UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): May 9, 2014
 
STERLING CONSTRUCTION COMPANY, INC.
(Exact name of registrant as specified in its charter)

Delaware
1-31993
25-1655321
(State or other jurisdiction of
incorporation or organization)
(Commission File Number)
(I.R.S. Employer Identification No.)
 
20810 Fernbush Lane
Houston, Texas
77073
(Address of principal executive offices)
(Zip Code)
 
Registrant’s telephone number, including area code:   (281) 821-9091

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
[  ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
[  ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
[  ] Pre-commencement communications pursuant to Rule 142-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
[  ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
Item 3.03
Material Modification to Rights of Security Holders .
 
The information set forth in Item 5.03 of this Current Report on Form 8-K is incorporated by reference into this Item 3.03.
 
Item 5.02
Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers .
 
Departure of Directors.   The bylaws of the Company provide that any director nominated for re-election at the Annual Meeting of Stockholders is required to submit a resignation in advance of the meeting that is contingent upon both the director failing to receive more votes for his or her election than against it (referred to as a majority vote) and the Board of Directors accepting the resignation.  At the Company's Annual Meeting of Stockholders on May 9, 2014, Robert A. Eckels failed to receive more votes for his election than against, and the Board accepted his resignation at a Board meeting held immediately following the Annual Meeting of Stockholders.
 
Compensatory Arrangements of Certain Officers — 2014 Incentive Compensation Plan .  On May 9, 2014, the Compensation Committee of the Board of Directors of the Company approved the adoption of the 2014 Sterling Incentive Compensation Plan.  The plan is substantially the same as the incentive compensation plan adopted for 2013.  Certain employees of the Company and of certain of its subsidiaries are participants in the plan.  Among the participants are two of the Company's executive officers named in the Summary Compensation Table of the Company's proxy statement, Thomas R. Wright, Executive Vice President & Chief Financial Officer, and Brian R. Manning, Executive Vice President & Chief Business Development Officer.
 
The following is a brief description of the plan, which is qualified in its entirety by the terms of the plan itself, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
 
The plan provides for establishing a target incentive amount for each participant in the plan which is expressed as a percentage of his or her base salary, for Mr. Wright, 120%, and for Mr. Manning, 40%.
 
For Messrs. Wright and Manning as well as for other participants in the plan who do not have operating unit responsibility, the amount of incentive compensation payable is based on the achievement of a Company earnings-per-share (EPS) goal for 2014, which accounts for 50% of the target incentive compensation, and on the achievement of personal goals, which accounts for the other 50% of the participant's target incentive compensation.
 
For participants who have operating unit responsibility, the amount of incentive compensation payable is based on the achievement of the EPS goal, which accounts for 25% of target incentive compensation; achievement of an operating unit earnings-before-interest-and-taxes (EBIT) goal, which accounts for 50% of target incentive compensation; and on the achievement of personal goals, which accounts for 25% of target incentive compensation.
 
For the EPS and EBIT goals, no incentive compensation is paid if less than 80% of the goal is achieved.  From and above the 80% threshold, the amount paid is calculated by multiplying the portion of incentive compensation allocated to the financial goal by the percentage of the goal achieved up to, but not in excess of, a 120% level of achievement irrespective of the level actually achieved.  For personal goals, there is no required minimum level of achievement, and no increased incentive compensation is paid for exceeding 100% achievement.
 
The EPS goal and the personal goals of the Company's executive officers are subject to approval by the Compensation Committee of the Board of Directors.
 
Payment of incentive compensation is made one-half in cash and one-half in shares of common stock of the Company that are subject to restrictions on their sale or other transfer for a period of three years.  The number of shares of stock is calculated by dividing the dollar amount of the incentive compensation earned by the simple average closing price of the Company's common stock during December 2014.
 
Compensatory Arrangements of Certain Officers — Sterling Construction Company, Inc. Stock Incentive Plan .  On March 13, 2014, the Board of Directors of the Company approved an amendment to the Company's Stock incentive Plan to increase the shares issuable under the plan by 900,000 shares, and at their Annual Meeting on May 9, 2014, the stockholders of the Company approved the amendment.  In all other respects, the plan remains unchanged.  Among the eligible participants in the plan are the Company's directors and executive officers.  A copy of the plan, as amended, is attached hereto as Exhibit 10.2 and incorporated herein by reference.
 
Item 5.03
Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year .
 
Amendments to Articles of Incorporation — Article IV .  On March 13, 2014, the Board of Directors of the Company adopted an amendment to Article IV of the Company's Certificate of Incorporation, subject to stockholder approval, to increase the number of shares of common stock the Company is authorized to issue from 19 million shares to 28 million shares.
 
Amendments to Articles of Incorporation — Article VI .   On November 8, 2013, the Board of Directors adopted an amendment to Section 6.2 of Article VI of the Company's Certificate of Incorporation, subject to stockholder approval, to phase out the classification of directors over a three-year period beginning with the 2015 Annual Meeting of Stockholders.
 
At the Company's May 9, 2014 Annual Meeting of Stockholders, both amendments were approved by the stockholders of the Company, and both amendments became effective on their filing with the Secretary of State of the State of Delaware.
 
The foregoing description of the amendments to the Company’s Certificate of Incorporation is qualified in its entirety by the certificate itself, an as-amended version of which is attached hereto as Exhibit 3.1 and incorporated herein by reference.
 
Item 5.07
Submission of Matters to a Vote of Security Holders .
 
Date of Meeting:
May 9, 2014
Type of Meeting:
Annual Meeting of Stockholders
 
Matters Voted on :
For
Against
Abstain
Broker Non-
Votes
Election of Directors:
Marian M. Davenport
12,123,898
981,098
6,846
2,239,112
Robert A. Eckels
5,439,236
7,665,760
6,846
2,239,112
Joseph P. Harper, Sr.
12,226,432
876,670
8,740
2,239,112
Charles R. Patton
12,123,942
980,955
6,945
2,239,112
Paul J. Varello
12,233,353
871,344
7,145
2,239,112
Approval of an amendment of Article IV of the Company's Certificate of Incorporation to increase the number of shares of common stock that the Company is authorized to issue.
12,621,281
2,693,870
8,520
27,283
Approval of an amendment of Article VI of the Company's Certificate of Incorporation to declassify the directors of the Company.
12,839,352
249,030
23,460
2,239,112
Approval of an amendment of the Company's Stock Incentive Plan to increase the number of shares of common stock that may be issued under the plan.
12,171,531
913,968
26,343
2,239,112
Ratification of the selection of Grant Thornton LLP as the Company's independent registered public accounting firm for 2014.
15,023,805
321,189
5,960
-0-
Approval of named executive officer compensation for 2013 (an advisory vote)
11,319,721
1,654,028
138,093
2,239,112
 
Item 9.01
Financial Statements and Exhibits .
 
(c)       Exhibits
 
Exhibit
Number
 
Description
3
 
Certificate of Incorporation of Sterling Construction Company, Inc. as amended through May 9, 2014 (filed herewith).
10.1#
 
The 2014 Sterling Incentive Compensation Plan (filed herewith).
10.2#
 
The Sterling Construction Company, Inc. Stock Incentive Plan as amended through May 9, 2014 (filed herewith) .
___________
#  Management contract or compensatory plan or arrangement.
 
 
 
 
Signatures
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Date: May 13, 2014 Sterling Construction Company, Inc .
   
   
 
/s/ Roger M. Barzun
 
Roger M. Barzun
Senior Vice President
 
 
 
 
 
 
 
 
Exhibit Index
Exhibit
Number
 
Description
3
 
Certificate of Incorporation of Sterling Construction Company, Inc. as amended through May 9, 2014 (filed herewith).
10.1#
 
The 2014 Sterling Incentive Compensation Plan (filed herewith).
10.2#
 
The Sterling Construction Company, Inc. Stock Incentive Plan as amended through May 9, 2014 (filed herewith).

_______________
#  Management contract or compensatory plan or arrangement.
Exhibit 3
Certificate of Incorporation
of
Sterling Construction Company, Inc.
 
Article I
 
The name of the Corporation is Sterling Construction Company, Inc. (hereinafter sometimes referred to as the " Corporation .")
 
Article II
 
The name of the registered agent for service of process of the Corporation is The Corporation Trust Company with an address at 1209 Orange Street, Wilmington, New Castle County, Delaware 19801.
 
Article III
 
The purpose for which the Corporation is formed is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law.
 
Article IV
 
4.1
Capitalization .  The Corporation is authorized to issue two classes of stock, one to be designated common stock (" Common Stock ") and the other to be designated preferred stock (" Preferred Stock. ")
 
 
(a)
The number of shares of Preferred Stock the Corporation has authority to issue is one million (1,000,000) with a par value of one cent ($0.01) per share.
 
 
(b)
The number of shares of Common Stock the Corporation has authority to issue is nineteen million (28,000,000) with a par value one cent ($0.01) per share.
 
4.2
Series of Preferred Stock.   The Board of Directors is authorized, subject to any limitations prescribed by law, to provide for the issuance from time to time of the shares of Preferred Stock in one or more series, and by adopting resolutions to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences, and rights of the shares of each such series and any qualifications, limitations or restrictions thereof.  Upon adopting such resolution or resolutions the Board of Directors shall cause a certificate of designation setting forth such resolution or resolutions and the number of shares of stock of such class or series as to which such resolution or resolutions shall apply to be executed and filed in accordance with applicable Delaware law.  The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the Common Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the certificate or certificates establishing the series of Preferred Stock.
 
4.3
Common Stock .  Each holder of Common Stock shall be entitled to one vote for each share of Common Stock held of record by such holder on all matters on which stockholders generally are entitled to vote; provided, however , that except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any Certificate of Designations relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of that series are entitled, either separately or together with the holders of one or more other series to vote thereon pursuant to this Certificate of Incorporation (including any Certificate of Designations relating to any series of Preferred Stock) or pursuant to the Delaware General Corporation Law.
 
 
 
Article V
 
The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for the further definition, limitation and regulation of the powers of the Corporation and its directors and stockholders:
 
5.1
Powers of Directors .  The business and affairs of the Corporation shall be managed by, or under the direction of, the Board of Directors.  In addition to the powers and authority expressly conferred upon them by statute or by this Certificate of Incorporation or the Bylaws of the Corporation, the directors are hereby empowered to exercise all such powers and to do all such acts and things as are not by statute or by this Certificate of Incorporation to be exercised or done by the stockholders of the Corporation.
 
5.2
Written Ballot .  The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide.
 
5.3
Stockholders Must Meet to Act .  Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any written consent by such stockholders.
 
5.4
Special Meetings of Stockholders .  Special meetings of stockholders of the Corporation may be called only by the Board of Directors.
 
Article VI
 
6.1
Number of Directors .  The number of directors of the Corporation which shall constitute the entire Board of Directors shall be such number as is initially fixed by the Incorporator and thereafter as fixed from time to time exclusively by the Board of Directors.
 
6.2
Election of Directors .
 
 
(a)
At the first annual meeting of stockholders of the Corporation, the directors shall be divided into three classes as nearly equal in number as reasonably possible, with the initial term of office of directors of the first class to expire at the second annual meeting of stockholders of the Corporation, the initial term of office of directors of the second class to expire at the third annual meeting of stockholders of the Corporation, and the initial term of office of directors of the third class to expire at the fourth annual meeting of stockholders of the Corporation.
 
 
(b)
From and after the 2015 annual meeting of stockholders, the directors shall be elected as follows:
 
 
(i)
At the 2015 annual meeting of stockholders, the successors to the directors of the class whose terms of office expire at the 2015 annual meeting of stockholders, shall be elected for one-year terms.
 
 
(ii)
At the 2016 annual meeting of stockholders, the successors to the directors of each class whose terms of office expire at the 2016 annual meeting of stockholders shall be elected for one-year terms.
 
 
(iii)
At the 2017 and succeeding annual meetings of stockholders, all directors of the Corporation shall be elected for one-year terms that expire at the next annual meeting of stockholders, and the directors of the Corporation shall cease to be divided into classes pursuant to Section 141(d) of the General Corporation Law of the State of Delaware.
 
 
(c)
All directors shall hold office until the expiration of their terms and until their successors are elected and qualified, except in the case of death, resignation or removal of a director."
 
6.3
Filling Vacancies on the Board .  Subject to the rights of the holders of any outstanding series of Preferred Stock, newly created directorships resulting from any increase in the authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, removal from office, disqualification or other cause may be filled only by a majority vote of the directors then in office, although less than a quorum.  Directors so chosen shall hold office for a term expiring at the next annual meeting of stockholders at which directors are to be elected.  No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
 
 
 
6.4
Removal of Directors .  Subject to the rights of the holders of any outstanding series of Preferred Stock, any director or the entire Board of Directors may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of a majority of the combined voting power of the then outstanding shares of capital stock of all classes and series of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
 
Article VII
 
7.1
Power to Amend Bylaws .
 
 
(a)
The Board of Directors is expressly empowered to adopt, amend or repeal any or all of the Bylaws of the Corporation.  Any adoption, amendment or repeal of the Bylaws of the Corporation by the Board of Directors shall require the approval of a majority of the Whole Board.  The term "Whole Board" shall mean the total number of authorized directors whether or not there exists any vacancy in previously authorized directorships.
 
 
(b)
The stockholders shall also have the power to adopt, amend or repeal the Bylaws of the Corporation.  In addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of a majority of the combined voting power of the then outstanding shares of capital stock of all classes and series of the Corporation entitled to vote generally in the election of directors, voting together as a single class shall be required to adopt, amend or repeal any provisions of the Bylaws of the Corporation.
 
Article VIII                      
 
8.1
Elimination of Certain Liability of Directors .  A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of his or her fiduciary duty as a director, except for liability —
 
 
(a)
For any breach of the director's duty of loyalty to the Corporation or its stockholders;
 
 
(b)
For acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
 
 
(c)
Under Section 174 of the Delaware General Corporation Law; or
 
 
(d)
For any transaction from which the director derived an improper personal benefit.
 
If after approval by the stockholders of this Article VIII , the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law as so amended.
 
Any repeal or modification of the foregoing provisions of this Article VIII by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of this Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.
 
8.2
Indemnification .
 
 
(a)
Right to Indemnification .  Each person who was or is made a party or is threatened to be made a party to, or is involved in, any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding") by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended, but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment, against all expense, liability and loss (including attorneys' fees, judgments, fines, excise taxes under the Employee Retirement Income Security Act of 1974 or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith.
 
 
 
 
 
(b)
The indemnification provided for herein shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Subsection (d) , below, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation.
 
 
(c)
The right to indemnification conferred in this Section 8.2 shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition.  However, if the Delaware General Corporation Law requires the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, payment shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section 8.2 or otherwise.  The Corporation may by action of its Board of Directors provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers.
 
 
(d)
Right of Claimant to Bring Suit .
 
 
(i)
If a claim under this Section 8.2 is not paid in full by the Corporation within thirty (30) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim.
 
 
(ii)
It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation.
 
 
(iii)
Neither (1) the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor (2) an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard or conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.
 
 
 
 
(e)
Non-Exclusivity of Rights .  The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section 8.2 shall not be exclusive of any other right that any person may have or hereafter acquire under any statute; any provision of this Certificate of Incorporation; any bylaw; any agreement; any vote of stockholders or disinterested directors; or otherwise.
 
 
(f)
Insurance .  The Corporation may, at its own expense, maintain insurance to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law.
 
 
(g)
Settlement of Claims .  The Corporation shall not be liable to indemnify any indemnitee under this Section 8.2 for any amounts paid in settlement of any action or claim effected without the Corporation's written consent, which consent shall not be unreasonably withheld, conditioned or delayed, or for any judicial award if the Corporation was not given a reasonable and timely opportunity, at its expense, to participate in the defense of such action.
 
 
(h)
Subrogation .  In the event the Corporation makes a payment under this Section 8.2 , the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the indemnitee, and the indemnitee shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Corporation effectively to bring suit to enforce such rights.
 
 
(i)
Procedures for Submission of Claims .  The Board of Directors may establish reasonable procedures for the submission of claims for indemnification pursuant to this Section 8.2 , for the determination of the entitlement of any person thereto, and for the review of any such determination.
 
Article IX
 
9.1
Amendments .
 
 
(a)
Amendment of Article VIII .  Notwithstanding any other provision of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any vote of the holders of any class or series of the stock of this Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least 75% of the combined voting power of the then outstanding shares of capital stock of all classes and series of the Corporation entitled to vote generally in the election of directors, voting together as a single class shall be required to amend or repeal Article VIII hereof and this Section 9.1(a) .
 
 
(b)
Amendment of Other Articles .  In addition to any vote of the holders of any class or series of stock of this Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of a majority of the combined voting power of the then outstanding shares of capital stock of all classes and series of the Corporation entitled to vote generally in the election of directors, voting together as a single class shall be required to amend or repeal the provisions of this Certificate of Incorporation except as provided above with respect to the amendment of Article VIII and Section 9.1(a) hereof.
 
 
 
 
In Witness Whereof , the Corporation has caused this Amended and Restated Certificate of Incorporation to be executed by a duly authorized officer of the Corporation this 8 th day of May, 2009.
Sterling Construction Company, Inc.
 
By: /s/ Roger M. Barzun  
 
Roger M. Barzun
Senior Vice President
 
 
                                                                                                                                                                                                                            
Exhibit 10.1




 
2014 Sterling Incentive
Compensation Plan
 

 
 
 
Table of Contents
 
 
INTRODUCTION
3
OVERVIEW
3
HOW THE PLAN WORKS
 
WHO IS ELIGIBLE
3
TARGET INCENTIVE AMOUNT
3
PERFORMANCE GOALS
4
HOW PAYOUTS ARE CALCULATED
4
PAYOUT AND TAXATION
5
CLAW-BACK POLICY
6
WHAT HAPPENS WHEN: A Reference Guide
6
Sample Eligibility Letter - Exhibit A
7
Sample Participant Payout Letter - Exhibit B
8
Claw-Back Policy – Exhibit C
9
 
This booklet was prepared to give you, the Participant, a better understanding of the Sterling Incentive Compensation Plan for 2014. This booklet, including the sample payout letter issued under the Plan serve as the official Plan documents. If there are any differences between this booklet and any other understanding you may have or any written documents of the Plan and its operation, this booklet will control. Sterling Construction Company, Inc. including its affiliates reserves the right to change, amend, modify or terminate the Plan at any time and for any reason. Participation in the Plan does not create any right or expectation of, continued employment or a continued employment relationship with Sterling.  Participation in the Plan also does not guarantee that you will receive incentive compensation.


 
Page 2
 
Introduction
 
As an organization, Sterling sets high goals for itself – goals that “stretch” Company performance to the next level.  You can play an important role in helping the part of the business in which you are employed to realize those goals.
 
The Sterling Incentive Compensation Plan (the “Plan”) provides financial rewards when you achieve individual goals, when the operating unit in which you are employed achieves its performance goals, and when the Company as a whole achieves its performance goals.  Goals are established for each Plan year (January 1 – December 31).  The Plan is designed to align individual and Company goals and to offer you the opportunity to increase your compensation when those goals are met or exceeded.
 
Overview
 
The Plan is a key component of total compensation for the Company's managers who can have a direct impact on the near-term performance of their operating units.  The Plan creates a clear link between participants' actions and the financial achievements of the operating units in which they are employed.  This link and our incentive compensation targets are consistent with our business focus and are driven by our market-competitive pay-for-performance compensation philosophy.  The Plan supports the pay-for-performance philosophy by linking a portion of your annual compensation opportunity to the achievement of the specific Company, operating unit, and individual performance goals. The goals are intended to promote teamwork (“ One Sterling ”) and collaboration among management leadership, and to encourage individual accountability.
 
The Plan also helps the Company manage costs and improve results because payouts under the Plan depend on the operating performance of our businesses.  Payouts are primarily based on performance measures which, if achieved, will increase the Company’s value to its shareholders by increasing profits, reducing costs, or both.
 
How the Plan Works
 
Who Is Eligible
 
Company leadership (including Named Executive Officers (NEOs) and certain non-NEOs, as determined by the CEO), who directly impact the financial performance of their operating units, or have a significant impact on Company operations are eligible to participate in the Plan.  When an employee first becomes eligible, he or she will be notified in writing by the CHRO of the Company.

Target Incentive Amount

Each Plan participant is assigned a Target Incentive Amount, expressed as a percentage of his or her base annualized salary.  Your Target Incentive Amount depends on your job responsibilities and the competitive compensation practices in the labor markets where we compete for talent.  Your actual incentive payout under the Plan may be less or more than your Target Incentive Amount, depending on the Company's financial results, your operating unit's financial results and your individual performance.
 
Performance Goals

Each year, financial and personal performance goals for the following year are established.  Your manager will explain to you those goals and will tell you what your Target Incentive Amount is.  Your manager will also tell you what you and your operating unit can do to achieve those goals.

For most participants* there are three types of goals, with the achievement of each one accounting for a portion of your Target Incentive Amount:

 
Page 3
 
1.  
Company Goals .  Each year, the CEO and CFO, in consultation with the Compensation Committee of the Company's Board of Directors, will determine the financial performance goal or goals for the Company as a whole.  For 2014 there will be an earnings-per-share goal ( the “EPS Goal” ), which is weighted at ___% of your Target Incentive Amount.

2.  
Operating Unit Goals .  Each year, the CEO and CFO, in consultation with operating unit managers, will determine the financial performance goal or goals for operating units.  For 2014 there will be an earnings-before-interest-and-taxes goal ( the “EBIT Goal” ), which is weighted at ___% of your Target Incentive Amount.
 
3.  
Personal Goals .  Each year, the CEO and the CHRO in consultation with your manager will establish your personal goals for the year, which are weighted at ___% of your Target Incentive Amount.  Personal goals consist of things that are considered to require an extra or particular performance effort during the year such as safety, project management, personal/team development, other projects, Core Values, or other strategic initiatives.

* Note : For Plan participants without P&L responsibility, incentive goals will be based 50% on the Company Goals and 50% on the achievement of Personal Goals.

How Payouts Are Calculated

In February of the year following the end of a Plan year, the level of achievement of each goal is determined in order to calculate your total incentive payout.  The CEO will review the level of achievement of all goals for the year, including your personal goals, which in turn will be based on your manager's written assessment of your individual performance during the year against those goals.

Once the financial performance results have been determined and your personal performance has been assessed, (and in some cases, after approval by the Compensation Committee) the CEO will inform you in writing of your payout amount.

All performance goals do not have to be met for a payout to be made.

·
If the level of achievement of any financial goal is below 80%, no payout will be made for that goal.
·
If at least 80%, but less than 100% of a financial goal is achieved, a payout for that goal will be calculated by taking the percentage of the goal achieved and multiplying it by the percentage of the Target Incentive Amount that was allocated to that goal.
Page 4
·
If more than 100% of any   financial goal is achieved, a payout for that goal will be calculated by taking the percentage of the goal achieved up to, but not in excess of 120%, and multiplying it by the percentage of the Target Incentive Amount that was allocated to that goal.

Example of a Payout Calculation
Let’s say your Target Incentive Amount for the Plan year is 40% of your base annualized salary of $100,000, or $40,000 and that the performance goals for the Plan year are weighted the way they are for the 2014 Plan year:
 
·
A Company EPS Goal worth 25% of your Target Incentive Amount
 
·
An Operating Unit EBIT goal worth 50% of your Target Incentive Amount, and
 
·
Personal Goals worth 25% of your Target Incentive Amount
 
 
Page 4
 
Below is an illustration of the incentive payout calculation based on the assumptions listed above and on the assumed "Level of Achievement" percentages for the Plan year in the table:
 
Goals
Level of Achievement in the Plan Year
% Weighted
Calculation
Percent of Target Incentive Amount Earned
Company EPS Goal
100%
25%
100% x 25%
25%
Operating Unit EBIT Goal
95%
50%
95% x 50%
47.5%
Personal Goals
75%
25%
75% x 25%
18.75%
Sum of percentages of Target Incentive Amount earned:
91.25%
Incentive Payout:
91.25% x 40% (Target Incentive Amount) = 36.5% of $100,000 (annualized base salary) or $36,500 incentive payout.
 
 
 
Page 5
 
Incentive Payout and Taxation
 
Annual incentive payments are made in the first quarter of the year following the Plan year, but no later than March 15 th .  Incentive payouts will be made 50% in cash and 50% in shares of the Company's common stock that are subject to restrictions on their sale or transfer for a fixed period of time, three years for the 2014 Plan.  The number of shares is calculated by using the simple average of the closing prices of the Company's common stock on the Nasdaq Global Select Market during December of the Plan year.
 
The cash portion of your incentive payout is treated as supplemental income for federal income tax withholding purposes. The Company is currently required to withhold at a flat rate of 25% for federal withholding together with Social Security and Medicare taxes of that amount, and you are permitted to use some of the shares released from the restrictions to pay the withholding tax.   The cash portion of payouts under the Plan may also be subject to state income tax withholding, and to garnishment, levy or other wage withholding order.  The payout is not eligible for deferral into your Company 401(k) account.
 
The shares of restricted Company common stock are taxable to you in the year in which the restrictions lapse at the end of the restriction period.  The amount taxed is the fair market value of the shares of common stock at that date.
 
Claw-Back Policy
 
Please read the Claw-Back Policy that is attached to this Plan as Exhibit “C.”  It concerns the effect on any incentive compensation that has been paid to you if the Company subsequently, for whatever reason, restates the financial statements on which your incentive compensation was based.
 
What Happens When: A Reference Guide
 
You are hired or promoted to a Plan-eligible position in the middle of a Plan year
Any incentive payout for the Plan year will be prorated based on the actual pay you received in the Plan-eligible position during the year.  The actual payout you receive may be adjusted up or down based on your individual performance.
You transfer between operating units during a Plan year
Your incentive payout for the Plan year will be prorated based on your operating unit’s performance against its goals and the number of days you worked in each operating unit. Managers from the operating units in which you were employed will collaborate on the assessment of your individual performance.
You take a leave of absence (including short-term or long-term disability, military leave, FMLA, or other paid or unpaid leave)
The amount of your incentive compensation will be prorated based on your earnings in the Plan-eligible position during the Plan year.  Your manager will determine your incentive payout based on your operating unit’s and your individual performance.
You retire, die, or are laid off during the Plan year
The amount of your incentive compensation will be prorated based on your earnings in the Plan-eligible position during the Plan year.  Your manager will determine your incentive payout based on your operating unit’s and your individual performance.
Your employment ends for any reason other than retirement, death, disability or layoff
Payments under the Plan are at the discretion of management, and/or the Compensation Committee.  In general, if you voluntarily resign or are terminated for cause, you will not be paid incentive compensation.

*******************
 
 
Page 6
 
Sterling Incentive Compensation Plan          EXHIBIT A




[SAMPLE PARTICIPANT             ELIGIBILITY LETTER]
[Date]
[Name]
Dear [Name]:
I am pleased to confirm your eligibility for participation in the Sterling Incentive Compensation Plan for 2014.
 
Participation in the Plan is generally limited to employees who directly impact the financial performance of their operating units, or have a significant impact on Company operations.  The Plan is intended to reward eligible participants for their collective and individual contributions to the success of the Company during a Plan year as measured by the level of the achievement of financial and individual performance goals.
 
Your Target Incentive Amount for 2014 is %_____ of your annualized base salary.  Any incentive payout to you will be paid 50% in cash and 50% in the form of shares of the Company's common stock that have restrictions on their sale or transfer for a fixed period of time.  The achievement of Company and operating unit financial results and of your personal goals will be used to calculate any 2014 incentive payout.

This eligibility letter and the accompanying 2014 incentive plan booklet and sample payout letter are confidential and the property of Sterling Construction Company, Inc.  These documents may not be duplicated or their contents divulged verbally or in writing to any third party during or after your employment.  Upon termination of your employment for any reason, all incentive plan documents must be returned to the Company.  Please refer to the Privacy section of the Code of Business Conduct for further information on the Company's confidentiality requirements.

Should you have any questions concerning the Plan for 2014, please do not hesitate to contact me directly.

Best regards,
Craig Allen
Chief Human Resources Officer
 
Sterling Incentive Compensation Plan                  EXHIBIT B



[SAMPLE PARTICIPANT              PAYOUT LETTER]
[Date]
[Name]
Dear [Name]:
I am pleased to confirm your Sterling Incentive Compensation Plan payout for 2014.  This payment, as you are aware, is made to eligible employees based on Company and operating unit financial performance, and the achievement by you of personal goals.
 
The level of achievement of those financial results and of your personal goals that were established for the Plan year together with your Target Incentive Amount percentage of ___% were used in accordance with the Plan to calculate your 2014 incentive payout.
 
 
Page 7
 
Goals
Level of
Achievement
% Weighted
Calculation
Percent of Target Incentive Amount Earned
Company Goal
       
Operating Unit Goal [If applicable]
       
Personal Goals
       
Sum of Percentages of Target Incentive Amount Earned:
 
Incentive Payout (Cash)
 
Incentive Payout (Shares of Restricted Common Stock)
 

The cash portion of your incentive payout for 2014 will be made via direct deposit to your bank account on [insert pay date].  You will also be receiving a Restricted Stock Agreement that shows the number of shares of the Company's common stock you have earned, and includes a description of the restrictions on the sale or transfer of the shares, the circumstances under which the shares may be forfeited, and the date the restrictions lapse.  You will be required to sign the agreement as a condition to receiving the shares.
 
[OPTIONAL] I am also pleased to also confirm that your new base annualized salary will be $__________ effective March ___, 2014.
 
Your valuable contributions on behalf of the Company during 2014 are much appreciated.
 
Best regards,
Peter Mac Kenna
President & Chief Executive Officer
 
Sterling Incentive Compensation Plan                             EXHIBIT C

Claw-Back Policy    

1.  
It is the policy of the Company that the amount of any bonus or other incentive compensation (together, " Incentive Compensation ") that has already been paid to an employee of the Company (either in cash or in common stock of the Company, or both) that was based on financial statements that are subsequently restated shall, if necessary, be adjusted either by repayment by the employee to the Company or by making an additional payment to the employee so that the employee will have received no more and no less than the amount that he or she would have received had the financial statements been restated before the amount of the Incentive Compensation was determined.
 
2.  
If as a result of the restatement, the Incentive Compensation is shown to have been —
 
(a)  
Overpaid, the recipient shall return the amount of the overpayment within sixty days of a written demand therefor by the Company.
 
(b)  
Underpaid, the Corporation shall pay the amount of the underpayment within thirty days of the completion of the restatement.
 
3.  
In the event that any repayment by an employee under this policy involves the re-conveyance to the Company of shares of common stock that have been sold by the employee, the proceeds realized from the sale shall be repaid to the Corporation.  If the shares shall have been otherwise transferred, or shall have been pledged or encumbered, the employee shall convey to the Company either —
 
(a)  
The market value of such shares at the date of such transfer, pledge or encumbrance or at the date the demand for repayment is made, whichever is higher; or
 
 
Page 8
 
(b)  
Shares of common stock of the Company having such market value.
 
4.  
Any payment and/or conveyance of shares to the Company under this policy shall be made whether or not the employee required to make the payment or conveyance was culpable with respect to the error, event, act or omission that caused the restatement to be made, but nothing in this policy shall be construed to prevent the Company from pursuing other remedies against the employee if the Company determines that he or she was in fact culpable in any respect.
________________
Adopted January 18, 2011
 
 
 
 
 
 
 
 
 
 
 
Page 9
Exhibit 10.2
STERLING CONSTRUCTION COMPANY, INC.
 
Stock Incentive Plan
 
1.
Background .  The Board of Directors of Sterling Construction Company, Inc. (the " Company ") on July 23, 2001 adopted the 2001 Stock Incentive Plan and the stockholders of the Company on October 16, 2001 approved it.  The purpose of this amendment and restatement is to (a) extend its term; (b) to conform it to applicable law; and (c) to change its name to the Sterling Construction Company, Inc. Stock Incentive Plan .  As initially adopted and as amended and in effect from time to time therafter, it will be referred to herein as this " Plan. ")
2.
Purpose .  The purpose of this Plan is to advance the interests of the Company's stockholders by enhancing the Company's ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing those persons with opportunities for equity ownership and performance-based incentives, and thereby to better align the interests of those persons with the interests of the Company's stockholders.  Except where the context otherwise requires, the term "Company" shall include Sterling Construction Company, Inc. and all its present or future subsidiary corporations as defined in Section 424(f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the " Code. ")
3.
Eligibility .  All of the Company's employees, officers, directors, consultants and advisors are eligible to be granted options, and to be awarded restricted stock and other stock-based compensation (each, an " Award ") under this Plan.  Any person to whom an Award has been made under this Plan shall be deemed a " Participant. "
4.
Administration of this Plan & Delegation .
 
4.1
Administration by the Board of Directors .
 
(a)
This Plan will be administered by the Board of Directors of the Company (the " Board. ")  The Board shall have authority to make Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to this Plan as it shall deem advisable.
 
(b)
The Board shall determine the extent, if any, to which any performance criteria or other conditions applicable to the vesting of an Award have been satisfied or whether such criteria shall be waived or modified.
 
(c)
The Board may interpret this Plan and correct any defect, supply any omission, or reconcile any inconsistency in this Plan or in any Award in the manner and to the extent it shall deem expedient to carry this Plan into effect, and the Board shall be the sole and final judge of such expediency.
 
(d)
No member of the Board shall be liable for any action or determination relating to this Plan, and no director or person acting pursuant to the authority delegated by the Board shall be liable for any action or determination under this Plan made in good faith.
 
(e)
All decisions by the Board shall be made in the Board's sole discretion and shall be final and binding on all persons having or claiming any interest in this Plan or in any Award.
 
4.2
Delegation by the Board .
 
(a)
To the extent permitted by applicable law, the Board may delegate any or all of its powers under this Plan to one or more committees or subcommittees of the Board (each a " Committee. ")  All references in this Plan to the "Board" shall mean the Board or a Committee to the extent that the Board's powers or authority under this Plan have been delegated to the Committee.
 
(b)
So long as the Company’s common stock, par value $0.01 per share (the " Common Stock ") is registered under the Securities Exchange Act of 1934 (the " Exchange Act ") the Board shall appoint one such Committee and delegate the administration of this Plan to that Committee.  The Committee shall consist of not less than three members, each member of which shall —
 
 
 
 
 
(i)
be a "non-employee director" as defined in Rule 16b-3 promulgated under the Exchange Act;
 
(ii)
be an "outside director" within the meaning of Section 162(m) of the Code and the Treasury regulations issued thereunder; and
 
(iii)
satisfy the requirements for independence of any exchange or trading system on which the Common Stock is traded.
5.
Shares Available for Awards .
 
5.1
Number of Shares .  Subject to adjustment under Section 5.4 , below, Awards may be made under this Plan covering up to 1,900,000 shares of Common Stock, and the maximum number of shares of Common Stock that may be issued under this Plan pursuant to the exercise of Incentive Stock Options is 1,900,000.  Shares issued under this Plan may consist in whole or in part of authorized but un-issued shares or treasury shares.
 
5.2
If any Award (a) expires; (b) is terminated, surrendered or canceled without having been fully exercised; or (c) is forfeited in whole or in part or results in any Common Stock not being issued, the unused Common Stock covered by such Award shall again be available for making Awards under this Plan, subject, however , in the case of Incentive Stock Options to any limitation required under the Code.
 
5.3
Calendar Year Per-Participant Limitation .
 
(a)
The maximum number of shares of Common Stock subject to Options (as defined in Section 6 , below) awarded to any one Participant pursuant to this Plan in any calendar year shall not exceed 100,000.
 
(b)
The maximum number of shares of Common Stock which may be subject to Restricted Stock Awards (as defined in Section 7 , below) made to any one Participant in any calendar year shall not exceed 100,000.
 
(c)
The maximum amount of any other compensation that may be paid to any Participant pursuant to any Awards under this Plan in any calendar year —
 
(i)
shall not exceed the fair market value (determined as of the date of payment) of 100,000 shares of Common Stock if the compensation under the Award is denominated under the Award agreement only in terms of shares of Common Stock or a multiple of the fair market value per share of Common Stock; or
 
(ii)
in all other cases, shall not exceed $1,000,000.
 
(d)
This Section 5.3 shall be construed and applied consistently with Section 162(m) of the Code.
 
5.4
Adjustment in the Number of Shares .
 
(a)
In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Common Stock other than a normal cash dividend —
 
(i)
the number and class of securities available under this Plan;
 
(ii)
the number and class of security and the exercise price per share subject to each outstanding Option;
 
(iii)
the repurchase price per security, if any, subject to each outstanding Restricted Stock Award; and
 
(iv)
the terms of each other outstanding stock-based Award,
shall be appropriately adjusted by the Company (or substituted Awards may be made, if applicable) to the extent the Board shall determine, in good faith, that such an adjustment (or substitution) is necessary and appropriate.
 
(b)
Notwithstanding the foregoing, all such adjustments, if any, shall be made —
 
 
 
 
(i)
in a manner consistent with the requirements of Section 409A of the Code in the case of an Award to which Section 409A of the Code is applicable or would be applicable as a result of, or in connection with, any actual or proposed adjustment or adjustments;
 
(ii)
in a manner consistent with the requirements of Section 424(a) of the Code in the case of Incentive Stock Options; and
 
(iii)
in a manner consistent with Section 162(m) of the Code in the case of any Award held by a Participant and intended to constitute performance-based compensation.
 
(c)
The Board’s determinations regarding the foregoing adjustments shall be final, binding and conclusive with respect to the Company and all other interested persons.
6.
Stock Options .
 
6.1
General .  The Board may grant options to purchase Common Stock (each an " Option ") and may determine all of the the terms, conditions and limitations applicable to each Option, including such conditions relating to applicable federal or state securities laws as it considers necessary, appropriate or advisable.
 
6.2
Incentive Stock Options .  An Option that the Board intends to be an "incentive stock option" as defined in Section 422 of the Code (an " Incentive Stock Option ") shall only be granted to employees of the Company and shall be subject to, and shall be construed consistently with, the requirements of Section 422 of the Code.  The Company shall have no liability to a Participant or any other party if an Option (or any part thereof) that is intended to be an Incentive Stock Option is for any reason not an Incentive Stock Option.  An Option that is not intended to be an Incentive Stock Option shall be designated a " Non-Statutory Stock Option ."
 
6.3
Exercise Price and Other Terms .
 
(a)
At the time each Option is awarded, the Board shall establish and specify the exercise price in accordance with applicable laws, rules and regulations; the time or times at which the Option is exercisable; and the term of the Option.
 
(b)
Options may only be exercised by delivery to the Company of a written notice of exercise signed by the Participant or other person authorized to do so on behalf of the Participant together with payment in full for the number of shares being purchased in the manner set forth in Section 6.4 , below.
 
6.4
Methods of Payment .
 
(a)
The purchase price of Common Stock purchased pursuant to the exercise of an Option shall be paid in cash or by check payable to the order of the Company except to the extent that the Board permits any other method of payment in a particular option agreement or generally as to all Options.
 
(b)
If the Common Stock is registered under the Exchange Act, payment of the purchase price may also be made by delivery of an irrevocable and unconditional undertaking by a credit-worthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and/or any applicable withholding tax, or by delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a credit worthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and/or any applicable withholding tax.
7.
Restricted Stock Awards .
 
7.1
Grants .  The Board may make Awards entitling the recipient to acquire shares of Common Stock subject to the right of the Company to repurchase from the recipient all or some of such shares at their issue price or other stated or formula price, or may make Awards without requiring any payment therefor that are subject to forfeiture of the shares covered by the Award in the event that conditions specified by the Board in the Award agreement are not satisfied prior to the end of a restriction period or periods established by the Board for such Award (each a " Restricted Stock Award. ")
 
7.2
Terms and Conditions .  The Board shall determine the terms and conditions of any Restricted Stock Award, including the issue price, if any, and the conditions for repurchase or forfeiture.  Any one or more stock certificates issued to cover a Restricted Stock Award shall be registered in the name of the Participant.  Unless otherwise determined by the Board, the Participant shall deposit or leave each certificate together with a stock power endorsed in blank by the Participant with the Company or its designee.  At the expiration of a restriction period, the Company (or such designee) shall deliver to the Participant the certificate representing the shares that are no longer subject to restrictions.  If the Participant has died, the certificate shall be delivered to the beneficiary designated by the Participant to receive amounts due to, or to exercise the rights of, the Participant in the event of his or her death (the " Designated Beneficiary. ")  The manner of such designation shall be determined by the Board.  In the absence of an effective designation by a Participant, the Designated Beneficiary shall be the Participant's estate.
 
 
 
 
8.
Other Stock-Based Awards .  The Board shall have the right to make any other Awards based upon the Common Stock having such terms and conditions as the Board may determine, including the grant of shares based upon certain conditions, the grant of securities convertible into Common Stock and the grant of stock appreciation rights.
9.
General Provisions Applicable to Awards .
 
9.1
Transferability of Options .  During the lifetime of a Participant, Options shall be exercisable only by the Participant.
 
(a)
Awards shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except —
 
(i)
by will or the laws of descent and distribution; or
 
(ii)
to immediate family members to the extent permitted by applicable laws,
provided that the transferee delivers to the Company a written instrument agreeing to be bound by all of the terms of the Award as if the transferee were the person to whom it was granted.
 
(b)
"Immediate family members" shall consist only of a person's spouse, parent, issue or any spouse of any such parent or issue (including issue by adoption) or a trust established for the benefit of a person's spouse, parent, issue or any spouse of any such parent or issue (including issue by adoption.)
 
(c)
References to a Participant, to the extent relevant in the context, shall include references to transferees authorized under this Plan; provided however , irrespective of any such transfer or assignment of an Option, the Company shall only be obliged to send notices with respect to that Option to the original grantee thereof, or in the event of the Participant’s death or disability, to his or her personal representative.
 
9.2
Documentation of Awards .  Each Award under this Plan shall be evidenced by a written agreement in such form as the Board shall determine.  Each Award may contain terms and conditions in addition to, but not inconsistent with, those set forth in this Plan.
 
9.3
Board Discretion as to Awards .  Except as otherwise provided by this Plan, each type of Award may be made alone, or in addition to, or in relation to, any other type of Award.  The terms of each type of Award need not be identical, and the Board need not treat Participants uniformly.
 
9.4
A Participant's Change of Status .  The Board shall determine the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant, and the extent to which, and the period during which, the Participant or the Participant's personal representative or Designated Beneficiary may exercise rights under the Award.
 
9.5
Substitute Awards .  The Board may make Awards under this Plan in substitution for stock and stock-based awards held by employees of another entity who become employees of the Company as a result of a merger or consolidation of the employing entity with the Company, or the acquisition by the Company of property or stock of the employing entity.  Each substitute Award shall be made on such terms and conditions as the Board considers appropriate in the circumstances.
 
 
 
 
 
9.6
Tax Withholding .  Each Participant shall pay to the Company, or make provision satisfactory to the Board for payment of, any taxes required by law to be withheld in connection with Awards to such Participant no later than the date of the event creating the tax liability.  The Board may allow Participants to satisfy such tax obligations in whole or in part in shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their fair market value as determined by the Board in good faith.  The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to such Participant.
 
9.7
Amendment of Awards .  The Board may amend, modify or terminate any outstanding Award, including by —
 
(a)
Substituting therefor another Award of the same or a different type;
 
(b)
Changing the date of exercise or realization; and/or
 
(c)
By converting an Incentive Stock Option into a Non-Statutory Stock Option,
provided that the Participant's consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant.
 
9.8
Pre-Conditions to Delivery of Shares .  The Company will not be obligated to deliver any shares of Common Stock pursuant to this Plan or to remove restrictions from shares previously delivered under this Plan until —
 
(a)
All conditions of the Award have been met or removed to the satisfaction of the Company;
 
(b)
In the opinion of the Company's counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable stock exchange or stock market rules and regulations; and
 
(c)
The Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules and regulations.
 
9.9
Acceleration of Awards .  The Board may at any time provide as follws:
 
(a)
That any Option shall become immediately exercisable in full or in part.
 
(b)
That any Restricted Stock Award shall be free of some or all restrictions.
 
(c)
That any other stock-based Award may become exercisable in full or in part or become free of some or all restrictions or conditions, or otherwise realizable in full or in part, as the case may be.
 
9.10
Re-pricing Options and Stock Appreciation Rights . Notwithstanding any other provision of this Plan, and except in connection with a corporate transaction involving the Company (including, without limitation, any stock dividend, distribution (whether in the form of cash, shares of Common Stock, other securities or other property), stock split, extraordinary cash dividend, recapitalization, change in control, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares of Common Stock or other securities, or similar transaction(s)), the Company may not, without obtaining stockholder approval: (a) amend the terms of outstanding options or stock appreciation rights to reduce the exercise price of such outstanding options or stock appreciation rights; (b) cancel outstanding options or stock appreciation rights in exchange for options or stock appreciation rights with an exercise price that is less than the exercise price of the original options or stock appreciation rights; or (c) cancel outstanding options or stock appreciation rights with an exercise price above the current stock price in exchange for cash or other securities.
10.
Definition of a Change of Control .  A Change of Control of the Company shall be deemed to have occurred upon the occurrence of any of the following events:
 
·
A "Change in Ownership;"
 
·
A "Change in Effective Control;" or
 
 
 
 
·
A "Change   in Ownership of Assets"
as those terms are defined below.
 
10.1
A Change in Ownership .
 
(a)
A Change in Ownership shall be deemed to occur on the date that any Person or Group (as those terms are defined below) acquires ownership of stock of the Company that, together with stock held by that Person or Group, constitutes more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company.
 
(b)
If any Person or Group is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same Person or Group is not considered to cause a Change in Ownership or to cause a Change in Effective Control.
 
(c)
An increase in the percentage of stock owned by any Person or Group as a result of a transaction in which the Company acquires its own stock in exchange for property (but not when the Company acquires its own stock for cash) will be treated as an acquisition of stock for purposes of this Agreement.
 
(d)
This Section 10.1 applies only when there is a transfer of stock of the Company or issuance of stock of the Company, and stock in the Company remains outstanding afte r the transaction.   Section 10.3 , below, describes a change in ownership of assets.  
 
10.2
A Change in Effective Control .  A Change in Effective Control shall be deemed to occur on the date on which a majority of the Company’s board of directors is replaced during any twelve-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s board of directors before the appointment or election.
 
10.3
A Change in Ownership of Assets .
 
(a)
A Change in Ownership of Assets shall be deemed to occur on the date that any Person or Group acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition by such Person or Group) assets from the Company that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions.  For purposes of this Section 10.3 —
 
(i)
the Company means and includes its consolidated subsidiaries; and
 
(ii)
gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
 
(b)
There is no change in control event under this Section 10.3 when there is a transfer to an entity that is controlled by the stockholders of the Company immediately after the transfer.
 
(c)
A transfer of assets by the Company is not treated as a change in the ownership of such assets if the assets are transferred to —
 
(i)
a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock;
 
(ii)
an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company;
 
(iii)
a Person or Group that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company; or
 
(iv)
an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person or Group described in the im mediately preceding Subsection (iii) .
 
(d)
Except as otherwise provided above in Section 10.3 (c)(iii) , a person's status is determined immediately after the transfer of the assets.  For example, a transfer to a corporation in which the Company has no ownership interest before the transaction, but that is a majority-owned subsidiary of the Company after the transaction, is not a Change in Ownership of Assets.
 
 
 
 
10.4
Section 409A of the Code .  Notwithstanding any provision to the contrary herein, in any circumstance in which the foregoing definition of Change of Control of the Company would be operative and with respect to which the income tax under Section 409A of the Code would apply or be imposed, but where such tax would not apply or be imposed if the meaning of the term "Change of Control of the Company" met the requirements of Section 409A(a)(2)(A)(v) of the Code, then the term "Change of Control of the Company" herein shall mean, but only for the transaction so affected, a "change in control event" within the meaning of Treasury regulation §1.409A-3(i)(5).
 
10.5
Consequences of a Change of Control .  Upon the occurrence of a Change of Control of the Company or the execution by the Company of any agreement which results in a Change of Control of the Company, the Board shall take one or more of the following actions with respect to then outstanding Awards:
 
(a)
Provide that such Awards shall be assumed, or equivalent Awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof;) provided however , that any stock options substituted for Incentive Stock Options shall to the extent that it is reasonably practical to do so, be made to satisfy (in the determination of the Board) the requirements of Section 424(a) of the Code, but if a substituted option shall fail for any reason to satisfy such requirements, such option shall become a Non-Statutory Stock Option and provided further, that the substitution shall satisfy the requirements of Treasury regulation Section 1.409A-1(b)(5)(v)(D) so as not to be treated as the grant of a new stock right or change in the form of payment for purposes of Treasury regulation Sections 1.409A-1 through 1.409A-6;
 
(b)
In the event of a transaction resulting in a Change of Control of the Company under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share of Common Stock surrendered pursuant to such transaction (the " Acquisition Price ") provide that all outstanding Options shall terminate upon consummation of such transaction and that Participants shall receive, in exchange for such Options, a cash payment equal to the amount, if any, by which (i) the Acquisition Price multiplied by the number of shares of Common Stock subject to the outstanding Options (whether or not then exercisable), exceeds (ii) the aggregate exercise price of such Options; and/or
 
(c)
Accelerate in full the vesting of such Awards; and/or
 
(d)
Tak e any other actions the Board deems appropriate.
11.
Other Provisions .
 
11.1
No Right to Employment or Other Status .  No person shall have any claim or right to an Award, and the making of an Award to a person shall not be construed as giving such person the right to continued employment or any other relationship with the Company.  The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under this Plan, except as otherwise expressly provided in the Award.
 
11.2
No Rights as a Stockholder .  Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed pursuant to an Award until becoming the record holder of such shares.
 
11.3
Effective Date and Term of Plan .  The amendment and restatment of this Plan shall become effective on the date on which it is adopted by the Board.  No Awards shall be granted under this Plan after the earlier of the tenth anniversary of (a) the date on which the amendment and restatement of this Plan was adopted by the Board; and (b) the date the amendment and restatement of this Plan was approved by the Company's shareholders, but Awards granted within such period may extend beyond the tenth anniversary.
 
 
 
 
11.4
Amendment of Plan .  The Board may amend, suspend or terminate this Plan or any portion thereof at any time, provided that no amendment shall be made without subsequent stockholder approval if such approval is necessary to comply with any applicable tax or regulatory requirements.  Amendments requiring stockholder approval shall become effective when adopted by the Board.
 
11.5
Governing Law .  The provisions of this Plan and all Awards made under this Plan shall be governed by, and interpreted in accordance with, the laws of the State of Delaware, without regard to any of its applicable conflicts of law provisions.
 
11.6
No Guarantee of Tax Consequences .  The Participant shall be solely responsible and liable for any tax consequences (including, but not limited to, any interest or penalties) as a result of participation in this Plan.  Neither the Board, nor the Company nor any Committee makes any commitment or guarantee that any federal, state or local tax treatment will apply or be available to any person participating or eligible to participate in this Plan and assumes no liability whatsoever for the tax consequences to the Participants.
 
11.7
A Specified Employee Under Section 409A of the Code .  Subject to any restrictions or limitations contained herein, in the event that a "specified employee" (as defined under Section 409A of the Code) becomes entitled to a payment under this Plan that is subject to Section 409A of the Code (and which does not qualify for any exceptions or exemption from Section 409A of the Code, such as the short-term deferrals and for separation pay only upon an involuntary separation from service exception) on account of a "separation from service" (as defined under Section 409A of the Code) such payment shall not occur until the date that is six (6) months plus one (1) day from the date of such "separation from service."
12.
Compliance with Section 409A of the Code .  Certain items of compensation paid pursuant to this Plan are or may be subject to Section 409A of the Code.  In such instances, this Plan is intended to comply and shall be administered in a manner that is intended to comply with Section 409A of the Code and shall be construed and interpreted in accordance with such intent.
________________
 
Adopted by the Board of Directors on July 23, 2001 and Approved by Stockholders on October 16, 2001
Amended by the Board of Directors March 17, 2006 and approved by Stockholders on May 10, 2006
Amended by the Board of Directors November 16, 2007
Amended by the Board of Directors on May 8, 2008 to be effective May 9, 2008
Amended and Restated by the Board of Directors on May 6, 2011
Amended by the Board of Directors on May 1, 2012
Approved by Stockholders on May 8, 2012
Amended by the Board of Directors on March 13, 2014
Approved by Stockholders on My 9, 2014