<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
GRANITE CONSTRUCTION INCORPORATED
- --------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
GRANITE CONSTRUCTION INCORPORATED
585 WEST BEACH STREET
WATSONVILLE, CALIFORNIA 95076
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
GRANITE CON-STRUCTION INCORPORATED, a Delaware corporation (the "Company"), will
be held on May 19, 1997, at 10:00 a.m. local time, at the Monterey Marriott
Hotel, 350 Calle Principal, Monterey, California, for the following purposes:
1. To elect two (2) directors of the Company for the ensuing three-year
term.
2. To ratify the appointment of Coopers & Lybrand, L.L.P. as the
independent accountants of the Company for the fiscal year ending
December 31, 1997.
3. To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on April 4, 1997 are
entitled to notice of, and to vote at, this meeting and any continuations or
adjournments thereof. For ten days prior to the meeting, a complete list of
stockholders entitled to vote at the meeting will be available for examination
by any stockholder for any purpose germane to the meeting during ordinary
business hours at the Monterey Marriott Hotel, 350 Calle Principal, Monterey,
California, 93940.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, WE URGE YOU TO SIGN, DATE
AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO THAT
AS MANY SHARES AS POSSIBLE MAY BE REPRESENTED AT THE MEETING.
The vote of every stockholder is important in achieving this goal, and your
cooperation in promptly returning your executed Proxy will be appreciated. Each
Proxy is revocable and will not affect your right to vote in person in the event
that you decide to attend the meeting.
By Order of the Board of Directors,
MICHAEL FUTCH
Vice President, General Counsel and
Secretary
Watsonville, California
April 29, 1997
<PAGE> 3
PROXY STATEMENT
1997 ANNUAL MEETING OF STOCKHOLDERS
------------------------
GRANITE CONSTRUCTION INCORPORATED
585 WEST BEACH STREET
WATSONVILLE, CALIFORNIA 95076
This Proxy Statement is furnished in connection with the solicitation by
the management of GRANITE CONSTRUCTION INCORPORATED, a Delaware corporation
(hereinafter called the "Company") of Proxies for use at the Annual Meeting of
Stockholders to be held on May 19, 1997, or any adjournment thereof, for the
purposes set forth in the accompanying Notice of Annual Meeting. This Proxy
Statement and accompanying Proxy are first being sent to stockholders on
approximately April 29, 1997. The cost of the solicitation of Proxies will be
borne by the Company. The Company may use the services of its officers,
directors and others to solicit Proxies personally or by telephone, without
additional compensation.
VOTING RIGHTS
All shares represented by valid Proxies received prior to the meeting will
be voted and, where a stockholder specifies by means of the Proxy a choice with
respect to any matter to be acted upon, the shares will be voted in accordance
with the specifications so made. If no instructions are given on the executed
Proxy, the Proxy will be voted in favor of the proposals described. A
stockholder who signs and returns a Proxy in proper form will have the power to
revoke it at any time before it is voted. A Proxy may be revoked by filing with
the Secretary of the Company a written revocation or duly executed Proxy bearing
a later date, or by appearing at the meeting and electing to vote in person. The
Company's bylaws provide that a majority of the shares entitled to vote, whether
present in person or represented by Proxy, shall constitute a quorum for the
transaction of business at the meeting.
The voting securities of the Company entitled to vote at the meeting
consist of shares of Common Stock. Only stockholders of record at the close of
business on April 4, 1997 are entitled to notice of, and to vote at, the Annual
Meeting. On April 4, 1997, there were 18,277,552 shares of Common Stock issued
and outstanding. Each share of Common Stock is entitled to one vote.
NOMINATION AND ELECTION OF DIRECTORS
The Company currently has an eight-member Board of Directors. Directors are
elected for three-year terms and are divided into three classes, with one class
elected at each annual meeting of stockholders.
Two (2) directors of the Company are to be elected for the ensuing
three-year term and until their successors are elected and qualified. The
nominees are Richard M. Brooks and Raymond E. Miles. Certain information with
respect to their age and background, are set forth below. Mr. Brooks and Mr.
Miles were elected to their present terms of office at the 1994 Annual Meeting
of Stockholders of the Company.
Each nominee will hold office until his or her term expires or until his or
her successor is elected and qualified unless he or she resigns or his or her
office becomes vacant by death, removal, or other cause in accordance with the
bylaws of the Company.
It is intended that votes pursuant to the Proxies will be cast for the
named nominees. The persons named in the accompanying form of Proxy will vote
the shares represented thereby for the nominees. Management knows of no reason
why any of these nominees should be unable or unwilling to serve. However, if
any nominee(s) should for any reason be unable or unwilling to serve, the
Proxies will be voted for the election of such other person(s) for the office of
director as the Board may recommend in the place of such nominee(s).
<PAGE> 4
If a quorum is present and voting, the two nominees receiving the highest
number of votes will be elected for the ensuing three-year term. Abstentions and
shares held by brokers that are present, but not voted because the brokers were
prohibited from exercising discretionary authority, i.e. broker nonvotes, will
be counted as present in determining if a quorum is present.
<TABLE>
<CAPTION>
DIRECTOR POSITION AGE DIRECTOR SINCE
- --------------------------- -------------------------- --- ---------------------------------------
<S> <C> <C> <C>
Nominees
- ----------
Richard M. Brooks.......... Director 68 Director since 1990; term ends 1997.
Raymond E. Miles........... Director 64 Director since 1988; term ends 1997.
Continuing
- -----------
Richard C. Solari.......... Chairman of the Board 72 Director since 1979; term ends 1999.
David H. Watts............. President, Chief Executive 58 Director since 1988; term ends 1999.
Officer and Director
Joseph J. Barclay.......... Director 64 Director since 1988; term ends 1999.
Brian C. Kelly............. Director 65 Director since 1995; term ends 1998.
Rebecca A. McDonald........ Director 44 Director since 1994; term ends 1998.
Denman K. McNear........... Director 71 Director since 1988; term ends 1998.
</TABLE>
Granite Construction Incorporated was incorporated in Delaware in January,
1990 as the holding company for Granite Construction Company, which was
incorporated in California in 1922. All dates for people listed in this proxy
referring to the dates of service with the Company include the periods in which
they served for Granite Construction Company.
Mr. Solari has been Chairman of the Board since 1985. Mr. Solari was
employed by the Company from 1945 until his retirement in 1995. He served as
President and Chief Executive Officer from 1979 to 1987.
Mr. Watts is currently, and has been since 1987, President and Chief
Executive Officer of the Company. He was formerly President and Chief Executive
Officer and a director of Ford, Bacon & Davis, Inc., an industrial engineering
and construction firm. Mr. Watts currently serves as a director of TIC Holdings,
Inc., the California State Chamber of Commerce, the Beavers, Nationwide Public
Projects Coalition, the Construction Industry President's Forum, the Monterey
Bay Area Council of the Boy Scouts of America, and the Community Foundation for
Monterey County. He holds a B.A. degree in Economics from Cornell University.
Mr. McNear is the retired Chairman, President and Chief Executive Officer
of the Southern Pacific Transportation Company. He holds a B.S. degree in Civil
Engineering from the Massachusetts Institute of Technology and an M.B.A. degree
from Stanford University.
Mr. Brooks is self-employed as a Financial Consultant. He was formerly
President and Chief Executive Officer of SFA Management Corporation and Vice
President, Finance and Treasurer of Lucky Stores, Inc. Mr. Brooks is also a
director of Longs Drug Stores Corporation, BEI Electronics Inc. and Western Farm
Credit Bank. He holds a B.S. degree in Applied Economics from Yale University
and an M.B.A. degree from the University of California, Berkeley.
Ms. McDonald is currently Group Vice President, Natural Gas, for Amoco
Corporation. She was formerly President and Vice President of Strategic Planning
for Tenneco Gas Marketing Company. Ms. McDonald holds a B.S. degree in Education
from Stephen F. Austin University.
Mr. Barclay is currently Chairman of Cascade Corporation, a manufacturer of
materials handling equipment. He served as Chairman and Chief Executive Officer
of Cascade from 1993 until 1996 and President and Chief Executive Officer from
1983 until 1993. Mr. Barclay is also a director of Cascade Corporation, Columbia
Machine, Inc. and Omni Products Inc. He holds a B.S. degree in Industrial
Engineering from the Illinois Institute of Technology.
Mr. Kelly is self-employed as a Construction Consultant. Recently, he has
utilized his business expertise as a volunteer with the Diocese of Monterey and
as a member of the Board of the Hospice of the Central
2
<PAGE> 5
Coast. Mr. Kelly holds a B.S. degree in Civil Engineering from Iowa State
University and an M.B.A. degree from Stanford University.
Dr. Miles is the Trefethen Professor Emeritus at the Walter A. Haas School
of Business at the University of California, Berkeley. He has been a member of
the faculty since 1963 and is a former Dean of the School. Dr. Miles is also a
director of the Union Bank of California. He holds B.A. and M.B.A. degrees from
the University of North Texas and a Ph.D. in Organizational Behavior and
Industrial Relations from Stanford University.
The Company has an Audit Committee, a Compensation Committee, a Nominating
Committee, a Strategic Planning Committee, and an Executive Committee.
AUDIT COMMITTEE
Richard M. Brooks, Chairman
Joseph J. Barclay
Brian C. Kelly
Rebecca A McDonald
Denman K. McNear
Raymond E. Miles
The functions of the Audit Committee include recommending the independent
accountants to the Board of Directors, reviewing and approving the planned scope
of the annual audit, proposed fee arrangements and the results of the annual
audit, reviewing the adequacy of accounting and financial controls, reviewing
the independence of the independent accountants, approving all assignments to be
performed by the independent accountants, and instructing the independent
accountants, as deemed appropriate, to undertake special assignments. The Audit
Committee is comprised entirely of outside directors. During fiscal year 1996,
the Audit Committee held two (2) meetings.
COMPENSATION COMMITTEE
Richard C. Solari, Chairman
Joseph J. Barclay
Richard M. Brooks
Denman K. McNear
The Compensation Committee reviews and recommends salaries for corporate
officers and key employees. In addition, the Compensation Committee administers
the 1990 Omnibus Stock and Incentive Plan with respect to persons subject to
Section 16 of the Securities Exchange Act of 1934. The Compensation Committee is
comprised entirely of outside directors. The Compensation Committee held two (2)
meetings in 1996.
NOMINATING COMMITTEE
Richard C. Solari, Chairman
Joseph J. Barclay
Denman K. McNear
Raymond E. Miles
The Nominating Committee recommends and nominates persons to serve on the
Board of Directors. The Committee will consider nominees recommended by
stockholders as long as the stockholder gives timely notice in writing of his or
her intent to nominate a director. To be timely, a stockholder nomination for a
director to be elected at an annual meeting must be received at the Company's
principal office not less than 120 calendar days in advance of the date that the
Company's Proxy Statement was released to stockholders in connection with the
previous year's annual meeting of stockholders. The Nominating Committee held no
meetings in fiscal year 1996.
3
<PAGE> 6
STRATEGIC PLANNING COMMITTEE
Raymond E. Miles
Rebecca A. McDonald
Brian C. Kelly
The function of the Strategic Planning Committee is to develop, in
conjunction with management, the Company's Strategic Plan and to provide overall
strategic planning direction for the Company. The Strategic Planning Committee
held two (2) meetings in 1996.
EXECUTIVE COMMITTEE
Richard C. Solari
David H. Watts
Joseph J. Barclay
The Executive Committee's responsibility is to exercise all powers and
authority of the Board of Directors in the management of business affairs of the
Company as authorized by the Board. The Committee reviews and approves specific
decisions as established by the current "Limits of Authority" schedule. It may
exercise the power and authority of the Board of Directors to declare a
dividend, authorize the issuance of stock or to adopt a certificate of ownership
and merger pursuant to Section 253 of the Delaware General Corporation Law.
Members of the Executive Committee do not receive any meeting fees or other
compensation for their service on the Committee.
During fiscal year 1996, the Board of Directors held six (6) meetings. No
Director attended fewer than seventy-five percent (75%) of the meetings of the
Board or any committee on which he or she served.
4
<PAGE> 7
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
The following table contains information as of March 20, 1997, (i)
regarding the ownership of the Common Stock of the Company by all persons who,
to the knowledge of the Company, were the beneficial owners of 5% or more of the
outstanding shares of Common Stock of the Company (except for Primecap
Management Company and Capital Guardian Trust which ownership interest is as of
December 31, 1996), (ii) each director and director nominee of the Company,
(iii) the Chief Executive Officer and the three other most highly compensated
executive officers of the Company as of December 31, 1996, whose salary and
bonus for the fiscal year ended exceeded $100,000, and (iv) all executive
officers and directors of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL COMMON STOCK
NAME OWNERSHIP(1) OUTSTANDING
- ------------------------------------------------------------- ----------------- ------------
<S> <C> <C>
Emben & Co. (ESOP Trust)..................................... 5,841,747 32.3%
c/o BNY Western Trust Company
One Wall Street
New York, NY 10286
Capital Guardian Trust....................................... 1,426,200 7.87%
Primecap Management Company.................................. 1,400,000 7.73%
Pasadena, California
Richard C. Solari(2)......................................... 55,309 *
David H. Watts(3)............................................ 120,967 *
Joseph J. Barclay............................................ 7,500 *
Richard M. Brooks............................................ 1,500 *
Brian C. Kelly............................................... 1,500 *
Rebecca A. McDonald.......................................... -0- -0-
Denman K. McNear............................................. 1,000 *
Raymond E. Miles............................................. 500 *
William E. Barton(4)......................................... 49,552 *
Patrick M. Costanzo(5)....................................... 127,821 *
William G. Dorey(6).......................................... 161,410 *
All executive officers and directors as a group (11
persons)(2)(3)(5)(6)....................................... 527,059 2.9%
</TABLE>
- ---------------
* Less than 1%.
(1) Except as indicated in the footnotes to this table, the persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock shown as beneficially owned by them, subject to community
property laws where applicable.
(2) Includes 50,000 shares of Common Stock held by the Solari-Lane Trust I as of
March 20, 1997. Mr. Solari is the trustee and a beneficiary under the trust.
(3) Includes approximately 30,218 shares of Common Stock owned by the Employee
Stock Ownership Plan ("ESOP") but allocated to Mr. Watts' account as of
March 20, 1997, and 55,488 shares of restricted stock over which Mr. Watts
has voting, but not dispositive power, as of March 20, 1997. These shares
are subject to vesting and distribution restrictions. Also included are
6,750 shares for options previously vested under the 1990 Omnibus Stock and
Incentive Plan and which Mr. Watts has the right to acquire. Mr. Watts may
be deemed to be the beneficial owner of such shares.
(4) Includes approximately 29,130 shares of Common Stock owned by the Employee
Stock Ownership Plan ("ESOP") but allocated to Mr. Barton's account as of
March 20, 1997, and 12,585 shares of restricted stock over which Mr. Barton
has voting, but not dispositive power, as of March 20, 1997. These shares
are subject to vesting and distribution restrictions. Also included are
3,000 shares for options previously vested under the 1990 Omnibus Stock and
Incentive Plan and which Mr. Barton has the right to acquire. Mr. Barton may
be deemed to be the beneficial owner of such shares.
5
<PAGE> 8
(5) Includes approximately 55,764 shares of Common Stock owned by the Employee
Stock Ownership Plan ("ESOP") but allocated to Mr. Costanzo's account as of
March 20, 1997, and 55,564 shares of restricted stock over which Mr.
Costanzo has voting, but not dispositive power, as of March 20, 1997. These
shares are subject to vesting and distribution restrictions. Also included
are 6,750 shares for options previously vested under the 1990 Omnibus Stock
and Incentive Plan and which Mr. Costanzo has the right to acquire. Mr.
Costanzo may bedeemed to be the beneficial owner of such shares.
(6) Includes approximately 99,023 shares of Common Stock owned by the Employee
Stock Ownership Plan ("ESOP") but allocated to Mr. Dorey's account as of
March 20, 1997, and 33,741 shares of restricted stock over which Mr. Dorey
has voting, but not dispositive power, as of March 20, 1997. These shares
are subject to vesting and distribution restrictions. Also included are
6,000 shares for options previously vested under the 1990 Omnibus Stock and
Incentive Plan and which Mr. Dorey has the right to acquire. Mr. Dorey may
be deemed to be the beneficial owner of such shares.
EXECUTIVE COMPENSATION AND OTHER MATTERS
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth a summary of compensation as to the Chief
Executive Officer and the three other most highly compensated executive officers
as of December 31, 1996, whose salary and bonus exceeded $100,000 for the fiscal
year ended December 31, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------
AWARDS
---------------------- PAYOUTS
ANNUAL COMPENSATION(1) RESTRICTED ----------
--------------------------- STOCK LTIP ALL OTHER
NAME AND SALARY BONUS(2) AWARDS(3) OPTIONS/ PAYOUTS(4) COMPENSATION(5)
PRINCIPAL POSITION YEAR ($) ($) ($) SARS (#) ($) ($)
- ----------------------------------- ---- ------- -------- ---------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
David H. Watts..................... 1996 240,000 290,000 379,540 -- -- 13,680
President and Chief 1995 240,000 290,000 505,515 -- -- 18,000
Executive Officer 1994 213,000 317,000 269,731 -- 278,964 16,909
William E. Barton.................. 1996 115,000 134,000 105,606 -- -- 13,680
Vice President and 1995 115,000 134,000 158,323 -- -- 18,000
Chief Financial Officer 1994 105,000 144,000 50,000 -- -- 16,909
Patrick M. Costanzo................ 1996 135,000 270,000 224,170 -- -- 13,680
Senior Vice President and 1995 135,000 270,000 276,124 -- -- 18,000
Manager Heavy Construction
Division 1994 115,000 619,000 302,270 -- -- 16,909
William G. Dorey................... 1996 135,000 270,000 241,259 -- -- 13,680
Senior Vice President and 1995 135,000 270,000 276,124 -- -- 18,000
Manager Branch Division 1994 115,000 290,000 151,900 -- 341,712 16,909
</TABLE>
- ---------------
(1) For the year ended December 31, 1996, compensation deferred at the election
of the officer under the Key Management Deferred Compensation Plan (page 11)
for Messrs. Watts, Barton, Costanzo and Dorey was $63,000; $3,000; $257,718
and $3,000, respectively. For the year ended December 31, 1995 such deferred
compensation amounted to $103,000; $2,370; $255,000 and $3,000,
respectively. The deferred compensation plan under which the 1996 and 1995
elections were made was not in existence for years prior to 1995, and was
for amounts paid in 1996 and future years.
(2) Amounts include cash bonuses earned in the current year but paid in the
following year but do not include cash bonuses paid in the current year but
earned in the previous year.
(3) The amount of awards for each year is based on the Company's stock closing
price on the grant date multiplied by the number of shares awarded for the
year. Such awards are earned in the current year but issued as stock in the
following year. The aggregate number of restricted shares outstanding at
December 31, 1996 for Messrs. Watts, Barton, Costanzo and Dorey were 70,577;
12,585; 70,657 and 47,956, respectively, with an aggregate market value for
those same officers of $1,340,963, $239,115, $1,342,483 and $911,164,
respectively, based on the Company's stock closing price of $19.00 at
December 31, 1996. All numbers of shares and share prices have been restated
to reflect the three for two
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<PAGE> 9
stock split paid on April 19, 1996. The number of shares and values for each
officer at December 31, 1996 exclude the shares issued in March 1997 for
services performed in 1996 which appear in the table as 1996 compensation. A
portion of the restricted stock reflected for 1996 and 1994 was awarded
based on deferred compensation from 1990. Such deferred compensation
reflects a one time event of accelerated income to the Company caused by the
Company's 1990 change from the completed contract to the percentage of
completion accounting method, on which incentive compensation was deferred
and is paid through restricted stock awards not to exceed $50,000 per year.
None of the restricted stock issued vests within three years of the date of
grant. Dividends are paid on restricted shares on the same basis as all
other outstanding shares.
(4) Amounts for the years ended December 31, 1994 represented payments under the
Company's terminated Book Value Appreciation Rights ("BVAR") Plan on rights
issued for the plan years 1989 and 1988, respectively, that fully vested as
of December 31, 1994. No additional payments are required under the
terminated BVAR Plan.
(5) Amounts represent contributions to the Employee Stock Ownership Plan and to
the Profit Sharing and 401(K) Plan. Such contributions are earned in the
current year but allocated in the following year.
OPTIONS OF EXECUTIVE OFFICERS
The following table provides the specified information concerning exercises
of options to purchase the Company's Common Stock in the fiscal year ended
December 31, 1996, and unexercised options held as of December 31, 1996, by the
persons named in the Summary Compensation Table above.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FY-END OPTIONS AT FY-END(1)
SHARES ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David H. Watts......... -- -- 6,750 -- $51,773 --
William E. Barton...... -- -- 3,000 -- $23,010 --
Patrick M. Costanzo.... -- -- 6,750 $51,773 --
William G. Dorey....... 750 4,075 6,000 -- $46,020 --
</TABLE>
- ---------------
All numbers of shares and share prices have been restated to reflect the
three for two stock split paid on April 19, 1996.
(1) For each named executive officer, the value of the exercisable options is
based on a closing stock sale price of $19.00 on December 31, 1996, less the
grant price of $11.33 per share.
EMPLOYMENT AGREEMENTS AND CHANGE OF CONTROL ARRANGEMENTS
In April, 1990, Granite Construction Company, a subsidiary of the Company
("Granite"), entered into employment agreements with William E. Barton, Mark E.
Boitano, Patrick M. Costanzo, William G. Dorey, Richard A. Lewis and David H.
Watts. Granite also entered into such agreements with Roxane C. Allbritton and
Michael L. Thomas on January 1, 1991 and Arthur B. Nickerson on January 1, 1993.
On January 2, 1996, the Company entered into the same form of employment
agreement with Michael Futch. Effective February 1, 1997 the employment
agreements entered into with Messers. Barton, Boitano, Costanzo, Dorey, Lewis,
Watts, Nickerson, Thomas and Ms. Allbritton were formally assigned to, and the
obligations thereunder accepted by, the Company. These agreements provide that
if the individual's employment with the Company is terminated for certain
reasons within two and one-half years after a "change in control" of the
Company, then the Company will pay to the individual amounts up to three times
the average gross annual compensation paid to the individual over the five years
prior to the "change in control." A "change in control" is defined as (i) a
merger, consolidation or acquisition of the Company where the stockholders of
the Company do not retain a majority interest in the surviving or acquiring
corporation; (ii) the transfer of
7
<PAGE> 10
substantially all of the Company's assets to a corporation not controlled by the
Company or its stockholders; or (iii) the transfer to affiliated persons of more
than 30% of the voting stock of the Company, leading to a change of a majority
of the members of the Board of Directors.
Also in the event of a "change in control," options and grants of
restricted stock (Awards) awarded under the 1990 Omnibus Stock and Incentive
Plan (the Plan) are affected. The Plan provides that the surviving, successor,
or acquiring corporation shall either assume outstanding Awards or substitute
new Awards having an equivalent value. In the event that does not occur, the
Company's Board shall provide that any Awards otherwise unexercisable and/or
unvested shall be immediately exercisable and vested in full. The Plan further
provides that if such newly exercisable or vested Awards have not been exercised
as of the date of the change in control, they shall terminate effective as of
the date of the change in control.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10% of
the Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission ("SEC"). Such
persons are required by SEC regulations to furnish the Company with copies of
all Section 16(a) forms filed by such persons.
Based solely on the Company's review of such forms furnished to the Company
and written representations from certain reporting persons, the Company believes
that all filing requirements applicable to the Company's executive officers,
directors and more than 10% stockholders were complied with, except that, due to
administrative error, Mr. Watts had one transaction that was not reported on a
timely basis; Mr. Barton had two transactions that were not reported on a timely
basis; Mr. Dorey had four transactions that were not reported on a timely basis;
and Mr. Costanzo had two transactions that were not reported on a timely basis.
All such transactions have been reported on Form 5 forms for the year ended
December 31, 1996. However, due to administrative error, each such Form 5 forms
for Messrs. Watts, Barton, Dorey and Costanzo were not timely filed.
COMPENSATION OF DIRECTORS
Mr. Solari, in his role as Chairman of the Board currently receives an
annual retainer of $36,000, payable quarterly. Mr. Watts receives $250 for each
month he serves as director of the Company. Messrs. Barclay, Brooks, Kelly,
McNear and Miles and Ms. McDonald currently receive an annual retainer of
$20,000, payable quarterly, for serving on the Board. In addition, Messrs.
Barclay, Brooks, Kelly, McNear, Miles and Solari and Ms. McDonald receive $800
for each Board of Directors meeting they attend and $600 for each Board of
Directors Committee meeting (except for meetings of the Executive Committee)
they attend.
8
<PAGE> 11
PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in
the cumulative total return on the Company's Common Stock with the cumulative
total return of the S&P 500 and the Dow Jones Heavy Construction Industry Index
(Fluor, Jacobs Engineering, Morrison Knudsen, Foster Wheeler, Stone & Webster
and Zurn Industries) for the period commencing on December 31, 1991, and ending
on December 31, 1996.
The graph assumes $100 invested on December 31, 1991 in the Company's stock
of $18.167 per share, and in the S & P 500 Index, and Dow Jones Construction
Industry Index. The Total Return also assumes reinvestment of dividends.
<TABLE>
<CAPTION>
Measurement Period Granite Constr DJ Heavy
(Fiscal Year Covered) Inc. S&P 500 Construction
<S> <C> <C> <C>
Dec-91 100 100 100
Dec-92 82 108 97
Dec-93 94 118 102
Dec-94 77 120 98
Dec-95 121 165 137
Dec-96 112 203 130
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Solari, Barclay, Brooks and McNear served as members of the
Compensation Committee during fiscal 1996. All Committee members are
non-employee directors.
9
<PAGE> 12
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is responsible for formulating the Company's
executive compensation policy. The Committee reviews, adopts and administers
incentive compensation plans applicable to executive officers and other senior
management personnel.
The Committee's primary compensation policy is that a substantial portion
of the annual compensation of each executive should be directly linked to the
performance of the Company. In exercising its responsibilities, the Committee is
guided by three basic objectives:
1. To attract and retain outstanding executives by providing excellent
earnings potential as compared to prevailing industry practices.
2. To encourage entrepreneurial drive and consistent profitability by
directly linking annual incentives to the profitability of the
enterprise and effective management of the Company's assets.
3. To link the long-term interests of executives and shareholders and
encourage career service by including stock ownership as an integral
part of the compensation package.
The Committee has, on occasion, retained the services of Hewitt Associates,
a compensation consulting firm, to assist the Committee in developing and
maintaining a competitive executive compensation program. Hewitt Associates has
provided the Compensation Committee information comparing the Company's
executive compensation to certain companies in the construction industry,
including companies in the Dow Jones Heavy Construction Group.
The Committee has considered the potential impact of Section 162(m) (the
"Section") of the Internal Revenue Code adopted under the Federal Reserve
Reconciliation Act of 1933. This section disallows a tax deduction for any
publicly-held corporation for individual compensation exceeding $1 million in
any taxable year for any of the named executive officers, unless such
compensation is subject to performance-based exemptions. Since the targeted cash
compensation of each of the named executive officers is well below the $1
million threshold and the Company believes that any options granted under the
1990 Omnibus Stock and Incentive Plan are exempt under transition provisions,
the Committee believes that this section will not materially, if at all, reduce
the tax deduction available to the Company. Although future grants of restricted
stock may not be exempt, the company believes that the value of the restricted
stock upon vesting combined with other non-exempt income will not materially, if
at all, exceed the one million dollar threshold in any year.
The Company's compensation package includes salary and annual incentive
compensation comprised of bonuses payable in cash or restricted stock. Following
a review of officer salaries, the Compensation Committee recommended to the full
board on December 16, 1996, to bring officer salaries into alignment with
competitive guidelines developed in 1993.
The incentive compensation plan is designed so that when bonuses exceed a
predetermined cap on total annual cash compensation, the amount in excess of the
cap is converted into long-term compensation in the form of restricted stock
with five year cliff vesting. Restricted stock limits have also been established
by the Committee to fix total compensation limits at appropriate levels. The
Committee determined the appropriate participation of officers as well as the
performance threshold, cash caps, and restricted stock limits to ensure a close
correlation between Company performance and executive compensation.
The Committee continued the Return on Net Assets (RONA) based compensation
plan in 1996 for Corporate Officers and Middle Managers. The Committee believes
that using RONA as the key performance factor ties earnings performance to the
Company's asset growth, asset utilization, and the cost of capital, and that
RONA is a superior measure of performance in an asset-heavy business. For the
Branch and Heavy Construction division officers, the Committee assigned
performance measures both at the Corporate and Division Level. Approximately 30%
of their incentive compensation was determined in 1995 by Corporate RONA, while
70% of their incentive compensation was based on the profitability of their
respective Divisions.
In addition to his 1996 base salary, CEO Watts also received an incentive
cash payment of $290,000 and restricted stock valued at $530,000 (both paid and
awarded in 1996 for performance provided in 1995) under
10
<PAGE> 13
the incentive plan in accordance with the terms of the plan described above. The
Committee believes Mr. Watts' compensation for the year ending December 31, 1996
reflects the Company's performance and was in the general range of compensation
for executives with like responsibilities in comparable companies and industries
achieving similar financial results.
Granite introduced a "Key Management Deferred Compensation Plan" for
payments received beginning January 1, 1996. This plan has four primary
elements.
1. Participating executives can defer up to 100% of their annual cash
incentive compensation.
2. Deferred and contributed funds held in the non-qualified plan will
receive a quarterly interest adjustment equal to the Lehman Brothers
long term bond index 30 day average ending on December 1 of the prior
year, plus 100 basis points.
3. The "Plan" provides benefits solely from the general assets of the
company and is therefore considered to be an "unfunded plan" for ERISA
purposes.
4. A retirement excess feature restoring benefits lost to executives due to
ERISA limits was included, increasing the compensation for retirement
benefit calculation from the ERISA $150,000 limit to a limit of
$250,000, which will be adjusted annually based on CPI index change.
Participants in the "Deferred Compensation Plan" include all officers and
approximately 30 key field managers.
The Committee met two (2) times in 1996.
<TABLE>
<S> <C>
Richard C. Solari Richard M. Brooks
Joseph J. Barclay Denman K. McNear
</TABLE>
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has appointed Coopers & Lybrand,
L.L.P. to serve as independent accountants to audit the financial statements of
the Company for fiscal 1997. Coopers & Lybrand, L.L.P. has acted in such
capacity since its appointment for fiscal 1982. A representative of Coopers &
Lybrand, L.L.P. will be present at the annual meeting, will be given the
opportunity to make a statement if the representative desires and will be
available to respond to appropriate questions. The affirmative vote of a
majority of the votes cast affirmatively or negatively at the annual meeting of
stockholders at which a quorum is present and voting either in person or by
Proxy is required for approval of this proposal. Votes for and against,
abstentions and "broker nonvotes" will each be counted as present for purposes
of determining a quorum. Neither abstention nor "broker nonvotes" will be
counted as having been cast affirmatively or negatively on the proposal.
In the event that ratification by the stockholders of the appointment of
Coopers & Lybrand, L.L.P. as the Company's independent accountants is not
obtained, the Board of Directors will reconsider said appointment. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT 1998 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 1998 Annual
Meeting of Stockholders of the Company (i) must be properly brought before the
meeting and be received by the Company at its offices at 585 West Beach Street,
Watsonville, California, 95076, on or before December 12, 1997 and (ii) must
satisfy the conditions established by the Securities and Exchange Commission for
stockholder proposals to be included in the Company's Proxy Statement for that
meeting and the other requirements contained in the Company's bylaws.
11
<PAGE> 14
TRANSACTION OF OTHER BUSINESS
At the date of this Proxy Statement, the only business which management
intends to present or knows that others will present at the meeting is as
hereinabove set forth. If any other matter or matters are properly brought
before the meeting, or any adjournment thereof, it is the intention of the
persons named in the accompanying form of Proxy to vote the Proxy on such
matters in accordance with their best judgment.
MICHAEL FUTCH
Vice President, General Counsel and
Secretary
Dated: April 29, 1997
12
<PAGE> 15
PROXY
GRANITE CONSTRUCTION INCORPORATED
ALLOCATED SHARES VOTING DIRECTIVE CARD FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby directs Bank of America N.T.&S.A. as Trustee of
the GRANITE CONSTRUCTION Employee Stock Ownership Plan to vote all of the
allocated shares of stock of GRANITE CONSTRUCTION INCORPORATED beneficially
held for me by the Plan at the Annual Meeting of the Stockholders of GRANITE
CONSTRUCTION INCORPORATED (the "Company") to be held at the Marriott Hotel, 350
Calle Principal, Monterey, California on May 19, 1997, at 10:00 a.m., local
time, and at any adjournment thereof (1) as hereinafter specified upon the
proposals listed below and as more particularly described in the Proxy
Statement of Company dated April 29, 1997 (the "Proxy Statement"), receipt of
which is hereby acknowledged, and (2) in their discretion upon such other
matters as may properly come before the meeting. The undersigned hereby
acknowledges receipt of the Company's 1997 Annual Report to Stockholders.
- ------------------------------------------------------------------------------
IMPORTANT: PLEASE DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED ALLOCATED SHARES
VOTING DIRECTIVE CARD IN THE ENCLOSED RETURN ENVELOPE TO ASSURE THAT YOUR SHARES
ARE REPRESENTED AT THE MEETING. IF YOU FAIL TO RETURN YOUR VOTING DIRECTIVE
CARD TO THE TRUSTEE BY MAY 19, 1997, THEN THE SHARES WILL NOT BE VOTED. AS A
PARTICIPANT IN THE GRANITE CONSTRUCTION EMPLOYEE STOCK OWNERSHIP PLAN (THE
"PLAN"), YOU ARE ENTITLED TO VOTE YOUR ALLOCATED PORTION OF THE SHARES OF THE
COMMON STOCK HELD IN THE PLAN. YOUR VOTING DIRECTION SUBMITTED TO THE BANK OF
AMERICA, N.T.&S.A., TRUSTEE OF THE PLAN, WILL BE CONFIDENTIAL.
- -------------------------------------------------------------------------------
(continued, and to be signed on the other side)
- -------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
<PAGE> 16
(continued from other side)
Please mark
your votes as
indicated in [X]
this example.
<TABLE>
<S> <C> <C>
A vote FOR the following proposals is recom- FOR WITHHOLD
mended by the Board of Directors: all nominees listed below AUTHORITY
(except as marked to to vote for all nomi-
1. To elect Richard M. Brooks and Raymond E. Miles the contrary) nees listed below
as directors to hold office for a three-year term and
until their respective successors are elected and [ ] [ ]
have qualified.
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME BELOW.)
RICHARD M. BROOKS RAYMOND E. MILES
FOR AGAINST ABSTAIN
2. To ratify the appointment of Coopers & Lybrand, L.L.P. [ ] [ ] [ ]
as the Company's independent accountants for the
fiscal year ending December 31, 1997.
3. With discretionary authority, upon such other matters as may properly come
before the meeting. The persons making this solicitation know at this time
of no other matters to be presented at the meeting.
The shares represented hereby shall be voted as specified. IF NO SPECIFICATION
IS MADE, SUCH SHARES WILL NOT BE VOTED.
Signature of Participant*________________________________ Dated:_________, 1997
*(PLEASE SIGN YOUR NAME EXACTLY AS IT APPEARS ON THE PLAN CERTIFICATE
REPRESENTING YOUR SHARES.)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
<PAGE> 17
PROXY
GRANITE CONSTRUCTION INCORPORATED
UNALLOCATED SHARES VOTING DIRECTIVE CARD FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby directs Bank of America N.T.&S.A. as Trustee of
the GRANITE CONSTRUCTION Employee Stock Ownership Plan to vote the
participant's pro rata portion of the unallocated shares of GRANITE
CONSTRUCTION INCORPORATED beneficially held by the Plan at the Annual Meeting
of the Stockholders of GRANITE CONSTRUCTION INCORPORATED (the "Company") to be
held at the Marriott Hotel, 350 Calle Principal, Monterey, California on May
19, 1997, at 10:00 a.m., local time, and at any adjournment thereof (1) as
hereinafter specified upon the proposals listed below and as more particularly
described in the Proxy Statement of the Company dated April 29, 1997 (the
"Proxy Statement"), receipt of which is hereby acknowledged, and (2) in their
discretion upon such other matters as may properly come before the meeting. The
undersigned hereby acknowledges receipt of the Company's 1997 Annual Report to
Stockholders.
_______________________________________________________________________________
IMPORTANT: PLEASE DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED UNALLOCATED SHARES
VOTING DIRECTIVE CARD IN THE ENCLOSED RETURN ENVELOPE TO ASSURE THAT YOUR
SHARES ARE REPRESENTED AT THE MEETING. IF YOU FAIL TO RETURN YOUR VOTING
DIRECTIVE CARD TO THE TRUSTEEE BY MAY 19, 1997, THEN THE SHARES WILL NOT BE
VOTED. AS A PARTICIPANT IN THE GRANITE CONSTRUCTION EMPLOYEE STOCK OWNERSHIP
PLAN (THE "PLAN"), YOU ARE ENTITLED TO VOTE YOUR PRO RATA PORTION OF THE
UNALLOCATED SHARES OF THE COMMON STOCK HELD IN THE PLAN. YOUR VOTING DIRECTION
SUBMITTED TO THE BANK OF AMERICA, N.T.&S.A., TRUSTEE OF THE PLAN, WILL BE
CONFIDENTIAL.
_______________________________________________________________________________
(continued, and to be signed, on other side)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
<PAGE> 18
(continued from other side)
Please mark
your votes as
indicated in [X]
this example.
<TABLE>
<S> <C> <C>
A vote FOR the following proposals is recom- FOR WITHHOLD
mended by the Board of Directors: all nominees listed below AUTHORITY
(except as marked to to vote for all nomi-
1. To elect Richard M. Brooks and Raymond E. Miles the contrary) nees listed below
as directors to hold office for a three-year term and
until their respective successors are elected and [ ] [ ]
have qualified.
</TABLE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME BELOW.)
RICHARD M. BROOKS RAYMOND E. MILES
FOR AGAINST ABSTAIN
2. To ratify the appointment of Coopers & Lybrand, L.L.P. [ ] [ ] [ ]
as the Company's independent accountants for the
fiscal year ending December 31, 1997.
3. With discretionary authority, upon such other matters as may properly come
before the meeting. The persons making this solicitation know at this time
of no other matters to be presented at the meeting.
The shares represented hereby shall be voted as specified. IF NO SPECIFICATION
IS MADE, SUCH SHARES WILL BE VOTED IN FAVOR OF PROPOSALS 1 AND 2.
Signature of Stockholder*________________________________ Dated:_________, 1997
*(Please sign your name exactly as it appears on the stock certificate
representing your shares.)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
<PAGE> 19
PROXY
GRANITE CONSTRUCTION INCORPORATED
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints David H. Watts and William E. Barton and each
of them with full power of substitution to represent the undersigned and to
vote all the shares of stock in GRANITE CONSTRUCTION INCORPORATED (the
"Company") which the undersigned is entitled to vote at the Annual Meeting of
the Stockholders of the Company to be held at the Monterey Marriott Hotel, 350
Calle Principal, Monterey, California on May 19, 1997, at 10:00 a.m., local
time, and at any adjournment thereof (1) as hereinafter specified upon the
proposals listed below and as more particularly described in the Proxy
Statement of the Company dated April 29, 1997 (the "Proxy Statement"), receipt
of which is hereby acknowledged, and (2) in their discretion upon such other
matters as may properly come before the meeting. The undersigned hereby
acknowledges receipt of the Company's 1996 Annual Report to Stockholders.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
- ------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
<PAGE> 20
A VOTE FOR THE FOLLOWING PROPOSALS IS RECOMMENDED BY Please mark
THE BOARD OF DIRECTORS: your votes as
indicated in
this example. [X]
<TABLE>
<CAPTION>
FOR all nominees WITHHOLD AUTHORITY
listed below (except as to vote for all
marked to the contrary) nominees listed below
<S> <C> <C>
1. ELECTION OF DIRECTORS
To elect Richard M. Brooks and Raymond E. Miles [ ] [ ]
as directors to hold office for a three-year term and
until their respective successors are elected and
have qualified.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR
ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH THE
NOMINEE'S NAME BELOW.)
Nominees: Richard M. Brooks
Raymond E. Miles
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
2. To ratify the appointment of Coopers & Lybrand [ ] [ ] [ ]
as the Company's independent accountants for
the fiscal year ending December 31, 1997.
3. With discretionary authority, upon such other matters as may properly come
before the meeting. The persons making this solicitation know at this time of no
other matters to be presented at the meeting.
The shares represented hereby shall be voted as specified. IF NO SPECIFICATION IS
MADE, SUCH SHARES WILL BE VOTED IN FAVOR OF PROPOSALS 1 AND 2.
</TABLE>
IMPORTANT: PLEASE DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE
ENCLOSED RETURN ENVELOPE TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE
MEETING. If you attend the meeting, you may vote in person should you wish to
do so even though you have already sent in your Proxy.
Signature(s)* Dated: , 1997
-------------------------------------- -----------
(Please sign your name exactly as it appears on the stock certificate
representing your shares.)
- --------------------------------------------------------------------------------
*FOLD AND DETACH HERE*
