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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________ to__________
Commission file number 1-12911
GRANITE CONSTRUCTION INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 77-0239383
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
525 WEST BEACH STREET, WATSONVILLE, CALIFORNIA 95076
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (831) 724-1011
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, $0.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of voting and non-voting stock held by non-affiliates
of the registrant was approximately $571,121,912 as of March 20, 2000 based upon
the average of the high and low sales prices per share of the registrant's
Common Stock as reported on the New York Stock Exchange on such date. Shares of
Common Stock held by each executive officer and director and by each person who
owns 5% or more of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
At March 20, 2000, 27,024,205 shares of Common Stock, par value $0.01 of the
registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information called for by Part III is incorporated by reference to the
definitive Proxy Statement for the Annual Meeting of Stockholders of the Company
to be held May 22, 2000, which will be filed with the Securities and Exchange
Commission not later than 120 days after December 31, 1999.
This report, including all exhibits and attachments, contains 161 pages. The
exhibit index is on pages 29-30.
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TABLE OF CONTENTS
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Page
No.
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<S> <C> <C>
PART I...............................................................................3
Item 1. BUSINESS................................................................3
Item 2. PROPERTIES.............................................................10
Item 3. LEGAL PROCEEDINGS......................................................10
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS....................10
PART II.............................................................................12
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS....................................................12
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA...................................12
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS..................................................14
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.............22
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...............23
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES..............................................24
PART III............................................................................25
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.....................25
Item 11. EXECUTIVE COMPENSATION.................................................25
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.........25
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................25
PART IV.............................................................................26
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K........26
</TABLE>
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PART I
ITEM 1. BUSINESS
FORWARD LOOKING DISCLOSURE
This report contains forward-looking statements; such as
statements related to the impact of government regulations on the
Company's operations, the adequacy of the Company's aggregate reserves,
1999 backlog expected to be completed in 2000, the existence of bidding
opportunities and the impact of legislation, availability of highway
funds and economic conditions on the Company's future results.
Additionally, forward-looking statements include statements that can be
identified by the use of forward-looking terminology such as "outlook,"
"believes," "expects," "appears," "may," "will," "should," or
"anticipates" or the negative thereof or comparable terminology, or by
discussions of strategy.
All such forward looking statements are subject to risks and
uncertainties that could cause actual results of operations and
financial condition and other events to differ materially from those
expressed or implied in such forward-looking statements. Specific risk
factors include, without limitation, changes in the composition of
applicable federal and state legislation appropriation committees;
federal and state appropriation changes for infrastructure spending;
the general state of the economy; weather conditions; competition and
pricing pressures; and state referendums and initiatives.
Forward-looking statements related to the Company's aggregate reserves
and completion of backlog carry risk factors which include, without
limitation, changes in estimates of existing reserves and estimates of
the Company's need for those reserves and delays in the progress of
work in the 1999 backlog.
INTRODUCTION
Granite Construction Incorporated (the "Company" or "Granite") was
incorporated in Delaware in January 1990 as the holding company for Granite
Construction Company, which was incorporated in California in 1922. Therefore,
references herein to the "Company" or "Granite" in the context of operations
should be read to mean Granite Construction Company and Granite Construction
Incorporated's other subsidiaries.
The Company is one of the largest heavy civil construction contractors
in the United States and operates nationwide. Its focus is primarily in the
West, Southwest, and Southeast serving both public and private sector clients.
Within the public sector, the Company concentrates on infrastructure projects;
including the construction of roads, highways, bridges, dams, tunnels, canals,
mass transit facilities and airports. Within the private sector, the Company
performs site preparation services for buildings, plants, subdivisions and other
facilities. Granite's participation in both the public and private sectors and
its diverse mix of project types and sizes have contributed to the Company's
revenue growth and profitability in various economic environments.
The Company owns and leases substantial aggregate reserves and owns 93
construction materials processing plants. The Company also owns one of the
largest heavy construction contractor equipment fleets in the United States. The
Company believes that the ownership of these assets enables it to compete more
effectively by ensuring availability of these resources at a favorable cost.
OPERATING STRUCTURE
The principal operating company, Granite Construction Company, is
organized into two business segments, the Branch Division and the Heavy
Construction Division. The Branch Division is comprised of branch offices which
serve local markets, while the Heavy Construction Division pursues major
infrastructure projects throughout the nation. The Heavy Construction Division
("HCD") generally builds large heavy civil projects with contract amounts in
excess of $15 million and contract durations greater than two years, while the
Branch Division projects are typically smaller in size and shorter in duration.
The two divisions complement each other in a variety of ways. The Heavy
Construction Division is a major user of large construction equipment and
employs sophisticated techniques on complex projects. The branches draw on these
resources which are generally not available to smaller, local competitors.
Conversely, the Branch Division has greater knowledge of local markets and
provides the Heavy Construction Division with valuable information regarding
larger projects in the branches' areas. The two divisions sometimes jointly
perform projects when a project in a particular region exceeds the local
branch's capabilities.
As decentralized profit centers, the branch offices and the Heavy
Construction Division independently estimate, bid and complete contracts. Both
divisions are supported by centralized functions, including finance, accounting,
tax, human resources, labor
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relations, safety, legal, insurance, surety and management information services.
The Company believes that centralized support for decentralized profit centers
results in a more market responsive business with effective controls and reduced
overhead.
In addition to cost and profitability estimates, Granite considers the
availability of estimating and project building personnel as key factors when
determining whether to bid on a project. Other factors considered include the
client, the geographic location, Granite's competitive advantages and
disadvantages relative to likely competitors for the project, current and
projected workload, and the likelihood of follow-up work. Both operating
divisions use a proprietary computer-based project estimating system that
reflects Granite's significant accumulated experience. Granite believes that an
exhaustive, detailed approach to a project's estimate and bid is important in
order to best identify the project's risks and opportunities. The Company's
estimates are comprehensive in nature, sometimes totaling hundreds of pages of
analysis. Each project is broken into phases and line items, for which separate
labor, equipment and material estimates are made. Once a project begins, the
estimate provides Granite with a budget against which actual project cost is
regularly measured, enabling Granite to manage its projects more effectively.
Information about the Company's business segments for the years ended
December 31, 1999, 1998 and 1997 is incorporated in Note 14 of the "Notes to the
Consolidated Financial Statements," located on page F-20 of this Annual Report
on Form 10K.
The Branch Division. In 1999, Branch Division contract revenue and
sales of aggregate products were $976.5 million (73.5% of Company revenue) as
compared with $945.9 million (77.1% of Company revenue) in 1998. The Branch
Division has both public and private sector clients. Public sector activities
include both new construction and improvement of streets, roads, highways and
bridges. For example, the branches widen and re-pave roads and modify and
replace bridges. Major private sector contracts include site preparation for
housing, including excavation; grading and street paving; and installation of
curbs, gutters, sidewalks and underground utilities.
The Company currently has 11 branch offices with 15 satellite
operations. The Company's branch offices in California are located in
Bakersfield, Hanford (Central Valley), Monterey Bay Area, Palm Springs (Southern
California), Sacramento, San Jose, Santa Barbara and Stockton. The Company's
branch offices outside of California are located in Arizona, Nevada and Utah.
Each branch effectively operates as a local or regional construction company and
its management is encouraged to participate actively in the local community.
While individual branch revenues vary from year to year, in 1999 these revenues
ranged from $33 million to $211 million.
As part of the Company's strategy, many of Granite's branches mine
aggregates and operate plants which process aggregates into construction
materials for internal use and for sale to others. These activities provide both
a source of profits and a competitive advantage to the Company's construction
business. Close to half of the aggregate products produced in these branch
operations are used in the Company's construction projects. The remainder is
sold to unaffiliated parties and accounted for $159.0 million of revenue in
1999, representing 12.0% of the Company's total 1999 revenue. The Company has
significant aggregate reserves which it has acquired by ownership in fee or
through long-term leases.
Heavy Construction Division. In 1999, revenue from HCD was $352.3
million (26.5% of Company revenue) as compared with $280.2 million (22.9% of
Company revenue) in 1998. HCD projects are usually larger and more complex than
those performed by the Branch Division. The Division has completed projects
throughout the nation; including mass transit projects in the metropolitan areas
of Atlanta, Baltimore, Los Angeles, San Francisco and Washington, D.C., and
major dam and tunnel projects in twelve states.
HCD builds infrastructure projects; including major highways, large
dams, mass transit facilities, bridges, pipelines, canals, tunnels, waterway
locks and dams and airport runways, and has engaged in contract mine stripping
and reclamation and large site preparation. It also performs activities such as
demolition, clearing, excavation, de-watering, drainage, embankment fill,
structural concrete, concrete and asphalt paving, and tunneling.
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The Division markets, estimates, bids and provides management overview
of its projects from its Watsonville, California headquarters and satellite
estimating offices in Texas, Georgia, and Florida. Project staff located at job
sites have the managerial, technical, and clerical capacity to meet on-site
project management requirements. HCD has the ability, if appropriate, to process
locally sourced aggregates into construction materials using its own portable
crushing, concrete and asphalt processing plants.
HCD participates in joint ventures with other large construction
companies from time to time. Joint ventures are used for large, technically
complex projects, including design/build projects, where it is desirable to
share risk and resources. Joint ventures provide independently prepared
estimates, and shared financing, equipment and expertise.
Design/build projects have emerged as an expanding market for HCD.
Unlike traditional projects where owners first hire a design firm and then put
the plans out to bid to find a contractor, design/build projects provide the
owner with a single point of responsibility and a single contact. Past
design/build projects have included two projects in California - the SR-91
Tollway which was completed in 1995 and the San Joaquin Hills Transportation
Corridor which was completed in 1996. Ongoing projects include the I-15 rebuild
in Salt Lake City, Utah, the Atlantic City/Brigantine Connector in New Jersey,
the I-17 rebuild project in Phoenix, Arizona, and a tollway in Laredo, Texas.
Design/build projects have historically been bid with the Company as part of a
joint venture team. While design/build is being used considerably more in the
private sector, the public sector is expanding its use.
INVESTMENT IN T.I.C. HOLDINGS, INC.
The Company currently holds a 30% minority interest in T.I.C. Holdings,
Inc. ("TIC"). In February 2000, the Company reached an agreement in principle
with TIC to sell its minority interest back to TIC over a three and one
half-year period. Under the agreement in principle, TIC will have the
opportunity to repurchase shares sooner based on an agreed to formula. A
definitive agreement has not yet been finalized. This will allow TIC to retain
its independence while allowing both companies to maintain their strategic
alliance. The proposed agreement will also allow the Company to intensify its
focus on its core business in heavy civil construction.
INVESTMENT IN WILDER CONSTRUCTION COMPANY
In January 2000, the Company purchased 30% of the common stock of
Wilder Construction Company ("Wilder") for a purchase price of $13.1 million.
The purchase agreement provides for the Company to increase its ownership in
Wilder to between 51% and 60% in 2002 and to 75% in 2004. Founded in 1911,
Wilder is a heavy civil construction company with regional offices located in
Washington, Oregon and Alaska. Wilder has annual revenues of approximately $150
million and employs approximately 650 people throughout the Northwest and
Alaska.
BUSINESS STRATEGY
Granite's fundamental objective is to increase long-term shareholder
value by focusing on consistent profitability from managed revenue growth.
Shareholder value is measured by the appreciation of the value of Granite stock
over a period of years, and to some degree, a return from dividends. Further, it
is a specific measure of the Company's financial success to achieve a Return on
Net Assets ("RONA") greater than the cost of capital, creating "Granite Value
Added." To accomplish these objectives, Granite employs the following
strategies:
Heavy/Highway Construction Focus - Granite concentrates its core
competencies on this segment of the construction industry which
includes the building of roads, highways, bridges, dams and tunnels,
mass transit facilities, underground utilities and site preparation.
This focus emphasizes the Company's specialized strengths which include
grading, paving and concrete structures.
Vertical Integration of Aggregate Materials into Construction - Granite
owns aggregate reserves and processing plants and thus, by ensuring
availability of these resources at favorable cost, it believes it has
significant bidding advantages in many of its markets.
Selective Bidding - Once Granite selects a job that meets its bidding
criteria, the project is estimated using a highly detailed method with
a proprietary estimating system which details anticipated cost to
construct and margin to achieve the appropriate bid price for the risk
assumed.
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Diversification - To mitigate the risks inherent in construction and
general economic factors, Granite pursues projects (i) in both the
public and private sectors; (ii) for a wide range of customers within
each sector (from the federal government to small municipalities and
from large corporations to individual homeowners); (iii) in diverse
geographic markets; and (iv) of various sizes, durations and
complexity.
Decentralized Profit Centers - Granite approaches each selected market
with a local focus through its decentralized structure. Each of
Granite's branches and the Heavy Construction Division are individual
profit centers.
Management Incentives - The Company compensates its profit center
managers with lower-than-market fixed salaries coupled with a
substantial variable cash and restricted stock incentive element based
on the annual profit performance of their respective profit centers.
Ownership of Construction Equipment - By owning and carefully
maintaining a large fleet of heavy construction equipment, Granite
competes more effectively by ensuring availability of these resources
at favorable cost.
Controlled Expansion - The Company intends to continue its expansion by
selectively adding branches in the western United States, pursuing
major infrastructure projects throughout the nation, expanding into
other construction market segments through acquisitions, and by
leveraging its financial capacity for projects that will utilize
Granite for construction work and provide an acceptable return on the
Company's investment.
Accident Prevention - Granite believes that the prevention of accidents
is both a moral obligation and good business. By identifying and
concentrating resources to address jobsite hazards the Company
continues to significantly reduce its incident rates and the costs
associated with accidents.
Environmental Affairs - Granite believes it benefits everyone to
maintain environmentally responsible operations. The Company is
committed to effective air quality control measures and reclamation at
its plant sites and to waste reduction and recycling of the potentially
environmentally sensitive products used in its operations.
Quality and High Ethical Standards - Granite emphasizes the importance
of performing high quality work and maintaining high ethical standards
through an established code of conduct and an effective corporate
compliance program.
CUSTOMERS
The Company has customers in both the public and private sectors. The
Branch Division's principal customers are State Departments of Transportation in
California, Nevada, Utah, and Arizona. In 1999, contracts with the California
Department of Transportation represented 10.2% of the Company's revenue. Other
Branch Division clients include county and city public works departments and
developers and owners of industrial, commercial and residential sites. The
principal clients of the Heavy Construction Division are in the public sector
and currently include the State Departments of Transportation in Texas, Utah,
Florida, New Jersey, and Arizona. (See Note 2 of Notes to Consolidated Financial
Statements).
A breakdown of the Company's revenues for the last three years by
geographic area and market sector is as follows (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
California ........................ $ 574,618 43.2% $ 585,983 47.8% $ 505,768 49.2%
West (excluding California) ....... 510,953 38.5 468,094 38.2 388,715 37.8
South/East ........................ 243,203 18.3 172,023 14.0 133,722 13.0
---------- ------- ---------- ------- ---------- -------
Total ............................. $1,328,774 100.0% $1,226,100 100.0% $1,028,205 100.0%
========== ======= ========== ======= ========== =======
</TABLE>
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<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Contract revenues:
Federal agencies ............... $ 31,641 2.4% $ 44,844 3.7% $ 38,789 3.8%
State agencies ................. 567,366 42.7 516,485 42.1 449,727 43.6
Local public agencies .......... 257,392 19.4 274,657 22.4 238,141 23.2
Private sector ................. 313,356 23.5 248,447 20.2 174,479 17.0
Construction materials sales ...... 159,019 12.0 141,667 11.6 127,069 12.4
---------- ------- ---------- ------- ---------- -------
Total ............................. $1,328,774 100.0% $1,226,100 100.0% $1,028,205 100.0%
========== ======= ========== ======= ========== =======
</TABLE>
BACKLOG
The Company's backlog (anticipated revenue from uncompleted portions of
existing contracts) was $793.3 million at December 31, 1999, down from $901.6
million at December 31, 1998, and was $909.8 million at December 31, 1997.
Approximately $120 million of the December 31, 1999 backlog is expected to
remain at December 31, 2000. The Company includes a construction project in its
backlog at such time as a contract is awarded or a firm letter of commitment is
obtained, and funding is in place. (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations.") The Company believes its
backlog figures are firm, subject only to the cancellation and modification
provisions contained in various contracts. Substantially all of the contracts in
the backlog may be canceled or modified at the election of the client. However,
the Company has not been materially adversely affected by contract cancellations
or modifications in the past. (See "Business-Contract Provisions and
Subcontracting.") A sizeable percentage of the Company's anticipated revenue in
any year is not reflected in its backlog at the start of the year due to the
short duration of smaller Branch Division projects that are initiated and
completed during such year ("Turn Business"). The following is a breakdown of
backlog as of December 31, 1999, 1998 and 1997 (in millions):
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
By Geographic Area:
California ............................ $ 245.9 31.0% $ 192.1 21.3% $ 214.4 23.6%
West (excluding California) ........... 205.5 25.9 312.0 34.7 379.5 41.7
South/East ............................ 341.9 43.1 397.5 44.0 315.9 34.7
------- ------- ------- ------- ------- -------
$ 793.3 100.0% $ 901.6 100.0% $ 909.8 100.0%
======= ======= ======= ======= ======= =======
By Market Sector:
Federal agencies ...................... $ 18.1 2.3% $ 22.6 2.5% $ 29.7 3.3%
State agencies ........................ 469.0 59.1 635.8 70.5 674.9 74.2
Local public agencies ................. 124.3 15.7 133.1 14.8 144.9 15.9
Private sector ........................ 181.9 22.9 110.1 12.2 60.3 6.6
------- ------- ------- ------- ------- -------
$ 793.3 100.0% $ 901.6 100.0% $ 909.8 100.0%
======= ======= ======= ======= ======= =======
</TABLE>
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EQUIPMENT
The Company purchases and maintains many pieces of equipment; including
cranes, bulldozers, scrapers, graders, loaders, trucks, pavers, rollers, and
construction materials processing plants. In 1999 and 1998, the Company spent
approximately $51.3 million and $35.7 million, respectively, for construction
equipment, plants and vehicles. The breakdown of the Company's construction
equipment, plants and vehicles at December 31, 1999 is as follows:
<TABLE>
<S> <C>
Heavy construction equipment............................. 2,135 units
Trucks, truck-tractors and trailers and vehicles......... 3,144 units
Aggregate crushing plants................................ 32 plants
Asphalt concrete plants.................................. 36 plants
Portland cement concrete batch plants.................... 14 plants
Thermal soil remediation plants.......................... 1 plants
Asphalt rubber plants.................................... 3 plants
Lime slurry plants....................................... 7 plants
</TABLE>
The Company believes that ownership of equipment is preferable to
leasing because ownership ensures the equipment is available as needed and
normally results in lower equipment costs. The Company attempts to keep its
equipment as fully utilized as possible by pooling equipment for use by both the
Branch Division and the Heavy Construction Division. From time to time, the
Company leases or rents equipment on a short-term basis.
EMPLOYEES
On December 31, 1999, Granite employed 1,250 salaried employees, who
work in management, estimating and clerical capacities, and 2,848 hourly
employees. The total number of hourly personnel employed by the Company is
subject to the volume of construction in progress. During 1999, the number of
hourly employees ranged from 2,551 to 4,419 and averaged approximately 3,589.
The Company's wholly owned subsidiary, Granite Construction Company, is a party
to craft collective bargaining agreements in many areas in which it is working.
The Company believes its employees are its most valuable resource and
that its workforce possesses a strong dedication to and pride in the Company.
Among salaried and non-union hourly employees, this dedication is reinforced by
31.9% equity ownership through the Employee Stock Ownership Plan ("ESOP"), the
Profit Sharing and 401k Plan and performance-based incentive compensation
arrangements. The Company's 388 managerial and supervisory personnel have an
average of 11 years of service with Granite.
COMPETITION
Factors influencing the Company's competitiveness are price, reputation
for quality, the availability of aggregate materials, machinery and equipment,
financial strength, knowledge of local markets and conditions, and estimating
abilities. The Company believes that it competes favorably on the basis of the
foregoing factors. Branch Division competitors range from small local
construction companies to large regional and national construction companies.
While the market areas of these competitors overlap with several of the markets
served by the Company's branches, few, if any, compete in all of the Company's
market areas. The Heavy Construction Division normally competes with large
regional and national construction companies. Although the construction business
is highly competitive, particularly for competitively bid projects in the public
sector, the Company believes it is well positioned to compete effectively.
CONTRACT PROVISIONS AND SUBCONTRACTING
The Company's revenue is substantially derived from contracts that are
"fixed unit price" contracts under which the Company is committed to provide
materials or services required by a project at fixed unit prices (for example,
dollars per cubic yard of concrete or cubic yards of earth excavated). While the
fixed unit price contract shifts the risk of estimating the quantity of units
required for a particular project to the customer; any increase in the Company's
unit cost over the unit price bid, whether due to inflation, inefficiency,
faulty estimates or other factors, is borne by the Company unless otherwise
provided in the contract. The Company's contracts are obtained primarily through
competitive bidding in response to advertisements by federal, state and local
government agencies and private parties.
There are a number of factors that can create variability in contract
performance and results as compared to a project's original bid. The most
significant of these include, without limitation, site conditions that differ
from those assumed in the original
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bid, the availability and skill level of workers in the geographic location of
the project, the availability and proximity of materials, inclement weather and
timing and coordination issues inherent in design/build projects. All of these
factors can impose inefficiencies on contract performance and therefore have a
direct impact on contract productivity (i.e. drive up contract costs) which in
turn can have a direct impact on contract results.
All federal government contracts and many of the Company's other
contracts provide for termination of the contract for the convenience of the
party contracting with the Company. In addition, many of the Company's contracts
are subject to certain completion schedule requirements with liquidated damages
in the event schedules are not met. The Company has not been materially
adversely affected by these provisions in the past.
The Company acts as prime contractor on most of the construction
projects it undertakes. The Company accomplishes the majority of its projects
with its own resources and subcontracts specialized activities such as
electrical and mechanical work. As prime contractor the Company is responsible
for the performance of the entire contract, including subcontract work. Thus,
the Company is subject to increased costs associated with the failure of one or
more subcontractors to perform as anticipated. The Company's subcontractors
generally furnish bonds if the Company believes it is necessary to provide an
additional measure of security of their performance. Disadvantaged business
enterprise regulations require the Company to use its best efforts to
subcontract a specified portion of contract work done for governmental agencies
to certain types of subcontractors. Some of these subcontractors may not be able
to obtain surety bonds. The Company has not incurred any material loss or
liability on work performed by subcontractors to date.
INSURANCE AND BONDING
The Company maintains general and excess liability, construction
equipment, and workers' compensation insurance; all in amounts consistent with
industry practices. Management believes its insurance programs are adequate.
In connection with its business, the Company generally is required to
provide various types of surety bonds which provide an additional measure of
security of its performance under certain public and private sector contracts.
The Company's ability to obtain surety bonds depends upon its capitalization,
working capital, past performance, management expertise and other factors.
Surety companies consider such factors in light of the amount of surety bonds
then outstanding for the Company and their current underwriting standards, which
may change from time to time. The Company has been bonded by the same surety for
more than 60 years and has never been refused a bond.
GOVERNMENT REGULATIONS
The Company's operations are subject to compliance with regulatory
requirements of federal, state, and municipal agencies and authorities;
including regulations concerning labor relations, affirmative action and the
protection of the environment. While compliance with applicable regulatory
requirements has not adversely affected the Company's operations in the past
relative to its competitive position within its industry sector, there can be no
assurance that these requirements will not change and that compliance will not
adversely affect the Company's operations. In addition, the aggregate materials
operations of the Company require operating permits granted by governmental
agencies. The Company believes that tighter regulations for the protection of
the environment and other factors will make it increasingly difficult to obtain
new permits and renewal of existing permits may be subject to more restrictive
conditions than currently exist.
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ITEM 2. PROPERTIES
The Company owns and leases real property for use in its construction
and aggregate mining and processing activities. The Company owns approximately
367,054 square feet of office and shop space and leases, pursuant to leases
expiring between January 2000 and April 2003, an additional 59,761 square feet
of office and shop space. The Company owns approximately 11,114 acres of land of
which 1,500 acres are un-permitted reserves available for future use and leases
approximately 4,302 additional acres of land at sites in California, Nevada,
Arizona and Utah. A majority of the land owned or leased by the Company is
intended to serve as aggregate reserves. There are no significant encumbrances
against owned property. The Company's leases for aggregate reserves generally
limit the Company's interest in the reserves to the right to mine the reserves.
These leases range from month-to-month leases to leases with expiration dates
ranging from January 2000 to June 2016. The Company considers its available and
future aggregate reserves adequate to meet its expected operating needs. The
Company pursues a plan of acquiring new sources of aggregate reserves to
replenish those depleted and to assure future growth.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to a number of legal proceedings. The Company
believes that the nature and number of these proceedings are typical for a
construction firm of its size and scope and that none of these proceedings is
material to the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders
during the fourth quarter of the year ended December 31, 1999.
EXECUTIVE OFFICERS OF THE REGISTRANT.
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Age Position
--- --------
<S> <C> <C>
David H. Watts 61 Chairman of the Board, President, Chief Executive Officer and Director
William G. Dorey 55 Executive Vice President and Chief Operating Officer
William E. Barton 55 Senior Vice President and Chief Financial Officer
Patrick M. Costanzo 61 Senior Vice President and Manager, Heavy Construction Division
Mark E. Boitano 51 Senior Vice President and Manager, Branch Division
</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 of service for the executive
officers of the registrant also include the periods in which they served for
Granite Construction Company.
Mr. Watts joined the Company in 1987 as President and Chief Executive
Officer and has served as a director since 1988, and Chairman of the Board since
1999. In May 1997, Mr. Watts became a director of TIC Holdings, Inc. and in
January 2000 he also became a director of Wilder Construction Company in which
Granite Construction Incorporated owns a 30% interest. From 1984 until 1987, Mr.
Watts served as President, Chief Executive Officer and a director of Ford, Bacon
& Davis, Inc., an industrial engineering and construction firm. From 1965 until
1984, Mr. Watts was employed by an underwater services and construction firm in
various capacities, including as President and Chief Operating Officer. He
received a B.A. degree in Economics from Cornell University in 1960. Mr. Watts
is the current Chair of the California Chamber of Commerce.
10
<PAGE> 11
Mr. Dorey has been an employee of the Company since 1968 and has served
in various capacities, including Executive Vice President and Chief Operating
Officer since 1998, Senior Vice President and Manager, Branch Division from 1987
to 1998, and as Vice President and Assistant Manager, Branch Division from 1983
to 1987. In 1997, Mr. Dorey became a director of TIC Holdings, Inc. and in
January 2000 he also became a director of Wilder Construction Company in which
Granite Construction Incorporated owns a 30% interest. He received a B.S. degree
in Construction Engineering from Arizona State University in 1967.
Mr. Barton has been an employee of the Company since 1980 and has
served in various capacities, including Senior Vice President since 1999, Vice
President and Chief Financial Officer from 1990 to 1999, Controller in 1989,
Treasurer in 1988 and Cash Manager from 1980 until 1988. In 1997, Mr. Barton
became a director of TIC Holdings, Inc. and in January 2000 he also became a
director of Wilder Construction Company in which Granite Construction
Incorporated owns a 30% interest. He received a B.S. degree in Accounting and
Finance from San Jose State University in 1967 and an M.B.A. degree from the
University of Santa Clara in 1973.
Mr. Costanzo has been an employee of the Company since 1970 and has
served in various capacities, including Senior Vice President and Manager, Heavy
Construction Division, since 1990, Vice President and Assistant Manager, Heavy
Construction Division, from 1988 to 1989, and an Area or Project Manager with
the Heavy Construction Division from 1971 to 1987. In 1997, Mr. Costanzo became
a director of TIC Holdings, Inc. He received a B.S. degree in civil engineering
from the University of Connecticut in 1960 and a M.S. degree in Civil
Engineering from Stanford University in 1961.
Mr. Boitano has been an employee of the Company since 1977 and has
served in various capacities, including Senior Vice President and Manager,
Branch Division since 1998, Assistant Branch Division Manager from 1987 to 1998,
Branch Manager, Arizona operations from 1983 to 1987, Assistant Manager, Arizona
operations from 1980 to 1983, Assistant Manager, Salinas Branch in 1980, and
Project Manager Estimator from 1977 to 1980. He received a B.S. degree in Civil
Engineering from Santa Clara University in 1971 and an M.B.A. degree from
California State University, Fresno in 1977.
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
On April 25, 1997, the Company commenced trading its common stock on
the New York Stock Exchange under the ticker symbol GVA. The Company's move from
NASDAQ Stock Market to the New York Stock Exchange was intended to improve
trading efficiencies and liquidity in an effort to promote enhanced shareholder
value. See Quarterly Results in Item 7 for a two-year summary of quarterly
dividends and high and low sales prices of the Company's stock.
The Company expects to pay a quarterly cash dividend of $0.10 plus a
special dividend of $0.06 per share of common stock to stockholders of record as
of March 31, 2000 payable on April 14, 2000 (See Note 15 of Notes to
Consolidated Financial Statements). Declaration and payment of dividends is
within the sole discretion of the Company's Board of Directors, subject to
limitations imposed by Delaware law, and will depend on the Company's earnings,
capital requirements, financial conditions and such other factors as the Board
of Directors deems relevant. As of March 20, 2000 there were 27,024,205 shares
of common stock outstanding held by approximately 367 stockholders of record.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated operations data for 1999, 1998 and 1997 and
consolidated balance sheet data as of December 31, 1999 and 1998 set forth below
have been derived from consolidated financial statements of the Company, and are
qualified by reference to our consolidated financial statements audited by
PricewaterhouseCoopers LLP, independent accountants included herein. The
selected consolidated statement of income data for 1996 through 1989 and the
consolidated balance sheet data as of December 31, 1997 through 1989 have been
derived from our audited financial statements not included herein. These
historical results are not necessarily indicative of the results of operations
to be expected for any future period.
12
<PAGE> 13
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1999 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING SUMMARY
Revenue $1,328,774 $1,226,100 $1,028,205 $ 928,799 $ 894,796 $ 693,388
Gross profit 179,201 153,092 111,730 110,655 111,963 89,988
As a percent of revenue 13.5% 12.5% 10.9% 11.9% 12.5% 13.0%
General and administrative expenses 94,939 83,834 73,593 71,587 69,610 62,795
As a percent of revenue 7.1% 6.8% 7.2% 7.7% 7.8% 9.1%
Income before cumulative effect of change
in accounting principle * 52,916 46,507 27,832 27,348 28,542 19,488
Net income 52,916 46,507 27,832 27,348 28,542 19,488
As a percent of revenue 4.0% 3.8% 2.7% 2.9% 3.2% 2.8%
Income per share before cumulative effect
of change in accounting principle:
Basic $ 2.03 $ 1.75 $ 1.05 $ 1.04 $ 1.10 $ 0.75
Diluted 1.96 1.70 1.03 1.02 1.08 0.74
Net income per share:
Basic 2.03 1.75 1.05 1.04 1.10 0.75
Diluted 1.96 1.70 1.03 1.02 1.08 0.74
Weighted average shares of common and
common stock equivalents outstanding:**
Basic 26,058 26,559 26,397 26,207 25,916 25,884
Diluted 26,963 27,339 26,942 26,748 26,474 26,289
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION SUMMARY
Total assets $ 679,572 $ 626,571 $ 551,809 $ 473,045 $ 454,744 $ 349,098
Cash, cash equivalents and short-term
investments 108,077 121,424 72,769 72,230 66,992 48,638
Working capital 143,657 142,448 103,910 92,542 77,179 65,537
Current maturities of long-term debt 5,985 10,787 12,921 10,186 13,948 10,070
Long-term debt 64,853 69,137 58,396 43,602 39,494 17,237
Stockholders' equity 327,732 301,282 257,434 233,605 209,905 182,692
Book value per share 12.14 10.90 9.40 8.59 7.82 6.91
Dividends per share $ 0.40 $ 0.30 $ 0.24 $ 0.25 $ 0.19 $ 0.09
Common shares outstanding 26,996 27,649 27,400 27,189 26,828 26,433
- -----------------------------------------------------------------------------------------------------------------------------------
BACKLOG $ 793,256 $ 901,592 $ 909,793 $ 597,876 $ 590,075 $ 550,166
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1993 1992 1991 1990 1989
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING SUMMARY
Revenue $ 570,379 $ 518,312 $ 564,060 $ 557,996 $ 504,084
Gross profit 50,743 50,578 69,502 70,646 60,837
As a percent of revenue 8.9% 9.8% 12.3% 12.7% 12.1%
General and administrative expenses 47,107 46,906 46,541 44,466 41,915
As a percent of revenue 8.3% 9.0% 8.3% 8.0% 8.3%
Income before cumulative effect of change
in accounting principle * 3,492 3,924 17,622 18,811 14,211
Net income 4,492 3,924 17,622 18,811 14,211
As a percent of revenue 0.8% 0.8% 3.1% 3.4% 2.8%
Income per share before cumulative effect
of change in accounting principle:
Basic $ 0.13 $ 0.15 $ 0.68 $ 0.76 $ 0.63
Diluted 0.13 0.15 0.67 0.75 0.63
Net income per share:
Basic 0.17 0.15 0.68 0.76 0.63
Diluted 0.17 0.15 0.67 0.75 0.63
Weighted average shares of common and
common stock equivalents outstanding:**
Basic 25,875 25,875 25,875 24,863 22,500
Diluted 26,133 26,114 26,123 24,933 22,500
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION SUMMARY
Total assets $ 319,416 $ 316,978 $ 277,426 $ 260,426 $ 245,880
Cash, cash equivalents and short-term
investments 48,810 54,139 54,973 50,451 46,306
Working capital 64,619 66,329 55,186 52,352 34,902
Current maturities of long-term debt 10,060 15,469 7,669 7,887 14,228
Long-term debt 28,585 38,618 14,816 19,084 39,707
Stockholders' equity 164,338 158,594 153,159 131,026 86,552
Book value per share 6.25 6.05 5.87 5.06 3.85
Dividends per share $ 0.09 $ 0.09 $ 0.09 $ 0.07 $ --
Common shares outstanding 26,301 26,216 26,078 25,875 22,500
- ---------------------------------------------------------------------------------------------------------------------
BACKLOG $ 659,738 $ 245,234 $ 292,017 $ 368,384 $ 377,529
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes."
13
<PAGE> 14
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Granite is one of the largest heavy civil contractors in the United
States and is engaged in the construction of highways, dams, airports, mass
transit facilities and other infrastructure-related projects. The Company has
offices in California, Texas, Georgia, Nevada, Arizona, Florida, and Utah.
The Company's contracts are obtained primarily through competitive
bidding in response to advertisements by federal, state and local agencies, and
private parties. The Company's bidding activity is affected by such factors as
backlog, current utilization of equipment and other resources, ability to obtain
necessary surety bonds and competitive considerations. Bidding activity, backlog
and revenue resulting from the award of new contracts to the Company may vary
significantly from period to period.
Revenue from construction contracts including construction joint
ventures is recognized using the percentage-of-completion method of accounting,
based upon costs incurred and projected costs. Revenue in an amount equal to
cost incurred is recognized prior to contracts reaching 25% completion. The
related earnings are not recognized until the period in which such percentage
completion is attained. Cost of revenue consists of direct costs on contracts;
including labor and materials, amounts payable to subcontractors, direct
overhead costs, equipment expense (primarily depreciation, maintenance and
repairs) and insurance costs. Depreciation is provided using accelerated methods
for construction equipment. Contracts frequently extend over a period of more
than one year and revisions in cost and profit estimates during construction are
reflected in the accounting period in which the facts that require the revision
become known. Losses on contracts, if any, are provided in total when
determined, regardless of the degree of project completion. Claims for
additional contract revenue are recognized in the period when it is probable
that the claim will result in additional revenue and the amount can be reliably
estimated. The foregoing as well as weather, stage of completion, and mix of
contracts at different margins may cause fluctuations in gross profit between
periods.
The Company's compensation strategy for selected management personnel
is to rely heavily on a variable cash and restricted stock performance-based
incentive element. Thus, the Company may experience an increase in general and
administrative expenses in a very profitable year and a decrease in less
profitable years. The Company's profit sharing and pension contribution in
excess of the 401K matching contributions is at the discretion of the Board of
Directors based on the Company reaching certain levels of profitability each
year.
CURRENT YEAR
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
In Thousands 1999 1998 INCREASE %
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Branch Division ................... $ 976.5 $ 945.9 $ 30.6 3.2
Heavy Construction Division ....... 352.3 280.2 72.1 25.7
- ---------------------------------------------------------------------------------------------
$1,328.8 $1,226.1 $ 102.7 8.4
=============================================================================================
</TABLE>
REVENUE AND BACKLOG. The increased revenue in 1999 was primarily
attributable to increased revenue from private sector contracts which increased
$65.0 million to $313.4 million or 23.5% of total revenue in 1999, from $248.4
million or 20.2% of total revenue in 1998. The Company's private sector work is
primarily comprised of site preparation for both commercial and residential
developments and privately funded transportation projects. The private sector
revenue growth has been significantly influenced by the continued strong growth
in residential and commercial building construction during 1999. In California,
one of the Company's largest markets, new building construction increased 13.0%
during 1999 to $42.6 billion from $37.7 billion in 1998, according to the
Construction Industry Research Board. The Company's revenue from public sector
contracts increased to $856.4 million in 1999 from $836.0 million in 1998 while
decreasing to 64.5% of the Company's total revenue in 1999 from 68.2% in 1998.
Although the level of funding for public sector projects remained strong in 1999
in most of the Company's markets, the increased TEA-21 funding has not yet
significantly impacted the Company's revenue (see "Outlook").
The increase in Branch Division revenue during the year resulted from
increases in revenue from private sector contracts and an increase in material
sales - both of which are strongly correlated to increases in private sector
construction and general economic conditions - partially offset by a slight
decrease in public sector revenue. The increase in HCD revenue is attributable
to significantly drier weather conditions; particularly in Texas and Florida,
and included revenue from a larger number of both private and public sector
projects which include a private sector railroad project in Texas which was
awarded in mid 1998, a private sector design-build
14
<PAGE> 15
tollroad project in Texas which was awarded in 1999 and a public sector
design-build highway project in Arizona which was awarded in late 1998.
The Company's backlog at December 31, 1999 was $793.3 million, down
$108.3 million, or 12.0% from 1998. The decrease in backlog was due primarily to
the absence of HCD awards in the fourth quarter. Management believes that
approximately 85% of the work in the backlog at December 31, 1999 will be
recognized as revenue during 2000. The Company believes its bidding
opportunities in its major marketplaces remain strong (see "Outlook").
GROSS PROFIT. For the year ended December 31, 1999, gross profit
reached $179.2 million, a $26.1 million increase from 1998. As a percentage of
revenue, gross profit increased in 1999 to 13.5% from 12.5% in 1998. The
increased gross profit margin was a result of the continued favorable market
conditions in both the public and private sectors as described above, which
tends to increase the Company's ability to win competitively bid projects at
higher margins. Additionally, gross profit margin in 1999 was positively
impacted by drier weather conditions, which allowed for more efficient
utilization of resources, and the successful execution of several HCD projects
that were added to backlog in mid to late 1998. Project to date revenue
recognized for projects less than 25% complete was approximately $36.9 million
and $24.4 million at December 31, 1999 and 1998, respectively. As described
under "General" above, the Company recognizes revenue only to the extent of
cost incurred until a project reaches 25% complete. During 1999, the Company's
gross profit margins were not significantly impacted by changes in the revenue
from projects that were less than 25% complete. Cost of revenue consists of
direct costs on contracts; including labor and materials, amounts payable to
subcontractors, direct overhead costs, equipment expense (primarily
depreciation, maintenance and repairs) and insurance costs. Although the
composition of costs varies with each contract, the Company's gross profit
margins were not significantly impacted by changes in any one of these costs
during 1999.
GENERAL AND ADMINISTRATIVE EXPENSES. For the years ended December 31,
1999 and 1998 general and administrative expenses comprised the following (in
thousands):
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
In Thousands 1999 1998
- -----------------------------------------------------------------------------
<S> <C> <C>
Salaries and related expenses $ 43,552 $ 40,602
Incentive compensation,
discretionary profit sharing and pension 22,264 18,894
Other general and administrative expenses 29,123 24,338
- -----------------------------------------------------------------------------
Total $ 94,939 $ 83,834
- -----------------------------------------------------------------------------
Percent of revenue 7.1% 6.8%
=============================================================================
</TABLE>
Salaries and related expenses increased in 1999 over 1998 due primarily
to increased staffing to support the Company's current and expected growth.
Incentive compensation and discretionary profit sharing and pension costs
increased in 1999 over 1998 as a function of the Company's increased
profitability. Other general and administrative expenses include various costs
to support its operations, none of which exceeds 10% of total general and
administrative expenses. The increase in other general and administrative
expenses in 1999 primarily reflect the absence of the collection of a previously
written-off bad debt that was recognized in 1998 and increases in other costs to
support the Company's growth.
OPERATING INCOME. The Heavy Construction Division's contribution to
operating income in 1999 increased over the 1998 contribution due to increases
in both the volume of work and the profit margins the Division was able to
achieve. The Division's profit margins were positively impacted by the
successful execution of new work that was added to backlog in mid to late 1998,
including two design-build projects, as well as drier weather conditions and
improved margins on projects nearing completion. The Branch Division's
contribution to operating income in 1999 decreased slightly compared to 1998 due
primarily to the absence of the collection of a previously written-off bad debt
and increases in other costs to support the Company's growth.
OTHER INCOME (EXPENSES). Other income decreased $4.0 million to $1.8
million in 1999. The decrease was due primarily to a loss experienced by TIC, in
which the Company has a 30% equity investment. The Company's share of TIC's loss
was approximately $2.8 million, a decrease of approximately $7.0 million from
the Company's share of TIC income in 1998. This decrease was partially offset by
a $2.8 million gain recorded on the sale of a depleted quarry property.
PROVISION FOR INCOME TAXES. The Company's effective tax rate was 38.5%
in 1999, an increase of 0.5% from 1998. The increase was primarily due to a
lower impact of the Company's percentage depletion deduction due to higher
pre-tax earnings.
OUTLOOK. As Granite enters 2000 on the heels of a record-breaking year,
the outlook for the Company's financial performance going forward continues to
be very good. The drivers of our business, public sector funding of the
infrastructure and the overall economy, appear to be very strong. The U.S.
economy continues to grow, producing demand for residential and commercial
15
<PAGE> 16
development and creating good overall demand for construction services
including materials in many of the Company's geographic regions. Public sector
funding has a very strong foundation supplied by the federal government, through
the 1998 Transportation Equity Act for the 21st Century ("TEA-21"), and state
and local governments have solid transportation capital and maintenance accounts
due to the collection of higher gas and other transportation taxes produced by
the strong economy. These drivers should provide the Company with increasing bid
opportunities during the coming year.
In October 1999, President Clinton signed into law legislation that
appropriated $28.8 billion for the federal-aid highway programs for the 2000
fiscal year. This marks a 6% increase from the $27.2 billion budgeted in 1999
and is in-line with the authorized amounts set by TEA-21. The recently proposed
2001 budget also requests a record $30.5 billion in Federal Highway
Administration obligations, up another 6% from 2000. These amounts reflect the
44% increase over TEA-21's predecessor, the Intermodal Surface Transportation
Efficiency Act (ISTEA), along with the nation's commitment to improve roads and
highways throughout the U.S.
As was the case with ISTEA, there is typically a lag before companies
like Granite feel the bill's effects on the bottom line. This lag is primarily a
result of the length of time that it takes federal money to progress from
planning to design to actual construction bids. It is also important to note
that Granite does not recognize profits on a job until it is 25% complete and
therefore does not anticipate any significant impact to earnings from the larger
TEA-21 funded projects until later in 2000 and beyond.
Our public sector business should also be bolstered from increased
airport construction spending. Legislators have approved a three-year
reauthorization of the Federal Aviation Administration and Airport Improvement
Program (AIP). The bill guarantees that Aviation Trust Fund revenues and
interest will be spent for capital improvements. AIP funding will be a minimum
of $3.2 billion to $3.4 billion for each of the next three years - more than 60%
increase over the $1.9 billion appropriated in 2000.
Momentum in the private sector construction markets also appears to be
carrying over into 2000. According to the U.S. Department of Commerce,
construction spending in January 2000 has surged to an all-time high monthly
level, led in part by spending on housing, commercial buildings and government
projects. Despite rising interest rates, spending on residential projects rose
2.5% while spending on new single-family homes grew by 2.1%. Granite has
witnessed the growth in the private sector market as illustrated by the 29%
compounded average growth rate in its private sector revenue since 1994.
In association with the strong economy, the Company has witnessed some
upward pressure on costs associated with rising oil prices and tight labor
markets. However, there has not been any significant impact on the Company in
1999. Due to the nature of Granite's turn business, we are able to adjust prices
fairly quickly allowing a level of protection against these fluctuating, or
currently rising, costs. In addition, certain costs such as diesel and asphalt
oil are indexed in contracts for state funded projects in Nevada. Similarly in
California, asphalt oil is indexed in contracts for the California Department of
Transportation (Caltrans). However, there is no assurance that the Company will
be able to mitigate 100% of the impact.
The Heavy Construction Division (HCD) also has some excellent near-term
bidding opportunities to add to its quality backlog. Many of the projects will
be let as design/build contracts - a more innovative form of project delivery
for which Granite has emerged as an industry leader. The current list of
targeted projects includes various highway and transit/rail projects exceeding
$3.5 billion. This list includes the Las Vegas Monorail project, the Legacy
highway project in Utah, the $1.4 billion I-25 SE Corridor project in Colorado,
light rail projects in Florida and California and several other large highway
projects in Arizona, Texas, California, Utah, Florida and Massachusetts.
In Florida, Governor Bush proposed his $4 billion Mobility 2000
Initiative. This plan would accelerate top-priority projects on the Florida
Intrastate Highway System with no increase in taxes. Under Mobility 2000,
projects that were originally planned over the next 20 years would be built
within the next ten years or sooner. Funding for the Governor's plan would come
from transportation-related revenues, TEA-21 and short-term bonds. The program
is expected to speed up improvements to Interstates 4, 275 and 75.
The Company's Branch Division also anticipates a healthy bidding
environment and strong demand for its construction services including aggregate
material products as a result of robust public and private sector markets.
According to a press release by the Nevada Department of Transportation (DOT),
state highway expenditures in their state are expected to reach a record $855.5
million in fiscal year 2000. In Texas and Florida, DOT officials report that
lettings in 2000 will be approximately $3.0 billion and $1.3 billion
respectively. Although Caltrans' advertising schedule for 2000 totals over $2.0
billion, officials estimate that it will let out to bid approximately $1.8
billion worth of work this year - in line with the approximate $1.8 billion let
in 1999.
On the political front, we will be heavily involved in supporting the
contracting out initiative on the November 2000 ballot in California. Sponsored
by the Consulting Engineers and Land Surveyors of California (CELSOC), the
initiative, if passed, would change the constitution to give state and local
entities more freedom to contract with private entities for engineering and
architectural services on public works projects. It is our belief that current
restrictions on these public agencies have created a significant bottleneck
within the project pipeline thereby causing considerable delays on many
projects, for which there is strong need and funding available.
16
<PAGE> 17
Further in California, SCA 3 - a constitutional amendment which would
have renewed expiring county half-cent sales taxes for transportation purposes
with a simple majority - will not be placed on the ballot by the legislature in
the near-term. A long-term fix for county and statewide transportation funding
in California is very fluid at this point in time, with a number of proposals
currently being debated in Sacramento. The attention on this issue by state
politicians reflects the public's demand that solutions should be put in place
to deal with state's traffic problems. The Company will have more to say on this
issue once a definitive plan has been formulated.
Going forward, we are very pleased with the success of our current
operations and the substantial bidding opportunities ahead. We will continue to
proactively work the M & A process in our industry to find those acquisition
candidates that offer good value by which to grow the Company externally. At the
same time, we will follow our strategic initiatives to create continued internal
organic growth. We have set out aggressive growth goals for the 3 to 5 year
period ahead because we believe that our strategic plans and favorable external
market factors will provide better than normal opportunities in the continued
effort to improve upon what has been a record financial performance in both
divisions.
PRIOR YEARS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
In Thousands 1998 1997 INCREASE %
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Branch Division .................................... $ 945.9 $ 831.9 $ 114.0 13.7
Heavy Construction Division ........................ 280.2 196.3 83.9 42.7
- ------------------------------------------------------------------------------------------------------------
$1,226.1 $1,028.2 $ 197.9 19.2
============================================================================================================
</TABLE>
REVENUE AND BACKLOG. Revenue from private sector contracts increased
$73.9 million to $248.4 million or 20.2% of total revenue in 1998, from $174.5
million or 17.0% of total revenue in 1997. The majority of the growth in revenue
from private sector contracts occurred in the Branch Division, where growth in
residential and commercial construction created strong demand for site
preparation projects. In California, one of the Company's largest markets, new
building construction increased 23.6% during 1998 to $37.7 billion from $30.5
billion in 1997, according to the Construction Industry Research Board. This
trend also had a positive impact on material sales which increased 11.5% during
1998. The Branch Division revenue was also positively impacted by contributions
made from flood related emergency work caused by severe winter weather
conditions. The Company's revenue from public sector contracts increased to
$836.0 million in 1998 from $726.6 million in 1997 while decreasing to 68.2% of
the Company's total revenue in 1998 from 70.6% in 1997. The growth in HCD
revenue was primarily in the public sector and reflected increased revenue from
HCD's portion of the Company's Interstate - 15 rebuild project in Utah and
various projects added to backlog in 1998.
The Company's backlog at December 31, 1998 was $901.6 million, down
$8.2 million, or 0.9% from 1997. The relatively flat backlog in 1998 reflected
new awards which offset a reduction due to a full year's work on the Company's
23% share of the I-15 Corridor Reconstruction project in Salt Lake City, Utah
which was awarded in the first quarter of 1997. Work on our $313.0 million
portion of the contract began during the second quarter of 1997 and was
approximately 48% complete at the end of 1998.
GROSS PROFIT. For the year ended December 31, 1998, gross profit
reached $153.1 million, a $41.4 million increase from 1997. As a percentage of
revenue, gross profit increased in 1998 to 12.5% from 10.9% in 1997. The
increased gross profit margin was attributable to the continued favorable market
conditions, particularly in the private sector as described above, which tends
to increase the Company's ability to win competitively bid projects at higher
margins. Project to date revenue recognized for projects less than 25% complete
was approximately $24.4 million and $56.7 million at December 31, 1998 and 1997,
respectively. As described under "General" above, the Company recognizes revenue
only to the extent of cost incurred until a project reaches 25% complete. During
1998, the Company's gross profit margins were positively impacted by the I-15
Corridor Reconstruction project which reached the 25% completion threshold in
the second quarter. Cost of revenue consists of direct costs on contracts;
including labor and materials, amounts payable to subcontractors, direct
overhead costs, equipment expense (primarily depreciation, maintenance and
repairs) and insurance costs. Although the composition of costs varies with
each contract, the Company's gross profit margins were not significantly
impacted by changes in any one of these costs during 1998.
17
<PAGE> 18
GENERAL AND ADMINISTRATIVE EXPENSES. For the years ended December 31,
1998 and 1997 general and administrative expenses comprised the following (in
thousands):
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
In Thousands 1998 1997
----------------------------------------------------------------------------
<S> <C> <C>
Salaries and related expenses $ 40,602 $ 35,834
Incentive compensation,
discretionary profit sharing and pension 18,894 13,223
Other general and administrative expenses 24,338 24,536
----------------------------------------------------------------------------
Total $ 83,834 $ 73,593
----------------------------------------------------------------------------
Percent of revenue 6.8% 7.2%
----------------------------------------------------------------------------
</TABLE>
Salaries and related expenses increased in 1999 over 1998 due primarily
to increased staffing to support the Company's current and expected growth .
Incentive compensation and discretionary profit sharing and pension costs
increased in 1999 over 1998 as a function of the Company's increased
profitability. Other general and administrative expenses include various costs
to support its operations, none of which exceeds 10% of total general and
administrative expenses. The decrease in other general and administrative
expenses in 1998 primarily reflected increases in other costs to support the
Company's growth offset by the collection of a previously written-off bad debt.
The decrease as a percent of revenue is due to the fixed nature of certain
expenses and higher revenue from non-sponsored joint venture contracts which do
not create a corresponding level of administrative expense.
OPERATING INCOME. The Branch Division's contribution to operating
income in 1998 increased over the 1997 contribution due primarily to improved
market conditions which increased both the volume of work and the profit margins
the Division was able to achieve. The Heavy Construction Division's contribution
to operating income also increased in 1998, primarily due to the impact of the
I-15 project reaching the 25% completion threshold for profit recognition as
described above.
OTHER INCOME (EXPENSES). Other income decreased $0.2 million to $5.8
million in 1998. The decrease was due to an increase in interest expense
resulting from additional borrowings under long-term debt agreements and lower
gain on sale of property and equipment which was partially offset by higher
interest income due to higher short-term investments and cash and cash
equivalents.
PROVISION FOR INCOME TAXES. The Company's effective tax rate was 38.0%
in 1998, an increase of 1.0% from 1997. The increase was primarily due to a
lower impact of the Company's percentage depletion deduction due to higher
pre-tax earnings.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
In Thousands 1999 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and cash equivalents $ 61,832 $ 62,470 $ 54,359
Net cash provided (used) by:
Operating activities 99,987 96,030 63,798
Investing activities (54,204) (87,194) (49,207)
Financing activities (46,421) (725) 1,105
Capital expenditures 82,035 52,462 48,448
Working Capital $ 143,657 $ 142,448 $ 103,910
- ---------------------------------------------------------------------------------
</TABLE>
During 1999 the Company generated cash and cash equivalents from
operating activities of $100.0 million which represented an increase of $4.0
million over 1998. This increase was due primarily to the Company's increase in
net income of $6.4 million or 13.8%, as well as increases in noncash adjustments
- - primarily depreciation and amortization and the adjustment to net income from
the Company's equity in loss of affiliates. The increased depreciation and
amortization is due to increases in property and equipment balances and the
equity in loss of affiliates relates primarily to the Company's equity in TIC's
loss. These increases were partially offset by a higher level of accounts
receivable at December 31, 1999 which related to increased revenue, particularly
in the fourth quarter.
18
<PAGE> 19
Cash used by investing activities in 1999 decreased $33.0 million from
1998 due primarily to a net decrease in short-term investments which was
partially offset by increased additions to property and equipment to support the
Company's current and expected growth.
Cash used by financing activities in 1999 increased $45.7 million from
1998 due to the lack of additions to long-term debt as well as the Company's
repurchase of its shares and increased dividend payments.
On March 17, 1999, the Board of Directors authorized the Company to
repurchase, at management's discretion, up to $35 million of its common stock on
the open market, exclusive of repurchases related to employee benefit plans.
This authorization amends an authorization previously made in March of 1997.
Through March 20, 2000 the Company has repurchased 984,150 shares for a total
purchase price of $21.7 million. The remaining amount authorized of $13.3
million equates to 491,500 shares using the closing market price of $27.06 on
March 20, 2000.
The Company has budgeted $58.0 million for capital expenditures in
2000, which includes amounts for construction equipment, aggregate and asphalt
plants, buildings, leasehold improvements and the purchase of land and aggregate
reserves. The Company anticipates that cash generated internally and amounts
available under its existing credit facilities will be sufficient to meet its
capital and other requirements, including contributions to employee benefit
plans, for the foreseeable future.
The Company believes it has adequate capital resources to fund its
operations at least through 2000. The Company's consolidated working capital
position was $143.7 million at December 31, 1999 compared to $142.4 million at
December 31, 1998. The Company currently has access to funds under its revolving
credit agreement which allow it to borrow up to $75.0 million, of which $62.4
million was available at December 31, 1999.
SUBSEQUENT EVENTS. On January 24, 2000, the Board of Directors declared
a special dividend of $0.06 per share of common stock in addition to a $0.10 per
share quarterly dividend, payable on April 14, 2000 to stockholders of record as
of March 31, 2000. The quarterly dividend represents a $0.03 per share increase
over the dividends paid in 1999 of $0.07 per share.
In January 2000, the Company purchased 30% of the common stock of
Wilder Construction Company ("Wilder") for a purchase price of $13.1 million.
The purchase agreement provides for the Company to increase its ownership in
Wilder to between 51% and 60% in 2002 and to 75% in 2004. Founded in 1911,
Wilder is a heavy-civil construction company with regional offices located in
Washington, Oregon and Alaska. Wilder has annual revenues of approximately $150
million and employs approximately 650 people throughout the Northwest and
Alaska.
The Company currently holds a 30% minority interest in T.I.C. Holdings,
Inc. ("TIC"). In February 2000, the Company reached an agreement in principle
with TIC to sell its minority interest back to TIC over a three and one
half-year period. Under the agreement in principle, TIC will have the
opportunity to repurchase shares sooner based on an agreed to formula. A
definitive agreement has not yet been finalized. This will allow TIC to retain
its independence while allowing both companies to maintain their strategic
alliance. The proposed agreement will also allow the Company to intensify its
focus on its core business in heavy civil construction.
IMPACT OF THE YEAR 2000 ISSUE. The Year 2000 issue is the result of
computer programs being written using two digits rather than four to define the
applicable year. The issue arises if date-sensitive software recognizes a date
using "00" as the year 1900 rather than the year 2000. This could result in a
system failure or miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
During 1999 the Company completed its process which addressed year 2000
readiness of its systems and completed its process of identifying and making
inquiries of its significant suppliers and large public and private sector
customers to determine the extent to which the Company is vulnerable to those
third parties' failure to solve their own Year 2000 issues.
The Company has not experienced any significant interruption in work or
cash flow related to the date change to the year 2000, either from its own
information systems or those of significant third parties with whom the Company
does business. The Company believes that the risk of significant business
interruption due to unanticipated problems with its own systems or the systems
of significant third parties is low based on our experience to date. In the
unlikely event that unforeseen Year 2000 related internal disruptions occur, the
Company believes that its existing disaster recovery program, which includes the
manual processing of certain key transactions, would significantly mitigate the
impact.
The Company's costs to address the Year 2000 issue were approximately
$865,000, all of which were incurred during 1999. These costs included
consulting fees and costs to remediate or replace hardware and software as well
as non-incremental costs
19
<PAGE> 20
resulting from redeployment of internal resources. The Company's Year 2000
efforts did not have a significant impact on other information technology
projects.
RECENT ACCOUNTING PRONOUNCEMENTS: In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 133, "SFAS 133", Accounting for Derivative Instruments and Hedging
Activities. SFAS 133 establishes methods of accounting and reporting for
derivative instruments and hedging activities related to those instruments as
well as other hedging activities, and is effective for fiscal quarters of fiscal
years beginning after June 15, 2000, as amended by SFAS 137. The Company
believes that adoption of this pronouncement will have no material impact on the
Company's financial position and results of operations.
20
<PAGE> 21
QUARTERLY RESULTS
The following table sets forth selected unaudited financial information
for the Company for the eight quarters in the period ended December 31, 1999
This information has been prepared on the same basis as the audited financial
statements and, in the opinion of management, contains all adjustments necessary
for a fair presentation thereof.
QUARTERLY FINANCIAL DATA
(Unaudited - In Thousands, Except for Per Share Data)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1999 QUARTERS ENDED DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 365,975 $ 418,703 $ 329,292 $ 214,804
Gross profit 51,194 58,509 46,169 23,329
As a percent of revenue 14.0% 14.0% 14.0% 10.9%
Net income 14,436 20,849 15,131 2,500
As a percent of revenue 3.9% 5.0% 4.6% 1.2%
Net income per share:
Basic $ 0.55 $ 0.80 $ 0.58 $ 0.09
Diluted $ 0.54 $ 0.77 $ 0.56 $ 0.09
- ------------------------------------------------------------------------------------------------------------
Dividends per share $ 0.07 $ 0.07 $ 0.07 $ 0.19
Market price
High $ 26.50 $ 29.81 $ 29.88 $ 37.75
Low $ 16.88 $ 22.69 $ 21.88 $ 19.63
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
1998 QUARTERS ENDED DEC. 31 SEPT. 30 JUNE 30 MARCH 31
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 338,000 $ 411,986 $ 292,792 $ 183,322
Gross profit 37,335 54,203 42,380 19,174
As a percent of revenue 11.1% 13.2% 14.5% 10.5%
Net income 10,059 20,521 14,545 1,382
As a percent of revenue 3.0% 5.0% 5.0% 0.8%
Net income per share:
Basic $ 0.38 $ 0.77 $ 0.55 $ 0.05
Diluted $ 0.36 $ 0.75 $ 0.54 $ 0.05
- ------------------------------------------------------------------------------------------------------------
Dividends per share $ 0.06 $ 0.06 $ 0.05 $ 0.13
Market price
High $ 34.38 $ 33.50 $ 20.59 $ 19.68
Low $ 25.13 $ 19.68 $ 17.38 $ 14.26
- ------------------------------------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to financial market risks due primarily to
changes in interest rates which it manages primarily by managing the maturities
in its investment portfolio. The Company does not use derivatives to alter the
interest characteristics of its investment securities or its debt instruments.
The Company has no holdings of derivative or commodity instruments and does not
transact business in foreign currencies.
The fair value of the Company's investment portfolio or related income
would not be significantly impacted by changes in interest rates since the
investment maturities are short and the interest rates are primarily fixed. The
Company's senior notes payable of $60.0 million at December 31, 1999 carry a
fixed interest rate of 6.54% per annum with principle payments due in nine equal
annual installments beginning in 2002. The Company's notes payable to bank of
$5.0 million carry a variable interest rate at the IBOR rate plus margin (6.19%
and 1.0%, respectively at December 31, 1999) with principal payable semiannually
through June 2000.
The table below presents principal amounts and related weighted average
interest rates by year for the Company's cash and cash equivalents, short-term
investments and significant debt obligations:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
In Thousands 2000 2001 2002 2003 2004 Thereafter Total
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Cash, cash equivalents and
short-term investments .................... $ 107,049 $ 1,028 $ -- $ -- $ -- $ -- $ 108,077
Weighted average interest rate ............ 5.5% 5.0% -- -- -- --
Liabilities
Fixed rate debt
Senior notes payable ................. $ -- $ -- $ 6,667 $ 6,667 $ 6,667 $ 39,999 $ 60,000
Weighted average interest rate ....... -- -- 6.54% 6.54% 6.54% 6.54% 6.54%
Variable rate debt (IBOR plus margin)
Notes payable to bank ................. $ 5,000 $ -- $ -- $ -- $ -- $ -- $ 5,000
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The estimated fair value of the Company's cash, cash equivalents and
short-term investments approximate the principal amounts reflected above based
on the short maturities of these financial instruments. The estimated fair value
of the Company's debt obligations approximates the principal amounts reflected
above based on rates currently available for debt with similar terms and
remaining maturities.
22
<PAGE> 23
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Registrant and
auditor's report are included in Item 8 and appear following Item 14:
Report of Independent Accountants
Consolidated Balance Sheets - At December 31, 1999 and 1998
Consolidated Statements of Income - Years Ended December 31,
1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity - Years Ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows - Years Ended December
31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
Additionally, a two-year Summary of Quarterly Results is included in
Item 7 under "Quarterly Results."
23
<PAGE> 24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
Not applicable.
24
<PAGE> 25
PART III
Certain information required by Part III is omitted from this Report in
that the Company will file its definitive proxy statement for the Annual Meeting
of Stockholders to be held on May 22, 2000 (the "Proxy Statement") pursuant to
Regulation 14A not later than 120 days after the end of the fiscal year covered
by this report, and certain information included therein is incorporated herein
by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to the directors of the Company is set forth under
the caption "Information about Granite - Management, Directors" in the Proxy
Statement. Such information is incorporated herein by reference. Information
relating to the executive officers of the Company is set forth in Part I of this
report under the caption "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is set forth under the
caption "Information about Granite - Compensation of Directors and Executive
Officers" in the Proxy Statement. Such information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to ownership of equity securities of the Company
by certain beneficial owners and Management is set forth under the caption
"Information about Granite - Stock Ownership of Certain Beneficial Owners and
Management" in the Proxy Statement. Such information is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to certain relationships and related transactions
is set forth under the caption "Information about Granite - Management, Certain
Transactions with Management" in the Proxy Statement. Such information is
incorporated herein by reference.
25
<PAGE> 26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
The following documents are filed as part of this Report:
(a) 1. FINANCIAL STATEMENTS. The following consolidated financial
statements are filed as part of this Report:
<TABLE>
<CAPTION>
Form 10-K
Pages
------------
<S> <C>
Report of Independent Accountants................................................ F-1
Consolidated Balance Sheets at December 31, 1999 and 1998........................ F-2
Consolidated Statements of Income for the Years Ended
December 31, 1999, 1998 and 1997.............................................. F-3
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997.................................. F-4
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997.............................................. F-5
Notes to the Consolidated Financial Statements................................... F-6 to F-21
2. FINANCIAL STATEMENT SCHEDULE. The following financial
statement schedule of Granite Construction Incorporated for
the years ended December 31, 1999, 1998 and 1997 is filed
as part of this Report and should be read in conjunction
with the consolidated financial statements of Granite
Construction Incorporated.
Form 10-K
Pages
------------
Schedule
Schedule II - Schedule of Valuation and Qualifying Accounts.................. S-1
</TABLE>
Schedules not listed above have been omitted because the
required information is not applicable or is shown in the
financial statements or notes.
3. EXHIBITS. The Exhibits listed in the accompanying Exhibit
Index are filed or incorporated by reference as part of
this Report.
(b) REPORTS ON FORM 8-K. The registrant was not required to file any
reports on Form 8-K during the fourth quarter of fiscal 1999.
26
<PAGE> 27
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and the stockholders
of Granite Construction, Inc.:
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on Page 26 present fairly, in all material
respects, the financial position of Granite Construction, Inc. and its
subsidiaries at December 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999 in conformity with accounting principles generally accepted in the
United States. In addition, in our opinion, the financial statement schedule
listed in the index appearing under Item 14(a)(2) on Page 26 presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements. These financial
statements and financial statement schedule are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
San Jose, California
February 11, 2000
F-1
<PAGE> 28
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
DECEMBER 31, 1999 1998
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 61,832 $ 62,470
Short-term investments 46,245 58,954
Accounts receivable 211,609 174,748
Costs and estimated earnings in excess of billings 14,105 14,677
Inventories 12,823 12,773
Deferred income taxes 14,885 15,397
Equity in construction joint ventures 30,611 20,020
Other current assets 10,211 11,769
------------------------
Total current assets 402,321 370,808
- ---------------------------------------------------------------------------------------------
Property and equipment 242,913 205,737
- ---------------------------------------------------------------------------------------------
Other assets 34,338 50,026
- ---------------------------------------------------------------------------------------------
$ 679,572 $ 626,571
=============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 5,985 $ 10,787
Accounts payable 95,662 88,194
Billings in excess of costs and estimated earnings 66,342 50,619
Accrued expenses and other current liabilities 90,675 78,760
------------------------
Total current liabilities 258,664 228,360
- ---------------------------------------------------------------------------------------------
Long-term debt 64,853 69,137
- ---------------------------------------------------------------------------------------------
Deferred income taxes 28,323 27,792
- ---------------------------------------------------------------------------------------------
Commitments and contingencies -- --
- ---------------------------------------------------------------------------------------------
Stockholders' equity
Preferred stock, $0.01 par value, authorized 3,000,000
shares, none outstanding -- --
Common stock, $0.01 par value, authorized 50,000,000
shares; issued and outstanding 26,995,506 shares in
1999 and 27,648,961 in 1998 270 277
Additional paid-in capital 49,817 45,080
Retained earnings 285,832 262,517
------------------------
335,919 307,874
Unearned compensation (8,187) (6,592)
------------------------
327,732 301,282
- ---------------------------------------------------------------------------------------------
$ 679,572 $ 626,571
=============================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 29
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Construction $ 1,169,755 $ 1,084,433 $ 901,136
Material sales 159,019 141,667 127,069
- ---------------------------------------------------------------------------------------------------
Total revenue 1,328,774 1,226,100 1,028,205
- ---------------------------------------------------------------------------------------------------
Cost of revenue:
Construction 1,015,041 955,213 806,280
Material sales 134,532 117,795 110,195
- ---------------------------------------------------------------------------------------------------
Total cost of revenue 1,149,573 1,073,008 916,475
- ---------------------------------------------------------------------------------------------------
GROSS PROFIT 179,201 153,092 111,730
- ---------------------------------------------------------------------------------------------------
General and administrative expenses 94,939 83,834 73,593
- ---------------------------------------------------------------------------------------------------
OPERATING INCOME 84,262 69,258 38,137
- ---------------------------------------------------------------------------------------------------
Other income (expense)
Interest income 8,682 9,856 7,941
Interest expense (8,791) (9,551) (7,515)
Gain on sales of property and equipment 4,544 1,819 2,463
Other, net (2,654) 3,629 3,152
- ---------------------------------------------------------------------------------------------------
1,781 5,753 6,041
- ---------------------------------------------------------------------------------------------------
INCOME BEFORE PROVISION FOR INCOME TAXES 86,043 75,011 44,178
Provision for income taxes 33,127 28,504 16,346
- ---------------------------------------------------------------------------------------------------
NET INCOME $ 52,916 $ 46,507 $ 27,832
===================================================================================================
Net income per share
Basic $ 2.03 $ 1.75 $ 1.05
Diluted $ 1.96 $ 1.70 $ 1.03
Weighted average shares of common and
common stock equivalents outstanding
Basic 26,058 26,559 26,397
Diluted 26,963 27,339 26,942
Dividends per share $ 0.40 $ 0.30 $ 0.24
===================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 30
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
ADDITIONAL
COMMON PAID-IN RETAINED UNEARNED
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 STOCK CAPITAL EARNINGS COMPENSATION TOTAL
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCES, DECEMBER 31, 1996 $ 273 $ 36,810 $ 201,663 $ (5,141) $ 233,605
Net income -- -- 27,832 -- 27,832
Restricted stock issued - 234,396 shares, net 1 3,240 -- (3,241) --
Amortized restricted stock -- -- -- 2,299 2,299
Employee stock options exercised and
related tax benefit- 32,850 shares -- 350 -- -- 350
Repurchase of common stock - 251,163 shares -- (3,011) (126) -- (3,137)
Common stock contributed to ESOP - 195,000 shares -- 2,356 -- -- 2,356
Cash dividends on common stock -- -- (6,578) -- (6,578)
Tax benefit from ESOP dividends -- -- 707 -- 707
- ---------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1997 274 39,745 223,498 (6,083) 257,434
Net income -- -- 46,507 -- 46,507
Restricted stock issued - 213,926 shares, net 2 3,793 -- (3,795) --
Amortized restricted stock -- -- -- 3,286 3,286
Employee stock options exercised and
related tax benefit- 81,405 shares 1 1,402 -- -- 1,403
Repurchase of common stock - 107,733 shares -- (2,440) -- -- (2,440)
Common stock contributed to ESOP - 61,800 shares -- 1,580 -- -- 1,580
Cash dividends on common stock -- -- (8,288) -- (8,288)
Tax benefit from ESOP dividends and other -- 1,000 800 -- 1,800
- ---------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1998 277 45,080 262,517 (6,592) 301,282
Net income -- -- 52,916 -- 52,916
Restricted stock issued - 236,578 shares, net 2 6,427 -- (6,429) --
Amortized restricted stock -- -- -- 4,834 4,834
Stock options and warrants exercised and
related tax benefit- 130,940 shares 1 1,419 -- -- 1,420
Repurchase of common stock - 1,112,073 shares (10) (5,255) (19,764) -- (25,029)
Common stock contributed to ESOP - 91,100 shares -- 2,146 -- -- 2,146
Cash dividends on common stock -- -- (10,876) -- (10,876)
Tax benefit from ESOP dividends and other -- -- 1,039 -- 1,039
- ---------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1999 $ 270 $ 49,817 $ 285,832 $ (8,187) $ 327,732
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 31
GRANITE CONSTRUCTION INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net income $ 52,916 $ 46,507 $ 27,832
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, depletion and amortization 42,363 38,124 38,219
Gain on sales of property and equipment (4,544) (1,819) (2,463)
Deferred income taxes 1,043 154 726
Decrease in unearned compensation 4,834 3,286 2,299
Common stock contributed to ESOP 2,146 1,580 2,356
Equity in (gain) loss of affiliates 5,292 (2,728) (733)
Other (424) -- --
Changes in assets and liabilities:
Accounts and notes receivable (34,106) (10,715) (43,072)
Inventories (50) (522) 1,242
Equity in construction joint ventures (10,591) (7,069) (7,580)
Other assets 1,327 189 864
Accounts payable 7,468 7,385 16,751
Billings in excess of costs and estimated earnings, net 18,285 6,954 13,130
Accrued expenses 14,028 14,704 14,227
---------------------------------------
Net cash provided by operating activities 99,987 96,030 63,798
- ---------------------------------------------------------------------------------------------------------------
Investing Activities
Purchases of short-term investments (98,082) (91,090) (27,351)
Maturities of short-term investments 110,791 50,546 42,508
Additions to property and equipment (82,035) (52,462) (48,448)
Proceeds from sales of property and equipment 9,130 5,357 4,688
Investment in affiliates 1,083 (385) (13,689)
Development and sale of land and other investing activities 4,909 840 (6,915)
---------------------------------------
Net cash used by investing activities (54,204) (87,194) (49,207)
- ---------------------------------------------------------------------------------------------------------------
Financing Activities
Additions to long-term debt -- 60,000 27,046
Repayments of long-term debt (10,786) (51,392) (16,480)
Employee stock options exercised 39 832 246
Repurchase of common stock (25,029) (2,440) (3,137)
Dividends paid (10,645) (7,725) (6,570)
---------------------------------------
Net cash provided (used) by financing activities (46,421) (725) 1,105
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (638) 8,111 15,696
Cash and cash equivalents at beginning of year 62,470 54,359 38,663
---------------------------------------
Cash and cash equivalents at end of year $ 61,832 $ 62,470 $ 54,359
===============================================================================================================
Supplementary Information
Cash paid during the year for:
Interest $ 5,926 $ 4,857 $ 5,180
Income taxes 24,210 22,294 10,172
Noncash financing and investing activity:
Restricted stock issued for services $ 6,429 $ 3,795 $ 3,241
Dividends accrued but not paid 1,890 1,659 1,096
Financed acquisition of property and equipment 1,700 -- 6,963
===============================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 32
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS: The Company is a heavy civil
contractor engaged in the construction of highways, dams, airports,
mass transit facilities, real estate site development and other
infrastructure related projects. The Company has offices in California,
Texas, Georgia, Nevada, Arizona, Utah, and Florida.
PRINCIPLES OF CONSOLIDATION: The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All intercompany transactions and accounts have been
eliminated. The Company uses the equity method of accounting for
affiliated companies where its ownership is between 20% and 50%.
Additionally, the Company participates in joint ventures with other
construction companies. The Company accounts for its share of the
operations of these jointly controlled ventures on a pro rata basis in
the consolidated statements of income and as a single line item in the
consolidated balance sheets.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
REVENUE RECOGNITION: Earnings on construction contracts
including construction joint ventures are recognized on the percentage
of completion method in the ratio of costs incurred to estimated final
costs. Revenue in an amount equal to cost incurred is recognized prior
to contracts reaching 25% completion. The related earnings are not
recognized until the period in which such percentage completion is
attained. It is the Company's judgment that until a project reaches 25%
completion, there is insufficient information to determine with a
reasonable level of comfort what the estimated profit on the project
will be. Factors that can contribute to changes in estimates of
contract profitability include, without limitation, site conditions
that differ from those assumed in the original bid, the availability
and skill level of workers in the geographic location of the project,
the availability and proximity of materials, inclement weather and
timing and coordination issues inherent in design/build projects.
Contract cost is recorded as incurred and revisions in contract revenue
and cost estimates are reflected in the accounting period when known.
The 25% threshold is applied to all percentage of completion projects
without exception unless and until the Company projects a loss on the
project, in which case the estimated loss is immediately recognized.
Claims for additional contract revenue are recognized if it is probable
that the claim will result in additional revenue and the amount can be
reliably estimated. Revenue from contract change orders is recognized
when the owner has agreed to the change order. Revenue from the sale of
materials is recognized upon delivery.
The Company's revenue is substantially derived from contracts
that are "fixed unit price" contracts under which the Company is
committed to provide materials or services required by a project at
fixed unit prices (for example, dollars per cubic yard of concrete or
cubic yards of earth excavated). The Company's contracts are obtained
primarily through competitive bidding in response to advertisements by
federal, state and local government agencies and private parties. All
federal government contracts and many of the Company's other contracts
provide for termination of the contract for the convenience of the
party contracting with the Company.
BALANCE SHEET CLASSIFICATIONS: The Company includes in current
assets and liabilities amounts receivable and payable under
construction contracts which may extend beyond one year. A one-year
time period is used as the basis for classifying all other current
assets and liabilities.
CASH AND CASH EQUIVALENTS: Cash equivalents are securities
held for cash management purposes having original maturities of three
months or less from the date of purchase.
SHORT-TERM INVESTMENTS: Short-term investments that are deemed
by management to be held-to-maturity are reported at amortized cost.
Short-term investments that are considered available-for-sale are
carried at fair value. Unrealized gains and losses, if material, are
reported net of tax as a separate component of stockholders' equity
until realized. Realized gains and losses, if any, are determined using
the specific identification method.
F-6
<PAGE> 33
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
FINANCIAL INSTRUMENTS: The carrying value of short-term
investments approximates their fair value as determined by market
quotes. All significant debt obligations carry variable interest rates
or interest rates that approximate market and their carrying value is
considered to approximate fair value. The carrying value of receivables
and other amounts arising out of normal contract activities, including
retentions, which may be settled beyond one year, is estimated to
approximate fair value.
INVENTORIES: Inventories consist primarily of quarry products
valued at the lower of average cost or market.
PROPERTY AND EQUIPMENT: Property and equipment are stated at
cost. Depreciation is provided using accelerated methods over lives
ranging from three to ten years for construction equipment and the
straight-line method over lives from three to twenty years for the
remaining depreciable assets. The Company believes that accelerated
methods best approximate the service provided by the construction
equipment. Depletion of quarry property is based on the usage of
depletable reserves. The cost and accumulated depreciation or depletion
of property sold or retired is removed from the accounts and gains or
losses, if any, are reflected in earnings for the period. During the
year ended December 31, 1999 the Company capitalized interest costs
related to certain self-constructed assets which reduced total interest
expense of $9,368 by $577.
LONG-LIVED ASSETS: Long-lived assets held and used by the
Company are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. There have been no such events or changes in circumstances
to date.
The Company holds for development and sale certain property
acquired in foreclosure proceedings. Such assets are held in long-term
other assets until such time as they are available to be sold and
expected to be sold within a year, at which time they are carried in
other current assets. Additionally, the Company frequently sells
property and equipment that has reached the end of its useful life or
no longer meets the Company's needs, including depleted quarry
property. Such property is held in property and equipment until sold.
During 1999, 1998 and 1997 there were no losses resulting from changes
in the carrying amounts of these assets.
INTANGIBLE ASSETS: Intangible assets consist primarily of
covenants not to compete amortized on a straight-line basis over five
years.
INCOME TAXES: Deferred taxes are provided on a liability
method whereby deferred tax assets are recognized for deductible
temporary differences and operating loss carryforwards and deferred tax
liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets are reduced by
a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted
for the effects of changes in tax laws and rates on the date of
enactment.
COMPUTATION OF EARNINGS PER SHARE: Basic earnings per share is
computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding, excluding
restricted common stock. Diluted earnings per share is computed giving
effect to all dilutive potential common shares that were outstanding
during the period. Dilutive potential common shares consist of the
incremental common shares issuable upon the exercise of stock options,
warrants and upon the vesting of restricted common stock.
RECLASSIFICATIONS: Certain financial statement items have been
reclassified to conform to the current year's format. These
reclassifications had no impact on previously reported net income.
F-7
<PAGE> 34
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
RECENT ACCOUNTING PRONOUNCEMENTS: In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 133, "SFAS 133", Accounting for Derivative Instruments
and Hedging Activities. SFAS 133 establishes methods of accounting and
reporting for derivative instruments and hedging activities related to
those instruments as well as other hedging activities, and is effective
for fiscal quarters of fiscal years beginning after June 15, 2000, as
amended by SFAS 137. The Company believes that adoption of this
pronouncement will have no material impact on the Company's financial
position and results of operations.
2. DISCLOSURE OF SIGNIFICANT RISKS AND UNCERTAINTIES
DISCLOSURE OF SIGNIFICANT ESTIMATES - REVENUE RECOGNITION: As
outlined in the Summary of Significant Accounting Policies, the
Company's construction revenue is recognized on the percentage of
completion basis. Consequently, construction revenue and gross margin
for each reporting period is determined on a contract by contract basis
by reference to estimates by the Company's engineers of expected costs
to be incurred to complete each project. These estimates include
provisions for known and anticipated cost overruns, if any exist or are
expected to occur. These estimates may be subject to revision in the
normal course of business.
DISCLOSURE OF SIGNIFICANT ESTIMATES - LITIGATION: The Company
is a party to a number of legal proceedings and believes that the
nature and number of these proceedings are typical for a construction
firm of its size and scope and that none of these proceedings is
material to the Company's financial position. The Company's litigation
typically involves claims regarding public liability or contract
related issues.
CONCENTRATIONS: The Company maintains the majority of cash
balances and all of its short-term investments with several financial
institutions. The Company invests with high credit quality financial
institutions, and, by policy, limits the amount of credit exposure to
any financial institution. A significant portion of the Company's labor
force is subject to collective bargaining agreements. Collective
bargaining agreements covering 28.4% of the Company's unionized labor
force at December 31, 1999 will expire during 2000.
Revenue received from federal, state and local government
agencies amounted to $856,399 (64.5%) in 1999, $835,986 (68.2%) in
1998, and $726,657 (70.6%) in 1997. California Department of
Transportation represented $135,265 (10.2%) in 1999, $142,008 (11.6%)
in 1998, and $139,300 (13.5%) in 1997 of total revenue. The Company
performs ongoing credit evaluations of its customers and generally does
not require collateral, although the law provides the Company the
ability to file mechanics liens on real property improved for private
customers in the event of non-payment by such customers. The Company
maintains reserves for potential credit losses and such losses have
been within management's expectations. The Company has no foreign
operations.
F-8
<PAGE> 35
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
3. SHORT-TERM INVESTMENTS
The carrying and market values of short-term investments are as follows
at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
Held-To-Maturity Held-To-Maturity
December 31, 1999 December 31, 1998
Carrying Unrealized Unrealized Fair Carrying Unrealized Unrealized Fair
Value Gains Losses Value Value Gains Losses Value
---------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and Agency
Obligations $ 20,222 $ 4 $ -- $ 20,226 $ 19,271 $ 10 $ -- $ 19,281
Commercial Paper 12,917 16 -- 12,933 25,721 2 (4) 25,719
Municipal Bonds -- -- -- -- 5,022 12 -- 5,034
Domestic Banker's Acceptance 7,079 22 -- 7,101 4,921 -- (3) 4,918
---------------------------------------------- ----------------------------------------------
40,218 42 -- 40,260 54,935 24 (7) 54,952
---------------------------------------------- ----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Available-For-Sale Available-For-Sale
December 31, 1999 December 31, 1998
Carrying Unrealized Unrealized Fair Carrying Unrealized Unrealized Fair
Value Gains Losses Value Value Gains Losses Value
---------------------------------------------- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government and Agency
Obligations 2,999 -- (82) 2,917 2,991 7 -- 2,998
Municipal Bonds 3,028 -- (18) 3,010 1,028 4 -- 1,032
---------------------------------------------- ----------------------------------------------
6,027 -- (100) 5,927 4,019 11 -- 4,030
---------------------------------------------- ----------------------------------------------
Total Short-Term Investments $ 46,245 $ 42 $ (100) $ 46,187 $ 58,954 $ 35 $ (7) $ 58,982
============================================== ==============================================
</TABLE>
There were no sales of investments classified as
available-for-sale for the years ended December 31, 1999 and 1998.
Unrealized gains and losses were considered immaterial for both 1999
and 1998 and, thus, not recorded as a separate item in stockholders'
equity. At December 31, 1999, scheduled maturities of investments are
as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Held-To- Available-
Maturity For-Sale Total
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Within one year $ 40,218 $ 4,999 $ 45,217
After one year through five years -- 1,028 1,028
- ----------------------------------------------------------------------------
$ 40,218 $ 6,027 $ 46,245
============================================================================
</TABLE>
For the years ended December 31, 1999 and 1998, purchases and
maturities were as follows:
<TABLE>
<CAPTION>
---------------------------------------- ----------------------------------------
December 31, 1999 December 31, 1998
Held-To- Available- Held-To- Available-
Maturity For-Sale Total Maturity For-Sale Total
---------------------------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Purchases $ 92,870 $ 5,212 $ 98,082 $ 83,968 $ 7,122 $ 91,090
Maturities 107,587 3,204 110,791 39,500 11,046 50,546
---------------------------------------- ----------------------------------------
Net change $ (14,717) $ 2,008 $ (12,709) $ 44,468 $ (3,924) $ 40,544
======================================== ========================================
</TABLE>
F-9
<PAGE> 36
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
4. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Construction Contracts
Completed and in progress $127,544 $ 96,895
Retentions 61,055 56,774
- --------------------------------------------------------------------------------
188,599 153,669
Construction material sales 19,421 19,554
Other 4,813 2,224
- --------------------------------------------------------------------------------
212,833 175,447
Less allowance for doubtful accounts 1,224 699
- --------------------------------------------------------------------------------
$211,609 $174,748
================================================================================
</TABLE>
Accounts receivable includes amounts billed and billable for public and
private contracts. The balances billed but not paid by customers
pursuant to retainage provisions in construction contracts generally
become due upon completion of the contracts and acceptance by the
owners. Retainage amounts at December 31, 1999 are expected to be
collected as follows: $56,457 in 2000; $1,015 in 2001, $3,353 in 2002
and $230 in 2003.
5. EQUITY METHOD INVESTMENTS
The Company participates in various construction joint venture
partnerships. Generally, each construction joint venture is formed to
accomplish a specific project and is dissolved upon completion of the
project. The joint venture agreements typically provide that the
interests of the Company in any profits and assets, and its respective
shares in any losses and liabilities that may result from the
performance of the contract are limited to the Company's stated
percentage interest in the project. Although the venture's contract
with the project owner typically requires joint and several liability,
the Company's agreements with its joint venture partners provide that
each party will assume and pay its full proportionate share of any
losses resulting from a project. The Company has no significant
commitments beyond completion of the contract. The Company's share of
these ventures ranges from 15% - 55% the most significant of which
include a 23% share of the I-15 Corridor reconstruction project in Salt
Lake City, Utah, a 40% share of a highway and tunnel project in
Atlantic City, New Jersey, a 25% share of a major dam project near
Hemet, California, and a 55% share of an I-17 design build project in
Maricopa County, Arizona.
F-10
<PAGE> 37
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
5. EQUITY METHOD INVESTMENTS, CONTINUED
The combined assets, liabilities and net assets of these ventures are
as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Assets
Total $260,275 $245,071
Less other venturers' interest 188,803 183,701
- --------------------------------------------------------------------------------
Company's interest 71,472 61,370
- --------------------------------------------------------------------------------
Liabilities
Total 149,453 162,476
Less other venturers' interest 108,592 121,126
- --------------------------------------------------------------------------------
Company's interest 40,861 41,350
- --------------------------------------------------------------------------------
Company's interest in net assets $ 30,611 $ 20,020
================================================================================
</TABLE>
The revenue and costs of revenue of construction joint ventures are as
follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1999 1998 1997
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue
Total $646,277 $649,042 $326,895
Less other venturers' interest 469,350 497,407 248,028
- ---------------------------------------------------------------------------------------
Company's interest 176,927 151,635 78,867
- ---------------------------------------------------------------------------------------
Cost of Revenue
Total 575,432 578,608 287,705
Less other venturers' interest 418,628 443,123 220,497
- ---------------------------------------------------------------------------------------
Company's interest 156,804 135,485 67,208
- ---------------------------------------------------------------------------------------
$ 20,123 $ 16,150 $ 11,659
=======================================================================================
</TABLE>
F-11
<PAGE> 38
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
5. EQUITY METHOD INVESTMENTS, CONTINUED
Additionally, the Company has investments in affiliates that
are accounted for on the equity method. The most significant of these
investments is a 30% interest in T.I.C. Holdings, Inc. and a 22.2%
limited partnership interest in a partnership which constructed and
operates a private toll road. At December 31, 1999 the Company had a
commitment supported by a letter of credit of $2,044 related to its
limited partnership interest. Differences between the carrying amount
of the Company's investments and the underlying equity in net assets,
which approximate $5,000 at December 31, 1999, are being amortized over
an estimated useful life of 10 years. The summarized financial
information below represents an aggregation of the Company's
nonsubsidiary affiliates:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1999 1998 1997
--------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance sheet data
Assets $ 347,721 $ 328,496 $ 275,685
Liabilities 305,542 267,397 216,512
Net assets 42,179 61,099 59,173
--------------------------------------------------------------------------------------
Company's equity investment in affiliates 23,139 29,515 25,008
--------------------------------------------------------------------------------------
Earnings data
Revenue 767,754 561,568 434,389
Gross profit 33,628 50,452 41,137
Earnings (loss) before taxes and
Continuing operations (12,426) 7,510 1,891
Earnings (loss) before taxes (18,655) 7,510 1,891
--------------------------------------------------------------------------------------
Company's equity in earnings (loss) $ (5,292) $ 2,728 $ 733
--------------------------------------------------------------------------------------
</TABLE>
The Company's equity investment in affiliates in 1998
reflected above includes an investment of $1,394 made in a prior
period.
F-12
<PAGE> 39
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
6. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Land $ 36,485 $ 33,742
Quarry property 46,891 38,390
Buildings and leasehold improvements 33,791 22,843
Equipment and vehicles 478,990 434,737
Office furniture and equipment 7,110 4,870
- --------------------------------------------------------------------------------
603,267 534,582
Less accumulated depreciation,
depletion and amortization 360,354 328,845
- --------------------------------------------------------------------------------
$242,913 $205,737
================================================================================
</TABLE>
7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Payroll and related employee benefits $ 40,375 $ 34,829
Accrued insurance 30,425 26,487
Income taxes 3,696 2,542
Other 16,179 14,902
- --------------------------------------------------------------------------------
$ 90,675 $ 78,760
================================================================================
</TABLE>
8. LONG-TERM DEBT AND CREDIT ARRANGEMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DECEMBER 31, 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Senior notes payable $ 60,000 $ 60,000
Notes payable to bank 5,000 15,000
Other notes payable 5,838 4,924
- --------------------------------------------------------------------------------
70,838 79,924
Less current maturities 5,985 10,787
- --------------------------------------------------------------------------------
$ 64,853 $ 69,137
================================================================================
</TABLE>
The aggregate minimum principal maturities of long-term debt for each of the
five years following December 31, 1999 are as follows: 2000 - $5,985; 2001 -
$2,707; 2002 - $7,686; 2003 - $6,863; 2004 - $6,876; and beyond 2004 - $40,721.
The Company has a bank revolving line of credit of $75,000
which allows for unsecured borrowings for up to five years through June
29, 2001, with interest rate options. Outstanding borrowings under the
revolving line of credit are at the IBOR interest rate plus margin
(6.19% and 1.0%, respectively at December 31, 1999) with principal
payable semiannually beginning December 2001 through June 2006 and
interest payable quarterly. There were no amounts outstanding at
December 31, 1999.
The Company has standby letters of credit totaling
approximately $14,603 outstanding at December 31, 1999 of which $12,559
reduces the amount available under the revolving line of credit and
$2,044 supports the commitment by the Company related to its investment
in a limited partnership. The unused and available portion of the line
of credit at December 31, 1999 was approximately $62,441.
F-13
<PAGE> 40
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
8. LONG-TERM DEBT AND CREDIT ARRANGEMENTS, CONTINUED
Senior Notes Payable in the amount of $60 million are due to a
group of institutional holders. The notes are due in nine equal annual
installments beginning in 2002 and bear interest at 6.54% per annum.
The Company used $39 million of the proceeds of the notes to retire its
bank revolving credit notes.
Notes payable to bank are unsecured with principal payable
semiannually and interest payable quarterly through June 2000 at the
IBOR rate plus margin (6.19% and 1.0%, respectively at December 31,
1999).
Restrictive covenants under the terms of debt agreements
include the maintenance of certain levels of working capital and cash
flow. Other covenants prohibit capital expenditures in excess of
specified limits and require the maintenance of tangible net worth (as
defined) of approximately $238,000.
Other notes payable are comprised primarily of notes incurred
in connection with the purchase of property and equipment, and other
assets. These notes are collateralized by the assets purchased and bear
interest at 6.5% to 8.8% per annum with principal and interest payable
in installments through 2007.
9. EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLAN: The Company's Employee Stock
Ownership Plan ("ESOP") covers all employees not included in collective
bargaining agreements. As of December 31, 1999, the ESOP owned
7,159,981 shares of the Company's common stock. Dividends on shares
held by the ESOP are charged to retained earnings and all shares held
by the ESOP are treated as outstanding in computing the Company's
earnings per share.
Contributions to the ESOP are at the discretion of the Board
of Directors and comprise shares of the Company's stock that were
purchased on the market and immediately contributed to the plan.
Compensation cost is measured as the cost to purchase the shares
(market value on the date of purchase and contribution). Contributions
for the years ended December 31, 1999, 1998 and 1997 were approximately
$1,769, $1,957 and $1,812, respectively.
PROFIT SHARING AND 401k PLAN: The Profit Sharing and 401k Plan
is a defined contribution plan covering all employees not included in
collective bargaining agreements. Each employee can elect to have up to
10% of gross pay contributed to the plan on a before-tax basis. The
plan allows for Company matching and additional contributions at the
discretion of the Board of Directors.
Company contributions to the Profit Sharing and 401k Plan for
the years ended December 31, 1999, 1998 and 1997 were $3,414, $8,402
and $4,706, respectively. Included in the contributions were 401k
matching contributions of $2,762, $1,990 and $1,807, respectively.
OTHER: The Company`s wholly owned subsidiary, Granite Construction
Company, also contributes to various multi-employer pension plans on
behalf of union employees. Contributions to these plans for the years
ended December 31, 1999, 1998 and 1997 were approximately $14,435,
$13,498 and $11,972, respectively.
F-14
<PAGE> 41
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
10. STOCKHOLDERS' EQUITY
1999 EQUITY INCENTIVE PLAN: On May 24, 1999, the Company's
stockholders approved the 1999 Equity Incentive Plan (the "Plan"),
which replaces the Company's 1990 Omnibus Stock and Incentive Plan (the
"1990 Plan"). The Plan provides for the grant of restricted common
stock, incentive and nonqualified stock options, performance units and
performance shares to employees and awards to the Company's board of
directors in the form of stock units or stock options ("Director
Options"). A total of 2,500,000 shares of the Company's common stock
have been reserved for issuance under the Plan. The exercise price for
incentive and nonqualified stock options granted under the Plan may not
be less than 100% and 85%, respectively, of the fair market value at
the date of the grant. Options granted will be exercisable at such
times and be subject to such restrictions and conditions as determined
by the compensation committee, but no option shall be exercisable later
than ten years from the date of grant. Restricted common stock is
issued for services to be rendered and may not be sold, transferred or
pledged for such period as determined by the compensation committee.
Restricted shares outstanding at December 31, 1999 were
804,412 shares. Restricted stock compensation cost is measured at the
stock's fair value on the date of grant. The compensation cost is
recognized ratably over the vesting period -- generally five years. An
employee may not sell or otherwise transfer unvested shares and, in the
event that an employee terminates his or her employment prior to the
end of the vesting period, any unvested shares are surrendered to the
Company. The Company has no obligation to repurchase restricted stock.
Compensation expense related to restricted shares for the years ended
December 31, 1999, 1998 and 1997 was $4,834, $3,286 and $2,299,
respectively.
Stock options granted under the 1990 Plan, all of which were
granted in 1990, will expire in 2000. All options were granted,
cancelled and exercised at $7.56 per share and are 100% vested at
December 31, 1999. Stock option transactions under the 1990 Plan during
1999, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
December 31, 1999 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding, beginning of year 70,625 157,125 189,975
Options exercised (17,250) (81,405) (32,850)
Options forfeited -- (5,095) --
- -------------------------------------------------------------------------------------
Options outstanding, end of year 53,375 70,625 157,125
=====================================================================================
</TABLE>
The Company granted Director Options to purchase 7,367 shares
of the Company's stock under the Plan during 1999 at a weighted average
exercise price of $10.35. The options are immediately exercisable and
all remain outstanding at December 31, 1999.
The Company has adopted the disclosure only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock Based Compensation" (SFAS 123). Accordingly, the compensation
cost for the options granted in 1999 was recognized to the extent the
fair market value exceeded the exercise price, as all of the options
were granted at prices less than fair market value.
F-15
<PAGE> 42
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
10. STOCKHOLDERS' EQUITY, CONTINUED
The fair value of each option grant was estimated at the grant
date using a type of Black-Scholes option pricing model with the
following assumptions used for grants: dividend yield of 1.53%-2.17%,
volatility of 33.8%, risk free interest rates of 5.9%-6.45% and an
expected life of eight years. Based on these assumptions, the aggregate
fair value and weighted average fair value per share of options granted
in 1999 was $90 (of which $78 was recognized as expense in 1999) and
$12.28, respectively. Had compensation expense been determined based
upon fair values at the grant date in accordance with SFAS 123, the
Company's net earnings would have been reduced to the pro forma amount
indicated below, however the Company's earnings per share would be
unchanged.
<TABLE>
<CAPTION>
-------------------------------------------------------
PRO FORMA NET INCOME
-------------------------------------------------------
<S> <C>
Net Income as Reported $ 52,916
Pro forma Net Income $ 52,904
=======================================================
</TABLE>
The options outstanding and exercisable by exercise price for
the Plan at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Weighted
Options Average Weighted
Outstanding Remaining Average
and Contractual Exercise
Exercise Prices Exercisable Life (years) Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 8.99 4,804 9.75 $ 8.99
$12.90 2,563 10.00 $12.90
- --------------------------------------------------------------------------------
7,367 9.84 $10.35
================================================================================
</TABLE>
OTHER: The Company has issued warrants to purchase 450,000
shares of its common stock at an exercise price of $13.37 per share.
The warrants expire on July 25, 2002. As of December 31, 1999 there
were 215,300 warrants outstanding.
F-16
<PAGE> 43
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
11. EARNINGS PER SHARE
In accordance with the disclosure requirements of SFAS 128, a
reconciliation of the numerator and denominator of basic and diluted
earnings per share is provided as follows (in thousands except per
share data):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1999 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NUMERATOR - BASIC AND DILUTED EARNINGS PER SHARE
Net income $ 52,916 $ 46,507 $ 27,832
==========================================================================================
DENOMINATOR - BASIC EARNINGS PER SHARE
Common stock outstanding 27,159 27,570 27,375
Less restricted stock outstanding 1,101 1,011 978
- ------------------------------------------------------------------------------------------
TOTAL 26,058 26,559 26,397
- ------------------------------------------------------------------------------------------
Basic earnings per share $ 2.03 $ 1.75 $ 1.05
==========================================================================================
DENOMINATOR - DILUTED EARNINGS PER SHARE
Denominator - Basic Earnings per Share 26,058 26,559 26,397
Effect of Dilutive Securities:
Warrants 190 175 --
Common stock options 41 64 74
Restricted stock 674 541 471
- ------------------------------------------------------------------------------------------
TOTAL 26,963 27,339 26,942
- ------------------------------------------------------------------------------------------
Diluted earnings per share $ 1.96 $ 1.70 $ 1.03
==========================================================================================
</TABLE>
F-17
<PAGE> 44
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
12. INCOME TAXES
Provision for income taxes:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Years Ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal
Current $ 26,823 $ 23,592 $ 12,964
Deferred 905 138 646
- --------------------------------------------------------------------------------------
27,728 23,730 13,610
- --------------------------------------------------------------------------------------
State
Current 5,260 4,758 2,656
Deferred 139 16 80
- --------------------------------------------------------------------------------------
5,399 4,774 2,736
- --------------------------------------------------------------------------------------
$ 33,127 $ 28,504 $ 16,346
======================================================================================
</TABLE>
Reconciliation of statutory to effective tax rate:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Years Ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% 35.0%
State taxes, net of federal tax benefit 4.1 4.1 4.0
Percentage depletion deduction (1.5) (1.1) (2.0)
Other 0.9 -- --
- --------------------------------------------------------------------------------------
38.5% 38.0% 37.0%
======================================================================================
</TABLE>
Deferred tax assets and liabilities:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
DECEMBER 31, 1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets:
Accounts receivable $ 1,222 $ 915
Inventory 1,349 1,556
Property and equipment 2,374 1,755
Insurance accruals 10,185 9,849
Deferred compensation 2,385 3,014
Other accrued liabilities 5,715 4,341
Other 329 936
- -------------------------------------------------------------------------------
23,559 22,366
- -------------------------------------------------------------------------------
Deferred Tax Liabilities:
Property and equipment 29,155 29,697
Contract recognition 3,867 1,532
TIC basis difference 2,694 3,053
Other 1,281 479
- -------------------------------------------------------------------------------
36,997 34,761
- -------------------------------------------------------------------------------
$(13,438) $(12,395)
===============================================================================
</TABLE>
The deferred tax asset for insurance accruals relates
primarily to the self funded portion of the Company's workers
compensation and public liability insurance which is deductible in
future periods. The deferred tax asset for other accrued liabilities
relates to various items including accrued vacation and accrued
reclamation costs which are deductible in future periods. The deferred
tax liability for the TIC basis difference represents the undistributed
earnings of TIC for which income and the related tax provision have
been recognized on the Company's records.
F-18
<PAGE> 45
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
13. LEASES
Minimum rental commitments under all noncancellable operating
leases, primarily quarry property and construction equipment, in effect
at December 31, 1999 were:
<TABLE>
<CAPTION>
Years Ending December 31,
<S> <C>
2000 $ 4,362
2001 2,602
2002 2,092
2003 1,932
2004 1,561
Later years (through 2016) 3,764
------------------------------------------------------
Total minimum rental commitment $16,313
======================================================
</TABLE>
Operating lease rental expense was $4,726 in 1999, $4,628 in 1998, and
$4,414 in 1997.
F-19
<PAGE> 46
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
14. BUSINESS SEGMENT INFORMATION
The Company has two reportable segments: the Branch Division
and the Heavy Construction Division (HCD). The Branch Division is
comprised of branch offices that serve local markets, while HCD pursues
major infrastructure projects throughout the nation. HCD generally has
large heavy civil projects with contract amounts in excess of $15
million and contract durations greater than two years, while the Branch
Division projects are typically smaller in size and shorter in
duration. HCD has been the primary participant in the Company's
construction joint ventures. Substantially all of the revenue from
these joint ventures is included in HCD's revenues from external
customers (Note 5).
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies (Note 1).
The Company evaluates performance based on operating profit or loss
which does not include income taxes, interest income, interest expense
or other income (expense).
INFORMATION ABOUT PROFIT AND ASSETS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
HCD BRANCH TOTAL
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
1999
Revenues from external customers $ 373,876 $ 954,898 $1,328,774
Intersegment revenue transfer (21,566) 21,566 --
-------------------------------------------
Net revenue 352,310 976,464 1,328,774
Depreciation and amortization 8,068 30,080 38,148
Operating income 34,176 83,878 118,054
Property and equipment 28,759 194,919 223,678
- ----------------------------------------------------------------------------------------
1998
Revenues from external customers $ 305,856 $ 920,244 $1,226,100
Intersegment revenue transfer (25,668) 25,668 --
-------------------------------------------
Net revenue 280,188 945,912 1,226,100
Depreciation and amortization 7,396 27,292 34,688
Operating income 12,139 86,688 98,827
Property and equipment 26,618 167,540 194,158
- ----------------------------------------------------------------------------------------
1997
Revenues from external customers $ 208,094 $ 820,111 $1,028,205
Intersegment revenue transfer (11,831) 11,831 --
-------------------------------------------
Net revenue 196,263 831,942 1,028,205
Depreciation and amortization 7,364 27,513 34,877
Operating income 3,394 54,679 58,073
Property and equipment 26,995 159,057 186,052
- ----------------------------------------------------------------------------------------
</TABLE>
F-20
<PAGE> 47
GRANITE CONSTRUCTION INCORPORATED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
14. BUSINESS SEGMENT INFORMATION, CONTINUED
RECONCILIATION OF SEGMENT PROFIT AND ASSETS TO THE COMPANY'S CONSOLIDATED
TOTALS:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Profit or Loss:
Total profit or loss for reportable segments $ 118,054 $ 98,827 $ 58,073
Other income 1,781 5,753 6,041
Unallocated other corporate expenses (33,792) (29,569) (19,936)
- --------------------------------------------------------------------------------------------
Income before provision for income taxes $ 86,043 $ 75,011 $ 44,178
============================================================================================
Assets:
Total assets for reportable segments $ 223,678 $ 194,158
Assets not allocated to segments:
Cash and cash equivalents 61,832 62,470
Short-term investments 46,245 58,954
Deferred income taxes 14,885 15,397
Other current assets 279,359 233,987
Property and equipment 19,235 11,579
Other assets 34,338 50,026
- ----------------------------------------------------------------------------
Consolidated Total $ 679,572 $ 626,571
============================================================================
</TABLE>
15. SUBSEQUENT EVENTS (UNAUDITED)
On January 24, 2000, the Board of Directors declared a special
dividend of $0.06 per share of common stock in addition to a $0.10 per
share quarterly dividend, payable on April 14, 2000 to stockholders of
record as of March 31, 2000. The quarterly dividend represents a $0.03
per share increase over the dividends paid in 1999 of $0.07 per share.
In January 2000, the Company purchased 30% of the common stock
of Wilder Construction Company ("Wilder") for a purchase price of $13.1
million. The purchase agreement provides for the Company to increase
its ownership in Wilder to between 51% and 60% in 2002 and to 75% in
2004. Founded in 1911, Wilder is a heavy-civil construction company
with regional offices located in Washington, Oregon and Alaska. Wilder
has annual revenues of approximately $150 million and employs
approximately 650 people throughout the Northwest and Alaska.
The Company currently holds a 30% minority interest in T.I.C.
Holdings, Inc. ("TIC"). In February 2000, the Company reached an
agreement in principle with TIC to sell its minority interest back to
TIC over a three and one half-year period. Under the agreement in
principle, TIC will have the opportunity to repurchase shares sooner
based on an agreed to formula. A definitive agreement has not yet been
finalized. This will allow TIC to retain its independence while
allowing both companies to maintain their strategic alliance. The
proposed agreement will also allow the Company to intensify its focus
on its core business in heavy civil construction.
F-21
<PAGE> 48
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (File No. 33-36482 and 33-36485) of Granite Construction
Incorporated of our report dated February 11, 2000 relating to the financial
statements and financial statement schedule, which appears in this Annual Report
on Form 10-K.
PricewaterhouseCoopers LLP
San Jose, California
March 30, 2000
27
<PAGE> 49
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: March 20, 2000 GRANITE CONSTRUCTION INCORPORATED
By: /s/ William E. Barton
-----------------------------------------
[William E. Barton, Senior Vice President
and Chief Financial Officer]
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below on March 22, 2000, by the following persons in the
capacities indicated.
<TABLE>
<S> <C>
/s/ David H. Watts Chairman of the Board,
- --------------------------------- President, Chief Executive Officer,
[David H. Watts] and Director
/s/ William E. Barton Senior Vice President and Chief Financial Officer
- --------------------------------- Principal Accounting and Financial Officer
[William E. Barton]
/s/ Joseph J. Barclay Director
- ---------------------------------
[Joseph J. Barclay]
/s/ Richard M. Brooks Director
- ---------------------------------
[Richard M. Brooks]
/s/ Linda Griego Director
- ---------------------------------
[Linda Griego]
/s/ Brian C. Kelly Director
- ---------------------------------
[Brian C. Kelly]
/s/ Rebecca A. McDonald Director
- ---------------------------------
[Rebecca A. McDonald]
/s/ Raymond E. Miles Director
- ---------------------------------
[Raymond E. Miles]
/s/ J. Fernando Niebla Director
- ---------------------------------
[J. Fernando Niebla]
/s/ George B. Searle Director
- ---------------------------------
[George B. Searle]
</TABLE>
28
<PAGE> 50
INDEX TO FORM 10-K EXHIBITS
<TABLE>
<CAPTION>
Exhibit Page
No. Description No.
- --- ----------- ----
<S> <C> <C>
3.1 Certificate of Incorporation of Granite Construction Incorporated [a]
3.1.a Amendment to the Certificate of Incorporation of Granite Construction Incorporated [f]
3.1.b Certificate of Incorporation of Granite Construction Incorporated as Amended and
Restated (Effective May 22, 1998) [f]
3.2 Bylaws of Granite Construction Incorporated (as amended and restated effective
February 27, 1991) [b]
10.1 Amendment to and Restatement of the Granite Construction Incorporated Employee
Stock Ownership Plan adopted November 16, 1998 and effective January 1, 1998 [f]
10.1.a Granite Construction Incorporated Employee Stock Ownership Trust Agreement [b]
10.1.b Amendment 1 to the Granite Construction Incorporated Employee Stock Ownership
Plan Trust Agreement adopted December 19, 1995, effective January 1, 1996 [c]
10.2 Granite Construction Profit Sharing and 401(k) Plan as Amended and Restated Effective
January 1, 1999 __
10.3 Credit Agreement dated and effective June 30, 1997 [e]
10.3.a First Amendment to the Credit Agreement entered into January 16, 1998 [e]
10.3.b Second Amendment to the Credit Agreement entered into June 30, 1998 [f]
10.3.c Third Amendment to the Credit Agreement entered into June 30, 1999 __
10.4 Form of Director and Officer Indemnification Agreement [a]
10.5 Form of Executive Officer Employment Agreement [a]
10.6 Amendment to and Restatement of the Granite Construction Incorporated Key
Management Deferred Compensation Plan adopted and effective January 1, 1998 [f]
10.6.a Amendment 1 to Granite Construction Incorporated Key Management Deferred
Compensation Plan dated April 23, 1999 __
10.7 Amendment to and Restatement of the Granite Construction Incorporated Key
Management Deferred Incentive Compensation Plan adopted and effective January 1, 1998 [f]
10.7.a Amendment 1 to Granite Construction Incorporated Key Management Deferred Incentive
Compensation Plan dated April 23, 1999 __
10.8 Note Purchase Agreement between Granite Construction Incorporated and certain purchasers
dated March 1, 1998 [f]
</TABLE>
29
<PAGE> 51
<TABLE>
<S> <C> <C>
10.9 Subsidiary Guaranty Agreement from the Subsidiaries of Granite Construction Incorporated
as Guarantors of the Guaranty of Notes and Note Agreement and the Guaranty of Payment
and Performance dated March 1, 1998 [f]
10.10 Granite Construction Incorporated 1999 Equity Incentive Plan __
21.1 List of Subsidiaries of Granite Construction Incorporated [d]
24.1 Consent of PricewaterhouseCoopers, LLP is contained on page 27 of this Report
27.1 Financial Data Schedule __
</TABLE>
[a] Incorporated by reference to the exhibits filed with the Company's
Registration Statement on Form S-1 (No. 33-33795).
[b] Incorporated by reference to the exhibits filed with the Company's Form
10-K for the year ended December 31, 1991.
[c] Incorporated by reference to the exhibits filed with the Company's Form
10-K for the year ended December 31, 1995.
[d] Incorporated by reference to the exhibits filed with the Company's Form
10-K for the year ended December 31, 1996.
[e] Incorporated by reference to the exhibits filed with the Company's Form
10-K for the year ended December 31, 1997.
[f] Incorporated by reference to the exhibits filed with the Company's Form
10-K for the year ended December 31, 1998.
30
<PAGE> 52
SCHEDULE II
GRANITE CONSTRUCTION INCORPORATED
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
--------------------------
BALANCE AT ADJUSTMENTS BALANCE AT
BEGINNING BAD DEBT AND END OF
DESCRIPTION OF YEAR EXPENSE COLLECTIONS DEDUCTIONS(1) PERIOD
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Allowance for doubtful accounts ........ $ 699 $ 997 $ 1,516 $ (1,988) $ 1,224
================================================================
Allowance for notes receivable ......... $ 68 $ -- $ -- $ -- $ 68
================================================================
YEAR ENDED DECEMBER 31, 1998
Allowance for doubtful accounts ........ $ 691 $ (2,628) $ 3,538 $ (902) $ 699
================================================================
Allowance for notes receivable ......... $ 68 $ -- $ -- $ -- $ 68
================================================================
YEAR ENDED DECEMBER 31, 1997
Allowance for doubtful accounts ........ $ 693 $ 759 $ 1,162 $ (1,923) $ 691
================================================================
Allowance for notes receivable ......... $ 68 $ -- $ -- $ -- $ 68
================================================================
</TABLE>
(1) Accounts deemed to be uncollectible
S-1
<PAGE> 1
EXHIBIT 10.2
GRANITE CONSTRUCTION
PROFIT SHARING AND 401(k) PLAN
As Amended and Restated Effective as of January 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C>
1. Nature of the Plan 1
2. Definitions 2
3. Eligibility and Participation 8
4. Contributions 11
5. Investment of Trust Assets 19
6. Allocations to Participants' Accounts 21
7. Allocation Limitation 24
8. Frozen Gibbons Accounts 25
9. Disclosure to Participants 28
10. Vesting and Forfeitures 29
11. Years of Vesting Service and Break in Service 30
12. When Capital Accumulation Will Be Distributed 32
13. Hardship Withdrawals 34
14. How Capital Accumulation Will Be Distributed 37
15. No Assignment of Benefits 39
16. Administration 39
17. Claims Procedure 43
18. Limitation on Participants' Rights 44
19. Future of the Plan 45
20. "Top-Heavy" Contingency Provisions 46
21. Governing Law 48
22. Execution 48
</TABLE>
<PAGE> 3
GRANITE CONSTRUCTION
PROFIT SHARING AND 401(k) PLAN
As Amended and Restated Effective As of January 1, 1999
Section 1. Nature of the Plan.
The purpose of this Plan is to enable participating Employees to save
funds on a tax-favored basis and to provide Participants with an opportunity to
accumulate capital for their future economic and retirement security.
The Plan, which was originally adopted effective as of January 1, 1995,
as an amendment and restatement of the Granite Construction Company Profit
Sharing Plan Trust Agreement (originally effective January 1, 1976), is hereby
amended and restated effective as of January 1, 1999. The Plan is a profit
sharing plan under Section 401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), that contains a "cash or deferred arrangement" under
Section 401(k) of the Code. In order to satisfy applicable requirements of the
Code, as amended by the Small Business Job Protection Act of 1996, the second
sentence in the first paragraph of Section 4(b)(5) and the third sentence in the
first paragraph of Section 4(c)(3) are amended effective as of January 1, 1997.
All Trust Assets held under the Plan will be administered, distributed,
forfeited and otherwise governed by the provisions of this Plan and the related
Trust Agreement. The Plan is administered by an Administrative Committee for the
exclusive benefit of Participants (and their Beneficiaries).
<PAGE> 4
Section 2. Definitions.
In this Plan, whenever the context so indicates, the singular or plural
number and the masculine, feminine or neuter gender shall be deemed to include
the other, the terms "he," "him" and "his" shall refer to a Participant, and the
capitalized terms shall have the following meanings:
<TABLE>
<S> <C>
Account One of several accounts maintained to
record the interest of a Participant.
See Section 6.
Additional
401(k) Contributions Employer Contributions made pursuant to
Participant elections under Section
4(b)(2).
Affiliate Any corporation which is a member of a
controlled group of corporations (within
the meaning of Section 414(b) of the
Code) of which the Company is also a
member or any trade or business (whether
or not incorporated) which is under
common control with the Company (within
the meaning of Section 414(c) of the
Code).
Allocation Date December 31st of each year (the
last day of each Plan Year).
Beneficiary The person (or persons) entitled to
receive any benefit under the Plan in
the event of a Participant's death. See
Section 14(b).
Board of Directors The Board of Directors of the Company.
Break in Service A Plan Year in which an Employee is not
credited with more than 500 Hours of
Service as a result of his termination
of Service. See Section 11(b).
Capital Accumulation A Participant's vested, nonforfeitable
interest in his Accounts under the Plan.
Each Participant's Capital Accumulation
shall be determined in accordance
</TABLE>
-2-
<PAGE> 5
<TABLE>
<S> <C>
with the provisions of Section 10 and
distributed as provided in Sections 12,
13 and 14.
Code The Internal Revenue Code of 1986, as
amended.
Committee The Administrative Committee appointed
by the Board of Directors to administer
the Plan. See Section 16.
Company Granite Construction Incorporated, a
Delaware corporation.
Compensation The Statutory Compensation paid to an
Employee by his Employer, but excluding
(1) reimbursements or other expense
allowances (including travel expense
allowances), (2) fringe benefits (cash
and noncash), (3) moving expenses, (4)
welfare benefits, (5) any amount in
excess of $160,000 (as adjusted
periodically after 1998 for increases in
the cost of living pursuant to Section
401(a)(17) of the Code), and (6) any
amount paid to an Employee pursuant to
the terms of a collective bargaining
agreement.
Disability Any mental or physical incapacity of an
Employee that, in the opinion of a
licensed physician selected by the
Company, renders the Employee totally
and permanently incapable of performing
his assigned duties with an Employer and
results in his termination of Service.
Employee Any individual who is treated by an
Employer as a common law employee. A
leased Employee, as described in Section
414(n) of the Code, is not an Employee
for purposes of this Plan.
Employer The Company and each Affiliate which is
designated as an Employer by the Board
of Directors and which adopts the Plan
for the benefits of its Employees.
</TABLE>
-3-
<PAGE> 6
<TABLE>
<S> <C>
Employer Contributions Payments made to the Trust by an
Employer (other than Rollover
Contributions) as described in Sections
4(a), (b) and (c).
ERISA The Employee Retirement Income Security
Act of 1974, as amended.
ESOP The Granite Construction Employee Stock
Ownership Plan, an employee stock
ownership plan under Section 4975(e)(7)
of the Code.
ESOP Diversification
Account The Account which reflects a
Participant's interest attributable to
amounts transferred from the ESOP
pursuant to the diversification election
procedures of the ESOP.
401(k) Account The Account which reflects a
Participant's interest under the Plan
attributable to 401(k) Contributions.
See Section 6.
401(k) Contributions Employer Contributions made pursuant to
Participant elections under Section
4(b). Any reference made to 401(k)
Contributions in the Plan shall
generally include a Participant's
Additional 401(k) Contributions, except
for purposes of Sections 3(b) and 4(c)
with respect to Matching Contributions.
Forfeiture The portion of a Participant's Accounts
which does not become a part of his
Capital Accumulation and which is
forfeited under Section 10(b).
Frozen Elective Deferral
Account The Account which reflects a
Participant's interest in his "elective
deferral account" under the Gibbons Plan
that was transferred to the Plan on May
1, 1998. See Section 8(a).
Frozen General
Account The Account which reflects a
Participant's interest in his "rollover
account," "employer matching
contribution account" and "employer
profit-sharing
</TABLE>
-4-
<PAGE> 7
<TABLE>
<S> <C>
contribution account" under the Gibbons
Plan that was transferred to this Plan
on May 1, 1998. See Section 8(a).
Gibbons Employee A Participant who became an
Employee as a result of the Company's
acquisition of G. G. & R., Inc.
(formerly known as the Gibbons Company)
and its affiliates on May 8, 1995.
Gibbons Plan The Gibbons Company Profit Sharing and
Retirement Plan, a qualified defined
contribution that was terminated,
effective as of March 31, 1998,
(excluding the portion of the plan that
was a "cash or deferred arrangement"
under Section 401(k) of the Code).
Amounts attributable to the portion of
the plan that was a "cash or deferred
arrangement" were transferred from the
Gibbons Plan to this Plan on the behalf
of Gibbons Employees on May 1, 1998.
Highly Compensated
Employee An Employee who (1) was a "5% owner" at
any time during the Plan Year or
preceding Plan Year, or (2) received
Statutory Compensation in excess of
$80,000 in the preceding Plan Year and
was in the top-paid 20% group of
Employees for such preceding Plan Year.
The $80,000 amount shall be adjusted
after 1998 for increases in the cost of
living pursuant to Section 414(q)(1) of
the Code.
Hour of Service Each hour of Service for which an
Employee is credited under the Plan, as
described in Section 3(d).
Matching Account The Account which reflects each
Participant's interest attributable to
Matching Contributions. See Section 6.
Matching Contributions Employer Contributions made under the
Plan in amounts related to the 401(k)
Contributions on behalf of each
Participant. See Section 4(c).
</TABLE>
-5-
<PAGE> 8
<TABLE>
<S> <C>
Participant Any Employee or former Employee who has
met the applicable eligibility
requirements of Section 3 and who has
not yet received a complete distribution
of his Capital Accumulation.
Plan The Granite Construction Profit Sharing
and 401(k) Plan, which includes this
Plan and the Trust Agreement.
Plan Year The 12-month period ending on each
Allocation Date (and coinciding with
each calendar year, which is the taxable
year of the Company).
Profit Sharing
Account The Account which reflects a
Participant's interest under the Plan
attributable to Profit Sharing
Contributions. See Section 6.
Profit Sharing
Contributions Employer Contributions made pursuant to
Section 4(a).
Retirement Termination of Service on or after
attaining age 55 or, if later, the
completion of ten Years of Vesting
Service (but not later than the date he
attains age 65 or, if later, the fifth
anniversary of the date he became a
Participant).
Rollover Account The Account which reflects a
Participant's interest under the Plan
attributable to Rollover Contributions.
See Section 6.
Rollover Contributions Payments made to the Trust by a
Participant under Section 4(e).
Service Employment with the Company and or any
Affiliate. For any corporation or other
business entity which is designated as
an Employer whose Employees are eligible
to participate in the Plan and for the
employees of any other business
substantially all the assets of which
are acquired by an Employer, the Board
of Directors may grant the Employees of
such entity credit for their years of
</TABLE>
-6-
<PAGE> 9
<TABLE>
<S> <C>
service with such entity (prior to the
date that such entity became an
Affiliate) for purposes of eligibility
and vesting under the Plan. Such grant
shall be evidenced by action of the
Board of Directors and attached to and
made a part of this Plan.
Statutory Compensation The total remuneration paid to an
Employee by an Employer during the Plan
Year for personal services rendered,
plus the amount of his 401(k)
Contributions and any amounts that are
contributed by an Employer on his behalf
that are not included in gross income
under Section 125 of the Code, but
excluding employer contributions to a
plan of deferred compensation, amounts
realized in connection with stock
options and amounts which receive
special tax benefits.
Stock Shares of common stock issued by the
Company.
Stock Fund The investment fund held by the Trust
consisting of shares of Stock.
Trust The Granite Construction Profit Sharing
and 401(k) Plan Trust, created by the
Trust Agreement entered into between the
Company and the Trustee.
Trust Agreement The Agreement between the Company and
the Trustee establishing the Trust and
specifying the duties of the Trustee.
Trust Assets The Stock (and other assets) held in the
Trust for the benefit of Participants.
See Section 5.
Trustee The Trustee (and any successor Trustee)
appointed by the Board of Directors to
hold the Trust Assets.
Year of Vesting Service Each Plan Year in which an Employee is
credited with at least 1000 Hours of
Service. See Section 11(a).
</TABLE>
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<PAGE> 10
Section 3. Eligibility and Participation.
(a) Each Employee who was a Participant on December 31, 1998, shall
continue as a Participant. Each other Employee shall become a Participant as of
the Allocation Date of the Plan Year in which his Service began if he is
credited with at least 1000 Hours of Service during that Plan Year and is still
an Employee on the Allocation Date; provided, however, that an Employee who
incurs a Disability during that Plan Year while an Employee shall become a
Participant on the date of Disability and an Employee who dies during that Plan
Year while an Employee shall become a Participant on the day prior to his date
of death. Each other Employee who does not become a Participant pursuant to the
preceding sentence shall become a Participant as of the June 30th or December
31st coinciding with or next following the date on which he is credited with at
least 1000 Hours of Service over a period that does not exceed 12 consecutive
months, provided that he is still an Employee on such June 30th or December
31st. For this purpose, the eligibility computation period for determining the
1,000 Hours of Service requirement in the preceding sentence shall initially be
the period of 12 consecutive months beginning on the Employee's initial date of
Service and thereafter shall be the period of 12 consecutive months beginning on
the anniversary date of the Employee's initial date of Service.
Employees whose terms of employment are covered by a collective
bargaining agreement shall not be eligible to participate in the Plan unless the
collective bargaining agreement specifically provides for such Employees to
participate in the Plan. Employees who are nonresident aliens who receive no
earned income from the Company or an Affiliate that constitutes income from
sources within the United States shall not be eligible to participate in the
Plan. An Employee who ceases to be ineligible to participate in the Plan shall
become a
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<PAGE> 11
Participant as of the later of the date he ceases to be ineligible or the date
described in the preceding paragraph.
(b) A Participant shall be entitled to share in the allocation of
Matching Contributions for each Plan Year in which he elects to make 401(k)
Contributions; provided, however, that a Participant shall not be entitled to
share in the allocation of Matching Contributions with respect to any Additional
401(k) Contributions that are made to the Trust on his behalf. A Participant is
entitled to share in the allocation of Profit Sharing Contributions and
Forfeitures for each Plan Year in which he is credited with at least 1000 Hours
of Service and in which he is an Employee on the Allocation Date. A Participant
shall also entitled to share in the allocation of Profit Sharing Contributions
and Forfeitures for the Plan Year of his Retirement, Disability or death.
(c) A former Participant who is reemployed by an Employer shall become
a Participant as of the date of his reemployment. A former Employee who is
reemployed by an Employer and who previously satisfied the service requirement
described in Section 3(a) shall become a Participant as of the later of the date
of his reemployment or the date described in Section 3(a). Notwithstanding any
provision of the Plan to the contrary, contributions, benefits and service
credit with respect to qualified military service will be provided in accordance
with Section 414(u) of the Code.
(d) Hours of Service - For purposes of determining the Hours of Service
to be credited to an Employee under the Plan, the following rules shall be
applied:
(1) Hours of Service shall include each hour of Service
for which an Employee is paid (or entitled to
payment) for the performance of duties;
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<PAGE> 12
each hour of Service for which an Employee is paid
(or entitled to payment) for a period during which no
duties are performed (irrespective of whether Service
has terminated) due to vacation, holiday, illness,
incapacity (including Disability), layoff, jury duty,
military duty or paid leave of absence; and each
additional hour of Service for which back pay is
either awarded or agreed to (irrespective of
mitigation of damages); provided, however, that not
more than 501 Hours of Service shall be credited for
a single continuous period during which an Employee
does not perform any duties (whether or not such
period occurs in a single Plan Year or 12 month
period, with respect to an Employee's initial
eligibility computation period).
(2) The crediting of Hours of Service shall be determined
in accordance with the rules set forth in paragraphs
(b) and (c) of Section 2530.200b-2 of the regulations
prescribed by the Department of Labor, which rules
shall be consistently applied with respect to all
Employees within the same job classification.
(3) Hours of Service shall not be credited to an Employee
for a period during which no duties are performed if
payment is made or due under a plan maintained solely
for the purpose of complying with applicable worker's
compensation, unemployment compensation or disability
insurance laws, and Hours of Service shall not be
credited on account of any payment made or due an
Employee solely in reimbursement of medical or
medically-related expenses.
(4) Hours of Service that are credited for the
performance of duties shall be determined from
records maintained by the Employer; provided,
however, that, in the case of an Employee whose
Compensation is not determined on the basis of
certain amounts for each hour worked and whose hours
are not required to be counted and recorded by any
Federal law (such as the Fair Labor Standards Act),
such Employee's Hours of Service need not be
determined from employment records, and such Employee
shall be credited with ten Hours of Service for each
day in which he would be credited with any Hours of
Service. Hours of Service that are credited for
periods during which no duties are performed or for
back pay shall be credited on the basis of 40 Hours
of Service for each week or eight Hours of Service
for each day.
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<PAGE> 13
Section 4. Contributions.
(a) Profit Sharing Contributions - Profit Sharing Contributions may be
paid to the Trustee for each Plan Year in such amounts (or under such formula)
as may be determined by the Board of Directors. Profit Sharing Contributions
shall be paid to the Trustee not later than the due date (including extensions)
for filing the Company's Federal income tax return for that Plan Year.
(b) 401(k) Contributions -
(1) Each Participant may elect as of the first business day of
each month (or as soon as administratively feasible) to have a whole percentage
(up to 10% or such other percentage as may be determined by the Board of
Directors) of his Compensation per pay period withheld by his Employer and
contributed to the Trust as 401(k) Contributions in lieu of receiving such
amount as Compensation. A Participant's 401(k) Contributions may not exceed
$10,000 (as adjusted periodically after 1998 for increases in the cost of living
pursuant to Section 402(g)(5) of the Code) for any Plan Year.
(2) Additional 401(k) Contributions. Under rules established
by the Committee, an eligible Participant may elect to have an additional
portion of his Compensation withheld by his Employer and contributed to the
Trust as Additional 401(k) Contributions equal to the full amount of the
quarterly cash dividends that are paid to him under Section 13(a) of the ESOP.
An Additional 401(k) Contribution may be made for a Participant under the
preceding sentence with respect to a calendar quarter only if he is an Employee
on the last day of such calendar quarter and if he is not a participant in a
non-qualified deferred compensation plan maintained by an Employer for such
calendar quarter. An eligible Participant who is not a
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<PAGE> 14
participant in a non-qualified deferred compensation plan maintained by an
Employer may also elect to have any portion of his Compensation contributed to
the Plan as Additional 401(k) Contributions under the terms of the Employer's
"cafeteria plan" under Section 125 of the Code. A Participant who is an Employee
and is not a participant in a non-qualified deferred compensation plan
maintained by an Employer may also elect to have up to 90% of his cash bonus (in
10% increments) under the Granite Construction Profit Sharing Cash Bonus Plan
contributed to the Plan as Additional 401(k) Contributions, less such amounts as
may be required to be withheld to satisfy tax withholding obligations.
(3) A Participant may change the amount of 401(k)
Contributions to be withheld or cease to have any 401(k) Contributions withheld
as of the first business day of each month or as soon as administratively
feasible. A Participant who elects to cease to have any 401(k) Contributions
withheld may not make a new election to have 401(k) Contributions withheld until
the beginning of the following Plan Year. Each such election (and any changes
thereof) shall be made on the payroll deduction authorization form supplied by
the Participant's Employer and in accordance with administrative rules and
procedures established by the Committee. 401(k) Contributions shall be paid by a
Participant's Employer to the Trustee as soon as practicable but in no event
later than the 15th business day of the month following the month in which such
amounts are withheld from the Participant's Compensation.
(4) 401(k) Contributions made under this Section 4(b) shall be
treated as automatically satisfying the nondiscrimination requirements of
Section 401(k)(3)(A)(ii) of the Code for any Plan Year in which Matching
Contributions are made at the rates described in Section 4(c)(1), in accordance
with Section 401(k)(12)(B)(iii) of the Code. For this purpose, the
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<PAGE> 15
Committee shall provide each eligible Employee with a written notice informing
such Employee of the amount he will be entitled to receive as a Matching
Contribution under Section 4(c)(l) for the subsequent Plan Year (if he elects to
make 401(k) Contributions to the Plan during such subsequent Plan Year),
including a description of the Employee's rights and obligations under the Plan,
as described in Internal Revenue Service Notice 98-52. For Employees who have
satisfied the requirements of Section 3(a) prior to the beginning of a Plan Year
(other than those Employees who terminate Service as a result of Disability or
death), such notice shall be provided to such Employees at least 30 days (and no
more than 90 days) prior to the first day of each Plan Year for which the Board
has determined to make Matching Contributions at rates described in Section
4(c)(1). For Employees (other than those Employees who terminate Service as a
result of Disability or death) who satisfy the requirements of Section 3(a) and
(c) during a Plan Year in which the Board has determined to make Matching
Contributions at rates described in Section 4(c)(1), the written notice shall be
provided no more than 90 days prior to the date that such Employees will become
eligible under Section 3(a) (and no later than the date that such Employees
become eligible).
(5) 401(k) Contributions for Highly Compensated Employees
shall be limited for any Plan Year in which no Matching Contributions are made
to the Plan to the extent necessary to satisfy one of the deferral percentage
tests described in Section 401(k)(3) of the Code and Section 1.401(k)-1(b) of
the regulations thereunder. Such deferral percentage requirements shall be
satisfied based upon the "current Plan Year testing method," as described in
Internal Revenue Service Notice 98-1.
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<PAGE> 16
The Committee may take any of the following corrective actions to
satisfy the deferral percentage tests:
(i) Prospectively limit the amount of 401(k)
Contributions for some or all Highly Compensated Employees for such
Plan Year, provided, however, that the Committee shall first limit the
amount of Additional 401(k) Contributions for some or all Highly
Compensated Employees for such Plan Year before limiting the amount of
such Highly Compensated Employees' 401(k) Contributions; or
(ii) Distribute all or a portion of the 401(k)
Contributions made on behalf of a Highly Compensated Employee (together
with any income attributable thereto) to him which are determined to be
"excess contributions" within the meaning of Section 1.401(k)-1(g)(7)
of the regulations. Such "excess contributions" are determined by
reducing 401(k) Contributions made on behalf of Highly Compensated
Employees in order of the actual deferral percentages beginning with
the highest of such percentages. The actual deferral percentage of the
Highly Compensated Employee with the highest such percentage shall be
reduced until it equals that of the Highly Compensated Employee with
the next highest percentage. This process shall be repeated until one
of the tests described in Section 40l(k)(3) of the Code and Section
1.40l(k)-l(b) is passed. The amount of excess contributions to be
distributed to Highly Compensated Employees under this Section
4(b)(5)(ii) shall be deemed attributable first to those Highly
Compensated Employees who have the greatest dollar amount of 401(k)
Contributions. Such excess contributions shall be reduced by any excess
deferrals previously distributed under Section 4(b)(6) for the calendar
year ending with the Plan Year. The amount of
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<PAGE> 17
excess contributions to be distributed to an affected Highly
Compensated Employee shall be taken first from the affected Highly
Compensated Employee's Additional 401(k) Contributions, if any.
To the extent practicable, the Committee shall take such corrective action by
March 15th of the following Plan Year; but in no event shall such action be
taken later than the Allocation Date of the following Plan Year.
(6) If during a Plan Year a Participant participates in more
than one qualified cash or deferred arrangement described in Section 401(k) of
the Code and the Participant notifies the Committee no later than the March 1st
following any calendar year that all or a specified portion of the 401(k)
Contributions made on the Participant's behalf for that calendar year should be
paid to the Participant (together with any income attributable thereto) because
such 401(k) Contributions constitute "excess deferrals," as described in Section
402(g)(2)(A) of the Code, distribution of such amounts to the Participant shall
occur no later than the April 15th following the calendar year in which the
"excess deferral" occurred.
(7) Any determination and distribution of income attributable
to 401(k) Contributions under Sections 4(b)(5)(ii) and (6) shall be made in
accordance with Section 1.401(k)-1(f) of the regulations under the Code.
(c) Matching Contributions -
(1) Matching Contributions shall be paid by an Employer to the
Trust together with the payment of the 401(k) Contributions to which the
Matching Contributions relate. With respect to each Participant, the rate of
Matching Contribution shall be equal to (1) 2% for 1% of Compensation deferred
as 401(k) Contributions, (2) 2.5% for 2% of Compensation deferred as 401(k)
Contributions, (3) 3% for 3% of Compensation deferred as
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<PAGE> 18
401(k) Contributions, (4) 3.5% for 4% of Compensation deferred as 401(k)
Contributions, or (5) 4% for 5% of Compensation deferred as 401(k)
Contributions. No Matching Contribution shall be made with respect to any
Additional 401(k) Contributions or for amounts contributed as 401(k)
Contributions by a Participant during any Plan Year in an amount that exceeds 5%
of such Participant's Compensation.
(2) Matching Contributions made under Section 4(c)(1) shall be
treated as automatically satisfying the nondiscrimination requirements of
Section 401(m)(2) of the Code in accordance with Section 40l(k)(12)(B)(iii) of
the Code. For this purpose, the Committee shall provide each Employee who has
satisfied the requirements of Section 3(a) with a written notice in the manner
described in Section 4(b)(4).
(3) Matching Contributions shall be subject to the
nondiscrimination testing requirements described in this Section 4(c)(3) if the
rate of Matching Contributions is changed for any Plan Year to be a rate that
does not satisfy Section 40l(m)(11) of the Code. For this purpose, Matching
Contributions for Highly Compensated Employees shall be limited to the extent
necessary to satisfy one of the contribution percentage requirements described
in Section 401(m)(2) of the Code and Section 1.40l(m)-1(b) of the regulations
thereunder. Such contribution percentage requirements shall be satisfied based
upon the "current Plan Year testing method," as described in Internal Revenue
Service Notice 98-1.
The Committee may take any of the following corrective actions to
satisfy one of the contribution percentage tests:
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<PAGE> 19
(i) Prospectively limit the amount of Matching
Contributions for some or all Highly Compensated Employees for such
Plan Year; or
(ii) Forfeit all or a portion of the Matching
Contributions made on behalf of a Highly Compensated Employee
attributable to 401(k) Contributions that are distributed under Section
4(b)(5)(ii) above.
(iii) Distribute all or a portion of the Matching
Contributions made on behalf of a Highly Compensated Employee (together
with any income attributable thereto) to him which are determined to be
"excess aggregate contributions" within the meaning of Section
1.401(m)-1(f)(8) of the regulations. Such "excess aggregate
contributions" are determined by reducing Matching Contributions made
on behalf of Highly Compensated Employees in order of the actual
contribution percentages beginning with the highest of such
percentages. The actual contribution percentage of the Highly
Compensated Employee with the highest such percentage shall be reduced
until it equals that of the Highly Compensated Employee with the next
highest percentage. This process shall be repeated until one of the
tests described in Section 401(m)(2) of the Code and Section
l.401(m)-l(b) of the regulations is passed. The amount of excess
aggregate contributions to be distributed to Highly Compensated
Employees under this Section 4(c)(3)(iii) shall be deemed attributable
first to those Highly Compensated Employees who have the greatest
dollar amount of Matching Contributions.
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<PAGE> 20
To the extent practicable, the Committee shall take such corrective action by
March 15th of the following Plan Year; but in no event shall such action be
taken later than the Allocation Date of the following Plan Year.
(d) Additional Provisions - Employer Contributions shall not be made
for any Plan Year in amounts which can be allocated to no Participant's Accounts
by reason of the allocation limitation described in Section 7 or in amounts
which are not deductible under Section 404(a) of the Code. Any Employer
Contributions which are not deductible under Section 404(a) of the Code may be
returned to the Employer by the Trustee (upon the direction of the Company)
within one year after the deduction is disallowed or after it is determined that
the deduction is not available. In the event that Employer Contributions are
paid to the Trust by reason of a mistake of fact, such Employer Contributions
may be returned to the Employer by the Trustee (upon the direction of the
Company) within one year after the payment to the Trust. The Employer shall pay
any amounts attributable to 401(k) Contributions which are not deductible under
Section 404(a) of the Code to the affected Participants as Compensation. In the
event that 401(k) Contributions are paid to the Trust by reason of a mistake of
fact, such 401(k) Contributions shall be returned to the Employer by the Trustee
(upon the direction of the Company) within one year after the payment to the
Trust. The Employer shall pay any amounts attributable to 401(k) Contributions
which are paid to the Trust by reason of a mistake of fact to the affected
Participants as Compensation.
(e) Rollover Contributions - Subject to such terms and conditions as
may be established from time to time by the Committee, an Employee who is in the
class of Employees that is eligible to participate in the Plan in accordance
with Section 3(a) may make a Rollover
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<PAGE> 21
Contribution to the Trust by delivering such contribution in cash to the
Trustee, together with a written certification, satisfactory to the Committee,
that the contribution qualifies as a Rollover Contribution under Section
402(c)(4) of the Code. Such Employee's Rollover Contributions shall be allocated
to his Rollover Account.
(f) Participant Contributions - Except as provided in Sections 4(b) and
4(e), no Participant shall be required or permitted to make contributions to the
Trust.
Section 5. Investment of Trust Assets.
(a) Each Participant shall direct the investment of his Accounts among
such investment funds as the Committee shall from time to time cause to be made
available, including the Stock Fund.
The Stock Fund shall be made available only if the offering of such
fund complies with the registration and/or qualification requirements of
applicable Federal or state securities laws. The Stock Fund shall be invested in
shares of Stock purchased by the Trustee from time to time in accordance with
the provisions of the Trust Agreement. All dividends (whether cash or stock)
with respect to the Stock in the Stock Fund shall be reinvested in the fund.
(b) Investment elections by Participants shall be made in such
increments and at such times as the Committee shall permit, in accordance with
administrative rules and procedures established from time to time by the
Committee, and shall be subject to such reasonable guidelines and limitations as
the Committee shall deem to be appropriate for the efficient administration of
the Plan. Each Participant shall bear the sole responsibility for the investment
of such Accounts, and the Committee shall not have any responsibility or
liability for any losses
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<PAGE> 22
that may occur in connection with such investment. No Participant who is subject
to the provisions of Section 16 of the Securities Exchange Act of 1934 may
invest in the Stock Fund. In addition, no portion of a Participant's ESOP
Diversification Account may be invested in the Stock Fund.
(c) Each Participant (or Beneficiary) shall be entitled to direct the
Trustee as to the manner in which shares of Stock then allocated to his Accounts
will be voted. Each Participant (or Beneficiary) who is entitled to direct the
Trustee as to the manner in which shares of Stock will be voted shall be
provided with the proxy statement and other materials provided to Company
shareholders in connection with each shareholder meeting, together with a form
or forms upon which the Participant (or Beneficiary) shall have the right to
give confidential voting instructions to the Trustee. A Participant (or
Beneficiary) who does not give instructions to the Trustee shall be treated as
having authorized the Committee to direct the Trustee as to the voting of his
shares of Stock.
In the event that there should be a tender or exchange offer for Stock,
each Participant (or Beneficiary) will be entitled to direct the Trustee as to
the manner in which to respond to such offer with respect to shares of Stock
then allocated to his Accounts. Each Participant (or Beneficiary) who is
entitled to direct the Trustee as to the manner in which the Trustee will
respond to any such offer shall be provided with the tender offer materials and
the Participant (or Beneficiary) shall have the right to provide confidential
instructions to the Trustee as to the manner in which to respond to such offer
with respect to the shares of Stock then allocated to his Accounts. A
Participant (or Beneficiary) who does not give instructions to the Trustee shall
be treated as having directed the Trustee not to tender.
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<PAGE> 23
Each Participant (or Beneficiary) shall be a named fiduciary of the
Plan for the purpose of providing directions as to the voting or tendering of
the shares of Stock allocated to his Accounts.
Section 6. Allocations to Participants' Accounts.
Profit Sharing Account - A Profit Sharing Account shall be maintained
to reflect the interest of each Participant who is eligible to receive Profit
Sharing Contributions or who had a prior profit sharing account under the Plan.
The Profit Sharing Account maintained for a Participant shall be credited
annually with his share of any Profit Sharing Contributions and Forfeitures. The
Profit Sharing Account shall be credited throughout each Plan Year with its
share of the net income (or loss) of the Trust. Subaccounts of a Participant's
Profit Sharing Account may be maintained to reflect the portion of the Profit
Sharing Account that is invested in each investment fund.
401(k) Account - A 401(k) Account shall be maintained to reflect the
interest of each Participant under the Plan who makes 401(k) Contributions. The
401(k) Account maintained for a Participant shall be credited throughout each
Plan Year with his 401(k) Contributions and with its share of the net income (or
loss) of the Trust. Subaccounts of a Participant's 401(k) Account may be
maintained to reflect Additional 401(k) Contributions and the portion of the
401(k) Account that is invested in each investment fund.
Matching Account - A Matching Account shall be maintained to reflect
the interest of each Participant who is eligible to receive Matching
Contributions. The Matching Account maintained for a Participant shall be
credited throughout each Plan Year with his share of any
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<PAGE> 24
Matching Contributions. The Matching Account maintained for a Participant shall
be credited throughout each Plan Year with its share of the net income (or loss)
of the Trust. Subaccounts of a Participant's Matching Account may be maintained
to reflect the portion of the Matching Account that is invested in each
investment fund.
Rollover Account - A Rollover Account shall be maintained to reflect
the interest of each Employee who makes Rollover Contributions. The Rollover
Account maintained for an Employee shall be credited throughout each Plan Year
with the Employee's Rollover Contributions and with its share of the net income
(or loss) of the Trust. Subaccounts of a Participant's Rollover Account may be
maintained to reflect the portion of the Rollover Account that is invested in
each investment fund.
ESOP Diversification Account - An ESOP Diversification Account shall be
maintained to reflect the interest of each Participant who elects have a portion
of his "stock account" under the ESOP transferred to the Plan in order to
satisfy the diversification election requirements of Section 401(a)(28)(B) of
the Code. The ESOP Diversification Account maintained for a Participant shall be
credited annually with any amounts that are so transferred on behalf of a
Participant. The ESOP Diversification Account shall be credited throughout each
Plan Year with its share of the net income (or loss) of the Trust. Subaccounts
of a Participant's ESOP Diversification Account may be maintained to reflect the
portion of the ESOP Diversification Account that is invested in each investment
fund. No portion of a Participant's ESOP Diversification Account may be invested
in the Stock Fund.
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<PAGE> 25
The allocations to Participants' Accounts for each Plan Year shall be
made as follows:
(a) Profit Sharing Contributions and Forfeitures - Profit Sharing
Contributions under Section 4(a) and Forfeitures under Section 10(b) for each
Plan Year shall be allocated as of the Allocation Date among the Profit Sharing
Accounts of Participants so entitled under Section 3(b) in the ratio that the
Compensation of each such Participant bears to the total Compensation of all
such Participants, subject to the allocation limitations described in Section 7.
(b) 401(k) Contributions - 401(k) Contributions under Section 4(b) for
each Plan Year shall be allocated to the 401(k) Accounts of the Participants on
whose behalf they were made, subject to the allocation limitations described in
Section 7.
(c) Matching Contributions - Matching Contributions under Section 4(c)
for each Plan Year shall be allocated to the Matching Accounts of the
Participants on whose behalf they were made, subject to the allocation
limitations described in Section 7.
(d) Rollover Contributions and ESOP Diversification Transfers -
Rollover Contributions and transfers from the ESOP (pursuant to the ESOP's
diversification election provisions) for each Plan Year shall be allocated to
the Rollover Accounts and ESOP Diversification Accounts, respectively, of those
Employees or Participants who made them.
(e) Net Income (or Loss) of the Trust - The net income (or loss) of the
Trust for each Plan Year attributable to Participants' Accounts shall be
determined separately on a daily basis for each investment fund and allocated
among such Accounts in proportion to the respective balances of such Accounts
invested in such funds.
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<PAGE> 26
(f) Accounting for Allocations - The Committee shall establish
accounting procedures for the purpose of making the allocations to Participants'
Accounts provided for in this Section 6. From time to time, the Committee may
modify the accounting procedures for the purposes of achieving equitable and
nondiscriminatory allocations among the Accounts of Participants in accordance
with the general concepts of the Plan, the provisions of this Section 6 and the
requirements of the Code and ERISA.
Section 7. Allocation Limitation.
The Annual Additions for each Plan Year with respect to any Participant
may not exceed the lesser of:
(1) 25% of the Participant's Statutory Compensation; or
(2) $30,000, as may be adjusted for increases in the cost
of living pursuant to Section 415(d)(1)(C) of the
Code.
For this purpose, "Annual Additions" shall be the total of the Employer
Contributions and Forfeitures (including any income attributable to Forfeitures)
allocated to the Accounts of a Participant for the Plan Year, plus the
allocations of employer contributions and forfeitures made on his behalf under
the ESOP. Annual Additions shall include 401(k) Contributions distributed to a
Participant pursuant to Sections 4(b)(5)(ii) or 4(b)(6), but shall exclude any
amounts paid to a Participant pursuant to the next paragraph of this Section 7.
If the aggregate amount that would be allocated to the accounts of a
Participant under this Plan and the ESOP in the absence of this limitation would
exceed the amount set forth in this
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<PAGE> 27
limitation, then, to the extent necessary, the Participant's Annual Additions
for the Plan Year shall be reduced and reallocated to the Accounts of
Participants not affected by this limitation for the Plan Year in the following
order: (1) any Profit Sharing Contributions made on the Participant's behalf for
the Plan Year shall be reduced, (2) any Additional 401(k) Contributions made on
the Participant's behalf for the Plan Year shall be returned to the Participant
as Compensation (together with any income attributable thereto), (3) any 401(k)
Contributions made on the Participant's behalf for the Plan Year shall be
returned to the Participant as Compensation (together with any income
attributable thereto), (4) any Matching Contributions made on the Participant's
behalf for the Plan Year shall be reduced and (5) any employer contributions
under the ESOP made on the Participant's behalf for the Plan Year shall be
reduced.
If, after such reductions, there are any Forfeitures which can be
allocated to no Participant's Accounts by reason of this limitation, such
Forfeitures shall be credited to a "Forfeiture Suspense Account" and allocated
as Forfeitures under Section 6(a) for the next succeeding Plan Year (prior to
the allocation of Employer Contributions for such succeeding Plan Year).
Section 8. Frozen Gibbons Accounts.
(a) Allocations to Gibbons Employee's Frozen Gibbons Accounts.
Frozen Elective Deferral Account - A Frozen Elective Deferral Account
shall be maintained to reflect the interest of each Gibbons Employee in his
"elective deferral account" under the Gibbons Plan that was transferred to this
Plan on May 1, 1998. The Frozen Elective
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Deferral Account maintained for a Participant shall be credited throughout each
Plan Year with its share of the net income (or loss) of the Trust. Subaccounts
of a Participant's Frozen Elective Deferral Account may be maintained to reflect
the portion of the Frozen Elective Deferral Account that is invested in each
investment fund.
Frozen General Account - A Frozen General Account shall be maintained
to reflect the interest of each Gibbons Employee in his "rollover account,"
"employer profit-sharing contribution account" and "employer matching
contribution account" that was transferred to the Plan on May 1, 1998. The
Frozen General Account maintained for a Gibbons Employee shall be credited
throughout each Plan Year with its share of the net income (or loss) of the
Trust. Subaccounts of a Gibbons Employee's Frozen General Account may be
maintained to reflect the portion of the Frozen General Account that is invested
in each investment fund.
(b) Distributions From Frozen Accounts. All distributions from a
Gibbons Employee's Frozen Elective Deferral Account and Frozen General Account
(collectively referred to as "Frozen Accounts") shall be subject to the
provisions of Section 12, except as otherwise provided in this Section 8(b). For
purposes of Section 12(c), distribution to a Gibbons Employee from his Frozen
Accounts shall commence no later than the date provided in the first sentence in
Section 12(c), unless a Gibbons Employee elects to maintain his Frozen Accounts
in the Plan until they are required to be distributed under the second and third
sentences of Section 12(c). For this purpose, failure to submit a claim for a
distribution shall be deemed such an election. A Gibbons Employee may elect to
receive his Frozen Accounts in one or a combination of the following forms:
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(i) A single lump sum cash payment.
(ii) Substantially equal monthly, quarterly or
annual cash installments over a period not
exceeding the life expectancy of the Gibbons
Employee and the Gibbons Employee's spouse.
The minimum installment amount, regardless
of the periodic method chosen, must be at
least $100.00.
If a Gibbons Employee fails to elect to a form of payment, payment shall be made
as a single lump sum cash payment.
(c) In-Service Distributions -
(1) Frozen Elective Deferral Account. Each Gibbons Employee
may request a withdrawal of all or a portion of his Frozen Elective Deferral
Account at any time after he attains age 59 1/2 in accordance with such rules as
may be prescribed by the Committee. A Gibbons Employee is entitled to make only
one such withdrawal from his Frozen Elective Deferral Account in any Plan Year.
Such withdrawals shall be distributed in the manner described in Section 8(b).
(2) Frozen General Account. Each Gibbons Employee may request
a withdrawal of all or a portion of his Frozen General Account at any time in
accordance with such rules as may be prescribed by the Committee. A Gibbons
Employee is entitled to make only one such withdrawal from his Frozen General
Account in any Plan Year. Such withdrawals shall be distributed in the manner
described in Section 8(b).
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Section 9. Disclosure to Participants.
(a) Summary Plan Description - Each Participant shall be furnished with
a summary plan description of the Plan required by Sections 102(a)(l) and
104(b)(1) of ERISA. Such summary plan description shall be updated from time to
time as required under ERISA and Department of Labor regulations thereunder.
(b) Summary Annual Report - Within two months after the due date for
filing the annual return/report (Form 5500) for the Plan with the Internal
Revenue Service, each Participant shall be furnished with the summary annual
report of the Plan required by Section 104(b)(3) of ERISA, in the form
prescribed in regulations of the U.S. Department of Labor.
(c) Quarterly Statement - Each Participant shall be furnished with a
statement reflecting the following information:
(1) The balances (if any) in the Participant's Accounts
as of the beginning of the period.
(2) The amount of each type of Employer Contributions,
Rollover Contributions and ESOP Diversification
transfers allocated to each of the Participant's
Accounts for the period.
(3) The adjustments to the Participant's Accounts to
reflect the Participant's share of the net income (or
loss) of the Trust for that period.
(4) The new balances in the Participant's Accounts as of
the end of the period.
(5) His number of Years of Vesting Service and his vested
percentage in his Account balances (under Sections 10
and 11).
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(d) Additional Disclosure - The Company shall make available for
examination by any Participant copies of the Plan, the Trust Agreement and the
latest annual report of the Plan filed (on Form 5500) with the Internal Revenue
Service. Upon written request of any Participant, the Company shall furnish
copies of such documents and may make a reasonable charge to cover the cost of
furnishing such copies, as provided in regulations of the U. S. Department of
Labor.
Section 10. Vesting and Forfeitures.
(a) Vesting -
(1) A Participant's interest in his 401(k) Account, Rollover
Account, Frozen Elective Deferral Account, Frozen General Account and ESOP
Diversification Account shall be 100% vested and nonforfeitable at all times.
Any Participant who is credited with an Hour of Service after December 31, 1998,
shall become 100% vested in his Matching Account.
(2) A Participant's interest in his Profit Sharing Account
shall become 100% vested and nonforfeitable if he (A) is eligible for Retirement
(whether or not he actually terminates Service), (B) terminates Service by
reason of Disability, (C) dies while employed by the Company or an Affiliate or
(D) completes five Years of Vesting Service.
(b) Forfeitures - Any portion of the final balances in a Participant's
Profit Sharing Account which is not vested (and does not become part of his
Capital Accumulation) shall become a Forfeiture as of the Allocation Date of the
Plan Year in which he incurs a five-consecutive-year Break in Service (or in
which he dies, if earlier). All Forfeitures will be reallocated to the Profit
Sharing Account of remaining Participants, as provided in Section 6, as
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of the Allocation Date of the Plan Year in which a five-consecutive-year Break
in Service occurs (or in which the Participant dies, if earlier).
Section 11. Years of Vesting Service and Break in Service.
(a) Years of Vesting Service - An Employee's Years of Vesting Service
shall be the number of Plan Years in which he is credited with at least 1000
Hours of Service. Years of Vesting Service shall include such Service with the
Company or any Affiliate.
(b) Break in Service - A one-year Break in Service shall occur in a
Plan Year in which an Employee is not credited with more than 500 Hours of
Service as a result of his termination of Service. A five-consecutive-year Break
in Service shall be five consecutive one-year Breaks in Service.
For purposes of determining whether a Break in Service has occurred, if
an Employee begins a maternity/paternity absence described in Section
41l(a)(6)(E)(i) of the Code or a leave covered under the Family and Medical
Leave Act of 1993, the computation of his Hours of Service shall include the
Hours of Service that would have been credited if he had not been so absent (or
eight Hours of Service for each normal work day of such absence if the actual
Hours of Service cannot be determined). For purposes of this Section 11(b), a
"maternity/paternity absence" means an Employee's absence (A) by reason of (i)
the pregnancy of the Employee, (ii) birth of a child of the Employee or (iii)
placement of a child with the Employee in connection with the adoption of such
child by such Employee, or (B) for purposes of caring for a child described in
clause (A) for a period beginning immediately following such birth or placement.
An Employee shall be credited for such Hours of Service (up to a maximum of 501
Hours of
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Service) in the Plan Year in which such absence begins (if such
crediting will prevent him from incurring a Break in Service in such Plan Year)
or in the next following Plan Year.
In addition, if an Employee is eligible for and is granted leave
pursuant to the Company's family care leave plan, a Break in Service shall not
occur if the Employee returns to Service with an Employer, without any
intervening employment with another employer, immediately following the
expiration of such leave and remains employed for a period of 90 days
thereafter. The Employee shall be credited with the Hours of Service that would
have been credited if he had not been so absent (or eight Hours of Service for
each normal work day of such absence if the actual Hours of Service cannot be
determined) up to a maximum of 501 Hours of Service for each Plan Year during
the period of such absence (if such crediting will prevent him from incurring a
Break in Service for any such Plan Year).
(c) Reemployment - If a former Employee is reemployed after a one-year
Break in Service, the following special rules shall apply in determining his
Years of Vesting Service:
(1) New Accounts may be established to reflect his
interest in the Plan attributable to Service after
the Break in Service.
(2) If he is reemployed after the occurrence of a
five-consecutive-year Break in Service, Years of
Vesting Service after the Break in Service will not
increase his vested interest in his Accounts
attributable to Service prior to the Break in
Service.
(3) After he completes one Year of Vesting Service
following reemployment, his Years of Vesting Service
will include his Years of Vesting Service accumulated
prior to the Break in Service.
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Section 12. When Capital Accumulation Will Be Distributed.
(a) Except as otherwise provided in Sections 8(b), 8(c), 12(c) and 13,
a Participant's Capital Accumulation shall be distributed following his
termination of Service. If the value of a Participant's Capital Accumulation at
the time distribution would otherwise commence under this Section 12 exceeds
$5,000, no portion of his Capital Accumulation may be distributed to him before
he attains age 65 without his written consent.
(b) Timing of Distributions -
(1) If the value of a Participant's Capital Accumulation is
$5,000 or less, his Capital Accumulation shall be distributed as soon as
practicable after the date his Service terminates, upon the completion and
processing of the applicable distribution forms. A Participant whose Service has
terminated but who does not have any nonforfeitable interest in his Accounts
shall be deemed to have received a distribution of zero dollars ($0).
(2) If the value of a Participant's Capital Accumulation
exceeds $5,000 and the Participant terminates Service (whether or not on account
of Retirement or Disability), the Participant may elect to receive a
distribution of his Capital Accumulation as soon as practicable after the date
his Service terminates, upon the completion and processing of the applicable
distribution forms.
(3) In the event of the Participant's death, his Capital
Accumulation shall be distributed to his Beneficiary as soon as practicable
following his death, upon the completion and processing of the applicable
distribution forms.
(4) For purposes of determining the amount of any
distribution, the value of the Participant's Accounts shall be determined at the
time his distribution forms are processed.
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(c) Distribution of a Participant's Capital Accumulation shall commence
not later than 60 days after the Allocation Date coinciding with or next
following the latest of (1) the date of his 65th birthday, (2) the 10th
anniversary of the date he became a Participant or (3) the date he terminates
Service. The distribution of the Capital Accumulation of any Participant who
attains age 70 1/2 in a calendar year and either has (1) terminated Service or
(2) is a "5% owner" (as defined in Section 4l6(i)(l)(B)(i) of the Code) must
occur not later than April 1st of the next calendar year and must be made in
accordance with the regulations under Section 401(a)(9) of the Code, including
Section 1.401(a)(9)-2. Distributions shall be offered to any other Participant
who attains age 70 1/2 before January 1, 1999, to the extent required under
Sections 401(a)(9) and 411(d)(6) of the Code and the regulations issued
thereunder. If the amount of a Participant's Capital Accumulation cannot be
determined (by the Committee) by the date on which a distribution is to occur,
or if the Participant cannot be located, distribution of his Capital
Accumulation shall occur within 60 days after the date on which his Capital
Accumulation can be determined or after the date on which the Committee locates
the Participant.
(d) If a Participant's Capital Accumulation is retained in the Trust
after his Service ends, his Accounts shall continue to be treated as described
in Section 6 and he shall continue to be able to direct the investment of his
Accounts (other than the nonvested portion of his Profit Sharing Account) in
accordance with Section 5. However, except as otherwise provided in Section
3(b), his Profit Sharing Account shall not be credited with any additional
Employer Contributions and Forfeitures. If a Participant's Service terminates
and he does not have any vested and nonforfeitable interest in his Profit
Sharing Account, the Participant shall continue to direct the Trustee as to the
investment of such Account until the date such Participant becomes
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eligible to receive a Plan distribution in accordance with Sections 12(b)(1) or
(2). After such date, the Committee shall direct the Trustee as to the
investment of such Account.
(e) Notwithstanding any other provision of this Plan, all or a portion
of a Participant's Capital Accumulation may be distributed at any time to the
Participant's former spouse or other alternate payee, even prior to the
Participant's "earliest retirement age" (as defined in Section 414(p) of the
Code), if such distribution is made pursuant to and in accordance with the terms
of a "qualified domestic relations order" ("QDRO"), (including QDROs which were
received prior to January 1, 1999). Such distribution will occur in a single
lump sum in cash as soon as practicable following the date that the Committee
determines that the order constitutes a QDRO. If the value of a Participant's
Capital Accumulation exceeds $5,000 (at the time a distribution to the
Participant's former spouse or other alternate payee would otherwise be
available under this Section 12(e)), no portion of such Capital Accumulation may
be distributed to his former spouse or other alternate payee, without the
written consent of such former spouse or other alternate payee.
Section 13. Hardship Withdrawals.
(a) A Participant who is an Employee shall be entitled to request a
hardship withdrawal of a portion of his Capital Accumulation attributable to his
Profit Sharing Account, 401(k) Account, Matching Account, Rollover Account and
ESOP Diversification Account (less the amount of any income attributable to his
401(k) Contributions and Matching Account), with the value available for
withdrawal determined at the time his hardship request is processed. Any
withdrawal attributable to the Participant's 401(k) Contributions and Matching
Contributions
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(less the amount of any income attributable to his 401(k) Contributions and
Matching Account) shall be available only if necessary in light of immediate and
heavy financial needs of the Participant, as determined by the Committee in
accordance with nondiscriminatory standards and pursuant to Section
1.401(k)-1(d)(2) of the regulations under the Code. A hardship withdrawal shall
be available only to be used for the following:
(1) costs related directly to the purchase of a principal
residence for the Participant (excluding mortgage
payments);
(2) reimbursement of tuition and related educational
fees, including room and board and the costs of
textbooks, for post-secondary education of the
Participant, his spouse, his children or his
dependents (as defined in Section 152 of the Code);
provided that, a withdrawal of a Participant's 401(k)
Contributions and Matching Contributions shall not be
permitted for the costs of textbooks and shall be
limited to tuition, fees, and room and board for the
12 month-period following the withdrawal; or
(3) payments necessary to prevent the eviction of the
Participant from his principal residence or
foreclosure on the mortgage on that residence.
(b) A withdrawal of less than $1,000 shall not be permitted, and no
more than two withdrawals shall be permitted in each Plan Year. The
determination of the amount of funds needed by the Participant may include any
amounts necessary to pay any Federal, state or local income taxes or penalties
reasonably anticipated to result from the withdrawal. The maximum aggregate
amount that may be withdrawn under this Section 13 shall be the lesser of 40% of
(1) the Participant's vested Profit Sharing Account, Matching Account, ESOP
Diversification Account and Rollover Account plus the Participant's 401(k)
Contributions, determined at the time the hardship request is processed, or (2)
$200,000 (reduced by any amount withdrawn as a
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hardship withdrawal from the ESOP), and the Committee may establish such rules
as it deems appropriate in order to compute the amount that may be withdrawn by
a Participant.
(c) Prior to allowing a withdrawal of the Participant's 401(k)
Contributions and Matching Contributions (less the amount of any income
attributable to his 401(k) Contributions and Matching Account), the Committee
shall make the following findings:
(1) The distribution requested by the Participant is not
in excess of the amount of the immediate and heavy
financial need of the Participant.
(2) The Participant has obtained all distributions
(including hardship distributions under the ESOP and
from the Participant's other Accounts under the Plan)
and all nontaxable loans under all qualified plans of
the Company.
(3) The Participant has agreed that no 401(k)
Contributions will be made on his behalf under
Section 4(b) (or under any other qualified or
nonqualified plan of deferred compensation maintained
by an Employer) during the 12-month period commencing
upon his receipt of a hardship withdrawal.
(4) 401(k) Contributions to be made on behalf of the
Participant for the Plan Year immediately following
the Plan Year of the hardship withdrawal shall not
exceed the applicable limit under Section 402(g) of
the Code for such succeeding Plan Year, less the
amount of the Participant's 401(k) Contributions for
the Plan Year of the hardship withdrawal.
(d) A hardship withdrawal shall be disbursed first from the
Participant's Profit Sharing Account, Matching Account, Rollover Account and
ESOP Diversification Account and then from the Participant's 401(k) Account. The
amount withdrawn shall be taken prorata from the investment funds in which the
Account is invested at the time of the withdrawal.
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Section 14. How Capital Accumulation Will Be Distributed.
(a) All distributions shall be made in a single lump sum in cash,
except as provided in Section 8(b).
(b) Distribution of a Participant's Capital Accumulation will be made
to the Participant if he is living, and if not, to his Beneficiary. In the event
of a Participant's death, the Participant's Beneficiary shall be the
Participant's surviving spouse, or if none, his estate. A Participant (with the
written consent of his spouse, if any, acknowledging the effect of the consent
and witnessed by a notary public or Plan representative) may designate a
different Beneficiary (and contingent Beneficiaries) from time to time by filing
a written designation with the Committee. A deceased Participant's entire
Capital Accumulation shall be distributed to his Beneficiary on or before the
December 31st of the calendar year that includes the fifth anniversary of his
death, except to the extent that distribution has previously commenced in
accordance with Section 8(b), as applicable.
(c) The Company shall furnish the recipient of a distribution with the
tax consequences explanation required by Section 402(f) of the Code and shall
comply with the withholding requirements of Section 3405 of the Code and of any
applicable state law with respect to distributions from the Trust. If the
Committee so elects for a Plan Year, distributions to Participants may commence
less than 30 days after the notice required under Section 1.411(a)-11(c) of the
regulations under the Code is given; provided, however, that no such
distribution to a Participant shall be made unless (1) the Participant is
informed that he has the right for a period of at least 30 days after receiving
the notice to consider whether or not to
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consent to a distribution (or a particular distribution option), and (2) the
Participant affirmatively elects to receive a distribution after receiving the
notice.
(d) If a distribution of a Participant's Capital Accumulation is not
the minimum amount required to be distributed pursuant to the second and third
sentences of Section 12(c), the Committee shall notify the Participant (or any
spouse or former spouse who is his alternate payee under a "qualified domestic
relations order" (as defined in Section 414(p) of the Code)) of his right to
elect to have the "eligible rollover distribution" paid directly to an "eligible
retirement plan" (within the meaning of Section 401(a)(31) of the Code) that is
an individual retirement account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of the Code, a
qualified trust described in Section 401(a) of the Code or a qualified annuity
plan described in Section 403(a) of the Code that accepts "eligible rollover
distributions." If such an "eligible rollover distribution" is to be made to the
Participant's surviving spouse, the Committee shall notify the surviving spouse
of his right to elect to have the distribution paid directly to an "eligible
retirement plan" that is either an individual retirement account described in
Section 408(a) of the Code or an individual retirement annuity described in
Section 408(b) of the Code. Any election under this Section 14(d) shall be made
and effected in accordance with such rules and procedures as may be established
from time to time by the Committee in order to comply with Section 401(a)(31) of
the Code.
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Section 15. No Assignment of Benefits.
A Participant's interest in the Plan may not be anticipated, assigned
(either at law or in equity), alienated or subject to attachment, garnishment,
levy, execution or other legal or equitable process, except in accordance with a
"qualified domestic relations order" (as defined in Section 414(p) of the Code).
Section 16. Administration.
(a) Administrative Committee - The Plan will be administered by an
Administrative Committee composed of not fewer than three individuals appointed
by the Board of Directors to serve at its pleasure and without compensation. The
members of the Committee shall be the named fiduciaries with authority to
control and manage the operation and administration of the Plan. Members of the
Committee need not be Employees or Participants. Any Committee member may resign
by giving notice, in writing, to the Board of Directors.
(b) Committee Action - Committee action will be by vote of a majority
of the members at a meeting or in writing by all the members without a meeting.
A Committee member who is a Participant shall not vote on any question relating
specifically to himself.
The Committee shall choose from its members a Chairman and a Secretary.
The Chairman or the Secretary of the Committee shall be authorized to execute
any certificate or other written direction on behalf of the Committee. The
Secretary shall keep a record of the Committee's proceedings and of all dates,
records and documents pertaining to the administration of the Plan.
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(c) Powers and Duties of the Committee - The Committee shall have all
powers necessary to enable it to administer the Plan and the Trust Agreement in
accordance with their provisions, including without limitation the following:
(1) resolving all questions relating to the eligibility
of Employees to become
Participants;
(2) determining the appropriate allocations to
Participants' Accounts pursuant to Section 6;
(3) determining the amount of benefits payable to a
Participant (or Beneficiary), and the time and manner
in which such benefits are to be paid;
(4) selecting the investment funds to be offered to
Participants for investment of their Accounts;
(5) authorizing and directing all disbursements of Trust
Assets by the Trustee;
(6) establishing procedures in accordance with Section
414(p) of the Code to determine the qualified status
of domestic relations orders and to administer
distributions under such qualified orders;
(7) engaging any administrative, legal, accounting,
clerical or other services that it may deem
appropriate;
(8) construing and interpreting the Plan and the Trust
Agreement and adopting rules for administration of
the Plan that are consistent with the terms of the
Plan documents and of ERISA and the Code;
(9) compiling and maintaining all records it determines
to be necessary, appropriate or convenient in
connection with the administration of the Plan;
(10) reviewing the performance of the Trustee with respect
to the Trustee's administrative duties,
responsibilities and obligations under the Plan and
Trust Agreement; and
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(11) executing agreements and other documents on behalf of
the Plan and Trust.
The Committee shall perform its duties under the Plan and the Trust
Agreement solely in the interests of the Participants (and their Beneficiaries).
Any discretion granted to the Committee under any of the provisions of the Plan
or the Trust Agreement shall be exercised only in accordance with rules and
policies established by the Committee which shall be applicable on a
nondiscriminatory basis. The Committee shall have the full and exclusive
discretion to interpret and administer the Plan. All actions, interpretations
and decisions of the Committee are conclusive and binding on all persons, and
shall be given the maximum possible deference allowed by law.
(d) Expenses - All reasonable expenses of administering the Plan and
Trust may be charged to and paid out of the Trust Assets. A Participant's
Accounts may be charged with any expenses that are incurred by the Participant
in connection with any investment transaction with respect to the Participant's
Accounts.
The Company may, however, pay all or any portion of such expenses of
the Plan and Trust directly, and payment of expenses by the Company shall not be
deemed to be Employer Contributions.
(e) Information to be Submitted to the Committee - To enable the
Committee to perform its functions, the Company shall supply full and timely
information to the Committee on all matters as the Committee may require, and
shall maintain such other records as the Committee may determine are necessary
or appropriate in order to determine the benefits due or which may become due to
Participants (or Beneficiaries) under the Plan.
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(f) Delegation of Fiduciary Responsibility - The Committee from time to
time may allocate to one or more of its members and/or may delegate to any other
persons or organizations any of its rights, powers, duties and responsibilities
with respect to the operation and administration of the Plan that are permitted
to be so delegated under ERISA. Any such allocation or delegation shall be made
in writing, shall be reviewed periodically by the Committee and shall be
terminable upon such notice as the Committee in its discretion deems reasonable
and proper under the circumstances.
(g) Bonding, Insurance and Indemnity - To the extent required under
Section 412 of ERISA, the Company shall secure fidelity bonding for the
fiduciaries of the Plan.
The Company (in its discretion) or the Trustee (as directed by the
Committee) may obtain a policy or policies of insurance for the Committee (and
other fiduciaries of the Plan) to cover liability or loss occurring by reason of
the act or omission of a fiduciary. If such insurance is purchased with Trust
Assets, the policy must permit recourse by the insurer against the fiduciary in
the case of a breach of a fiduciary obligation by such fiduciary. The Company
hereby agrees, to the maximum extent permitted by law, to indemnify and hold
harmless the Committee and each of its designees under Section 16(f), who is an
officer, director or employee of any Employer, against any and all claims, loss,
damages, liability, expenses, including legal fees, costs, judgments, fines,
settlements and other amounts actually and reasonably incurred, including in
connection with any proceeding, arising by reason of the fact that such person
is or was acting in such capacity.
(h) Notices, Statements and Reports - The Company shall be the "Plan
Administrator" (as defined in Section 3(16)(A) of ERISA and Section 414(g) of
the Code) for
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purposes of the reporting and disclosure requirements of ERISA and
the Code. The Committee shall assist the Company, as requested, in complying
with such reporting and disclosure requirements. The Company shall be the
designated agent of the Plan for the service of legal process.
Section 17. Claims Procedure.
A Participant (or Beneficiary) who does not receive a distribution of
benefits to which he believes he is entitled may present a claim to the
Committee. The claim for benefits must be in writing and addressed to the
Committee or to the Company. If the claim for benefits is denied, the Committee
shall notify the Participant (or Beneficiary) in writing within 90 days after
the Committee initially received the benefit claim. If there are special
circumstances which require an extension of time for processing the claim for
benefits, the Committee's decision shall be rendered not later than 180 days
after receipt of a claim. Any notice of a denial of benefits shall advise the
Participant (or Beneficiary) of the basis for the denial, any additional
material or information necessary for the Participant (or Beneficiary) to
perfect his claim and the steps which the Participant (or Beneficiary) must take
to have his claim for benefits reviewed.
Each Participant (or Beneficiary) whose claim for benefits has been
denied may file a written request for a review of his claim by the Committee.
The request for review must be filed by the Participant (or Beneficiary) within
60 days after he receives the written notice denying his claim. The decision of
the Committee will be made within 60 days after receipt of a request for review
and shall be communicated in writing to the claimant. Such written notice shall
set forth the basis for the Committee's decision. If there are special
circumstances (such as the need to
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hold a hearing) which require an extension of time for completing the review,
the Committee's decision shall be rendered not later than 120 days after receipt
of a request for review. All decisions and interpretations of the Committee
under this Section 17 shall be conclusive and binding upon all persons with an
interest in the Plan and shall be given the greatest deference permitted by law.
Section 18. Limitation on Participants' Rights.
A Participant's Capital Accumulation will be based solely upon his
vested interest in his Accounts and will be paid only from the Trust Assets. An
Employer, the Committee or the Trustee shall not have any duty or liability to
furnish the Trust with any funds, securities or other assets, except as
expressly provided in the Plan.
The adoption and maintenance of the Plan shall not be deemed to
constitute a contract of employment or otherwise between an Employer and any
Employee, or to be a consideration for, or an inducement or condition of, any
employment. Nothing contained in this Plan shall be deemed to give an Employee
the right to be retained in the Service of an Employer or to interfere with the
right of an Employer to discharge, with or without cause, any Employee at any
time.
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Section 19. Future of the Plan.
The Company reserves the right to amend or terminate the Plan (in whole
or in part) and the Trust Agreement at any time, by action of the Board of
Directors. Neither amendment nor termination of the Plan shall retroactively
reduce the vested rights of Participants or permit any part of the Trust Assets
to be diverted to or used for any purpose other than for the exclusive benefit
of the Participants (and their Beneficiaries).
The Company specifically reserves the right to amend the Plan and the
Trust Agreement retroactively in order to satisfy any applicable requirements of
the Code and ERISA.
If the Plan is terminated (or partially terminated), participation of
Participants affected by the termination will end. If Employer Contributions are
not replaced by contributions to a comparable plan which satisfies the
requirements of Section 401(a) of the Code, the Accounts of only those
Participants who are Employees on the effective date of termination will become
nonforfeitable as of that date. A complete discontinuance of Employer
Contributions shall be deemed to be a termination of the Plan for this purpose.
The Capital Accumulation of those Participants whose Service terminated prior to
the effective date of Plan termination shall continue to be determined pursuant
to Section 10; and, to the extent that such Participants are not vested, the
nonvested balances in their Accounts will become Forfeitures to be reallocated
as of the effective date of Plan termination (even if they have not incurred a
five-consecutive-year Break in Service).
After termination of the Plan, the Trust will be maintained until the
Capital Accumulations of all Participants have been distributed. Capital
Accumulations shall be distributed as soon as practicable following termination
of the Plan.
-45-
<PAGE> 48
In the event of the merger or consolidation of this Plan with another
plan, or the transfer of Trust assets (or liabilities) to another plan, the
Account balances of each Participant immediately after such merger,
consolidation or transfer must be at least as great as immediately before such
merger, consolidation or transfer (as if the Plan had then terminated).
Section 20. "Top-Heavy" Contingency Provisions.
(a) The provisions of this Section 20 are included in the Plan pursuant
to Section 40l(a)(10)(B)(ii) of the Code and shall become applicable only if the
Plan becomes a "top-heavy plan" under Section 416(g) of the Code for any Plan
Year.
(b) The determination as to whether the Plan becomes "top-heavy" for
any Plan Year shall be made as of the Allocation Date of the immediately
preceding Plan Year by considering the Plan together with the ESOP and any other
tax-qualified plan maintained by an Employer in which a "key employee"
participates. The Plan and the ESOP (and any other plan required to be
aggregated with the Plan) shall be "top-heavy" only if the total of the account
balances under the Plan and the ESOP and such other plan for "key employees" as
of the determination date exceeds 60% of the total of the account balances for
all Participants. For such purpose, account balances shall be computed and
adjusted pursuant to Section 4l6(g) of the Code. "Key employees" shall be
certain Participants (who are officers or shareholders of the Company) and
Beneficiaries described in Section 416(i)(1) or (5) of the Code.
(c) For any Plan Year in which the Plan is "top-heavy," each
Participant who is an Employee on the Allocation Date (and who is not a "key
employee") shall receive a minimum allocation of Employer Contributions and
Forfeitures which is equal to the lesser of:
-46-
<PAGE> 49
(1) 3% of his Statutory Compensation; or
(2) the same percentage of his Statutory Compensation as
the allocation to the "key employee" for whom the
percentage is the highest for that Plan Year. 401(k)
Contributions made by key employees during a Plan
Year shall be included in determining the "key
employee" with the highest percentage for such Plan
Year.
For this purpose, Statutory Compensation of each Employee shall not take into
account any amount in excess of $160,000 (as adjusted periodically after 1998
for increases in the cost of living).
(d) As of the first day of any Plan Year in which the Plan has become
"top-heavy," the vesting provision in Section 10(a)(2) shall be amended (with
respect to any Employee who is credited with at least one Hour of Service after
the Plan has become "top-heavy") to provide for vesting upon completion of at
least three Years of Vesting Service.
If the Plan ceases to be "top-heavy," the Capital Accumulation of a
Participant who, at that time, has less than three years of Service shall
thereafter be determined under the vesting provision in Section 10(a)(2),
instead of under this Section 20(d), except that his nonforfeitable percentage
shall not be reduced below the nonforfeitable percentage that he had at the time
the Plan ceased to be "top-heavy." If the Plan ceases to be "top-heavy," the
Capital Accumulation of a Participant who, at that time, has three or more years
of Service shall continue to be determined under this Section 20(d).
-47-
<PAGE> 50
Section 21. Governing Law.
The provisions of this Plan and the Trust Agreement shall be construed,
administered and enforced in accordance with the laws of the State of
California, to the extent such laws are not superseded by ERISA.
Section 22. Execution.
To record the amendment and restatement of the Plan, the Company has
caused this document to be executed on this _____ day of_____________, 199____.
GRANITE CONSTRUCTION
INCORPORATED
By
----------------------------------
Its
--------------------------------
By
----------------------------------
Its
--------------------------------
-48-
<PAGE> 1
EXHIBIT 10.3.C
THIRD AMENDMENT TO CREDIT AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as of
June 30, 1999, is entered into by and among GRANITE CONSTRUCTION INCORPORATED, a
Delaware corporation (the "Company"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Issuing Bank, and as agent for itself and the Banks (in such
capacity, the "Agent"), and the several financial institutions party to the
Credit Agreement (collectively, the "Banks").
RECITALS
A. The Company, the Banks, the Issuing Bank and the Agent are parties
to a Credit Agreement dated as of June 30, 1997, as amended by a First Amendment
to the Credit Agreement dated as of January 16, 1998, and a Second Amendment to
Credit Agreement dated as of June 30, 1998 (as so amended, the "Prior Credit
Agreement"). The Prior Credit Agreement, as amended by this Amendment, is herein
referred to as the "Credit Agreement".
B. Pursuant to the Prior Credit Agreement, the Banks have extended and
are continuing to extend certain credit facilities to the Company.
C. The Company has requested that the Banks agree to certain amendments
of the Prior Credit Agreement.
D. The Banks are willing to amend the Prior Credit Agreement, subject
to the terms and conditions of this Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Defined Terms. Unless otherwise defined herein, capitalized terms
used herein shall have the meanings, if any, assigned to them in the Prior
Credit Agreement.
2. Amendments to Prior Credit Agreement.
(a) Section 1.01 of the Prior Credit Agreement shall be
amended by amending and restating the defined term "Aggregate L/C Commitment" in
its entirety to read as follows:
"Aggregate L/C Commitment" means the
combined L/C Commitments of the Banks, in the initial
amount of $50,000,000, as such amount may be reduced
from time to time pursuant to this Agreement.
(b) Section 1.01 of the Prior Credit Agreement shall be
amended by amending and restating the defined term "Applicable Margin" in its
entirety to read as follows:
1
<PAGE> 2
"Applicable Margin" means the per annum
rates of interest specified in the chart below:
<TABLE>
<CAPTION>
Revolving Commitment
--------------------
Term Revolving Term
Commitment Period Period
<S> <C> <C> <C>
Reference Rate Loans +0% +0% +0%
Eurodollar Rate Loans +1.000% +1.000% +1.000%
CD Rate Loans +1.125% +1.125% +1.125%
</TABLE>
Where:
"Revolving Period" means the period
from the Closing Date to the Revolving
Termination Date; and
"Term Period" means the period from
the Revolving Termination Date to the date
of the final semi-annual payment under
Section 2.07(b).
(c) Section 1.01 of the Prior Credit Agreement shall be
amended by amending and restating the defined term "Letter of Credit" in its
entirety to read as follows:
"Letter of Credit" means any standby letter
of credit Issued by the Issuing Bank pursuant to
Article III, which shall include the Existing Letters
of Credit.
(d) Section 1.01 of the Prior Credit Agreement shall be
amended by amending and restating the defined term "Revolving Termination Date"
in its entirety to read as follows:
"Revolving Termination Date" means
the earlier to occur of:
(a) June 29, 2001; and
(b) The date on which the
Commitments shall terminate in accordance
with the provisions of this Agreement.
Subject to clause (b) of this definition,
the term "Revolving Termination Date" shall be deemed
to refer to any such Revolving Termination Date as
extended from time to time pursuant to, and subject
to the conditions of, Section 2.15.
2
<PAGE> 3
(e) Section 1.01 of the Prior Credit Agreement shall be
amended by deleting the defined term "Retention Letter of Credit" and adding the
following defined term in appropriate alphabetical order:
"Third Amendment Effective Date" means the
"Effective Date" under and as defined in the Third
Amendment to Credit Agreement dated as of June 30,
1999 among the Company, the Banks party thereto, the
Issuing Bank and the Agent.
(f) Subsection 2.07(b) of the Prior Credit Agreement shall be
amended and restated in its entirety to read as follows:
(b) The Revolving Credit. The Company agrees to repay
the principal amount outstanding as of the Revolving
Termination Date of the Revolving Loans in ten equal
semi-annual installments (i) beginning on the last Business
Day in December, 2001 (as such date may be extended pursuant
to the terms of and subject to the conditions of subsection
2.15(b)), and (ii) thereafter on the last Business Day of June
and December of each year thereafter, through and including
the last Business Day of June, 2006 (as such date may be
extended pursuant to the terms of and subject to the
conditions of subsection 2.15(b)).
(g) Subsection 2.09(b) of the Prior Credit Agreement shall be
amended by deleting the amount "0.1875%" in the first sentence and inserting
instead the amount "0.20%."
(h) Subsection 2.15(a) of the Prior Credit Agreement shall be
amended and restated in its entirety to read as follows:
(a) Not earlier than April 28, 2000 and not later
than April 30, 2001 and, if the Revolving Termination Date has
previously been extended pursuant to this Section 2.15, not
earlier than the April 30 of the year immediately prior to the
year in which the Revolving Termination Date then occurs, and
not later than the April 30 of the year in which the Revolving
Termination Date then occurs, the Company may, at its option,
request that all the Banks extend the Revolving Termination
Date by one year by means of a letter, addressed to the Agent
and each Bank, substantially in the form of Exhibit I;
provided, however, that notwithstanding the foregoing, the
Revolving Termination Date shall occur on the date that the
Commitments terminate pursuant to Section 9.02 or the
Revolving Commitments are terminated pursuant to Section 2.05.
The Revolving Termination Date shall be extended by one year
if all of the Banks consent (in each Bank's sole and absolute
discretion) to such extension, such consent to be given by
executing and delivering to the Agent, no later than 15
Business Days after its receipt of such letter, a counterpart
of such letter; provided, that, if, one or more Banks decline
to consent to the extension of the Revolving Termination Date,
any Bank's consent to such extension shall be nullified, and
the Revolving Termination Date shall not be extended. If any
Bank fails to execute and deliver
3
<PAGE> 4
such letter on or before the expiration of the aforesaid 15
Business Day period, such Bank shall be deemed to have
declined to consent to extend the Revolving Termination Date,
and the Revolving Termination Date shall not be extended.
(i) Clause (iii) of subsection 3.01(b) of the Prior Credit
Agreement shall be amended and restated in its entirety to read as follows:
(iii) the expiry date of any requested Letter of
Credit is (x) more than one year after the date of issuance,
unless the Issuing Bank and the Majority Banks have approved
such expiry date in writing, or (y) after the Revolving
Termination Date, unless all the Banks have approved such
expiry date in writing;
(j) Clause (v) of subsection 3.01(b) of the Prior Credit
Agreement shall be amended and restated in its entirety to read as follows:
(v) such Letter of Credit is for the purpose of
supporting the issuance of any letter of credit by any other
Person, or the Issuance of such Letter of Credit shall violate
any other applicable policies of the Issuing Bank;
(k) Clause (vi) of subsection 3.01(b) of the Prior Credit
Agreement shall be amended and restated in its entirety to read as follows:
(vi) Intentionally Omitted.
(l) Section 3.02 of the Prior Credit Agreement shall be
amended by (i) deleting the parenthetical proviso at the end of clause (ii) of
subsection (a) thereof; and (ii) deleting the parenthetical "(other than a
Retention Letter of Credit)" in each case where it appears in subsection (f)
thereof.
(m) Section 3.07 of the Prior Credit Agreement shall be
amended and restated in its entirety to read as follows:
3.07 Cash Collateral Pledge. Upon the request of the
Agent, if (i) the Issuing Bank has honored any full or partial
drawing request on any Letter of Credit, or (ii) as of the
Revolving Termination Date, any Letters of Credit may for any
reason remain outstanding and partially or wholly undrawn, the
Company shall immediately pay over, pledge and deliver,
pursuant to a security agreement in form and substance
acceptable to the Agent, cash in an amount equal to the
maximum amount available for drawing under any outstanding
Letters of Credit, to the Agent for the benefit of the Banks
as collateral.
(n) The first sentence of Section 3.08 of the Prior Credit
Agreement shall be amended and restated in its entirety to read as follows:
4
<PAGE> 5
The Company shall pay to the Agent for the benefit of
the Banks letter of credit fees equal to (i) 1.00% per annum,
in each case of the face amount of outstanding financial
Letters of Credit, and (ii) 0.875% per annum, in each case of
the face amount of outstanding performance Letters of Credit.
(o) Subsections 6.11(c), 8.06(b) and 8.18(b) of the Prior
Credit Agreement shall each be amended by deleting the words "Closing Date" and
inserting instead the words "Third Amendment Effective Date."
(p) Article VI of the Prior Credit Agreement shall be amended
by adding the following Section 6.22 at the end thereof:
6.22 Year 2000. The Company has (a) initiated a
review and assessment of all areas within its and each of its
Subsidiaries' business and operations (including those
affected by customers and vendors) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that
computer applications and devices containing imbedded computer
chips used by the Company or any of its Subsidiaries (or their
respective customers and vendors) may be unable to recognize
and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999),
(b) developed a plan and timeline for addressing the Year 2000
Problem on a timely basis, and (c) to date, implemented that
plan in accordance with that timetable. Based on the
foregoing, the Company believes that all computer applications
and devices containing imbedded computer chips (including
those of its and its Subsidiaries' customers and vendors) that
are material to its or any of its Subsidiaries' business and
operations are reasonably expected on a timely basis to be
able to perform properly date-sensitive functions for all
dates before and after January 1, 2000, except to the extent
that a failure to do so could not reasonably be expected to
have a Material Adverse Effect.
(q) Subsections 8.01(i), 8.06(e), 8.18(c) and 8.18(e) of the
Prior Credit Agreement shall each be amended by deleting the amount
"$12,000,000" and inserting instead the amount "$25,000,000."
(r) Section 8.04 of the Prior Credit Agreement shall be
amended by relettering clause (e) to clause (f) and by adding the following new
clause (e) after clause (d):
(e) investments in the Company's stock pursuant to
repurchases thereof permitted under Section 8.09;
(s) Section 8.09 of the Prior Credit Agreement shall be
amended by (i) deleting the amount "$35,000,000" in clause (c) thereof and
inserting instead the amount "$50,000,000;" (ii) deleting the first proviso at
the end of Section 8.09; and (iii) deleting the words "and provided, further"
from the second proviso at the end of Section 8.09 and inserting instead the
word "provided."
5
<PAGE> 6
(t) Schedules 6.11(c) [Leases, Dividends and Letters of
Credit], 6.12 [Environmental Matters], 6.18 [Subsidiaries and Equity
Investments], 8.04 [Investment Policy], 8.06 [Contingent Obligations] and 8.18
[Indebtedness] shall each be amended and restated in their entirety to read as
set forth in such Schedules attached hereto.
3. Representations and Warranties. The Company hereby represents and
warrants to the Agent and the Banks as follows:
(a) Both before and after giving effect to this Amendment, no
Default or Event of Default has occurred and is continuing.
(b) The execution, delivery and performance by the Company of
this Amendment and by the Guarantors of their acknowledgment and consent to this
Amendment have been duly authorized by all necessary corporate, partnership and
other action and do not and will not require any registration with, consent or
approval of, notice to or action by, any Person (including any Governmental
Approvals) in order to be effective and enforceable. Each of the Prior Credit
Agreement as amended by this Amendment, the Guaranty and the other Loan
Documents to which the Company or any of its Subsidiaries is a party constitutes
and continues to constitute the legal, valid and binding obligations of the
Company and such Subsidiary party thereto, enforceable against the Company and
such Subsidiaries in accordance with their respective terms, without defense,
counterclaim or offset.
(c) All representations and warranties of the Company
contained in the Prior Credit Agreement, after giving effect to the amendments
to certain Schedules as set forth herein, are true and correct and will be true
and correct on the Effective Date.
(d) The Company is entering into this Amendment on the basis
of its own investigation and for its own reasons, without reliance upon the
Agent and the Banks or any other Person.
4. Effective Date. This Amendment will become effective the date first
above written (the "Effective Date"), provided that each of the following
conditions precedent is satisfied:
(a) The Agent has received in sufficient number for each Bank,
duly executed originals (or, if elected by the Agent, an executed facsimile
copy):
(i) of this Amendment, executed by the Company
and each of the Banks; and
(ii) of the Guarantors' Acknowledgment and
Consent in the form attached hereto,
executed by each Guarantor; and
(b) The Agent has received from the Company and each Guarantor
a copy of a resolution passed by the board of directors (or similar governing
body) of each such Person or its general partner, certified by the Secretary or
an Assistant Secretary of such corporation as being in full force and effect on
the date hereof, authorizing the execution, delivery and
6
<PAGE> 7
performance of this Amendment or the Guarantors' Acknowledgment and Consent, as
applicable.
5. Reservation of Rights. The Company acknowledges and agrees that the
execution and delivery by the Agent and the Banks of this Amendment shall not be
deemed to create a course of dealing or otherwise obligate the Agent or the
Banks to execute similar amendments under the same or similar circumstances in
the future.
6. Miscellaneous.
(a) Except as herein expressly amended, all terms, covenants
and provisions of the Prior Credit Agreement are and shall remain in full force
and effect and all references therein and in the other Loan Documents to such
Credit Agreement shall henceforth refer to the Prior Credit Agreement as amended
by this Amendment. This Amendment shall be deemed incorporated into, and a part
of, the Credit Agreement. This Amendment is one of the Loan Documents.
(b) This Amendment shall be binding upon and inure to the
benefit of the parties hereto and thereto and their respective successors and
assigns. No third party beneficiaries are intended in connection with this
Amendment.
(c) This Amendment shall be governed by and construed in
accordance with the law of the State of California.
(d) This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each of
the parties hereto understands and agrees that this document (and any other
document required herein) may be delivered by any party thereto either in the
form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by delivery of a hard copy original, and
that receipt by the Agent of a facsimile transmitted document purportedly
bearing the signature of a Bank or the Company or any Guarantor shall bind such
Bank, the Company, or such Guarantor, respectively, with the same force and
effect as the delivery of a hard copy original. Any failure by the Agent to
receive the hard copy executed original of such document shall not diminish the
binding effect of receipt of the facsimile transmitted executed original of such
document of the party whose hard copy page was not received by the Agent.
(e) This Amendment, together with the Prior Credit Agreement,
contains the entire and exclusive agreement of the parties hereto with reference
to the matters discussed herein and therein. This Amendment supersedes all prior
drafts and communications with respect thereto. This Amendment may not be
amended except in accordance with the provisions of Section 11.01 of the Credit
Agreement.
(f) If any term or provision of this Amendment shall be deemed
prohibited by or invalid under any applicable law, such provision shall be
invalidated without affecting the remaining provisions of this Amendment or the
Prior Credit Agreement, respectively.
7
<PAGE> 8
(g) Each of the provisions set forth in Article XI of the
Prior Credit Agreement is incorporated herein by this reference and made
applicable to this Amendment.
(h) The Company covenants to pay to or reimburse the Agent,
upon demand, for all costs and expenses (including allocated costs of in-house
counsel) incurred in connection with the development, preparation, negotiation,
execution and delivery of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
GRANITE CONSTRUCTION
INCORPORATED
By: /s/ William E. Barton
Title: ------------------------------------
William E. Barton
------------------------------------
Sr. Vice President
By: /s/ R.C. Allbritton
Title: ------------------------------------
R.C. Allbritton
------------------------------------
Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By:
----------------------------------------
Title: Managing Director
-------------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
and as Issuing Bank
By:
----------------------------------------
Title: Managing Director
-------------------------------------
BANQUE NATIONALE DE PARIS
By:
----------------------------------------
Title:
-------------------------------------
By:
----------------------------------------
Title:
-------------------------------------
8
<PAGE> 9
(g) Each of the provisions set forth in Article XI of the
Prior Credit Agreement is incorporated herein by this reference and made
applicable to this Amendment.
(h) The Company covenants to pay to or reimburse the Agent,
upon demand, for all costs and expenses (including allocated costs of in-house
counsel) incurred in connection with the development, preparation, negotiation,
execution and delivery of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
GRANITE CONSTRUCTION
INCORPORATED
By:
----------------------------------------
Title:
-------------------------------------
By:
----------------------------------------
Title:
-------------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By: /s/ signature
----------------------------------------
Title: Managing Director
-------------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
and as Issuing Bank
By: /s/ signature
---------------------------------------
Title: Managing Director
------------------------------------
BANQUE NATIONALE DE PARIS
By:
---------------------------------------
Title:
------------------------------------
By:
---------------------------------------
Title:
------------------------------------
8
<PAGE> 10
(g) Each of the provisions set forth in Article XI of the
Prior Credit Agreement is incorporated herein by this reference and made
applicable to this Amendment.
(h) The Company covenants to pay to or reimburse the Agent,
upon demand, for all costs and expenses (including allocated costs of in-house
counsel) incurred in connection with the development, preparation, negotiation,
execution and delivery of this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first above written.
GRANITE CONSTRUCTION
INCORPORATED
By:
----------------------------------------
Title:
-------------------------------------
By:
----------------------------------------
Title:
-------------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as Agent
By:
----------------------------------------
Title:
-------------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as a Bank
and as Issuing Bank
By:
---------------------------------------
Title:
------------------------------------
BANQUE NATIONALE DE PARIS
By: /s/ Debra Wright
---------------------------------------
Title: Debra Wright
------------------------------------
Vice President
By: /s/ Katherine Wolfe
---------------------------------------
Title: Katherine Wolfe
------------------------------------
Vice President
8
<PAGE> 11
UNION BANK OF CALIFORNIA, N.A.
By: /s/ signature
---------------------------------------
Title: Vice President
-----------------------------------
9
<PAGE> 12
GUARANTORS' ACKNOWLEDGMENT AND CONSENT
Each of the undersigned Guarantors hereby acknowledges the foregoing
Third Amendment to Credit Agreement (the "Amendment"), consents (without
implying the need for any such acknowledgment or consent) to its terms, and
represents and warrants to the Agent and the Banks that, both before and after
giving effect to the Amendment, its Guaranty remains in full force and effect as
an enforceable obligation of the Guarantor, except as limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws of general applicability
affected the enforceability of creditor rights. Each Guarantor further
represents that the execution, delivery and performance by such Guarantor of
this Acknowledgment and Consent have been duly authorized by all necessary
corporate, partnership and other action and do not and will not require any
registration with, consent or approval of, notice to or action by, any Person
(including any Governmental Approvals) in order to be effective and enforceable.
Each Guarantor remakes as of the Effective Date (as defined in the Amendment)
all of the representations and warranties made by it pursuant to the Guaranty.
Capitalized terms used herein and not otherwise defined have the respective
meanings defined in the Credit Agreement (as defined in the Amendment).
IN WITNESS WHEREOF, each Guarantor has executed this Acknowledgment and
Consent by its duly authorized officers as of this 30th day of June, 1999.
GRANITE CONSTRUCTION COMPANY DESERT AGGREGATES, INC.
By: /s/ William E. Barton By: /s/ David J. Brunton
-------------------------------- ---------------------------------
Name: William E. Barton Name: David J. Brunton
------------------------------ -------------------------------
Title: Senior Vice President & CFO Title: CFO & Assistant Secretary
----------------------------- ------------------------------
By: /s/ R.C. Allbritton By: /s/ Kathleen Kenan
-------------------------------- ---------------------------------
Name: R.C. Allbritton Name: Kathleen Kenan
------------------------------ -------------------------------
Title: Vice President and Treasurer Title: Assistant Secretary
----------------------------- ------------------------------
GRANITE SR91 CORPORATION GG&R, INC.
By: /s/ David H. Watts By: /s/ David H. Watts
-------------------------------- ---------------------------------
Name: David H. Watts Name: David H. Watts
------------------------------ -------------------------------
Title: President & CEO Title: President & CEO
----------------------------- ------------------------------
By: /s/ William E. Barton By: /s/ William E. Barton
-------------------------------- ---------------------------------
Name: William E. Barton Name: William E. Barton
------------------------------ -------------------------------
Title: Senior Vice President & CFO Title: Senior Vice President & CFO
----------------------------- ------------------------------
10
<PAGE> 13
WILCOTT CORPORATION INTERMOUNTMN SLURRY SEAL, INC.
By: /s/ David H. Watts By: /s/ David J. Brunton
----------------------------- -----------------------------------
Name: David H. Watts Name: David J. Brunton
--------------------------- ---------------------------------
Title: President and CEO Title: CFO & Assistant Secretary
-------------------------- --------------------------------
By: /s/ William E. Barton By: /s/ Kathleen Kenan
----------------------------- -----------------------------------
Name: William E. Barton Name: Kathleen Kenan
--------------------------- ---------------------------------
Title: Vice President and CFO Title: Assistant Secretary
-------------------------- --------------------------------
BEAR RIVER CONTRACTORS GILC, L.P.
By: GILC, INCORPORATED, sole general partner
By: /s/ David J. Brunton By: /s/ William E. Barton
----------------------------- -----------------------------------
Name: David J. Brunton Name: William E. Barton
--------------------------- ---------------------------------
Title: Chief Financial Officer Title: President and CEO
-------------------------- --------------------------------
By: /s/ Kathleen Kenan By: /s/ R.C. Allbritton
----------------------------- -----------------------------------
Name: Kathleen Kenan Name: R.C. Allbritton
--------------------------- ---------------------------------
Title: Assistant Secretary Title: Vice President and CFO
-------------------------- --------------------------------
POZZOLAN PRODUCTS COMPANY GRANITE SR9l, L.P.
(P.P.C.) By: GRANITE SR91 CORPORATION, sole general
partner
By: /s/ David J. Brunton By: /s/ David H. Watts
----------------------------- -----------------------------------
Name: David J. Brunton Name: David H. Watts
--------------------------- ---------------------------------
Title: CFO and Assistant Secretary Title: President and CEO
-------------------------- --------------------------------
By: /s/ Kathleen Kenan By: /s/ William E. Barton
----------------------------- -----------------------------------
Name: Kathleen Kenan Name: William E. Barton
--------------------------- ---------------------------------
Title: Assistant Secretary Title: Vice President and CFO
-------------------------- --------------------------------
GILC INCORPORATED GTC, INC
By: /s/ William E. Barton By: /s/ William E. Barton
----------------------------- -----------------------------------
Name: William E. Barton Name: William E. Barton
--------------------------- ---------------------------------
Title: President & CEO Title: President & Treasurer
-------------------------- --------------------------------
By: /s/ R.C. Allbritton By: /s/ R.C. Allbritton
----------------------------- -----------------------------------
Name: R.C. Allbritton Name: R.C. Allbritton
--------------------------- ---------------------------------
Title: Vice President & CFO Title: Vice President & Assistant Secretary
-------------------------- --------------------------------
11
<PAGE> 14
<TABLE>
<S> <C> <C>
Incorporated: 1/24/90 - Delaware GRANITE CONSTRUCTION INCORPORATED EIN: 77-0239383
(and wholly-owned subsidiaries)
P.O. Box 50085, Watsonville, CA 95077-5085
</TABLE>
<TABLE>
<S> <C> <C> <C>
Officers: *W.E. Barton, Sr. V.P. & CFO
Directors: B.C. Kelly D.H. Watts, Pres. & CEO *+R.C.Allbritton, V.P. & Treas.
D.H. Watts, Chairman R.A. McDonald *W.G. Dorey, Exec. V.P. & COO M. Futch, V.P. & Sect'y
J.J. Barclay R.E. Miles *P.M. Costanzo, Sr.V.P. & Mgr. HCD *G.M. Higdem, V.P. & Asst. HCD Mgr.
R.M. Brooks G.B. Searle *M.E. Boitano, Sr. V.P. & Branch Div. Mgr. *J.H. Roberts, V.P. & Asst. Branch Div. Mgr.
*M.L. Thomas, V.P. & Dir. Human Resources
*D.R. Grazian, Dir. Of Corp. Taxation
*M. McCann-Jenni, Controller
*Assistant Secretary
+Assistant Financial Officer
</TABLE>
<TABLE>
<S> <C> <C> <C>
GRANITE DESERT SR91 GILC INCORPORATED
CONSTRUCTION AGGREGATES, INC. CORPORATION P.O. Box 50085
COMPANY P.O. Box 11478 P.O. Box 50085 Watsonville, CA 95077
P.O. Box 50085 Palm Desert, CA 92255 Watsonville, CA 95077
Watsonville, CA 95077 Equipment Leasing
Material Sales & Property Heavy/Highway
Heavy/Highway Const. & Development Construction Incorporated: 5/22/95
Material Sales EIN: 77-0406448
Incorporated: 1/4/22 Incorporated: 4/28/93 Incorporated: 6/23/93
EIN: 77-0337518 EIN: 77-0342750 Director:
Acquired: 2/5/90 D.H. Watts, Chairman
Directors: Directors:
EIN: 94-0519552 R. Kremer, Chairman D.H. Watts, Chairman Officers:
M.L. Thomas P.M. Costanzo W.E. Barton, Pres. & CEO
D.J. Brunton W.E. Barton R.C. Allbritton, V.P. & CFO
M. Futch, V.P. & Sect'y
Directors: Officers: Officers: *D.R. Grazian, V.P.
D.H. Watts, Chairman R. Kremer, Chairman, Pres. & D.H. Watts, Pres. & CEO
J.J. Barclay CEO P.M. Costanzo, Sr. V.P.
R.M. Brooks M.L. Thomas, V.P. & Sect'y W.E. Barton, Sr. V.P. &
B.C. Kelly D.J. Brunton, CFO, Treas. & CFO
R.A. McDonald Asst. Sect'y M. Futch, V.P. & Sect'y
R.E. Miles K. Kenan, Asst. Sect'y
G.B. Searle
Officers:
D.H. Watts, President & CEO
*W.G. Dorey, Exec. V.P.
*P.M. Costanzo, Sr. V.P.
*M.E. Boitano, Sr. V.P.
*W.E. Barton, Sr. V.P. & CFO
*+R.C. Allbritton, V.P. & Treas.
M Futch, V.P. & Sect'y
*G.M. Higdem, V.P.
*J.H. Roberts, V.P.
*D.R. Grazian, Dir. of Corp. Tax.
*M. McCann-Jenni, Controller
*M. Donnino, Regional Mgr.
*H. Heilbron, Area Mgr.
*K. Smith, HCD Counsel
*Asst. Sect'y
+Asst. Financial Officer
</TABLE>
GG&R, INC.
P.O. Box 30429
Salt Lake City, UT 84130
Holding Company
Incorporated: 1/7/76
Acquired: 5/8/95
EIN: 87-0317516
Director:
D.H. Watts, Chairman
Officers:
D.H. Watts, President & CEO
W.E. Barton, Sr. V.P. & CFO
M. Futch, V.P. & Secretary
BEAR RIVER CONTRACTORS
4130 South 1630 East
St. George, UT 84790
Heavy/Highway Construction - Non-Union
Crusher/Asphalt Plant
Incorporated: 4/23/82 Acquired: 5/8/95 EIN: 87-0307259
Directors:
M. Thomas, Chairman
D. Brunton & K. Kenan
Officers:
M.L. Thomas, President & CEO
D. Brunton, V.P., Sect'y, CFO & Treas.
K. Kenan, Asst. Secretary
S. Gogol, Asst. Secretary
<TABLE>
<S> <C>
INTERMOUNTAIN SLURRY SEAL, INC. POZZOLAN PRODUCTS COMPANY (PPC)
100 North Warm Springs Road dba GARCO TESTING
Salt Lake City, UT 84130 532 West 3560 South
Highway Construction - Non Union Salt Lake City, UT 84115
Utah and Surrounding States Material Testing - Non-Union
Incorporated: 8/14/48 Incorporated: 1/2/76
Acquired: 5/8/95 EIN: 87-0207591 Acquired: 5/8/95 EIN: 87-0332091
Directors Directors:
M. Thomas, Chairman M. Thomas, Chairman
D. Brunton & K. Kenan D. Brunton & K. Kenan
Officers Officers:
M. Thomas, President & CEO
M. Thomas, President & CEO D. Watson, VP, Secretary & General Mgr.
R. Cahoon, V.P., Sect'y & General Mgr. D. Brunton, Asst. Sect'y, Treas. & CFO
D. Brunton, Asst. Sect'y & CFO K. Kenan, Asst. Secretary
K. Kenan, Asst. Secretary
S. Gogol, Asst. Secretary
S. Gogol, Asst. Secretary
</TABLE>
<TABLE>
<S> <C> <C>
GTC, INC. WILCOTT GRANITE
P.O. Box 50085 CORPORATION CONSTRUCTION
Watsonville, CA 95077 P.O. Box 628 INTERNATIONAL
Watsonville, CA 95077 P.O. Box 50085
Waters Ridge II Ltd. Watsonville, CA 95077
Project Development Heavy/Highway Construction
Heavy/Highway
Incorporated: 10/28/96 Incorporated: 2/6/81 Construction
EIN: 77-0446298 Acquired: 2/5/90 non-domestic
EIN: 94-2717069
Director: Incorporated: 7/31/97
D.H. Watts, Chairman Directors: EIN: 77-0466093
D.H. Watts, Chairman
Officers: W.G. Dorey Directors:
W.E. Barton, Pres. & Treas. W.E. Barton D.H. Watts, Chairman
M. Futch, V.P. & Sect'y W.E. Barton
R.C. Allbritton, V.P., Asst. Officers: W.G. Dorey
Sect'y & Asst. Treas. D.H. Watts, Pres. & CEO P.M. Costanzo
M.F. Donnino, V.P. W.G. Dorey, Exec. V.P.
S.D. Wolcott, V.P. W.E. Barton, Sr. V.P. & Officers:
CFO D.H. Watts, Pres. & CEO
M. Futch, V.P. & Sect'y *W.G. Dorey, Exec. V.P.
*P.M. Costanzo, Sr. V.P.
*M.E. Boitano, Sr. V.P.
*W.E. Barton, Sr. V.P. & CFO
*R.C. Allbritton, V.P. & Treas.
M. Futch, V.P. & Sect'y
*G.M. Higdem, V.P.
*D.R. Grazian, Dir. of Corp. Tax
*Asst. Sect'y
</TABLE>
<PAGE> 15
GRANITE CONSTRUCTION INCORPORATED
SCHEDULE 6.11(c)
<TABLE>
<CAPTION>
LEASES: (GCC AS LESSEE)
- ---------------------------------
Annual
Lessor Description Maturity Payments
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Arizona State Labor Department Pit 01/31/00 21,318
Associates Construction Equipment 04/30/99 15,921
Associates Construction Equipment 04/30/99 276,500
Associates Construction Equipment 12/31/00 343,243
Associates Construction Equipment 04/30/00 141,504
Associates Construction Equipment 06/30/00 28,188
Associates Construction Equipment 09/30/00 145,152
Associates Construction Equipment 03/31/00 29,028
Associates Construction Equipment 12/31/00 203,310
Associates Construction Equipment 07/31/00 27,076
Associates Construction Equipment 09/30/01 24,356
Associates Construction Equipment 01/31/02 91,980
Associates Construction Equipment 04/30/00 112,574
Centerpoint Plaza Office Building 05/30/99 25,000
Chemical Lime Company of Arizona Plant Property 10/31/07 633,333
Chevron USA Inc. Pit Monthly 2,400
Crawford Pit 12/31/99 40,000
French, Warren R., and Mabel L. Office Building 04/30/03 5,760
GE Capital Modular Space Office Building 11/30/01 7,260
Gibbons Realty Company Building 05/08/05 30,000
Granite Rock Company Office & Yard 12/31/00 177,440
Hansen, Clarence & Sinnott Quarry Property 07/31/99 29,167
Harper Contracting Inc. Quarry Property 04/06/03 144,000
IBM Credit Corporation Computer Hardware 01/01/00 241,740
I. Christensen & Bruno Benna Office Building 03/31/99 3,750
Jackling Aggregate Limited Pit 12/31/05 72,000
Julia C. Matthews Pit Monthly 24,000
Komatsu Equipment Co. Construction Equipment 04/30/00 261,008
Kern Front Oil Company Pit Monthly 1,200
Little Rock Sand & Gravel Pit 04/30/01 173,472
L.R. Peterson and E.W. McGah Pit 01/02/06 75,000
Maria Bazzi Pit 12/31/00 62,783
Meredit, Parker, Key, Bath Pit 12/31/03 283,755
M.L. Hillcock & B.C. Hillcock Pit 01/31/01 14,188
Parc Center Office Building 11/30/00 271,969
Pebble Beach Corporation Pit 12/31/00 22,000
Rae Barker Trust Pit 12/31/01 2,000
R. Jay Deserpa Company Yard 12/31/08 12,000
Recupido, Fredrick Office Building 11/30/03 20,000
Sister Margaret Patricia McCarran Plant Property 12/31/00 10,000
Sopori Land & Cattle Company Quarry Property 08/31/01 13,500
Standard Hill Mining Company Pit 02/28/03 18,000
Tejon Ranch Company Plant Property 10/31/99 20,000
Topo Ranch (Singleton Group) Pit 06/30/07 22,500
Walker Development Pit 12/31/09 75,000
Wells Family Members Pit 12/31/01 25,000
Westem Pacific Railroad Co. Pit 06/01/01 50,000
Woodland - Reiff Pit 05/31/03 2,000
Woodland - Schneegas Pit 05/31/03 750
- ------------------------------------------------------------------------------------------------------
$4,332,125
</TABLE>
<PAGE> 16
GRANITE CONSTRUCTION INCORPORATED
SCHEDULE 6.11(c)
<TABLE>
<CAPTION>
LEASES: (DESERT AGGREGATES AS LESSEE)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Raymond J. Fanchon/L. Muller Pit 03/07/16 24,000
William Barry Shannon Pit 02/29/96 7,200
- ----------------------------------------------------------------------------------------------------
$31,200
</TABLE>
<TABLE>
LEASES: (BRC AS LESSEE)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SCACH, Inc. Office Building 03/01/02 32,136
Associate Leasing Construction Equipment 09/30/99 30,640
- ----------------------------------------------------------------------------------------------------
$62,776
</TABLE>
<TABLE>
LEASES: (PPC AS LESSEE)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
S W Souvall Company Office Building 6/30/99 5,871
- ----------------------------------------------------------------------------------------------------
$5,871
</TABLE>
<TABLE>
DIVIDENDS: (GCI OBLIGATION) MATURITY AMOUNT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Second Quarter 1999 $.07 dividend
declared for holders of record as of June 30,1999 (approximately) 07/16/99 $1,902,950
- ----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
LETTERS OF CREDIT:
- ----------------------------------------------------------------------------------------------------
BENEFICIARY TYPE SECURED LENDER MATURITY AMOUNT
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Chase Bank of Texas (Camino Columbia) Performance N B of A 05/26/00 10,016,400
Worker=s Compensation (GCC) Performance N B of A OPEN 2,334,343
Granite SR91 L.P. (SR91 Corp. & GCI) Performance N B of A 07/14/00 2,044,461
- ----------------------------------------------------------------------------------------------------
$14,395,204
-----------
$20,730,126
-----------
</TABLE>
<PAGE> 17
GRANITE CONSTRUCTION INCORPORATED
SCHEDULE 6.12
ENVIRONMENTAL MATTERS
Granite Construction in the normal course of business utilizes petroleum
(hydrocarbon) products which may be considered hazardous materials when
encountered at regulatory levels established by the Federal EPA or the Regional
State EPA. The utilization of these asphalt products, diesel, and gasoline over
the years of operations have the potential of creating exposure to environmental
clean up requirements. All underground tanks meet current requirements. There is
no pending government ordered clean up requirements. However, the following
represents estimates based on construction industry housekeeping practices as
encountered during our normal course of business. Except as indicated with an
"*", these costs do not represent actual identified exposures.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
LOCATIONS DESCRIPTION AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Arvin, CA Asphalt Batch Plant 100,000
Arvin, CA Surface Spills 50,000
Bakersfield, CA Surface Spills 100,000
Bakersfield, CA Diesel Aboveground Storage Tanks 25,000
Bakersfield, CA Asphalt Batch Plant 100,000
Coalinga, CA Asphalt Batch Plant 50,000
Felton, Ca Asphalt Batch plant 200,000
French Camp, CA Diesel/Gasoline Underground Storage Tanks 10,000
Gardnerville, NV Surface Spills 25,000
Gardnerville, NV Asphalt Batch Plant 50,000
lndio, CA Massey Shop/Smitty's Garage Cleanup 50,000
Palmdale, CA Surface Spills 10,000
Palmdale, CA Asphalt Batch Plant 50,000
Patrick, NV Asphalt Batch Plant 75,000
Patrick, NV Surface Spills 50,000
Sacramento, CA Diesel/Gasoline Underground Storage Tanks 50,000
Sacramento, CA Asphalt Batch Plant 300,000
Sacramento, CA Surface Spills 200,000
Sacramento, CA Diesel Aboveground Storage Tanks 50,000
Sacramento, CA Shop Area Cleanup 50,000
Salinas, CA Surface Spills 250,000
Santa Barbara, CA Surface Spills 200,000
Santa Barbara, CA Asphalt Batch Plant 50,000
Santa Cruz, CA Santa Cruz Yard Cleanup 250,000
Sparks, NV Diesel/Gasoline Underground Storage Tanks 100,000
Tracy, CA Asphalt Batch Plant 75,000
Tracy, CA Surface Spills 25,000
Tucson, AZ Surface Spills 25,000
Watsonville, CA Surface Spills 50,000
Webb, UT * Asphalt Batch Plant 1,400,000
Whitehall, UT * Asphalt Batch Plant 55,000
Salt Lake City, UT * Concrete Batch Plant 250,000
Salt Lake County, UT * Surface Spills 30,000
Weber County, UT (Ogden) * Surface Spills 100,000
Salt Lake County, UT (CPC) * Aggregate and smelter site 1,250,000
Cahoon, UT * Surface Spills 100,000
Fireclay Battery, UT * Surface Spills 25,000
- -------------------------------------------------------------------------------------------------------
$5,830,000
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 18
GRANITE CONSTRUCTION INCORPORATED
SCHEDULE 6.18
SUBSIDIARIES AND EQUITY INVESTMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
COMPANY DESCRIPTIONS QUANTITY INVESTMENT MARKET
VALUE 05/31/99
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Perini Corporation Common Stock 100 shares 2,879
Calmat Company Common Stock 100 shares 2,384
Cascade Corporation Common Stock 100 shares 2,812
TIC Holdings Minority Interest 257,126 Shares 27,986,746
CPTC L.P./SR9l L.P. Joint Venture 326,332
Waters Ridge II LLP 1,344,803
Waters Ridge (Phase II) LLP 5,048,533
Granite Regional Park LLP 1,611,066
Kiewit/Granite (TCA) Joint Venture 365,611
Kiewit/Granite (KG Leasing) Joint Venture 3,040,899
Kiewit/Granite/MK (Wasatch) Joint Venture 2,249,343
Kiewit/Granite/MK (KGW Leasing) Joint Venture 7,887,973
Kiewit/Granite (E. Dam) Joint Venture 2,034,448
Yonkers/Granite(Atlantic City) Joint Venture 5,549,834
Western Summit/TIC/Granite (UTOY) Joint Venture 291,582
WS/TICGranite (UTOY Leasing) Joint Venture 326,405
Granite/Kiewit(Tongue River) Joint Venture 66,967
Granite/Sundt(ADOT) Joint Venture 23,679
Kiewit/Granite/MK(UTA) Joint Venture 115,000
- -------------------------------------------------------------------------------------------------------
$58,277,296
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 19
GRANITE CONSTRUCTION INCORPORATED
SCHEDULE 8.04
INVESTMENT POLICY
<PAGE> 20
GRANITE CONSTRUCTION INCORPORATED
INVESTMENT POLICY GUIDELINES
EFFECTIVE: JANUARY 1, 1999
Revised: June 30, 1999
PURPOSE
Within the spectrum of activities of this Corporation, it is necessary to
provide a framework for the regular and continuous management of its investment
funds. Short term and intermediate term investments provide earnings on excess
cash while maintaining liquidity and working funds for the present and future
operations.
INVESTMENT OBJECTIVES
In order to provide control of all investments and cash, the Corporation has
established the following objectives regarding its investment policy:
- - Safety - the primary objective of the investment activities of the
Corporation is protection of capital. Each investment transaction shall
seek to first ensure that capital losses are avoided, whether they are
from securities defaults or erosion of market value.
- - Liquidity - the investment portfolio must be structured in a manner
that will provide sufficient liquidity to pay the obligations of the
Corporation. Any excess cash above the aforementioned requirements may
be invested in instruments with longer maturity.
- - Diversification - the investment activity must ensure diversification
of investments that minimizes risk exposure to any one security and/or
issuer.
- - Investment Return - the Corporation seeks to maximize the return on all
investments within the constraints of safety and liquidity.
DURATION
The duration of the portfolio including escrows and deposits shall be consistent
with the cash needs as determined by the cash forecast. Cash investments are
restricted to the average duration of one (1) year from date of settlement. Any
investments with longer maturity than one year must be invested in instruments
issued by, guaranteed by, or insured by the U.S. Government or any of its
agencies. The average portfolio duration of escrows and deposit agreements shall
not exceed five (5) years.
Short-term investments shall be defined as instruments maturing in ninety-one
(91) days or more.
MARKETABILITY
Holdings should be of sufficient size and held in issues which are traded
actively (except time deposits, loan participation, and master notes) to
facilitate transactions at a minimum cost and accurate market valuations.
TRADING
The following individuals are authorized traders:
Roxane C. Allbritton, Vice President/Treasurer
Jigisha Desai, Cash Manager
Mary McCann-Jenni, Controller
Page 1 of 3
<PAGE> 21
Any individual transaction conforming to the policy set forth herein or, any
transaction of an Investment Manager not conforming to the respective Investment
Manager's policy shall be approved by one of the following officers or, any
transaction not conforming to the policy set forth herein must be approved by
any two of the following officers:
<TABLE>
<S> <C>
D.H. Watts W.E. Barton
W.G. Dorey M.E. Boitano
</TABLE>
DEALERS AND BANKS FOR TRADING
The following institutions are authorized dealers:
BA Securities
ING Baring Furman Selz
Lehman Brothers
Merrill Lynch
Salomon Smith Barney
All purchased investments will be delivered to Bank of New York for safekeeping
and paid for upon receipt.
SAFEKEEPING
The banks designated as safekeeping depositories in order of choice are:
Bank of America, Glendale, CA (Wentworth, Hauser & Violich)
Bank of New York (BNY Western Trust Company)
Each financial institution must provide timely confirmation/safekeeping receipts
on all investment transactions and provide monthly transaction reports.
ESCROW
Escrows in lieu of retention are allowed at the following:
Bank of America (formerly Nations Bank, Texas)*
Bank One, Arizona*
Merrill Lynch Trust Company
Nevada Highway Fund (State of Nevada Treasury)*
SunTrust Bank, Georgia*
Union Bank of California
US Trust of California
Zions Bank, Utah* *Required by Owner
The types of investments will be guided by the terms of the escrow, but in all
cases the investment will be governed by the investment policy. *Required by
Owner.
Banks not listed, but required by escrow agreement, will also be acceptable.
REPORTING
- - Daily - An investment transaction sheet, sequentially numbered will be
processed for approval by an authorized offer.
- - Weekly and Monthly - A portfolio will be provided to the President,
Chief Financial Officer and all traders.
- - For FASB 115 purposes, the Corporation classifies all fixed income
investments as "Held to Maturity."
Page 2 of 3
<PAGE> 22
GRANITE CONSTRUCTION INCORPORATED
INVESTMENT POLICY GUIDELINES
EFFECTIVE: JANUARY 1,1999
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ELIGIBLE INVESTMENTS MINIMUM CREDIT QUALITY CONCENTRATION CONCENTRATION
BY BY
ISSUER PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Obligations issued by U.S. Government N/A No Maximum No Maximum
limited to:
U. S. Treasury Bills/Bonds/Notes
- --------------------------------------------------------------------------------------------------------------------------------
Obligations of agencies of the U.S. $1,000,000 or 10% of total 25%
Government limited to: N/A portfolio (whichever is
Federal Farm Credit Bank greater)
Federal Home Loan Bank
Federal Home Loan Mortgage Corp.
Federal National Mortgage Association
Student Loan Marketing Association
- --------------------------------------------------------------------------------------------------------------------------------
Obligations collateralized by U.S. Fully collateralized by U.S. $1,000,000 or 10% of total 25%
Government securities limited to: Gov't and Agency securities portfolio (whichever is
Repurchase Agreements included in these guidelines. greater)
Reverse Repurchase Agreements Collateral value plus accrued
interest must exceed and be
maintained at level exceeding
value of agreement.
- --------------------------------------------------------------------------------------------------------------------------------
Obligations issued by U.S. owned Limited to Top 25 U.S. Banks by $1,000,000 or 10% of total 50%
domestic commercial banks limited to: deposit and assets. Short-Term portfolio (whichever is
Banker's Acceptance rating of A-1/P-1, or Long-Term greater)
Certificate of Deposit rating of AAA/NR or AA/Aa (at
the time of purchase)
- --------------------------------------------------------------------------------------------------------------------------------
Obligations issued by U.S. bank Limited to Top 25 U.S. Banks by $1,000,000 or 10% of total 40%
subsidiaries of Non U.S. Bank limited to: deposit and assets. Short-Term portfolio (whichever is
Yankee Banker's Acceptance rating of A-1/P-1, or Long-Term greater)
Yankee Certificates of Deposit rating of AAA/NR or AA/Aa (at
(all securities U. S. dollar denominated) the time of purchase)
- --------------------------------------------------------------------------------------------------------------------------------
Obligations of major U.S. corporations Any TWO of three rating $1,000,000 or 10% of total 50%
and U.S. holding companies limited to: services: A-1/P-1/D-1 S&P, portfolio (whichever is
Commercial Paper Moody's, Duff & Phelps (at the greater)
time of purchase)
- --------------------------------------------------------------------------------------------------------------------------------
Loan Participation Same as commercial paper credit $1,000,000 or 10% of total 25%
Master Notes quality requirements portfolio (whichever is
greater)
- --------------------------------------------------------------------------------------------------------------------------------
Money Market Funds Any TWO of three rating $1,000,000 or 10% of total 50%
services: AAAm/Aaa/AAA S&P, portfolio (whichever is
Moody's, Duff & Phelps (at the greater)
time of purchase)
- --------------------------------------------------------------------------------------------------------------------------------
Taxexempt investments limited to: S&P: A-1, AA or better, Sp-1 $1,000,000 or 10% of total 25%
Commercial Paper AND Moody's: P-1, Aa or better, portfolio (whichever is
Floating Rate Put Bonds VMIG-1 greater)
Floating Rate Put Notes
Municipal Notes
Municipal Bonds
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 3 of 3
<PAGE> 23
GRANITE CONSTRUCTION INCORPORATED
SCHEDULE 8.06
CONTINGENT OBLIGATIONS
Granite Construction Company has a $50.1MM design-build contract to construct
the Camino Columbia Toll Road near Laredo, Texas. (GCl as a Guarantor)
<PAGE> 24
GRANITE CONSTRUCTION INCORPORATED
SCHEDULE 8.18
INDEBTEDNESS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
LENDER TYPE SECURED INTEREST MATURITY BALANCE
Y/N RATE 05/31/99
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Raymond Flaschbarth (GOC) Land Acquisition N 8.00% 06/30/00 260,000
C.B. Concrete Company, Inc. (GCC) Acquisition N 6.50% 04/14/02 2,055,564
Rosemary's Mountain (GCC) Land Acquisition N 8.82% Open 1,700,000
Glendale Property (GCC) Land Acquisition N 6.50% 12/31/07 1,732.736
Scach, Inc (BRC) Acquisition N 6.50% 04/14/02 178,833
- -------------------------------------------------------------------------------------------------------
$5,927,133
==========
</TABLE>
NOTE: PLEASE SEE SCHEDULE 6.11(c) FOR CAPITALIZED LEASES.
<PAGE> 1
EXHIBIT 10.6.a
GRANITE CONSTRUCTION INCORPORATED
KEY MANAGEMENT DEFERRED COMPENSATION PLAN
Amendment No. 1
- --------------------------------------------------------------------------------
WHEREAS, Granite Construction Incorporated (the "Company") maintains
the Granite Construction Incorporated Key Management Deferred Compensation Plan
(the "Plan") for the benefit of its eligible employees; and
WHEREAS, the Company desires to modify the Plan's distribution
provisions.
NOW THEREFORE, effective as of January 1, 1999, the Plan is hereby
amended as follows:
1. The first sentence of Section 6(a) is amended to read as follows:
The deferral form must be signed and dated by the Participant,
and must specify the payment date and method for distribution
of the Participant's Account.
2. Section 7(c) is amended to read as follows:
(c) Timing Of Distributions. Subject to Sections
7(d), 7(g) and 10, the distribution of the balance of a
Participant's Account will be made or begin as soon as
practicable following the earliest of the following events:
<PAGE> 2
- The Participant's disability, as determined under
the Company's Long Term Disability Plan.
- The Participant's "retirement" under the Company's
tax-qualified retirement plans; provided, however,
that a Participant may elect to have his or her
distribution be made or begin not later than five
years after such "retirement."
- The Participant's death.
To record the adoption of this Amendment No. 1 to the Plan, the Company
has caused it to be executed this 23 day of April, 1999.
GRANITE CONSTRUCTION
INCORPORATED
By /s/ David H. Watts
--------------------------------------
DAVID H. WATTS, PRESIDENT & CEO
By /s/ Michael Futch
--------------------------------------
MICHAEL FUTCH, SECRETARY
-2-
<PAGE> 1
EXHIBIT 10.7.a
GRANITE CONSTRUCTION INCORPORATED
KEY MANAGEMENT DEFERRED INCENTIVE COMPENSATION PLAN
Amendment No. 1
- --------------------------------------------------------------------------------
WHEREAS, Granite Construction Incorporated (the "Company") maintains
the Granite Construction Incorporated Key Management Deferred Incentive
Compensation Plan (the "Plan") for the benefit of its eligible employees; and
WHEREAS, the Company desires to modify the Plan's distribution
provisions.
NOW, THEREFORE, Section 7(c) of the Plan is hereby amended as follows,
effective as of January 1, 1999:
(c) Timing Of Distributions. Subject to Sections 7(d), 7(g)
and 10, the distribution of the balance of a Participant's Account will
be made or begin as soon as practicable following the earliest of the
following events:
- Occurrence of the date set forth in the Participant's
deferral form.
- The Participant's disability, as determined under the
Company's Long Term Disability Plan.
- The Participant's "retirement" under the Company's
tax-qualified retirement plans; provided, however, that a
Participant may elect to have his or her distribution be
made or begin not later than five years after such
retirement."
- The Participant's death.
<PAGE> 2
To record the adoption of this Amendment No. 1 to the Plan, the Company
has caused it to be executed this 23 day of April 1999.
GRANITE CONSTRUCTION
INCORPORATED
By /s/ David H. Watts
-----------------------------------
DAVID H. WATTS, PRESIDENT & CEO
By /s/ Michael Futch
-----------------------------------
MICHAEL FUTCH, SECRETARY
-2-
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EXHIBIT 10.10
GRANITE CONSTRUCTION INCORPORATED
1999 EQUITY INCENTIVE PLAN
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TABLE OF CONTENTS
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SECTION 1. ESTABLISHMENT, PURPOSE, AND TERM OF PLAN 1
1.1 Establishment 1
1.2 Purpose 1
1.3 Term of Plan
SECTION 2. DEFINITIONS AND CONSTRUCTION 1
2.1 Definitions 1
2.2 Construction 5
SECTION 3. ELIGIBILITY AND AWARD LIMITATIONS 5
3.1 Persons Eligible for Incentive Stock Options 5
3.2 Persons Eligible for Other Awards 5
3.3 Section 162(m) Award Limits 5
SECTION 4. ADMINISTRATION 6
4.1 Administration by Committee 6
4.2 Authority of Officers 6
4.3 Administration with Respect to Insiders 6
4.4 Committee Complying with Section 162(m) 6
4.5 Powers of the Committee 6
SECTION 5. STOCK SUBJECT TO PLAN 8
5.1 Maximum Number of Shares Issuable 8
5.2 Lapsed Awards 8
5.3 Adjustment in Capitalization 8
SECTION 6. STOCK OPTIONS 8
6.1 Grant of Options 8
6.2 Exercise Price 9
6.3 Exercise Period 9
6.4 Payment of Exercise Price 9
6.5 Effect of Termination of Service 10
6.6 Transferability of Options 12
SECTION 7. RESTRICTED STOCK 12
7.1 Grant of Restricted Stock 12
7.2 Nontransferability During Period of Restriction 12
7.3 Other Restrictions 12
7.4 Voting Rights 13
7.5 Dividends and Other Distribution 13
7.6 Effect of Termination of Service 13
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TABLE OF CONTENTS
(continued)
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SECTION 8. PERFORMANCE SHARES AND PERFORMANCE UNITS 13
8.1 Grant of Performance Shares or Performance Units 13
8.2 Value of Performance Shares and Performance Units 14
8.3 Establishment of Performance Goals and Performance Period 14
8.4 Measurement of Performance Goals 14
8.5 Determination of Value of Performance Shares and Performance Units 15
8.6 Dividend Equivalents 15
8.7 Form and Timing of Payment 15
8.8 Restrictions Applicable to Payment in Shares 15
8.9 Effect of Termination of Service 16
8.10 Nontransferability 16
SECTION 9. DIRECTOR FEE AWARDS 16
9.1 Effective Date and Duration of this Section 16
9.2 Mandatory and Elective Director Fee Awards 17
9.3 Time and Manner of Election 17
9.4 Automatic Grant of Director Fee Awards 18
9.5 Option Payment 18
9.6 Stock Units Payment 20
9.7 Fractional Shares 21
SECTION 10. CHANGE IN CONTROL 22
10.1 Effect of Change in Control 22
10.2 Termination of Service After a Change in Control 22
10.3 Definition 23
SECTION 11. REQUIREMENTS OF LAW 23
11.1 Compliance with Securities Law 23
11.2 Governing Law 24
SECTION 12. TAX WITHHOLDING 24
12.1 Tax Withholding In General 24
12.2 Withholding of Shares 24
SECTION 13. AMENDMENT AND TERMINATION OF PLAN 24
13.1 Amendment and Termination of Plan 24
13.2 Effect of Amendment or Termination 24
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TABLE OF CONTENTS
(continued)
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SECTION 14. MISCELLANEOUS PROVISIONS 24
14.1 Beneficiary Designation 24
14.2 Rights as an Employee or Director 25
14.3 Rights as a Stockholder 25
14.4 Provision of Information 25
14.5 Unfunded Obligation 25
14.6 Indemnification 25
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PLAN HISTORY
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May 17, 1999 Board adopts Plan, with an initial reserve of 2,500,000 shares.
May 24, 1999 Stockholders approve Plan, with an initial reserve of 2,500,000 shares.
[ May 24, 2004 In compliance with Treas. Reg. Section 1.162-27(e)(4)(vi), the stockholders reapprove the
material terms of the "performance goals" for purposes of Section 162(m) at the annual
stockholders meeting occurring in the fifth year following the year in which the
stockholders previously approved the performance goals.]
</TABLE>
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GRANITE CONSTRUCTION INCORPORATED
1999 EQUITY INCENTIVE PLAN
SECTION 1. ESTABLISHMENT, PURPOSE, AND TERM OF PLAN
1.1 ESTABLISHMENT. Granite Construction Incorporated, a Delaware
corporation, hereby establishes the Granite Construction Incorporated 1999
Equity Incentive Plan (the "PLAN") effective as of the date of its approval by
the stockholders of the Company (the "EFFECTIVE DATE").
1.2 PURPOSE. The purpose of the Plan is to advance the interests of the
Company, by encouraging and providing for the acquisition of an equity interest
in the success of the Company by Employee and Directors, by providing additional
incentives and motivation toward superior performance of the Company, and by
enabling the Company to attract and retain the services of Employees and
Directors upon whose judgment, interest, and special effort the successful
conduct of its operations is largely dependent. The Plan seeks to achieve this
purpose by providing for Awards in the form of Options, Restricted Stock,
Performance Units and Performance Shares, by providing Nonemployee Directors
with the opportunity to receive Options or Stock Units in lieu of compensation
otherwise payable in cash, and by providing for payments in the form of shares
of Stock or cash.
1.3 TERM OF PLAN. The Plan shall remain in effect until the earlier of
(i) its termination by the Committee pursuant to Section 13 or (ii) the date on
which all of the shares of Stock 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. However, all
Awards shall be granted, if at all, within five (5) years from the Effective
Date.
SECTION 2. DEFINITIONS AND CONSTRUCTION
2.1 DEFINITIONS. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(a) "AWARD" means any Option, Restricted Stock, Performance
Unit, Performance Share or Director Fee Award granted under the Plan.
(b) "AWARD AGREEMENT" means a written agreement between the
Company and a Participant setting forth the terms, conditions and restrictions
of the Award granted to the Participant. An Award Agreement may be an "Option
Agreement," a "Restricted Stock Agreement," a "Performance Share Agreement," a
"Performance Unit Agreement," a "Nonemployee Director Option Agreement," or a
"Stock Units Agreement."
(c) "BOARD" means the Board of Directors of the Company.
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<PAGE> 7
(d) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
(e) "COMMITTEE" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. If no committee of the Board has been
appointed to administer the Plan, the Board shall exercise all of the powers of
the Committee granted herein, and, in any event, the Board may in its discretion
exercise any or all of such powers.
(f) "COMPANY" means Granite Construction Incorporated, a
Delaware corporation, or any successor corporation thereto.
(g) "DIRECTOR" means a member of the Board.
(h) "DIRECTOR FEE AWARD" means any Nonemployee Director Option
or Stock Unit granted pursuant to Section 9.
(i) "DISABILITY" means a permanent and total disability as
defined under the Company's Long Term Disability Plan or any successor plan,
regardless of whether the Participant is covered by such Long Term Disability
Plan.
(j) "DIVIDEND EQUIVALENT" means a credit, made at the
discretion of the Committee or as otherwise provided by the Plan, to the account
of a Participant in an amount equal to the cash dividends paid on one share of
Stock for each share of Stock represented by an Award of Performance Shares or
Stock Units held by such Participant.
(k) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company and, with respect to any Incentive Stock
Option granted to such person, who is an employee for purposes of Section 422 of
the Code; provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(m) "FAIR MARKET VALUE" means, as of any relevant date, the
closing sale price of a share of Stock (or the mean of the closing bid and asked
prices if the Stock is so quoted instead) on the relevant date on the New York
Stock Exchange or such other national or regional securities exchange or market
system constituting the primary market for the Stock, as reported in the Wall
Street Journal or such other source as the Company deems reliable. If the
relevant date does not fall on a day on which the Stock has traded on such
securities exchange or market system, the date on which the Fair Market Value
shall be established shall be the last day on which the Stock was so traded
prior to the relevant date, or such other appropriate day as shall be determined
by the Committee, in its discretion. If on such date, there is no public market
for the Stock, the Fair Market Value of a share of Stock shall be as determined
by the Committee.
2
<PAGE> 8
(n) "INCENTIVE STOCK OPTION" means an Option intended to be
(as set forth in the Option Agreement) and which qualifies as an incentive stock
option within the meaning of Section 422(b) of the Code.
(o) "INSIDER" means an officer or a Director of the Company or
any other person whose transactions in Stock are subject to Section 16 of the
Exchange Act.
(p) "NONEMPLOYEE DIRECTOR" means a Director of the Company who
is not an Employee.
(q) "NON EMPLOYEE DIRECTOR OPTION" means a Director Fee Award
in the form of Nonstatutory Stock Option granted pursuant to the terms and
conditions of Section 9.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended
to be (as set forth in the Option Agreement) or which does not qualify as an
Incentive Stock Option.
(s) "OPTION" means the right to purchase Stock at a stated
price for a specified period of time pursuant to the terms and conditions of the
Plan. An Option may be either an Incentive Stock Option or a Nonstatutory Stock
Option.
(t) "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(u) "PARTICIPANT" means any eligible person who has been
granted one or more Awards.
(v) "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation.
(w) "PARTICIPATING COMPANY GROUP" means, at any point in time,
all corporations collectively which are then Participating Companies.
(x) "PERFORMANCE GOAL" means a performance goal established by
the Committee pursuant to Section 8.3.
(y) "PERFORMANCE PERIOD" means a period established by the
Committee pursuant to Section 8.3 at the end of which one or more Performance
Goals are to be measured.
(z) "PERFORMANCE SHARE" means a bookkeeping entry representing
a right granted to a Participant pursuant to the terms and conditions of Section
8 to receive a payment equal to the value of a Performance Share, as determined
by the Committee, based on performance.
(aa) "PERFORMANCE UNIT" means a bookkeeping entry representing
a right granted to a Participant pursuant to the terms and conditions of Section
8 to receive a payment equal to the value of a Performance Unit, as determined
by the Committee, based upon performance.
3
<PAGE> 9
(bb) "PERIOD OF RESTRICTION" means the period during which
shares of Restricted Stock are subject to restriction as set forth in Section
7.2.
(cc) "RESTRICTED STOCK" means Stock granted to a Participant
pursuant to the terms and conditions of Section 7.
(dd) "RETIREMENT" means (i) with respect to an Employee,
termination of employment for retirement under the terms of the Company's
defined contribution plans, and (ii) with respect to a Nonemployee Director,
resignation from Service on the Board after attaining the age of 55 and after at
least ten years of Service on the Board.
(ee) "RULE 16b-3" means Rule 16b-3 under the Exchange Act, as
amended from time to time, or any successor rule or regulation.
(ff) "SECTION 162(m)" means Section 162(m) of the Code.
(gg) "SECURITIES ACT " means the Securities Act of 1933, as
amended.
(hh) "SERVICE" means a Participant's employment or service
with the Participating Company Group, whether in the capacity of an Employee or
a Director. A Participant's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Participant renders
Service to the Participating Company Group or a change in the Participating
Company for which the Participant renders such Service, provided that there is
no interruption or termination of the Participant's Service. Furthermore, a
Participant's Service with the Participating Company Group shall not be deemed
to have terminated if the Participant takes any military leave, sick leave, or
other bona fide leave of absence approved by the Company; provided, however,
that if any such leave exceeds ninety (90) days, on the one hundred eighty-first
(181st) day following the commencement of such leave any Incentive Stock Option
held by the Participant shall cease to be treated as an Incentive Stock Option
and instead shall be treated thereafter as a Nonstatutory Stock Option unless
the Participant's right to return to Service with the Participating Company
Group is guaranteed by statute or contract. Notwithstanding the foregoing,
unless otherwise designated by the Company or required by law, a leave of
absence shall not be treated as Service for purposes of determining vesting
under the Participant's Award Agreement. A Participant's Service shall be deemed
to have terminated either upon an actual termination of Service or upon the
corporation for which the Participant performs Service ceasing to be a
Participating Company. Subject to the foregoing, the Company, in its discretion,
shall determine whether a Participant's Service has terminated and the effective
date of such termination.
(ii) "STOCK" means the Common Stock of the Company, as
adjusted from time to time in accordance with Section 5.3.
(jj) "STOCK UNIT" means a Director Fee Award in the form of a
bookkeeping entry representing a right granted to a Participant pursuant to the
terms and conditions of Section 9 to receive payment of one (1) share of Stock.
4
<PAGE> 10
(kk) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in section 424(f) of the
Code.
(ll) "TEN PERCENT OWNER" means a Participant who, at the time
an Option is granted to the Participant, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of a
Participating Company within the meaning of Section 422(b)(6) of the Code.
2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, words in
the masculine gender, when used in the Plan shall include the feminine gender,
the singular shall include the plural, and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.
SECTION 3. ELIGIBILITY AND AWARD LIMITATIONS
3.1 PERSONS ELIGIBLE FOR INCENTIVE STOCK OPTIONS. Incentive Stock
Options may be granted only to Employees. For purposes of the foregoing
sentence, the term "Employees" shall include prospective Employees to whom
Options are granted in connection with written offers of employment with the
Participating Company Group, provided that any such Option shall be deemed
granted effective on the date that the Participant commences Service as an
Employee, with an exercise price determined as of such date in accordance with
Section 6.2.
3.2 PERSONS ELIGIBLE FOR OTHER AWARDS. Awards other than Incentive
Stock Options may be granted only to Employees and Directors. For purposes of
the foregoing sentence, the terms "Employees" and "Directors" shall include
prospective Employees and prospective Directors to whom Awards are granted in
connection with written offers of employment or service as a Director with the
Participating Company Group, provided that no Stock subject to any such Award
shall vest, become exercisable or be issued prior to the date on which the
Participant commences Service. A Director Fee Award may be granted only to a
person who, at the time of grant, is a Nonemployee Director. Eligible persons
may be granted more than one (1) Award.
3.3 SECTION 162(m) AWARD LIMITS. The following limitations (the
"SECTION 162(m) AWARD LIMITS") shall apply to the grant of any Award if, at the
time of grant, the Company is a "publicly held corporation" within the meaning
of Section 162(m).
(a) STOCK OPTIONS. Subject to adjustment as provided in
Section 5.3, no Employee shall be granted one or more Options within any fiscal
year of the Company which in the aggregate are for the purchase of more than one
hundred thousand (100,000) shares; provided, however, that the Company may make
an additional one-time grant to any newly-hired Employee of an Option for the
purchase of up to two hundred fifty thousand (250,000) shares. An Option which
is canceled in the same fiscal year of the Company in which it was granted shall
continue to be counted against the limits described in this subsection for such
period.
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<PAGE> 11
(b) RESTRICTED STOCK. Subject to adjustment as provided in
Section 5.3, no Employee may be granted within any fiscal year of the Company
more than one hundred thousand (100,000) shares of Restricted Stock, provided
that such limit shall apply only to Awards of Restricted Stock which are granted
or with respect to which the Period of Restriction lapses contingent upon the
attainment of Performance Goals.
(c) PERFORMANCE SHARES AND PERFORMANCE UNITS. Subject to
adjustment as provided in Section 5.3, no Employee may be granted (i)
Performance Shares which could result in such Employee receiving more than one
hundred thousand (100,000) shares of Stock for each full fiscal year of the
Company contained in the Performance Period for such Award, or (ii) Performance
Units which could result in such Employee receiving more than one million five
hundred thousand dollars ($1,500,000) for each full fiscal year of the Company
contained in the Performance Period for such Award. No Participant may be
granted more than one Performance Share Award or one Performance Unit Award (but
not both such Awards) for the same Performance Period.
SECTION 4. ADMINISTRATION
4.1 ADMINISTRATION BY COMMITTEE. The Plan shall be administered by the
Committee. All questions of interpretation of the Plan or of any Award shall be
determined by the Committee, and such determinations shall be final, binding and
conclusive for all purposes and upon all persons whomsoever.
4.2 AUTHORITY OF OFFICERS. Any officer of a Participating Company shall
have the authority to act on behalf of the Company with respect to any matter,
right, obligation, determination or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, determination or
election.
4.3 ADMINISTRATION WITH RESPECT TO INSIDERS. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.
4.4 COMMITTEE COMPLYING WITH SECTION 162(m). If the Company is a
"publicly held corporation" within the meaning of Section 162(m), the Board may
establish a Committee of "outside directors" within the meaning of Section
162(m) to approve the grant of any Award which might reasonably be anticipated
to result in the payment of employee remuneration that would otherwise exceed
the limit on employee remuneration deductible for income tax purposes pursuant
to Section 162(m).
4.5 POWERS OF THE COMMITTEE. In addition to any other powers set forth
in the Plan and subject to the provisions of the Plan, the Committee shall have
the full and final power and authority, in its discretion:
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<PAGE> 12
(a) to determine the persons to whom, and the time or times at
which, Awards shall be granted and the number of shares of Stock or units to be
subject to each Award and the value of a unit;
(b) to determine the type of Award granted and to designate
Options as Incentive Stock Options or Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of Stock or
other property;
(d) to determine the terms, conditions and restrictions
applicable to each Award (which need not be identical) and any shares acquired
pursuant thereto, including, without limitation, (i) the exercise price of any
Option, (ii) the method of payment for shares purchased upon the exercise of any
Option, (iii) the method for satisfaction of any tax withholding obligation
arising in connection with any Award, including by the withholding or delivery
of shares of stock, (iv) the timing, terms and conditions of the exercisability
or vesting of any Award or any shares acquired pursuant thereto, (v) the
Performance Goals applicable to any Award and the extent to which such
Performance Goals have been attained, (vi) the time of the expiration of any
Award, (vii) the effect of the Participant's termination of Service on any of
the foregoing, and (viii) all other terms, conditions and restrictions
applicable to the Award or shares acquired pursuant thereto not inconsistent
with the terms of the Plan;
(e) to determine whether an Award of Performance Shares or
Performance Units will be settled in shares of Stock, cash, or in any
combination thereof;
(f) to approve one or more forms of Award Agreement;
(g) to amend, modify, extend, cancel, renew, or grant a new
Award in substitution for, any Award or to waive any restrictions or conditions
applicable to any Award or any shares acquired pursuant thereto;
(h) to accelerate, continue, extend or defer the
exercisability or vesting of any Award or any shares acquired pursuant thereto,
including with respect to the period following a Participant's termination of
Service;
(i) to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or alternative
versions of the Plan, including, without limitation, as the Committee deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted Awards;
and
(j) to correct any defect, supply any omission or reconcile
any inconsistency in the Plan or any Award Agreement and to make all other
determinations and take such other actions with respect to the Plan or any Award
as the Committee may deem advisable to the extent consistent with the Plan and
applicable law.
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SECTION 5. STOCK SUBJECT TO PLAN
5.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 5.3, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be two million five hundred thousand
(2,500,000) and shall consist of authorized but unissued or reacquired shares of
Stock not reserved for any other purpose, or any combination thereof.
5.2 LAPSED AWARDS. If any Award granted under the Plan terminates,
expires or lapses for any reason without having been exercised or settled in
full, or if shares are reacquired pursuant to withholding, or if shares subject
to forfeiture or repurchase are forfeited or repurchased by the Company, any
shares reacquired or subject to such lapsed Award again shall be available for
issuance under the Plan.
5.3 ADJUSTMENT IN CAPITALIZATION. In the event of any stock dividend,
stock split, reverse stock split, recapitalization, merger, combination,
exchange of shares, reclassification or similar change in the capital structure
of the Company, appropriate adjustments shall be made in the number and class of
shares subject to the Plan and to any outstanding Awards, in the Section 162(m)
Award Limits set forth in Section 3.3, and in the exercise price per share of
any outstanding Options. If a majority of the shares which are of the same class
as the shares that are subject to outstanding Awards are exchanged for,
converted into, or otherwise become (whether or not pursuant to a Change in
Control, as defined in Section 10.3) shares of another corporation (the "NEW
SHARES"), the Committee may unilaterally amend the outstanding Awards to provide
that such Awards are for New Shares. In the event of any such amendment, the
number of shares subject to outstanding Awards and the exercise price per share
of outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Committee, in its discretion. Notwithstanding the foregoing,
any fractional share resulting from an adjustment pursuant to this Section 5.3
shall be rounded down to the nearest whole number, and in no event may the
exercise price of any Option be decreased to an amount less than the par value,
if any, of the stock subject to the Option. The adjustments determined by the
Committee pursuant to this Section 5.3 shall be final, binding and conclusive.
SECTION 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the provisions of Sections 1.3 and 5,
Options (other than pursuant to a Director Fee Award) may be granted to
Participants at any time and from time to time as shall be determined by the
Committee. Each Option shall be evidenced by an Option Agreement that shall
specify the type of Option granted, the exercise price, the duration of the
Option, the number of shares of Stock to which the Option pertains, and such
other provisions as the Committee shall determine. No Option or purported Option
shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Option Agreement. Option Agreements may incorporate all or any of
the terms of the Plan by reference and, except as otherwise set forth in Section
9 with respect to a Nonemployee Director Option, shall comply with and be
subject to the terms and conditions set forth in Sections 6.2 through 6.6 below.
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6.2 EXERCISE PRICE. The exercise price for each Option shall be
established in the discretion of the Committee; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of a share
of Stock on the effective date of grant of the Option, and (c) no Incentive
Stock Option granted to a Ten Percent Owner shall have an exercise price per
share less than one hundred ten percent (110%) of the Fair Market Value of a
share of Stock on the effective date of grant of the Option. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) may be granted with an exercise price lower than the minimum exercise
price set forth above if such Option is granted pursuant to an assumption or
substitution for another option in a manner qualifying under the provisions of
Section 424(a) of the Code.
6.3 EXERCISE PERIOD. Options shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria and restrictions as shall be determined by the Committee
and set forth in the Option Agreement evidencing such Option; provided, however,
that (a) no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option, (b) no Incentive Stock Option
granted to a Ten Percent Owner shall be exercisable after the expiration of five
(5) years after the effective date of grant of such Option, and (c) no Option
granted to a prospective Employee or prospective Director may become exercisable
prior to the date on which such person commences Service. Subject to the
foregoing, unless otherwise specified by the Committee in the grant of an
Option, any Option granted hereunder shall have a term of ten (10) years from
the effective date of grant of the Option.
6.4 PAYMENT OF EXERCISE PRICE. The purchase price of Stock upon
exercise of any Option shall be paid in full by such methods as shall be
permitted by the Committee or as provided in a Participant's Option Agreement,
which need not be the same for all Participants, and subject to the following:
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash, by check, or
cash equivalent, (ii) by tender to the Company, or attestation to the ownership,
of shares of Stock owned by the Participant having a Fair Market Value not less
than the exercise price, (iii) by delivery of a properly executed notice
together with irrevocable instructions to a broker providing for the assignment
to the Company 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 (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System) (a "CASHLESS EXERCISE"), (iv) provided that the Participant is an
Employee, by cash for a portion of the aggregate exercise price not less than
the par value of the shares being acquired and the Participant's promissory note
in a form approved by the Company for the balance of the aggregate exercise
price, (v) by such other consideration as may be approved by the Committee from
time to time to the extent permitted by applicable law, or (vi) by any
combination thereof. The Committee may at any time or from time to time grant
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Options which do not permit all of the foregoing forms of consideration to be
used in payment of the exercise price or which otherwise restrict one or more
forms of consideration. The proceeds from payment of the Option exercise prices
shall be added to the general funds of the Company and shall be used for general
corporate purposes.
(b) LIMITATIONS ON FORMS OF CONSIDERATION.
(i) TENDER OF STOCK. Notwithstanding the foregoing,
an Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock to the extent such tender or attestation would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company's stock. Unless otherwise provided by
the Committee, an Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock unless such shares either have
been owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.
(ii) CASHLESS EXERCISE. The Company reserves, at any
and all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.
(iii) PAYMENT BY PROMISSORY NOTE. No promissory note
shall be permitted if the exercise of an Option using a promissory note would be
a violation of any law. Any permitted promissory note shall be on such terms as
the Committee shall determine at the time the Option is granted. The Committee
shall have the authority to permit or require the Optionee to secure any
promissory note used to exercise an Option with the shares of Stock acquired
upon the exercise of the Option or with other collateral acceptable to the
Company. Unless otherwise provided by the Committee, if the Company at any time
is subject to the regulations promulgated by the Board of Governors of the
Federal Reserve System or any other governmental entity affecting the extension
of credit in connection with the Company's securities, any promissory note shall
comply with such applicable regulations, and the Optionee shall pay the unpaid
principal and accrued interest, if any, to the extent necessary to comply with
such applicable regulations.
6.5 EFFECT OF TERMINATION OF SERVICE.
(a) OPTION EXERCISABILITY. Subject to earlier termination of
the Option as otherwise provided herein and unless otherwise provided by the
Committee in the grant of an Option and set forth in the Option Agreement, an
Option shall be exercisable after a Participant's termination of Service as
follows:
(i) DEATH OR DISABILITY. If the Participant's Service
is terminated by reason of the death or Disability of the Participant, the
Option, to the extent unexercised and exercisable on the date on which the
Participant's Service terminated, may be exercised by the Participant (or the
Participant's guardian or legal representative or other person who acquired the
right to exercise the Option by reason of the Participant's death) at any time
prior to the
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expiration of six (6) months (or such longer period of time as determined by the
Committee, in its discretion) after the date on which the Participant's Service
terminated, but in any event no later than the date of expiration of the
Option's term as set forth in the Option Agreement evidencing such Option (the
"OPTION EXPIRATION DATE"). If an Option intended to be an Incentive Stock Option
is exercised by a Participant more than three (3) months following the
Participant's termination of Service by reason of a Disability which is not a
"permanent and total disability" as defined in Section 22(e)(3) of the Code,
such exercise will be treated as the exercise of a Nonstatutory Stock Option to
the extent required by Section 422 of the Code. The Participant's Service shall
be deemed to have terminated on account of death if the Participant dies within
three (3) months after the Participant's termination of Service.
(ii) RETIREMENT. If the Participant's Service is
terminated by reason of the Retirement of the Participant, the Option may be
exercised at such time (but in any event no later than the Option Expiration
Date) and in such amounts as shall be determined by the Committee at the time of
grant of the Option and set forth in the Option Agreement.
(iii) TERMINATION FOR CAUSE. Notwithstanding any
other provision of the Plan to the contrary, if the Participant's Service is
terminated for Cause, as defined below, the Option shall terminate and cease to
be exercisable immediately upon such termination of Service. For purposes of
this subsection, "CAUSE" shall mean any of the following: (1) the Participant's
theft, dishonesty, or falsification of any Participating Company documents or
records; (2) the Participant's repeated failure to report to work during normal
hours, other than for customarily excused absences for personal illness or other
reasonable cause; (3) the Participant's conviction (including any plea of guilty
or nolo contendere) of theft or felony; (4) the Participant's wrongful
disclosure of a Participating Company's trade secrets or other proprietary
information; (5) any other dishonest or intentional action by the Participant
which has a detrimental effect on a Participating Company; or (6) the
Participant's habitual and repeated nonperformance of the Participant's duties.
(iv) OTHER TERMINATION OF SERVICE. If the
Participant's Service terminates for any reason, except death, Disability,
Retirement or termination for Cause, the Option, to the extent unexercised and
exercisable by the Participant on the date on which the Participant's Service
terminated, may be exercised by the Participant within thirty (30) days (or such
longer period of time as determined by the Committee, in its discretion) after
the date on which the Participant's Service terminated, but in any event no
later than the Option Expiration Date.
(b) EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding
the foregoing (except Section 6.5(a)(iii)), if the exercise of an Option within
the applicable time periods set forth in Section 6.5(a) is prevented by the
provisions of Section 11.1 below regarding compliance with securities laws, the
Option shall remain exercisable until thirty (30) days after the date the
Participant is notified by the Company that the Option is exercisable, but in
any event no later than the Option Expiration Date.
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(c) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing (except Section 6.5(a)(iii)), if a sale within the
applicable time periods set forth in Section 6.5(a) of shares acquired upon the
exercise of the Option would subject the Participant to suit under Section 16(b)
of the Exchange Act, the Option shall remain exercisable until the earliest to
occur of (i) the tenth (10th) day following the date on which a sale of such
shares by the Participant would no longer be subject to such suit, (ii) the one
hundred and ninetieth (190th) day after the Participant's termination of
Service, or (iii) the Option Expiration Date.
6.6 TRANSFERABILITY OF OPTIONS. During the lifetime of the Participant,
an Option shall be exercisable only by the Participant or the Participant's
guardian or legal representative. No Option shall be assignable or transferable
by the Participant, except by will or by the laws of descent and distribution.
Notwithstanding the foregoing, a Nonstatutory Stock Option shall be assignable
or transferable to the extent permitted by the Committee and set forth in the
Option Agreement evidencing such Option.
SECTION 7. RESTRICTED STOCK
7.1 GRANT OF RESTRICTED STOCK. Subject to the provisions of Sections
1.3 and 5, Awards of Restricted Stock may be granted to Participants at any time
and from time to time as shall be determined by the Committee, including,
without limitation, upon the attainment of one or more Performance Goals as
described in Section 8.4. If either the grant of Restricted Stock or the lapsing
of the Period of Restriction is to be contingent upon the attainment of one or
more Performance Goals, the Committee shall follow procedures substantially
equivalent to those set forth in Sections 8.3 through 8.5. Shares of Restricted
Stock shall be issued for no consideration other than services rendered. Each
grant of Restricted Stock shall be evidenced by a Restricted Stock Agreement
that shall specify the number of shares of Stock subject to and the other terms,
conditions and restrictions of such Award as the Committee shall determine. No
Restricted Stock Award or purported Restricted Stock Award shall be a valid and
binding obligation of the Company unless evidenced by a fully executed
Restricted Stock Agreement. Restricted Stock Agreements may incorporate all or
any of the terms of the Plan by reference and shall comply with and be subject
to the terms and conditions set forth in Sections 7.2 through 7.6 below.
7.2 NONTRANSFERABILITY DURING PERIOD OF RESTRICTION. During such period
beginning on the date of grant of a Restricted Stock Award as may be established
by the Committee (the "PERIOD OF RESTRICTION"), no shares of such Restricted
Stock may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, except by will or the laws or descent and distribution. The
Committee, in its discretion, may provide for the lapse of the Period of
Restriction, in full or in installments, at such time or times, upon such event
or events, or upon satisfaction of such conditions or performance criteria
(including, without limitation, Performance Goals as described in Section 8.4)
as the Committee may establish and set forth in the Restricted Stock Agreement
evidencing the Award. All rights with respect to Restricted Stock granted to a
Participant hereunder shall be exercisable during his or her lifetime only by
such Participant.
7.3 OTHER RESTRICTIONS. The Committee may impose such other
restrictions on any shares of Restricted Stock granted hereunder as it may deem
advisable, including, without
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limitation, restrictions under applicable Federal securities law and under any
blue sky or state securities laws applicable to such shares, and may legend the
certificates representing the Restricted Stock to give appropriate notice of
such restrictions.
7.4 VOTING RIGHTS. During the Period of Restriction, Participants
holding shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those shares.
7.5 DIVIDENDS AND OTHER DISTRIBUTION. During the Period of Restriction,
Participants holding shares of Restricted Stock granted hereunder shall be
entitled to receive all dividends and other distributions paid with respect to
those shares while they are so held. If any such dividends or distributions are
paid in shares of stock, the shares shall be subject to the same restrictions on
transferability pursuant to Section 7.2 as the shares of Restricted Stock with
respect to which they were paid.
7.6 EFFECT OF TERMINATION OF SERVICE. Unless otherwise provided by the
Committee in the grant of a Restricted Stock Award and set forth in the
Restricted Stock Agreement, the effect of a Participant's termination of Service
on his or her Restricted Stock Award shall be as follows:
(a) DEATH OR DISABILITY. If the Participant's Service is
terminated by reason of the death or Disability of the Participant during the
Period of Restriction, the restrictions applicable to the shares of Restricted
Stock pursuant to Section 7.2 shall terminate automatically with respect to all
such shares.
(b) RETIREMENT. If the Participant's Service is terminated by
reason of the Retirement of the Participant during the Period of Restriction,
then the restrictions applicable to the shares of Restricted Stock pursuant to
Section 7.2 shall terminate automatically with respect to that number of shares
(rounded to the nearest whole number) equal to (i) the number of shares of
Restricted Stock granted to the Participant multiplied by (ii) the number of
full months which have elapsed since the effective date of grant of the Award
divided by the maximum number of full months of the Period of Restriction. All
remaining shares of Restricted Stock shall be forfeited and automatically
reacquired by the Company.
(c) OTHER TERMINATION OF SERVICE. If the Participant's Service
terminates during the Period of Restriction for any reason except death,
Disability or Retirement, any shares of Restricted Stock still subject to
restrictions pursuant to Section 7.2 at the date of such termination shall be
forfeited and automatically reacquired by the Company; provided, however, that,
in the event of an involuntary termination of the Participant's Service, the
Committee, in its sole discretion, may waive the automatic forfeiture of any or
all such shares and/or add such new restrictions to such shares of Restricted
Stock as it deems appropriate.
SECTION 8. PERFORMANCE SHARES AND PERFORMANCE UNITS
8.1 GRANT OF PERFORMANCE SHARES OR PERFORMANCE UNITS. Subject to the
provisions of Sections 1.3 and 5, the Committee, at any time and from time to
time, may grant Awards of Performance Shares or Performance Units to such
Participants and in such amounts as it shall
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<PAGE> 19
determine. Each grant of a Performance Share or Performance Unit Award shall be
evidenced by a Performance Share Agreement or a Performance Unit Agreement that
shall specify the number of Performance Shares or Performance Units subject
thereto, the value of each Performance Share or Performance Unit, the
Performance Goals and Performance Period applicable to the Award, and the other
terms, conditions and restrictions of the Award as the Committee shall
determine. No Performance Share or Performance Unit Award or purported Award
shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Award Agreement. Performance Share and Performance Unit
Agreements may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the terms and conditions set forth in
Sections 8.2 through 8.10 below.
8.2 VALUE OF PERFORMANCE SHARES AND PERFORMANCE UNITS. Unless otherwise
provided by the Committee in granting an Award, each Performance Share shall
have an initial value equal to the Fair Market Value of a share of Stock on the
effective date of grant of the Performance Share and each Performance Unit shall
have an initial value of one hundred dollars ($100). The ultimate value of a
Performance Share or Performance Unit to the Participant will depend on the
extent to which Performance Goals established by the Committee are attained
within the applicable Performance Period established by the Committee.
8.3 ESTABLISHMENT OF PERFORMANCE GOALS AND PERFORMANCE PERIOD. The
Committee, in its discretion, shall establish the Performance Period applicable
to each Performance Share or Performance Unit Award. Prior to the commencement
of the applicable Performance Period, or such later date as may be permitted
with respect to "performance-based compensation" under Section 162(m), the
Committee shall establish one or more Performance Goals which, when measured at
the end of the Performance Period, shall determine the ultimate value of the
Award to be paid to the Participant. Once established, the Performance Goals
shall not be changed during the Performance Period.
8.4 MEASUREMENT OF PERFORMANCE GOALS. Performance Goals shall be
established by the Committee on the basis of targets to be attained
("PERFORMANCE TARGETS") with respect one or more measures of business or
financial performance (each, a "PERFORMANCE MEASURE"). Performance Measures
shall have the same meanings as used in the Company's financial statements, or
if such terms are not used in the Company's financial statements, they shall
have the meaning applied pursuant to generally accepted accounting principles,
or as used generally in the Company's industry. Performance Targets may include
a minimum, maximum, target level and intermediate levels of performance, with
the ultimate value of a Performance Share or Performance Unit Award determined
by the level attained. Performance Targets may be absolute or relative to a
standard selected by the Committee. Performance Measures shall be calculated
with respect to the Company and each Parent Corporation and Subsidiary
Corporation consolidated therewith for financial reporting purposes or such
division or other business unit thereof as may be selected by the Committee. For
purposes of the Plan, the Performance Measures applicable to an Award shall be
calculated before the effect of changes in accounting standards, restructuring
charges and similar extraordinary items, determined according to criteria
established by the Committee, occurring after the establishment of the
Performance Goals applicable to an Award. Performance Measures may be one or
more of the following as
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determined by the Committee: (a) revenue, (b) operating income, (c) pre-tax
profit, (d) net income, (e) gross margin, (f) operating margin, (g) earnings per
share, (h) return on stockholder equity, (i) return on capital, (j) return on
net assets, (k) economic value added and (1) cash flow.
8.5 DETERMINATION OF VALUE OF PERFORMANCE SHARES AND PERFORMANCE UNITS.
As soon as practicable following the completion of the Performance Period for
each Performance Share and Performance Unit Award, the Committee shall certify
in writing the extent to which the applicable Performance Goals have been
attained and the resulting value of the Award earned by the Participant and to
be paid upon its settlement in accordance with the terms of the Award Agreement.
The Committee shall have no discretion to increase the value of an Award payable
upon its settlement in excess of the amount called for by the terms of the Award
Agreement on the basis of the degree of attainment of the Performance Goals as
certified by the Committee. However, notwithstanding the attainment of any
Performance Goal, if permitted under a Participant's Award Agreement evidencing
a Performance Share or Performance Unit Award, the Committee shall have the
discretion, on the basis of such criteria as may be established by the
Committee, to reduce some or all of the value of an Award that would otherwise
be paid upon its settlement. No such reduction may result in an increase in the
amount payable upon settlement of another Participant's Award. As soon as
practicable following the Committee's certification, the Company shall notify
the Participant of the determination of the Committee.
8.6 DIVIDEND EQUIVALENTS. The Committee may, in its discretion, provide
that any Performance Share shall include a right to Dividend Equivalents with
respect to cash dividends paid on Stock for which the record date is prior to
the date on which the Performance Share is settled or forfeited. Dividend
Equivalents may be paid currently or may be accumulated and paid to the extent
that Performance Shares become nonforfeitable, as determined by the Committee.
Settlement of Dividend Equivalents may be in cash, shares of Stock, or a
combination thereof as determined by the Committee, and may be paid on the same
basis as settlement of the related Performance Share as provided in Section 8.7.
Dividend Equivalents shall not be paid with respect to Performance Units.
8.7 FORM AND TIMING OF PAYMENT. Payment of the ultimate value of a
Performance Share or Performance Unit Award earned by a Participant as
determined following the completion of the applicable Performance Period
pursuant to Sections 8.5 and 8.6 may be made in cash, shares of Stock, or a
combination thereof as determined by the Committee. Payments in shares of Stock
shall be determined by the Fair Market Value of a share of Stock on the last day
of such Performance Period. Payment may be made in a lump sum or installments as
prescribed by the Committee. If any payment is to be made on a deferred basis,
the Committee may, but shall not be obligated to, provide for the payment of
Dividend Equivalents or interest during the deferral period.
8.8 RESTRICTIONS APPLICABLE TO PAYMENT IN SHARES. Shares of Stock
issued in payment of any Performance Share or Performance Unit Award may be
fully vested and freely transferable shares or may be shares of Restricted Stock
subject to a Period of Restriction as provided in Section 7.2. Any such shares
of Restricted Stock shall be evidenced by a Restricted
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Stock Agreement and shall be subject to the terms and conditions set forth in
Sections 7.2 through 7.6 above.
8.9 EFFECT OF TERMINATION OF SERVICE. Unless otherwise provided by the
Committee in the grant of a Performance Share or Performance Unit Award and set
forth in the Award Agreement, the effect of a Participant's termination of
Service on his or her Performance Share or Performance Unit Award shall be as
follows:
(a) DEATH, DISABILITY OR RETIREMENT. If the Participant's
Service is terminated by reason of the death, Disability or Retirement of the
Participant while he or she is the holder of a Performance Share or Performance
Unit Award but before the completion of the applicable Performance Period, the
value of the Participant's Award shall be determined by the extent to which the
applicable Performance Goals have been attained with respect to the entire
Performance Period and shall be prorated based on the number of months of the
Participant's Service during the Performance Period. Payment shall be made
following the end of the Performance Period in any manner permitted by Section
8.7.
(b) OTHER TERMINATION OF SERVICE. If the Participant's Service
terminates for any reason except death, Disability or Retirement before the
completion of the Performance Period applicable to a Performance Share or
Performance Unit Award held by such Participant, such Award shall be forfeited
in its entirety; provided, however, that in the event of an involuntary
termination of the Participant's Service, the Committee, in its sole discretion,
may waive the automatic forfeiture of all or any portion of any such Award and
provide for payment of such Award or portion thereof on the same basis as if the
Participant's Service had terminated by reason of Retirement.
8.10 NONTRANSFERABILITY. No Performance Shares or Performance Units may
be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
otherwise than by will or by the laws of descent and distribution until the
termination of the applicable Performance Period. All rights with respect to
Performance Shares and Performance Units granted to a Participant hereunder
shall be exercisable during his or her lifetime only by such Participant.
SECTION 9. DIRECTOR FEE AWARDS
9.1 EFFECTIVE DATE AND DURATION OF THIS SECTION. This Section 9 shall
become effective on the first day (the "SECTION 9 EFFECTIVE DATE") of the first
calendar quarter beginning after the Effective Date, provided that elections
pursuant to Section 9.2 may be made prior to the Section 9 Effective Date. This
Section 9 shall continue in effect for the remainder of the calendar year
commencing on the Section 9 Effective Date (the "INITIAL PLAN YEAR") and for
each subsequent calendar year commencing during the term (as provided in Section
1.3) of the Plan (a "PLAN YEAR"). Notwithstanding any Participant's prior
election pursuant to Section 9.2, no Director Fee Award shall be granted after
termination of the Plan, and all Director Fees (as defined below) with respect
to which Director Fee Awards have not been granted prior to termination of the
Plan shall thereafter be paid in cash in accordance with the Company's normal
Director Fee payment procedures. However, subject to compliance with applicable
law as provided in Section 11, all Director Fee Awards granted prior to
termination of the Plan shall
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continue to be governed by and may be exercised or settled in accordance with
the terms of the Plan and the Award Agreement evidencing such Director Fee
Award.
9.2 MANDATORY AND ELECTIVE DIRECTOR FEE AWARDS. Except as otherwise
provided below, each Nonemployee Director shall be granted one or more Director
Fee Awards in lieu of payment in cash of fifty percent (50%) of such
Participant's annual retainer fee, meeting fees and other compensation payable
with respect to such Participant's service as a Director ("DIRECTOR FEES")
during the Initial Plan Year and each subsequent Plan Year (or the portion of
such Plan Year following an individual's initial appointment or election as a
Nonemployee Director). In addition, each Participant may elect to receive
Director Fee Awards in lieu of payment in cash of all or any portion of the
remaining fifty percent (50%) of such Participant's Director Fees for the
Initial Plan Year and each subsequent Plan Year or applicable portion thereof.
For the Initial Plan Year and each subsequent Plan Year or applicable portion
thereof, a Participant shall be entitled to elect one of the following
alternative forms of payment of the value of the Participant's Director Fees:
(a) OPTION PAYMENT. A minimum of fifty percent (50%), together
with such additional portion, if any, elected by the Participant up to a maximum
of one hundred percent (100%), of the Participant's Director Fees will be paid
in the form of a Nonemployee Director Option (an "OPTION PAYMENT") and the
balance will be paid in cash in accordance with the Company's normal Director
Fee payment procedures.
(b) STOCK UNITS PAYMENT. A minimum of fifty percent (50%),
together with such additional portion, if any, elected by the Participant up to
a maximum of one hundred percent (100%), of the Participant's Director Fees will
be paid in the form of Stock Units (a "STOCK UNITS PAYMENT") and the balance
will be paid in cash in accordance with the Company's normal Director Fee
payment procedures. In connection with an election to receive a Stock Units
Payment, the Participant may elect an "Early Settlement Date" (as defined below)
upon which the Stock Units will be settled in accordance with Section 9.6(d);
provided, however, that upon termination of the Participant's Service as a
Director prior to the Early Settlement Date, settlement shall be made as
provided in Section 9.6(d). Any "EARLY SETTLEMENT DATE" elected by the
Participant shall become irrevocable as provided in Section 9.3(b) and shall be
December 1 of the third Plan Year following the Plan Year of the Stock Units
Payment or December 1 of any subsequent Plan Year.
9.3 TIME AND MANNER OF ELECTION.
(a) TIME OF ELECTION. Each Nonemployee Director shall make an
election pursuant to Section 9.2:
(i) for the Initial Plan Year: prior to the earlier
of (1) the date thirty (30) days following the Effective Date or (2) the Section
9 Effective Date;
(ii) for each subsequent Plan Year: prior to the
first day of such Plan Year; and
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(iii) in the case of a newly appointed or elected
Nonemployee Director: on the date of such appointment or election for the
remainder of the Initial Plan Year or subsequent Plan Year of appointment or
election, as the case may be.
(b) ELECTION IRREVOCABLE. An election pursuant to Section 9.2
shall become irrevocable as of the commencement of the Plan Year or portion
thereof to which it applies.
(c) FAILURE TO TIMELY ELECT. Any Nonemployee Director who
fails to make an election in accordance with this Section for any Plan Year (or
the Initial Plan Year, as the case may be) shall be deemed to have elected
pursuant to Section 9.2 to receive Option Payments for fifty (50%) of the value
of such Participant's Director Fees earned during such Plan Year (or Initial
Plan Year) and to receive the balance of such Participant's Director Fees in
cash in accordance with the Company's normal Director Fee payment procedures.
(d) MANNER OF ELECTION. Each election in accordance with this
Section shall be made on a form prescribed by the Company for this purpose and
filed with the Chief Financial Officer of the Company.
9.4 AUTOMATIC GRANT OF DIRECTOR FEE AWARDS. Subject to the provisions
of Sections 1.3 and 5, effective as of the last day of each quarter during any
Plan Year (or the Initial Plan Year, as the case may be), each Nonemployee
Director shall be granted automatically and without further action of the
Committee a Director Fee Award in lieu of that portion of the Director Fees
earned by the Participant during such quarter and specified by the Participant's
election under Section 9.2 for such Plan Year (or Initial Plan Year) and any
fractional share amount carried over from the prior quarter as provided in
Section 9.7 (the "QUARTERLY DIRECTOR FEES"). In accordance with the
Participant's election under Section 9.2 for the Plan Year (or Initial Plan
Year), the Director Fee Award shall be either in the form of an Option Payment
pursuant to Section 9.5 or a Stock Units Payment pursuant to Section 9.6.
9.5 OPTION PAYMENT. Each Option Payment shall be in the form of a
Nonemployee Director Option and shall be evidenced by a Nonemployee Director
Option Agreement that shall specify the exercise price, the duration of the
Nonemployee Director Option, the number of shares of Stock to which the
Nonemployee Director Option pertains, and such other provisions as the Committee
shall determine. No such Nonemployee Director Option or purported Nonemployee
Director Option shall be a valid and binding obligation of the Company unless
evidenced by a fully executed Nonemployee Director Option Agreement. Nonemployee
Director Option Agreements may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the terms and conditions of
Section 6 to the extent not inconsistent with this Section and the terms and
conditions set forth in Sections 9.5(a) through 9.5(d) below:
(a) EXERCISE PRICE. The exercise price per share for each
Nonemployee Director Option shall be fifty percent (50%) of the average of the
Fair Market Values of a share of Stock for the ten (10) trading days preceding
the effective date of grant of the Nonemployee Director Option.
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(b) NUMBER OF SHARES SUBJECT TO NONEMPLOYEE DIRECTOR OPTION.
The number of shares of Stock subject to a Nonemployee Director Option shall be
determined by the following formula (with any resulting fractional share being
disregarded):
X = A / (B x 50%)
where,
X is the number of shares subject to the
Nonemployee Director Option;
A is the amount of Quarterly Director Fees
in lieu of which the Option Payment is made;
and
B is the average of the Fair Market Values
of a share of Stock for the ten (10) trading
days preceding the effective date of grant
of the Nonemployee Director Option.
(c) EXERCISE PERIOD. Each Nonemployee Director Option shall be
vested and exercisable on and after the date of grant of the Nonemployee
Director Option and shall terminate and cease to be exercisable on the date ten
(10) years after the date of grant of the Nonemployee Director Option, unless
earlier terminated pursuant to the terms of the Plan or the Nonemployee Director
Option Agreement.
(d) EFFECT OF TERMINATION OF SERVICE.
(i) NONEMPLOYEE DIRECTOR OPTION GRANT. No Participant
shall be granted a Nonemployee Director Option following the date on which such
Participant's Service as a Director terminates for any reason. All of such
Participant's Director Fees with respect to which Director Fee Awards have not
been granted prior to the Participant's termination of Service as a Director
shall be paid in cash in accordance with the Company's normal Director Fee
payment procedures.
(ii) NONEMPLOYEE DIRECTOR OPTION EXERCISABILITY.
Subject to earlier termination as otherwise provided herein, a Nonemployee
Director Option shall remain exercisable after a Participant's termination of
Service at any time prior to the expiration of twelve (12) months after the date
on which the Participant's Service terminated, but in any event no later than
the Option Expiration Date.
(iii) EXTENSION IF EXERCISE PREVENTED BY LAW.
Notwithstanding the foregoing, if the exercise of a Nonemployee Director Option
within the applicable time period set forth in Section 9.5(d)(ii) is prevented
by the provisions of Section 11.1 below, the Nonemployee Director Option shall
remain exercisable until thirty (30) days after the date the Participant is
notified by the Company that the Nonemployee Director Option is exercisable, but
in any event no later than the Option Expiration Date.
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(iv) EXTENSION IF PARTICIPANT SUBJECT TO SECTION
16(b). Notwithstanding the foregoing, if a sale within the applicable time
period set forth in Section 9.5(d)(ii) of shares acquired upon the exercise of
the Nonemployee Director Option would subject the Participant to suit under
Section 16(b) of the Exchange Act, the Option shall remain exercisable until the
earliest to occur of (i) the tenth (10th) day following the date on which a sale
of such shares by the Participant would no longer be subject to such suit, (ii)
the one hundred and ninetieth (190th) day after the Participant's termination of
Service, or (iii) the Option Expiration Date.
9.6 STOCK UNITS PAYMENT. Each Stock Units Payment shall be evidenced by
a Stock Units Agreement that shall specify the number of Stock Units to which
such agreement pertains, the form and time of settlement of such Stock Units and
such other provisions as the Committee shall determine. No such Stock Units
Award or purported Stock Units Award shall be a valid and binding obligation of
the Company unless evidenced by a fully executed Stock Units Agreement. Stock
Units Agreements may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the terms and conditions set
forth in Sections 9.6(a) through 9.6(f) below:
(a) PAYMENT. No additional cash consideration shall be
required upon settlement of a Stock Units Award.
(b) NUMBER OF STOCK UNITS SUBJECT TO STOCK UNITS AWARD. The
number of Stock Units subject to a Stock Units Award shall be determined by the
following formula (with any resulting fractional Stock Unit being disregarded):
X = A / B
where,
X is the number of Stock Units subject to
the Stock Units Award;
A is the amount of Quarterly Director Fees
in lieu of which the Stock Units Payment is
made; and
B is the average of the Fair Market Values
of a share of Stock for the ten (10) trading
days preceding the effective date of grant
of the Stock Units Award.
(c) VOTING AND DIVIDEND EQUIVALENT RIGHTS. Participants shall
have no voting rights with respect to shares of Stock represented by Stock Units
until the date of the issuance of a certificate for such shares (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company). Prior to settlement of a Stock Units Award, such
Award shall include the right to Dividend Equivalents, pursuant to which the
Participant shall be credited with additional whole and/or fractional Stock
Units as of the record date of any payment of cash dividends with respect to the
Stock occurring prior to such settlement date. Such additional Stock Units shall
be subject to the same terms and
20
<PAGE> 26
conditions and shall be settled in the same manner and at the same time as the
Stock Units originally subject to the Stock Units Award. The number of such
whole and/or fractional Stock Units to be credited with respect to any Stock
Units Award on the record date of any cash dividend paid on the Stock shall be
determined by the following formula:
X = (A x B) / C
where,
X is the number of whole and/or fractional
Stock Units to be credited with respect to
the Stock Units Award;
A is the amount of cash dividends paid on
one share of Stock;
B is the number of whole and fractional
Stock Units subject to the Stock Units Award
as of the cash dividend record date; and
C is the Fair Market Value of a share of
Stock on the cash dividend record date.
(d) SETTLEMENT OF STOCK UNITS. Subject to the provisions of
Section 11.1 below, the Company shall issue to the Participant, within thirty
(30) days following the earlier of (i) the Early Settlement Date elected by the
Participant with respect to the Stock Units Award or (ii) the date of
termination of the Participant's Service as a Director, a number of whole shares
of Stock equal to the number of whole Stock Units subject to the Stock Units
Award. Such shares of Stock shall not be subject to any restriction on transfer
other than any such restriction as may be required pursuant to Section 11.1 or
any applicable law, rule or regulation. On the same settlement date, the Company
shall pay to the Participant cash in lieu of any fractional Stock Unit subject
to the Stock Units Award in an amount equal to the Fair Market Value on the
settlement date of such fractional share of Stock.
(e) EFFECT OF TERMINATION OF SERVICE. No Participant shall be
granted a Stock Units Award following the date on which such Participant's
Service as a Director terminates for any reason. All of such Participant's
Director Fees with respect to which Director Fee Awards have not been granted
prior to the Participant's termination of Service as a Director shall be paid in
cash in accordance with the Company's normal Director Fee payment procedures.
(f) NONTRANSFERABILITY OF STOCK UNITS. Prior to their
settlement pursuant to Section 9.6(d), no Stock Units granted to a Participant
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the Participant
or the Participant's beneficiary, except by will or by the laws of descent and
distribution.
9.7 FRACTIONAL SHARES. No fractional shares of Stock shall be issued
upon the exercise of any Nonemployee Director Option or settlement of any Stock
Units. Any portion of
21
<PAGE> 27
a Participant's Quarterly Director Fees subject to the Participant's election
under Section 9.2 representing a fractional share amount that would otherwise be
paid in the form of an Option Payment or a Stock Units Payment shall instead be
carried over and combined with the Quarterly Director Fees for the following
quarter of the Plan Year (or Initial Plan year, as the case may be) or the
subsequent Plan Year. Any such fractional share amount remaining upon
termination of a Participant's Service as a Director shall be paid to the
Participant in cash, without interest.
SECTION 10. CHANGE IN CONTROL
10.1 EFFECT OF CHANGE IN CONTROL. In the event of a Change in Control
of the Company as defined in Section 10.3 below, the surviving, continuing,
successor, or purchasing corporation or parent corporation thereof, as the case
may be (the "ACQUIRING CORPORATION"), shall either assume all outstanding Awards
or substitute new Awards having an equivalent value for such outstanding Awards.
In the event the Acquiring Corporation elects not to assume or substitute for
such outstanding Awards, and provided that the Participant's Service has not
terminated prior to the effective date of the Change in Control (unless, with
respect to Performance Shares or Performance Units, the Participant's Service
terminated by reason of the death, Disability or Retirement of the Participant),
all unexercisable, unvested or unpaid portions of such outstanding Awards shall
become immediately exercisable, immediately payable and vested in full
immediately prior to the effective date of the Change in Control. For purposes
of the preceding sentence:
(a) the value of Performance Shares and Performance Units
shall be determined and paid based upon the greater of (i) the extent to which
the applicable Performance Goals have been attained during the Performance
Period up to the effective date of the Change in Control or (ii) the
pre-established 100% of target level with respect to each Performance Target
comprising the applicable Performance Goals;
(b) any outstanding Stock Units Award not assumed or
substituted for by the Acquiring Corporation shall be settled in accordance with
Section 9.6(d) immediately prior to the effective date of the Change in Control;
and
(c) any Director Fees with respect to which the Company has
not made either an Option Payment or a Stock Units Payment pursuant to Section 9
prior to the effective date of the Change in Control shall be paid in cash
immediately prior to such effective date.
Any Options which are neither assumed or substituted for by the Acquiring
Corporation nor exercised as of the date of the Change in Control shall
terminate as of the effective date of the Change in Control.
10.2 TERMINATION OF SERVICE AFTER A CHANGE IN CONTROL. The Committee
may, in its discretion, provide in any Award Agreement that if the Participant's
Service is terminated within twelve (12) months (or such other period specified
by the Committee) following a Change in Control by reason of (a) the involuntary
termination by the Participating Company Group of the Participant's Service for
any reason other than "Cause" (as such term is defined in the Award Agreement)
or the Participant's death or Disability, or (b) the Participant's resignation
for "Good
22
<PAGE> 28
Reason" (as such term is defined in the Award Agreement) from all capacities in
which the Participant is then rendering Service to the Participating Company
Group, then (i) the exercisability, vesting and payment of the outstanding Award
held by such Participant shall be accelerated effective as of the date on which
the Participant's Service terminated to such extent, if any, as shall have been
specified by the Committee and set forth in the Award Agreement, and (ii) the
outstanding Option held by such Participant, to the extent unexercised and
exercisable on the date on which the Participant's Service terminated, may be
exercised by the Participant (or the Participant's guardian or legal
representative) at any time prior to the expiration of six (6) months (or such
other period of time specified by the Committee) after the date on which the
Participant's Service terminated, but in any event no later than the Option
Expiration Date.
10.3 DEFINITION. A "CHANGE IN CONTROL" shall be deemed to have occurred
in the event of:
(a) 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; or
(b) 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
(c) a transaction or series of related transactions in which
stock of the Company representing more than thirty percent (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.
The Board shall have final authority to determine whether multiple
transactions are related and the exact date on which a Change in Control has
been deemed to have occurred under subsections (a), (b), and (c) above.
SECTION 11. REQUIREMENTS OF LAW
11.1 COMPLIANCE WITH SECURITIES LAW. The granting of Awards and the
issuance of shares of Stock pursuant to any Award shall be subject to compliance
with all applicable laws, rules, and regulations, and to such approvals by any
governmental agencies, securities exchanges or market systems as may be
required. In addition, no Option may be exercised unless (a) a registration
statement under the Securities Act shall at the time of exercise of the Option
be in effect with respect to the shares issuable upon exercise of the Option or
(b) in the opinion of legal counsel to the Company, the shares issuable upon
exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act.
The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company's legal counsel to be
necessary to the lawful issuance and sale of any shares hereunder shall relieve
the Company of any liability in respect of the failure to issue or sell such
shares as to which such requisite authority shall not
23
<PAGE> 29
have been obtained. As a condition to the issuance of any Stock, the Company may
require the Participant to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and to
make any representation or warranty with respect thereto as may be requested by
the Company.
11.2 GOVERNING LAW. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of
California.
SECTION 12. TAX WITHHOLDING
12.1 TAX WITHHOLDING IN GENERAL. The Company shall have the power to
withhold, or require a Participant to remit to the Company, an amount sufficient
to satisfy the Federal, state, local and foreign tax withholding obligations, if
any, of any Participating Company with respect to any Award. The Company shall
have no obligation to deliver shares of Stock or make any payment of cash under
the Plan until such tax withholding obligations have been satisfied.
12.2 WITHHOLDING OF SHARES. To the extent permissible under applicable
tax, securities, and other laws, the Company may, in its sole discretion, permit
a Participant to satisfy all or a part of his or her tax withholding requirement
by directing the Company to apply shares of Stock to which the Participant is
entitled as a result of the exercise of an Option or the lapse of a Period of
Restriction with respect to a Restricted Stock Award (including, for this
purpose, the filing of an election under section 83(b) of the Code), or which
would otherwise be issued to the Participant pursuant to an Award, to satisfy
such requirement. Shares of Stock so applied shall be valued at their Fair
Market Value on the date when the taxes otherwise would be withheld in cash.
SECTION 13. AMENDMENT AND TERMINATION OF PLAN
13.1 AMENDMENT AND TERMINATION OF PLAN. The Committee at any time may
terminate, and from time to time, may amend, the Plan; provided, however, that
no such amendment may be made without approval of the stockholders of the
Company to the extent that the Committee deems such stockholder approval to be
necessary or advisable for compliance with applicable tax and securities laws or
other regulatory requirements, including the requirements of any stock exchange
or market system on which the Stock is then listed.
13.2 EFFECT OF AMENDMENT OR TERMINATION. No termination or amendment of
the Plan shall affect any then outstanding Award unless expressly provided by
the Committee. In any event, no termination or amendment of the Plan shall in
any manner adversely affect any Award theretofore granted under the Plan,
without the consent of the Participant, unless such termination or amendment is
necessary to comply with any applicable law, regulation or rule.
SECTION 14. MISCELLANEOUS PROVISIONS
14.1 BENEFICIARY DESIGNATION. Each Participant may name, from time to
time, any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in case of such
Participant's death before he or she receives
24
<PAGE> 30
any or all of such benefit. Each designation will revoke all prior designations
by the same Participant, shall be in a form prescribed by the Company, and will
be effective only when filed by the Participant in writing with the Company
during the Participant's lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be paid to his or her
estate.
14.2 RIGHTS AS AN EMPLOYEE OR DIRECTOR. No individual, even though
eligible pursuant to Section 3, shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a Participant.
Nothing in the Plan or any Award granted under the Plan shall confer on any
Participant a right to remain an Employee or Director, or interfere with or
limit in any way the right of a Participating Company to terminate the
Participant's Service at any time.
14.3 RIGHTS AS A STOCKHOLDER. A Participant shall have no rights as a
stockholder with respect to any shares covered by an Award until the date of the
issuance of a certificate for such shares (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the
Company). No adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date such certificate is
issued, except as provided in Section 5.3 or another provision of the Plan.
14.4 PROVISION OF INFORMATION. Each Participant shall be given access
to information concerning the Company equivalent to that information generally
made available to the Company's common stockholders.
14.5 UNFUNDED OBLIGATION. Any amounts payable to Participants pursuant
to the Plan shall be unfunded obligations for all purposes, including, without
limitation, Title I of the Employee Retirement Income Security Act of 1974. No
Participating Company shall be required to segregate any monies from its general
funds, or to create any trusts, or establish any special accounts with respect
to such obligations. The Company shall retain at all times beneficial ownership
of any investments, including trust investments, which the Company may make to
fulfill its payment obligations hereunder. Any investments or the creation or
maintenance of any trust or any Participant account shall not create or
constitute a trust or fiduciary relationship between the Committee or any
Participating Company and a Participant, or otherwise create any vested or
beneficial interest in any Participant or the Participant's creditors in any
assets of any Participating Company. The Participants shall have no claim
against any Participating Company for any changes in the value of any assets
which may be invested or reinvested by the Company with respect to the Plan.
14.6 INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Committee or officers or
employees of the Participating Company Group, members of the Committee and any
officers or employees of the Participating Company Group to whom authority to
act for the Committee or the Company is delegated shall be indemnified by the
Company against all reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted
25
<PAGE> 31
hereunder, and against all amounts paid by them in settlement thereof (provided
such settlement is approved by independent legal counsel selected by the
Company) or paid by them in satisfaction of a judgment in any such action, suit
or proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that such person is liable for gross negligence,
bad faith or intentional misconduct in duties; provided, however, that within
sixty (60) days after the institution of such action, suit or proceeding, such
person shall offer to the Company, in writing, the opportunity at its own
expense to handle and defend the same.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Granite Construction Incorporated 1999 Equity Incentive Plan
was duly adopted by the Board on May 17, 1999.
GRANITE CONSTRUCTION INCORPORATED
/s/ Michael Futch
------------------------------------
Michael Futch, Secretary
26
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS, CONDENSED CONSOLIDATED STATEMENTS OF INCOME, AND
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FORM 10-K, DECEMBER 31, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 61,832
<SECURITIES> 46,245
<RECEIVABLES> 212,833
<ALLOWANCES> 1,224
<INVENTORY> 12,823
<CURRENT-ASSETS> 402,321
<PP&E> 603,267
<DEPRECIATION> 360,354
<TOTAL-ASSETS> 679,572
<CURRENT-LIABILITIES> 258,664
<BONDS> 64,853
0
0
<COMMON> 270
<OTHER-SE> 327,462
<TOTAL-LIABILITY-AND-EQUITY> 679,572
<SALES> 1,328,774
<TOTAL-REVENUES> 1,328,774
<CGS> 1,149,573
<TOTAL-COSTS> 1,149,573
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,791
<INCOME-PRETAX> 86,043
<INCOME-TAX> 33,127
<INCOME-CONTINUING> 52,916
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,916
<EPS-BASIC> 2.03
<EPS-DILUTED> 1.96
</TABLE>
