SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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UNITED STATES | |||
SECURITIES AND EXCHANGE COMMISSION | |||
Washington, D.C. 20549 | |||
SCHEDULE 14A | |||
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INFORMATION REQUIRED IN PROXY STATEMENT | |||
SCHEDULE 14A INFORMATION | |||
Proxy Statement Pursuant to Section 14(a) of | |||
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☐ | Preliminary Proxy Statement | ||
☐ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | ||
☒ | Definitive Proxy Statement | ||
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Tutor Perini Corporation
15901 Olden Street
Sylmar, California 91342
NOTICE OF SPECIALANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 12, 2014MAY 25, 2016
Dear Tutor Perini Shareholder:TO THE SHAREHOLDERS OF TUTOR PERINI CORPORATION:
You are cordially invited to attend Tutor Perini’s SpecialNOTICE IS HEREBY GIVEN that the 2016 Annual Meeting of Shareholders toof TUTOR PERINI CORPORATION, a Massachusetts corporation (the “Company”, “Tutor Perini”, “we”, “us”, or “our”) will be held at our corporate headquarters, 15901 Olden Street, Sylmar, California, on November 12, 2014May 25, 2016 at 8:309:00 a.m., Pacific Time at The Ritz-Carlton, 600 Stockton Street, San Francisco, California 94108. Daylight Time.
At the Special Meeting, youmeeting, holders of common stock, par value $1.00 per share, of the Company (the “Common Stock”) will be asked to:consider and vote on the following matters:
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2. | Consider and ratify the selection of Deloitte & Touche LLP, independent registered public accountants, as auditors of the Company for the fiscal year ending December 31, 2016; |
3. | Approve the amendment and restatement of Tutor Perini’s by-laws to modify indemnification provisions, reduce the shareholder threshold required to call special meetings and modify other provisions to reflect best practice based on the Massachusetts Business Corporation Act; |
4. | Consider an advisory vote on |
5. | Such other business as may properly come before the meeting. |
Tutor Perini provides equity compensation to certain employees as an incentive to align their interests with those of our shareholders, which we believe increases long-term shareholder value. We believe that our equity compensation programs are an essential tool in helping us to attract and retain talented and highly-skilled individuals to serve as employees. We also believe that our equity compensation plans motivate high levels of performance and create incentives that reward the contributions of our employees.
Approval of the Amended Plan is essential for us to continue to remain competitive in utilizing equity compensation as a key element of the total compensation of our senior-most executives. If the Amended Plan is not approved at the Special Meeting, we will issue any future long-term incentive compensation awards under alternative methods. These methods would require treating such awards under mark-to-fair market accounting rules. This could result in unfavorable impacts to shareholders because our future earnings would be subjected to the volatility associated with mark-to-fair market accounting and our future cash flow would be adversely affected as a result of having to settle these new awards in cash rather than in shares of common stock. In order to continue to attract and retain key executives, we must continue to provide long-term incentives that are aligned with shareholder value regardless of the availability of shares under the plan. The adverse effects of these accounting rules will be avoided if the Amended Plan is approved.
The Board of Directors has fixed the close of business on September 22, 2014March 31, 2016 as the record date for the determination of the shareholders entitled to vote at the Special Meeting.meeting. Only shareholders of record as of the close of business on the record date will be entitled to notice of and to vote at the Special Meetingmeeting and any adjournments or postponements thereof.
We are relying on the Securities and Exchange Commission (“SEC”) rule permittingrules permit us to furnish proxy materials to shareholders over the Internet. We have mailedwill be mailing to our shareholders a Notice of Internet Availability of Proxy Materials, which indicates how to access our proxy materials on the Internet. We are constantly focused on improving the ways people connect with information, and believe that providing our proxy materials over the Internet increases the ease and ability of information accessibility for our shareholders to connect with the information they need while reducing the environmental impacts.impact of our Annual Meeting. If you would prefer to receive a paper copy of the proxy materials, you may request them by following the procedures set forth in the Notice of Internet Availability of Proxy Materials.
Your vote is very important. Whether or not you plan to attend the SpecialAnnual Meeting, we encourage you to read this proxy statement and submit your proxy or voting instructions as soon as possible. If you are a shareholder of record, you may vote your shares over the Internet at www.proxyvote.com,, telephonically by dialing 1-800-690-6903 or if you requested to receive printed proxy materials, via your enclosed proxy card. If the shares you own are held in “street name” by a bank or brokerage firm, your bank or brokerage firm will provide a Notice of Availability of Proxy Materials, or, if requested, a printed set of proxy materials together with a voting instruction form, which you may use to direct how your shares will be voted.
By order of the Board of Directors,
William B. Sparks,
By order of the Board of Directors, | |
John D. Barrett, Secretary |
Sylmar, California
October 2, 2014
April 11, 2016
Important Notice Regarding the Availability of Proxy Materials
for theSpecial Annual Meeting of Shareholders to be Held on November 12, 2014May 25, 2016
ThisThe Proxy Statement and Tutor Perini’s 20132015 Annual Report are available at
http://investors.tutorperini.com/events-calendar/proxy-voting/default.aspx
2014 SPECIAL2016 ANNUAL MEETING OF SHAREHOLDERS
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ANNUAL MEETING OF SHAREHOLDERS | |
Electronic Availability of Proxy Statement and | |
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Corporate Governance | 8 |
Report of the Audit Committee | 10 |
Report of the Compensation Committee | 12 |
Executive Officers | 13 |
Compensation Discussion and Analysis | 14 |
Ownership of Common Stock by Directors, Executive Officers and Principal Shareholders | |
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PROPOSAL 2: RATIFICATION OF APPOINTMENT OF AUDITORS | 45 |
PROPOSAL 3: AMENDMENT AND RESTATEMENT OF BY-LAWS TO MODIFY INDEMNIFICATION AND OTHER PROVISIONS | 46 |
PROPOSAL 4: ADVISORY (NON-BINDING) VOTE ON TUTOR PERINI’S EXECUTIVE COMPENSATION | 48 |
SHAREHOLDER PROPOSALS FOR | |
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PROXY STATEMENT FOR SPECIALANNUAL MEETING OF SHAREHOLDERS
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING OF SHAREHOLDERS
AND PROCEDURAL MATTERS
Q: Why am I receiving these proxy materials?
A: The Board of Directors (the “Board”) of Tutor Perini Corp. (“Tutor Perini,” the “Company,” “we” or “our”) is providing these proxy materials to you in connection with the solicitation of proxies by the Board for use at our Special Meeting of Shareholders, and at any adjournment, postponement or other delay thereof (the “Special Meeting”), to be held on Wednesday, November 12, 2014, at 8:30 a.m., Pacific Time, for the purpose of considering and acting upon the matters set forth in this Proxy Statement. We are providing these materials to all of our shareholders through a Notice of Internet Availability of Proxy Materials (the “Notice”) unless a shareholder has specifically requested a paper copy of this Proxy Statement.
Q: Where is the Special Meeting going to be held?
A: The Special Meeting will be held at The Ritz-Carlton, 600 Stockton Street, San Francisco, California 94108.
Q: What will be voted on at the Special Meeting?
A: At the Special Meeting, shareholders will be asked to vote to approve the Amended and Restated Tutor Perini Corporation Long-Term Incentive Plan (the “Amended Plan”), which: (i) increases the number of shares reserved for issuance under the plan by 1,600,000 shares, (ii) specifies the Section 162(m) performance goals and annual grant limitations under the plan, and (iii) extends the term of the plan (Proposal 1).
Q: Can I attend the Special Meeting?
A: Yes, you can attend the Special Meeting in person if you are a shareholder of record or a beneficial owner as of September 22, 2014 (the “Record Date”). Please notify Jorge Casado, Tutor Perini’s Vice President of Investor Relations, by telephone at (818) 408-5746 or by email at investor.relations@tutorperini.com if you plan to attend the Special Meeting.
Attendance at the Special Meeting will be limited to shareholders and Tutor Perini’s invited guests. Each shareholder may be asked to present valid picture identification, such as a driver’s license or passport. If your shares are held in a brokerage account or by a bank, broker or other agent, you also will need to bring a copy of your brokerage statement reflecting stock ownership as of the record date. Cameras, recording devices and other electronic devices will not be permitted at the Special Meeting.
The Special Meeting will begin promptly at 8:30 a.m., Pacific Time. Please leave ample time for parking and to check in.
Q: Why did I receive a Notice in the mail regarding the Internet availability of proxy materials instead of a paper copy of this Proxy Statement?
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A: We are again relying on a Securities and Exchange Commission (“SEC”) rule that allows companies to furnish their proxy materials over the Internet rather than in paper form. This rule allows us to send all of our shareholders a Notice that explains how to access the proxy materials over the Internet or how to request a paper copy of the proxy materials. If you would prefer to receive proxy materials in printed form by mail or electronically by email on an ongoing basis, please follow the instructions contained in the Notice. Proxy materials for our 2015 and future annual and special meetings of shareholders will be delivered to all of our shareholders by a Notice rather than in paper form unless a shareholder specifically requests to receive printed proxy materials.
Q: Why did I receive a paper copy of this Proxy Statement in the mail and not a Notice regarding the Internet availability of proxy materials?
A: Shareholders who previously requested full paper copies of the proxy materials are receiving paper copies of the proxy materials instead of a Notice. If you would like to reduce the costs we incur in printing and mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via email or the Internet. To sign up for electronic delivery, please follow the instructions provided on your proxy card or voting instruction form.
Stock Ownership, Quorum and Voting
Q: Who is entitled to vote at the Special Meeting?
A: Shareholders of record of Tutor Perini’s common stock, par value $0.01 per share (“Common Stock”), at the close of business on the Record Date are entitled to receive notice of and to vote their shares at the Special Meeting. Beneficial owners have the right to direct their broker or other agent on how to vote their shares at the Special Meeting, as described below. Shareholders are entitled to cast one vote for each share of Common Stock they hold as of the Record Date.
As of the Record Date, there were 48,641,218 shares of Common Stock outstanding and entitled to vote at the Special Meeting. No shares of Tutor Perini’s Preferred Stock were outstanding.
Q: What is the difference between holding shares as a shareholder of record and as a beneficial owner?
A: Shareholders of record – If your shares are registered directly in your name with Tutor Perini’s transfer agent, Computershare Investor Services LLC, you are considered, with respect to those shares, the “shareholder of record.” If you are a shareholder of record, these proxy materials have been sent directly to you by Tutor Perini.
Beneficial owners – Many Tutor Perini shareholders hold their shares through a broker or other agent rather than directly in their own name. If your shares are held in a brokerage account or by a broker or other agent, you are considered the “beneficial owner” of shares held in “street name.” If you hold your shares in street name, these proxy materials have been forwarded to you by your broker or other agent. That entity is considered, with respect to those shares, the shareholder of record. As the beneficial owner, you have the right to direct your broker or other agent on how to vote your shares. Since a beneficial owner is not the shareholder of record, you may not vote these shares in person at the Special Meeting unless you obtain a “legal proxy” from the broker or other agent that holds your shares, giving you the right to do so.
Q: How many shares must be present or represented by proxy to conduct business at the Special Meeting?
A: A quorum consists of a majority in interest of all stock issued and outstanding and entitled to vote at the Special Meeting. Any abstentions and broker “non-votes” will be included in determining whether a quorum exists.
Q: What are broker “non-votes”?
A: Generally, if shares are held in street name, the beneficial owner is entitled to give voting instructions to the broker or other agent holding the shares. If the beneficial owner does not provide voting instructions, the broker or other agent can still vote the shares with respect to matters that are considered “routine,” but not with respect to “non-routine” matters. Broker non-votes occur when a
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beneficial owner of shares held in “street name” does not give instructions to the broker or other agent holding the shares as to how to vote on matters deemed “non-routine.” If a broker or other record holder of our Common Stock indicates on a proxy that it does not have discretionary authority to vote certain shares on a particular proposal, then those shares will be treated as broker non-votes with respect to that proposal. Accordingly, if you own shares through a broker or other agent, please be sure to instruct your broker or other agent how to vote to ensure that your vote is counted on the proposal.
Q: Is Proposal 1 considered “routine” or “non-routine”?
A: The approval of the Amended Plan, which: (i) increases the number of shares reserved for issuance under the plan by 1,600,000 shares, (ii) specifies the Section 162(m) performance goals and annual grant limitations under the plan, and (iii) extends the term of the plan (Proposal 1) is considered a non-routine matter under applicable rules. A broker or other agent cannot vote without instructions on non-routine matters, so there may be broker non-votes on Proposal 1.
Q: How can I vote my shares in person at the Special Meeting?
A: If you hold shares in your name as the shareholder of record, you may vote those shares in person at the Special Meeting. If you hold shares beneficially in street name, you may vote those shares in person at the Special Meeting only if you obtain a “legal proxy” from the broker or other agent that holds your shares giving you the right to do so. Even if you plan to attend the Special Meeting, we recommend that you also submit your proxy card or follow the voting instructions described below so that your vote will be counted if you later decide not to attend.
Q: How can I vote my shares without attending the Special Meeting?
A: If you are a shareholder of record, you may instruct the proxy holders how to vote your shares in one of three ways:
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Proxy cards submitted by mail must be received by the time the Special Meeting begins in order for your shares to be voted. If you sign, date and return a proxy card without giving specific voting instructions, your shares will be voted as recommended by the Board.
Specific instructions for using the telephone and Internet voting systems can be found on the proxy card and Notice. The telephone and Internet voting systems for shareholders of record will be available until 11:59 p.m. (Eastern Time) on November 11, 2014.
If you are a beneficial owner, you will receive instructions from your broker or other agent that you must follow in order to have your shares voted. These instructions will indicate if Internet and telephone voting are available and, if so, how to access and use these methods.
Q: What is the voting requirement to approve Proposal 1?
A: The affirmative vote of a majority of the votes duly cast is required to approve the Amended Plan (Proposal 1).
Tutor Perini Corporation Long-Term Incentive Plan and Equity Compensation at Tutor Perini
Q: Why is Tutor Perini asking shareholders to approve the Amended Plan?
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A: We are asking shareholders to approve the Amended and Restated Tutor Perini Long-Term Incentive Plan (the “Amended Plan”), which: (i) increases the number of shares reserved for issuance under the plan by 1,600,000 shares, (ii) specifies the Section 162(m) performance goals and annual grant limitations under the plan, and (iii) extends the term of the plan. As further described in Proposal 1, we are seeking shareholder approval so that we can continue to use the Amended Plan to achieve Tutor Perini’s employee performance, recruiting and retention goals.
Q: Why is Tutor Perini asking shareholders to approve the Amended and Restated Tutor Perini Corporation Long-Term Incentive Plan at this time?
A: We are asking, as part of this proposal, that our shareholders approve the Amended Plan at this time because the shares reserved for issuance under the Plan have been practically depleted based on the number of awards granted in fiscal 2013 and 2014. By obtaining shareholder approval of the Amended Plan at the Special Meeting on November 12, 2014, the Compensation Committee will retain its ability to design effective executive compensation programs during the annual compensation cycle in March 2015. Rather than waiting until the 2015 Annual Meeting of Shareholders, which will be held in May or June of 2015, we are holding a Special Meeting on November 12, 2014 to seek approval of the Amended Plan to allow us to plan accordingly.
Approval of the Amended Plan is essential if we are to continue to remain competitive in making equity compensation a key element of the total compensation of our senior-most executives.
Q: Would you please elaborate on the potential unfavorable consequences to shareholders should the Amended Plan not be approved?
A: If the Amended Plan is not approved at the Special Meeting, to continue to attract and retain key executives and non-executive directors, we will be required to grant future long-term incentive compensation awards in an alternative form that are settled in cash rather than shares of Common Stock. The use of these alternative types of awards could result in significant unfavorable consequences to shareholders as a result of increased earnings volatility through the vesting date and the adverse impact to cash flow at the date of vesting.
Increased earnings volatility would arise because these alternative types of awards would be subject to mark-to-fair market accounting rules, which require us to cumulatively adjust each quarter the associated booked liability to reflect the then-current fair market value of those award liabilities. Over time, the impact on reported earnings would be the difference between the value of the award at the time of vesting and the value at the time the award is granted.
Our future cash flows would be adversely affected because we would settle these alternative types of awards in cash rather than in shares of Common Stock, thus requiring us to budget for significant cash payments at the time of vesting, rather than utilizing that cash for normal business operations and growth initiatives.
By contrast, the continued use of equity awards and settlement of such equity awards in Common Stock under a shareholder-approved Amended Plan would not result in such earnings volatility and would not impact our cash flow.
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SPECIAL MEETING OF SHAREHOLDERS OF TUTOR PERINI CORPORATION
This proxy statement is furnished in connection with the solicitation by the Board of Directors (the “Board”) of TUTOR PERINI CORPORATION (the “Company”, “Tutor Perini”, “we”, “us” or “our”) of proxies for use in voting at the 2014 Special2016 Annual Meeting of Shareholders (“SpecialAnnual Meeting”) to be held at The Ritz-Carlton, 600 Stocktonour corporate headquarters, 15901 Olden Street, San Francisco,Sylmar, California, 94108, on November 12, 2014,May 25, 2016, at 8:309:00 a.m., Pacific Daylight Time, and any adjournment or postponement thereof, for the purposes set forth in the accompanying Notice of SpecialAnnual Meeting of Shareholders. On or about October 2, 2014April 15, 2016, proxy materials for the SpecialAnnual Meeting, including this proxy statement wereand the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 will be made available over the Internet to shareholders entitled to vote at the SpecialAnnual Meeting. A Notice of Internet Availability of Proxy Materials indicating how to access our proxy materials over the Internet waswill be first sent, or given, to shareholders on or about October 2, 2014.April 15, 2016. The date of this proxy statement is October 2, 2014.April 11, 2016.
The Board has fixed the close of business on September 22, 2014March 31, 2016 as the record date for the determination of the shareholders entitled to vote at the SpecialAnnual Meeting. As of September 22, 2014,March 31, 2016, the Company had outstanding 48,641,21849,072,710 shares of Common Stock. Each share is entitled to one vote.
Only shareholders of record as of the close of business on September 22, 2014March 31, 2016 will be entitled to notice of and to vote at the meeting and any adjournments or postponements thereof. Notwithstanding the record date specified above, our stock transfer books will not be closed and shares may be transferred subsequent to the record date. However, all votes must be cast in the names of shareholders of record on the record date.
Shareholders wishing to attend the Annual Meeting can access directions found in the “Contact Us” section of our website at www.tutorperini.com.
You are entitled to attend the SpecialAnnual Meeting if you were a shareholder of record or a beneficial owner of our Common Stock on the record date. If you are a shareholder of record, you may be asked to present valid picture identification, such as a driver'sdriver’s license or passport, for admission to the SpecialAnnual Meeting. Seating and parking are limited.
If your shares are registered in the name of a bank or brokerage firm (your record holder), you may be asked to provide proof of beneficial ownership as of the record date, such as a brokerage account statement, a copy of the Notice of Internet Availability of Proxy Materials or voting instruction form provided by your bank, broker or other holder of record, or other similar evidence of ownership, as well as picture identification, for admission. If you wish to be able to vote in person at the SpecialAnnual Meeting, you should obtain a legal proxy from your brokerage firm, bank or other holder of record and present it to the inspector of elections with your ballot at the SpecialAnnual Meeting.
As discussed in the Notice of Internet Availability of Proxy Materials you received in the mail, if you are a shareholder of record, you may vote your shares over the Internet at www.proxyvote.com or telephonically by dialing 1-800-690-6903. Proxies submitted via the Internet or by telephone must be received by 8:59 p.m., Pacific Daylight Time on November 11, 2014.May 24, 2016. If you would prefer to receive a printed copy of the proxy materials, you may request it by following the procedures set forth in the Notice of Internet Availability of Proxy Materials, and you may vote your shares by following the instructions on the enclosed proxy card.
If the shares you own are held in “street name” by a bank or brokerage firm, you are considered the “beneficial owner” of such shares, and your bank or brokerage firm will provide a Notice of Internet Availability of Proxy Materials, or a printed set of proxy materials together with a voting instruction form which you may use to direct how your shares will be voted. In order to vote your shares, you must follow the voting instructions forwarded to you by or on behalf of that organization. Brokerage firms, banks and other fiduciaries or nominees are required to request voting instructions for shares they hold on behalf of customers and others. As the beneficial owner, you have the right to direct your broker, bank or other nominee or fiduciary how to vote and you are also invited to attend the Annual Meeting. We encourage you to provide instructions to your broker, bank or other nominee or fiduciary to vote your shares. Since a beneficial owner is not the record shareholder, you may not vote the shares in person at the Annual Meeting unless you obtain a legal proxy from the broker, bank or other nominee or fiduciary that holds your shares giving you the right to vote the shares at the meeting.
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Proposal 1, approvalfor the election of each of the Amended and Restated Tutor Perini Long-Term Incentive Plan which: (i) increasesnominees for director, requires the numberaffirmative vote of shares reserved for issuance under the plan by 1,600,000 shares, (ii) specifies the Section 162(m) performance goals and annual grant limitations under the plan, and (iii) extends the terma plurality of the plan,votes cast at the Annual Meeting. You may vote FOR any or all director nominees and/or WITHHOLD your vote from any or all of the director nominees. We recommend a vote FOR the election of each nominee as a director.
Proposal 2, for ratification of the selection of Deloitte & Touche LLP as the Company’s independent auditors for fiscal 2016, requires the affirmative vote of the holders of a majority of the votes cast on the proposal at the SpecialAnnual Meeting. We recommend a vote FOR the ratification of Deloitte & Touche LLP.
Proposal 3, for approval of the amendment and restatement of Tutor Perini’s by-laws to modify indemnification provisions, reduce the shareholder threshold required to call special meetings and modify other provisions to reflect best practice based on the Massachusetts Business Corporation Act, as discussed on page 46, requires the affirmative vote of the holders of a majority of the votes cast on the proposal at the Annual Meeting. We recommend a vote FOR this amendment and restatement of our by-laws.
Proposal 4, an advisory (non-binding) vote on the Company’s executive compensation plans and programs as disclosed in “Compensation Discussion and Analysis” starting on page 14, requires the affirmative vote of the holders of a majority of the votes cast on the proposal at the Annual Meeting. This proposal is advisory in nature, which means that the vote is not binding upon the Company. The opinions expressed by shareholders on this matter will be taken into consideration when making future executive compensation decisions. We recommend a vote FOR the advisory vote to approve executive compensation.
ELECTRONIC AVAILABILITY OF PROXY STATEMENT AND 20132015 ANNUAL REPORT
As permitted by Securities and Exchange Commission (“SEC”) rules, we are making this proxy statement and our 20132015 Annual Report available to shareholders electronically via the Internet at http://investors.tutorperini.com/events-calendar/proxy-voting/default.aspx.default.aspx. On or about October 2, 2014,April 15, 2016, we beganwill begin mailing to our shareholders a Notice of Internet Availability of Proxy Materials containing instructions on how to access this proxy statement and our 20132015 Annual Report and how to vote online. If you received that notice, you will not receive a printed copy of the proxy materials unless you request it by following the instructions for
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requesting such materials contained in the notice. We are constantly focused on improving the ways people connect with information, and believe that providing our proxy materials over the Internet increases the ease and ability of our shareholders to connect with the information they need while reducing the environmental impact of our SpecialAnnual Meeting.
A quorum consistsThe presence, in person or by proxy, of outstanding shares of Common Stock representing a majority in interest of all stock issued and outstanding andthe shares entitled to vote is necessary to constitute a quorum for the transaction of business at the SpecialAnnual Meeting. AnyShares that reflect abstentions andor broker non-votes will be included incounted for purposes of determining whether a quorum exists.is present for the transaction of business at the Annual Meeting.
ABSTENTIONS AND BROKER NON-VOTES
An “abstention” occurs when a shareholder sends in a proxy with explicit instructions to decline to vote regarding a particular matter. For purposes of establishing a quorum, abstentions in person and proxies received but marked as abstentions as to any or all matters to be voted will be included in determining whether a quorum exists.on count as present.
Under our Second Amended and Restated By-Laws, abstentions will not be counted in determining the outcome of the vote on the proposal discussed in this proxy statement. Under New York Stock Exchange rules, abstentions will be counted with votes cast against the proposal when determining whether the proposal received a majority of the votes cast.
Because the proposal contained herein (Proposal 1) is considered a non-routine matter, ifIf your shares are held in "street“street name,"” your brokerage firm, will leaveunder certain circumstances, may vote your shares unvotedfor you if you do not return your proxy. Brokerage firms have authority under the rules of the New York Stock Exchange (“NYSE”) to vote customers’ unvoted shares on some routine matters. If you do not give a proxy to your brokerage firm.firm to vote your shares, your brokerage firm may either vote your shares on routine matters or leave your shares unvoted. Votes that cannot be cast by brokerage firms on non‑routine matters will be “broker non-votes.” Of the proposals contained herein, only Proposal 2 is considered a routine matter.
Regardless of whether you are a record holder of your shares or hold your shares in “street name,” we encourage you to provide voting instructions to your brokerage firm. This ensures your shares will be voted at the meeting according to your instructions.
Abstentions and broker non-votes have no effect on any of the proposals discussed in this proxy statement.
PROXY SOLICITATION SOLICITATION
In addition to solicitation by mail, our directors, officers, and employees may solicit proxies from Tutor Perini shareholders by telephone, facsimile or other electronic means of communication. These persons will not receive additional or special compensation
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for such solicitation services. In addition, the Company has retained the services of Proxy Advisory Group (PAG) to assist as needed in the proxy preparation, review, and solicitation process for a fee not to exceed $15,000. We pay the cost of soliciting proxies, and we will, upon request, reimburse brokers, banks and other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions.
If you execute and return a form of proxy or vote electronically in accordance with the instructions provided in the Notice of Internet Availability of Proxy Materials, your proxy may be revoked at any time before it is voted by written notice to our Secretary, by the subsequent execution and delivery of another proxy, or by voting in person at the SpecialAnnual Meeting. Please note that if you have instructed your broker to vote your shares, the options for revoking your proxy described above do not apply and instead you must follow the directions provided by your broker to change those instructions.
ADJOURNMENTS AND POSTPONEMENTS
Although it is not currently expected, the SpecialAnnual Meeting may be adjourned or postponed, including for the purpose of soliciting additional proxies, by action of the presiding officer of the SpecialAnnual Meeting in accordance with Tutor Perini’s bylaws.by-laws. In addition, the Board may postpone and reschedule the SpecialAnnual Meeting prior to the meeting in accordance with Tutor Perini’s bylaws.by-laws. Any adjournment may be made without notice, other than by an announcement made at the SpecialAnnual Meeting of the time, date and place of the adjourned meeting, regardless of whether or not a quorum is present.
Any adjournment or postponement of the SpecialAnnual Meeting for the purpose of soliciting additional proxies will allow the Tutor Perini shareholders who have already sent their proxies to revoke them any time prior to their use at the SpecialAnnual Meeting as adjourned or postponed.
PROPOSAL 1: ELECTION OF DIRECTORS
Since March 2013, the Company’s Board of Directors has been declassified. As such, the terms of all current members of the Board of Directors will expire at the Annual Meeting of Shareholders on May 25, 2016.
The current Board of Directors consists of eleven (11) members, eight (8) of whom are independent directors. The Board has re-nominated ten (10) of the current directors to serve until the 2017 Annual Meeting of Shareholders. Ms. Marilyn Alexander has notified the Board that she will not be standing for re-election at the 2016 Annual Meeting due to personal reasons. Ms. Alexander will continue as a director of the Company until the election of directors at the Annual Meeting. In accordance with our by-laws, each director nominee will be elected to serve a one-year term expiring at the 2017 Annual Meeting of Shareholders, unless he or she resigns, dies, or is removed before his or her term expires, or until his or her successor has been duly elected and qualified.
The following individuals are the nominees for election to the Board:
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Ronald N. Tutor |
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| 1997 |
Peter Arkley |
| 61 |
| 2000 |
Sidney J. Feltenstein |
| 75 |
| 2013 |
James A. Frost |
| 63 |
| 2015 |
Michael R. Klein |
| 74 |
| 1997 |
Robert C. Lieber |
| 61 |
| 2014 |
Raymond R. Oneglia |
| 68 |
| 2000 |
Dale A. Reiss |
| 68 |
| 2014 |
Donald D. Snyder |
| 68 |
| 2008 |
Dickran M. Tevrizian, Jr. |
| 75 |
| 2011 |
The Board has affirmatively concluded that Mr. Arkley, Mr. Klein, Mr. Lieber, Mr. Oneglia, Ms. Reiss, Mr. Snyder and Judge Tevrizian qualify as independent directors under the independence standards established by Section 303A of the NYSE corporate governance rules. Mr. Tutor and Mr. Frost, both of whom are executive officers and employees of the Company, as well as Mr. Feltenstein, who is Mr. Tutor’s father-in-law, do not qualify as independent directors, and none of them serves on any committee that is reserved for independent directors. More detailed information about the Board’s determination of director independence is provided in the section of this proxy statement titled “Director Independence” starting on page 7.
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The principal occupation, business experience and educational background of Contentseach director nominee are set forth below:
Ronald N. Tutor has served as our Chief Executive Officer since March 2000, as Chairman of the Board since July 1999, and as a director since January 1997. Mr. Tutor also served as Chairman of the Board, President and Chief Executive Officer of Tutor-Saliba Corporation (“Tutor-Saliba”), a privately held California corporation engaged in the construction industry, until Tutor-Saliba merged with the Company in September 2008. He is a member of the Board of Trustees of the University of Southern California. With over 19 years at the Company and over 53 years in the industry, Mr. Tutor brings to our Board an industry acknowledged leadership role and in-depth knowledge of our Company and the construction industry. Mr. Tutor holds a Bachelor of Science degree in Finance from the University of Southern California.
Peter Arkley has served as a director since May 2000. Since June 2011, he has served as Senior Managing Director, Construction Services Group of Alliant Insurance Services, an insurance and bonding brokerage firm. From 1994 to 2008, he served as the Chairman/CEO of AON’s United States Construction Services Group, an insurance and bonding brokerage firm, and from 2008 until June 2011 he served as the Managing Principal/CEO of AON’s Global Construction Group. He is also a director of the Greater Los Angeles Zoo Association, a non-profit organization. Mr. Arkley has extensive knowledge and expertise in insurance surety and financial service markets. Mr. Arkley provides the Board insight on risk management and financial service matters. Mr. Arkley holds a Bachelor of Science degree in Finance from Wagner College.
Sidney J. Feltenstein has served as a director since November 2013 and is a Senior Operating Partner of Sentinel Capital Partners. He is the retired chairman and CEO of Yorkshire Global Restaurants, Inc., the holding company for A&W Restaurants and Long John Silver’s, which he founded in 1994. Prior to creating Yorkshire Global Restaurants, Mr. Feltenstein spent 19 years with Dunkin’ Donuts in both operations and marketing, the last 12 of which he spent as chief marketing officer. In 1992, he left Dunkin’ Donuts to become executive vice president of worldwide marketing for Burger King Corporation. Mr. Feltenstein serves as a director of Focus Brands, Arby’s, Inc., Wingstop, Inc., Huddle House, Inc., Checkers, Inc., and TGI Fridays, all of which are privately held companies. In addition, he is a former trustee and Audit Committee chairman and is currently an Overseer of Boston University, and is a trustee of The Health Store Foundation and One Family Health, all of which are non-profit organizations. Mr. Feltenstein is a past chairman of the International Franchise Association (IFA) and a former chairman of the IFA Educational Foundation. He is also a member of the IFA Hall of Fame and a past recipient of the IFA’s Entrepreneur of the Year Award. Mr. Feltenstein brings extensive operational and marketing management expertise to the Board through various positions held over his career and through his experience as a director of other public and private companies. Mr. Feltenstein holds a Bachelor of Arts degree in Communications from Boston University.
James A. (Jack) Frost has served as a director since February 2015, when he was promoted to the position of President and Chief Operating Officer. In addition, since 2008, Mr. Frost has served as CEO of Tutor Perini’s Civil Group. He originally joined the Company’s predecessor, Tutor-Saliba, in 1988 and quickly climbed to the role of Chief Operating Officer. Prior to Tutor-Saliba, Mr. Frost founded and was the majority owner of his own general construction company, which he successfully operated for ten years. Earlier, he spent more than four years in active duty military service with the United States Air Force, during which time he trained and became certified as an expert in explosive ordnance management and disposal. He served multiple tours of duty in Southeast Asia and attended several schools and conducted assignments with the U.S. Navy, Marines and Army. Mr. Frost studied engineering at the College of Southern Maryland, at Texas State University and at the University of Texas in Austin. He also completed a two-year business management program at the University of Phoenix in Woodland Hills, California. Over the course of his career, Mr. Frost has gained extensive executive leadership experience in construction management and operations, overseeing numerous projects, including many of the Company’s largest and most difficult building and civil projects. With 28 years of experience with the Company, Mr. Frost provides to the Board significant insight into the executive management and operational aspects of the Company.
Michael R. Klein has served as a director since January 1997 and as Vice Chairman of the Board since September 2000. He is considered an independent director, as defined by the NYSE, and he has been affirmed by the Board as the Lead Independent Director. Mr. Klein, serves as Chairman of the Board of Directors of CoStar Group, Inc., a publicly held provider of commercial real estate information of which he was a co-founder; as Chairman and CEO of the Sunlight Foundation and of Gun Violence Archive, both non-profit organizations which he founded; and as Chairman of the Shakespeare Theatre Company, a non-profit organization. Through 2009, he served as Chairman of the Board of Directors of Le Paradou, LLC, a privately held company, and through 2011 he served as the Lead Independent Director and Chairman of the Governance Committee of SRA International, Inc., a formerly publicly held provider of technology and strategic consulting services and solutions which was sold in June 2011, and as a director of ASTAR Air Cargo, Inc., a privately held company which was sold in 2014. He is a director of ThinkFood Group, LLC, a privately held food services company. From 1974 until 2005, Mr. Klein was a partner of the law firm Wilmer Cutler Pickering, now Wilmer Hale. Mr. Klein’s 40 plus years as a corporate lawyer, investor, and director of multiple corporations, both public and private, qualify and enable him to contribute sound judgment and leadership to the Company in his role as Lead Independent Director. Mr. Klein holds a Master of Laws degree from the Harvard Law School and Juris Doctor and Bachelor of Business Administration degrees from the University of Miami.
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PROPOSALRobert C. Lieber has served as a director since August 2014. Mr. Lieber is Executive Managing Director of the Island Capital Group, which he joined in July 2010 after having served under New York City Mayor Michael R. Bloomberg as Deputy Mayor for Economic Development. Prior to joining the Bloomberg administration in January 2007, Mr. Lieber retired from Lehman Brothers after 23 years, serving most recently as a Managing Director in Lehman’s Real Estate Private Equity Group and prior to that as the Global Head of Real Estate Investment Banking. Mr. Lieber also serves as a Director of ACRE Realty Investors, a publicly traded real estate investment trust headquartered in Atlanta, Georgia. He also served as a Board member, Secretary of the Board and Trustee for the Urban Land Institute and is a former Chairman of the Zell-Lurie Real Estate Center at the Wharton School, University of Pennsylvania. Mr. Lieber brings extensive expertise and insight into financial and political matters pertaining to real estate and infrastructure development projects, gained through his experience in the financial and government sectors. Mr. Lieber holds a Bachelor of Arts degree from the University of Colorado and a Master of Business Administration degree from the Wharton School.
Raymond R. Oneglia has served as a director since March 2000. Since 1997, he has also served as Vice Chairman of the Board of Directors of O&G Industries, Inc. (“O&G”), a Connecticut corporation engaged in the construction industry, and prior to that, served in various operating and administrative capacities since 1970. Mr. Oneglia’s 46 years of experience at O&G allows him to contribute an in-depth industry perspective. Mr. Oneglia holds a Bachelor of Science degree from Union College.
Dale A. Reiss has served as a director since May 2014. She currently serves as senior managing director of Brock Capital Group LLC and chairman of Brock Real Estate LLC, its equity and mezzanine financing arm, as well as managing director of Artemis Advisors, LLC. Ms. Reiss is a director of iStar Financial Inc., a real estate finance company, where she is chairperson of the Audit Committee, of CYS Investments, Inc., where she is a member of the Audit and Nominating and Governance Committees and of Care Capital Properties Inc., a healthcare REIT, where she is Chair of the Compensation Committee and a member of the Nominating and Governance and Executive Committees. Until her retirement in 2008, she served as Global and America’s director of real estate, hospitality and construction, at Ernst & Young LLP and was a senior partner there from 1995 through 2008. She was subsequently senior consultant to the Global Real Estate Center of Ernst & Young LLP from 2008 to 2011. She served as a managing partner at Kenneth Leventhal & Company from 1985 through its merger with Ernst & Young in 1995. From 1980 to 1985, Ms. Reiss was a senior vice president and controller at Urban Investment & Development Company. Since 1998, Ms. Reiss has served as a governor and past trustee of Urban Land Institute and in various Urban Land Institute officer and committee leadership positions. She also serves on the board of directors of the Guttmacher Institute. She is a former member of the board of directors of Post Properties, Inc., where she served on the Audit Committee, and of the Pension Real Estate Association. Ms. Reiss brings extensive expertise in financial and accounting matters from her experience over an extended period at several major public accounting firms, her leadership experience in management and operations at those firms, and her experience as a director of other public and private companies. Ms. Reiss holds a Bachelor of Science degree in Economics and Accounting from the Illinois Institute of Technology and a Master of Business Administration degree from the University of Chicago. She is a Certified Public Accountant.
Donald D. Snyder has served as a director since 2008. He was a director and the president of Boyd Gaming Corporation from 1997 until his retirement in 2005. Following service from 2010 as dean of the Harrah College of Hotel Administration at the University of Nevada, Las Vegas (“UNLV”), Mr. Snyder was named Acting President of UNLV in February 2014. Since January 2015, he has served as Presidential Advisor at UNLV. He also serves as a member of the nominating and governance (chair) and the risk management committees of Western Alliance Bancorporation, a publicly held commercial bank holding company, as well as serving as a member of the board of directors of its lead bank, Western Alliance Bank (formerly Bank of Nevada), and as a director and member of the compensation, governance (chair), and audit committees of Switch, LLC, a privately held technology company. He is presently on the Board of Directors of non-profit entities, including The Smith Center for the Performing Arts (Chairman) and the Nathan Adelson Hospice. Mr. Snyder’s role as a public gaming company executive, his experience in commercial banking (former Chairman & CEO of First Interstate Bank of Nevada), and his experience on several public, private and non-profit boards provides the Board comprehensive insight on financial and business matters. Mr. Snyder holds a Bachelor of Science degree in Business Administration from the University of Wyoming.
Dickran M. Tevrizian, Jr. has served as a director since September 2011. Prior to his retirement in April 2007, Mr. Tevrizian was a federal judge for the United States District Court for the Central District of California since 1986, and earlier served from 1972 to 1982 as a Municipal and then as a Superior Court judge for the State of California. From 1999 to 2007, Judge Tevrizian also served as an Advisory Director to the University of California, Los Angeles School of Public Policy. Upon retirement from the federal judiciary, Judge Tevrizian assumed the role of a private mediator/arbitrator with Judicial Arbitration and Mediation Services. Judge Tevrizian also serves on the boards of the Children’s Hospital of Los Angeles, the legal advisory board of Legal Zoom, Inc. and several other privately held companies and corporations. He is also a trustee of Pacific Oaks College. Judge Tevrizian’s 31 plus years of experience as a federal and state judge provides the Board with significant insight on risk management and compliance matters. Mr. Tevrizian holds a Juris Doctor degree and a Bachelor of Science degree in Finance from the University of Southern California.
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Our Corporate Governance and Nominating Committee has recommended each of the above listed individuals for re-election as directors. Unless otherwise noted thereon, proxies solicited hereby will be voted for the election of the director nominees to hold office until the 2017 Annual Meeting of Shareholders and until their successors are chosen and qualified. Each nominee has consented to being named in this proxy statement and, if elected, each nominee has consented to serve as a director until his successor is duly elected and qualified. The Board does not contemplate that any nominee will be unable to serve as a director for any reason, but if that should occur prior to the meeting, proxies solicited hereby may be voted either for a substitute nominee designated by the Board or recommended by the Corporate Governance and Nominating Committee, or the Board may determine to leave any such Board seat vacant until a suitable candidate is identified, or to reduce the size of the Board.
THE TUTOR PERINI BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE BOARD OF DIRECTORS’ NOMINEES FOR RE-ELECTION AS DIRECTOR.
INFORMATION ABOUT THE BOARD OF DIRECTORS
Board Composition
The Board currently consists of 11 directors, all of whose terms expire upon the election of their successors at the 2016 Annual Meeting. The most recent additions to the Board include Robert C. Lieber, who was elected to the Board by a vote of the directors in August 2014, and was subsequently re-elected by a vote of the shareholders at the 2015 Annual Meeting. Earlier, Dale A. Reiss was elected to the Board by a vote of the Company’s shareholders at the 2014 Annual Meeting of Shareholders, and was also subsequently re-elected by a vote of the shareholders at the 2015 Annual Meeting. Sidney J. Feltenstein was originally appointed to the Board in November 2013, and was subsequently re-elected by a vote of the shareholders at the 2014 Annual Meeting. Mr. Feltenstein was originally nominated by Mr. Tutor pursuant to his rights under a shareholder agreement by and among the Company and certain of its shareholders dated April 2, 2008, as amended on September 17, 2010, June 2, 2011, September 13, 2011 and March 20, 2013 (the “Amended Shareholders Agreement”), as discussed below. Mr. Feltenstein is Mr. Tutor’s father-in-law. The Corporate Governance and Nominating Committee reviewed Mr. Feltenstein’s qualifications and his appointment to the Board was unanimously approved by the Board.
Under the Amended Shareholders Agreement, which became effective upon the September 2008 merger between Perini Corp. and Tutor-Saliba, Mr. Tutor (as the representative of the former Tutor-Saliba shareholders) has the right to designate one nominee for election as a member of the Board (and thereafter, for nomination for election), so long as Mr. Tutor and three trusts he controls (the “Tutor Group”) own at least 11.25% of the outstanding shares of the Company’s Common Stock. For more information, see “Amended Shareholders Agreement” starting on page 40.
As of the date of this proxy statement and as also discussed above, Mr. Tutor elected to exercise his right to designate one nominee to the Board when he designated Mr. Feltenstein for nomination and election to the Board.
Director 1: APPROVAL OF THE AMENDED AND RESTATED TUTOR PERINI CORPORATION LONG-TERM INCENTIVE PLANIndependence
The Company currently maintains the Tutor Perini Corporation Long-Term Incentive Plan, as amended and restated June 1, 2011 (the “Current Plan”). The board of directors believes that the Current Plan has been effective in providing equity to key employees and that the awards granted under the Current Plan have provided strategic alignment with shareholder interests and achievement of retention goals of the key executives. The Compensation CommitteeBoard has reviewed the Current Plan,independence of directors for 2015 and has concluded that Ms. Alexander, Mr. Arkley, Mr. Klein, Mr. Lieber, Mr. Oneglia, Mr. Snyder, Ms. Reiss, and Judge Tevrizian, are “independent” in accordance with the assistanceindependence standards established by Section 303A of the NYSE rules. In determining independence pursuant to NYSE standards, after an initial review by the Corporate Governance and Nominating Committee, each year the Board makes an affirmative determination whether directors have a direct or indirect material relationship with Tutor Perini, including its compensation consultant.subsidiaries, that may interfere with their ability to exercise their independence from Tutor Perini.
Based on its review,In evaluating the Compensation Committee recommendedindependence of each non-employee director, the Board considered several factors. With respect to Mr. Oneglia, the Board considered the relationship between O&G, of which Mr. Oneglia is Vice Chairman of the Board of Directors and a shareholder, and Tutor Perini, including the construction joint ventures between Tutor Perini and O&G. The Board determined that the Current Planjoint ventures did not impact Mr. Oneglia’s independence from Tutor Perini management because: (1) the joint ventures are formed for the limited purposes of performing specific contractual requirements for owners as is commonplace in the construction business, (2) Mr. Oneglia recuses himself on all Board decisions related to the joint ventures between the Company and O&G, (3) Mr. Oneglia is not personally involved in the management of these joint ventures and (4) Tutor Perini and O&G have an equal vote in the governance of such joint ventures. With respect to Mr. Arkley, the Board considered the relationship between Alliant Insurance Services (“Alliant”) during 2015, of which Mr. Arkley is currently Senior Managing Director, Construction Services Group, and Tutor Perini, an insurance and bonding client of Alliant. The Board has determined that his independence from Tutor Perini management is not impacted because: (1) services provided by Alliant are supplied to Tutor Perini on terms similar to Alliant’s other clients and (2) income generated by Alliant for services provided to Tutor Perini are not material to Alliant’s U.S. or consolidated operations. Specifically with regard to the income generated by Alliant, the Board also considered the independence testing as defined in the NYSE Listing
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Standard 303A.02(b)(v), which states that a director is not independent if the director is a current employee of a company that has made payments to or received payments from Tutor Perini in an amount which, in any of the last three fiscal years exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues. During the years 2013, 2014 and 2015, Tutor Perini paid fees to Alliant which were less than 2% of Alliant’s consolidated gross revenues in each respective year. No other independent directors had material relationships with Tutor Perini other than in their capacities as directors.
Messrs. Tutor and Frost, who are executive officers and employees of Tutor Perini, as well as Mr. Feltenstein, who is Mr. Tutor’s father-in-law, do not qualify as independent directors, and none of them serves on any committee that is reserved for independent directors.
Communications with the Board
The Board welcomes the submission of any comments or concerns from shareholders, employees and other interested parties. Any shareholder, employee or interested party who wishes to communicate with the Board may submit such communication in writing to Tutor Perini Corporation, 15901 Olden Street, Sylmar, California 91342 and marked to the attention of the Board or any of its committees or individual directors. All comments or concerns from shareholders and other interested parties will be amendedforwarded directly to the appropriate Board committee or specific directors, as well as to the Company’s Compliance Officer.
In order to facilitate communications with the independent directors, we have a secure telephone number (800-489-8689) whereby shareholders, employees and restatedother interested parties may be able to make their concerns known directly and confidentially to the non-employee directors, the Audit Committee, or the Corporate Governance and Nominating Committee. Shareholders and other interested parties can also communicate with the independent directors via email at board@tutorperini.com. The designated recipients of these reports will not filter the communications.
Board Leadership
Mr. Tutor is the Chairman of the Board and Chief Executive Officer. The Chairman of the Board and Chief Executive Officer positions are separately designated offices of the Company, as defined in the Company’s by-laws. However, these offices may be held by the same person. Mr. Tutor’s Employment Agreement stipulates that he shall serve as the Company’s Chief Executive Officer, as a member of the Board of Directors, and as Chairman of the Board. Furthermore, the Board has evaluated these positions and determined that Mr. Tutor’s continued participation in both positions is important to the continued success of the Company because of: (i) his iconic role in the construction industry with a proven past in the successful bidding and managing of large, complex building and civil projects, (ii) his strong industry relationships with our surety and insurance partners, and (iii) his lengthy history of business acumen and strategic acquisitions, which have significantly increased the Company’s competitiveness through vertical integration of the Company’s services and an expanded nationwide footprint, including a strong presence in the New York and east coast construction markets.
Mr. Klein is an independent (non-employee) director and the Lead Independent Director as affirmed by a majority of the independent directors. As Lead Independent Director, Mr. Klein has the duties and authority outlined starting on page 11 under “Corporate Governance and Nominating Committee.”
Committees and Meetings of the Board of Directors
The Board met six times during 2015. During 2015, each of our directors attended at least 75% of: (i) the total number of meetings of the Board and (ii) the total number of meetings held by all committees on which such director served, with the exception of Mr. Frost, who did not attend two meetings, one of which was missed for medical reasons. With regard to the meetings missed, Mr. Frost was actively engaged with management and the directors regarding the topics discussed. The members of the Board are encouraged to attend our annual shareholders meetings. All 11 of the current directors attended the 2015 Annual Meeting of Shareholders.
Our by-laws authorize the Board to appoint one or more committees, each consisting of one or more directors. The Board currently has three standing committees: an Audit Committee, a Corporate Governance and Nominating Committee, and a Compensation Committee. Each of the committees of our Board has a charter, which satisfies the requirements of the corporate governance rules issued by the SEC and the NYSE for each respective committee. Each Committee reviews its charter annually and revises it as appropriate. We maintain copies of the charters of each of the committees of our Board in the “Corporate Governance” section of our website at www.tutorperini.com and provide copies in print, without charge, to any shareholder who requests a copy.
8
The Board’s Role in Risk Oversight
Periodically, and at least quarterly, the Board meets with management to discuss key risks to our operations and our strategy, as well as risk mitigation plans and activities. The Board plays an integral role in providing risk oversight on potential related party transactions and any transactions outside of the normal course of our operations. Our Board administers its risk oversight function as a whole and through its Board committees. For example, the Audit Committee regularly discusses with management certain risk exposures, their potential financial impact on our company and our risk mitigation strategies. In addition, each of the other standing Board committees (the Compensation Committee and the Corporate Governance and Nominating Committee) regularly meets to discuss the short-term and long-term objectives and to provide oversight for risks relating to the applicable committee’s areas of responsibility. The Compensation Committee, with management’s assistance, reviews the compensation plans and programs throughout the Company to confirm that these plans do not encourage excessive risk-taking that may have a materially adverse effect on the Company.
Since Mr. Tutor serves as both CEO and Chairman of the Board, having a Lead Independent Director in place, as discussed above, helps to ensure that the Board is fulfilling its role in risk oversight.
The Board seeks candidates who are independent, possess relevant business, professional or board experience to make a significant contribution to the Board and have sufficient availability to attend to the business of the Company. Annually, the Corporate Governance and Nominating Committee conducts an evaluation of the Board to determine whether it is functioning effectively and recommends to the full Board the slate of director-nominees to be nominated for election at the next annual meeting of shareholders. Potential candidates for the Board may include candidates nominated by shareholders in accordance with our by-laws, those identified by a search firm retained for such purpose, or candidates recommended by other persons, including current directors or executive officers. Pursuant to the Corporate Governance and Nominating Committee charter, the process and criteria for considering the recommendations of shareholders with respect to candidates for election to the Board is the same as those used for candidates recommended by other parties. The minimum qualifications and specific qualities and skills required for directors are set forth in the Corporate Governance Guidelines, a copy of which is maintained in the “Corporate Governance” section of our website at www.tutorperini.com. The Corporate Governance and Nominating Committee considers the diversity in skill and experience of each nominee when evaluating candidates individually and when considered with all directors as a group.
A shareholder who wishes to recommend a director-nominee to the Corporate Governance and Nominating Committee for the 2017 Annual Meeting of Shareholders should submit the recommendation in writing to Tutor Perini Corporation, 15901 Olden Street, Sylmar, California 91342, Attention: Corporate Secretary, so it is received not less than 75 days nor more than 180 days prior to the anniversary date of the 2016 Tutor Perini Annual Meeting of Shareholders. However, if the 2017 Annual Meeting of Shareholders is held more than seven (7) days earlier than the anniversary date of the 2016 Annual Meeting of Shareholders, then notice must be delivered or received no later than 5:00 p.m. Pacific Daylight Time on (a) the 20th day following modifications,the earlier of: (i) the day on which require shareholder approval:such notice of the date of the annual meeting is mailed or (ii) the day on which public disclosure of the date of the annual meeting is made, or (b) if such date of notice or public disclosure occurs more than 75 days prior to the scheduled date of such meeting, then the later of: (i) the 20th day following the first to occur of such notice or such public disclosure or (ii) the 75th day prior to such scheduled date of such meeting.
Audit Committee
The Audit Committee currently consists of Dale A. Reiss (Chair), Marilyn A. Alexander, Michael R. Klein and Raymond R. Oneglia. Each of the members of the Audit Committee is “financially literate,” as defined in the NYSE listing standards and meets the independence and experience requirements for members of an audit committee set forth in the rules of the SEC and the listing standards of the NYSE, as affirmed by the Board. Based upon review of their qualifications, the Board has designated Ms. Reiss and Ms. Alexander and Mr. Klein as the Company’s “audit committee financial experts” as defined by the rules of the SEC. None of the Audit Committee members serve on the audit committees of more than two other public companies.
The Audit Committee has the authority to retain special legal, accounting or other consultants as deemed necessary. The Audit Committee met eight times during 2015. Ms. Alexander has notified the Board that she will not be standing for re-election at the 2016 Annual Meeting due to personal reasons.
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The Audit Committee (the “Committee”) oversees the financial reporting process of Tutor Perini Corporation (the “Company”), on behalf of the Board of Directors (the “Board”) of the Company in accordance with the Audit Committee charter. The Board, in its judgment, has determined that all members of the Committee meet the independence and experience requirements of the Securities and Exchange Commission (the “SEC”) and the New York Stock Exchange (the “NYSE”). The Board has designated Marilyn A. Alexander, Michael R. Klein and Dale A. Reiss (Chair) as the Company’s “Audit Committee financial experts,” as defined by the rules of the SEC and NYSE, based on review of their qualifications.
The Company's management is responsible for the financial reporting process and preparation of the quarterly and annual consolidated financial statements, including maintaining a system of internal controls over financial reporting, as well as disclosure controls and procedures. In fulfilling its oversight responsibilities, the Committee meets with its independent auditor (Deloitte & Touche LLP, or “Deloitte,” an independent registered public accounting firm), internal audit and management to review accounting, auditing, internal controls and financial reporting matters. The Committee is directly responsible for the appointment, compensation, retention, oversight and termination of the Company's independent auditor. The independent auditor audits the effectiveness of the Company's internal controls over financial reporting and expresses its opinion thereon, in addition to auditing the annual consolidated financial statements and expressing an opinion whether those financial statements present fairly the financial position, results of operations and cash flows of the Company in the conformity with generally accepted accounting principles in the United States.
In connection with the December 31, 2015 audited consolidated financial statements, the Committee:
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· | Reviewed and considered the written disclosures and the letter regarding the independence of the |
Based on the reviews and discussions above, the Committee recommended to the Board that the audited consolidated financial statements for 2015 be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 for filing with the SEC. The maximum number of shares of Common Stock originally reserved for issuance underBoard approved the Current Plan is 6,900,000 subject to adjustment for changes in capital structure. As of June 30, 2014, 46,680 shares of Common Stock remained available for issuance under the Current Plan. Additionally, as of June 30, 2014, the number of granted but unexercised stock options was 2,009,000 with a weighted-average exercise price of $19.56 and a weighted-average remaining term of 6.4 years, and the number of granted but unvested restricted stock units was 1,051,500.Committee’s recommendation.
The Amended Plan also includes a new policy specifying a minimum vesting period of six months for stock options and stock appreciation rights granted effective August 12, 2014.
Members during the year just concluded were: | |
Dale A. Reiss, Chair | |
Marilyn A. Alexander | |
Michael R. Klein | |
Raymond R. Oneglia |
Accordingly, the Board of Directors approved and recommends that the Company’s shareholders approve the Amended Plan, as amended and restated effective October 2, 2014. Upon shareholder approval of the Amended Plan by the Company’s shareholders, the Amended Plan will replace the Current Plan and no new awards will be made under the terms of the Current Plan. However, any outstanding awards previously granted under the Current Plan will continue in effect after approval of the Amended Plan and will not be deemed amended or modified by the adoption and approval of the Amended Plan. If the Amended Plan is not approved at the Special Meeting, we will issue any future long-term incentive compensation awards under alternative methods. These methods would require treating such awards under mark-to-fair market accounting rules. This could result in unfavorable impacts to shareholders because our future earnings would be subjected to the volatility associated with mark-to-fair market accounting and our future cash flow would be adversely affected as a result of having to settle these new awards in cash rather than in shares of Common Stock. In order to continue to attract and retain key executives, we must continue to provide long-term incentives that are aligned with shareholder value regardless of the availability of shares under the plan. The adverse effects of these accounting rules will be avoided if the Amended Plan is approved.
Shareholder approval of the Amended Plan also is desired to ensure the tax deductibility by the Company of certain performance-based awards granted under the Amended Plan for purposes of Section 162(m) of the United States Internal Revenue Code of 1986, as amended (the “Code”), and to meet the listing requirements of the New York Stock Exchange.
Summary Description of the Amended Plan
The following is a summary of the principal features of the Amended Plan. The summary is not a complete description of all the terms of the Amended Plan and is qualified in its entirety by reference to the complete text of the Amended Plan, which is attached to this Proxy Statement as Exhibit A. To the extent there is a conflict between this summary and the actual terms of the Amended Plan, the terms of the Amended Plan will govern. The Amended Plan is administered by the Compensation Committee of our Board of Directors (the “Administrator”). Awards granted under the Amended Plan will be entirely in the discretion of the Administrator and are therefore not currently determinable.
Amended Plan Administration. The Administrator has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, to make any combination of awards to participants, and to determine the specific terms and conditions of each award, subject to the provisions of the Amended Plan. The Administrator may permit Common Stock, and other amounts payable pursuant to an award, to be deferred. In such instances, the Administrator may permit interest, dividends or deemed dividends to be credited to the amount of deferrals. In addition, the Administrator may not reprice outstanding options.
Eligibility and Limitations on Grants. All full-time and part-time officers, employees, non-employee directors and other key persons of Tutor Perini and its subsidiaries are eligible to participate in the Amended Plan, subject to the discretion of the Administrator.
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The maximum number of shares available for issuance under the Amended Plan would increase by 1,600,000 from 6,900,000 under the Current Plan to 8,500,000 under the Amended Plan. The maximum award of stock options or stock appreciation rights granted to any one individual will not exceed 500,000 shares of Common Stock (subject to adjustment for stock splits and similar events) for any calendar-year period. Effective August 12, 2014, the minimum vesting period for stock options and stock appreciation rights shall be six months. If any award of restricted stock or deferred stock granted to an individual is intended to qualify as “performance based compensation” under Section 162(m) of the Code, then the maximum award shall not exceed 500,000 shares of Common Stock (subject to adjustment for stock splits and similar events) to any one such individual in any calendar-year period.
Stock OptionsCorporate . Options granted under the Amended Plan may be either incentive stock options (within the meaning of Section 422 of the Code) or non-qualified stock options. Incentive options may be granted only to employees of Tutor Perini or any subsidiary. Options granted under the Amended Plan will be non-qualified options if they (i) fail to qualify as incentive options, (ii) are granted to a person not eligible to receive incentive options under the Code, or (iii) otherwise so provide. Non-qualified options may be granted to any persons eligible to receive incentive stock optionsGovernance and to non-employee directors and other key persons.
Other Option Terms. The Administrator has authority to determine the terms of options granted under the Amended Plan. However, options must be granted with an exercise price that is not less than the fair market value of the shares of Common Stock on the date of the option grant.Nominating Committee
The termCorporate Governance and Nominating Committee consists of each option will be fixedMichael R. Klein (Chair), Robert C. Lieber, Donald D. Snyder and Dickran M. Tevrizian, Jr. Each member of the Corporate Governance and Nominating Committee is an independent director, as defined by the Administrator but may not exceed ten years fromNYSE and as affirmed by the date of grant.Board. The Administrator will determine at what time or times each option may be exercised and, subject to the provisionsduties of the Amended Plan, the period of time, if any, after retirement, death, disability or termination of employment during which options may be exercised. Options may be made exercisable in installments,Corporate Governance and the exercisability of options may be accelerated by the Administrator. In general, unless otherwise permitted by the Administrator, no option granted under the Amended Plan is transferable by the optionee other than by will or by the laws of descent and distribution, and options may be exercised during the optionee’s lifetime only by the optionee, or by the optionee’s legal representative or guardian in the case of the optionee’s incapacity.
Options granted under the Amended Plan may be exercised for cash or by transfer to Tutor Perini (either actually or by attestation) of shares of Common Stock that are not then subject to restrictions under any Tutor Perini stock plan, and that have a fair market value equivalent to the option exercise price of the shares being purchased. Subject to applicable law, options granted under the Amended Plan also may be exercised by compliance with certain provisions pursuant to which a securities broker delivers the purchase price for the shares to us.
To qualify as incentive options, options must meet additional federal tax requirements, including a $100,000 limit on the value of shares subject to incentive options which first become exercisable in any one calendar year, and a shorter term and higher minimum exercise price in the case of ten percent shareholders.
Stock Appreciation Rights. The Administrator may award a stock appreciation right either as a freestanding award or in tandem with a stock option. The term of each freestanding stock appreciation right will be fixed by the Administrator but may not exceed ten years. The term of a stock appreciation right granted in tandem with a stock option shall be the same as the related stock option. Upon exercise of the stock appreciation right, the holder will be entitled to receive an amount equal to the excess of the fair market value on the date of exercise of one share of Common Stock over the exercise price per share specified in the related stock option (or, in the case of a freestanding stock appreciation right, the price per share specified in such right) times the number of shares of Common Stock with respect to which the stock appreciation right is exercised. This amount may be paid in cash, in shares of Common Stock, or a combination of cash and Common Stock, as determined by the Administrator. The exercise price per share of stock appreciation rights may not be less than 100% of the fair market value of the shares of Common Stock on the date of grant.
Prohibition on Repricing of Stock Options and Stock Appreciation Rights without Shareholder Approval. The Administrator may not implement any of the following repricing or cash-out programs without obtaining shareholder approval; (i) reduce the exercise price of an outstanding Stock Option or an outstanding Stock Appreciation Right, (ii) cancel an outstanding Stock Options or outstanding Stock Appreciation Rights in exchange for other Stock Options or other Stock Appreciation Rights with an exercise price that is less than the exercise price of the cancelled Stock Options or cancelled Stock Appreciation Rights, as applicable, or (iii) cancel an outstanding Stock Option or an outstanding Stock Appreciation Right with an exercise price that is less than the Fair Market Value of a share of Stock on the date of cancellation in exchange for cash or another Award.
Restricted Stock Awards. The Administrator may grant shares, at a purchase price (which may be zero, subject to the limitations of applicable law) determined by the Administrator, of Common Stock to any participant subject to such conditions and restrictions as the Administrator may determine. These conditions and restrictions may include the achievement of pre-established performance goals and/or continued employment with Tutor Perini through a specified vesting period. The vesting period shall be determined by the Administrator. However, in the event these awards have a performance-based goal, the restriction period will be at least one year, and
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in the event these awards have a time-based restriction, the restriction period will be at least three years. If the applicable performance goals and other restrictions are not attained, the participant will forfeit his or her award of restricted stock.
Unrestricted Stock Awards. The Administrator may also grant shares (at no cost or for a purchase price determined by the Administrator) of Common Stock that are free from any restrictions under the Amended Plan. Unrestricted stock may be granted to any participant in recognition of past services or other valid consideration, and may be issued in lieu of cash compensation due to such participant.
Deferred Stock Awards. The Administrator also may award phantom stock units as deferred stock awards to participants. The deferred stock awards are ultimately payable in the form of shares of Common Stock and/or cash and may be subject to such conditions and restrictions as the Administrator may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with Tutor Perini through a specified vesting period. However, in the event these awards have a performance-based goal, the restriction period will be at least one year, and in the event these awards have a time-based restriction, the restriction period will be at least three years. During the deferral period, subject to terms and conditions imposed by the Administrator, the deferred stock awards may be credited with dividend equivalent rights (discussed below). Subject to the consent of the Administrator, a participant may make an advance election to receive a portion of his or her compensation or restricted stock award otherwise due in the form of a deferred stock award.
Dividend Equivalent Rights. The Administrator may grant dividend equivalent rights that entitle the recipient to receive credits for dividends that would be paid if the recipient had held specified shares of Common Stock. Dividend equivalent rights may be granted as a component of another award or as a freestanding award. Dividend equivalent rights credited under the Amended Plan may be paid currently or be deemed to be reinvested in additional shares of Common Stock, that may thereafter accrue additional dividend equivalent rights at fair market value at the time of deemed reinvestment or on the terms then governing the reinvestment of dividends under our dividend reinvestment plan, if any. Dividend equivalent rights may be settled in cash, shares of Common Stock or a combination thereof, in a single installment or installments, as specified in the award.
Section 162(m) Awards. Stock options and stock appreciation rights granted under the Amended Plan are intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Internal Revenue Code. The Administrator may grant awards of restricted stock and deferred stock that are intended to qualify as “performance-based compensation” for purposes of Section 162(m) of the Internal Revenue Code (“162(m) Awards”). These awards may be granted, vest and be paid based on attainment of specified performance goals established by the Administrator. These performance goals will be based on the attainment (on an annual and/or cumulative basis) of a certain target level of or a specified increase or decrease in, one or more of the following criteria selected by the Administrator:Nominating Committee include:
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The Corporate Governance and Nominating Committee has the authority to retain consultants or other experts as it considers necessary to assist in the performance of its duties. During 2015, the Corporate Governance and Nominating Committee did not retain any consultants or other experts. The Corporate Governance and Nominating Committee met five times during 2015.
The independent directors have designated Michael R. Klein, chair of the Corporate Governance and Nominating Committee, to act as the “Lead Independent Director.” In his capacity as Lead Independent Director, Mr. Klein has the following duties and authority:
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We have developed Corporate Governance Guidelines and a Code of Business Conduct and Ethics to outline our commitment to carefully govern the operation of our business and compliance with applicable laws and regulations, while maintaining the highest ethical standards. The Code applies to all of our officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer and persons performing similar functions. Tutor Perini’s Corporate Governance Guidelines and Code of Business Conduct and Ethics are also available in the “Corporate Governance” section of our website at www.tutorperini.com. Interested parties may obtain printed copies of these documents by writing to or calling the Investor Relations Department of the Company at 15901 Olden Street, Sylmar, California 91342; Telephone: (818) 362-8391; E‑Mail: investor.relations@tutorperini.com. Any amendments to, or waivers of, the Code of Business Conduct and Ethics that apply to our directors, Chief Executive Officer, President, Chief Financial Officer or any person performing similar functions will be disclosed on our website promptly following the date of such amendment or waiver.
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Compensation Committee
The Compensation Committee consists of Donald D. Snyder (Chair), Peter Arkley and Michael R. Klein. Each member of the Compensation Committee is an independent director, as defined by the NYSE and as affirmed by the Board.
The principal powers and duties of the Compensation Committee as established by the Board are to:
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The Compensation Committee has the authority to retain special consultants to advise the Committee as it considers necessary. These consultants report exclusively to the Compensation Committee, which has sole discretion to hire and fire the consultants and to approve the consultants’ fees. The Compensation Committee in 2015 retained the services of Meridian Compensation Partners, LLC (“Meridian”) to review and provide guidance on the 2015 proxy statement and to provide other consultative services related to our compensation program and practices. In addition, during 2015, the Compensation Committee consulted Kirkland & Ellis LLP (“K&E”), on certain legal aspects of executive compensation, including our employment and compensation arrangements with our CEO and other executive officers, the design of performance goals pursuant to our 2015 incentive compensation program for our executive officers, and our Say-on-Pay Proposal. K&E also advises the Company regarding executive compensation matters, including executive compensation practices and contractual matters, as well as regarding our equity compensation plans and other executive and employee plans. The Compensation Committee considered independence factors under Dodd-Frank and NYSE rules and concluded that the work performed by Meridian and K&E did not give rise to any conflicts of interest.
The Compensation Committee met eight times during 2015.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis (“CD&A”) contained in this proxy statement with management. Based on the aforementioned review and discussion, the Compensation Committee has recommended to the Board, and the Board has approved, that the CD&A be included in the Company’s 2016 proxy statement for filing with the SEC.
Members during the year just concluded were: | |
Donald D. Snyder, Chair | |
Peter Arkley | |
Michael R. Klein |
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The Administrator may provide in any Award intended to qualify as a Section 162(m) Award that any evaluation of performance may include or exclude the impact, if any, on reported financial results of any of the following events that occurs during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) changes in tax laws, accounting principles or other laws or provisions, (d) reorganization or restructuring programs, (e) acquisitions or divestitures, (f) discontinued operations, (g) foreign exchange gains and losses, (h) gains and losses that are treated as extraordinary items under Accounting Standards Codification Topic 225, or (i) an event either not directly related to the operations of Tutor Perini or not within the reasonable control of Tutor Perini’s management. To the extent such inclusions or exclusions affect Awards to Covered Employees; they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.
The Administrator retains the discretion to adjust otherwise payable Section 162(m) Award downward, either on a formula or discretionary basis or any combination, as the Administrator determines, in its sole discretion. However, Administrator does not have the authority to adjust upward any otherwise payable Section 162(m) Award.
Performance goals may also be based on an individual participant’s performance goals, as determined by the Administrator, in its sole discretion.
Any Performance Goal may, as the Administrator, in its sole discretion deems appropriate, (i) relate to the performance of the Tutor Perini or any Subsidiary as a whole or any business unit or division of the Tutor Perini or any Subsidiary or any combination thereof, (ii) be compared to the performance of a group of comparator companies, or published or special index, (iii) be based on change in the applicable performance criteria over a specified period of time and such change may be measured based on an arithmetic change over the specified period (e.g., cumulative change or average change), or percentage change over the specified period (e.g., cumulative percentage change, average percentage change or compounded percentage change), (iv) relate to or be compared to one or more other performance criteria, or (v) any combination of the foregoing.
The Administrator is under no obligation to structure Awards granted under the Amended Plan to qualify as 162(m) Awards and has the express authority to grant Awards that do not qualify as 162(m) Awards. Additionally, there is no guarantee that an Award that is intended to qualify as a 162(m) Award will so qualify in any particular circumstance. To maintain flexibility in compensating our executives, the Administrator reserves the right to use its judgment to grant or approve Awards or compensation that is non-deductible when the Administrator believes such Awards or compensation is appropriate.
Shareholder approval of the Amended Plan will also constitute approval of the material terms of the performance criteria under the Amended Plan for purposes of establishing the specific vesting targets for one or more 162(m) Awards under the Amended Plan.
Tax WithholdingEXECUTIVE OFFICERS. Participants under the Amended Plan are responsible for the payment of any federal, state or local taxes that we are required by law to withhold upon any option exercise or vesting of other awards. Subject to approval by the Administrator, participants may elect to have the minimum tax withholding obligations satisfied either by authorizing us to withhold shares of Common Stock to be issued pursuant to an option exercise or other award, or by transferring to us shares of Common Stock having a value equal to the amount of such taxes.
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Adjustments for Stock Dividends, Mergers, etc. The Amended Plan authorizes the Administrator to make appropriate adjustments to the number of shares of Common Stock that are subject to the Amended Plan and to any outstanding stock options to reflect stock dividends, stock splits and similar events. In the event of certain transactions, such as a merger, consolidation, dissolution or liquidation of Tutor Perini, all stock options and stock appreciation rights will automatically become fully exercisable and the restrictions and conditions on all other stock based awards will automatically be deemed waived. In addition, upon the effective time of any such transaction, the Amended Plan and all awards will terminate unless the parties to the transaction, in their discretion, provide for appropriate substitutions or adjustments of outstanding stock options or other awards.
Amendments and Termination. The Board may at any time amend or discontinue the Amended Plan and the Administrator may at any time amend or cancel any outstanding award, but no such action shall adversely affect the rights under any outstanding awards without the holder’s consent subject to certain exceptions. These exceptions permit the Administrator to amend outstanding awards to adjust for the occurrence of certain unusual or non-recurring events and to conform to legal requirements without the written consent of the award recipient. . Any amendments that materially change the terms of the Amended Plan, including any amendments that increase the number of shares reserved for issuance under the Amended Plan, expand the type of awards available, materially expand the eligibility to participate or materially extend the term of the Amended Plan, or materially change the method of determining fair market value, will be subject to approval by our shareholders. To the extent required by the Code to ensure that options granted under the Amended Plan qualify as incentive options or that compensation earned under awards granted under the Amended Plan qualify as performance-based compensation under the Code, Amended Plan amendments shall be subject to approval by our shareholders.
Certain U.S. Federal Income Tax Consequences
The rules concerning the federal income tax consequences with respect to options granted and to be granted pursuant to the Amended Plan are quite technical. Moreover, the applicable statutory provisions are subject to change, as are their interpretations and applications, which may vary in individual circumstances. Therefore, the following is designed to provide a general understanding of the U.S. federal income tax consequences with respect to such grants. In addition, the following discussion does not set forth any gift, estate, social security or state or local tax consequences that may be applicable and is limited to the U.S. federal income tax consequences to individuals who are citizens or residents of the United States, other than those individuals who are taxed on a residence basis in a foreign country.
Incentive Stock Options. In general, an employee will not realize taxable income upon either the grant or the exercise of an incentive stock option and Tutor Perini will not realize an income tax deduction at either of such times. In general, however, for purposes of the alternative minimum tax, the excess of the fair market value of the shares of Common Stock acquired upon exercise of an incentive stock option (determined at the time of exercise) over the exercise price of the incentive stock option will be considered income. If the recipient was continuously employed from the date of grant until the date three months prior to the date of exercise and such recipient does not sell the shares of Common Stock received pursuant to the exercise of the incentive stock option within either (i) two years after the date of the grant of the incentive stock option, or (ii) one year after the date of exercise, a subsequent sale of such shares of Common Stock will result in long-term capital gain or loss to the recipient and will not result in a tax deduction to Tutor Perini.
If the recipient is not continuously employed from the date of grant until the date three months prior to the date of exercise or such recipient disposes of the shares of Common Stock acquired upon exercise of the incentive stock option within either of the time periods described in the immediately preceding paragraph, the recipient will generally realize as ordinary income an amount equal to the lesser of (i) the fair market value of such shares of Common Stock on the date of exercise over the exercise price, and (ii) the amount realized upon disposition over the exercise price. In such event, subject to the limitations under Sections 162(m) and 280G of the Internal Revenue Code (as described below), Tutor Perini generally will be entitled to an income tax deduction equal to the amount recognized as ordinary income. Any gain in excess of such amount realized by the recipient as ordinary income would be taxed at the rates applicable to short-term or long-term capital gains (depending on the holding period).
Nonqualified Stock Options. A recipient will not realize any taxable income upon the grant of a nonqualified stock option and Tutor Perini will not receive a deduction at the time of such grant unless such option has a readily ascertainable fair market value (as determined under applicable tax law) at the time of grant. Upon exercise of a nonqualified stock option, the recipient generally will realize ordinary income in an amount equal to the excess of the fair market value of the shares of Common Stock on the date of exercise over the exercise price. Upon a subsequent sale of such shares of Common Stock by the recipient, the recipient will recognize short-term or long-term capital gain or loss depending upon his or her holding period of such shares of Common Stock. Subject to the limitations under Sections 162(m) and 280G of the Internal Revenue Code (as described below), Tutor Perini will generally be allowed a deduction equal to the amount recognized by the recipient as ordinary income.
Certain Other Tax Issues. In addition to the matters described above, (i) any entitlement to a tax deduction on the part of Tutor Perini is subject to applicable federal tax rules (including, without limitation, Section 162(m) of the Internal Revenue Code regarding the $1,000,000 limitation on deductible compensation), (ii) the exercise of an incentive stock option may have implications in the computation of alternative minimum taxable income, (iii) certain awards under the Amended Plan may be subject to the requirements
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of Section 409A of the Internal Revenue Code (regarding nonqualified deferred compensation), and (iv) if the exercisability or vesting of any option is accelerated because of a change in control, such option (or a portion thereof), either alone or together with certain other payments, may constitute parachute payments under Section 280G of the Internal Revenue Code, which excess amounts may be subject to excise taxes. Officers and directors of Tutor Perini subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, may be subject to special tax rules regarding the income tax consequences concerning their options.
The Amended Plan is not subject to any of the requirements of the Employee Retirement Income Security Act of 1974, as amended. The Amended Plan is not, nor is it intended to be, qualified under Section 401(a) of the Internal Revenue Code.
Grants and Awards as of December 31, 2013
As of December 31, 2013, the following outstanding awards have been granted under the Current Plan to each of the executive officers named below, all current executive officers as a group, all non-employee directors as a group, and all other employees, respectively:
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| Stock Awards |
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| Price |
| Not Vested |
| at 12/31/13 | ||
Name |
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| ($/Share) |
| (#) |
| ($) | ||
Ronald N. Tutor |
| 675,000 |
| 14.35 |
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| 675,000 |
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| 17,752,500 |
Michael J. Kershaw |
| 15,000 |
| 11.31 |
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| 60,000 |
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| 1,578,000 |
Robert Band |
| — |
| — |
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Craig W. Shaw |
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| 15,000 |
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| 394,500 |
James A. Frost |
| 200,000 |
| 14.03 |
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| 200,000 |
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| 5,260,000 |
Total executive officers |
| 890,000 |
| 14.23 |
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| 950,000 |
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| 24,985,000 |
Non-employee directors |
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All other employees |
| 290,000 |
| 14.76 |
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| 479,168 |
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| 12,602,118 |
Total Outstanding |
| 1,180,000 |
| 14.36 |
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| 1,429,168 |
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| 37,587,118 |
Future Plan Awards. The terms and number of options or other awards to be granted in the future under the Amended Plan are to be determined in the discretion of the Compensation Committee. Since no such determinations regarding awards or grants have yet been made, the benefits or amounts that will be received by or allocated to the Company’s executive officers or other eligible employees or non-employee directors cannot be determined at this time.
As of September 24, 2014, the closing price on the New York Stock Exchange of the Company’s Common Stock was $28.00 per share.
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Equity Compensation Plan Information
The following table sets forth as of December 31, 2013, certain information related to the Company’s equity compensation plans.on our executive officers.
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Approved by Security Holders: |
| 3,414,168 |
| 17.30 |
| 330,286 |
2004 Stock Option and Incentive Plan |
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Equity Compensation Plans Not Approved by Security Holders |
| — |
| — |
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Total |
| 3,414,168 |
| 17.30 |
| 330,286 |
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Name |
| Position | ||
Ronald N. Tutor | 75 | Chairman of | ||
James A. Frost | 63 | President and Chief Operating Officer | ||
Michael J. Kershaw | 66 | Former Executive Vice President and Chief Financial Officer (through August 31, 2015) | ||
Gary G. Smalley | 57 | Executive Vice President and Chief Financial Officer (since September 1, 2015) | ||
Craig W. Shaw | 61 | Executive Vice President and CEO of the |
Supplemental Information on Equity Compensation Plan GrantsFor biographical summaries of Mr. Tutor and Mr. Frost, see Proposal 1 above.
Michael J. Kershaw served as Executive Vice President and Chief Financial Officer from September 2011 through August 2015. Previously, he served as Senior Vice President and Chief Accounting Officer of The Company manages equity awards to market competitive levels to ensure thatShaw Group, Inc., a global provider of technology, engineering, procurement, and construction services. Mr. Kershaw joined The Shaw Group in September 2007 as Senior Vice President and Corporate Controller. From 2005 until September 2007, he served as the overall compensation program attracts, retainsVice President of Accounting and motivates our employees. Burn rateFinance of the Energy and Chemicals Division of KBR, Inc., a global engineering, construction and services company. From 2003 until 2005, Mr. Kershaw served as Senior Controller for KBR, Inc. Mr. Kershaw holds a Master of Business Administration degree from Tulane University and a Bachelor of Science degree in Economics and Accounting from the University of Bristol in England. He is generally calculated as (a) all non-performance-based stock options, restricted stocka fellow of the Institute of Chartered Accountants in England and restricted stock units granted in a fiscal year, plus (b) actual performance-based stock options and shares vested in a fiscal year, divided by (c) the weighted-average common shares outstanding for that fiscal year.Wales.
The following table sets forth information regarding awards grantedGary G. Smalley has served as Executive Vice President and earned,Chief Financial Officer since September 2015. Previously, he served as Senior Vice President and Controller of Fluor Corporation (“Fluor”), a global engineering, procurement, fabrication and construction company, since March 2008 and, from October 2014 until July 2015, concurrently served as Group Chief Financial Officer for one of Fluor's business segments. Prior to these roles, Mr. Smalley was employed by Fluor as Vice President of Internal Audit from September 2002 to March 2008 and, since joining Fluor in 1991, held a variety of other financial management positions in Australia, Chile, Mexico and the burn rate for eachUnited States. Prior to joining Fluor, he held audit positions with Ernst & Young and J.P. Stevens and Company. Mr. Smalley holds a Bachelor of Science degree in Business Administration from the University of North Carolina at Chapel Hill and a Master of Business Administration degree from Northwestern University. He is a Certified Public Accountant, Certified Fraud Examiner and a Chartered Global Management Accountant.
Craig W. Shaw was appointed Executive Vice President and Chief Executive Officer of the last three fiscal years,Building Group in May 2013. Mr. Shaw was previously appointed in May 2007, and continues to serve, as President and Chief Executive Officer of Tutor Perini Building Corp., one of the average burn rate overbusiness units within the last three years. Building Group. Prior to that, he served in various project and executive management positions, including President, at Perini Building Company since joining the Company in 1978. Mr. Shaw holds a Bachelor of Science degree in Construction Engineering from Arizona State University.
Burn Rate
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Service-based stock options granted |
| 290,465 |
| 15,000 |
| — |
| 101,822 |
Actual performance-based stock options earned |
| 360,465 |
| 293,333 |
| 246,668 |
| 300,155 |
Service-based restricted stock and restricted stock units granted |
| 105,000 |
| 15,000 |
| 15,000 |
| 45,000 |
Actual performance-based restricted stock, restricted stock units and performance shares earned |
| 233,333 |
| 269,998 |
| 821,666 |
| 441,666 |
Weighted-average common shares outstanding |
| 47,225,704 |
| 47,469,536 |
| 47,851,082 |
| 47,515,441 |
Burn Rate |
| 2.09% |
| 1.25% |
| 2.26% |
| 1.87% |
Required Vote
The affirmative voteOur officers are elected on an annual basis at the Board of a majorityDirectors’ meeting immediately following the Annual Meeting of Shareholders, to hold such offices until the votesBoard of Directors’ meeting following the next Annual Meeting of Shareholders and until their respective successors have been duly cast is required to approve this Proposal 1.
THE TUTOR PERINI BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS SHAREHOLDERS VOTE “FOR” THE APPROVAL OF THE AMENDED AND RESTATED TUTOR PERINI CORPORATION LONG-TERM INCENTIVE PLAN.appointed or until their earlier resignation or removal.
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EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
Because we are soliciting shareholder approval of an amendment to an employee equity compensation plan in Proposal 1, SEC rules require us to include an “Executive Compensation” section in this proxy statement. Except for minor conforming changes and supplemental information provided on pages 20 and 24 regarding certain incentive compensation equity grants made in March 2014, the following section is identical to the Executive Compensation section that appeared in our proxy statement for our 2014 Annual Meeting of Shareholders held in May 2014. At our 2014 Annual Meeting of Shareholders, 44% of the votes cast by our shareholders supported the executive compensation of our named executive officers. As such, our shareholders by majority vote did not approve, on a non-binding advisory basis, of the executive compensation of our named executive officers. Tutor Perini continues its shareholder outreach program to seek feedback regarding our executive compensation policies in order to inform future executive compensation decisions.
Introduction
This discussionsection, Compensation Discussion and Analysis (“CD&A”), addresses executive compensation in 20132015 for our named executive officers (“NEOs”), who are:
· | Ronald N. Tutor – Chairman of the Board and Chief Executive Officer; |
· | Michael J. Kershaw – Former Executive Vice President and Chief Financial |
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· | James A. Frost – |
· | Craig W. Shaw – Executive Vice President and CEO of the Building Group. |
In this Compensation Discussion and Analysis ("CD&A"), we first provide a summaryTutor Perini’s core compensation philosophy is based on the concept of pay for performance. Accordingly, our executive compensation practices. Next, we discuss Tutor Perini's history, evolution,program is predicated on providing significant performance-based compensation to our NEOs, allowing them to earn amounts that are greater than their base salary if they achieve financial goals that the Compensation Committee and market position, as they factor into the Company’sBoard believe are critical to enhancing shareholder value. The following discussion will cover our executive compensation practices and the unique factors that play into these practices. We then provide an overview ofwill discuss our 20132015 business highlightsresults and discuss the resultsoutcome of the 20132015 advisory vote on our executive compensation and the various actions we have taken and changes made in response to the advisory vote results.both. Finally, we will discuss the Company’s compensation philosophy, including the process which the Compensation Committee follows in deciding how to compensate Tutor Perini'sour NEOs and provide an overview and details regarding the various elements of compensation and targets of Tutor Perini's compensation program.the NEOs compensation.
Tutor Perini’s core compensation philosophy is one of pay for performance whereby incentive compensation to our executive officers is based on the achievement of financial goals that the Compensation Committee and our Board believe are critical to enhancing shareholder value.
Executive Compensation Practices
Tutor Perini’s executive compensation programs areprogram is designed to reflect appropriate governance practices aligned with the needs of our business. Below is a summary of compensation practices we have implemented to drive performance in alignment with shareholder interests, followed by a list of those we do not practice.
1Mr. Kershaw served as Executive Vice President and Chief Financial Officer through August 31, 2015.
2Mr. Smalley commenced his employment with the Company as Executive Vice President and Chief Financial Officer on September 1, 2015.
3Mr. Frost was promoted to the position of President and Chief Operating Officer and appointed to the Company’s board of directors on February 12, 2015.
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What We Do: |
Pay-for-Performance Philosophy – The majority of executive compensation is performance-based and is tied to our financial performance. We utilize aggressive, but achievable performance targets to provide our executives strong incentives |
Ongoing Shareholder Outreach Program – We maintain an open and regular dialogue with our large institutional shareholders to |
Double-Trigger Equity Acceleration upon a Change-in-Control – |
Stock Ownership Policy – NEOs must acquire and hold Tutor Perini stock worth three to six times their base salary within five years of appointment. As of the most recent measurement date, all NEOs, |
Stock Retention Policy – NEOs, as well as |
Clawback Policy – NEOs are subject to a clawback policy that applies in the event of certain financial restatements. |
Mitigation of Undue Risk – Our compensation |
Independent Executive Compensation Consultant – The Compensation Committee worked with an independent executive compensation consultant on |
What We Don’t Do: |
No Excise Tax Gross-Ups Upon Change-in-Control – As of September 2013, the Company does not and will not provide any 280G excise tax gross-up benefits upon a change-in-control. |
No Repricing of Underwater Stock Options |
No Discounted Stock Option Grants |
No Permitted Hedging, Short Sales or Derivative Transactions in Company Stock |
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Tutor Perini’s History, Evolution, and Market Position FactorUnique Factors Play into our Executive Compensation Decisions and Practices
We believe it is helpful for shareholders to understand Tutor Perini’s unique history and evolution inOver the markets in which it competes, as it factors into the Company’s executive compensation views and practices. Tutor Perini was formed through the merger in 2008 between Perini Corp., a publicly held construction company based in Framingham, Massachusetts and Tutor-Saliba Corp. based in Sylmar, California. Prior to the merger, Mr. Tutor had been the owner, President and Chief Executive Officer of Tutor-Saliba for many years. In the late 1990s, the board of directors of Perini Corp. requested the assistance of Mr. Tutor in restructuring Perini Corp., which was then in extreme financial distress. Mr. Tutor became Perini’s Chairman and Chief Executive Officer. Through the late 1990s and into the mid-2000s, while continuing to successfully manage and grow his privately held company, Mr. Tutor was instrumental in successfully restructuring the Perini organization and returning it to financial health and improved operational performance. During this period, Mr. Tutor was compensated minimally for his efforts in assisting Perini. In fact, his level of compensation was insufficient to fully cover expenses incurred in his travels back and forth between his west coast business and east coast Perini. Mr. Tutor’s successful role in Perini’s corporate survival and return to prosperity was evidenced in 2005 when Forbes magazine named Perini Corp. to its list of the Best Managed Companies in America.
In 2007, when Mr. Tutor was contemplating an initial public offering for Tutor-Saliba, the board of Perini asked him to consider a merger between the two companies rather than a separate IPO. The rationale was that the two companies were highly complementary and together could address even larger, more complex projects than they could individually. Additionally, Mr. Tutor was already completely familiar with the operations, markets, and opportunities of both firms. Mr. Tutor agreed and the merger was completed in September 2008. The newly combined company changed its name to Tutor Perini Corporation in 2009.
Since the merger,past several years, Mr. Tutor has been the key driving force—both strategically and operationally—behind the Company’s growth and evolution into a stronger, vertically integrated and broader geographic player in the market. While the financial crisis in 2008 and the resultant recession created a significant negative impact on the traditional markets in which the Company competed, Mr. Tutor saw it as an opportunity to make a number ofThrough several strategic acquisitions which diversified our capabilities and helped us continue our growth despite the extremely weak building market environment in 2011 and 2012. Through these acquisitions and other strategicbusiness decisions, including a refocus led by Mr. Tutor from the Las Vegas market to the New York market, Mr. Tutor has transformed the Company has transformed from a firm primarily involved in lower-margin building work to one that today boasts a broad nationwide footprint with particular strength in the California, New York, Florida and east coastother East Coast markets. Our growth is now driven today by the largesta large volume of higher-margin civil and specialty contracting opportunities in decades. This shift and expansion is best illustrated by the change inan increasing volume of larger, complex building project opportunities. The Company’s uniquehistory and evolution has had a substantial impact on the Company’s backlogexecutive compensation views and operating income mix among our groups from 2007 (the year prior to the merger with Tutor-Saliba) to 2013 as shown in the charts below.
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practices.
Note: In 2007,Mr. Tutor’s value to the Civil Group had an operating loss of $13.0 millionCompany is significant. This factors in to the Compensation Committee’s decision-making process and thus was excluded fromplays strongly into the illustration above.
The success of our diversification and expansion efforts, andCompensation Committee’s views on the appropriateness of Mr. Tutor’s involvement in our bidding efforts, continues to be evidenced by the numerous new, large, complex contract awards received in 2013. See “2013 Business Highlights” on page 18. Mr. Tutor plays an important role in the review and approval process of bids for many of the Company’s larger prospective civil projects. Many of these contracts were won partly as a result of our integrated approach to bidding and executing large projects, which involves fully leveraging all of our civil, building, and specialty contracting capabilities.compensation.
At its core, Tutor Perini is a construction services company that competes with many other companies—both public and private—for projects and for executive talent. Our closest competitors for projects are primarily large privately held firms or U.S. subsidiaries of foreign parent firms, whose focus and revenues stem largely from construction services and less from providing design and engineering services. In contrast, the revenues of many of the larger publicly traded companies with which we sometimes compete are primarily consulting, design, architecture and engineering services, with some construction-related revenues. Our Board and executive management have found through various succession planning effortsendeavors that overall executive compensation levels at our privately held and U.S. subsidiary competitors tend to be higher compared with compensation levels at our publicly traded peers. While Mr. Tutor’s compensation is higher than the compensation levels of CEOs at several of the Company’s public peers, the Board believes it is lower thancomparable to the compensation levels of CEOs at our privately heldnon-public peers and significantly lower than it was at thenhis compensation under his predecessor company, privately held Tutor-Saliba.
The construction markets in which the Company operates are inherently cyclical and demand levels fluctuate significantly more than in the markets for consulting, engineering and design services. Throughout these cycles, we strive to ensure that our executive compensation programs remainprogram remains consistent with the competitive labor markets for executive talent, especially in comparison with the privately held and U.S. subsidiary peers with which we compete for projects and executive talent. The Compensation Committee considers, when available, private
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company compensation levels and construction market cyclicality and volatility as important factors when assessing and understanding the Company’s executive compensation programs.program.
It is also important
The success of our diversification and growth efforts continues to note thatbe evidenced by the compensation arrangements forvarious large contract awards received in 2015.See “2015 Business Results and Key Events” below. Mr. Tutor were negotiated in conjunction with the merger agreement and were necessary to secure his continued leadershipplays a vital role in the Company. In merging with Tutor-Salibareview and approval process of bids for many of the Company’s larger prospective projects. Mr. Tutor also plays an instrumental role in September 2008, we acquired enhanced opportunities for growth not availablenavigating and negotiating the legal processes related to the Company on a stand-alone basis through increased size, scalevarious disputes over our claims, unapproved change orders and management capabilities, complementary assets and expertise, immediate access to multiple geographic regions, and increased ability to compete for a large number of projects, particularly in the civil construction segment due to an increased bonding capacity. Mr. Tutor’s value to the Company, both current and prospective, is a significant factor in the Compensation Committee’s decision-making process and plays strongly into the Compensation Committee’s views on the appropriateness of Mr. Tutor’s compensation.other matters.
2013 was a year of solid growthResults and improved profitability for Tutor Perini. During the year, we continued leveraging our broad geographic reach and enhanced self-perform capabilities through our integrated approach to bidding and executing projects, and were rewarded by winning several new major projects, such as the $840 million San Francisco Central Subway project, our $511 million share of the joint venture California High-Speed Rail design-build project, the $510 million Hudson Yards platform project, our approximately $200 million share of a joint venture bridge superstructure project between Minnesota and Wisconsin, two Wisconsin highway construction contracts collectively valued at $191 million, a $143 million concrete package for the South Tower at Hudson Yards, the $133 million Amtrak Tunnel project at Hudson Yards, a $102 million bridge project in New York, and a $100 million bus station redevelopment project in New York. As a result of these and other new contract awards, we grew our backlog by 24% year-over-year to $7 billion – the highest level since 2008.Key Events
Overall, the CompanyBusiness Results
Our revenue grew its revenue by 2%10% to $4.9 billion in 20132015 compared to 2012.$4.5 billion in 2014. The revenue growth was driven by strong performance from our Civil and Building segments, the revenue of which increased by 20% and 12%, respectively, in 2015, supported by continued strong demand for new building and civil infrastructure, especially in the California, New York and Midwest markets. Our Specialty Contractors segment which grew its revenue by 8% year-over-year. The Company also experienced a significant improvementdeclined 6% in its operating income compared to 2012. The Civil segment typically generates the highest margins across our business. Our Building and Specialty Contractor segments’ revenues were stable compared to 2012. Our Management Services segment experienced a 16% revenue decline2015 due to reduced activity largely attributable to federal budgetary concernson electrical projects at the World Trade Center and sequestrationmechanical projects at the United Nations in 2013. Our operating marginNew York, as well as on various smaller electrical projects in the southern United States.
We faced a number of unique challenges in 2015 that prevented us from achieving our profit expectations for 2013 was 4.9% – the highest operating marginyear. Most significant of these were $45.6 million of pre-tax project charges recorded in the Specialty Contractors segment by our New York City electrical subsidiary, Five Star Electric (Five Star). We believe that certain management personnel changes at Five Star, together with detailed project claims reviews we perform, and our close ongoing coordination with the new Five Star management team, will result in better performance and accountability going forward at Five Star. Other issues that impacted us in 2015 included a $24.3 million pre-tax loss in the Building segment on the since 2010. This was driven, again, by strong performance from ourcompleted Tower C concrete superstructure project in New York and a $23.9 million pre-tax litigation-related charge in the Civil segment which delivered an operating marginpertaining to a long-standing lawsuit for a completed joint venture project that predated our 2011 acquisition of 12.5%Frontier-Kemper.
Predominantly as a result of these issues, our net income decreased to $45.3 million in 2015 compared to $107.9 million in 2014. Because the Company did not achieve its consolidated pre-tax income performance target, none of our NEOs earned or was paid his
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incentive compensation (bonus) award for the year, up more than 300 bps compared to its operating margin in 2012. Our Building segment recovered to a respectable operating margin of 1.6%except for the year, compared to a slight loss in 2012. Our Specialty Contractors segment finished 2013 with an operating margin of 4.1%, which was slightly below longer-term expectations due to unfavorable execution on certain projects and reduced activity in one of its business units. Our Management Services segment’s operating margin for the year was 6.0%, stable compared to 2012.
In addition, through a strong and dedicated focus on cash generation and management throughout 2013, we were successful in generating $50.7 million of cash from operating activities and $8.4 million in free cash for the year – a significant improvement compared to 2012, when we used $67.9 million of cash from operating activities and used $109.2 million of free cash.
As a result of the Company’s strong financial performance in 2013, all but one of our group NEOs achieved and was paidMr. Frost. The Compensation Committee deemed that Mr. Frost earned his incentive compensation award for 2015 based on his continued role and responsibilities as CEO of the year.Civil group, and the Civil group’s achievement of its pre-tax income performance target. For more information, see “Incentive Compensation Plan – Annual Awards” starting on page 2223.
Notably, Tutor Perini’s share price increased 92%Continued Strong End Market Demand across our Business
During 2015, we added approximately $4.6 billion of new awards and adjustments to existing contracts. These included various significant project awards, such as an $800 million technology research and development office facility project and $230 million of incremental funding for a biotechnology facility project, both in 2013 compared toCalifornia, a 23% increase$239 million hospitality building project in the NYSE Composite IndexPennsylvania, an $80 million mass-transit project in New York, highway projects in Delaware, Maryland and Pennsylvania valued at $70 million, $60 million and $58 million, respectively, and a 26% average increasetunnel extension project in New York worth $56 million.
We ended 2015 with a strong backlog of $7.5 billion, nearly two-thirds of which is associated with higher-margin civil and specialty projects. In addition, we had approximately $3.6 billion of pending awards at the share priceend of 2015, and we expect that many of these awards will be booked into backlog in 2016. Finally, the publicly traded companiesstrength of our end markets remains at elevated levels unseen in many years. We have approximately $35 billion of prospective projects to be bid and awarded over the Company’s 2013 Peer Group (seenext 12 to 18 months across all our segments, including $20 billion for the Civil segment, $12 billion for the Building segment and $3 billion for the Specialty Contractors segment.
Key Events
In July 2015, we announced the appointment of Gary G. Smalley as Executive Vice President and Chief Financial Officer to replace Michael J. Kershaw. Prior to commencing his employment with the Company on September 1, 2015, Mr. Smalley served in several executive and managerial positions with Fluor since 1991 (for his full biography, see page 2213). Mr. Kershaw continues to serve the Company in a limited capacity, providing consulting services and support for the list of these companies).certain special projects.
20132015 Advisory Vote on Executive Compensation
At our 20132015 Annual Meeting of Shareholders, we held38% of the votes cast by our third shareholdershareholders supported the executive compensation of our NEOs. Accordingly, our shareholders by majority vote did not approve, on a non-binding advisory vote onbasis, the executive compensation. We received 38% shareholder approvalcompensation of our NEOs. The Compensation Committee considered these results in assessing whether there was a need for modification or enhancement of our executive compensation program and plans. The Compensation Committee believes that our existing executive compensation program and plans properly encourage and programs. This vote representedreward the third consecutive yearachievement of financial results that promote long-term shareholder value creation. No new equity awards were approved in 2015 beyond those equity grants that had already been approved and awarded in prior years, with the exception of equity awarded to Mr. Frost in connection with his promotion to the position of President and Chief Operating Officer, which a majorityallows for annual grants in three tranches from 2015 through 2017, and to Mr. Smalley in connection with the commencement of his employment, which allows for annual grants in three tranches from 2016 through 2018. The Company continues its shareholder outreach program to solicit feedback and suggestions from our larger shareholders voted againstregarding our executive compensation program and plans, and programs. The Compensation Committee has taken into consideration these vote results in determining theorder to inform future executive compensation decisions and policies for 2013, and based on this consideration the Compensation Committee took the following actions: (i) continued conducting a shareholder outreach program and (ii) made important changes in our executive compensation programs and policies. Both of these actions are described in greater detail below.decisions.
Since 2012, we have conducted an ongoing shareholder outreach program to maintain discussionsan open and regular dialogue with and glean insights fromcertain of our largelarger shareholders to understand their views regarding our executive compensation programs, andprogram. Additionally, this outreach program is intended to provide insights to our shareholders regarding the Company’s unique evolution, history, and position in its industry, and the relative lack of comparability between Tutor Perini and
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other public companies in terms of its size, focus and operations. Our outreach program has included several productive discussions regarding certain policy changes the Company has implemented over the past couplefew years in light of its recent advisory votes on executive compensation. Most recently, we invited our top 1518 institutional shareholders, who collectively represented more than 50%55% of our outstanding shares, to a dialogue regarding their views, opinions, and proxy voting guidelines with respect to companies’ executive compensation programsprogram and disclosures. As a result of that outreach, wedisclosures, and held productive discussions with nineseveral of these shareholders who represented more than 30% of our shares. The discussionsas a result. Discussions with shareholders over the past few years have included topics such as CEO compensation, compensation disclosure, equity award vesting periods and performance-based vesting criteria and metrics, board and committee composition, share pledging, voting standards for director elections, talent management acquisitions, and succession planning. The participants of Tutor Perini’s shareholder outreach team have generally consisted of our Lead Director and Compensation Committee Chair, our Chief Financial Officer, and our Vice President of Investor Relations.Relations and, at times, our Lead Independent Director. The Compensation Committee intends to continue this outreach program going forward to facilitate continued shareholder input into the Company’s compensation philosophy.
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Summary of Recent Changes to Executive Compensation
The principal
As mentioned earlier, no changes were made in 2015 to our executive compensation programs made byprogram or policies. In addition, no new equity awards were approved in 2015 beyond those equity grants that had already been approved and awarded in prior years, with the exception of equity awarded to Mr. Frost in connection with his promotion to the position of President and Chief Operating Officer, which allows for annual grants in three tranches from 2015 through 2017, and to Mr. Smalley in connection with the commencement of his employment, which allows for annual grants in three tranches from 2016 through 2018. Prior to 2015, the Compensation Committee made certain changes and the Company followingimprovements to our 2013 Annual Meeting of Shareholdersexecutive compensation program, which are summarizeddetailed below. These changes were made based upon information and feedback gathered from our larger shareholders as part of our shareholder outreach program, our executive officers and Meridian Compensation Partners.Meridian. The Board and the Compensation Committee will continue to explore additional ways in whichto improve Tutor Perini's executive compensation programs can be improved.program.
Relative-Return-Based Performance Metric for Certain Long-Term Compensation Awards
In 2014, the Compensation Committee approved a new performance-based metric for the award of certain long-term equity incentives based upon the achievement of a 3-year Total Shareholder Return (TSR) relative to the Company’s disclosed peer group. This new relative-return-based metric was applied to two grants of performance shares to Mr. Tutor as part of the consideration for his amended and restated employment agreement, which extended his term with the Company through December 31, 2018 (for more details, see “Employment Agreements” on page 34). This new metric was implemented in response to requests by several of the Company’s largest shareholders for a relative performance metric to be used for long-term incentive compensation.
3-Year Cumulative EPS Metric for Long-Term Equity Compensation Awards
In response to feedback from shareholders during our outreach efforts regarding their preference for a different, longer-term performance metric than an annual pre-tax income metric, in March 2014, the Compensation Committee approved a new performance-based metric for the award of certain long-term equity incentives. The new metric was based upon the achievement of a forward 3-year cumulative consolidated amount of diluted earnings per share (EPS). For the initial measuring year (2014), the level of diluted EPS required to earn the equity bonus was linked to the Company’s announced 2014 EPS guidance. For each subsequent year, the target diluted EPS level is based on a pre-determined annual percentage increase over the prior year’s reported diluted EPS, as specified in each equity award agreement and subject to adjustment at the sole discretion of the Compensation Committee for the financial impact of significant one-time events that are not in the ordinary course of business (e.g., substantial settlements of prior-year claims). The pre-determined annual percentage increase is undisclosed and will not change during the performance period of each award.
Under the 3-year cumulative EPS performance metric, each of the awards shall be earned on a prorated basis to the following extent:
· | 50% of the award earned if 80% of the target is achieved |
· | 100% of the award earned if 100% of the target is achieved |
· | 150% of the award earned if 120% or more of the target is achieved |
Additional Incentive Compensation Performance Metric
ToIn alignment with shareholder focus and requests for improved cash generation, as discussed during our shareholder outreach program, and in an effort to increase theour internal focus on cash generation while continuing to reward the achievement of pre-tax income performance targets, in 2013 the Company implemented an additional incentive compensation (bonus) performance metric based on the Company’s quality of earnings. This new metric will applyapplies to our NEOskey business unit executives and tocertain other business unit employees who qualify for short-term (annual) incentive compensation. Historically, one of the significant components of the Company’s working capital and cash usage has been the financing of unapproved change orders and claims associated with various projects – projects—both those that are ongoing as well as those that have largely been completed. Given the fact that a significant component of our work is lump sum fixed price, it is important that the Company manages that financial risk by clearly identifying changes in scope and pursuing entitlement to financial recovery through contractual change order processes. While these unapproved change orders and claims are being negotiated and finalized, the Company bears the burden of funding the associated costs. By incorporating a performance metric related to the successful negotiation and resolution of unapproved change orders and claims, over time, the Company expects to strongly motivate NEOskey business unit executives and other key project executives to more efficiently manage working capital and accelerate cash generation.
The first step is to assess whether the Company, Group, and/or business unit has achieved its pre-tax income target for the period. If that target has been achieved, the second step will beis to assess the quality of earnings by measuring the percentage of pre-tax income associated with unapproved change orders and claims. If the Company’s, Group’s and/or business unit’s pre-tax income includes significant unapproved change orders and claims,
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then full payment of the bonus will not be made until either the change orders have been approved or the Company has successfully negotiated legally enforceable settlements.
New Criteria for Long-Term Equity Compensation Awards
In March 2014, the Compensation Committee approved a new policy and related criteria for the award of long-term equity incentives. This new policy was implemented in response to requests by several of the Company’s largest shareholders for a different performance metric than pre-tax income to be used for long-term incentive compensation. The new criterion is based upon the achievement of a forward 3-year cumulative consolidated amount of diluted earnings per share (EPS). For the initial measuring year (2014), the level of diluted EPS required to earn the equity bonus will be linked to the Company’s announced 2014 EPS guidance. In each successive year, the required diluted EPS level will be an amount reflecting a pre-determined percentage increase over the reported diluted EPS achieved in the prior year, subject to adjustment at the sole discretion of the Compensation Committee for the financial impact of significant one-time events that are not in the ordinary course of business (e.g., substantial settlements of prior-year claims).
Under the new policy, each of the awards shall be earned on a prorated basis to the following extent:
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At the same time this new policy was approved, the Compensation Committee approved certain long-term incentive awards recommended by the Chairman and CEO subject to the new policy criteria. These awards consisted of the following, which will vest in March 2017 subject to achievement of the new criteria described above:
Increased Rigor in Performance Goals Related to Long-Term Equity Incentive Compensation
Previously,Prior to November 2013, full payouts of long-term equity incentive compensation awards based on pre-tax income performance targets set annually by the Compensation Committee were tiedlinked to the achievement of a 70% threshold based on target pre-tax income performance goals, which are set annually byof the Compensation Committee. Iftarget. Accordingly, if the 70% threshold was achieved, 100% of the long-term equity incentive compensation award was earned and paid. In an effortNovember 2013, to increase the rigor in performance goals related to our long-term equity incentive compensation, beginning in November 2013, the Company began incorporating sliding-scale award payouts and, infor certain cases, a more rigorous (100%) threshold for the achievement and payout of such compensation.equity awards.
For example, Mr. Tutor’s November 2013 awardKey Policy Elements of 75,000 restricted stock units and 75,000 stock options are based on the achievement of between 70% and 100% of the Company’s 2014 target consolidated pre-tax income goal. Thus, if the Company achieves 70% of this goal in 2014, Mr. Tutor will earn and receive only 70% of the value of these awards, compared to previously having earned and received a full 100% of the value. These sliding-scale award payout provisions apply to the November 2013 incentive compensation awards granted to Messrs. Tutor, Shaw, and Kershaw, as detailed in “Long-Term Incentives” starting on page 23.
For Mr. Frost, his November 2013 award of 50,000 restricted stock units and 50,000 stock options is based on an even more rigorous performance threshold of 100% achievement of the Civil Group’s 2014 target pre-tax income goal. This higher performance threshold was implemented by theOur Executive Compensation Committee to increase the rigor in achieving a high level of performance in the Civil Group, which typically generates the Company’s highest margins.Program
The following are several key policy elements of Tutor Perini’s Executive Compensation program:
Excise Tax Gross-Up: As of September 2013, the Company has no agreements in place that would provide excise tax gross-ups to any NEO in the event of a termination following a change-in-control, and the Company will not enter into any new agreements that would provide such gross-ups.
Stock Ownership Policy: The Company maintains a stock ownership policy whereby the Chief Executive Officer and the Chief Executive Officer’s direct reports are expected to maintain stock ownership levels, dependent on their role.role, within five years of appointment. The Chief Executive Officer is subject to a guideline of six times base salary and executive officers that report directly to the Chief Executive Officer are subject to a guideline of three times base salary. As of the most recent measurement date, all NEOs, other than Mr. Smalley who joined the Company effective September 1, 2015, are in compliance with the policy. Mr. Smalley has until August 31, 2020 to acquire the necessary shares. In addition, the Company’s non-employee directors are expected to maintain stock ownership at a level representing at least five times the directors’ annual cash retainer by the later of fiscal year-end 2015 or five years from the date of their election to the Board. As of the most recent measurement date, all non-employee directors are in compliance with the policy, with the exception of Mr. Feltenstein, Mr. Lieber and Ms. Reiss, for whom compliance with the guidelines is not required until November 2018, August 2019, and May 2019, respectively, the five-year anniversary when each became a director.
Stock Retention Policy: The Company maintains a policy requiring the Chief Executive Officer and the Chief Executive Officer’s direct reports to maintain ownership of at least 75% of net shares earned through future equity grants until termination of employment.
Clawback Provision: The Company maintains a clawback policy whereby any future short- and long-term incentive awards are subject to a clawback provision allowing the Company to recoup any incentives earned based on financial information that is later restated, in specific circumstances.
Anti-Hedging Provision: The Company maintains an anti-hedging policy that prohibits executive officers from hedging their position relative to Company stock they own.
Double-Trigger Equity Awards: The Company requires that any new equity grants will have a “double-trigger,” effectively requiring a qualifying termination of employment within 24 months following a change in control for any vesting/payout to be accelerated.
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In addition to the changes to the executive compensation plansprogram and programsplans discussed above, the Compensation Committee continues to maintain and demonstrate a commitment to a pay-for-performance philosophy. All annual bonuses and equity awards are generally performance-based, with the exception of sign-on and promotional awards used to recruit and retain top talent.
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Compensation Philosophy
Our executive compensation plansprogram and programsplans are intended to:
· | Provide a competitive pay opportunity to attract and retain the most qualified executive officers and key management employees who have the ability to secure and successfully complete the most profitable projects. |
· | Provide total target compensation (i.e., the sum of base salary, target bonus opportunity and target long-term incentive opportunity) to our executive officers in or near the upper quartile of market pay particularly with respect to company peers and, in situations involving extraordinary performance and value to the Company, provide compensation to our executive officers that may reach toward the top end of the upper quartile of market pay at the Compensation Committee’s discretion. |
· | Provide an annual performance-based cash incentive (bonus) to each of our executive officers that is aligned with the Company’s project business cycle and strategic objectives. |
· | Provide an appropriate, but significant, mix of performance-based compensation to align our executive officers’ interests with the achievement of the Company’s operating and financial goals. |
In recognition of the cyclicality and variability of the construction industry, we believe that compensation focusing on both variable short-term and long-term corporate goals is appropriate for Tutor Perini and our shareholders. This incentive approach also provides greater rewards for higher performance and has been effective in retaining and motivating our highest-performing key executive talent. As a result, our compensation practices for our NEOs have a significant focus on annual “variable pay” incentive awards. Long-term incentive awards have periodically been granted to select executives when the Compensation Committee has determined an award to be appropriate based upon Company strategic goals, superior performance and upon the perceived value of the executive to the Company.
The Compensation Committee is guided by the above philosophy when making compensation decisions. The Compensation Committee periodically reviews public and, when available, private company market data and evaluates each executive officer’s performance and value to Tutor Perini, balanced with providing a competitive pay package to encourage attraction and retention. Lastly, the Compensation Committee considers ways to appropriately focus the efforts of its executives on achieving Tutor Perini’s overall corporate goals and business strategies.
We believe that the results of the Company’s 20132015 compensation plan reflect the Company’s pay-for-performance philosophy and alignment of its compensation philosophy with shareholder value creation given the variable industry in which we operate. Mr. Tutor’s amended employment agreement sets his target incentive cash bonus compensation at 60% of total target cash compensation (i.e., the sum of base salary and target annual bonus opportunity). Target incentive cash bonus compensation for our other executive officers has historically been set at 40-50% of total target cash compensation (depending upon the position). Additionally, with the exceptions of a restricted stock unit and stock option award granted to Mr. Kershaw in 2011 and 2012 that will vest in 2014 and 2016, all of our periodic equity grants to our executive officers during the past five years have been performance-based. performance-based with the exception of restricted stock unit awards and a stock option award granted to Mr. Kershaw in 2011 and 2012.
OurThe Compensation Committee strives to establish aggressive, but achievable financial goals that motivate our NEOs to attain the levels of prospective work required to grow our business segments and to effectively manage the execution of our current projects to ensure we achieve maximum profitability. For example,profitability, while appropriately managing risk.
Because the Company did not achieve its 2015 consolidated pre-tax income performance target, establishednone of our NEOs earned or was paid a bonus, with the exception of Mr. Frost, who was deemed to have earned his bonus based on his continued role as CEO of the Civil Group and based on the Civil Group’s achievement of its performance target. Additionally, substantial long-term incentive equity awards that were granted to Mr. Tutor and Mr. Frost in March 2015 were forfeited in December 2015 because the Company did not achieve the performance threshold required for 2013 represented a 13% growth inthose grants to vest (see page 28). These outcomes illustrate the effectiveness of the Company’s diluted earnings per share compared to 2012 (calculated on a non-GAAP basis). The non-GAAP adjustments to the 2012 diluted earnings per share included a $376.6 million goodwill and intangible asset impairment charge which the Company recognized in the second quarter of 2012, a related $50.2 million tax benefit, a $2.7 million realized loss on the sale of certain auction rate securities and $3.6 million in discrete tax adjustments, and a $3 million (after-tax) litigation charge related to an adverse jury verdict. pay-for-performance philosophy.
Decision-Making Process
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Setting Our Executive Compensation
To execute the executive compensation strategy, the Compensation Committee works with management to determine compensation for the NEOs. The Compensation Committee believes that the CEO is best positioned to evaluate the performance of our other NEOs. Accordingly, the Compensation Committee works closely with Mr. Tutor in establishing the compensation of our NEOs, excluding himself.other NEOs. The CEO reviews performance of the executive officers and based on his assessment makes recommendations to the Compensation Committee for approval.approval, based on these parameters: base salary and the opportunity, metrics and targets of our annual cash incentive compensation and our long-term equity awards. The Compensation Committee also reviews the CEO’s performance and, based on his
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performance, makes pay recommendations regarding CEO compensation to the Board for approval. Additionally, the Compensation Committee reviews available competitive external market data. As part of this process, the Compensation Committee receives independent advice and recommendations, as needed, from Meridian, which serves as the Compensation Committee’s executive compensation consultant.
The Compensation Committee annually reviews base salary, annual incentive compensation opportunities and long-term equity target values for executive officers for the current year and assesses this data in relation to market data for the Company’s peer group. Taking into account the Company’s long-term strategy and annual business plan, the Compensation Committee, at its regularly scheduled March meeting, reviews and approves the annual incentive compensation performance targets, as well as our long-term equity award performance targets for awards granted in that year to executive officers. The Compensation Committee, also at its regularly scheduled March meeting, reviews performance against the plan provisions and associated expense implications of the annual incentive compensation amounts earned for the previous year, retaining discretion as to the final incentive compensation for subsequent approval. The Compensation Committee may set salary and grant cash incentive awards and equity awards for executive officers at other times to reflect promotions, new hires or other special circumstances.
Our Compensation Targets
We do not target a specific mix of pay for our executive officers. We set base salary, annual incentive and long-term incentive compensation opportunities and target total compensation annually, in light of our evaluation of competitive market factors. Concurrent with that process, we review pay levels for comparator company executives, and each executive officer’s performance and experience. This process provides guideposts for establishing the mix of pay for our executives, in terms of short-term versus long-term compensation and in terms of cash versus equity compensation. As reflected in the following charts, long-term incentive compensation, which we typically grant in the form of performance-based equity awards, made up more than 56% of target total compensation for our CEO and more than 40% (on average) for our other NEOs in 2015. Overall performance-based incentive compensation (annual and long-term combined) made up more than 82% of our CEO’s target total compensation and more than 70% (on average) for our other NEOs in 2015. These significant percentages of pay “at risk” reinforce the alignment of our executive officers with our shareholders.
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We calculate target total compensation (base salary plus target annual incentives plus target annual long-term incentive value) for each of our executive officers to confirm that it is appropriate for the position and make adjustments where appropriate. We target executive officers’ total compensation to be highly competitive (generally in or near the upper quartile of total pay) relative to our comparator companies. Executive officers then have the potential through incentive compensation to earn actual total compensation at a level that can be well above or below the peer group median, depending upon performance. See page 26 for a summary of how our actual total compensation in 2015 compares to targeted parameters.
According to data provided by Equilar, a leading provider of executive compensation data, target total compensation for most of our NEOs for 2015 was below the median percentile on average, which reflects relatively low compensation for our NEOs in a year in which the Company did not achieve its performance targets. An individual executive’s salary, annual incentive opportunity and long-term incentive opportunity may be higher or lower relative to the competitive market depending on a variety of factors specific to the position or the incumbent.
In the second half of 2012, theThe Compensation Committee undertook a peer group review with the aim of optimizingreviews the Company’s peer group on an annual basis to ensure that it continues to be valid for benchmarkinganalyzing and determining executive compensation in 2013.for the Company. The Peer Grouppeer group companies were selected based on various criteria considered by the Compensation Committee including industry, revenue and market capitalization size, and location.capitalization. As a result of this peer group review and evaluation, the Compensation Committee selectedapproved the 2013 Peer Group shown below to be used inCompany’s 2015 peer group for its assessment of the Company’s executive compensation in 2013 and for2015. This peer group (“2015 Peer Group”) is identical to the foreseeable future. Thispreviously used 2014 peer group, with the exception of three companies that were removed from the 2014 peer group because they have been acquired or have split into separate public companies. The 2015 Peer Group represents a current and accurate list of the public and private companies with which Tutor Perini competes for projects as well as forand/or executive talent and, unlike the previous peer group which the Company used from 2010 through 2012, the 2013 Peer Group does not include companies that are outside the Engineering and Construction industry with which we compete neither for projects nor for talent. The Compensation Committee utilizes thisutilized compensation data for the subset of 12 public companies in the 2015 Peer Group to assess the relative competitiveness of the compensation for the Company’s NEOs.NEOs in 2015 by reviewing market information on the 2015 Peer Group NEOs’ base salaries, annual cash incentive compensation and long-term incentive compensation.
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The following table shows the companies included in the 2013Company’s 2015 Peer Group:
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AECOM |
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| Kiewit Corp.* |
Chicago Bridge & Iron Co. | McDermott International, Inc. |
Dycom Industries, Inc. | Parsons Corp.* |
EMCOR Group, Inc. | PCL Constructors, Inc.* |
Flatiron Construction Corp.* | Quanta Services, Inc. |
Fluor | Skanska USA (part of Skanska AB) |
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Granite Construction, Inc. |
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Henkels & McCoy, Inc.* |
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Jacobs Engineering Group, Inc. |
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KBR, Inc. |
* PrivatelyNot a U.S. publicly traded company (i.e., either privately held peeror a U.S. subsidiary of a foreign parent company)
Elements of Compensation
Our executive compensation program relies on annual cash and stock basedshare-based compensation to retain and motivate our NEOs. In addition, the Compensation Committee has granted stock basedshare-based long-term incentive awards when deemed appropriate by the Compensation Committee, based on strategic goals, superior performance and value of the executive to the Company.
Base Salary
We provide market-competitive base salaries to fairly compensate our NEOs for the services that they provide during the year and to assist in retaining our NEOs. No changes wereThe only change made in 20132015 to the base salaries of any of our NEOs.NEOs was for Mr. Tutor’sFrost, who, in February 2015 received a 25% increase in base salary has not been increased since he entered into(from $800,000 to $1,000,0000) concurrent with his employment agreement in 2008,promotion to the role of President and Mr. Band’s base salary has not been increased since 2008.Chief Operating Officer.
Incentive Compensation Plan—Plan - Annual Awards
The Compensation Committee believes that providing meaningful cash-based incentives provides executives with a focus to achieve the Company’s strategic goals. To provide appropriate incentives to our current NEOs, between 40% and 50% to 60% (depending upon theon position) of their target annual cash compensation is comprised of an annual incentive bonus opportunity that is paid only if Tutor Perini achieves pre-established performance goals set by the Compensation Committee.
For the CEO, according to the terms of his employment agreement, Mr. Tutor’s target annual bonus opportunity represented approximately 60% of his total target annual cash compensation.
For 2013,2015, the Compensation Committee established a target annual bonus opportunity for each NEO, stated as a percentage of each NEO’s base salary. The annual bonus was only payable if Tutor Perini achieved financial performance goals established at the beginning of the performance period by the Compensation Committee. For 2013,2015, if Tutor Perini achieved 80% of the target goal (the “Threshold” as shown in the table below), each NEO would receive 80% of his target annual bonus amount.amount, except for Mr. Tutor, who would receive 100% of base salary as annual bonus. If Tutor Perini achieved between 80% and 100% of this goal, each NEO
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would receive between 80% and 100% of his target annual bonus amount.amount, except for Mr. Tutor, who would receive between 100% and 150% of base salary as annual bonus. With the exception of Mr. Tutor, each NEO’s annual bonus was capped at 100% of his applicable target bonus. Mr. Tutor can earn an annual bonus of up to 215% of his base salary if the Company achieves 120% or more of the target goal. Mr. Smalley’s bonus opportunity for 2015 was prorated based on his September 1, 2015 employment date.
The table below shows the threshold, target and maximum bonus opportunities as a percentage of the executive’s base salary:
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| Threshold |
| Target |
| Maximum | Threshold |
| Target |
| Maximum | ||||||
R. Tutor |
| 100 | % |
| 150 | % |
| 215 | % | 100 | % |
| 150 | % |
| 215 | % |
M. Kershaw |
| 60 | % |
| 75 | % |
| 75 | % | 80 | % |
| 100 | % |
| 100 | % |
R. Band |
| 80 | % |
| 100 | % |
| 100 | % | ||||||||
G. Smalley | 80 | % |
| 100 | % |
| 100 | % | |||||||||
J. Frost |
| 80 | % |
| 100 | % |
| 100 | % | 80 | % |
| 100 | % |
| 100 | % |
C. Shaw |
| 80 | % |
| 100 | % |
| 100 | % | 80 | % |
| 100 | % |
| 100 | % |
The dollar amounts corresponding to these percentages are included in the table captioned “Grants of Plan-Based Awards Table” on page 2831.
For 2013,2015, the Compensation Committee selected pre-tax income as the applicable performance metric for the annual bonus plan. The rationale for using pre-tax income centers upon the fact that operating results in the construction industry are project-driven, and as a
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result there may be fluctuations in earnings depending upon the cycle and mix of projects. However, the common goal in managing the Company’s operations is the maximization of pre-tax income, which best aligns with the goal of shareholder value creation. Furthermore, the Compensation Committee believes that a focus on pre-tax income maximization encourages executives to both obtain new projects for Tutor Perini and to complete Tutor Perini’s projects on a cost efficient basis. The applicable targets set by the Compensation Committee and the actual performance as calculated based on the plan formula for 20132015 were as follows:
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| Target Amount |
| 2013 Results (a) |
| Achievement | |
(Dollars in thousands) |
| ($) |
| ($) |
| (%) | |
Consolidated |
| 148,000 |
| 153,000 |
| 103 | % |
Civil Group |
| 120,000 |
| 149,000 |
| 124 | % |
Building Group |
| 22,000 |
| 30,000 |
| 136 | % |
Management Services Group – excludes certain subsidiaries |
| 5,000 |
| 700 |
| 14 | % |
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| Target Amount |
| 2015 Results (1) |
| Achievement | |
(Dollars in thousands) |
| ($) |
| ($) |
| (%) | |
Consolidated (applicable to Messrs. Tutor, Kershaw and Smalley) |
| 184,200 |
| 101,413 |
| 55.1 | % |
Civil Group (applicable to Mr. Frost) |
| 166,600 |
| 167,087 |
| 100.3 | % |
Building Group - excluding one business unit (applicable to Mr. Shaw) |
| 24,000 |
| (929) |
| (3.9) | % |
| Amounts |
Annual Incentive Compensation – Cash Payouts for 2015 Performance
The table below shows the actual incentive compensation (bonus) payouts for our NEOs based on their 2015 performance relative to the above-referenced targets. As previously mentioned, none of our NEOs, except for Mr. Frost, was paid his bonus for 2015 because the applicable performance goals were not achieved. Mr. Frost did earn and was paid his bonus for 2015 because the Civil Group, for which he was directly responsible in 2015, achieved its performance target.
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| Payout for | |||
Named Executive Officer |
| Target Opportunity |
| Achievement |
| 2015 Performance | |||
R. Tutor |
| $ | 2,625,000 |
| 55.1 | % |
| $ | — |
M. Kershaw |
| $ | 600,000 |
| 55.1 | % |
| $ | — |
G. Smalley (since September 1, 2015) |
| $ | 233,333 |
| 55.1 | % |
| $ | — |
J. Frost |
| $ | 975,000 |
| 100.3 | % |
| $ | 975,000 (max.) |
C. Shaw |
| $ | 650,024 |
| (3.9) | % |
| $ | — |
Mr. Tutor’s, Mr. Kershaw’s and Mr. Kershaw’s 2013Smalley’s 2015 annual bonuses were based solely on the achievement of the consolidated pre-tax income target. Mr. Frost’s annual bonus was based on the achievement of the Civil Group target, and Mr. Shaw’s annual bonus was based on the achievement of the Building Group target.
Succession Planning Implementation Bonus
During 2015, Mr. Band did not earnTutor was paid in two separate tranches a combined $3.75 million portion of his annual$5 million succession plan implementation bonus. The $5 million succession plan implementation bonus becausewas approved in December 2014 by the Management Services Group did not achieve its pre-tax income target. Importantly, there were no discretionary bonuses paidCompensation Committee as part of Mr. Tutor’s amended employment agreement.
Sign-on and Relocation-Related Bonuses
In addition to any NEOthe performance-based awards discussed above, the Compensation Committee approved a $250,000 signing bonus for 2013 performance.Mr. Smalley in September 2015 for his appointment to the role of Executive Vice President and Chief Financial Officer and to compensate him for incentives foregone from his previous employment by assuming this role for the Company. The Compensation Committee also approved a $700,000 special bonus for relocation-related payments to Mr. Smalley related to his move from Texas to California.
Periodic non-annual grantsawards of long-term incentives have played a significant role in our executive compensation program because of our long heldlong-held belief that due to the cyclical nature of our business, year-to-year annual incentives better focus our executives on achieving Tutor Perini’s quickly moving performance objectives. Historically, the Compensation Committee has made periodic equity grantsawards to select key executives based upon Company strategic goals, executive performance and upon the value of the executive to the Company. Not all executives receive equity grants. awards. During 2015, only Mr. Tutor and Mr. Frost were granted equity awards. However, all of the equity awards granted to Mr. Tutor and Mr. Frost in 2015 were forfeited in December 2015 because the Company did not achieve the threshold consolidated performance target required for those equity awards to vest.
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The Compensation Committee has historically used pre-tax income as the annual performance goal for performance-based equity awards and, as mentioned above, the rationale for using pre-tax income centers upon the fact that operating results in the construction industry are project-driven, and as a result there may be fluctuations in earnings depending upon the cycle and mix of projects. The common goal in managing the Company’s operations is the maximization of pre-tax income, which best aligns with the goal of shareholder value creation. As mentioned above, the Compensation Committee believes that a focus on pre-tax income maximization encourages executives to both obtain new projects for Tutor Perini and to complete Tutor Perini’s projects on a cost-efficient basis. Typically, equity is awarded to certain executives subject to the achievement of annual performance measures. Consistent with prior years,Accordingly, the Compensation Committee selected pre-tax income as the performance measure for 2013. As previously mentioned, the Compensation Committee has recently implemented new criteria for long-term equity compensation awards and increased the rigorgranted in the performance goals tied to these awards. See “Summary of Changes to Executive Compensation” starting on page 19.
However, in response to requests by several of the Company’s largest shareholders for a different performance metric than pre-tax income to be used for long-term incentive compensation, in March 2014, the Compensation Committee approved a new policy and
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related criteria for the award of long-term equity incentives. The new criterion is based upon the achievement of a forward 3-year cumulative consolidated amount of diluted earnings per share (EPS). See page 19 for further detail on the new policy.2015.
Equity Grants Made to Mr. Tutor in 2015
Under the terms of Mr. Tutor’s 20092012 equity award agreement, as amended, in March 2015 the Company granted to Mr. Tutor in 2013, 150,000 restricted stock units and 150,000 stock options that will vest subject to the achievement of 2014 pre-tax income performance set by the Compensation Committee.
In November 2013, the Company awarded to Mr. Tutor 75,000 restricted stock units and 75,000 stock options subject to the achievement, on a sliding-scale basis, as previously mentioned, of a 2014 annual financial goal for the Company. This financial goal was set by the Compensation Committee in March of 2014 and, as such, these awards are considered “granted” from an accounting perspective in 2014, as opposed to in 2013. For this reason, these grants are not listed in the Grants of Plan-Based Awards Table on page 28. They will, however, be reported in the Grants of Plan-Based Awards Table in our 2015 proxy statement. The Compensation Committee considered these awards to be a consistent incentive with Mr. Tutor’s previous awards and an important step to assure that Mr. Tutor remains committed to serving the Company through the continued execution of our strategic goals including the vertical integration of our recent acquisitions and our focus on acquiring higher margin, large complex public works projects.
As mentioned on page 20, in March 2014, the Company awarded to Mr. Tutor 150,000 restricted stock units (RSUs) and 150,000 stock options, subject to the achievementvesting of a forward 3-year cumulative EPS goal which was based on achieving a consolidated 2015 pre-tax income performance target set by the Compensation Committee atCommittee. As previously mentioned, all of these RSUs and stock options were forfeited in December 2015 because the time of award. The Compensation Committee considered these awards, as well as the awards made concurrently to Messrs. Frost, Kershaw, and Shaw, consistent with its plan to include, per our shareholders’ request, a new and different performance metric than pre-tax income to be used for long-term incentive compensation.target was not achieved.
Equity Grants Made to Mr. Frost in 2015
In November 2013,March 2015, the Company awarded and granted to Mr. Frost 100,000 RSUs and 100,000 stock options, the vesting of which was based on achieving a consolidated 2015 pre-tax income performance target set by the Compensation Committee approved a performance-based awardCommittee. As mentioned above, all of 50,000 restrictedthese RSUs and stock unitsoptions were forfeited in December 2015 because the performance target was not achieved.
Equity Awards Made to Mr. Smalley in 2015
In September 2015, the Company awarded 45,000 RSUs and 50,00045,000 stock options to Mr. Frost thatSmalley in connection with the commencement of his employment, which will vest subject to a 100% achievement of a 2014 Civil Group pre-tax income target, which was setbe granted in November 2013.
As mentioned on page 20, in March 2014, the Company awarded to Mr. Frost 100,000 restricted stock units and 100,000 stock options subject to the achievement of a forward 3-year cumulative EPS goal which was set by the Compensation Committee at the time of award.tranches from 2016 through 2018.
Equity Grants Made to Mr. KershawCompensation Plan Information for 2015
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| Number of securities |
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| to be issued upon |
| Weighted-average |
| Remaining securities | |
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| exercise of outstanding |
| exercise price |
| available to be awarded | |
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| stock options and restricted |
| of outstanding |
| under share-based | |
Plan Category |
| stock units |
| stock options |
| compensation plan | |
Equity Compensation Plans Approved by Security Holders: |
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Amended and Restated Tutor Perini Corporation Long-Term Incentive Plan |
| 2,723,597 |
| $ | 19.62 |
| 489,022 |
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Equity Compensation Plans Not Approved by Security Holders |
| — |
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| — |
| — |
Total |
| 2,723,597 |
| $ | 19.62 |
| 489,022 |
In November 2013, the Compensation Committee approved a performance-based award of 15,000 restricted stock units to Mr. Kershaw that will vest subject to the achievement, on a sliding-scale basis, as previously mentioned, of a 2014 annual financial goal for the Company. This financial goal was set in March 2014 and, as such, this award is considered “granted” from an accounting perspective in 2014, as opposed to in 2013. For this reason, this grant is not listed in the Grants of Plan-Based Awards Table on page 28. It will, however, be reported in the Grants of Plan-Based Awards Table in our 2015 proxy statement.
As mentioned on page 20, in March 2014, the Company awarded to Mr. Kershaw 30,000 restricted stock units subject to the achievement of a forward 3-year cumulative EPS goal which was set by the Compensation Committee at the time of award.
Equity Grants Made to Mr. Shaw
In November 2013, the Compensation Committee approved a performance-based award of 15,000 restricted stock units to Mr. Shaw that will vest subject to the achievement, on a sliding-scale basis, as previously mentioned, of a 2014 Building Group pre-tax income target. This financial goal was set in March 2014 and, as such, this award is considered “granted” from an accounting perspective in 2014, as opposed to in 2013. For this reason, this grant is not listed in the Grants of Plan-Based Awards Table on page 28. It will, however, be reported in the Grants of Plan-Based Awards Table in our 2015 proxy statement.
As mentioned on page 20, in March 2014, the Company awarded to Mr. Shaw 30,000 restricted stock units subject to the achievement of a forward 3-year cumulative EPS goal which was set by the Compensation Committee at the time of award.
Retirement Benefits
Tutor Perini does not provide additional retirement benefits to executive officers beyond what is offered to all employees.
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Perquisites
We provide certain perquisites to our executives because of the demand in time and travel, as well as security and productivity factors, required in their leadership across multiple businesses in multiple geographicalgeographic locations. We only provide these perquisites where we feel there is a business need. The perquisites afforded to each of our NEOs include vehicle usage and allowances, insurance policy coverage, relocation expense reimbursement and housing allowance during a period of relocation.
Mr. Tutor continues to beis entitled to 150 hours of flyingflight time per calendar year offor personal use of Tutor Perini’s business jet.aircraft. This benefit was originally negotiated during the merger with Tutor-Saliba, which resulted inTutor-Saliba. This perquisite was extended under the Company purchasing its business jet at an approximate $30 million discount from its appraised value.terms of Mr. Tutor’s amended employment agreement (see page 34). For safety reasons, productivity maximization and cost control, the Company continues to providealso provides Mr. Tutor with a vehicle and driver and reimburses Mr. Tutor for certain operational costs.
The Company also provides Mr. Tutor with additional life insurance coverage that can be purchased for an annual premium not to exceed $160,000. Additionally, the Compensation Committee
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has approved to provide limited personal financial services for Mr. Tutor as long as he uses Company resources and no outside expenses are incurred.
How Actual Total Compensation Compares to Targeted Parameters
The following table shows how 2015 total compensation for our NEOs compares to our targeted parameters. As a reminder, we target our executive officers’ total compensation to be highly competitive (generally in or near the upper quartile of total pay) relative to the comparator companies in our peer group, and, in situations involving extraordinary performance and value to the Company, provide compensation to our executive officers that may reach toward the top end of the upper quartile of market pay. Most of our NEOs earned substantially less than they were eligible to earn during 2015, which reflects the impact that our pay-for-performance compensation philosophy had in a year in which, due to the Company’s failure to achieve certain performance goals, no NEO except for Mr. Frost achieved his annual bonus, and significant performance-based equity grants made to Mr. Tutor and Mr. Frost were forfeited at the end of 2015.
Named Executive Officer (1) | 2015 Total Compensation | Result vs. 2015 Peer Group | |||
R. Tutor | $ | 12,053,561 | Below the 90th percentile (2) | ||
M. Kershaw | $ | 636,220 | Below the 10th percentile | ||
J. Frost | $ | 5,453,825 | Below the 50th percentile (2) | ||
C. Shaw | $ | 559,756 | Below the 10th percentile |
(1) | Mr. Smalley was not included in the table above because of partial-year total compensation based on his employment on September 1, 2015. He will be included in this table beginning in the 2017 proxy statement. |
(2) | Importantly, excluding the value of forfeited equity grants, Mr. Tutor’s realizable 2015 total compensation was $6,409,620 (at approximately the 50th percentile) and Mr. Frost’s realizable 2015 total compensation was $2,121,627 (below the 10th percentile). |
Severance Benefits
As of December 31, 2013,2015, Mr. Tutor and Mr. Frost are eligible for severance benefits beyond what is afforded to all employees. The Compensation Committee determined their benefits in accordance with their respective employment agreements. Mr. Tutor and Mr. Frost would each receive certain compensation in the event of termination by the Company without “Cause” or if either of them terminates his employment for “Good Reason”.Reason.” We have provided these severance benefits to retain Mr. Tutor and Mr. Frost giving consideration to their years of service and dedication to the Company. These severance benefits also provide Mr. Tutor and Mr. Frost an incentive to remain with the Company in the event of a change in control in order to obtain the best terms for the shareholders of the Company and to reduce their concerns regarding future employment following a change in control. For more information, see “Termination Benefits – Potential Payments Upon Termination or Change in Control” starting on page 3134.
Employment Agreements
In September 2008, the Company entered into an employment agreement with Mr. Tutor to have him serve as the Chairman of the Board and Chief Executive Officer of the Company. Through this agreement, the Company has retained Mr. Tutor’s extraordinary leadership and management capabilities, which are important forto the growth of the Company going forward.Company. A revised and amended employment agreement was negotiated in June 2012.2012, and a second revised and amended employment agreement was negotiated in December 2014. For a description of material terms of Mr. Tutor’s employment agreement, see pages 3134 through 3336.
In March 2011, the Company entered into an employment agreement with Mr. Frost to have him serve as Executive Vice President and Chief Executive Officer of the Civil Group of the Company. For a description of material terms of Mr. Frost’s employment agreement, see pages 3336 through 3438. The Company is currently in the process of negotiating with Mr. Frost a revised and amended employment agreement based on his promotion in February 2015 to the position of President and Chief Operating Officer.
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Impact of Accounting and Tax Treatment
We believe that the primary goals of our executive compensation program are to attract and retain valued and important NEOs, to clearly identify for our NEOs the corporate goals and objectives important to Tutor Perini, to motivate our NEOs to achieve these goals and to fairly reward our NEOs for achieving these goals. Accordingly, the accounting and tax treatment of our executive compensation program, while important, is not a determining factor in structuring our program. We appropriately account for our executive compensation and, to the extent consonant with the goals of our executive compensation program, we attempt to structure our executive compensation program to preserve the deductibility of amounts paid to our NEOs. In certain instances, however, we believe that it is in our best interest and that of our shareholders, to have the flexibility to pay compensation to our NEOs that is not tax deductible in order to provide a compensation package consistent with our objectives.
Compensation Program Risk Assessment
Management and the Compensation Committee reviewed the Company’s incentive compensation plans and programs and concluded that the plans and programs do not create risks that are reasonably likely to have a materially adverse effect on the Company. The review identified several risk mitigating factors, such as capped incentive payouts, clawback provisions, and independent Compensation Committee oversight of plans and programs.compensation plans. Additionally, the review identified a clearly articulated philosophy and peer group, use of competitive market data, and an effective use of cash and strategic equity grants which all contribute to a balanced pay program.
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Summary Compensation Table
The table below summarizes the total compensation paid to or earned by each of our NEOs for the fiscal years ended December 31, 2013, December 31, 20122015, 2014 and December 31, 2011.
2013.
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| Compensation |
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| Bonus |
| Awards |
| Awards |
| Compensation |
| Earnings |
| Compensation |
| Total |
|
Position |
| Year |
| Salary |
| Bonus |
| Awards |
| Awards |
| Compensation |
| Earnings |
| Compensation |
| Total |
| Year |
| ($)(1) |
| ($)(2) |
| ($)(3) |
| ($)(4) |
| ($)(5) |
| ($)(6) |
| ($) (7) |
| ($) (8) |
|
|
|
|
| ($) (1) |
| ($) (2) |
| ($) (3) |
| ($) (3) |
| ($) (4) |
| ($) (5) |
| ($) (6) |
| ($) | |||||||||||||||||||
Ronald N. Tutor |
| 2013 |
| 1,500,058 |
| — |
| 2,895,000 |
| 1,038,750 |
| 2,404,538 |
| — |
| 882,726 |
| 8,721,072 |
| 2015 |
| 1,750,000 |
| 3,750,000 |
| 3,502,500 | (9) | 2,141,441 | (9) | — |
| — |
| 909,620 |
| 12,053,561 | (9) |
Chairman and Chief |
| 2012 |
| 1,500,058 |
| 750,029 |
| 2,323,500 |
| 843,000 |
| — |
| — |
| 416,092 |
| 5,832,679 |
| 2014 |
| 1,500,058 |
| — |
| 15,250,495 |
| 5,975,250 |
| 2,481,443 |
| — |
| 348,169 |
| 25,555,415 |
|
Executive Officer |
| 2011 |
| 1,500,000 |
| — |
| 3,654,000 |
| 2,002,500 |
| 2,612,600 |
| — |
| 702,800 |
| 10,471,900 |
| 2013 |
| 1,500,058 |
| — |
| 2,895,000 |
| 1,038,750 |
| 2,404,538 |
| — |
| 882,726 |
| 8,721,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Michael J. Kershaw |
| 2013 |
| 550,021 |
| — |
| — |
| — |
| 412,516 |
| — |
| 38,530 |
| 1,001,067 | |||||||||||||||||||
Gary G. Smalley |
| 2015 |
| 233,333 |
| 950,000 |
| — |
| — |
| — |
| — |
| 23,968 |
| 1,207,301 |
| ||||||||||||||||||
Executive Vice |
| 2012 |
| 529,183 |
| 264,591 |
| 169,650 |
| 89,136 |
| — |
| — |
| 45,679 |
| 1,098,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President, CFO |
| 2011 |
| 140,200 |
| 250,000 |
| 372,600 |
| — |
| 97,600 |
| — |
| 25,600 |
| 886,000 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Robert Band |
| 2013 |
| 600,024 |
| — |
| — |
| — |
| — |
| (139,496) |
| 59,822 |
| 520,350 | |||||||||||||||||||
President, CEO |
| 2012 |
| 600,024 |
| — |
| — |
| — |
| — |
| 28,842 |
| 58,132 |
| 686,998 | |||||||||||||||||||
Management |
| 2011 |
| 600,000 |
| — |
| — |
| — |
| 597,200 |
| 96,000 |
| 80,149 |
| 1,373,349 | |||||||||||||||||||
Services Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
President, CFO (since |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
September 1, 2015) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
James A. Frost |
| 2013 |
| 724,999 |
| — |
| 1,110,000 |
| 541,000 |
| 724,999 |
| — |
| 85,366 |
| 3,186,364 |
| 2015 |
| 975,000 |
| — |
| 2,335,000 | (9) | 997,198 | (9) | 975,000 |
| — |
| 171,627 |
| 5,453,825 | (9) |
Executive Vice |
| 2012 |
| 724,999 |
| 513,777 |
| 562,000 |
| — |
| 565,782 |
| — |
| 94,337 |
| 2,460,895 |
| 2014 |
| 796,875 |
| — |
| 7,042,500 |
| 4,317,500 |
| 796,875 |
| — |
| 188,284 |
| 13,142,034 |
|
President, CEO |
| 2011 |
| 714,600 |
| — |
| 1,218,000 |
| — |
| — |
| — |
| 80,250 |
| 2,012,850 |
| 2013 |
| 724,999 |
| — |
| 1,110,000 |
| 541,000 |
| 724,999 |
| — |
| 85,366 |
| 3,186,364 |
|
Civil Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Craig W. Shaw |
| 2013 |
| 600,024 |
| — |
| — |
| — |
| 600,024 |
| (96,370) |
| 10,328 |
| 1,114,006 |
| 2015 |
| 650,024 |
| — |
| — |
| — |
| — |
| (97,776) |
| 7,508 |
| 559,756 |
|
Executive Vice |
| 2012 |
| 600,000 |
| — |
| — |
| — |
| — |
| 148,596 |
| 12,618 |
| 761,214 |
| 2014 |
| 650,024 |
| — |
| 1,273,950 |
| — |
| 582,422 |
| 291,032 |
| 10,452 |
| 2,807,880 |
|
President, CEO |
| 2011 |
| 600,000 |
| — |
| — |
| — |
| 597,146 |
| 228,444 |
| 12,393 |
| 1,437,983 |
| 2013 |
| 600,024 |
| — |
| — |
| — |
| 600,024 |
| (96,370) |
| 10,328 |
| 1,114,006 |
|
Building Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael J. Kershaw |
| 2015 |
| 600,000 |
| — |
| — |
| — |
| — |
| — |
| 36,220 |
| 636,220 |
| ||||||||||||||||||
Executive Vice |
| 2014 |
| 589,588 |
| — |
| 1,273,950 |
| — |
| 589,588 |
| — |
| 26,988 |
| 2,480,114 |
| ||||||||||||||||||
President, CFO (through |
| 2013 |
| 550,021 |
| — |
| — |
| — |
| 412,516 |
| — |
| 38,530 |
| 1,001,067 |
| ||||||||||||||||||
August 31, 2015) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | The |
Ronald N. Tutor | $ | 1,750,000 |
Gary G. Smalley(a) | 700,000 | |
James A. Frost(b) | 1,000,000 | |
Craig W. Shaw | 650,024 |
(a)Mr. Smalley joined the Company September 1, 2015 as Executive Vice President and Chief Financial Officer.
(b)Mr. Frost’s base salary was increased to $1,000,000 effective February 16, 2015, based on his promotion to the position of President and Chief Operating Officer.
(2) |
|
(3) |
28 |
earn up to a maximum of 2.5 times the target shares. Per ASC 718, the grant-date fair value of the target shares is included in Mr. Tutor’s 2014 stock award |
(4) |
|
26
(5) |
|
(6) | The |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Ronald N. |
| Michael J. |
| Robert |
| James A. |
| Craig W. | |||||
|
| Tutor |
| Kershaw |
| Band |
| Frost |
| Shaw | |||||
(a) Personal use of corporate aircraft |
| $ | 798,948 |
| $ | — |
| $ | — |
| $ | — |
| $ | — |
(b) Personal financial services |
|
| 23,437 |
|
| — |
|
| — |
|
| — |
|
| — |
(c) Vehicle expenses |
|
| 60,341 |
|
| 25,419 |
|
| 33,201 |
|
| 29,868 |
|
| 5,078 |
(d) Company paid insurance premiums |
|
| — |
|
| 7,861 |
|
| 21,371 |
|
| 50,248 |
|
| — |
(e) Company contributions to 401(k) |
|
| — |
|
| 5,250 |
|
| 5,250 |
|
| 5,250 |
|
| 5,250 |
Total |
| $ | 882,726 |
| $ | 38,530 |
| $ | 59,822 |
| $ | 85,366 |
| $ | 10,328 |
|
|
|
|
|
|
| All of the equity grants made to Mr. Tutor and Mr. Frost in 2015 were forfeited in December 2015 because the Company |
|
|
2729
Grants of Plan-Based Awards Table (as of Fiscal 2013 Year-End)All Other Compensation
The following table details the components of the “All Other Compensation” column (for 2015) in the foregoing Summary Compensation Table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| All |
|
|
| Grant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
| Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Option |
|
|
| Fair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| All Other |
| Awards: |
| Exercise |
| Value of |
|
|
|
| Estimated Future Payouts |
| Estimated Future Payouts |
| Stock |
| Underlying |
| or Base |
| Stock | ||||||||
|
|
|
| Under Non-Equity |
| Under Equity Incentive |
| Awards: |
| # of |
| Price of |
| and | ||||||||
|
|
|
| Incentive Plan Awards (1) |
| Plan Awards (2) |
| # of Shares |
| Securities |
| Option |
| Option | ||||||||
|
|
|
| Threshold |
| Target |
| Maximum |
| Threshold |
| Target |
| Maximum |
| or Units |
| Options |
| Awards |
| Awards |
Name |
| Grant Date |
| ($) |
| ($) |
| ($) |
| (#) |
| (#) |
| (#) |
| (#) |
| (#) |
| ($/Share) |
| ($) |
R. Tutor |
|
|
| 1,500,058 |
| 2,250,087 |
| 3,225,125 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
(3) |
| 3/28/2013 |
| — |
| — |
| — |
| — |
| 150,000 |
| — |
| — |
| — |
| — |
| 2,895,000 |
(3) |
| 3/28/2013 |
| — |
| — |
| — |
| — |
| 150,000 |
| — |
| — |
| — |
| 20.33 |
| 1,038,750 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
M. Kershaw |
|
|
| 330,013 |
| 412,516 |
| 412,516 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
R. Band |
|
|
| 480,019 |
| 600,024 |
| 600,024 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
J. Frost |
|
|
| 579,999 |
| 724,999 |
| 724,999 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
(4) |
| 11/13/2013 |
| — |
| — |
| — |
| — |
| 50,000 |
| — |
| — |
| — |
| — |
| 1,110,000 |
(4) |
| 11/13/2013 |
| — |
| — |
| — |
| — |
| 50,000 |
| — |
| — |
| — |
| 22.20 |
| 541,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
C. Shaw |
|
|
| 480,019 |
| 600,024 |
| 600,024 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
| (b) |
| (c) |
| (d) |
| (e) |
|
| Company Contributions to Defined Contribution Plans |
| Insurance Premiums |
| Perquisites |
| Total All Other Compensation |
Ronald N. Tutor |
| — |
| 159,770 |
| 749,850 |
| 909,620 |
Gary G. Smalley |
| — |
| 3,806 |
| 20,162 |
| 23,968 |
James A. Frost |
| 5,400 |
| 50,248 |
| 115,979 |
| 171,627 |
Craig W. Shaw |
| 5,400 |
| — |
| 2,108 |
| 7,508 |
Michael J. Kershaw |
| 5,400 |
| 7,861 |
| 22,959 |
| 36,220 |
(1) | The |
(2) | The amounts in column (c) represent premiums paid by the Company for supplemental life and short-term disability insurance policies that are not available to all salaried employees. |
(3) | The amounts in column (d) represent the incremental cost to the Company for personal benefits conferred to the NEOs. The total for Mr. Tutor includes $680,430 related to the personal use of Company aircraft and $69,420 for vehicles. The total for Mr. Frost includes $41,406 related to the personal use of Company aircraft and $74,573 for vehicles. |
(4) | The amounts in column (e) represent the totals of columns (b) through (d). |
30
Grants of Plan-Based Awards Table (as of Fiscal 2015 Year-End)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
| (b) |
| (c) |
| (d) |
| (e) |
| (f) |
| (g) |
| (h) |
| (i) |
| (j) |
| (k) |
| (l) |
| (m) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| All |
|
|
| Grant |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other |
|
|
| Date |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Option |
|
|
| Fair |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| All Other |
| Awards: |
| Exercise |
| Value of |
|
|
|
|
|
|
| Estimated Future Payouts |
| Estimated Future Payouts |
| Stock |
| Underlying |
| or Base |
| Stock |
| ||||||||
|
|
|
|
|
| Under Non-Equity |
| Under Equity Incentive |
| Awards: |
| # of |
| Price of |
| and |
| ||||||||
|
|
|
|
|
| Incentive Plan Awards(2) |
| Plan Awards(3) |
| # of Shares |
| Securities |
| Option |
| Option |
| ||||||||
|
| Type of |
|
|
| Threshold |
| Target |
| Maximum |
| Threshold |
| Target |
| Maximum |
| or Units |
| Options |
| Awards |
| Awards |
|
Name |
| Award(1) |
| Grant Date |
| ($) |
| ($) |
| ($) |
| (#) |
| (#) |
| (#) |
| (#) |
| (#) |
| ($/Share)(4) |
| ($) |
|
R. Tutor |
|
|
|
|
| 1,750,000 |
| 2,625,000 |
| 3,762,500 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| RSU |
| 3/31/2015 |
| — |
| — |
| — |
| — |
| 150,000 |
| — |
| — |
| — |
| — |
| 3,502,500 | (5) |
|
| SO |
| 3/31/2015 |
| — |
| — |
| — |
| — |
| 150,000 |
| — |
| — |
| — |
| 11.05 |
| 2,141,441 | (6) |
G. Smalley |
|
|
|
|
| 186,666 |
| 233,333 |
| 233,333 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
J. Frost |
|
|
|
|
| 780,000 |
| 975,000 |
| 975,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
|
| RSU |
| 3/31/2015 |
| — |
| — |
| — |
| 70,000 |
| 100,000 |
| 100,000 |
| — |
| — |
| — |
| 2,335,000 | (5) |
|
| SO |
| 3/31/2015 |
| — |
| — |
| — |
| 70,000 |
| 100,000 |
| 100,000 |
| — |
| — |
| 23.35 |
| 997,198 | (7) |
C. Shaw |
|
|
|
|
| 520,019 |
| 650,024 |
| 650,024 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
M. Kershaw |
|
|
|
|
| 480,000 |
| 600,000 |
| 600,000 |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
|
(1) | The types of awards that were granted in 2015 are RSUs and stock options (SO). |
(2) | Columns (d), (e) and (f) show the threshold, target and maximum payout, for each NEO’s 2015 annual incentive award. All potential payouts were performance-based and, therefore, completely at risk. The Company did not achieve its consolidated 2015 pre-tax income target; however, the Company did achieve its 2015 pre-tax income target for the Civil Group. As a result, only Mr. Frost earned his incentive plan (bonus) award for his role as CEO of the Civil Group. The performance goals are further discussed in the Compensation Discussion and Analysis on page 23. |
(3) | Columns (g), (h) and (i) show the threshold, target and maximum number of units for each NEO’s 2015 share-based awards. All potential payouts were performance-based and, therefore, completely at risk. The Company did not achieve its consolidated 2015 pre-tax income target and, as a result, all 2015 share-based grants were forfeited. The performance targets are further discussed in the Compensation Discussion and Analysis on page 23. The Equity Incentive Plan, which consists of the Amended and Restated Tutor Perini Corporation Long-Term Incentive Plan, is discussed under “Long-Term Incentives” |
|
|
(4) | The |
(5) | This amount represents the fair value of the RSUs granted on March 31, 2015 as part of the 2015 long-term incentive awards. The value is computed in accordance with ASC 718, using the grant |
(6) | This amount represents the grant date fair value of the nonqualified stock options granted on March 31, 2015 as part of the 2015 long-term incentive awards. The value is computed in accordance with ASC 718, using a Black-Scholes option pricing model value of $14.276 per option. |
(7) | This amount represents the grant date fair value of the nonqualified stock options granted on March 31, 2015 as part of the 2015 long-term incentive awards. The value is computed in accordance with ASC 718, using a Black-Scholes option pricing model value of $9.972 per option. |
2831
Outstanding Equity Awards at Fiscal 20132015 Year-End Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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(a) |
| (b) |
| (c) |
| (d) |
| (e) |
| (f) |
| (g) |
| (h) |
| (i) |
| (j) | ||||||||||||||||||
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| Options Awards |
| Stock Awards | ||||||||||||||
|
| Options Awards (1) |
| Stock Awards (2) |
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| Equity |
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| Equity |
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| Incentive |
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| Incentive |
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| Plan Awards: |
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| Market |
| Equity Incentive |
| Equity Incentive |
|
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| Plan Awards: |
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| Market |
| Equity Incentive |
| Equity Incentive |
| Number of |
| Number of |
| Number of |
|
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|
| Number of |
| Value of |
| Plan Awards: |
| Plan Awards: |
|
| Number of |
| Number of |
| Number of |
|
|
|
|
| Number of |
| Value of |
| Plan Awards: |
| Plan Awards: |
| Securities |
| Securities |
| Securities |
|
|
|
|
| Shares or |
| Shares or |
| Number of |
| Market or Payout |
|
| Securities |
| Securities |
| Securities |
|
|
|
|
| Shares or |
| Shares or |
| Number of |
| Market or Payout |
| Underlying |
| Underlying |
| Underlying |
|
|
|
|
| Units of |
| Units of |
| Unearned Shares, |
| Value of Unearned |
|
| Underlying |
| Underlying |
| Underlying |
|
|
|
|
| Units of |
| Units of |
| Unearned Shares, |
| Value of Unearned |
| Unexercised |
| Unexercised |
| Unexercised |
| Option |
| Option |
| Stock That |
| Stock That |
| Units or Rights |
| Shares, Units or |
|
| Unexercised |
| Unexercised |
| Unexercised |
| Option |
| Option |
| Stock That |
| Stock That |
| Units or Rights |
| Shares, Units or |
| Options |
| Options |
| Unearned |
| Exercise |
| Expiration |
| Have Not |
| Have Not |
| That Have Not |
| Other Rights That |
|
| Options |
| Options |
| Unearned |
| Exercise |
| Expiration |
| Have Not |
| Have Not |
| That Have Not |
| Other Rights That |
| (#) |
| (#) |
| Options |
| Price |
| Date |
| Vested |
| Vested |
| Vested |
| Have Not Vested |
Name |
| Exercisable |
| Unexercisable |
| Options |
| Price |
| Date |
| Vested |
| Vested |
| Vested (3) |
| Have Not Vested |
| Exercisable |
| Unexercisable |
| (#)(1) |
| ($/Share) |
|
|
| (#) |
| ($) |
| (#)(2) |
| ($)(3) |
Ronald N. Tutor |
| 750,000 |
| — |
| — |
| 20.33 |
| 5/28/2019 |
| — |
| — |
| — |
| — | ||||||||||||||||||
|
| (#) |
| (#) |
| (#) |
| ($/Share) |
|
|
| (#)(3) |
| ($) |
| (#) |
| ($) |
| 150,000 |
| — |
| 150,000 |
| 11.05 |
| 6/1/2022 |
| — |
| — |
| 150,000 |
| $ 2,511,000 |
Ronald N. Tutor |
| 600,000 |
| 150,000 |
| — |
| 20.33 |
| 5/28/2019 |
| 150,000 |
| 3,945,000 |
| — |
| — | ||||||||||||||||||
|
| 75,000 |
| — |
| — |
| 22.20 |
| 11/13/2023 |
| — |
| — |
| — |
| — | ||||||||||||||||||
|
| — |
| — |
| 150,000 |
| 28.17 |
| 3/30/2024 |
| — |
| — |
| 150,000 |
| $ 2,511,000 | ||||||||||||||||||
|
| — |
| — |
| 300,000 |
| 24.05 |
| 12/22/2024 |
| — |
| — |
| 300,000 |
| $ 5,022,000 | ||||||||||||||||||
|
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 120,097 |
| $ 2,010,424 | ||||||||||||||||||
Gary G. Smalley |
| — |
| — |
| 45,000 |
| 17.06 |
| 9/1/2025 |
| — |
| — |
| 45,000 |
| $ 753,300 | ||||||||||||||||||
James A. Frost |
| 100,000 |
| — |
| — |
| 26.19 |
| 9/5/2018 |
| — |
| — |
| — |
| — | ||||||||||||||||||
|
| 50,000 |
| — |
| — |
| 22.20 |
| 11/13/2023 |
| — |
| — |
| — |
| — | ||||||||||||||||||
|
| — |
| — |
| 150,000 |
| 11.31 |
| 5/30/2022 |
| — |
| — |
| 150,000 |
| $ 2,511,000 | ||||||||||||||||||
|
| — |
| — |
| 100,000 |
| 28.17 |
| 3/30/2024 |
| — |
| — |
| 100,000 |
| $ 1,674,000 | ||||||||||||||||||
|
| — |
| — |
| 200,000 |
| 23.56 |
| 4/9/2025 |
| — |
| — |
| 200,000 |
| $ 3,348,000 | ||||||||||||||||||
Craig W. Shaw |
| 50,000 |
| — |
| — |
| 12.54 |
| 11/16/2018 |
| — |
| — |
| — |
| — | ||||||||||||||||||
|
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 30,000 |
| $ 502,200 | ||||||||||||||||||
Michael J. Kershaw |
| — |
| — |
| 15,000 |
| 11.31 |
| 5/30/2022 |
| — |
| — |
| 15,000 |
| 394,500 |
| — |
| — |
| 15,000 |
| 11.31 |
| 5/30/2022 |
| — |
| — |
| 15,000 |
| $ 251,100 |
Michael J. Kershaw |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| 30,000 |
| 789,000 | ||||||||||||||||||
Robert Band |
| 75,000 |
| — |
| — |
| 12.54 |
| 11/19/2018 |
| — |
| — |
| — |
| — | ||||||||||||||||||
James A. Frost |
| 100,000 |
| — |
| — |
| 26.19 |
| 9/5/2018 |
| — |
| — |
| — |
| — | ||||||||||||||||||
James A. Frost |
| — |
| — |
| 50,000 |
| 22.20 |
| 11/13/2023 |
| — |
| — |
| 50,000 |
| 1,315,000 | ||||||||||||||||||
Craig W. Shaw |
| 50,000 |
| — |
| — |
| 12.54 |
| 11/19/2018 |
| — |
| — |
| — |
| — |
(1) |
|
|
|
|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
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|
|
|
Stock Options |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2016 |
| 2017 |
| 2018 |
| 2019 |
| Total |
| Vesting Based On |
Ronald N. Tutor |
| — |
| 300,000 |
| 150,000 |
| 150,000 |
| 600,000 |
| Performance |
Gary G. Smalley |
| — |
| 15,000 |
| 15,000 |
| 15,000 |
| 45,000 |
| Performance |
James A. Frost |
| — |
| 350,000 |
| 100,000 |
| — |
| 450,000 |
| Performance |
Michael J. Kershaw |
| 15,000 |
| — |
| — |
| — |
| 15,000 |
| Time |
|
| 15,000 |
| 665,000 |
| 265,000 |
| 165,000 |
| 1,110,000 |
|
|
(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Units |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2016 |
| 2017 |
| 2018 |
| 2019 |
| Total |
| Vesting Based On |
Ronald N. Tutor |
| — |
| 420,097 |
| 150,000 |
| 150,000 |
| 720,097 |
| Performance |
Gary G. Smalley |
| — |
| 15,000 |
| 15,000 |
| 15,000 |
| 45,000 |
| Performance |
James A. Frost |
| — |
| 350,000 |
| 100,000 |
| — |
| 450,000 |
| Performance |
Craig Shaw |
| — |
| 30,000 |
| — |
| — |
| 30,000 |
| Performance |
Michael J. Kershaw |
| 15,000 |
| — |
| — |
| — |
| 15,000 |
| Time |
|
| 15,000 |
| 815,097 |
| 265,000 |
| 165,000 |
| 1,260,097 |
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| March |
| Oct |
| March |
| Dec |
|
| ||||
|
| 2014 |
| 2014 |
| 2015 |
| 2016 |
| Total | ||||
Ronald N. Tutor |
| 150,000 | (P) |
| — |
|
| — |
|
| — |
|
| 150,000 |
Michael J. Kershaw |
| — |
|
| 30,000 | (T) |
| — |
|
| 15,000 | (T) |
| 45,000 |
James A. Frost |
| — |
|
| — |
|
| 50,000 | (P) |
|
|
|
| 50,000 |
|
|
2932
2015 Option Exercises and Stock Vested Table
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Options Awards |
| Stock Awards |
| Options Awards |
| Stock Awards | ||||||||||
|
| Number of |
|
|
| Number |
| Value |
| Number of |
|
|
| Number |
| Value | ||
|
| Shares |
| Value |
| of Shares |
| Realized on |
| Shares |
| Value |
| of Shares |
| Realized on | ||
|
| Acquired |
| Realized on |
| Acquired |
| Vesting (1) |
| Acquired |
| Realized on |
| Acquired |
| Vesting (1) | ||
Name |
| on Exercise |
| Exercise |
| on Vesting |
| ($) |
| on Exercise |
| Exercise |
| on Vesting |
| ($) | ||
Ronald N. Tutor |
| — |
| — |
| 150,000 | (P) |
| 2,802,000 |
| — |
| — |
| 225,000 | (2) |
| 4,846,500 |
Michael J. Kershaw |
| — |
| — |
| — |
|
| — | |||||||||
Robert Band |
| — |
| — |
| 75,000 | (P) |
| 1,688,250 | |||||||||
James A. Frost |
| — |
| — |
| 150,000 | (P) |
| 3,780,000 | |||||||||
James A. Frost |
| — |
| — |
| 50,000 | (P) |
| 844,500 |
| — |
| — |
| 50,000 | (2) |
| 1,077,000 |
Craig W. Shaw |
| — |
| — |
| 50,000 | (P) |
| 1,125,500 |
| — |
| — |
| 13,440 | (2) |
| 289,498 |
Michael J. Kershaw |
| — |
| — |
| 15,000 | (2) |
| 323,100 |
(1) | Reflects the value at the closing price of the Common Stock on the vesting date. |
| (2) | These awards |
Pension Benefits for 2013 Fiscal Year
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Payments |
|
|
|
|
|
| Present |
| During |
|
|
|
| Number of |
| Value of |
| Last |
|
|
|
| Years of |
| Accumulated |
| Fiscal |
|
|
|
| Credited |
| Benefit (1) |
| Year |
Name |
| Plan Name |
| Service |
| ($) |
| ($) |
Ronald N. Tutor |
| — |
| — |
| — |
| — |
Michael J. Kershaw |
| — |
| — |
| — |
| — |
Robert Band |
| Pension Plan |
| 36 |
| 665,657 |
| — |
|
| BEP |
| 36 |
| 607,999 |
| — |
James A. Frost |
| — |
| — |
| — |
| — |
Craig W. Shaw |
| Pension Plan |
| 28 |
| 633,886 |
| — |
|
| BEP |
| 28 |
| 670,348 |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Payments |
|
|
|
|
|
| Present |
| During |
|
|
|
| Number of |
| Value of |
| Last |
|
|
|
| Years of |
| Accumulated |
| Fiscal |
|
|
|
| Credited |
| Benefit (2) |
| Year |
Name (1) |
| Plan Name |
| Service |
| ($) |
| ($) |
Craig W. Shaw |
| Defined Benefit Pension Plan |
| 30 |
| 727,812 |
| — |
|
| Benefits Equalization Plan |
| 30 |
| 769,678 |
| — |
(1) | Messrs. Tutor, Smalley, Frost and Kershaw do not participate in the pension plans. |
(2) | Assumes retirement occurs at the later of age 62 or current age, in a life annuity form, and a discount rate of |
Tutor Perini has a defined benefit pension plan that covers its executive, professional, administrative and clerical employees, subject to certain specified service requirements. The plan is non-contributory and benefits are based on an employee’s years of service and “final average earnings” (as defined)defined in the plan). The plan provides reduced benefits for early retirement and takes into account offsets for social security benefits. Tutor Perini also has an unfunded supplemental retirement plan (referred to as the Benefits Equalization Plan, or BEP)Plan) for certain employees whose benefits under the defined benefit pension plan were reduced because of compensation limitations under federal tax laws. Effective June 1, 2004, all benefit accruals under Tutor Perini’sthe above pension plans were frozen; however, the current vested benefit was preserved. Accordingly, our NEOsMr. Shaw will not earn additional pension benefits, but they may become eligible for an early retirement benefit (which will be based on their “frozen” normal retirement benefit) based on service after June 1, 2004.
The normal retirement benefit under these plans is equal to:
· | 0.75% of “final average |
· | 1.5% of final average earnings, in excess of covered compensation multiplied by years of service, up to 25. |
Our plans provide for early retirement upon either the attainment of age 55 and 10 years of service, or the completion of 25 years of service. Under our plans, a participant who elects early retirement may elect to receive either an immediate early retirement income equal to 91% of his or her normal retirement benefit or a deferred benefit. Upon the attainment of age 62 and completion of 25 years of service, the participant may receive an unreduced pension equal to his or her normal retirement benefit. A reduced benefit is available for a participant who elects early retirement and wishes to receive benefits prior to age 62. The ages of Mr. Band and Mr. Shaw are 66 and 60, respectively.is 61 years of age.
3033
Termination Benefits - Potential Payments Upon Termination or Change in Control
Ronald N. Tutor Employment Agreement
In merging with Tutor-Saliba in September 2008, the Company not only secured enhanced opportunities to acquire a higher volume of quality Civil Group business based on Tutor-Saliba’s resume,résumé, but also more closely aligned Mr. Tutor’s compensation with growth in shareholder value. With regard to Mr. Tutor’s compensation and in entering into the employment agreement with Mr. Tutor in 2008, the Compensation Committee considered a number of factors in developing a range of reasonable total target compensation including: (i) the level of compensation Mr. Tutor had in place in his role as the President and Chief Executive Officer of Tutor-Saliba, prior to merging with the Company, (ii) the compensation philosophies of privately held peer companies which are geared toward earnings, (iii) compensation data from our publicly held peers, and (iv) alignment of Mr. Tutor’s compensation with growth in shareholder value through long-term equity awards.
On June 1, 2012,During 2014, the Board determined it would be important and in the best interests of the Company’s shareholders to secure Mr. Tutor’s services through the end of 2018 – an additional two years beyond the term of his previous employment agreement, in order to help ensure a smooth and orderly transition to a new CEO upon Mr. Tutor’s eventual departure from that role, particularly at a time when the Company has experienced and expects to continue experiencing a very high volume of backlog execution and pipeline of prospective projects. The Board determined that the additional two years also would be essential to successfully complete certain needed cultural and management changes in some of the Company’s acquired business units, and to complete the transition of Mr. Tutor’s bidding and claims management expertise more broadly throughout the Company. Accordingly, on December 22, 2014, the Company entered into an amended and restated employment agreement with Ronald N. Tutor (the “Amended Agreement”). The Amended Agreement supersedessuperseded the employment agreement originally entered into with Mr. Tutor on December 23, 2008, and as amended by Amendment No. 1 thereto dated March 20, 2009 and Amendment No. 2 thereto dated June 1, 2012 (collectively, the “Original Agreement”).
The Amended Agreement extendsextended the initial term of Mr. Tutor’s employment through December 31, 2016.2018. Mr. Tutor continues to serve as the Company’s Chief Executive Officer, as a member of the Company’s Board of Directors and as Chairman of the Board. The Amended Agreement increased Mr. Tutor’s annual base salary of at least $1,500,000 remains unchanged.to $1,750,000 effective January 1, 2015. Prior to this, Mr. Tutor’s salary had not been adjusted since 2008. Subject to performance criteria to be determined by the Compensation Committee, effective for periods beginning after June 1, 2012, Mr. Tutor is to be paid an annual bonus of 150% of salary, (reduced from 175% under the Original Agreement), which is subject to adjustment pursuant to a formula established by the Compensation Committee for Tutor Perini’s performance above and below target. Under the Amended Agreement, Mr. Tutor’s incentive-based compensation will be subject to clawback by the Company in the manner required by the Company’s recoupment policy. Whereas, under the Original Agreement, Mr. Tutor was considered for equity incentives at the discretion of the Compensation Committee, underUnder the Amended Agreement, hisMr. Tutor’s equity incentives will beare based on the achievement of performance criteria to be established in the beginning of each applicable fiscal year for fiscal years 20142015 through 2016,2018, commensurate with the extended term of the Amended Agreement. Mr. Tutor continues to receive various benefits and perquisites provided under the Original Agreement, including: (i) 150 hours of flying time per calendar year of personal use of Tutor Perini’s business jet,aircraft, with any unused balance being carried forward to subsequent years while employed; (ii) participation in all fringe benefits and perquisites made available generally to senior executives of Tutor Perini, generally on the same terms and conditions; (iii) 30 days of vacation; and (iv) participation in all pension, retirement, profit sharing, savings, 401(k), income deferral, life insurance, disability insurance, accidental death and dismemberment protection, travel accident insurance, hospitalization, medical, dental, vision and other employee benefit plans, programs and arrangements made available generally to other senior executives of Tutor Perini, to the extent eligible. Certain perquisites provided toIn addition, Mr. Tutor underis entitled to an automobile and driver on terms and conditions as determined by the Original Agreement have been reduced or eliminated such as: (i) eliminating theBoard, use of an apartment in Las Vegas; and (ii) removing the formal allowance fora reasonable level of Company resources necessary to provide personal financial and accounting services, and additional life insurance policies. coverage that can be purchased for an annual premium of not more than $160,000.
As part of the inducement for Mr. Tutor to extend his contract, to implement a successful transition and to maintain his focus on increasing shareholder value, Mr. Tutor’s Amended Agreement included a $5.0 million cash succession bonus and an additional restricted stock units. The realization of the succession bonus is based on achieving Board-approved succession milestones, including the naming of a successor for the role of the Chief Executive Officer of the Company. As of December 31, 2015, $3.75 million of the $5.0 million bonus was earned and paid. The realization of the restricted stock units is based on achieving a defined TSR over a three-year period (TSR RSUs). The restricted stock units were granted in two separate grants. The first grant was made in December 2014 for 120,097 restricted stock units, and the second was made in January 2016 for 176,887 restricted stock units. Each grant was valued at approximately $3.0 million of total economic value on the date of the grant, and each represents the target number of shares to be earned for that grant if the Company’s TSR performance over the three-year period relative to the peer group meets the 50th percentile. Mr. Tutor will receive zero shares under these grants if the Company’s TSR is below the 30th percentile and 250% of the target shares if the Company’s TSR is at or above the 80% percentile, with a pre-determined pro-ration between those ranges.
34
The initial term of the Amended Agreement, which ends on December 31, 20162018, extends automatically for successive one-year periods, unless the Company or Mr. Tutor notifies the other party in writing at least 90 days in advance of the anniversary date that such party is electing not to extend the term of employment under the Amended Agreement.
Mr. Tutor has agreed that during the term of his employment with Tutor Perini and for six months after the end of his employment (unless his employment is terminated by Tutor Perini without “Cause” or he terminates his employment for “Good Reason” (each as defined in the employment agreement)), he will not compete with Tutor Perini or solicit certain of its employees. Mr. Tutor has also agreed to be bound by customary restrictions on disclosure of confidential information.
The AmendedOriginal Agreement, effective as of September 8, 2013, eliminateseliminated the excise tax gross-up obligation requiring the Company to indemnify Mr. Tutor for excise taxes that may be imposed on him by reason of the application of Sections 280G and 4999 of the Internal Revenue Code for payments and benefits that he may receive in connection with a change in control of the Company.
31
Certain payments would be payable to Mr. Tutor in the event of his termination. The amounts depend upon the circumstances surrounding his termination as follows, assuming the triggering event occurred on December 31, 2013:
2015:
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|
| Base |
|
|
|
|
| O/S Equity |
| Cash Lump |
| Cutback Related |
|
|
| Base |
|
|
|
|
| O/S Equity |
| Cash Lump |
| Cutback Related |
|
|
|
| Salary |
| Bonus |
| Benefits |
| Awards |
| Sum |
| to Best Payment |
| Total |
| Salary |
| Bonus |
| Benefits |
| Awards |
| Sum |
| to Best Payment |
| Total |
Triggering Event |
| ($) (1) |
| ($) (2) |
| ($) (3) |
| ($) (4) |
| ($) (5) |
| ($) (6) |
| ($) |
| ($) (1) |
| ($) (2) |
| ($) (3) |
| ($) (4) |
| ($) (5) |
| ($) (6) |
| ($) |
A. Death |
| — |
| — |
| 173,084 |
| 29,400,000 |
| — |
| — |
| 29,573,084 |
| — |
| — |
| 201,923 |
| 12,907,924 |
| — |
| — |
| 13,109,847 |
B. Disability |
| — |
| — |
| 173,084 |
| 29,400,000 |
| — |
| — |
| 29,573,084 |
| — |
| — |
| 201,923 |
| 12,907,924 |
| — |
| — |
| 13,109,847 |
C. Termination by Employer for Cause or by Executive without Good Reason |
| — |
| — |
| 173,084 |
| — |
| — |
| — |
| 173,084 | ||||||||||||||
D. Termination by Employer without Cause or by Executive with Good Reason |
| — |
| — |
| 263,059 |
| 29,400,000 |
| 7,500,290 |
| — |
| 37,163,349 | ||||||||||||||
E. Change in Control (7) |
| — |
| — |
| 308,046 |
| 29,400,000 |
| 11,250,435 |
| — |
| 40,958,481 | ||||||||||||||
C. Retirement |
| — |
| — |
| 201,923 |
| 670,074 |
| — |
| — |
| 871,997 | ||||||||||||||
D. Termination by Employer |
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for Cause or by Executive |
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| ||||||||||||||
without Good Reason |
| — |
| — |
| 201,923 |
| — |
| — |
| — |
| 201,923 | ||||||||||||||
E. Termination by Employer |
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without Cause or by |
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Executive with Good Reason |
| — |
| — |
| 251,950 |
| 11,567,574 |
| 8,750,000 |
| — |
| 20,569,524 | ||||||||||||||
F. Change in Control (7) |
| — |
| — |
| 276,963 |
| 12,907,924 |
| 13,125,000 |
| — |
| 26,309,887 |
(1) | In all cases, accrued salary through the date of termination would be due to Mr. Tutor. As of December 31, |
(2) | The incentive compensation for |
(3) | Benefits include vacation and health |
35
(4) | Mr. Tutor had |
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| RSUs |
| TSR RSUs |
| Options |
| Total |
Triggering Event |
| ($) |
| ($) |
| ($) |
| ($) |
A. Death |
| 10,044,000 |
| 2,010,424 |
| 853,500 |
| 12,907,924 |
B. Disability |
| 10,044,000 |
| 2,010,424 |
| 853,500 |
| 12,907,924 |
C. Retirement |
| — |
| 670,074 |
| — |
| 670,074 |
D. Termination by Employer |
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for Cause or by Executive |
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without Good Reason |
| — |
| — |
| — |
| — |
E. Termination by Employer |
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|
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without Cause or by |
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|
|
Executive with Good Reason |
| 10,044,000 |
| 670,074 |
| 853,500 |
| 11,567,574 |
F. Change in Control |
| 10,044,000 |
| 2,010,424 |
| 853,500 |
| 12,907,924 |
(5) | A cash lump sum would be due in the amount of two times the sum of annual salary and target bonus in the case of Event |
(6) | If any amounts owed to Mr. Tutor in connection with a change in control of the Company are subject to the excise tax imposed by Section 4999 of the Internal Revenue Code, we will cut back such amounts to a safe harbor limit so that the excise tax is not triggered, unless the net after-tax value of the amounts due to Mr. Tutor after imposition of the excise tax would be greater (in which case no reduction will occur). |
(7) | This event applies if there is a change in control and Mr. Tutor is terminated other than for “Cause” or disability, if he was terminated in anticipation of a change in control, or if Mr. Tutor terminated the employment agreement for “Good Reason” within two years following a change in control. |
Tutor Perini will generally have “Cause” to terminate Mr. Tutor’s employment in the following circumstances: (i) his conviction of, or plea of nolo contendere to, a felony; (ii) his willful and continued failure to substantially perform his essential job functions; (iii) his material act of fraud or willful and material misconduct to Tutor Perini; (iv) his willful and material breach of the employment contract; (v) a material breach by him of any material written Tutor Perini policy; or (vi) a failure by him to cooperate in any investigation or audit regarding the accounting practices, financial statements, or business practices of Tutor Perini. For purposes of this provision, no act or failure to act, on the part of Mr. Tutor, shall be considered “willful” unless it is done, or omitted to be done, by Mr. Tutor in bad faith or without reasonable belief that his action or omission was in the best interest of Tutor Perini. Any termination for “Cause” generally requires written notice to Mr. Tutor and providing him with 10 days to cure the conduct after such notice. The Board must also vote affirmatively that Mr. Tutor is to be terminated for “Cause” after giving him an opportunity to be heard by the Board.
32
Mr. Tutor will generally have “Good Reason” to terminate his employment under any of the following circumstances: (i) any adverse change in his titles; (ii) any reduction in his base salary; (iii) a material diminution in his authority, responsibilities or duties; (iv) the assignment of duties materially inconsistent with his position; (v) a relocation of his place of employment to a location more than 50 miles further from the current offices near Los Angeles, California; (vi) any other material breach of the terms in the employment agreement or (vii) the failure of Tutor Perini to have his contract assumed after a merger, consolidation, sale or similar transaction. In order to invoke a termination for “Good Reason”,Reason,” Mr. Tutor must notify Tutor Perini of the existence of the event of “Good Reason” within 90 days of its occurrence, Tutor Perini must fail to cure the event within 30 days of the notice, and Mr. Tutor must terminate his employment within 10 days of the expiration of such period.
James A. Frost Employment Agreement
On March 21, 2011, the Company entered into an employment agreement with Mr. Frost to have him serve as Executive Vice President and Chief Executive Officer of the Civil Group of the Company. Mr. Frost had served in this role without an employment agreement since March 23, 2009. As part of the negotiations with Mr. Frost concerning his employment agreement, the Company and he agreed to make the terms of the employment agreement retroactive to June 30, 2009 (the “Effective Date”) in recognition of his contributions to the Company prior to his entering into the employment agreement.
Pursuant to the employment agreement, Mr. Frost will receivereceived an initial annual base salary of $675,000, subject to review and upward adjustment in the discretion of the Company, an annual performance-based cash bonus equal to 100% of his base salary if target
36
performance levels established by the Compensation Committee are satisfied (with greater or lesser amounts paid if performance levels are above or below such target), and will beis eligible to participate in the Company’s equity incentive plan. Mr. Frost will be considered for equity incentives at the discretion of the Compensation Committee, and receives various benefits and perquisites including: (i) participation in all fringe benefits and perquisites made available generally to senior executives of Tutor Perini, generally on the same terms and conditions, and (ii) participation in all pension, retirement, profit sharing, savings, 401(k), income deferral, life insurance, disability insurance, accidental death and dismemberment protection, travel accident insurance, hospitalization, medical, dental, vision and other employee benefit plans, programs and arrangements made available generally to other senior executives of Tutor Perini, to the extent eligible. Since
As mentioned earlier, Mr. Frost’s base salary was increased from $800,000 to $1,000,000 effective February 16, 2015, based upon his promotion to the Effective Date,position of President and Chief Operating Officer. In conjunction with his promotion the Company, upon the authority granted to it byCorporate Governance and Nominating Committee, the Compensation Committee hasand the Board of Directors also approved two merit-based increases totaling $125,000 to Mr. Frost’s annual base salary, resulting in a current annual base salary of $800,000.the following items:
· | An extension of his contact through December 31, 2017; |
· | An annual bonus equal to 100% of his salary, based on the achievement of performance targets to be set each year by the Compensation Committee; |
· | An annual grant of 100,000 RSUs and 100,000 stock options for each of the years 2015, 2016 and 2017, based on the achievement of performance targets to be set each year by the Compensation Committee; |
· | An additional $8.8 million of life insurance coverage over and above the life insurance generally available as part of the Company’s standard benefits; and |
· | An annual allotment of 20 hours of personal use of Company aircraft. |
The employment agreement has an initial term of five years commencing on the Effective Date,effective date, as defined in his employment agreement, and it renews automatically for successive one-year periods thereafter, unless either party thereto provides at least 60 days’days advance written notice of a decision not to renew.
Pursuant to the terms of the employment agreement, Mr. Frost is subject to a covenant providing that for one year after the end of his employment he will not compete with the Company or solicit certain of its employees.
Certain payments would be payable to Mr. Frost in the event of his termination. The amounts depend upon the circumstances surrounding his termination as follows, assuming the triggering event occurred on December 31, 2013:
2015:
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| Base |
|
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|
|
| O/S Equity |
| Cash Lump |
|
|
| Base |
|
|
|
|
| O/S Equity |
| Cash Lump |
|
|
|
| Salary |
| Bonus |
| Benefits |
| Awards |
| Sum |
| Total |
| Salary |
| Bonus |
| Benefits |
| Awards |
| Sum |
| Total |
Triggering Event |
| ($) (1) |
| ($) (2) |
| ($) (3) |
| ($) (4) |
| ($) (5) |
| ($) |
| ($) (1) |
| ($) (2) |
| ($) (3) |
| ($) (4) |
| ($) (5) |
| ($) |
A. Death |
| — |
| — |
| 41,827 |
| 7,724,500 |
| — |
| 7,766,327 |
| — |
| — |
| 57,692 |
| 8,347,500 |
| — |
| 8,405,192 |
B. Disability |
| — |
| — |
| 41,827 |
| 7,724,500 |
| — |
| 7,766,327 |
| — |
| — |
| 57,692 |
| 8,347,500 |
| — |
| 8,405,192 |
C. Termination by Employer for Cause or by Executive without Good Reason |
| — |
| — |
| 41,827 |
| — |
| — |
| 41,827 | ||||||||||||
D. Termination by Employer without Cause or by Executive with Good Reason |
| — |
| — |
| 79,222 |
| 7,724,500 |
| 2,174,997 |
| 9,978,719 | ||||||||||||
C. Termination by Employer for Cause or by |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Executive without Good Reason |
| — |
| — |
| 57,692 |
| — |
| — |
| 57,692 | ||||||||||||
D. Termination by Employer without Cause or by |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Executive with Good Reason |
| — |
| — |
| 88,090 |
| 8,347,500 |
| 3,000,000 |
| 11,435,590 | ||||||||||||
E. Change in Control (6) |
| — |
| — |
| — |
| 7,724,500 |
| — |
| 7,724,500 |
| — |
| — |
| — |
| 8,347,500 |
| — |
| 8,347,500 |
(1) | In all cases, accrued salary through the date of termination would be due to Mr. Frost. As of December 31, |
(2) | The incentive compensation for |
(3) | Benefits include vacation
|
health |
(4) | Mr. Frost had |
37
(5) | A cash lump sum would be due in the amount of one and one half times the sum of annual salary and target bonus in the case of Event D. |
(6) | Although Mr. Frost’s employment agreement does not include a “change in control” triggering event, pursuant to the terms of the Long-Term Incentive Plan, all remaining outstanding equity awards would immediately vest and outstanding options would be exercisable in the event of a change in control. |
Tutor Perini will generally have “Cause” to terminate Mr. Frost’s employment in the following circumstances: (i) his conviction of, or plea of nolo contendere to, a felony; (ii) his willful and continued failure to substantially perform his essential job functions; (iii) his material act of fraud or willful and material misconduct to Tutor Perini; (iv) his willful and material breach of the employment contract; (v) a material breach by him of any material written Tutor Perini policy; or (vi) a failure by him to cooperate in any investigation or audit regarding the accounting practices, financial statements, or business practices of Tutor Perini. For purposes of this provision, no act or failure to act, on the part of Mr. Frost, shall be considered “willful” unless it is done, or omitted to be done, by Mr. Frost in bad faith or without reasonable belief that his action or omission was in the best interest of Tutor Perini. Any termination for “Cause” generally requires written notice to Mr. Frost and providing him with 10 days to cure the conduct after such notice. The Board must also vote affirmatively that Mr. Frost is to be terminated for “Cause” after giving him an opportunity to be heard by the Board.
Mr. Frost will generally have “Good Reason” to terminate his employment under any of the following circumstances: (i) any reduction in his titles or responsibilities, or (ii) any reduction in his compensation or benefits.
As mentioned earlier, the Company is currently in the process of negotiating with Mr. Frost a revised and amended employment agreement based on his promotion in February 2015 to the position of President and Chief Operating Officer.
As of December 31, 2013,2015, none of our other executive officers has an agreement with us providing for termination benefits. However, under the Long-Term Incentive Plan, upon a change in control, all remaining outstanding equity awards, stock options and restricted stock units, immediately vest. As of December 31, 2013,2015, pursuant to the Long-Term Incentive Plan, Messrs. Kershaw, BandShaw and ShawSmalley have $1,802,850, $1,032,000$332,550, $502,200 and $394,500,$753,300, respectively, of outstanding equity awards that will immediately vest upon a change in control. The values of the outstanding restricted stock units and the intrinsic value of the stock options were quantified using the Company’s closing share price of $26.30$16.74 on December 31, 2013.2015.
Director Compensation
Our Compensation Committee recommends the level of compensation to be paid to our Board. In 2013, the Committee reviewed the Company’s public company peer group board compensation levels and, as a result, recommended that the equity retainer of 1,000 shares per year be increased to an annual award of $150,000 payable in shares, leaving all other elements of compensation unchanged. This recommendation was approved by the Board and implemented for 2013 and 2014. Periodically, the Compensation Committee reviews the functions being performed by the Board and its committees, as well as board compensation paid by similar companies, in order to determine whether an adjustment should be made.
Fees for our outsidenon-employee directors consist of an annual cash retainer fee of $80,000, payable in cash or Common Stock at each director’s option, plus an equity retainer in the amount of $150,000 payable in shares of Common Stock on the business day following the annual meeting of shareholders. Directors also receive $900 per Board meeting attended in person and $300 per meeting attended telephonically. Members of the Audit Committee receive $2,000 per meeting attended in person and $500 per meeting attended telephonically. The Audit Committee Chair receives an annual retainer of $20,000 and the Compensation Committee Chair receives an annual retainer of $10,000 for services on their respective committees. Members of the Compensation and Corporate Governance and Nominating Committees receive $900 per meeting attended in person and $300 per meeting attended telephonically. The Lead Independent Director also receives an additional annual retainer of $20,000 based on the increased responsibilities associated with this role.
3438
The table below summarize the total compensation earned by each of Contents
The following table sets forth compensation information for 2013 for each member of our Board.
the non-management directors serving in 2015.
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| Change in |
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| Pension Value |
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| ||||||
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| and |
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| ||||||
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| Fees |
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| Nonqualified |
|
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| ||||||
|
| Earned |
|
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|
|
| Non-Equity |
| Deferred |
|
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|
| ||||||
(a) |
| (b) |
| (c) |
| (d) | ||||||||||||||
|
| or Paid in |
| Stock |
| Option |
| Incentive Plan |
| Compensation |
| All Other |
|
|
| Fees Earned or |
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|
|
|
| Cash |
| Awards |
| Awards |
| Compensation |
| Earnings |
| Compensation |
| Total |
| Paid in Cash |
| Stock Awards |
| Total |
Name |
| ($) (a) |
| ($) (b) |
| ($) |
| ($) |
| ($) |
| ($) |
| ($) |
| ($) (1) |
| ($) (2) |
| ($) (3) |
Marilyn A. Alexander |
| 93,600 |
| 150,000 |
| — |
| — |
| — |
| — |
| 243,600 |
| 94,221 |
| 149,979 |
| 244,200 |
Peter Arkley |
| 87,800 |
| 150,000 |
| — |
| — |
| — |
| — |
| 237,800 |
| 88,421 |
| 149,979 |
| 238,400 |
Robert Band |
| (c) |
| (c) |
| (c) |
| (c) |
| (c) |
| (c) |
| (c) | ||||||
Sidney J. Feltenstein |
| 20,000 |
| 37,500 |
| — |
| — |
| — |
| — |
| 57,500 |
| 84,221 |
| 149,979 |
| 234,200 |
Michael R. Klein |
| 50,900 |
| 230,000 |
| — |
| — |
| — |
| — |
| 280,900 |
| 122,621 |
| 149,979 |
| 272,600 |
Martin R. Melone |
| 63,600 |
| 200,000 |
| — |
| — |
| — |
| — |
| 263,600 | ||||||
Robert L. Miller (d) |
| 83,600 |
| 150,000 |
| — |
| — |
| — |
| — |
| 233,600 | ||||||
Robert C. Lieber |
| 87,821 |
| 149,979 |
| 237,800 | ||||||||||||||
Raymond R. Oneglia |
| 53,600 |
| 190,000 |
| — |
| — |
| — |
| — |
| 243,600 |
| 92,121 |
| 149,979 |
| 242,100 |
Dale A. Reiss |
| 114,221 |
| 149,979 |
| 264,200 | ||||||||||||||
Donald D. Snyder |
| 91,400 |
| 150,000 |
| — |
| — |
| — |
| — |
| 241,400 |
| 102,921 |
| 149,979 |
| 252,900 |
Dickran M. Tevrizian, Jr. |
| 47,200 |
| 190,000 |
| — |
| — |
| — |
| — |
| 237,200 |
| 88,121 |
| 149,979 |
| 238,100 |
Ronald N. Tutor |
| (c) |
| (c) |
| (c) |
| (c) |
| (c) |
| (c) |
| (c) |
(1) | The amounts in column (b) represent fees paid for annual cash retainer, committee chair retainers, the Lead Independent Director retainer, attendance at board and committee meetings and the $21 difference between the overall value of the stock grant reflected in column (b) and the value of equity retainer of $150,000. The following table presents the cash and equity components of the $80,000 annual cash retainer for the directors who elected to receive a portion of this retainer in shares of the Company’s common stock based on the closing price on the New York Stock Exchange on the date of grant: |
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| Share |
| Cash |
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| ||||
|
| Amounts |
| Price |
| Value |
| Payment |
| Total |
Name |
| # |
| ($) |
| ($) |
| ($) |
| ($) |
Robert C. Lieber |
| 3,647 |
| 21.93 |
| 79,979 |
| 21 |
| 80,000 |
Raymond R. Oneglia |
| 1,823 |
| 21.93 |
| 39,978 |
| 40,022 |
| 80,000 |
Dale A. Reiss |
| 1,139 |
| 21.93 |
| 24,978 |
| 55,022 |
| 80,000 |
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| Cash |
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| Share |
| Stock |
Name |
| Payment |
| # Shares |
| Price * |
| Value |
|
| ($) |
|
|
| ($) |
| ($) |
Marilyn A. Alexander |
| 80,000 |
| — |
| — |
| — |
Peter Arkley |
| 80,000 |
| — |
| — |
| — |
Sidney J. Feltenstein |
| 20,000 |
| — |
| — |
| — |
Michael R. Klein |
| — |
| 4,289 |
| 18.65 |
| 80,000 |
Martin R. Melone |
| 30,000 |
| 2,680 |
| 18.65 |
| 50,000 |
Robert L. Miller |
| 80,000 |
| — |
| — |
| — |
Raymond R. Oneglia |
| 40,000 |
| 2,144 |
| 18.65 |
| 40,000 |
Donald D. Snyder |
| 80,000 |
| — |
| — |
| — |
Dickran M. Tevrizian |
| 40,000 |
| 2,144 |
| 18.65 |
| 40,000 |
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|
Mr. Klein had an equity award in the formAs of 100,000 restricted stock units that vested on September 4, 2013. NoneDecember 31, 2015, none of our other non-employee directors havehad any outstanding equity awards as shares of Common Stock are typically only issued to non-employee directors as part of their annual retainer fee.awards.
In 2012, the Company implemented a policy requiring the NEOs, as well as outsidenon-employee directors and other executives designated by the Compensation Committee, to maintain ownership of at least 75% of net shares acquired via grants of equity-based compensation until they are no longer with the Company. As of the most recent measurement date, all NEOs, outsidenon-employee directors and other executives so designated by the Compensation Committee were in compliance with this policy.
35Stock Ownership Guidelines for Non-Employee Directors
TableIn 2014, the Company implemented a policy requiring stock ownership by non-employee directors. Specifically, the Company’s non-employee directors are subject to stock ownership guidelines which are intended to align their interests with those of Contentsour shareholders. Under the guidelines, our non-employee directors must maintain ownership of Tutor Perini stock at a multiple of five times the annual cash retainer. The minimum number of shares guideline is updated annually based on the current cash retainer ($80,000 as of December 31, 2015) and the 12-month trailing average Tutor Perini stock price. Shares owned directly or indirectly, deferred stock units, value of vested but unexercised stock options and unvested RSUs are counted toward the guidelines. Non-employee directors have until the later of fiscal year-end 2015 or five years after becoming a director to comply with the guidelines.
All of our non-employee directors exceeded the stock ownership guidelines, with the exception of Mr. Feltenstein, Mr. Lieber and Ms. Reiss, for whom compliance with the guidelines is not required until November 2018, August 2019, and May 2019, respectively, the five-year anniversary when each became a director.
Director and Officer Indemnification
Our amended and restated articles of organization provide that no director shall be personally liable to us or to our shareholders for monetary damages for breach of fiduciary duty as a director, except for liability for any breach of the director’s duty of loyalty to us or
39
our shareholders, for acts or omissions not in good faith, for acts or omissions involving intentional misconduct or a knowing violation of law or for any transaction from which the director derived an improper personal benefit. Our bylawsby-laws provide that our directors and officers will be indemnified against liabilities that arise from their service as directors and officers, subject to certain exceptions. We have obtained insurance which insures our directors and officers against certain losses and which insures us against our obligations to indemnify our directors and officers.
CERTAINRELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We have adopted thea Code of Business Conduct and Ethics for all executive officers, directors, and employees, thatwhich addresses potential conflict of interest situations, including related party transactions. Under this policy,Code of Business Conduct and Ethics, any questions involving potential conflict of interest situations are required to be directed to our chief compliance officer, and suspected violations are required to be reported to either the chief compliance officer or the Chair of the Audit Committee. In addition, our Audit Committee is responsible for reviewing and evaluating potential transactions with related parties, and then advising the Board whether such transactions are appropriate.
The transactions described below were reviewed and approved by the Audit Committee and the Board, as applicable, in accordance with our policies.policies involving potential conflict of interest situations. In addition, we believe that the transactions described below were on terms that were at least as favorable to us as we would have expected to negotiate with other unaffiliated third parties at the point in time these transactions were consummated.
Merger with Tutor-Saliba Corporation
On September 8, 2008, we completed the merger with Tutor-Saliba pursuant to an agreement and plan of merger between us, Tutor-Saliba, Ronald N. Tutor and shareholders of Tutor-Saliba. The merger and related transactions were recommended to the Board by the Special Committee which included only independent and disinterested directors. Subsequent to the approval of the merger by our shareholders, we issued 22,987,293 shares of Common Stock to the shareholders of Tutor-Saliba in exchange for 100% of the outstanding capital stock of Tutor-Saliba. Mr. Tutor served as our Chairman and Chief Executive Officer prior to the merger and continues in that role pursuant to his Employment Agreement. See “Employment Agreements” starting on page 31. In addition, Mr. Tutor controls two trusts that collectively owned 96% of the outstanding stock of Tutor-Saliba prior to the merger. As a result of the merger, Mr. Tutor, through these two trusts, became the beneficial owner of approximately 43% of the outstanding Common Stock. The shares owned by the two trusts are subject to certain restrictions contained in the Amended Shareholders Agreement as described below.
Amended Shareholders Agreement
Effective September 8, 2008 upon completion of the merger with Tutor-Saliba, we entered into a shareholders agreement with Mr. Tutor, as the shareholder representative, and each of the former Tutor-Saliba shareholders who became shareholders of Tutor Perini. The shareholders agreement was amended by a first amendment dated September 17, 2010, a second amendment dated June 2, 2011, a third amendment dated September 13, 2011, and a fourth amendment dated March 20, 2013.
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Composition of the Board of Directors
The Amended Shareholders Agreement provides that the shareholder representative has the right to designate two nominees for election to the Board for so long as the Tutor Group owns at least 22.5% of the outstanding shares of Common Stock and one nominee if the Tutor Group owns less than 22.5% but more than 11.25% of the outstanding shares of Common Stock. Mr. Tutor elected to exercise his right to designate one nominee to the Board when he designated Mr. Feltenstein for nomination and election to the Board. In addition, for so long as Mr. Tutor serves as the Chief Executive Officer of Tutor Perini, he will be nominated for election to the Board. At each meeting of shareholders at which directors are to be elected, we have agreed to nominate for election to the Board and recommend the election of the shareholder representative’s designees and Mr. Tutor (as long as he serves as our Chief Executive Officer), subject to certain limitations to comply with law, governance requirements or eligibility for listing on a securities exchange or if a nominee is deemed to be unfit to serve as a director of an NYSE-listed company or otherwise does not meet applicable eligibility criteria.
Voting Restrictions
Pursuant to the Amended Shareholders Agreement, until the later of September 8, 2011 or the date on which the Tutor Group owns less than 20% of the outstanding shares of Common Stock, the Tutor Group will vote all of their shares of Common Stock in support of the Board’s slate of directors, and on all other matters to be voted on by shareholders, the Tutor Group will vote their shares of Common Stock that are, in the aggregate, equal to up to 20% of the voting power of the outstanding shares in their discretion and the balance of their shares in the same proportions as all other shares of Common Stock (excluding the Tutor Group) are voted on such matter.
These voting restrictions terminated effective November 16, 2012 when the Tutor Group’s ownership percentage decreased to less than 20% of the outstanding shares of Common Stock of the Company.
Standstill
Pursuant to the Amended Shareholders Agreement, until the later of September 8, 2011 or the date on which the Tutor Group owns less than 20% of the outstanding shares of Common Stock, the Tutor Group may not take certain actions that may be deemed to be actions to obtain control of Tutor Perini, including:
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These standstill restrictions will not prohibit or restrict any action taken by a director or designee of the shareholder representative as a member of the Board or the exercise of any voting rights with regard to shares of the Common Stock.
These standstill restrictions terminated effective November 16, 2012 when the Tutor Group’s ownership percentage decreased to less than 20% of the outstanding shares of Common Stock of the Company.
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Transfer Restrictions
Prior to March 20, 2013, the Amended Shareholders Agreement contained certain restrictions on the ability of Ronald N. Tutor and certain trusts controlled by Ronald N. Tutor to freely transfer certain shares of Company Common Stock; however, the fourth amendment to the Amended Shareholders Agreement provided that such transfer restrictions were terminated as of such date.
Registration Rights
Pursuant to the Amended Shareholders Agreement, Tutor Perini has agreed to give the Tutor Group certain registration rights with respect to the shares of the Common Stock acquired pursuant to the merger. After March 8, 2009, subject to the continuing effect of the transfer restrictions set forth in the Amended Shareholders Agreement noted above, the shareholder representative may require Tutor Perini, on up to three occasions, to register shares of Common Stock issued to the Tutor Group in connection with the merger for resale under the Securities Act in an underwritten offering. Tutor Perini is responsible for paying the expenses of any such registration.
If we propose to register any securities under the Securities Act, each member of the Tutor Group must receive notice of the registration and the opportunity to include its shares of the Common Stock in the registration. These “piggyback registration” rights are subject to customary conditions and limitations, including the right of the underwriters of an offering to limit the number of shares included in such registration and Tutor Perini’s right not to effect a requested registration. Tutor Perini is responsible for paying the expenses of any such registration.
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Leased Property
We lease certain facilities from Ronald N. Tutor and an affiliateentity owned by Mr. Tutor under non-cancelable operatingat market lease agreements with monthly payments of $180,000, which increase at 3% per annum beginning August 1, 2009 and expire on July 31, 2016. Lease expense forrates. Under these leases recorded on a straight-line basis was $2.5we paid $2.7 million and recognized expense of $3.2 million for the year ended December 31, 2013.
O&G Joint Ventures
Raymond R. Oneglia, one of our directors, is the Vice Chairman of the Board of Directors of O&G Industries, Inc. (“O&G”). As of December 31, 2013, the Company had a 30% interest in a joint venture with O&G as the sponsor involving a highway construction project for the State of Connecticut with an estimated total contract value of approximately $368 million, scheduled for completion in 2017. Under this arrangement, O&G Industries provides project-related equipment and services directly to the customer on customary trade terms. In accordance with the joint venture agreement, O&G Industries was paid $6.9 million in 2013. The Company’s2015. Our participation in this joint venturethese lease agreements was reviewed and approved by the Audit Committee in accordance with the Company’s policy. Code of Business Conduct and Ethics.
O&G’s cumulative holding&G Joint Ventures
Raymond R. Oneglia, Vice Chairman of O&G Industries, Inc. (“O&G”), is one of our directors. As of December 31, 2015, O&G owned 500,000 shares of our Common Stock. We formed a joint venture with O&G to provide contracting services for a highway construction project. O&G provides equipment and services to the joint venture on customary trade terms. The joint venture paid O&G $10.7 million for the year ended December 31, 2015. We have a 30% percent interest in the joint venture, which we account for using the proportionate consolidation method. Our participation in this joint venture was reviewed and approved by the Audit Committee in accordance with the Company’s stock was 600,000 shares, or 1.24%Code of total common shares outstandingBusiness Conduct and Ethics.
Alliant Insurance Services, Inc.
Peter Arkley, Senior Managing Director, Construction Services Group, of Alliant Insurance Services, Inc. (“Alliant”), is one of our directors. We use Alliant for various insurance related services and have paid Alliant $9.8 million for the year ended December 31, 2015. The Company owed Alliant $7.5 million for services rendered as of December 31, 2013.2015. Pursuant to the Company’s Code of Business Conduct and Ethics, the Audit Committee has approved the use of Alliant for the Company’s insurance services.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee has served as one of our officers or employees at any time. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the Boardboard or Compensation Committeecompensation committee of any entity that has one or more executive officers serving on our Board or Compensation Committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) No member of the Securities Exchange ActCompensation Committee, other than Peter Arkley, had any relationship requiring disclosure under Item 404 of 1934,Regulation S-K. Mr. Arkley is Senior Managing Director, Construction Services Group, of Alliant. We use Alliant for various insurance related services and have paid Alliant $9.8 million for the year ended December 31, 2015. The Company owed Alliant $7.5 million for services rendered as amended, requires our executive officers (as defined in regulations issuedof December 31, 2015. Our use of Alliant’s various insurance related services were reviewed and approved by the SEC) and directors, and persons who own more than ten percent of a registered class of Tutor Perini’s equity securities (collectively, “Insiders”), to file initial reports of ownership and reports of changesAudit Committee in ownership of the Common Stock (including options and warrants to acquire Common Stock)accordance with the SEC. Officers, directorsCompany’s Code of Business Conduct and greater than ten percent shareholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
Ronald N. Tutor, Chairman of the Board and Chief Executive Officer, and the Ronald N. Tutor Separate Property Trust (a separate entity that owns more than ten percent of Tutor Perini’s Common Stock) each had one Form 4 filed on their behalf one day late on September 20, 2013 due to an administrative oversight.Ethics, as noted above.
OWNERSHIP OF COMMON STOCK BY DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL SHAREHOLDERS
The following table sets forth certain information concerning beneficial ownership as of March 20, 201431, 2016 of the Common Stock by each director and nominee;nominee, each executive officer named in the summary compensation table;table, all directors and executive officers as a group;group and all persons we know to hold in excess of 5% of the Common Stock.
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In preparing the following table, we relied upon statements filed with the SEC by beneficial owners of more than 5% of the outstanding shares of the Common Stock pursuant to Section 13(d) or 13(g) of the Exchange Act, unless we knew or had reason to believe that the information contained in such statements was not complete or accurate, in which case we relied upon information which we considered to be accurate and complete. Unless otherwise indicated, the address of each of the individuals and entities named below is: c/o Tutor Perini Corporation, 15901 Olden Street, Sylmar, California 91342.
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Name of Beneficial Owner |
| Amount of Common Stock Beneficially Owned (1) |
| Percent of Common Stock Beneficially Owned (2) | |
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Named Executive Officers |
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Ronald N. Tutor |
| 9,806,375 | (3)(4) |
| 19.6% |
James A. Frost |
| 597,226 | (5) |
| * |
Craig W. Shaw |
| 146,731 |
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| * |
Michael J. Kershaw |
| 30,863 |
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| * |
Gary G. Smalley |
| — |
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| * |
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Non-Employee Directors |
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Raymond R. Oneglia |
| 552,929 | (6) |
| * |
Michael R. Klein |
| 440,883 |
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| * |
Peter Arkley |
| 41,710 |
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| * |
Dickran M. Tevrizian, Jr. |
| 39,346 |
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| * |
Donald D. Snyder |
| 28,920 |
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| * |
Marilyn A. Alexander |
| 26,703 |
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| * |
Sidney J. Feltenstein |
| 13,346 |
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| * |
Dale A. Reiss |
| 12,807 |
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| * |
Robert C. Lieber |
| 14,578 |
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| * |
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All Directors and Executive Officers as a Group (16 persons) |
| 11,752,417 |
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| 23.4% |
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Beneficial Ownership of 5% or More |
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Ronald N. Tutor |
| 9,806,375 | (3)(4) |
| 19.6% |
Dimensional Fund Advisors LP |
| 4,116,970 | (7) |
| 8.4% |
Barrow, Hanley, Mewhinney & Strauss, LLC |
| 3,540,890 | (8) |
| 7.2% |
Hotchkis and Wiley Capital Management, LLC |
| 2,605,433 | (9) |
| 5.3% |
The Vanguard Group, Inc. |
| 2,596,448 | (10) |
| 5.3% |
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| Shares of Common Stock | |||
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| August 29, 2014 | |||
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Name |
| Shares |
| % | |
Directors and Executive Officers |
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Ronald N. Tutor |
| 9,156,375 | (3)(4) |
| 18.9% |
James A. Frost |
| 609,442 | (5) |
| 1.3% |
Michael R. Klein |
| 484,044 |
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| 1.0% |
Robert Band |
| 145,261 |
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| ** |
Craig W. Shaw |
| 137,513 |
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| ** |
Raymond R. Oneglia |
| 43,767 | (6) |
| ** |
Peter Arkley |
| 34,871 |
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Dickran M. Tevrizian, Jr. |
| 32,507 |
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| ** |
Donald D. Snyder |
| 22,081 |
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| ** |
Michael J. Kershaw |
| 30,000 |
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| — |
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Marilyn A. Alexander |
| 19,864 |
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| ** |
Sidney J. Feltenstein |
| 6,507 |
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| ** |
Ron Marano |
| 5,000 |
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| ** |
Dale A. Reiss |
| 4,829 |
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| ** |
Robert C. Lieber |
| 4,092 |
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| ** |
Kenneth R. Burk |
| — | (7) |
| — |
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All Directors and Executive Officers as a Group (16 persons) |
| 10,736,153 |
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| 22.1% |
Beneficial Ownership of 5% or More |
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Ronald N. Tutor, 15901 Olden Street, Sylmar, CA 91342 |
| 9,156,375 | (3) |
| 18.9% |
Dimensional Fund Advisors LP, Palisades West, Building One, 6300 Bee Cave Road, Austin, TX 78746 |
| 3,545,204 | (8) |
| 7.3% |
AllianceBernstein LP, 1345 Avenue of the Americas, New York, NY 10105 |
| 3,490,690 | (8) |
| 7.2% |
FMR LLC, 245 Summer Street, Boston, MA 02210 |
| 2,856,808 | (8) |
| 5.9% |
** Less than 1%.
(1) | Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock and stock options |
(2) |
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(3) | Based on |
(4) | Includes 4,500,000 shares that have been pledged as collateral for a line of credit. |
(5) | Includes |
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(6) |
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(7) |
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voting power relative to 0 shares, (iii) sole dispositive power relative to 4,116,970 shares and |
(8) |
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(9) | Based on Schedule 13G filed with the SEC on February 12, 2016 by Hotchkis & Wiley Capital Management, LLC (“Hotchkis & Wiley”), which indicates that as of December 31, 2015, Hotchkis & Wiley had (i) sole voting power relative to 2,170,933 shares, (ii) shared voting power relative to 0 shares, (iii) sole dispositive power relative to 2,605,433 shares and (iv) shared dispositive power relative to 0 shares. The address of Hotchkis & Wiley is 725 S. Figueroa Street, 39th Fl, Los Angeles, CA 90017. |
(10) | Based on Schedule 13G filed with the SEC on February 10, |
SHAREHOLDERSECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our officers (as defined in regulations issued by the SEC) and directors, and persons who own more than ten percent of a registered class of Tutor Perini’s equity securities, to file initial reports of ownership and reports of changes in ownership of the Common Stock (including options and warrants to acquire Common Stock) with the SEC. Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Based on our records and other information, we believe that our officers, directors and beneficial owners of more than 10% of our total outstanding shares of Common Stock who are required to file reports under Section 16(a) of the Securities Exchange Act of 1934 reported all transactions in shares of our Common Stock and derivative securities (including options and warrants to acquire Common Stock), on a timely basis during the year ended December 31, 2015.
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Performance Graph
The following graph compares the cumulative 5-year total return to shareholders on our Common Stock relative to the cumulative total returns of the NYSE Composite Index and the Dow Jones Heavy Construction Index (“DJ Heavy Construction Index”). We selected the DJ Heavy Construction Index because we believe the index reflects the market conditions within the industry in which we primarily operate. The comparison of total return on investment, defined as the change in year-end stock price plus reinvested dividends, for each of the periods assumes that $100 was invested on December 31, 2010, in each of our Common Stock, the NYSE and the DJ Heavy Construction Index, with investment weighted on the basis of market capitalization.
The comparisons in the following graph are based on historical data and are not intended to forecast the possible future performance of our Common Stock.
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| Fiscal year Ending December 31, | ||||||||||
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| 2010 |
| 2011 |
| 2012 |
| 2013 |
| 2014 |
| 2015 |
Tutor Perini Corp. |
| 100.00 |
| 57.64 |
| 63.99 |
| 122.84 |
| 112.42 |
| 78.19 |
NYSE Composite Index |
| 100.00 |
| 93.89 |
| 106.02 |
| 130.59 |
| 136.10 |
| 127.37 |
DJ Heavy Construction Index |
| 100.00 |
| 82.13 |
| 99.22 |
| 129.68 |
| 96.09 |
| 84.45 |
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PROPOSAL 2: RATIFICATION OF APPOINTMENT OF AUDITORS
Our Audit Committee has selected the firm of Deloitte & Touche LLP, independent registered public accounting firm, as our auditors for the fiscal year ending December 31, 2016. Although shareholder approval of the selection of Deloitte & Touche LLP is not required by law, the Board believes that it is advisable to give shareholders an opportunity to ratify this selection. If this proposal is not approved by our shareholders at the 2016 Annual Meeting, our Audit Committee will reconsider their selection of Deloitte & Touche LLP. Deloitte & Touche LLP has been our independent registered public accounting firm since 2002. Representatives of Deloitte & Touche LLP will be present at the 2016 Annual Meeting of Shareholders, will have the opportunity to make a statement, if they so desire, and will be available to answer appropriate questions.
FEES PAID TO AUDIT FIRM
During the years ended December 31, 2015 and 2014, we retained Deloitte & Touche, LLP to provide services in the following categories and amounts:
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| 2015 |
| 2014 | ||
Audit Fees | $ | 3,646,225 |
| $ | 3,611,573 |
Audit-Related Fees(1) |
| 55,125 |
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| 53,650 |
Tax Fees(2) |
| 145,000 |
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| 359,114 |
Total Fees | $ | 3,846,350 |
| $ | 4,024,337 |
(1) | Audit-related fees were primarily for assurance services and services that are not required by statute or regulation. |
(2) | Consists of fees for tax consulting services, including evaluation of recently issued regulations as well as the Company’s qualifications for certain tax benefits. |
Pre-Approval Policy for Services Provided by our Independent Registered Public Accounting Firm
The Audit Committee has established a policy to pre-approve all permissible audit and non-audit services provided by our independent registered public accounting firm consistent with applicable SEC rules. Our independent registered public accounting firm is generally prohibited from performing any management consulting projects. Our independent registered public accounting firm is also prohibited from providing tax consulting services relating to transactions or proposals in which the sole purpose may be tax avoidance or for which the tax treatment may not be supported by the Internal Revenue Code. Prior to the engagement of our independent registered public accounting firm for the next year’s audit, management submits an aggregate of services expected to be rendered during that year for each of the categories of services described above to the Audit Committee for approval. Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted by category of service and the Audit Committee receives periodic reports from management and our independent registered public accounting firm on actual fees versus the budget by category of service. During the year, circumstances may arise when it may become necessary to engage our independent registered public accounting firm for additional services not contemplated in the pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging our independent registered public accounting firm.
The Audit Committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated is required to report, for informational purposes, any pre-approval decisions to the Audit Committee at its next regularly scheduled meeting.
THE TUTOR PERINI BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR TUTOR PERINI FOR THE FISCAL YEAR ENDING DECEMBER 31, 2016.
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PROPOSAL 3: AMENDMENT AND RESTATEMENT OF BY-LAWS TO MODIFY INDEMNIFICATION AND OTHER PROVISIONS
The Board has approved an amendment and restatement of our by-laws to modify indemnification provisions, reduce the shareholder threshold required to call special meetings and modify other provisions to reflect best practice based on the Massachusetts Business Corporation Act. The proposed amendments are set forth in the Amended and Restated By-Laws attached as Appendix A to this proxy statement and are summarized below. This summary is qualified in its entirety by reference to Appendix A, which is incorporated herein by reference. The Board recommends that our shareholders approve these proposed amendments. If these amendments to our by-laws are not approved, the current by-laws will remain in effect, subject to the right of the Board to approve amendments not required to be approved by shareholders, including the “Other proposed amendments” listed below.
Amendments Relating to Indemnification
Current By-Laws
Our by-laws currently require the Company to indemnify our directors and officers against expenses incurred by them in connection with any proceeding in which they are involved as a result of serving in their role with the Company, except in the case of actions in which they are determined not to have acted in good faith and in the reasonable belief that their actions were in the best interest of the Company, or with respect to a criminal matter, if they had reasonable cause to believe that their conduct was unlawful. However, the bylaws do not require indemnification for liabilities other than expenses, and no indemnification may be provided for any director or officer with respect to actions by the Company or shareholder derivative lawsuits in which he or she is determined to be liable to the Company. The by-laws specify that they do not limit the power of the Company to indemnify our officers and directors to the full extent permitted by law, but such indemnification is not mandatory, and would not be permitted in the case of actions by the Company or shareholder derivative lawsuits, except to the limited extent set forth in our current by-laws.
Proposed Amendments
The proposed amendments would expand the mandatory indemnification of our directors and officers to the fullest extent authorized by Massachusetts law. The Company would also be required to indemnify employees serving in any capacity with respect to employee benefit plans.
· | Indemnification would be provided against all liabilities and expenses, including judgments, fines, penalties, settlement amounts and legal fees. No indemnification would be provided with respect to any matter in which an indemnitee is determined not to have acted in good faith in the reasonable belief that his action was in the best interests of the Company or, to the extent the matter relates to service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of the employee benefit plan. |
· | Eligibility for indemnification for actions by the Company and shareholder derivative lawsuits would be based on the same standard as any other claim, and unlike the current bylaws would not be limited to expenses incurred. |
· | The Company would be required to advance expenses incurred by the indemnitee in defending an action in advance of its final disposition, subject to an undertaking by the indemnitee to repay such amount in the event he or she is determined not to be eligible for indemnification. |
The Board believes that highly competent persons are reluctant to serve corporations as directors or officers or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation. The Board believes that it is accordingly reasonable, prudent and necessary for the Company’s indemnification of its officers and directors to be provided to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified. The proposed amendments affect necessary changes to the Company’s by-laws to ensure that the Company’s indemnification of its directors and officers meets this standard. Under Section 12(e) of our by-laws, amendments relating to the indemnification of our directors may only be made with the approval of our shareholders.
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Other Proposed Amendments
The table below summarizes additional amendments to our by-laws, including how the proposed amendments compare to the current by-laws. The Board is seeking shareholder approval for these provisions even though pursuant to the by-laws these amendments could be effected by the Board without shareholder approval. The first amendment lowers the threshold required to call a special meeting and is in response to feedback received in our shareholder outreach program. The other amendments are being proposed because the Board believes that they reflect best practice based on the Massachusetts Business Corporation Act.
Section | Current Provision | Proposed Provision | ||
2.3 | The shareholder threshold for calling special meetings of shareholders is 40% of the capital stock entitled to vote; the by-law does not specify that the shareholders’ application of meeting must specify the purpose. | The shareholder threshold for calling special meetings of shareholders would be reduced to 25%, such request to be made pursuant to an application that describes the purpose for which the meeting is to be held. | ||
2.4 | Adjourned sessions of shareholder meetings must be held in the same city or town as the initial session, or within Massachusetts. | Adjourned sessions of shareholder meetings need not be held in the same place as the initial session, or within Massachusetts. | ||
2.5 | A minimum of 10 days is required for notice of shareholder meetings. | The minimum number of days for notice of shareholder meetings was reduced to seven days. | ||
2.5 | Notice of shareholder meetings is required to be given in person or by mail. | Notice may be given for all purposes under the by-laws using a variety of different methods consistent with today’s delivery options, including by telephone, voice mail, electronic means, mail, messenger or delivery service. In some circumstances, notice may be given by publication. | ||
2.6 | Quorums are determined based on shares entitled to vote at the meeting. | Quorums are based on voting groups and will be determined for each matter coming before the meeting. | ||
2.8 | Fractional share voting not specified. | Fractional shares are entitled to a proportional vote. | ||
2.11 | Proxies are valid only for six months from the date granted. | Proxies are valid for up to 11 months. | ||
3.8 | Action of directors by written consent must be signed in writing. | Action of directors by written consent may be delivered by electronic transmission. | ||
8.3 | Record dates for shareholder meetings and for other actions may not be more than 60 days in advance of the meeting or other action. The record date is valid at any adjournment of the meeting. | Record dates for shareholder meetings and for other actions may not be more than 70 days in advance of the meeting or other action. The record date is effective for any adjournment unless the Board fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the annual meeting. | ||
10.2 | The right of a shareholder to inspect and copy records of the Company is not expressly restricted in the case of material non-public information. | The right of a shareholder to inspect and copy records of the Company may be restricted in the case of material non-public information. |
Effectiveness of Amendment and Restatement
If approved at the 2016 Annual Meeting, the amendment and restatement of our by-laws would be effective upon such approval.
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THIS PROPOSAL TO AMEND AND RESTATE OUR BY-LAWS.
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PROPOSAL 4: ADVISORY (NON-BINDING) VOTE ON TUTOR PERINI’S EXECUTIVE COMPENSATION
Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires that the Company seek a non-binding advisory vote from its shareholder to approve the compensation of our NEOs as disclosed in the Compensation Discussion and Analysis (“CD&A”) and tabular disclosures of this proxy statement.
As described in detail in the CD&A, we seek to provide our executives with appropriate incentives to drive the success of our business. We strive to design programs that are performance-based and that encourage executives to further the overall business strategy of the company. We provide compensation that is competitive to retain high-quality executives to produce successful results for shareholders.
The vote on this resolution is not intended to address any specific element of compensation; rather, the vote relates to the compensation of our NEOs, as described in this proxy statement in accordance with the compensation disclosure rules of the SEC, including the CD&A and the related tables and narrative disclosures. We believe that the Company’s NEO compensation program has been effective at appropriately aligning pay and performance and in enabling the Company to attract and retain very talented executives within our industry.
The vote on this resolution is advisory and therefore not binding on the Company, the Compensation Committee or the Board. Although the vote is non-binding, the Compensation Committee will review the voting results in connection with the on-going evaluation of the Company’s executive compensation program.
THE TUTOR PERINI BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS SHAREHOLDERS VOTE “FOR” THE FOLLOWING RESOLUTION:
“RESOLVED, that the shareholders approve the compensation awarded by the Company to the Named Executive Officers, as described in the CD&A, tabular disclosures, and other narrative executive compensation disclosures in this proxy statement as required by the rules of the Securities and Exchange Commission.”
SHAREHOLDER PROPOSALS FOR 20152017 ANNUAL MEETING
Any proposal of a shareholder submitted pursuant to Exchange Act Rule 14a-8 for inclusion in Tutor Perini’s proxy statement and form of proxy for its 20152017 Annual Meeting of Shareholders must be received by Tutor Perini on or before December 18, 201416, 2016 in order to be considered for inclusion in its proxy statement and form of proxy. If the 20152017 Annual Meeting of Shareholders is advanced or delayed by more than 30 calendar days from May 28, 2015,25, 2017, Tutor Perini will inform shareholders of such change and the new dates for submitting shareholder proposals for inclusion in the 20152017 Annual Meeting of Shareholders proxy statement. Such proposals must comply with the requirements as to form and substance established by the SEC if such proposals are to be included in the proxy statement and form of proxy. Any such proposal should be mailed to: Tutor Perini Corporation, 15901 Olden Street, Sylmar, California 91342, Attention: Corporate Secretary.
Tutor Perini’s bylawsby-laws require that Tutor Perini be given advance written notice of matters that shareholders wish to present for action at an annual meeting of shareholders (other than matters included in Tutor Perini’s proxy materials in accordance with Rule 14a-8 under the Exchange Act). Any proposal of a shareholder intended to be presented at Tutor Perini’s 20152017 Annual Meeting of Shareholders, other than shareholder proposals submitted pursuant to Exchange Act Rule 14a-8, must be received by us no earlier than November 29, 2014,27, 2016, nor later than March 14, 2015.12, 2017. If the 20152017 Annual Meeting of Shareholders is advanced by more than 7 calendar days from May 28, 2015,25, 2017, Tutor Perini will inform shareholders of such change and the new dates for submitting shareholder proposals pursuant to the Tutor Perini bylawsby-laws (other than shareholder proposals submitted pursuant to Exchange Act Rule 14a-8) for presentation at the 20152017 Annual Meeting of Shareholders. If a shareholder fails to provide timely notice of a proposal to be presented at the 20152017 Annual Meeting of Shareholders, the proxies designated by the Board will have discretionary authority to vote on any such proposal that may come before the meeting. In addition, shareholder proposals must comply with the requirements of our bylaws.by-laws. Any such proposal should be mailed to: Tutor Perini Corporation, 15901 Olden Street, Sylmar, California 91342, Attention: Corporate Secretary.
Please see “Nominations for Director” on page 9 for a description of the requirements for submitting a candidate for nomination as a director at the 2017 Annual Meeting of Shareholders.
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The Board knows of no other matters that are likely to be brought before the meeting. However, if any other matters of which the Board is not aware are presented to the meeting for action, it is the intention of the persons named in the accompanying form of proxy to vote said proxy in accordance with their judgment on such matters.
HOUSEHOLDING OF ANNUAL AND SPECIAL MEETING MATERIALS
Some banks, brokers and other nominee record holders may be participating in the practice of “householding”.“householding.” This means that only one copy of our Notice of Internet Availability of Proxy Materials may have been sent to multiple shareholders in your household. We will promptly deliver a separate copy to you if you call or write us at the following address or telephone number: Tutor Perini Corporation, 15901 Olden Street, Sylmar, California 91342, Attention: Corporate Secretary, (818) 362-8391. If you want to receive separate copies of the Notice of Internet Availability of Proxy Materials in the future, or if you are receiving multiple copies and would like to receive only one copy for your household, you should contact your bank, broker, or other nominee record holder, or you may contact us at the above address and telephone number.
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WHEREYOU CAN FIND ADDITIONAL INFORMATION
Tutor Perini files annual, quarterly, and current reports, proxy statements and other information with the SEC. You may read and copy any reports, proxy statements or other information that we file with the SEC at the following location:
Public Reference Room
100 F. Street, N.E.
Washington, D.C. 20549
Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. You may also obtain copies of reports, proxy statements or other information concerning us, including any document incorporated by reference in this proxy statement, without charge, by written or telephonic request directed to us at Tutor Perini Corporation, 15901 Olden Street, Sylmar, California 91342, Attention: Corporate Secretary, (818) 362-8391. If you would like to request documents, please do so by November 2, 2014May 17, 2016 in order to receive them before the SpecialAnnual Meeting of Shareholders on November 12, 2014.May 25, 2016.
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EXHIBITAPPENDIX A
AMENDED AND RESTATED TUTOR PERINI CORPORATION
LONG-TERM INCENTIVE PLAN
(as amended on October 2, 2014)
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Tutor Perini Corporation Amended and Restated Long-Term Incentive Plan (the “Amended Plan”). The purpose of the Plan is to encourage and enable the officers, employees, non-employee directors and other key persons (including consultants and prospective employees) of Tutor Perini Corporation (the “Company”) and its Subsidiaries upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of their interests with those of the Company, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
“Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.
“Administrator” is defined in Section 2(a).
“Award” or “Awards,” except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Deferred Stock Awards, Restricted Stock Awards, Unrestricted Stock Awards and Dividend Equivalent Rights.
“Board” means the Board of Directors of the Company.
“Code” means the Internal Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.
“Committee” means the Committee of the Board referred to in Section 2.
“Covered Employee” means an employee who is a “Covered Employee” within the meaning of Section 162(m) of the Code.
“Deferred Stock Award” means Awards granted pursuant to Section 8.
“Dividend Equivalent Right” means Awards granted pursuant to Section 11.
“Effective Date” has the meaning set forth in Section 17.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
“Fair Market Value” of the Stock on any given date means the fair market value of the Stock determined by its closing price on the New York Stock Exchange. If there are no market quotations for such date, the determination shall be made by reference to the last date preceding such date for which there are market quotations.
“Incentive Stock Option” means any Stock Option designated and qualified as an “incentive stock option” as defined in Section 422 of the Code.
“Non-Qualified Stock Option” means any Stock Option that is not an Incentive Stock Option.
“Option” or “Stock Option” means any option to purchase shares of Stock granted pursuant to Section 5.
“Performance Cycle” means one or more periods of time, which may be of varying and overlapping durations, as the Administrator may select, over which the attainment of one or more performance criteria will be measured for the purpose of determining a grantee’s right to and the payment of a Restricted Stock Award or Deferred Stock Award.
“Performance Goals” is defined in Appendix 1.
“Restricted Stock Award” means Awards granted pursuant to Section 7.
“Section 162(m) Award” is defined in Section 10.
“Stock” means the Common Stock, par value $1.00 per share, of the Company.
“Stock Appreciation Right” means any Award granted pursuant to Section 6.
“Subsidiary” means any corporation or other entity (other than the Company) in which the Company has a controlling interest, either directly or indirectly.
“Unrestricted Stock Award” means any Award granted pursuant to Section 9.
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SECTION 2. ADMINISTRATION OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS
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All decisions and interpretations of the Administrator shall be binding on all persons, including the Company and Plan grantees.
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SECTION 3. STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
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The Administrator may also adjust the number of shares subject to outstanding Awards and the exercise price and the terms of outstanding Awards to take into consideration material changes in accounting practices or principles, unusual or non-recurring events, extraordinary dividends, acquisitions or dispositions of stock or property or any other event if it is determined by the Administrator that such adjustment is appropriate to avoid distortion in the operation of the Plan, provided that no such adjustment shall be made in the case of an Incentive Stock Option, without the consent of the grantee, if it would constitute a modification, extension or renewal of the Option within the meaning of Section 424(h) of the Code.
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Notwithstanding anything to the contrary in this Section 3(c), in the event of a Sale Event pursuant to which holders of the Stock of the Company will receive upon consummation thereof a cash payment for each share surrendered in the Sale Event, the Company shall have the right, but not the obligation, to make or provide for a cash payment to the grantees holding Options and Stock Appreciation Rights, in exchange for the cancellation thereof, in an amount equal to the difference between (A) the value as determined by the Administrator of the consideration payable per share of Stock pursuant to the Sale Event (the “Sale Price”) times the number of shares of Stock subject to outstanding Options and Stock Appreciation Rights (to the extent then exercisable at prices not in excess of the Sale Price) and (B) the aggregate exercise price of all such outstanding Options and Stock Appreciation Rights.
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SECTION 4. ELIGIBILITY
Grantees under the Plan will be such full or part-time officers and other employees, non-employee directors and key persons (including consultants and prospective employees) of the Company and its Subsidiaries as are selected from time to time by the Administrator in its sole discretion.
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SECTION 5. STOCK OPTIONS
Any Stock Option granted under the Plan shall be in such form as the Administrator may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock Options may be granted only to employees of the Company or any Subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the Code. To the extent that any Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option.
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Payment instruments will be received subject to collection. The delivery of certificates representing the shares of Stock to be purchased pursuant to the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in accordance with the provisions of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other requirements contained in the Option Award agreement or applicable provisions of laws. In the event an optionee chooses to pay the purchase price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the optionee upon the exercise of the Stock Option shall be net of the number of shares attested to.
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SECTION 6. STOCK APPRECIATION RIGHTS
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A Stock Appreciation Right or applicable portion thereof granted in tandem with a Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Option.
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SECTION 7. RESTRICTED STOCK AWARDS
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SECTION 8. DEFERRED STOCK AWARDS
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SECTION 9. UNRESTRICTED STOCK AWARDS
The Administrator may, in its sole discretion, grant (or sell at par value or such higher purchase price determined by the Administrator) an Unrestricted Stock Award to any grantee pursuant to which such grantee may receive shares of Stock free of any restrictions (“Unrestricted Stock”) under the Plan. Unrestricted Stock Awards may be granted in respect of past services or other valid consideration, or in lieu of cash compensation due to such grantee.
SECTION 10. PERFORMANCE-BASED SECTION 162(m) AWARDS TO COVERED EMPLOYEES
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SECTION 11. DIVIDEND EQUIVALENT RIGHTS
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SECTION 12. TAX WITHHOLDING
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SECTION 13. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a termination of employment:
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SECTION 14. AMENDMENTS AND TERMINATION
(a) The Board may, at any time, amend or discontinue the Plan and the Administrator may, at any time, amend or cancel any outstanding Award, but no such action shall adversely affect rights under any outstanding Award without the holder’s consent subject to paragraph (b) below. Except as provided in Section 3(b) or 3(c), in no event may the Administrator exercise its discretion to (i) reduce the exercise price of an outstanding Stock Option or an outstanding Stock Appreciation Right, (ii) cancel outstanding Stock Options outstanding Stock Appreciation Rights in exchange for other Stock Options or other Stock Appreciation Rights with an exercise price that is less than the exercise price of the cancelled Stock Options or cancelled Stock Appreciation Rights, as applicable, or (iii) cancel an outstanding Stock Option or an outstanding Stock Appreciation Right with an exercise price that is less than the Fair Market Value of a share of Stock on the date of cancellation in exchange for cash or another Award.
Any material Plan amendments (other than amendments that curtail the scope of the Plan), including any Plan amendments that (i) increase the number of shares reserved for issuance under the Plan, (ii) expand the type of Awards available, materially expand the eligibility to participate or materially extend the term of the Plan, or (iii) materially change the method of determining Fair Market Value, shall be subject toapproval by the Company stockholders entitled to vote at a meeting of stockholders. In addition, to the extent determined by the Administrator to be required by the Code to ensure that Incentive Stock Options granted under the Plan are qualified under Section 422 of the Code or to ensure that compensation earned under Awards qualifies as performance-based compensation under Section 162(m) of the Code, Plan amendments shall be subject to approval by the Company stockholders entitled to vote at a meeting of stockholders. Nothing in this Section 14 shall limit the Administrator’s authority to take any action permitted pursuant to Section 3(c).
(b) Notwithstanding any other provision of this Plan to the contrary, the Administrator may amend the Plan or an Award Agreement, to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Plan or an outstanding Award to any law relating to plans of this or similar nature, and to the administrative regulations and rulings promulgated thereunder. By accepting an Award under this Plan, a grantee
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agrees to any amendment made pursuant to this Section 14(b) to the Plan and any Award without further consideration or action.
SECTION 15. STATUS OF PLAN
With respect to the portion of any Award that has not been exercised and any payments in cash, Stock or other consideration not received by a grantee, a grantee shall have no rights greater than those of a general creditor of the Company unless the Administrator shall otherwise expressly determine in connection with any Award or Awards. In its sole discretion, the Administrator may authorize the creation of trusts or other arrangements to meet the Company’s obligations to deliver Stock or make payments with respect to Awards hereunder, provided that the existence of such trusts or other arrangements is consistent with the foregoing sentence.
SECTION 16. GENERAL PROVISIONS
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No shares of Stock shall be issued pursuant to an Award until all applicable securities law and other legal and stock exchange or similar requirements have been satisfied. The Administrator may require the placing of such stop-orders and restrictive legends on certificates for Stock and Awards as it deems appropriate.
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SECTION 17. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon approval by the holders of a majority of the votes cast at a meeting of stockholders at which a quorum is present. Subject to such approval by the stockholders and to the requirement that no Stock may be issued hereunder prior to such approval, Stock Options and other Awards may be granted hereunder on and after adoption of this Plan by the Board. No grants of Stock Options and other Awards may be made hereunder after the tenth (10th) anniversary of the Effective Date and no grants of Incentive Stock Options may be made hereunder after the tenth (10th) anniversary of the date the Plan is approved by the Board.
SECTION 18. GOVERNING LAW
This Plan and all Awards and actions taken thereunder shall be governed by, and construed in accordance with, the laws of the Commonwealth of Massachusetts, applied without regard to conflict of law principles.
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Appendix 1
Section 162(m) Awards Performance Criteria
An Award that is intended to qualify as a 162(m) Award shall be subject to one or more Performance Goals that shall be based on the attainment (on an annual and/or cumulative basis) of a certain target level of, or a specified increase or decrease in, one or more of the following criteria selected by the Administrator:
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The Administrator may provide in any Award intended to qualify as a Section 162(m) Award that any evaluation of performance may include or exclude the impact, if any, on reported financial results of any of the following events that occurs during a Performance Period: (a) asset write-downs, (b) litigation or claim judgments or settlements, (c) changes in tax laws, accounting principles or other laws or provisions, (d) reorganization or restructuring programs, (e) acquisitions or divestitures, (f) discontinued operations, (g) foreign exchange gains and losses, (h) gains and losses that are treated as extraordinary items under Accounting Standards Codification Topic 225, or (i) an event either not directly related to the operations of Tutor Perini or not within the reasonable control of Tutor Perini’s management. To the extent such inclusions or exclusions affect Awards to Covered Employees; they shall be prescribed in a form that meets the requirements of Code Section 162(m) for deductibility.TUTOR PERINI CORPORATION
The Administrator retains the discretion to adjust otherwise payable Section 162(m) Award downward, either on a formula or discretionary basis or any combination, as the Administrator determines, in its sole discretion. However, Administrator does not have the authority to adjust upward any otherwise payable Section 162(m) Award.
Performance goals may also be based on an individual participant’s performance goals, as determined by the Administrator, in its sole discretion.
As amended through ________, 2016
Any Performance Goal may, as the Administrator, in its sole discretion deems appropriate, (i) relate to the performance of the Tutor Perini or any Subsidiary as a whole or any business unit or division of the Tutor Perini or any Subsidiary or any combination thereof, (ii) be compared to the performance of a group of comparator companies, or published or special index, (iii) be based on change in the applicable performance criteria over a specified period of time and such change may be measured based on an arithmetic change over the specified period (e.g., cumulative change or average change), or percentage change over the specified period (e.g., cumulative percentage change, average percentage change or compounded percentage change), (iv) relate to or be compared to one or more other performance criteria, or (v) any combination of the foregoing.
The Administrator is under no obligation to structure Awards granted under the Amended Plan to qualify as 162(m) Awards and has the express authority to grant Awards that do not qualify as 162(m) Awards. Additionally, there is no guarantee that an Award that is intended to qualify as a 162(m) Award will so qualify in any particular circumstance. To maintain flexibility in compensating our executives, the Administrator reserves the right to use its judgment to grant or approve Awards or compensation that is non-deductible when the Administrator believes such Awards or compensation is appropriate.
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Table of Contents
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| Page |
1 | |||
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1 | |||
| Annual Meeting | 1 | |
| Special Meeting in Place of Annual Meeting | 1 | |
| Special Meetings | 1 | |
| Place of Meetings | 1 | |
| Notice of Meetings | 1 | |
| Quorum of Shareholders | 2 | |
| Action by Vote | 2 | |
| Voting | 2 | |
| Matters to be considered at Annual Meeting | 2 | |
| 2.10 | Action by Writing | 4 |
| Proxies | 4 | |
| Postponement or Adjournment of Annual or Special Meeting | 5 | |
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5 | |||
| Election, Number and Qualification | 5 | |
| Powers; Issuance of Stock | 5 | |
| Committees | 6 | |
| Meetings | 6 | |
| Notice | 6 | |
| Quorum | 6 | |
| Action by Vote | 6 | |
| Action by Writing | 7 | |
| Nomination of Directors | 7 | |
| Lead Outside Director | 8 | |
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8 | |||
| Enumeration and Qualification | 8 | |
| Powers | 9 | |
| Appointment | 9 | |
| Tenure | 9 | |
| Chairman of the Board, Vice-Chairman of the Board, | 9 | |
| Vice Presidents | 9 | |
| Treasurer and Assistant Treasurers | 10 | |
| Secretary and Assistant Secretary | 10 | |
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10 | |||
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11 | |||
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| Number and Par Value | 11 | |
| Fractional Shares | 11 | |
| Stock Certificates | 11 | |
| Uncertificated Shares | 12 | |
| Loss of Certificates | 12 | |
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12 | |||
| Transfer on Books | 12 | |
| Record Holder | 12 | |
| Record Date | 12 | |
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13 | |||
| Actions, Suits and Proceedings | 13 | |
| Settlements | 13 | |
| Notification and Defense of Claim | 14 | |
| Advance of Expenses | 14 | |
| Partial Indemnity | 15 | |
| Rights Not Exclusive | 15 | |
| Insurance | 15 | |
| Insurance Offset | 15 | |
| Amendment | 15 | |
| 9.10 | Mergers, etc | 15 |
| Savings Clause | 16 | |
| Definitions | 16 | |
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| Records to be Kept | 16 | |
| Inspection of Records by Shareholders | 17 | |
| Scope of Inspection Right | 18 | |
| Inspection of Records by Directors | 18 | |
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| Corporate Seal | 18 | |
| Execution of Papers | 18 | |
| Voting of Securities | 19 | |
| Fiscal Year | 19 | |
| Control Share Acquisition | 19 | |
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SECTION 13. Manner of Notice | 19 |
ii
THIRD AMENDED AND RESTATED
BY-LAWS OF TUTOR PERINI CORPORATION
As amended through November 18________, 20092016
SECTION 1. Articles of Organization
These SecondThird Amended and Restated By-Laws (“By-Laws”) shall be subject to the provisions of the articles of organizationArticles of Organization of the corporation, as amended and in effect from time to time.
2.1Annual Meeting. The annual meeting of the shareholders shall be held within six (6) months after the end of the fiscal year of the corporation, at the hour, date and place which is fixed by the board of directors, the chairman of the board or the president.
2.2Special Meeting in Place of Annual Meeting. If no annual meeting has been held in accordance with the foregoing provisions, a special meeting of the shareholders may be held in place thereof, and any action taken at such special meeting shall have the same force and effect as if taken at the annual meeting and in such case all references in these By-Laws to the annual meeting of the shareholders shall be deemed to refer to such special meeting. Any such special meeting shall be called as provided in Section 2.3.
2.3Special Meetings. Special meetings of shareholders may be called by the chairman of the board, by the president or by the board of directors. Special meetings shall be called by the clerksecretary, or in case of the death, absence, incapacity or refusal of the clerksecretary, by any other officer, upon written application of one or more shareholders who hold at least fortytwenty-fivepercent (4025%) in interest of the capital stock entitled to vote at such meeting describing the purposes for which it is to be held.
2.4Place of Meetings. Meetings of the shareholders may be held anywhere within the United States at such place as shall be fixed by the chairman of the board, the president or the directors. Any adjourned session of any meeting of the shareholders shall be held at the same city or town as the initial session, or within Massachusetts, in either case at the place designated in the vote of adjournment.
2.5Notice of Meetings. A written notice of each meeting of shareholders, stating the place, date and hour and the purposes of the meeting, shall be given at least tenno fewer than seven (107) but no more than sixty (60) days before the meeting to each shareholder entitled to vote thereat and to each shareholder who, by law, by the articles of organization or byArticles of Organization or these By-Laws, is entitled to notice, by leaving such notice with him or at his residence or usual place of business, or by mailing it, postage prepaid, and addressed to such shareholder at his address as it appears in the records of the corporation. Such notice shall be given by the clerk or an assistant clerk or by the secretary or an assistant secretary. All notices to shareholders shall conform to the requirements of Section 13 of these Bylaws. No notice of any meeting of shareholders need be given to a
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shareholder if a written waiver of notice, executed before or after the meetingdate and time specified in the notice by such shareholder or his attorney thereunto duly authorized, is filed with the records of the meeting.
2.6Quorum of Shareholders. At any meeting
(a)of the shareholders, a quorum shall consist of a majority in interest of all stock issued and outstanding and entitled to vote at the meeting; except that if two (2)Unless otherwise provided by law, or in the Articles of Organization, these By-Laws or, to the extent authorized by law, a resolution of the Board of Directors requiring satisfaction of a greater quorum requirement for any voting group, a majority of the votes entitled to be cast on a matter by a voting group constitutes a quorum of that voting group for action on that matter. As used in these By-Laws, a voting group includes all shares of one or more classes or series of stockthat, under the Articles of Organization or the Massachusetts Business Corporation Act, as in effect from time to time (the “MBCA”), are entitled to vote as separate classes or series, then in the case of each such class or series a quorum shall consist of a majority in interest of all stock of that class or series issued and outstanding; and except when a larger quorum is required by law, by the articles of organization or by these By-Laws. Stock owned directly or indirectly by the corporation, if any, shall not be deemed outstanding for this purpose. Any meeting may be adjourned from time to time by a majority of the votes properly cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice.and to be counted together collectively on a matter at a meeting of shareholders.
(b)A share once represented for any purpose at a meeting is deemed present for quorum purposes of the remainder of the meeting and for any adjournment of that meeting unless (1) the shareholder attends solely to object to lack of notice, defective notice or the conduct of the meeting on other grounds and does not vote the shares or otherwise consent that they are to be deemed present, or (2) in the case of an adjournment, a new record date is or shall be set for that adjourned meeting
2.7Action by Vote. WhenIf a quorum is present at any meeting, a plurality of the votes properly cast for election to any office shall elect to such office, and a majority of the votes properly cast upon any question other than an election to an office shall decide the question, except when a larger vote is required by law, by the articles of organization or by these By-Laws. No ballot shall be required for any election unless requested by a shareholder present or represented at the meeting andof a voting group exists, favorable action on a matter, other than the election of a member of the Board of Directors, is taken by a voting group if the votes cast within the group favoring the action exceed the votes cast opposing the action, unless a greater number of affirmative votes is required by law, the Articles of Organization, these By-Laws or, to the extent authorized by law, a resolution of the Board of Directors requiring receipt of a greater affirmative vote of the shareholders, including more separate voting groups. If a quorum of a voting group exists, directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election.
2.8Voting. Except as otherwise provided in the articles of organization,this Section 2.8 or unless the Articles of Organization provide otherwise, each outstanding share, regardless of class, is entitled to one vote on each matter voted on at a shareholders’ meeting.
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Only shares are entitled to vote shall have one (1) vote for each share of stock entitled to vote held by them of record according to the records of the corporation. The corporation shall not, directly or indirectly, vote any share of its own stock., and each fractional share, if any, is entitled to a proportional vote. Absent special circumstances, the shares of the corporation are not entitled to vote if they are owned, directly or indirectly, by another entity of which the corporation owns, directly or indirectly, a majority of the voting interests; provided, however, that nothing in these Bylaws shall limit the power of the corporation to vote any shares held by it, directly or indirectly, in a fiduciary capacity. Unless the Articles of Organization provide otherwise, redeemable shares are not entitled to vote after notice of redemption is given to the holders and a sum sufficient to redeem the shares has been deposited with a bank, trust company or other financial institution under an irrevocable obligation to pay the holders the redemption price upon surrender of the shares.
2.9Matters to be considered at Annual Meeting. At an annual meeting of shareholders, only such business shall be conducted, and only such proposals shall be acted upon, as shall have been properly brought before the annual meeting (a) by, or at the direction of, a majority of the board of directors or (b) by any holder of record (both as of the time notice of such proposal is given by the shareholder as set forth below and as of the record date for the annual meeting in question) of any shares of the corporation’s capital stock entitled to vote at such annual meeting who complies with the procedures set forth in this Section 2.9. For a proposal to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the clerksecretary of the corporation, and such shareholder or his representative must be present in person at the annual meeting. To be timely, a shareholder’s notice must be delivered to, or mailed and received at, the principal executive offices of the corporation not less than seventy-five (75) days nor more than one hundred eighty (180) days prior to the anniversary of the annual meeting immediately preceding the annual meeting at which the proposal is proposed to be acted upon (the “Anniversary Date”); provided, however, that if the annual meeting in any year is scheduled to be held on a day which is more than seven (7) days earlier than the Anniversary Date, then notice by a shareholder to be timely must be so delivered or received not later than the close of business on (a) on the twentieth (20th) day following the earlier of (i) the day on which such notice of the date of the annual meeting is mailed or (ii) the day on which public disclosure of the date of the annual meeting is made, or (b) if such date of notice or public disclosure occurs more than seventy-five (75) days prior to the
scheduled date of such meeting, then the later of (i) the twentieth (20th) day following the first to occur of such notice or such public disclosure or (ii) the seventy-fifth (75th) day prior to such scheduled date of such meeting. A shareholder’s notice to the clerksecretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting (a) a brief description of the proposal desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and address, as they appear on the corporation’s stock transfer books, of the shareholder proposing such business and of the beneficial owners (if any) of the stock registered in such shareholder’s name and the name and address of other shareholders known by such shareholder to be supporting such proposal on the date of such shareholder’s notice, (c) the class and number of shares of the corporation’s capital stock which are beneficially owned by the shareholder and such beneficial owners (if any) on the
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date of such shareholder’s notice and by any other shareholders known by such shareholder to be supporting such proposal on the date of such shareholder'sshareholder’s notice, and (d) any financial interest of the shareholder in such proposal.
If the board of directors, or a designated committee thereof, determines that any shareholder proposal was not timely made in accordance with the terms of this Section 2.9, such proposal shall not be presented for action at the annual meeting in question. If the board of directors, or a designated committee thereof, determines that the information provided in a shareholder’s notice does not satisfy the informational requirements of this section in any material respect, the clerksecretary of the corporation shall promptly notify such shareholder of the deficiency in the notice. Such shareholder shall have an opportunity to cure the deficiency by providing additional information to the clerksecretary within such period of time, not to exceed five (5) days from the date such deficiency notice is given to the shareholder, as the board of directors or such committee shall reasonably determine. If the deficiency is not cured within such period, or if the board of directors or such committee determines that the additional information provided by the shareholder, together with the information previously provided, does not satisfy the requirements of this Section 2.9 in any material respect, then such proposal shall not be presented for action at the annual meeting in question.
Notwithstanding the procedure set forth in the preceding paragraph, if neither the board of directors nor such committee makes a determination as to the validity of any shareholder proposal as set forth above, the presiding officer of the annual meeting shall determine and declare at the annual meeting whether the shareholder proposal was made in accordance with the terms of this Section 2.9. If the presiding officer determines that a shareholder proposal was made in accordance with the terms of this Section 2.9, he shall so declare at the annual meeting. If the presiding officer determines that a shareholder proposal was not made in accordance with the provisions of this Section 2.9, he shall so declare at the annual meeting and such proposal shall not be acted upon at the annual meeting.
This provision shall not prevent the consideration and approval or disapproval at the annual meeting of reports of officers, directors and committees of the board of directors, but in connection with such reports, no new business shall be acted upon at such annual meeting except in accordance with the provisions of this Section 2.9.
(a)Any action to be taken by shareholders may be taken without a meeting if all shareholders entitled to vote on the matter consent to the action by a writing filed with the records of the meetings of shareholders. Such consent shall be treated for all purposes as a vote at a meeting. The action shall be evidenced by one or more written consents that describe the action taken, are signed by all such shareholders, bear the date of the signatures of such shareholders, and are delivered to the corporation for inclusion with the records of meetings
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within 60 days of the earliest dated consent delivered to the corporation as required by this Section 2.10.
2.11 Proxies. Shareholders entitled to vote may vote either in person or by proxy. Any proxy must be in writing and must be filed with the clerk or other person responsible to record the proceedings of the meeting before being voted. No proxy dated more than six (6) months before the meeting named therein shall be valid. Unless otherwise specifically limited by their terms, such proxies shall entitle the holders thereof to vote at the meeting named therein and at any adjournment of such meeting, but no proxy shall be valid after the final adjournment of such meeting. A proxy with respect to stock held in the name of two (2) or more persons shall be valid if executed by any one of them unless, at or prior to exercise of the proxy, the corporation receives a specific written notice to the contrary from any one of them. A proxy purporting to be executed by or on behalf of a shareholder shall be deemed valid unless challenged at or prior to its exercise and the burden of proving invalidity shall rest on the challenger.
(b)If action is to be taken pursuant to the consent of voting shareholders without a meeting, the corporation, at least seven days before the action pursuant to the consent is taken, shall give notice, which complies in form with the requirements of Section 13 of these Bylaws, of the action to nonvoting shareholders in any case where such notice would be required by law if the action were to be taken pursuant to a vote by voting shareholders at a meeting. The notice shall contain, or be accompanied by, the same material that would have been required by law to be sent to shareholders in or with the notice of a meeting at which the action would have been submitted to the shareholders for approval.
2.11Proxies. A shareholder may vote his or her shares in person or may appoint a proxy to vote or otherwise act for him or her by signing an appointment form, either personally or by his or her attorney-in-fact. An appointment of a proxy is effective when received by the secretary or other officer or agent authorized to tabulate votes. Unless otherwise provided in the appointment form, an appointment is valid for a period of 11 months from the date the shareholder signed the form or, if it is undated, from the date of its receipt by the officer or agent. An appointment of a proxy is revocable by the shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest, as defined in the MBCA. An appointment made irrevocable is revoked when the interest with which it is coupled is extinguished. The death or incapacity of the shareholder appointing a proxy shall not affect the right of the corporation to accept the proxy’s authority unless notice of the death or incapacity is received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises his or her authority under the appointment. A transferee for value of shares subject to an irrevocable appointment may revoke the appointment if he or she did not know of its existence when he or she acquired the shares and the existence of the irrevocable appointment was not noted conspicuously on the certificate representing the shares or on the information statement for shares without certificates. Subject to the provisions of Section 7.24 of the MBCA, or any successor Section thereto, and to any express limitation on the proxy’s authority appearing on the face of the appointment form, the Corporation is entitled to accept the proxy’s vote or other action as that of the shareholder making the appointment.
2.12Postponement or Adjournment of Annual or Special Meeting. The board of directors acting by resolution may postpone and reschedule any previously scheduled annual or special meeting of shareholders. The presiding officer at all annual or special meetings of
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shareholders shall have the power, among other things, to adjourn such meeting at any time and from time to time, subject to Section 2.6. The order of business and all other matters of procedure at any meeting of the shareholders shall be determined by the presiding officer.
3.1Election, Number and Qualification.
(a)During any time that the corporation is subject to Section 8.06 of Chapter 156D of the Massachusetts General Laws (“Section 8.06”), (i) the number of directors (which shall not be less than three (3) or less than the number of shareholders, if less than three (3)) shall be determined and increased or decreased from time to time only by vote of the board of directors and (ii) the directors, other than those who may be elected by the holders of any class or series of preferred stock, shall be classified with respect to the term for which they generally hold office, pursuant to the terms of Section 8.06.
(b)During any time that the corporation is not subject to Section 8.06, (i) the number of directors shall be determined and increased or decreased from time to time only by vote of the board of directors, except that the board of directors may be enlarged by the shareholders at any meeting, provided that the vacancies created by such an enlargement shall be filled in accordance with Section 6 and (ii) except as otherwise provided by law, by the articles of organizationArticles of Organization or by these By-Laws, directors shall hold office until the next annual meeting of shareholders and until their successors are chosen and qualified.
(c)No director need be a shareholder. No decrease in the number of directors shall shorten the term of any incumbent director.
3.2Powers; Issuance of Stock. Except as reserved to the shareholders by law, by the articles of organizationArticles of Organization or by these By-Laws, the business and affairs of the corporation shall be managed byunder the direction of the directors, who shall have and may exercise all the powers of the corporation. In particular, and without limiting the generality of the foregoing, the board of directors shall have the authority to issue or reserve for issue from time to time the whole or any part of the capital stock of the corporation which may be authorized from time to time, to such persons or organizations, for such consideration, whether cash, property, services or expenses, and on such terms as the board of directors may determine, including without limitation the granting of options, warrants, or conversion or other rights to subscribe to said capital stock.
3.3Committees. The directors may, by vote of a majority of the directors then in office or if greater the number of directors required by the Articles of Organization or By-Laws to take action under Section 8.24 of the MBCA, elect from their number an executive committee and other committees and may by vote delegate to any such committee or committees some or all of the powers of the directors except those which by law, by the articles of organizationArticles of Organization or by these By-Laws they are prohibited from delegating.
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Except as the directors may otherwise determine, any such committee may make rules for the conduct of its business, but unless otherwise provided by the directors or such rules, its meetings shall be called, notice given or waived, its business conducted, or its action taken as nearly as may be the same manner as is provided by these By-Laws with respect to meetings or for the conduct of business or the taking of action by the directors. All members of such committees shall hold such offices at the pleasure of the board of directors. The board of directors may abolish any such committee at any time. Any committee to which the board of directors delegates any of its powers or duties shall keep records of its meetings and shall report its action to the board of directors. The board of directors shall have power to rescind any action of any committee, but no such rescission shall have retroactive effect.
3.4Meetings. Regular meetings of the directors, including the first meeting of the board following the annual meeting of the shareholders, may be held without call or notice at such places and at such times as the directors may from time to time determine, provided that notice of the first regular meeting following any such determination shall be given to absent directors. Special meetings of the directors may be held at any time and at any place designated in the call of the meeting when called by the chairman of the board, the vice chairman of the board, the president, the treasurer or by the directors, notice thereof being given to each director by the clerk or an assistant clerk or by the secretary or an assistant secretary or by the officer or the directors calling the meeting. Directors may participate in meetings of the board of directors by means of conference telephone or similar communications equipment by means of which all directors participating in the meeting can hear each other, and participation in a meeting in accordance herewith shall constitute presence in person at such meeting.
3.5Notice. It shall be sufficient notice to a director to send written notice by mail at least forty-eight (48) hours or by telegram at least twenty-four (24) hours before the meeting addressed to him at his usual or last known business or residence address or to give notice to him in person or by telephone ator electronic transmission at least twenty-four (24) hours before the meeting. Notice of a meeting need not be given to any director if a written waiver of notice, executed by him before or after the meeting, is
filed with the records of the meeting, or to any director who attends the meeting without protesting prior thereto or at its commencement the lack of notice to him. Neither notice of a meeting nor a waiver of a notice need specify the purposes of the meeting.
3.6Quorum. At any meeting of the directors a majority of the directors then in office shall constitute a quorum. Any meeting may be adjourned from time to time by a majority of the votes cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice.
3.7Action by Vote. WhenIf a quorum is present at any meeting,when a vote is taken, the affirmative vote of a majority of the directors present may take any actionis the act of the board of directors except when a larger vote is required by law, by the articles of organizationArticles of Organization or by these By-Laws.
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3.8Action by Writing. Any action required or permitted to be taken at any meeting of the directors may be taken without a meeting if a written consent thereto is signed by all the directors and such written consent is filed with the records of the meetings of the directors. Such consent shall be treated for all purposes as a vote at a meeting.the action is taken by the unanimous consent of the members of the board of directors. The action must be evidenced by one or more consents describing the action taken, in writing, signed by each director, or delivered to the corporation by electronic transmission, to the address specified by the corporation for the purpose or, if no address has been specified, to the principal office of the corporation, addressed to the Secretary or other officer or agent having custody of the records of proceedings of directors, and included in the minutes or filed with the corporate records reflecting the action taken. Action taken under this Section 3.8 is effective when the last Director signs or delivers the consent, unless the consent specifies a different effective date. A consent signed or delivered under this Section 3.8 has the effect of a meeting vote and may be described as such in any document.
3.9Nomination of Directors. Nominations of candidates for election as directors of the corporation at any annual meeting of shareholders may be made (a) by, or at the direction of, a majority of the board of directors or (b) by any holder of record (both as of the time notice of such nomination is given by the shareholder as set forth below and as of the record date for the annual meeting in question) of any shares of the corporation’s capital stock entitled to vote at such meeting who complies with the procedures set forth in this Section 3.9. Any shareholder who seeks to make such a nomination, or his representative, must be present in person at the annual meeting. Only persons nominated in accordance with the procedures set forth in this Section 3.9 shall be eligible for election as directors at an annual meeting of shareholders.
Nominations, other than those made by, or at the direction of, the board of directors, shall be made pursuant to timely notice in writing to the clerksecretary of the corporation as set forth in this Section 3.9. To be timely, a shareholder’s notice shall be delivered to, or mailed and received at, the principal executive offices of the corporation not less than seventy-five (75) days nor more than one hundred eighty (180) days prior to the Anniversary Date; provided, however, that if the annual meeting in any year is scheduled to be held on a day which is more than seven (7) days earlier than the Anniversary Date then notice by a shareholder to be timely must be so delivered or received not later than the close of business on (a) the twentieth (20th) day following the earlier of (i) the day on which such notice of the date of the annual meeting is mailed or (ii) the day on which public disclosure of the date of the annual meeting is made, or (b) if such date of notice or public disclosure occurs more than seventy-five (75) days prior to the scheduled date of such meeting, then the later of (i) the twentieth (20th) day following the first to occur of such notice or such public disclosure or (ii) the seventy-fifth (75th) day prior to such scheduled date of such meeting. Such shareholder’s notice shall set forth (a) as to each person whom the shareholder proposes to nominate for election or re-election as a director (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person for the past five years and (iii) the class and number of shares of the corporation’s capital stock which are beneficially owned by such person on the date of such
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shareholder notice and (b) as to the shareholder giving the notice (i) the name and address, as they appear on the corporation’s stock transfer books, of such shareholder and of the beneficial owners (if any) of the stock registered in such shareholder’s name and the name and address of other shareholders known by such shareholder to be supporting such nominees on the date of such shareholder’s notice and (ii) the class and number of shares of the corporation’s capital stock which are beneficially owned by such shareholder and such beneficial owners (if any) on the date of such shareholder notice and by any other shareholders known by such shareholder to be supporting such nominees on the date of such shareholder notice. At the request of the board of directors, any person nominated by, or at the direction of, the board of directors for election as a director at an annual meeting shall furnish to the clerksecretary of the corporation that information required to be set forth in a shareholder’s notice of nomination which pertains to the nominee.
No person shall be elected by the shareholders as a director of the corporation unless nominated in accordance with the procedures set forth in this Section 3.9. If the board of directors, or a designated committee thereof, determines that any shareholder nomination was not timely made in accordance with the terms of this Section such nomination shall not be considered at the annual meeting in question. If the board of directors, or a designated committee thereof, determines that the information provided in a shareholder’s notice does not satisfy the informational requirements of this Section 3.9 in any material respect, the clerksecretary of the corporation shall promptly notify such shareholder of the deficiency in the notice. Such shareholder shall have an opportunity to cure the deficiency by providing additional information to the clerksecretary within such period of time, not to exceed five (5) days from the date such deficiency notice is given to the shareholder, as the board of directors or such committee shall determine. If the deficiency is not cured within such period, or if the board of directors or such committee reasonably determines that the additional information provided by the shareholder, together with the information previously provided, does not satisfy the requirements of this Section 3.9 in any material respect, such nomination shall not be considered at the annual meeting in question.
Notwithstanding the procedure set forth in the preceding paragraph, if neither the board of directors nor such committee makes a determination as to the validity of any nominations by a shareholder as set forth above, the presiding officer of the annual meeting shall determine and declare at the annual meeting whether a nomination was made in accordance with the terms of this Section 3.9. If the presiding officer determines that a nomination was made in accordance with the terms of this Section 3.9, he shall so declare at the annual meeting. If the presiding officer determines that a nomination was not made in accordance with the terms of this Section 3.9, he shall so declare at the annual meeting and such nomination shall be disregarded.
3.10Lead Outside Director. The board of directors shall include a lead outside director. The lead outside director shall be an independent director and shall be elected by a majority of the independent directors. The lead outside director shall have such duties and powers as shall be determined from time to time by the board of directors.
SECTION 4. Officers and Agents
4.1Enumeration and Qualification. The officers of the corporation shall be a chief executive officer, a chairman of the board, a president, a treasurer, a clerk, a secretary and such other officers, including a vice-chairman of the board and one or more vice-presidents, as the directors from time to time may in their discretion elect or appoint. The corporation may also have such agents as the directors from time to time may in their discretion appoint. The president, the chairman of the board and the vice-chairman of the board, if any, shall be elected from the board of directors, but need not be shareholders. No other officer need be a director or shareholder. The clerk shall be a resident of Massachusetts unless the corporation has a resident agent appointed for the purpose of service of process. Any two (2) or more offices may be held in the same person. Any officer may be required by the directors to give bond for the faithful performance of his duties to the corporation in such amount and with such sureties as the directors may determine.
4.2Powers. Subject to law, to the articles of organizationArticles of Organization and to the other provisions of these By-Laws, each officer shall have, in addition to the duties and powers herein set forth, such duties and powers as are commonly incident to his office and such duties and powers as the directors may from time to time designate.
4.3ElectionAppointment. The chairman of the board, the president, the treasurer, the clerk and the secretary shall be electedappointed annually by the directors at their first meeting following the annual meeting of the shareholders. All other officers shall be elected or appointed from time to time as the directors may in their discretion determine.
4.4Tenure. Except as otherwise provided by law or by the articles of organizationArticles of Organization or by these By-Laws, the chairman of the board, the president, the treasurer and the clerksecretary shall hold office until the first meeting of the directors following the next annual meeting of the shareholders and until their respective successors are chosen and qualified, and each other officer shall hold office until the first meeting of the directors following the next annual meeting of the shareholders unless a shorter period shall have been specified by the terms of his election or appointment, or in each case until he sooner dies, resigns, is removed or becomes disqualified. Each agent shall retain his authority at the pleasure of the directors.
4.5Chairman of the Board, Vice-Chairman of the Board, Chief Executive Officer and President. The chairman of the board shall preside at all meetings of the shareholders and of the directors at which he is present. The vice-chairman of the board, if there is such a position, shall, in the absence of the chairman of the board, preside at all meetings of the shareholders and of the directors at which he is present. The chairman and vice-chairman shall each advise with and make his counsel available to the other officers of the corporation and each shall have such other duties and powers as shall be prescribed from time to time by the directors.
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The chief executive officer shall, subject to the direction of the directors, have general charge of the property and business of the corporation and of all operations, shall employ and remove at pleasure and fix the duties and compensation of managers, agents, salesmen, clerkssecretaries,
workmen and other subordinate employees of the corporation, and shall have such other duties and powers as shall be prescribed from time to time by the directors.
The president, subject to the direction of the directors and of the chairman of the board, shall direct and supervise the administration of the business and affairs of the corporation and shall have such other duties and powers as shall be prescribed from time to time by the directors.
4.6Vice Presidents. The vice presidents shall have such duties and powers as shall be prescribed for them respectively from time to time by the directors or by the chief executive officer. The directors or the chief executive officer may from time to time designate one (1) or more vice presidents as executive vice president, financial vice president, administrative vice president, senior vice president, or otherwise, or may otherwise fix or indicate the order of their rank, and, in their or his discretion, may from time to time change or revoke any such designation. In the event of the death or disability of the president, the vice president designated by the directors or the chief executive officer, or in the absence of such designation, the vice presidents in the order of their rank, shall perform all the duties of the president, and when so acting shall have all the powers of the president.
4.7Treasurer and Assistant Treasurers. The treasurer shall, subject to the direction and under the supervision of the board of directors, have general charge of the financial concerns of the corporation and of its funds and valuable papers, and shall have such other duties and powers as may be prescribed from time to time by the directors or the chief executive officer. The treasurer shall report to the directors but in the ordinary conduct of the company’s business shall be under the supervision of the chief executive officer or such other officer as the directors from time to time may determine.
Any assistant treasurers shall have such duties and powers as shall be prescribed from time to time by the directors, the chief executive officer or the treasurer, and shall be responsible to and shall report to the treasurer.
4.8ClerkSecretary and Assistant ClerkSecretary. The clerksecretary shall keep a true record of all proceedings of the shareholders. If no secretary is elected, the clerk shall keep a true record of the proceedings of all meetings of theand the directors. In the absence of the clerksecretary from any meeting of shareholders (or directors, if there is no secretary), an assistant clerksecretary, or if there be none or he is absent, a temporary clerksecretary chosen at the meeting, shall record the proceedings thereof. Unless a transfer agent has been appointed, the clerksecretary shall keep or cause to be kept the transfer records of the corporation, which shall contain the names and record addresses of all shareholders and the amount of stock held by each. Any assistant clerksecretary shall have such duties and powers as shall be prescribed from time to time by the directors.
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4.9 Secretary and Assistant Secretaries. The secretary shall keep a true record of the proceedings of all meetings of the directors and in his absence from any such meeting an assistant secretary, or if there be none or he is absent, a temporary secretary chosen at the meeting, shall record the proceedings thereof.
Any assistant secretaries shall have such duties and powers as shall be prescribed from time to time by the directors, the chief executive officer or the secretary, and shall be responsible to and shall report to the secretary.
SECTION 5. Resignations and Removals
Any director or officer may resign at any time by delivering his resignation in writing to the president, the treasurer or the clerksecretary or to a meeting of the directors. Such resignation shall be effective upon receipt unless specified to be effective at some other time. A director (including persons elected by directors to fill vacancies in the board) may be removed from office only (a) if Section 8.06 is then applicable to the corporation, for cause by the shareholders by the affirmative vote of a majority of the shares outstanding and entitled to vote in the election of directors or with or without cause by vote of a majority of the directors then in office or (b) if Section 8.06 is not then applicable to the corporation, with or without cause by vote of the holders of a majority of the voting power of the then outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors, voting together as a single class, or for cause by vote of a majority of the directors then in office.
The directors may remove any officer electedappointed by them with or without cause by the vote of a majority of the directors then in office. A director or officer may be removed for cause only after reasonable notice and opportunity to be heard before the body proposing to remove him. No director or officer resigning and (except where a right to receive compensation shall be expressly provided in a duly authorized written agreement with the corporation) no director or officer removed, shall have any right to any compensation as such director or officer for any period following his resignation or removal, or any right to damages on account of such removal, whether his compensation be by the month or by the year or otherwise unless in the case of a resignation, the directors, or in the case of a removal, the body acting on the removal, shall in their or its discretion provide for compensation.
Any vacancy in the board of directors, including a vacancy resulting from the enlargement of the board, may be filled (a) if Section 8.06 is then applicable to the corporation, only by the directors by vote of a majority of the directors then in office, even though less than a quorum of the board, and (b) if Section 8.06 is not then applicable to the corporation, by the shareholders or, in the absence of shareholder action, by the directors by vote of a majority of the directors then in office. Each successor shall hold office for the unexpired term, and in the case of the president, the treasurer and the clerksecretary, until his successor is chosen and qualified, or in each case until he sooner dies, resigns, is removed or becomes disqualified. The directors shall have and may exercise all their powers not withstandingnotwithstanding the existence of one or more vacancies in their number.
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7.1Number and Par Value. The total number of shares and the par value, if any, of each class of stock which the corporation is authorized to issue shall be stated in the articles of organizationArticles of Organization.
7.2Fractional Shares. The corporation may issue fractional shares and may issue in lieu thereof scrip in registered or bearer form which shall entitle the holder to receive a certificate for a full share or an uncertificated share upon surrender of such scrip aggregating a full share. The terms and conditions and manner of issue of such scrip shall be fixed by the directors.
7.3Stock Certificates. Each shareholder shall be entitled to a certificate stating the number and the class and the designation of the series, if any, of the shares held by him, in such form as shall be prescribed from time to time by the directors; provided, however, that pursuant to Section 7.4 of these By-Laws, the board of directors may provide that some or all of the shares of any or all of the corporation’s classes or series shall be uncertificated shares, in which case the holders of such shares will not be entitled to certificates with respect to such shares, unless a holder requests a certificate with respect to such shares. If shares are represented by certificates, at a minimum each share certificate shall state on its face: (a) the name of the corporation and that it is organized under the laws of The Commonwealth of Massachusetts, (b) the name of the person to whom issued, and (c) the number and class of shares and the designation of the series, if any, the certificate represents, or any other items required by law. If different classes of shares or different series within a class are authorized, then the variations in rights, preferences and limitations applicable to each class and series, and the authority of the board of directors to determine variations for any future class or series, must be summarized on the front or back of each certificate. Alternatively, each certificate may state conspicuously on its front or back that the corporation will furnish the shareholder this information on request in writing and without charge. Such certificate shall be signed by the president or a vice president and by the treasurer or an assistant treasurer, or any two officers designated by the board of directors. Such signatures may be facsimiles if the certificate is signed by a transfer agent or by a registrar, other than a director, officer or employee of the corporation. In case any officer who has signed or whose facsimile signature has been placed on such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the time of its issue.
7.4Uncertificated Shares. The board of directors may authorize the issuance of some or all of the shares of any or all of the corporation’s classes or series without certificates. The authorization shall not affect shares already represented by certificates until such certificates are surrendered to the corporation. Within a reasonable time after the issuance or transfer of shares without certificates, the corporation shall send the shareholder any written statement of information required by Chapter 156D of the General Laws of Massachusetts.
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7.5Loss of Certificates. In the case of the alleged loss or destruction or the mutilation of a certificate of stock, a duplicate certificate or uncertificated shares may be issued in place thereof, upon such terms as the directors may prescribe.
SECTION 8. Transfer of Shares of Stock
8.1Transfer ofon Books. Subject to the restrictions, if any, stated or noted on the stock certificates or in the case of uncertificated shares, on any written statement of information pertaining to such shares required by Chapter 156D of the General Laws of Massachusetts, shares of stock may be transferred on the books of the corporation (a) in the case of shares represented by certificates, by the surrender to the corporation or its transfer agent of the certificates therefor properly endorsed or accompanied by a written assignment and power of attorney properly executed, with necessary transfer stamps affixed, and with such proof of the authenticity of signature as the directors or the transfer agent of the corporation may reasonably require, or (b) in the case of uncertificated shares, by delivery of duly executed instructions or in any other manner the corporation may specify.
8.2Record Holder. Except as may be otherwise required by law, the articles of organizationArticles of Organization or by these By-Laws, the corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of dividends and the right to receive notice and to vote with respect thereto, regardless of any transfer, pledge or other disposition of such stock, until the shares have been transferred on the books of the corporation in accordance with the requirements of these By-Laws.
It shall be the duty of each shareholder to notify the corporation of his post office address.
8.3Record Date and Closing Transfer Books. The directors may fix in advance a time, not more than sixty (60) days before the date of any meeting of shareholders or the date for payment of any dividend or making of any distribution to shareholders or the last day on which the consent or dissent of shareholders may be effectively expressed for any purpose, as the record date for determining the shareholders having the right to notice of and to vote at such meeting and any adjournment thereof or the right to receive such dividend or distribution or the right to give such consent or dissent. In such case, only shareholders of record on such record date shall have such right, notwithstanding any transfer of stock on the books of the corporation after the record date. Without fixing such record date, the directors may for any of such purposes close the transfer books for all or any part of such period.Record Date. The Board of Directors may fix the record date in order to determine the shareholders entitled to notice of a shareholders’ meeting, to demand a special meeting, to vote or to take any other action. If a record date for a specific action is not fixed by the Board of Directors, and is not supplied by law, the record date shall be (a) the close of business either on the day before the first notice is sent to shareholders, or, if no notice is sent, on the day before the
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meeting or (b) in the case of action without a meeting by written consent, the date the first shareholder signs the consent or (c) for purposes of determining shareholders entitled to demand a special meeting of shareholders, the date the first shareholder signs the demand or (d) for purposes of determining shareholders entitled to a distribution, other than one involving a purchase, redemption or other acquisition of the corporation’s shares, the date the Board of Directors authorizes the distribution. A record date fixed under this Section 8.3 may not be more than 70 days before the meeting or action requiring a determination of shareholders. A determination of shareholders entitled to notice of or to vote at a shareholders’ meeting is effective for any adjournment of the meeting unless the Board of Directors fixes a new record date, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.
SECTION 9. Indemnification of Directors and Officers
9.1Actions, Suits and Proceedings. Except as otherwise provided below, the corporation shall, to the fullest extent authorized by Chapter 156D of the Massachusetts General Laws, as the same exists or may hereafter be amended (in the case of any such amendment, only to the extent that such amendment either (i) permits the corporation to provide broader indemnification rights than such laws permitted prior to such amendment or (ii) prohibits or limits any of the indemnification rights previously set forth in such laws), indemnify each person who is, or shall have been, a director or officer of the corporation or who is or was a director or employee of the corporation and is serving, or shall have served, at the request of the corporation, as a director or officer of another organization or in any capacity with respect to any employee benefit plan of the corporation, against all liabilities and expenses (including judgments, fines, penalties, amounts paid or to be paid in settlement, and reasonable attorneys’ fees) imposed upon or incurred by any such person (the “Indemnitee”) in connection with, or arising out of, the defense or disposition of any action, suit or other proceeding, whether civil or criminal, in which he may be a defendant or with which he may be threatened or otherwise involved, directly or indirectly, by reason of his being or having been such a director or officer or as a result of his serving or having served with respect to any such employee benefit plan; provided, however, that the corporation shall provide no indemnification with respect to any matter as to which any such Indemnitee shall be finally adjudicated in such action, suit or proceeding not to have acted in good faith in the reasonable belief that his action was (i) in the best interests of the Corporation or (ii) to the extent such matter relates to service with respect to an employee benefit plan, in the best interests of the participants or beneficiaries of such employee benefit plan.
9.2Settlements. The right to indemnification conferred in this Article shall include the right to be paid by the corporation for liabilities and expenses incurred in connection with the settlement or compromise of any such action, suit or proceeding, pursuant to a consent decree or otherwise, unless a determination is made, within 45 days after receipt by the corporation of a written request by the Indemnitee for indemnification, that such settlement or compromise is not in the best interests of the corporation or, to the extent such matter relates to service with respect to an employee benefit plan, that such settlement or compromise is not in the best interests of the participants or beneficiaries of such plan. Any such determination shall be made (i) by the Board of Directors of the corporation by a majority vote of a quorum consisting of disinterested directors, or (ii) if such quorum is not obtainable, by a majority of the disinterested directors of
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the corporation then in office. Notwithstanding the foregoing, if there are less than two disinterested directors then in office, the Board of Directors shall promptly direct that independent legal counsel (who may be regular legal counsel to the corporation) determine, based on facts known to such counsel at such time, whether such Indemnitee acted in good faith in the reasonable belief that his action was in the best interests of the corporation or the participants or beneficiaries of any such employee benefit plan, as the case may be; and, in such event, indemnification shall be made to such Indemnitee unless, within 45 days after receipt by the Corporation of the request by such Indemnitee for indemnification, such independent legal counsel in a written opinion to the Corporation determines that such Indemnitee did not act in good faith in the reasonable belief that his action was in the best interests of the Corporation or the participants or beneficiaries of any such employee benefit plan, as the case may be.
9.3Notification and Defense of Claim. As a condition precedent to his right to be indemnified, the Indemnitee must give to the corporation notice in writing as soon as practicable of any action, suit or proceeding involving him for which indemnity will or could be sought. With respect to any action, suit or proceeding of which the corporation is so notified, the corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to such Indemnitee. After notice from the corporation to the Indemnitee of its election so to assume such defense, the corporation shall not be liable to such Indemnitee for any legal or other expenses subsequently incurred by such Indemnitee in connection with such claim, but the fees and expenses of such counsel incurred after notice from the corporation of its assumption of the defense thereof shall be at the expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee has been authorized by the corporation, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the corporation and the Indemnitee in the conduct of the defense of such action or (iii) the corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases, the fees and expenses of counsel for the Indemnitee shall be at the expense of the corporation, except as otherwise expressly provided by this Article. The corporation shall not be entitled to assume the defense of any claim brought by or on behalf of the corporation or as to which counsel for the Indemnitee shall have reasonably made the conclusion provided for in (ii) above.
9.4 9.1 GeneralAdvance of Expenses. Subject to the provision of this Section and any limitations imposed by law, the corporation shall indemnify its directors and officers against all expenses incurred by them in connection with any proceeding in which they are involved by reason of their serving in such capacities except that (a) no indemnification shall be provided for any director or officer with respect to any matter as to which he shall have been adjudicated not to have acted Section 9.3 above, the right to indemnification conferred in this Article shall include the right to be paid by the corporation for reasonable expenses (including reasonable attorneys’ fees) incurred in defending a civil or criminal action, suit or proceeding in advance of its final disposition, subject to receipt from the Indemnitee of (i) a written affirmation of his good faith belief that he has met the relevant standard of conduct for indemnification or that the proceeding involves conduct for which liability has been eliminated under a provision of the corporation’s Articles of Organization as authorized by clause (4) of subsection (b) of Section 2.02 of the MBCA; ane (ii) his written undertaking to repay any funds advanced if he is not entitled to mandatory indemnification under section 8.52 of the MBCA and it is ultimately
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determined under section 8.54 or section 8.55 that he has not met the relevant standard of conduct described in section 8.51. Such repayment undertaking must be an unlimited general obligation of the Indemnitee but need not be secured and may be accepted without reference to the financial ability of such Indemnitee to make such repayment. Notwithstanding the foregoing, no advance shall be made by the corporation under this Section 9.4 if a determination is reasonably and promptly made by the Board of Directors by a majority vote of a quorum consisting of disinterested directors or, if such quorum is not obtainable, by a majority of the disinterested directors of the corporation then in office or, if there are not at least two disinterested directors then in office, by independent legal counsel (who may be regular legal counsel to the corporation) in a written opinion that, based on facts known to the Board or counsel at such time, such Indemnitee did not act in good faith and in the reasonable belief that his action was in the best interests of the corporation, or with respect to a criminal matter, that he had reasonable cause to believe that his conduct was unlawful, and (b) no indemnification shall be provided for any director or officer with respect toCorporation or the participants or beneficiaries of an employee benefit plan of the Corporation, as the case may be.
9.5Partial Indemnity. If an Indemnitee is entitled under any provision of this Article to indemnification by the corporation for some or a portion of the liabilities or expenses imposed upon or incurred by such Indemnitee in the investigation, defense, appeal or settlement of any action, suit or proceeding but not, however, for the total amount thereof, the corporation shall nevertheless indemnify the Indemnitee for the portion of such liabilities or expenses to which such Indemnitee is entitled.
9.6Rights Not Exclusive. The right to indemnification and advancement of expenses conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Articles of Organization, By-Laws, agreement, vote of stockholders or directors or otherwise. Without limiting the generality of the foregoing, the corporation, acting through its Board of Directors, may enter into agreements with any director, officer, employee or agent of the corporation providing for indemnification rights equivalent to or greater than the indemnification rights set forth in this Article.
a proceeding by or in the right of the corporation in which he is adjudicated to be liable to the corporation. Such indemnification may be provided to an officer or director in connection with a proceeding in which it is alleged that he received an improper personal benefit by reason of his position, regardless of whether the claim involves his services in such capacity, subject to the foregoing limitation, unless it shall have been determined that an improper personal benefit was received by the director or officer. Except as provided in Section 9.2, indemnification under this Section 9 shall be authorized in each case as determined by the board of directors, which may act notwithstanding that one or more of its members are parties to the proceeding in question or otherwise have an interest in such indemnification.
9.2 Mandatory Indemnification. Notwithstanding any contrary provisions of this Section, if a director or officer of the corporation has been wholly successful on the merits in defense of any proceeding in which he was involved by reason of his position or as a result of his serving in such capacity (including the termination of investigative or other proceedings without a finding
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of fault on the part of the director of officer), he shall be indemnified by the corporation against all expenses incurred by him in connection therewith.
9.3 Definitions. For purposes of this Section 9:
(a) A “director” or “officer” means any person serving in an office filled by appointment or election by the directors or the shareholders and also includes (i) a director or officer of the corporation serving at the request of the corporation as a director, officer, employee, trustee, partner or other agent of another organization, (ii) any person who formerly served as a director or officer, and (iii) the heirs or personal representatives of such persons;
(b) “Expenses” means all expenses (including attorneys’ fees and disbursements) actually and reasonably incurred in defense of a proceeding or in successfully seeking indemnification under Section 9.2 hereof, and any judgments, awards, fines, penalties and reasonable amounts paid in settlement of a proceeding; and
(c) A “proceeding” means any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, and any claim which could be the subject of a proceeding.
9.4 Advances. Except as limited by law, expenses incurred by a director or officer in defending any proceeding in which he is involved by reason of serving in such capacities may be paid by the corporation in advance of final disposition of the proceeding upon receipt of his written undertaking to repay such amount if it is ultimately determined that he is not eligible to be indemnified, which undertaking shall be an unlimited general obligation but need not be secured and may be accepted without regard to the financial ability of such persons to make repayment; provided, that no such advance payment shall be made if it is determined by the board of directors on the basis of the circumstances known at the time (without further investigation) that said director or officer will ultimately be ineligible to be indemnified under this Section 9.
9.5 Settlement Proceedings. If a proceeding is compromised or settled in a manner which imposes a liability or obligation upon a director or officer, (a) no indemnification shall be provided to him with respect to a proceeding by or in the right of the corporation unless the board of directors determines in its discretion that indemnification is appropriate under the circumstances, and (b) no indemnification shall be provided to him with respect to any other type of proceeding if it is determined by the board of directors that said director or officer is ineligible to be indemnified under this Section 9. The determination by the board of directors in each case shall be made on the basis of the circumstances know to it at that time without further investigation.
9.7 9.6Insurance. The corporation shall have power tomay purchase and maintain insurance on behalf of, at its expense, to protect itself and any director or officer of the corporation or who, while a director or officer of the corporation, serves at the corporation’s request as a director, officer, partner, trustee, employee or agent of theanother domestic or foreign corporation, partnership, joint venture, trust, employee benefit plan or other entity, against any expense or liability or cost incurred by him in any such capacity, or arising out of histhe status as such, whether or not the corporation would have the power to indemnify himsuch person against such expense or liability or costunder Chapter 156D of the Massachusetts General laws.
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9.7 Employee Benefit Plans. If the corporation or any of its directors or officers sponsors, undertakes or incurs any responsibility as a fiduciary with respect to an employee benefit plan, then, for purposes of indemnification of such person under this Section (a) a “director” or “officer” shall be deemed to include any director or officer of the corporation who serves at its request in any capacity with respect to said plan, (b) such director or officer shall be deemed not to have failed to have acted in good faith and in the reasonable belief that his action was in the best interests of the corporation if he acted in good faith and in the reasonable belief that his action was in the best interest of the participants or beneficiaries of said plan, and (c) “expenses” shall be deemed to include any taxes or penalties assessed on such director or officer with respect to said plan under applicable law.
9.8 Other Provisions. The provisions of this Section 9 shall not be construed to limit the power of the corporation to indemnify its officers or directors to the full extent permitted by law and enter specific agreements or arrangements for this purpose. In addition, the corporation shall have power to indemnify any of its agents or employees who are not directors or officers on any terms consistent with law which it deems to be appropriate.
9.9 Amendment. The provisions of this Section 9 may be amended or repealed by the shareholders; however, no such amendment or repeal which adversely affects the rights of a director or officer under this Section 9 with respect to his acts or omissions at any time prior to such amendment or repeal, shall apply to him without consent.
9.8Insurance Offset. The corporation’s obligation to provide indemnification under this Article shall be offset to the extent of any other source of indemnification or any otherwise applicable insurance coverage under a policy maintained by the corporation or any other person.
9.9Amendment. Without the consent of a person entitled to the indemnification and other rights provided in this Article (unless otherwise required by Chapter 156D of the Massachusetts General Laws), no amendment modifying or terminating such rights shall adversely affect such person’s rights under this Article with respect to the period prior to such Amendment.
9.10Mergers, etc. If the corporation is merged into or consolidated with another corporation and the corporation is not the surviving corporation, or if substantially all of the assets of the corporation are acquired by any other corporation, or in the event of any other similar reorganization involving the corporation, the Board of Directors of the corporation or the board of directors of any corporation assuming the obligations of the corporation shall assume the obligations of the corporation under this Article, through the date of such merger, consolidation, sale or reorganization, with respect to each person who is entitled to indemnification rights under this Article as of such date.
9.11Savings Clause. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each Indemnitee as to any liabilities and expenses with respect to any action, suit or proceeding to the full extent permitted by any applicable portion of this Article that shall not have been invalidated and to the full extent permitted by applicable law.
9.12Definitions. As used in this Article, the term “director”, “officer” and “person” include their respective heirs, executors, administrators, and legal representatives, and an
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“interested” director is one against whom in such capacity the proceedings in question or another proceeding on the same or similar grounds is then pending.
(a)The corporation shall keep as permanent records minutes of all meetings of its shareholders and board of directors, a record of all actions taken by the shareholders or board of directors without a meeting, and a record of all actions taken by a committee of the board of directors in place of the board of directors on behalf of the corporation. The corporation shall
maintain appropriate accounting records. The corporation or its agent shall maintain a record of its shareholders, in a form that permits preparation of a list of the names and addresses of all shareholders, in alphabetical order by class of shares showing the number and class of shares held by each. The corporation shall maintain its records in written form or in another form capable of conversion into written form within a reasonable time.
(b)The corporation shall keep within the Commonwealth of Massachusetts a copy of the following records at its principal office or an office of its transfer agent or of its secretary or assistant secretary or of its registered agent:
(i)its articlesArticles or restated articles of organizationArticles of Organization and all amendments to them currently in effect;
(ii)its by-laws or restated by-laws and all amendments to them currently in effect;
(iii)resolutions adopted by its board of directors creating one or more classes or series of shares, and fixing their relative rights, preferences, and limitations, if shares issued pursuant to those resolutions are outstanding;
(iv)the minutes of all shareholders’ meetings, and records of all action taken by shareholders without a meeting, for the past three (3) years;
(v)all written communications to shareholders generally within the past three (3) years, including the financial statements furnished under Section 16.20 of Chapter 156D of the Massachusetts General Laws for the past three (3) years;
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(vi)a list of the names and business addresses of its current directors and officers; and
(vii)its most recent annual report delivered to the Secretary of the Commonwealth of Massachusetts.
10.2Inspection of Records by Shareholders.
(a)A shareholder is entitled to inspect and copy, during regular business hours at the office where they are maintained pursuant to Section 10.1(b), copies of any of the records of the corporation described in said Section if he or she gives the corporation written notice of his or her demand at least five (5) business days before the date on which he or she wishes to inspect and copy.
(b)A shareholder is entitled to inspect and copy, during regular business hours at a reasonable location specified by the corporation, any of the following records of the corporation if the shareholder meets the requirements of subsection (c) of this Section 10.2 and gives the corporation written notice of his or her demand at least five (5) business days before the date on which he or she wishes to inspect and copy:
(i)excerpts from minutes reflecting action taken at any meeting of the board of directors, records of any action of a committee of the board of directors while acting in place of the board of directors on behalf of the corporation, minutes of any meeting of the shareholders, and records of action taken by the shareholders or board of directors without a meeting, to the extent not subject to inspection under subsection (a) of this Section 10.2;
(ii)accounting records of the corporation, but if the financial statements of the corporation are audited by a certified public accountant, inspection shall be limited to the financial statements and the supporting schedules reasonably necessary to verify any line item on those statements; and
(iii)the record of shareholders described in Section 10.1(a).
(c)A shareholder may inspect and copy the records described in Section 10.2(b) only if:
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(i)his or her demand is made in good faith and for a proper purpose;
(ii)he or she describes with reasonable particularity his or her purpose and the records he or she desires to inspect;
(iii)the records are directly connected with his or her purpose; and
(iv)the corporation shall not have determined in good faith that disclosure of the records sought would adversely affect the corporation in the conduct of its business or constitute material non-public information at the time when the shareholder’s notice of demand to inspect and copy is received by the corporation.
(d)For purposes of this Section 10.2, “shareholder” includes a beneficial owner whose shares are held in a voting trust or by a nominee on his or her behalf.
10.3Scope of Inspection Right.
(a)A shareholder’s agent or attorney has the same inspection and copying rights as the shareholder represented.
(b)The corporation may, if reasonable, satisfy the right of a shareholder to copy records under Section 10.2 by furnishing to the shareholder copies by photocopy or other means chosen by the corporation including copies furnished through an electronic transmission.
(c)The corporation may impose a reasonable charge, covering the costs of labor, material, transmission and delivery, for copies of any documents provided to the shareholder. The charge may not exceed the estimated cost of production, reproduction, transmission or delivery of the records.
(d)The corporation may comply, at its expense, with a shareholder’s demand to inspect the record of shareholders under Section 10.2(b)(iii) by providing the shareholder with a list of shareholders that was compiled no earlier than the date of the shareholder’s demand.
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(e)The corporation may impose reasonable restrictions on the use or distribution of records by the demanding shareholder.
10.4Inspection of Records by Directors. A director is entitled to inspect and copy the books, records and documents of the corporation at any reasonable time to the extent reasonably related to the performance of the director’s duties as a director, including duties as a member of a committee, but not for any other purpose or in any manner that would violate any duty to the corporation.
11.1Corporate Seal. The seal of the corporation shall, subject to alteration by the directors, consist of a flat faced circular die with the words “Massachusetts” and “Corporate Seal”, together with the name of the corporation and the year of its organization, cut or engraved thereon.
11.2Execution of Papers. Except as the directors may generally or in particular cases authorize the execution thereof in some other manner, all deeds, leases, transfers, contracts, bonds, notes, checks, drafts and other obligations made, accepted or endorsed by the corporation shall be signed by the chief executive officer.
11.3Voting of Securities. Unless otherwise provided by the board of directors, the chairman of the board, president or treasurer each may waive notice of and act on behalf of this corporation, or appoint another person or persons to act as proxy or attorney-in-fact for this corporation with or without discretionary power and/or power of substitution, at any meeting of shareholders or stockholders of any other corporation or organization, any of whose securities are held by this corporation.
11.4Fiscal Year. Except as from time to time provided by the board of directors, the fiscal year of the corporation shall end on the 31st day of December.
11.5Control Share Acquisition. Until such time as this Section 11.5 shall be repealed or these By-Laws shall otherwise be amended to provide otherwise, in each case in accordance with Section 12 of these By-Laws, the provisions of Chapter 110D of the Massachusetts General Laws (“Chapter 110D”) shall not apply to “control share acquisitions” of the corporation within the meaning of Chapter 110D.
These By-Laws may be altered, amended or repealed at any annual or special meeting of the shareholders called for the purpose by vote of the shareholders entitled to vote on the matter
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of the proposed alteration, amendment or repeal, and the sections to be affected thereby. If authorized by the articles of organizationArticles of Organization, these By-Laws may also be altered, amended or repealed by vote of the majority of the directors then in office, except that the directors shall not amend the By-Laws in a manner which:
(a)Alters or abolishes any preferential right of stock of a series with shares already outstanding;
(b)Creates, alters or abolishes any right in respect of redemption of stock of a series with shares already outstanding;
(c)Creates or alters any restriction on transfer applicable to stock of a series with shares already outstanding;
(d)Excludes or limits the right of a shareholder of a series with shares already outstanding to vote on a matter;
(e)Alters the provisions for indemnification of directors or affects the powers of directors or officers to contract with the corporation.
Any by-law so altered, amended or repealed by the directors may be further altered or amended or reinstated by the shareholders in the above manner.
All notices provided for under these By-laws shall conform to the following requirements:
(a)Notice shall be in writing unless oral notice is reasonable under the circumstances. Notice by electronic transmission is written notice.
(b)Notice may be communicated in person; by telephone, voice mail, telegraph, teletype, or other electronic means; by mail; by electronic transmission; or by messenger or delivery service. If these forms of personal notice are impracticable, notice may be communicated by a newspaper of general circulation in the area where published; or by radio, television, or other form of public broadcast communication.
(c)Written notice, other than notice by electronic transmission, by a domestic or foreign corporation to any of its shareholders, if in a comprehensible form, is effective upon deposit in the United States mail, if mailed postpaid and correctly addressed to the shareholder’s address shown in the corporation’s current record of shareholders.
(d)Written notice by electronic transmission by a domestic or foreign corporation to any of its shareholders, if in comprehensible form, is effective:
(1)if by facsimile telecommunication, when directed to a number furnished by the shareholder for the purpose;
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(2)if by electronic mail, when directed to an electronic mail address furnished by the shareholder for the purpose;
(3)if by a posting on an electronic network together with separate notice to the shareholder of such specific posting, directed to an electronic mail address furnished by the shareholder for the purpose, upon the later of (i) such posting and (ii) the giving of such separate notice; and
(4)if by any other form of electronic transmission, when directed to the shareholder in such manner as the shareholder shall have specified to the corporation.
An affidavit of the secretary or an assistant secretary of the corporation, the transfer agent or other agent of the corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
(e)Written notice, including notice by electronic transmission, to a domestic or foreign corporation, authorized to transact business in the commonwealth, may be addressed to its registered agent at its registered office or to the corporation at its principal office shown in its most recent annual report or, in the case of a foreign corporation that has not yet delivered an annual report, in its application for a certificate of qualification.
(f)Except as provided in subsection (c), written notice, other than notice by electronic transmission, if in a comprehensible form, is effective at the earliest of the following:
(2)five days after its deposit in the United States mail, if mailed postpaid and correctly addressed;
(3)on the date shown on the return receipt, if sent by registered or certified mail, return receipt requested; or if sent by messenger or delivery service, on the date shown on the return receipt signed by or on behalf of the addressee; or
(4)on the date of publication if notice by publication is permitted.
(g)Oral notice is effective when communicated if communicated in a comprehensible manner.
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