shall mean any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, or Other Stock-Based Award.
“Award Agreement” shall mean any written or electronic notice of grant, agreement, contract or other instrument or document evidencing any Award, which the Company may, but need not, require a Participant to execute, acknowledge, or accept.
“Applicable Law” means the legal requirements relating to the administration of options and share-based plans under applicable U.S. federal and state laws, the Code, any applicable stock exchange or automated quotation system rules or regulations, and the applicable laws of any other country or jurisdiction where Awards are granted, as such laws, rules, regulations and requirements shall be in place from time to time.
“Board” shall mean the Board of Directors of the Company.
“Change of Control” shall mean the occurrence of any of the following events: a “Change in Ownership”, a “Change in Effective Control,” or a“Change in Ownership Assets,” as those terms are defined below.
(i) A “Change in Ownership.”
(A) 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 Common Stock 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 Common Stock.
(B) 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 Common Stock, the acquisition of additional stock by the same Person or Group is not considered to cause a Change in Ownership or to cause a Change in Effective Control.
(C) An increase in the percentage of Common Stock owned by any Person or Group as a result of a transaction 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 Plan.
(ii) A “Change in Effective Control.” A Change in Effective Control shall be deemed to occur on the date on which a majority of the Board is replaced during any twelve-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the appointment or election.
(iii) A “Change in Ownership of Assets.”
(A) 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 (iii) –
(I) the Company means and includes its consolidated subsidiaries; and
(II) gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
(B) There is no change of control event under this Section (iii) when there is a transfer to an entity that is controlled by the stockholders of the Company immediately after the transfer.
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(C) 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 –
(I) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to its Common Stock;
(II) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company;
(III) a Person or Group that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company; or
(IV) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person or Group described in the immediately preceding Subsection (III).
(D) Except as otherwise provided above in Section (iii)(C)(III), a person’s status is determined immediately after the transfer of the assets. For example, a transfer to a corporation in which the Company has no ownership interest before the transaction, but that is a majority-owned subsidiary of the Company after the transaction, is not a Change in Ownership of Assets.
Notwithstanding the above and solely with respect to any Award that constitutes “deferred compensation” subject to Section 409A and that is payable on account of a Change of Control (including any installments or stream of payments that are accelerated on account of a Change of Control), a Change of Control shall occur only if such event also constitutes a “change in the ownership”, “change in effective control”, and/or a “change in the ownership of a substantial portion of assets” of the Company as those terms are defined under Treasury Regulation §1.409A-3(i)(5), but only to the extent necessary to establish a time or form of payment that complies with Section 409A, without altering the definition of Change of Control for purposes of determining whether a Participant's rights to such Award become vested or otherwise unconditional upon the Change of Control.
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
“Committee” means one or more committees or subcommittees of the Board appointed by the Board to administer the Plan in accordance with Section 3.1 of the Plan. With respect to any decision relating to a Reporting Person, the Committee shall consist of two or more Outside Directors who are disinterested within the meaning of Rule 16b-3. Unless and until determined otherwise by the Board, the Committee shall be the Compensation Committee of the Board.
“Common Stock” shall mean the Company's common stock, $0.01 par value per share.
“Company” shall mean Sterling Construction Company,Infrastructure, Inc.
“Continuous Service” means the absence of any interruption or termination of service as an Eligible Individual. Continuous Service shall not be considered interrupted in the case of: (i) sick leave; (ii) military leave; or (iii) any other leave of absence approved by the Committee, provided that such leave is for a period of not more than 90 days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time.
“Designated Beneficiary” shall mean the beneficiary designated by the Participant, in a manner determined by the Committee, to receive the benefits due the Participant under the Plan in the event of the Participant's death. In the absence of an effective designation by the Participant, Designated Beneficiary shall mean the Participant's estate.
“Effective Date” shall mean the date this Plan is approved by the Company's stockholders.
“Eligible Individual” shall mean (i) any person providing services as an officer of the Company or a Subsidiary, whether or not employed by such entity, including any such person who is also a director of the Company; (ii) any employee of the Company or a Subsidiary, including any director who is also an employee of the Company or a Subsidiary; (iii) Outside Directors; (iv) any officer or employee of an entity with which the Company has contracted to receive executive, management, or legal services who provides services to the Company or a Subsidiary through such arrangement; and (v) any consultant or adviser to the Company, a Subsidiary, or to an entity described in clause (iv) hereof who provides services to the Company or a Subsidiary through such arrangement.
“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.
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“Fair Market Value” shall mean, except as provided below in connection with a cashless exercise through a broker: (i) if the Common Stock is listed on an established stock exchange or any automated quotation system that provides sale quotations, the closing sale price for a share of the Common Stock on such exchange or quotation system on the date as of which fair market value is to be determined; (ii) if the Common Stock is not listed on any exchange or quotation system, but bid and asked prices are quoted and published, the mean between the quoted bid and asked prices on the date as of which fair market value is to be determined, and if bid and asked prices are not available on such day, on the next preceding day on which such prices were available; and (iii) if the Common Stock is not regularly quoted, the fair market value of a share of Common Stock on the date as of which fair market value is to be determined, as established by the Committee in good faith. In the context of a cashless exercise through a broker, the Fair Market Value shall be the price at which the Common Stock subject to the stock option is actually sold in the market to pay the option exercise price.
“Immediate Family Members” shall mean the spouse and natural or adopted children or grandchildren of the Participant and his or her spouse.
“Incentive Stock Option” shall mean an option granted under Section 6 of the Plan that is intended to meet the requirements of Section 422 or any successor provision thereto.
“Nonqualified Stock Option” shall mean an option granted under Section 6 of the Plan that is not intended to be an Incentive Stock Option.
“Option” shall mean an Incentive Stock Option or a Nonqualified Stock Option.
“Other Stock-Based Award” shall mean any right or award granted under Section 10 of the Plan.
“Outside Directors” shall mean members of the Board who are not employees of the Company.
“Participant” shall mean any Eligible Individual granted an Award under the Plan.
“Person” shall mean any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof, or other entity.
“Reporting Person” means an officer, director, or greater than ten percent shareholder of the Company within the meaning of Rule 16a-2 under the Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the Exchange Act.
“Restricted Stock” shall mean any restricted stock granted under Section 8 of the Plan.
“Restricted Stock Unit” or “RSU” shall mean any restricted stock unit granted under Section 9 of the Plan.
“Section 409A” shall mean Section 409A of the Code and all regulations and guidance promulgated thereunder as in effect from time to time.
“Section 422” shall mean Section 422 of the Code and all regulations and guidance promulgated thereunder as in effect from time to time.
“Securities Act” means of the Securities Act of 1933, as amended.
“Shares” shall mean the shares of Common Stock and such other securities of the Company or a Subsidiary as the Committee may from time to time designate.
“Stock Appreciation Right” or “SAR” shall mean any right granted under Section 7 of the Plan.
“Subsidiary” shall mean (i) any corporation or other entity in which the Company possesses directly or indirectly equity interests representing at least 50% of the total ordinary voting power or at least 50% of the total value of all classes of equity interests of such corporation or other entity and (ii) any other entity in which the Company has a direct or indirect economic interest that is designated as a Subsidiary by the Committee.
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