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): February 24, 2016

 

 

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.)
     
1800 Hughes Landing Blvd.
The Woodlands, Texas 		 

 

77380

(Address of principal executive offices)   (Zip Code)
     
Registrant’s telephone number, including area code:   (281) 214-0800
             

 

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 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers .

 

Compensatory Arrangements of Certain Officers . On February 24, 2016, the Compensation Committee of the Board of Directors of the Company approved the adoption of the 2016 Executive Incentive Compensation Program.

 

Of the five executive officers of the Company named in the Summary Compensation Table for 2015 in the Company's 2015 proxy statement, one, Con L. Wadsworth, President of the Company's Ralph L. Wadsworth Construction Company, LLC subsidiary, is eligible to participate in the program. The others are no longer with the Company. Among the other participants in the program will be the Company's Executive Vice President & Chief Financial Officer, Ronald A. Ballschmiede. No other current executive officer of the Company will participate in the program.

 

The following is a brief summary of the program, which is qualified in its entirety by the Program Description, a copy of which is attached hereto as Exhibit 10.1 and by the form of Restricted Stock Award Agreement, a copy of which is attached hereto as Exhibit 10.2, both of which exhibits are incorporated herein by this reference.

 

The 2016 Executive Incentive Compensation Program is a one-year program that provides for establishing at the beginning of 2016 a target amount for each participant, which is the amount that can be earned by the participant if all the goals of the program are achieved in 2016, and is expressed as a percent of the participant's base salary.

 

Incentive compensation is earned based on the level of achievement of a Company earnings-per-share (EPS) goal for 2016, individual performance goals, and for participants in the Company's operating units, an operating-unit earnings before interest and taxes goal. The EPS goal and the individual performance goals of officers of the Company and of the chief executives of the Company's subsidiaries are subject to approval by the Compensation Committee of the Board of Directors.

 

Payment of one-half of any incentive compensation earned under the program is made in cash, and one-half in the form of an award of shares of the Company's common stock that are subject to restrictions on their sale or other transfer and to forfeiture in certain circumstances, except that with respect to Mr. Wadsworth, his incentive compensation, if any is earned, will be payable all in cash. The restrictions lapse at the end of three years if the participant is then still an employee of the Company.

 

The effect of the termination of employment of a participant during 2016 ranges from forfeiture of all of the benefits of the program, in the case of a termination for cause or a resignation by the participant, to full benefits based on the actual financial results for the year and an assumption that the participant completed all individual performance goals satisfactorily, in the event of a termination of employment without cause, for permanent disability or the death of the participant.

 

The following table shows some additional information about the program, including various program and participant percentages.

 

Program Term: One year (January 1 – December 31, 2016)
Target Amount as a percent of salary:

Con L. Wadsworth 100%

Ronald A. Ballschmiede 170%

The EPS Goal:

 

Minimum Required Achievement Level:

 

Cap on Achievement Level:

Accounts for 50% of the Target Amount

 

80% of the EPS Goal

 

120% of the EPS Goal

Individual Performance Goals:

Account for 50% of the Target Amount

(no minimum & no cap)

Item 9.01 Financial Statements and Exhibits .

 

(c) Exhibits

 

Exhibit Number Description
10.1# Program Description — 2016 Executive Incentive Compensation Program (furnished herewith)
10.2# Form of 2016 Executive Incentive Compensation Program Restricted Stock Award Agreement (furnished 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: February 26, 2016 Sterling Construction Company, Inc .
   
   
  /s/ Roger M. Barzun
  Roger M. Barzun
  Senior Vice President
   

 

 

 

 

 

Exhibit Index

 

Exhibit Number Description
10.1# Program Description — 2016 Executive Incentive Compensation Program (furnished herewith)
10.2# Form of 2016 Executive Incentive Compensation Program Restricted Stock Award Agreement (furnished herewith)

# Management contract or compensatory plan or arrangement.

Exhibit 10.1

 

 

 

2016 EXECUTIVE INCENTIVE COMPENSATION PROGRAM

 

Program Description

 

Introduction

 

You have been selected to participate in the Company's 2016 Executive Incentive Compensation Program (the "EICP"). The EICP was adopted by the Compensation Committee of the Board of Directors of the Company to be effective as of January 1, 2016. The program gives you the opportunity to earn additional cash and stock-based compensation depending on the achievement of financial and individual performance goals in calendar year 2016.

 

The purpose of this program 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 who are expected to make) important contributions to the Company. Participants do not have any special right to continued employment by the Company because of their participation in this program.

 

Sterling sets high goals — goals that are designed to encourage key employees like you to exert an extra effort to raise the Company's performance. The EICP is designed to provide you with that incentive, both in the near term and over the course of several years.

 

The EICP reflects the pay-for-performance philosophy of the Company by linking your opportunity to earn additional compensation to the achievement of Company, operating unit, and individual performance goals.

 

References in this Program Description to being an employee of the Company or employment with the Company mean an employee of or with the Company or one of its operating units.

______________

 

 

2016 Executive Incentive Compensation Program- [insert name]

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Part I

 

Elements of the 2016 Executive Incentive Compensation Program

 

EICP Target Amount .

 

Each participant in the EICP is assigned an EICP Target Amount, which is expressed as a percentage of his or her base salary. Participants do not necessarily have the same EICP Target Amounts. Your EICP Target Amount for 2016 is set forth in Appendix A to this Program Description.

 

Your EICP Target Amount is the amount that you can earn if 100% of the 2016 financial goal or goals and your individual performance goals are met. The actual payout, if any, may be less than or more than your EICP Target Amount depending on the Company's actual financial results, your operating unit's actual financial results (if you are employed by one of the Company's operating units) and your individual performance during the year measured against the individual performance goals that are set for you at the beginning of the year.

 

EICP Awards.

 

Awards under the EICP are payable half in cash and half in shares of the Company's common stock. The shares of common stock are subject to a three-year restriction on their sale or other transfer. The shares are released from those restrictions (that is, the shares vest) at the end of the three-year period as long as you are an employee of the Company at the end of the three-year period. Shares of restricted stock that fail to vest are automatically forfeited and returned to the Company without the payment of any compensation to you.

 

EICP Performance Goals .

 

There are three types of EICP goals for participants with operating responsibilities, and two types of goals for participants who do not have operating responsibilities, as follows:

 

1. A Company financial goal, which is based on the Company achieving a target level of earnings per share in 2016, which is referred to as the EPS Goal .

 

2. An operating unit financial goal, which is based on your operating unit achieving a target level of earnings before interest and taxes in 2016, which is referred to as the EBIT Goal .

 

3. Individual performance goals, which are established at the beginning of the year and consist of value–added tasks or projects to be accomplished by you in 2016 that are considered to require an extra or particular effort on your part.

 

Your EICP Target Amount is allocated among the goals, as follows:

 

Participant

Company

EPS Goal

Operating Unit

EBIT Goal

Individual
Performance
Goals
Operating Unit Participants 25% 50% 25%
Non-Operating Unit Participants 50% N/A 50%

 

Calculation of Payouts .

 

In early 2017, the level of the achievement of the 2016 EPS Goal and the 2016 EBIT Goal will be determined from the Company's financial statements.

 

The level of the achievement of your individual performance goals will be determined by the manager to whom you report directly, and for some participants, also by a committee of the Board of Directors.

 

Once the levels of achievement have been determined, the payout for each goal will be determined.

 

2016 Executive Incentive Compensation Program- [insert name]

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1. Payout for Financial Goals . The payout, if any, for the achievement of financial goals is determined from the following formula:

 

Your Target Amount times the percent of your Target Amount allocated to the financial goal, times the percent of the financial goal that was achieved in 2016. However , there is a minimum and a maximum achievement level:

 

— If the achievement level of a financial goal is below 80%, no payout will be made for that goal.

 

— If the achievement level of a financial goal is more than 100%, the payout cannot exceed 120% of your Target Amount allocated to that goal.

 

2. Payout for Individual Performance Goals . The payout for the completion of individual performance goals is determined by the percentage of your goals that you complete satisfactorily in 2016. Just as for financial goals, the formula for payout on individual performance goals is —

 

Your Target Amount times the percent of your Target Amount allocated to individual performance goals, times the percentage of individual performance goals satisfactorily completed. Any positive level of achievement will result in some payout, but there cannot be more than a 100% payout for satisfactorily completing all of your individual performance goals.

 

Termination of Employment During Calendar Year 2016 . In the event that you cease to be an employee of the Company during 2016, your participation in the EICP will be treated as follows:

 

Reason for Termination   Effect on your Participation in the STIP
For Cause  

No payment under the EICP will be made to you if the termination of your employment was for one or more of the following reasons:

 

a)          You were grossly negligent in the performance of your duties and/or your responsibilities; or you refused to perform your duties and/or responsibilities.

 

b)          You committed an act of theft or other dishonesty, including, but not limited to an intentional misapplication of the Company's or of any of its subsidiaries' funds or other property.

 

c)          You were convicted of any other criminal activity (other than a traffic violation or minor misdemeanor).

 

d)          You participated in any activity involving moral turpitude that is, or could reasonably be expected to be injurious to the business or reputation of the Company.

 

e)          You used alcohol immoderately and /or used non-prescribed narcotics that had the effect of adversely and materially affecting the performance of your duties.

 

f)           You committed a material breach of a Company policy.

 

Your Resignation   No payment under the EICP will be made to you.  
Without Cause, Permanent Disability, Death or Retirement (as defined by the Compensation Committee )  

The incentive compensation that you would have earned, if any, had your employment not terminated, based on the level of achievement of the financial goal or goals at the end of 2016, and assuming that you had completed all of your individual performance goals satisfactorily, will be multiplied by — a fraction, the numerator of which is the number of days in 2016 that you were an employee of the Company, and the denominator of which is 366.

 

The resulting incentive compensation, if any, will be paid to you or your personal representative, as the case may be, when other participants are paid, except that any incentive compensation payable in restricted stock will be paid in cash.

 

 

2016 Executive Incentive Compensation Program- [insert name]

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Part II:

 

Other Terms of the 2016 Executive Incentive Compensation Program

 

Administration of the Program . The EICP is administered by the Compensation Committee of the Board of Directors. Among other things, the Committee determines those employees who are eligible to participate in the program, the participants' Target Amounts, and the goals and other performance measures. In early 2017, the Committee will determine whether and to what extent the financial goals, and for certain participants the individual performance goals, and other performance measures, have been met.

 

The Committee will correct any defects, supply any omissions, and reconcile any inconsistencies in the program or in any award made under the program in the manner and to the extent it believes necessary or advisable to implement the program.

 

Taxes & Tax Consequences .

 

1. Any payout under the EICP will be made in the first quarter of 2017, but no later than March 15, 2017.

 

2. Payouts to you under the EICP are treated as 2017 supplemental income for federal income tax withholding purposes. The Company is currently required to withhold 25% of the cash payout amount plus Social Security and Medicare taxes on the payout.

 

3. Payouts may also be subject to state income tax withholding, and to any garnishment, levy or other wage withholding order affecting you.

 

4. Payouts are not eligible for deferral into your Company 401(k) account.

 

The Company's Claw-Back Policy . The Company's Claw-Back Policy applies to any payments made under the EICP. A copy of the Claw-Back Policy is attached as Appendix B to this Program Description. Please read it. It affects any incentive compensation (cash or stock) that was paid to you if the Company subsequently, for whatever reason, restates the financial statements on which all or a portion of that incentive compensation was based.

Change of Control . A "Change of Control" of the Company is defined in the Company's Stock Incentive Plan, and generally refers to an acquisition of the Company or a large portion of the Company through acquisition of shares of the Company's common stock, acquisition of assets of the Company, a merger or the like. If there is a Change of Control while restricted stock issued to you under the EICP is still outstanding, it will vest in full.

 

Governing Law . The provisions of the EICP are governed by, and interpreted in accordance with, the laws of the State of Delaware, without regard to any of its conflicts of law provisions.

 

Compliance with Section 409A of the Code . The Company intends that the EICP either (a) complies with Section 409A of the Internal Revenue Code of 1986, as amended, and the guidance thereunder; or (b) is excepted from the provisions of Section 409A. As a result, the Company has the right to amend the EICP in order to cause them to be in compliance with Section 409A or to qualify for being excepted from the provisions of Section 409A, and to take any other actions to achieve that compliance or exception.

______________

 

2016 Executive Incentive Compensation Program- [insert name]

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[Insert Name] — Appendix A

 

Your Key Numbers for the 2016 Executive Incentive Compensation Program

 

Financial Goals: The 2016 Company EPS Goal: $____ (TBD) __ per share
  Your Operating Unit 2016 EBIT Goal: $____ (refer to your approved budget)

 

Your 2016 Base Salary ($)

Your EICP Target Amount

Percent — Dollars

Your EICP Target Amount

EPS Goal Allocation

Percent — Dollars

Your EICP Target Amount

EBIT Goal Allocation

Percent — Dollars

Your EICP Target Amount

Individual Performance Goals

Allocation

Percent — Dollars

         

Your individual performance goals will be set forth on the form developed for that purpose by the Human Resources Department.

 

A change in your base salary during 2016 will not affect your Target Amount.

__________________

 

 

 

 

 

 

 

 

2016 Executive Incentive Compensation Program- [insert name]

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Appendix B

Sterling Construction Company, Inc.

 

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

 

(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 by the Board of Directors on January 18, 2011

 

2016 Executive Incentive Compensation Program- [insert name]

Page 6 of 6

Exhibit 10.2

 

STERLING CONSTRUCTION COMPANY, INC .

 

[Form of] Restricted Stock Award Agreement

 

  Award Date:    
  Award Recipient:    
  Shares of Common Stock:    
  Expiration Date: [Third anniversary of the Award Date]  

 

This Restricted Stock Award Agreement (this " Agreement ") is made effective as of the Award Date set forth above, and is entered into between you, the above-named Award Recipient, and Sterling Construction Company, Inc. (the " Company ") pursuant to the Company’s Stock Incentive Plan (the " Plan. ") The Plan is hereby incorporated into this Agreement by this reference. By signing this Agreement, you acknowledge that you have received a copy of the Plan and a summary description of the Plan.

 

In consideration of the award to you of the number of Shares of Common Stock of the Company set forth above (the " Shares ") you and the Company agree as follows:

 

1. Award of the Shares . The Company hereby awards to you, and you hereby accept the award of the Shares subject to the terms and conditions set forth in this Agreement. Any additional shares of common stock of the Company that are issued to you on account of the Shares as a result of stock dividends, stock splits or recapitalizations (whether by way of mergers, consolidations, combinations or exchanges of shares, or the like) will be subject to this Agreement and are included in the definition of the word "Shares."

 

2. The Restrictions . You may not sell, assign, transfer, pledge or otherwise dispose of or encumber any of the Shares or any of your rights or interests under this Agreement or under the Plan except by your will, or according to the laws of descent and distribution (the " Restrictions. ")

 

3. Expiration of the Restrictions . The Restrictions will expire on the date of the earliest to occur of the following events:

 

· The close of business on the Expiration Date set forth above.

· A Change in Control of the Company (as that term is defined in the Plan.)

· Your employment is terminated without Cause (as defined below.)

· Your employment is terminated because you have become permanently disabled (as defined below.)

· Your death.

 

4. Forfeiture of the Shares . If any of the following events occurs, all of the Shares that are then subject to the Restrictions will be forfeited:

 

· You resign your employment.

· Your employment is terminated for Cause.

 

5. Definitions . As used in this Agreement —

 

5.1 The words "permanently disabled" mean that because of a physical or mental impairment, you are unable to perform your duties and responsibilities as an employee for ninety or more days within a six-month period.

 

 

 

5.2 "Cause" means —

 

(a) Willful or gross neglect of your duties; gross negligence in the performance of your duties; your refusal to perform your duties; or a significant violation of a Company policy.

 

(b) Unsatisfactory performance of your duties that is not cured within thirty working days after written notice is given to you identifying the reason why your performance is unsatisfactory.

 

(c) Any act of theft or other dishonesty by you, including, but not limited to any intentional misapplication of the Company's or of any of its subsidiaries' funds or other property.

 

(d) Your conviction of any criminal activity (other than a traffic violation or a Class C misdemeanor) not described in Subsection (c), above, or your participation in an activity involving moral turpitude that is, or could reasonably be expected to be harmful to the business or reputation of the Company.

 

(e) Your immoderate use of alcohol.

 

(f) The use of non-prescribed narcotics that adversely and materially affects the performance of your duties.

 

6. Your Rights as a Stockholder . Except for the Restrictions and the other limitations and conditions set forth in this Agreement, as owner of the Shares, you will have all of the rights of a stockholder of the Company, including the right to vote the Shares and to receive any dividends paid on the Shares.

 

7. The Shares .

 

7.1 The Shares will be issued to you as a book entry by the Company's transfer agent, and you will be advised of their issuance. When the Restrictions expire, subject to the provisions of Section 8 , below, you may either leave the Shares in your account at the transfer agent; you may have your broker transfer the Shares electronically to your brokerage account; or you may have the Shares delivered to you in the form of a stock certificate.

 

7.2 All of the Shares that are forfeited will be returned to the Company and canceled without the payment of any compensation to you.

 

8. Securities and Other Laws . The Company may require as a pre-condition to the delivery of the Shares to you —

 

8.1 That they shall have been duly listed, upon official notice of issuance, upon any national securities exchange or automated quotation system on which the Company's common stock may then be listed or quoted;

 

8.2 That either (a) a registration statement under the Securities Act of 1933 (the " Act ") relating to the Shares is in effect; or (b) in the opinion of counsel to the Company, the issuance of the Shares is exempt from registration under the Act, in which event, you shall have made such undertakings and agreements with the Company as the Company may reasonably require; and

 

8.3 That such other steps, if any, as counsel to the Company considers necessary to comply with any law applicable to the Shares shall have been taken by you, by the Company, or both. The Shares may be made subject to such restrictions as counsel for the Company considers necessary to comply with applicable laws.

 

9. Taxes . You agree to pay to the Company or to make provision satisfactory to the Company for the payment of any taxes required by law to be paid by you, or that are required to be withheld from you relating to the Shares no later than the date of the event creating the tax liability. To the extent permitted by law, the Company may deduct any such tax obligation that is not paid when due from any payment of any kind due to you from the Company.

 

[Name of Recipient] Restricted Stock Agreement dated as of [Award Date]

Page 2  of 3

 

10. Adjustment in Provisions . Upon any change from time to time in the outstanding common stock of the Company by reason of a stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares, or other such transaction affecting the Company’s common stock, the relevant parts of this Agreement shall be appropriately adjusted by the Company, if necessary, to reflect such change in a fair manner.

 

11. Amendments . The Compensation Committee of the Board of Directors (the " Committee ") may amend, modify or terminate this Agreement, including by substituting another award of the same or a different type. Your consent to such an action will be required unless the Committee determines that the action, taking into account any related action, would not materially and adversely affect you.

 

12. Decisions by the Committee . Any dispute or disagreement that arises under, or as a result of, or pursuant to, this Agreement shall be resolved by the Committee in its sole and absolute discretion, and any such resolution, or any other determination by the Committee under, or pursuant to, this Agreement, and any interpretation by the Committee of the terms and conditions of this Agreement or the Plan shall be final, binding, and conclusive on all persons affected thereby.

 

In Witness Whereof , you and the Company have signed this Agreement to be effective as of the Award Date.

 

Sterling Construction Company, Inc .

 

 

 

 

By:      
  Chief Executive Officer   [Name of Recipient]

 

 

 

 

[Name of Recipient] Restricted Stock Agreement dated as of [Award Date]

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