<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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 240.14a-11(c) or 240.14a-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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
LOGO
GRANITE CONSTRUCTION INCORPORATED
585 WEST BEACH STREET
WATSONVILLE, CALIFORNIA 95076
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 24, 1999
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of
GRANITE CONSTRUCTION INCORPORATED, a Delaware corporation (the "Company"), will
be held on May 24, 1999, at 10:30 a.m. local time, at the Embassy Suites, 1441
Canyon Del Rey, Seaside, California for the following purposes:
1. To elect two (2) directors of the Company for the ensuing three-year
term;
2. To ratify the directorship of one (1) director appointed by the Board on
May 18, 1998;
3. To approve the Granite Construction Incorporated 1999 Equity Incentive
plan;
4. To ratify the appointment of PricewaterhouseCoopers LLP as the
independent accountants of the Company for the fiscal year ending
December 31, 1999; and
5. To transact such other business as may properly come before the meeting.
Stockholders of record at the close of business on April 9, 1999 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 Embassy Suites, 1441 Canyon Del Rey, Seaside, California
93955.
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,
LOGO
Michael Futch
Vice President, General Counsel and
Secretary
Watsonville, California
April 22, 1999
<PAGE> 3
GRANITE CONSTRUCTION INCORPORATED
585 WEST BEACH STREET
WATSONVILLE, CALIFORNIA 95076
------------------------
PROXY STATEMENT
1999 ANNUAL MEETING OF STOCKHOLDERS
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 24, 1999, 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 22, 1999. 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 9, 1999 are entitled to notice of, and to vote at, the Annual
Meeting. On April 9, 1999, there were 27,203,065 shares of Common Stock issued
and outstanding. Each share of Common Stock is entitled to one vote.
NOMINATION AND ELECTION OF DIRECTORS
RATIFICATION OF DIRECTORSHIP
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 David H. Watts and Joseph J. Barclay. Certain information with
respect to their ages and background is set forth below. Both Mr. Watts and Mr.
Barclay were elected to their present terms of office at the 1996 Annual Meeting
of Stockholders of the Company.
George B. Searle was appointed by the Board on May 18, 1998. Mr. Searle's
directorship is to be ratified for the remaining two-year term and until his
successor is elected and qualified.
Richard C. Solari was elected to his present term of office at the 1996
Annual Meeting. His term will expire at this year's Annual Meeting. The Board of
Directors' retirement policy provides that a director may continue to serve as a
director until the end of the term of office in which the director reaches his
or her 72nd birthday. Accordingly, Mr. Solari will retire from the Board, and
the Board of Directors will elect a new director at the earliest practicable
date.
<PAGE> 4
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).
Pursuant to the bylaws and policies of the Company, in advance of the
Annual Meeting of Stockholders, management will appoint an independent Inspector
of Elections to supervise the voting of shares for the Annual Meeting. The
Inspector will decide all questions respecting the qualification of voters, the
validity of the Proxies and the acceptance or rejection of votes. The Inspector,
before entering upon the discharge of his or her duties, shall take and sign an
oath faithfully to execute the duties of Inspector with strict impartiality and
according to the best of his or her ability.
All elections shall be determined by a plurality of votes cast, and except
as otherwise provided by law, all other matters shall be determined by a
majority of the votes cast affirmatively or negatively. Each stockholder shall
have one vote for every share of stock entitled to vote which is registered in
his or her name on the record date for the meeting, except as otherwise provided
herein or required by law.
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. The term of Mr.
Searle's directorship will be ratified for the term expiring at the 2001 Annual
Meeting of Stockholders. Abstentions and shares held by brokers that are
present, but not voted because the brokers were prohibited from exercising
discretionary authority, i.e., broker nonvoter, will be counted as present in
determining if a quorum is present.
<TABLE>
<CAPTION>
DIRECTOR POSITION AGE DIRECTOR SINCE
-------- -------- --- --------------
<S> <C> <C> <C>
NOMINEES
David H. Watts................. President, Chief Executive 60 Director since 1988; term
Officer and Director ends 1999.
Joseph J. Barclay.............. Director 66 Director since 1988; term
ends 1999.
George B. Searle............... Director 66 Director since 1998; term
ends 2001.
CONTINUING
Richard M. Brooks.............. Director 70 Director since 1990; term
ends 2000.
Raymond E. Miles............... Director 66 Director since 1988; term
ends 2000.
Rebecca A. McDonald............ Director 46 Director since 1994; term
ends 2001.
Brian C. Kelly................. Director 67 Director since 1995; term
ends 2001.
RETIRING
Richard C. Solari.............. Chairman of the Board 74 Director since 1979; term
ends 1999.
</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.
2
<PAGE> 5
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. Solari will retire
from the Board after his term expires at the Annual Meeting.
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 Chamber of Commerce, the Beavers, Nationwide Public
Projects Coalition, the Construction Industry Round Table, 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. Brooks is self-employed as a Financial Consultant. He was formerly
President and Chief Executive Officer of SFA Management Corporation. Mr. Brooks
is a director of Longs Drug Stores Corporation, BEI Technologies, 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 Executive Managing Director of Enron
International. She was formerly President and Chief Executive Officer of Amoco
Energy Development and Managing Director of Amoco Energy Group North America.
Ms. McDonald is a director of Morton International. She holds a B.S. degree in
Education from Stephen F. Austin University.
Mr. Barclay was formerly Chairman, President, Chief Executive Officer and a
director of Cascade Corporation, a manufacturer of materials handling equipment.
He is a director of Columbia Machine, Inc. Mr. Barclay holds a B.S. degree in
Industrial Engineering from Illinois Institute of Technology.
Mr. Kelly is self-employed as a Construction Consultant with over 40 years
of construction experience. He is currently utilizing his business expertise as
a volunteer with the Diocese of Monterey and other community organizations. 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 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.
Mr. Searle is currently President of Searle Associates, Inc., consultants
to the construction industry. He was formerly President of IA Construction Co.
of Concordville, Pennsylvania, a leading construction company in the Northeast.
Mr. Searle holds a B.A. degree in mathematics from Harvard University.
The Company has an Audit/Compliance Committee, a Compensation Committee, a
Nominating Committee, a Strategic Planning Committee, and an Executive
Committee.
AUDIT/COMPLIANCE COMMITTEE
Richard M. Brooks, Chairman
Joseph J. Barclay
Brian C. Kelly
Rebecca A McDonald
Raymond E. Miles
George B. Searle
The functions of the Audit/Compliance 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, instructing the
independent accountants, as deemed appropriate, and to undertake special
assignments. The committee also oversees the Ethics and Compliance Program
including participation in the annual evaluation of the Compliance Officer and
giving a detailed annual report to the Board on the
3
<PAGE> 6
progress of the Program and plans for its future activities. The
Audit/Compliance Committee is comprised entirely of non-employee directors.
During fiscal year 1998, the Audit/Compliance Committee held 2 meetings.
COMPENSATION COMMITTEE
Richard C. Solari, Chairman
Joseph J. Barclay
Richard M. Brooks
Brian C. Kelly
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 non-employee directors. The Compensation Committee held 2
meetings in 1998.
NOMINATING COMMITTEE
Richard C. Solari, Chairman
Joseph J. Barclay
Raymond E. Miles
George B. Searle
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 the 2000 Annual Meeting must be received at the
Company's principal office on or before December 12, 1999. The Nominating
Committee held 1 meeting in fiscal year 1998.
STRATEGIC PLANNING COMMITTEE
Raymond E. Miles
Rebecca A. McDonald
Brian C. Kelly
George B. Searle
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 1 meeting in fiscal year 1998.
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 1998, the Board of Directors held 6 meetings. All
Directors except Rebecca A. McDonald attended 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 31, 1999 (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 which ownership interest is as of December 31, 1998), (ii)
each director and director nominee of the Company, (iii) the Chief Executive
Officer and the four other most highly compensated executive officers of the
Company as of March 31, 1999, 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)............................. 7,727,222 28.33%
c/o BNY Western Trust Company
One Wall Street
New York, NY 10286
Primecap Management Company.......................... 2,100,000 7.70%
Pasadena, California
Richard C. Solari(2)................................. 142,013 *
David H. Watts(3).................................... 255,892 *
Joseph J. Barclay.................................... 11,250 *
Richard M. Brooks.................................... 4,500 *
Brian C. Kelly....................................... 6,750 *
Rebecca A. McDonald.................................. 750 *
Raymond E. Miles..................................... 750 *
George B. Searle..................................... 5,000 *
William G. Dorey(4).................................. 257,453 *
William E. Barton(5)................................. 94,764 *
Patrick M. Costanzo(6)............................... 250,163 *
Mark E. Boitano(7)................................... 167,400 *
All executive officers and directors as a group (12
persons)(2)(3)(4)(5)(6)(7)......................... 1,196,685 4.39%
</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 112,500 shares of Common Stock held by the Solari-Lane Trust I and
16,078 shares held by the Solari Family Trust as of March 31, 1999. Mr.
Solari is the trustee and a beneficiary under the trusts. Also includes
2,472 shares held in an IRA Roll-Over Account.
(3) Includes 46,583 shares of Common Stock owned by the Employee Stock Ownership
Plan ("ESOP") but allocated to Mr. Watts' account as of March 31, 1999, and
154,459 shares of restricted stock over which Mr. Watts has voting, but not
dispositive power, as of March 31, 1999. These shares are subject to vesting
and distribution restrictions.
(4) Includes 149,791 shares of Common Stock owned by the Employee Stock
Ownership Plan ("ESOP") but allocated to Mr. Dorey's account as of March 31,
1999, and 90,508 shares of restricted stock over which Mr. Dorey has voting,
but not dispositive power, as of March 31, 1999. These shares are subject to
vesting and distribution restrictions.
(5) Includes 44,952 shares of Common Stock owned by the Employee Stock Ownership
Plan ("ESOP") but allocated to Mr. Barton's account as of March 31, 1999,
and 42,557 shares of restricted stock over which
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<PAGE> 8
Mr. Barton has voting, but not dispositive power, as of March 31, 1999.
These shares are subject to vesting and distribution restrictions.
(6) Includes 84,902 shares of Common Stock owned by the Employee Stock Ownership
Plan ("ESOP") but allocated to Mr. Costanzo's account as of March 31, 1999,
and 101,103 shares of restricted stock over which Mr. Costanzo has voting,
but not dispositive power, as of March 31, 1999. These shares are subject to
vesting and distribution restrictions. Also included are 10,125 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 be deemed
to be the beneficial owner of such shares.
(7) Includes 103,908 shares of Common Stock owned by the Employee Stock
Ownership Plan ("ESOP") but allocated to Mr. Boitano's account as of March
31, 1999, and 63,492 shares of restricted stock over which Mr. Boitano has
voting, but not dispositive power, as of March 31, 1999. These shares are
subject to vesting and distribution restrictions.
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 four other most highly compensated executive officers
as of December 31, 1998, whose salary and bonus exceeded $100,000 for the fiscal
year ended December 31, 1998:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-------------------------------
AWARDS PAYOUTS
ANNUAL --------------------- -------
COMPENSATION(1) RESTRICTED
------------------ STOCK LTIP ALL OTHER
SALARY BONUS(2) AWARDS(3) OPTIONS/ PAYOUTS COMPENSATION(4)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) SARS (#) ($) ($)
--------------------------- ---- ------- -------- ---------- -------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
David H. Watts.................... 1998 300,000 300,000 530,865 -- -- 33,713
President and 1997 270,000 305,000 516,839 -- -- 23,132
Chief Executive Officer 1996 240,000 290,000 379,540 -- -- 22,791
William G. Dorey.................. 1998 200,000 280,000 283,128 -- -- 32,592
Executive Vice President and 1997 170,000 285,000 340,774 -- -- 23,131
Chief Operating Officer 1996 135,000 270,000 241,259 -- -- 22,790
William E. Barton................. 1998 165,000 126,000 171,644 -- -- 32,592
Vice President and 1997 140,000 130,000 144,009 -- -- 23,131
Chief Financial Officer 1996 115,000 134,000 105,606 -- -- 21,892
Patrick M. Costanzo............... 1998 200,000 280,000 364,109 -- -- 33,713
Senior Vice President and
Manager 1997 170,000 285,000 170,689 -- -- 23,131
Heavy Construction Division 1996 135,000 270,000 224,170 -- -- 22,791
Mark E. Boitano(5)................ 1998 150,000 210,000 212,346 -- -- 32,592
Senior Vice President and 1997 -- -- -- -- -- --
Manager Branch Division 1996 -- -- -- -- -- --
</TABLE>
- ---------------
(1) For the year ended December 31, 1998, compensation deferred at the election
of the officer under the Key Management Deferred Compensation Plan for
Messrs. Watts, Dorey, Barton, Costanzo and Boitano was $300,531; $265,264;
$6,000; $289,070; and $6,000, respectively. For the year ended December 31,
1997 such deferred compensation amounted to $295,203; $6,000; $6,000;
$273,283 and N/A, respectively, while for the year ended December 31, 1996
deferred compensation amounted to $63,000; $3,000; $3,000, $257,718 and N/A,
respectively.
(2) Amounts include cash bonuses earned in the current year but paid in the
following year. Amounts do not include cash bonuses paid in the current year
but earned in the previous year.
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<PAGE> 9
(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, 1998 for Messrs. Watts, Dorey, Barton, Costanzo, and Boitano
were 136,509; 83,100; 35,253; 87,454 and 54,456, respectively, with an
aggregate market value for those same officers of $4,581,583, $2,789,044,
$1,183,179, $2,935,175 and $1,827,680 respectively, based on the Company's
stock closing price of $33.5625 at December 31, 1998. The number of shares
and values for each officer at December 31, 1998 exclude the shares issued
in March, 1999 for services performed in 1998 which appear in the table as
1998 compensation.
A portion of the restricted stock reflected for 1997 and 1996 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.
At December 31, 1998, the amounts of 1990 deferred compensation remaining to
be paid were $36,139 and $11,383 for Messrs. Watts and Dorey, respectively.
None of the restricted stock issued vests within three years of the date of
grant, although, if Messrs. Watts and Costanzo choose to retire at age 62,
they would be allowed to vest 90% of their unvested shares within two years
from December 31, 1998. Dividends are paid on restricted shares on the same
basis as all other outstanding shares.
(4) Amounts represent contributions to the Employee Stock Ownership Plan and to
the Profit Sharing and 401(k) Plan that were earned during the current year,
of which a portion was allocated in the following year. Prior years have
been restated to conform to the 1998 presentation.
(5) Mr. Boitano was promoted to an executive officership during the fiscal year
ended December 31, 1998. Information is provided for 1998 only.
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, 1998, and unexercised options held as of December 31, 1998, 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
SHARES OPTIONS AT FY-END AT FY-END(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David H. Watts............... 10,125 $255,682 0 -- 0 --
William G. Dorey............. 9,000 $217,710 0 -- 0 --
William E. Barton............ 4,500 $113,655 0 -- 0 --
Patrick M. Costanzo.......... -- -- 10,125 -- $263,275 --
Mark E. Boitano.............. -- -- 0 -- 0 --
</TABLE>
- ---------------
(1) For each named executive officer, the value of the exercisable options is
based on a closing stock sale price of $33.5625 on December 31, 1998, less
the grant price of $7.56 per share.
7
<PAGE> 10
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, 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
and May 19, 1997, the Company entered into the same form of employment agreement
with Michael Futch and Garry M. Higdem, respectively. Effective February 1, 1997
the employment agreements entered into with Messrs. Barton, Boitano, Costanzo,
Dorey, 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 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
in-house administrative error, the Form 3 for Mr. Boitano and the Form 4 for Mr.
Barton 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,
Miles, Searle and Ms. McDonald currently receive an annual retainer of $20,000,
payable quarterly, for serving on the Board. In addition, Messrs. Barclay,
Brooks, Kelly, Miles, Searle 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, 1993, and ending
on December 31, 1998.
The graph assumes $100 invested on December 31, 1993 in the Company's stock
at $25.00 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>
GRANITE CONSTR INC. S&P 500 DJ HEAVY CONSTRUCTION
------------------- ------- ---------------------
<S> <C> <C> <C>
'12/93' 100 100 100
'12/94' 82 101 96
'12/95' 130 139 134
'12/96' 119 171 128
'12/97' 147 229 96
'12/98' 326 294 100
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Solari, Barclay, Brooks and Kelly served as members of the
Compensation Committee during fiscal 1998. All Committee members are
non-employee directors.
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, with the intention of providing both competitive and
appropriate levels of compensation.
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 addition, compensation should 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 compensation
consultants to assist the Committee in developing and maintaining a competitive
executive compensation program. Hewitt Associates,
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<PAGE> 12
for example, has regularly 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 named executive officers, unless such compensation is
subject to performance-based exemptions. Since most of the targeted compensation
of each of the named executive officers is performance-based, the exemption
applies and 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. Effective January 1, 1998, CEO David H. Watts' salary
was increased from $270,000 to $300,000.
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 for all officers
in 1998. Effective January 1, 1998, CEO Watts' cash limit was increased to
$600,000 and his total compensation limit to $1,200,000.
The Committee continued the Return on Net Assets (RONA) based compensation
plan in 1998 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 and asset utilization compared with 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 1998 by Corporate RONA, while
70% of their incentive compensation was based on the profitability of their
respective Divisions.
In addition to his 1998 base salary, CEO Watts also received an incentive
cash payment of $305,000 and restricted stock valued at $454,990 (paid in 1998
for performance provided in 1997, except for $50,000 of the restricted stock
which relates to the 1990 deferred compensation as discussed in Footnote 3 of
the Summary Compensation Table) under 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, 1998 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.
The Committee met two (2) times in 1998.
<TABLE>
<S> <C>
Richard C. Solari Richard M. Brooks
Joseph J. Barclay Brian C. Kelly
</TABLE>
10
<PAGE> 13
1999 EQUITY INCENTIVE PLAN
At the Annual Meeting, the stockholders will be asked to approve the
Granite Construction Incorporated 1999 Equity Incentive Plan (the "Plan"). The
Plan was adopted by the Board of Directors on March 17, 1999, to become
effective on the date of its approval by stockholders (the "Effective Date").
The Plan is intended to replace the Company's 1990 Omnibus Stock and Incentive
Plan, which will expire on June 30, 1999.
The Board of Directors believes that the Company must offer a competitive
equity incentive program if it is to continue to successfully attract and retain
the best possible candidates for positions of responsibility within the Company.
The Board expects that the Plan will be an important factor in attracting and
retaining the high caliber employees and directors essential to the success of
the Company and in motivating these individuals to strive to enhance the
Company's growth and profitability. The proposed Plan is intended to ensure that
the Company will continue to have available a reasonable number of shares to
meet these goals.
The Plan is also designed to preserve the Company's ability to deduct in
full for federal income tax purposes the compensation recognized by its
executive officers in connection with certain awards granted under the Plan.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
generally denies a corporate tax deduction for annual compensation exceeding $1
million paid to the chief executive officer or to any of the four other most
highly compensated officers of a publicly held company. However, certain types
of compensation, including performance-based compensation, are generally
excluded from this deductibility limit. To enable compensation in connection
with stock options, restricted stock, performance shares and performance units
awarded under the Plan to qualify as "performance-based" within the meaning of
Section 162(m), the Plan limits the sizes of such awards as further described
below. While the Company believes that compensation in connection with such
awards under the Plan generally will be deductible by the Company for federal
income tax purposes, under certain circumstances, such as a change in control of
the Company, compensation paid in settlement of performance share and
performance unit awards may not qualify as "performance-based." By approving the
Plan, the stockholders will be approving, among other things, eligibility
requirements for participation in the Plan, financial performance measures upon
which specific performance goals applicable to certain awards would be based,
limits on the numbers of shares or compensation that could be made subject to
certain awards, and the other material terms of the awards described below.
SUMMARY OF THE PLAN
The following summary of the Plan is qualified in its entirety by the
specific language of the Plan, a copy of which is available to any stockholder
upon request.
General. The purpose of the Plan is to advance the interests of the Company
by providing an incentive program that will enable the Company to attract and
retain employees and directors upon whose judgment, interest and efforts the
Company's success is dependent and to provide them with an equity interest in
the success of the Company in order to motivate superior performance. These
incentives are provided through the grant of stock options, restricted stock,
performance shares, performance units and stock-based director fee awards.
Shares Subject to Plan. The maximum aggregate number of authorized but
unissued or reacquired shares of the Common Stock of the Company that may be
issued under the Plan is 2,500,000. Appropriate adjustments will be made to the
forgoing limit and to outstanding awards upon any stock dividend, stock split,
reverse stock split, recapitalization, merger, combination, exchange of shares
or similar change in the capital structure of the Company. If any award expires,
lapses or otherwise terminates for any reason without having been exercised or
settled in full, if shares are reacquired pursuant to withholding, or if shares
subject to forfeiture or repurchase are forfeited or repurchased by the Company,
any such shares reacquired or subject to a terminated award will again become
available for issuance under the Plan.
Administration. The Plan will be administered by the compensation or other
committee of the Board of Directors duly appointed to administer the Plan, or,
in the absence of such committee, by the Board. In the case of awards intended
to qualify for the performance-based compensation exemption under Section 162(m)
11
<PAGE> 14
of the Code, administration must be by a compensation committee comprised solely
of two or more "outside directors" within the meaning of Section 162(m). (For
purposes of this summary, the term "Committee" will refer to either such duly
appointed committee or the Board of Directors.) Subject to the provisions of the
Plan, the Committee determines in its discretion the persons to whom and the
times at which awards are granted, the types and sizes of such awards, and all
of their terms and conditions. The Committee may, subject to certain limitations
on the exercise its discretion required by Section 162(m), amend, cancel, renew,
or grant a new award in substitution for, any award, waive any restrictions or
conditions applicable to any award, and accelerate, continue, extend or defer
the vesting of any award. The Plan provides, subject to certain limitations, for
indemnification by the Company of any director, officer or employee against all
reasonable expenses, including attorneys' fees, incurred in connection with any
legal action arising from such person's action or failure to act in
administering the Plan. The Committee will interpret the Plan and awards granted
thereunder, and all determinations of the Committee will be final and binding on
all persons having an interest in the Plan or any award.
Eligibility. Awards may be granted to employees and directors of the
Company or of any present or future parent or subsidiary corporations of the
Company. In addition, awards may be granted to prospective employees and
directors in connection with written employment offers, provided that no shares
subject to any such award may vest, become exercisable or be issued prior to
such person's commencement of service. Incentive stock options may be granted
only to employees, and director fee awards may be granted only to members of the
Board of Directors who, as of the time of grant, are not employees of the
Company or any parent or subsidiary corporation of the Company ("nonemployee
directors"). As of March 31, 1999, the Company had approximately 100 employees,
including 5 executive officers and 7 nonemployee directors who would be eligible
under the Plan.
Stock Options. The Committee may grant nonstatutory stock options and
incentive stock options within the meaning of Section 422 of the Code, or any
combination of these. Subject to appropriate adjustment in the event of any
change in the capital structure of the Company, no employee may be granted in
any fiscal year of the Company options which in the aggregate are for more than
100,000 shares, provided that an additional one-time grant of an option for up
to 250,000 shares may be made to any newly-hired employee.
Each option granted under the Plan must be evidenced by a written agreement
between the Company and the optionee specifying the number of shares subject to
the option and the other terms and conditions of the option, consistent with the
requirements of the Plan. The exercise price of each incentive stock option may
not be less than the fair market value of a share of Common Stock on the date of
grant, while the exercise price of a nonstatutory stock option may not be less
than 85% of such fair market value. However, any incentive stock option granted
to a person who at the time of grant owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or any parent
or subsidiary corporation of the Company (a "Ten Percent Stockholder") must have
an exercise price equal to at least 110% of the fair market value of a share of
Common Stock on the date of grant. On March 31, 1999, the closing price of the
Company's Common Stock on the New York Stock Exchange was $23.375 per share.
The Plan provides that the option exercise price may be paid in cash, by
check, or in cash equivalent, by the assignment of the proceeds of a sale or
loan with respect to some or all of the shares being acquired upon the exercise
of the option, to the extent legally permitted, by tender of shares of Common
Stock owned by the optionee having a fair market value not less than the
exercise price or by means of a promissory note if the optionee is an employee,
by such other lawful consideration as approved by the Committee, or by any
combination of these. Nevertheless, the Committee may restrict the forms of
payment permitted in connection with any option grant. No option may be
exercised unless the optionee has made adequate provision for federal, state,
local and foreign taxes, if any, relating to the exercise of the option,
including, if permitted by the Company, through the optionee's surrender of a
portion of the option shares to the Company.
Options will become vested and exercisable at such times or upon such
events and subject to such terms, conditions, performance criteria or
restrictions as specified by the Committee. The maximum term of any option
granted under the Plan is ten years, provided that an incentive stock option
granted to a Ten Percent Stockholder must have a term not exceeding five years.
Subject to the term of the option, an option generally
12
<PAGE> 15
will remain exercisable for 30 days following the optionee's termination of
service, provided that if service terminates as a result of the optionee's death
or disability, the option generally will remain exercisable for six months, or
if service is terminated for cause, the option will terminate immediately. The
Committee, in its discretion, may provide longer post-termination exercise
periods, but in any event the option must be exercised no later than its
expiration date.
Incentive stock options are nontransferable by the optionee other than by
will or by the laws of descent and distribution, and are exercisable during the
optionee's lifetime only by the optionee. Nonstatutory stock options granted
under the Plan may be assigned or transferred to the extent permitted by the
Committee and set forth in the option agreement.
Restricted Stock. Awards of restricted stock may be granted by the
Committee subject to such restrictions for such periods as determined by the
Committee and set forth in a written agreement between the Company and the
participant. Restricted stock may not be sold or otherwise transferred or
pledged until the restrictions lapse or are terminated. Restrictions may lapse
in full or in installments on the basis of the participant's continued service
or other factors, such as performance criteria (see discussion under
"Performance Awards" below) established by the Committee. Participants holding
restricted stock will have the right to vote the shares and to receive all
dividends and other distributions, except that any dividends or other
distributions in shares will be subject to the same restrictions on
transferability as the original award. Subject to appropriate adjustment in the
event of any change in the capital structure of the Company, no employee may be
granted in any fiscal year of the Company more than 100,000 shares of restricted
stock on which the restrictions are based on performance criteria.
Unless otherwise provided by the Committee, a participant will forfeit any
shares of restricted stock as to which the restrictions have not lapsed prior to
the participant's termination of service, provided that if termination of
service is due to the participant's death or disability, all restrictions will
lapse automatically. The Plan provides that, unless otherwise determined by the
Committee, upon a participant's retirement, the restrictions will lapse on the
basis of the number of months of service elapsed since the date of the award,
and the remaining shares will be forfeited to the Company.
Performance Awards. The Committee may grant performance awards subject to
such conditions and the attainment of such performance goals over such periods
as the Committee determines in writing and sets forth in a written agreement
between the Company and the participant. These awards may be designated as
performance shares or performance units. Performance shares and performance
units are unfunded bookkeeping entries generally having initial values,
respectively, equal to the fair market value determined on the grant date of a
share of Common Stock and $100 per unit. Performance awards will specify a
predetermined amount of performance shares or performance units that may be
earned by the participant to the extent that one or more predetermined
performance goals are attained within a predetermined performance period. To the
extent earned, performance awards may be settled in cash, shares Common Stock
(including shares of restricted stock) or any combination thereof. Subject to
appropriate adjustment in the event of any change in the capital structure of
the Company, for each fiscal year of the Company contained in the applicable
performance period, no employee may be granted performance shares that could
result in the employee receiving more than 100,000 shares of Common Stock or
performance units that could result in the employee receiving more than
$1,500,000. A participant may receive only one performance award with respect to
any performance period.
Prior to the beginning of the applicable performance period or such later
date as permitted under Section 162(m) of the Code, the Committee will establish
one or more performance goals applicable to the award. Performance goals will be
based on the attainment of specified target levels with respect to one or more
measures of business or financial performance of the Company and each parent and
subsidiary corporation consolidated therewith for financial reporting purposes,
or such division or business unit of the Company as may be selected by the
Committee. The Committee, in its discretion, may base performance goals on one
or more of the following such measures: revenue, operating income, pre-tax
profit, net income, gross margin, operating margin, earnings per share, return
on stockholder equity, return on capital, return on net assets, economic value
added and cash flow. The target levels with respect to these performance
measures may be expressed on an absolute basis or relative to a standard
specified by the Committee. The degree of attainment
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<PAGE> 16
of performance measures will, according to criteria established by the
Committee, be computed before the effect of changes in accounting standards,
restructuring charges and similar extraordinary items occurring after the
establishment of the performance goals applicable to a performance award.
Following completion of the applicable performance period, the Committee
will certify in writing the extent to which the applicable performance goals
have been attained and the resulting value to be paid to the participant. The
Committee retains the discretion to eliminate or reduce, but not increase, the
amount that would otherwise be payable to the participant on the basis of the
performance goals attained. However, no such reduction may increase the amount
paid to any other participant. In its discretion, the Committee may provide for
the payment to a participant awarded performance shares of dividend equivalents
with respect to cash dividends paid on the Company's Common Stock. Performance
award payments may be made in lump sum or in installments. If any payment is to
be made on a deferred basis, the Committee may provide for the payment of
dividend equivalents or interest during the deferral period.
Unless otherwise provided by the Committee, if a participant's service
terminates due to the participant's death, disability or retirement prior to
completion of the applicable performance period, the final award value will be
determined at the end of the performance period on the basis of the performance
goals attained during the entire performance period but will be prorated for the
number of months of the participant's service during the performance period. If
a participant's service terminates prior to completion of the applicable
performance period for any other reason, the Plan provides that, unless
otherwise determined by the Committee, the performance award will be forfeited.
No performance award may be sold or transferred other than by will or the laws
of descent and distribution prior to the end of the applicable performance
period.
Director Fee Awards. The Plan provides that commencing with the start of
the first full calendar quarter following stockholder approval of the Plan, each
nonemployee director must receive at least 50% of the value of all compensation
for services as a director in the form of a stock-based director fee award in
lieu of receipt of such amounts in cash. A nonemployee director may elect to
receive up to 100% of director compensation in the form of a director fee award.
Any such election must generally be made prior to the first day of the calendar
year to which it applies. Director fee awards will be granted automatically on
the last day of each calendar quarter for the elected portion (not less than
50%) of a nonemployee director's compensation earned during the quarter (the
"Elected Quarterly Compensation"). Director compensation not paid in the form of
a director fee award will be paid in cash in accordance with the Company's
normal payment procedures.
Each nonemployee director must elect, generally prior to the start of the
applicable calendar year, to receive director fee awards during such year in the
form of either an Option Payment or a Stock Units Payment. A nonemployee
director electing to receive an Option Payment will be granted automatically on
the last day of each calendar quarter during the year a nonstatutory stock
option (a "Nonemployee Director Option") for a number of shares of Common Stock
determined by dividing the Elected Quarterly Compensation by an amount equal to
50% of the average closing price of a share of the Company's Common Stock on the
New York Stock Exchange on the ten trading days preceding the date of grant and
having an exercise price per share equal to 50% of such average closing price.
Each Nonemployee Director Option must be evidenced by a written agreement
between the Company and the nonemployee director specifying the number of shares
subject to the option and the other terms and conditions of the option,
consistent with the requirements of the Plan. The exercise price may be paid in
cash, by check, or in cash equivalent, by the assignment of the proceeds or a
sale or loan with respect to some or all of shares being acquired upon exercise
of the option, and, to the extent legally permitted, by tender of shares of
Common Stock owned by the director having a fair market value not less than the
exercise price. Nonemployee Director Options will be fully vested and will have
a term of ten years. Subject to such term, a Nonemployee Director Option will
remain exercisable for 12 months following the director's termination of
service. A Nonemployee Director Option may be assigned or transferred to the
extent permitted by the Committee and set forth in the option agreement.
A nonemployee director electing to receive a Stock Units Payment will be
granted automatically on the last day of each calendar quarter during the year
an award (a "Stock Units Award") for a number of stock units determined by
dividing the Elected Quarterly Compensation by an amount equal to the average
closing
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<PAGE> 17
price of a share of the Company's Common Stock on the New York Stock Exchange on
the ten trading days preceding the date of grant. A stock unit is an unfunded
bookkeeping entry representing a right to receive one share of the Common Stock
of the Company in accordance with the terms and conditions of the Stock Units
Award. Nonemployee directors are not required to pay any additional cash
consideration in connection with the settlement of a Stock Units Award.
Each Stock Units Award must be evidenced by a written agreement between the
Company and the nonemployee director specifying the number of stock units
subject to the award and the other terms and conditions of the Stock Units
Award, consistent with the requirements of the Plan. Stock Unit Awards are fully
vested upon grant and will be settled by distribution to the nonemployee
director of a number of whole shares of Common Stock equal to the number of
stock units subject to the award within 30 days following the earlier of (i) the
date on which the participant's service as a director terminates or (ii) an
early settlement date elected by the nonemployee director in accordance with the
terms of the Plan at the time of his or her election to receive the Stock Units
Payment. A holder of stock units has no voting rights or other rights as a
stockholder until shares of Common Stock are issued to the participant in
settlement of the stock units. However, nonemployee directors holding stock
units will be entitled to receive dividend equivalents with respect to any
payment of cash dividends on an equivalent number of shares of Common Stock.
Such dividend equivalents will be credited in the form of additional whole and
fractional stock units determined by the fair market value of a share of Common
Stock on the dividend record date. Prior to settlement, no Stock Units Award may
be assigned or transferred other than by will or the laws of descent and
distribution.
Change in Control. The Plan defines a "Change in Control" of the Company as
any of the following events: (i) an acquisition, consolidation, or merger of the
Company with or into any other corporation or corporations, unless the
stockholders of the Company retain, directly or indirectly, at least a majority
of the beneficial interest in the voting stock of the surviving or acquiring
corporation or corporations; (ii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company to a transferee other than a
corporation or partnership controlled by the Company or the stockholders of the
Company; or (iii) a transaction or series of related transactions in which stock
of the Company representing more than 30% of the outstanding voting power of the
Company is sold, exchanged, or transferred to any single person or affiliated
persons leading to a change of a majority of the members of the Board of
Directors. If a Change in Control occurs, the surviving, continuing, successor
or purchasing corporation or parent corporation thereof may either assume all
outstanding awards or substitute new awards having an equivalent value. If the
outstanding awards are not assumed or replaced, then all unexercisable, unvested
or unpaid portions of the outstanding awards will become immediately
exercisable, vested and payable in lull immediately prior to the date of the
Change in Control. For this purpose, the value of outstanding performance awards
will be determined and paid on the basis of the greater of (i) the degree of
attainment of the applicable performance goals prior the date of the Change in
Control or (ii) 100% of the pre-established performance goal target. Any option
not assumed, replaced or exercised prior to the Change in Control will
terminate. The Plan authorizes the Committee, in its discretion, to provide in
any award agreement that if; within a period following a Change in Control
specified by the Committee, the participant's service is involuntarily
terminated without cause (as defined in the Plan) or the participant resigns for
good reason (as defined in the Plan), then the exercisability, vesting and
payment of such participant's outstanding awards will be accelerated to such
extent as specified by the Committee and, if the outstanding award is an option,
it will remain exercisable for six months (or such other period specified by the
Committee) following the date of the participant's termination of service (but
not beyond the expiration of the option's term).
Termination or Amendment. The Plan will continue in effect until the first
to occur of (i) its termination by the Committee, (ii) the date on which all
shares available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing awards granted under the Plan have lapsed, or (iii) the fifth
anniversary of the Effective Date. The Committee may terminate or amend the Plan
at any time, provided that no amendment may be made without stockholder approval
if the Committee deems such approval necessary for compliance with any
applicable tax or securities law or other regulatory requirements, including the
requirements of any stock exchange or market system on which the Common Stock of
the Company is then listed. No termination or amendment may affect any
15
<PAGE> 18
outstanding award unless expressly provided by the Committee, and, in any event,
may not adversely affect an outstanding award without the consent of the
participant unless necessary to comply with any applicable law, regulation or
rule.
SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES
The following summary is intended only as a general guide to the U.S.
federal income tax consequences under current law of participation in the Plan
and does not attempt to describe all possible federal or other tax consequences
of such participation or tax consequences based on particular circumstances.
Incentive Stock Options. An optionee recognizes no taxable income for
regular income tax purposes as a result of the grant or exercise of an incentive
stock option qualifying under Section 422 of the Code. Optionees who neither
dispose of their shares within two years following the date the option was
granted nor within one year following the exercise of the option will normally
recognize a capital gain or loss equal to the difference, if any, between the
sale price and the purchase price of the shares. If an optionee satisfies such
holding periods upon a sale of the shares, the Company will not be entitled to
any deduction for federal income tax purposes. If an optionee disposes of shares
within two years after the date of grant or within one year after the date of
exercise (a "disqualifying disposition"), the difference between the fair market
value of the shares on the determination date (see discussion under
"Nonstatutory Stock Options" below) and the option exercise price (not to exceed
the gain realized on the sale if the disposition is a transaction with respect
to which a loss, if sustained, would be recognized) will be taxed as ordinary
income at the time of disposition. Any gain in excess of that amount will be a
capital gain. If a loss is recognized, there will be no ordinary income, and
such loss will be a capital loss. Any ordinary income recognized by the optionee
upon the disqualifying disposition of the shares generally should be deductible
by the Company for federal income tax purposes, except to the extent such
deduction is limited by applicable provisions of the Code.
The difference between the option exercise price and the fair market value
of the shares on the determination date of an incentive stock option (see
discussion under "Nonstatutory Stock Options" below) is treated as an adjustment
in computing the optionee's alternative minimum taxable income and may be
subject to an alternative minimum tax which is paid if such tax exceeds the
regular tax for the year. Special rules may apply with respect to certain
subsequent sales of the shares in a disqualifying disposition, certain basis
adjustments for purposes of computing the alternative minimum taxable income on
a subsequent sale of the shares and certain tax credits which may arise with
respect to optionees subject to the alternative minimum tax.
Nonstatutory Stock Options. Options not designated or qualifying as
incentive stock options will be nonstatutory stock options having no special tax
status. An optionee generally recognizes no taxable income as the result of the
grant of such an option. Upon exercise of a nonstatutory stock option, the
optionee normally recognizes ordinary income in the amount of the difference
between the option exercise price and the fair market value of the shares on the
determination date (as defined below). If the optionee is an employee, such
ordinary income generally is subject to withholding of income and employment
taxes. The "determination date" is the date on which the option is exercised
unless the shares are subject to a substantial risk of forfeiture (as in the
case where an optionee is permitted to exercise an unvested option and receive
unvested shares which, until they vest, are subject to the Company's right to
repurchase them at the original exercise price upon the optionee's termination
of service) and are not transferable, in which case the determination date is
the earlier of (i) the date on which the shares become transferable or (ii) the
date on which the shares are no longer subject to a substantial risk of
forfeiture. If the determination date is after the exercise date, the optionee
may elect, pursuant to Section 83(b) of the Code, to have the exercise date be
the determination date by filing an election with the Internal Revenue Service
no later than 30 days after the date the option is exercised. Upon the sale of
stock acquired by the exercise of a nonstatutory stock option, any gain or loss,
based on the difference between the sale price and the fair market value on the
determination date, will be taxed as capital gain or loss. No tax deduction is
available to the Company with respect to the grant of a nonstatutory stock
option or the sale of the stock acquired pursuant to such grant. The Company
generally should be entitled to a deduction equal to the amount of ordinary
income recognized by the optionee as a
16
<PAGE> 19
result of the exercise of a nonstatutory stock option, except to the extent such
deduction is limited by applicable provisions of the Code.
Restricted Stock. A participant acquiring restricted stock generally will
recognize ordinary income equal to the fair market value of the shares on the
"determination date" (as defined above under "Nonstatutory Stock Options"). If
the participant is an employee, such ordinary income generally is subject to
withholding of income and employment taxes. If the determination date is after
the date on which the participant acquires the shares, the participant may
elect, pursuant to Section 83(b) of the Code, to have the date of acquisition be
the determination date by filing an election with the Internal Revenue Service
no later than 30 days after the date the shares are acquired. Upon the sale of
shares acquired pursuant to a restricted stock award, any gain or loss, based on
the difference between the sale price and the fair market value on the
determination date, will be taxed as capital gain or loss. The Company generally
should be entitled to a deduction equal to the amount of ordinary income
recognized by the participant on the determination date, except to the extent
such deduction is limited by applicable provisions of the Code.
Performance and Stock Units Awards. A participant generally will recognize
no income upon the grant of a performance share, performance units or stock
units award. Upon the settlement of such awards, participants normally will
recognize ordinary income in the year of receipt in an amount equal to the cash
received and the fair market value of any nonrestricted shares received. If the
participant is an employee, such ordinary income generally is subject to
withholding of income and employment taxes. If the participant receives shares
of restricted stock, the participant generally will be taxed in the same manner
as described above (see discussion under "Restricted Stock"). Upon the sale of
any shares received, any gain or loss, based on the difference between the sale
price and the fair market value on the "determination date" (as defined above
under "Nonstatutory Stock Options"), will be taxed as capital gain or loss. The
Company generally should be entitled to a deduction equal to the amount of
ordinary income recognized by the participant on the determination date, except
to the extent such deduction is limited by applicable provisions of the Code.
NEW PLAN BENEFITS
No awards will be granted under the Plan prior to its approval by the
stockholders of the Company. With the exception of the minimum director fee
awards that will be granted automatically to nonemployee directors, awards under
the Plan will be granted at the discretion of the Committee, and, accordingly,
are not yet determinable. In addition, benefits under the Plan, including
director fee awards, will depend on a number of factors, including the fair
market value of the Company's Common Stock on future dates, actual Company
performance against performance goals established with respect to performance
awards and decisions made by the participants. Consequently it is not possible
to determine the benefits that might be received by participants under the Plan.
VOTE REQUIRED AND BOARD OF DIRECTORS RECOMMENDATION
Approval of this proposal requires a number of votes "For" the proposal
that represents a majority of the shares present or represented by proxy and
entitled to vote at the Annual Meeting, with abstentions and broker non-votes
each being counted as present for purposes of determining the presence of a
quorum, abstentions having the same effect as a negative vote and broker
non-votes having no effect on the outcome of the vote.
The Board of Directors believes that adoption of the proposed Plan is in
the best interests of the Company and the stockholders for the reasons stated
above. THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
PROPOSAL TO APPROVE THE PLAN.
17
<PAGE> 20
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has appointed PricewaterhouseCoopers
LLP to serve as independent accountants to audit the financial statements of the
Company for fiscal 1999. Coopers & Lybrand, L.L.P., predecessor to
PricewaterhouseCoopers LLP, has acted in such capacity since its appointment for
fiscal 1982. A representative of PricewaterhouseCoopers LLP 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 nonvoter" will each be
counted as present for purposes of determining a quorum. Neither abstention nor
"broker nonvoter" 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
PricewaterhouseCoopers LLP as the Company's independent accountants is not
obtained, the Board of Directors will reconsider said appointment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE "FOR" THIS PROPOSAL.
STOCKHOLDER PROPOSALS TO BE PRESENTED
AT 2000 ANNUAL MEETING
Proposals of stockholders intended to be presented at the 2000 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, 1999 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.
INCORPORATION BY REFERENCE
Certain information required by Item 13(a) of Schedule 14A is incorporated
by reference to the Company's 1998 Annual Report mailed on approximately April
22, 1999.
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.
LOGO
Michael Futch
Vice President, General Counsel and
Secretary
Dated: April 22, 1999
18
<PAGE> 21
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
Stockholders of the Company to be held at the Embassy Suites, 1441 Canyon Del
Rey, Seaside, California on May 24, 1999 at 10:30 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 22, 1999 (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 1998
Annual Report.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
FOLD AND DETACH HERE
<PAGE> 22
FOR all nominees WITHHOLD AUTHORITY
listed below (except as to vote for all
marked to the contrary) nominees listed below
1. ELECTION OF DIRECTORS [ ] [ ]
To elect David H. Watts and
Joseph J. Barclay as directors
to hold office for a three-year
term and until their respective
successors are elected and have
qualified.
2. RATIFICATION OF DIRECTOR [ ] [ ]
To ratify the directorship of
George B. Searle to hold office
for the term expiring at the 2001
Annual Meeting of Stockholders
and until his successor is
elected and has qualified.
(INSTRUCTION: TO WITHHOLD AUTHORITY
TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S
NAME BELOW.)
Nominees: David H. Watts
Joseph J. Barclay
George B. Searle
FOR AGAINST ABSTAIN
3. To approve the Granite Construction [ ] [ ] [ ]
Incorporated 1999 Equity Incentive Plan.
4. To ratify the appointment of [ ] [ ] [ ]
PricewaterhouseCoopers LLP as the
Company's independent accountants for
the fiscal year ending December 31, 1999.
5. 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, 2 AND 3.
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: ________, 1999
*(Please sign your name exactly as it appears on the stock certificate
representing your shares.)
FOLD AND DETACH HERE
<PAGE> 23
PROXY
GRANITE CONSTRUCTION INCORPORATED
ALLOCATED SHARES VOTING DIRECTIVE CARD FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby directs BNY Western Trust Company 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 Stockholders of GRANITE CONSTRUCTION
INCORPORATED (the "Company") to be held at the Embassy Suites, 1441 Canyon Del
Rey, Seaside, California on May 24, 1999 at 10:30 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 22, 1999 (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 1998
Annual Report.
- --------------------------------------------------------------------------------
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 24, 1999 you will be deemed to have
authorized the Plan's Committee to direct the Trustee how to vote these shares.
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 BNY
Western Trust Company, Trustee of the Plan, will be confidential.
(continued, and to be signed, on other side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 24
(Continued from other side)
Please mark
your votes as [x]
indicated in
this example
A vote for the following proposals is recommended by the Board of Directors:
FOR all nominees WITHHOLD AUTHORITY
listed below (except as to vote for all
marked to the contrary) nominees listed below
1. ELECTION OF DIRECTORS [ ] [ ]
To elect David H. Watts and
Joseph J. Barclay as directors
to hold office for a three-year
term and until their respective
successors are elected and have
qualified.
2. RATIFICATION OF DIRECTOR [ ] [ ]
To ratify the directorship of
George B. Searle to hold office
for the term expiring at the 2001
Annual Meeting of Stockholders
and until his successor is
elected and has qualified.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME BELOW.)
DAVID H. WATTS JOSEPH J. BARCLAY GEORGE B. SEARLE
FOR AGAINST ABSTAIN
3. To approve the Granite Construction
Incorporated 1999 Equity Incentive Plan. [ ] [ ] [ ]
4. To ratify the appointment of [ ] [ ] [ ]
PricewaterhouseCoopers LLP as the
Company's independent accountants for
the fiscal year ending December 31, 1999.
5. 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, I AUTHORIZE THE PLAN'S COMMITTEE TO DIRECT THE TRUSTEE
HOW TO VOTE THESE SHARES.
Signature of Participant* ________________________________ Dated: ________, 1999
*(Please sign your name exactly as it appears on the plan certificate
representing your shares.)
FOLD AND DETACH HERE
<PAGE> 25
PROXY
GRANITE CONSTRUCTION INCORPORATED
UNALLOCATED SHARES VOTING DIRECTIVE CARD FOR ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby directs BNY Western Trust Company 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 Stockholders of GRANITE
CONSTRUCTION INCORPORATED (the "Company") to be held at the Embassy Suites, 1441
Canyon Del Rey, Seaside, California on May 24, 1999 at 10:30 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 22, 1999 (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 1998 Annual Report.
- --------------------------------------------------------------------------------
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 Trustee by May 24, 1999, you will be deemed to have authorized the Plan's
Committee to direct the Trustee how to vote these shares. 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 BNY Western Trust
Company, Trustee of the Plan, will be confidential.
(continued, and to be signed, on other side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 26
(Continued from other side)
Please mark
your votes as [x]
indicated in
this example
A vote FOR the following proposals is recommended by the Board of Directors:
FOR all nominees WITHHOLD AUTHORITY
listed below (except as to vote for all
marked to the contrary) nominees listed below
1. ELECTION OF DIRECTORS [ ] [ ]
To elect David H. Watts and
Joseph J. Barclay as directors
to hold office for a three-year
term and until their respective
successors are elected and have
qualified.
2. RATIFICATION OF DIRECTOR [ ] [ ]
To ratify the directorship of
George B. Searle to hold office
for the term expiring at the 2001
Annual Meeting of Stockholders
and until his successor is
elected and has qualified.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME BELOW.)
DAVID H. WATTS JOSEPH J. BARCLAY GEORGE B. SEARLE
FOR AGAINST ABSTAIN
3. To approve the Granite Construction
Incorporated 1999 Equity Incentive Plan. [ ] [ ] [ ]
4. To ratify the appointment of [ ] [ ] [ ]
PricewaterhouseCoopers LLP as the
Company's independent accountants for
the fiscal year ending December 31, 1999.
5. 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, I AUTHORIZE THE PLAN'S COMMITTEE TO DIRECT THE TRUSTEE
HOW TO VOTE THESE SHARES.
Signature of Stockholder* ________________________________ Dated: ________, 1999
(Please sign your name exactly as it appears on the stock certificate
representing your shares.)
FOLD AND DETACH HERE
