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Sterling Construction Company, Inc.
Exhibit 10.1 
 
Patrick T. Manning Employment Agreement
 

 

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THIS EMPLOYMENT AGREEMENT (this "Agreement") is made to be effective as of  July
19, 2007 (the "Effective Date") by and between Patrick T. Manning (hereinafter
referred to as "Mr. Manning") and Sterling Construction Company, Inc.
(hereinafter referred to as the "Company.")
 
Background
 
Mr. Manning has been an employee of the Company under an employment agreement
that expired at the close of business on July 18, 2007 (the "Prior
Agreement.")  Mr. Manning and the Company wish to enter into another employment
agreement on the terms and conditions set forth herein.
 
THEREFORE, for and in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is hereby agreed as follows:
 
1.
Term & Transition.

 
1.1.
Mr. Manning's employment under this Agreement shall commence on the Effective
Date and shall expire on the earlier to occur of (a) a termination of his
employment pursuant to Section 8 (Termination by the Company) or Section 9
(Termination by Mr. Manning) below; or (b) 5:00 p.m. Central Time on December
31, 2010.

 
1.2.
Because this Agreement will be in effect for only a part of calendar year 2007,
Mr. Manning's salary shall be pro rated as provided in Exhibit A, below.

 
1.3.
For calendar year 2007, the provisions of the Prior Agreement relating to
vacation shall be superseded in their entirety by the provisions relating to
vacation in this Agreement.

 
2.
Title, Reporting Relationship, Responsibilities & Place of Employment.

 
2.1.
So long as Mr. Manning is an employee of the Company under this Agreement —

 
 
2.1.1.
He shall be elected to the position or positions set forth on Exhibit A;

 
 
2a.1.2.
He shall have the reporting relationship set forth on Exhibit A;

 
 
2.1.3.
He shall devote his full working time to diligently carrying out the duties and
responsibilities set forth in Exhibit A to the best of  abilities; and

 
 
2.1.4.
His place of employment shall be based in Houston, Texas except for required
travel on the Company's business.

 
3.
Compensation.

 
3.1.
Cash Compensation.  Subject to the transition provisions for calendar year 2007
set forth in Exhibit A, below, so long as Mr. Manning is an employee of the
Company under this Agreement, he shall be paid the Base Payroll Salary and shall
be eligible to earn the Base Deferred Salary and the Incentive Bonus set forth
in Exhibit A in accordance with the terms thereof.

 
 
3.1.1.
Base Deferred Salary and Incentive Bonus if and to the extent either is earned
in a given year shall be paid after January 1 and before March 15 of the
calendar year immediately following such year.

 
 
3.1.2.
All cash compensation shall be subject to legally-required and any voluntary
withholdings and deductions.

 
3.2.
Benefits.  Mr. Manning shall be entitled to the same health, life insurance,
disability and other like benefits as are made available to the Company's senior
managers generally, and on the same terms and conditions.  He shall also be
entitled to paid vacation time as set forth on Exhibit A.

 

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Patrick T. Manning Employment Agreement — continued
 
4.
Business Expense Reimbursement.  Mr. Manning shall be reimbursed in accordance
with the Company's business expense reimbursement policy from time to time in
effect for all reasonable business expenses incurred by him in the performance
of his duties.

 
5.
Indemnification.

 
5.1.
Mr. Manning shall be indemnified by the Company with respect to claims made
against him as a director, officer and/or employee of the Company and of any
affiliate of the Company to the fullest extent permitted by the Company's
charter, by-laws and the laws of the State of Delaware.

 
5.2.
The Company shall ensure that Mr. Manning is covered by a standard form
directors and officers liability insurance policy obtained and maintained at no
cost to Mr. Manning.

 
6.
Confidential Information.

 
6.1.
During his employment by the Company and thereafter, Mr. Manning shall not
disclose to any person or entity Confidential Information (as defined below)
except in the proper performance of his duties and responsibilities under this
Agreement, or except as may be expressly authorized by the Board of Directors of
the Company.

 
6.2.
For purposes of this Agreement, "Confidential Information" is defined as any
information of the Company or its affiliates that derives independent economic
value from not being generally known or readily ascertainable by proper means
and includes, but is not limited to trade secrets, customer names and lists,
vendor names and lists, business plans, marketing plans, non-public financial
data, product specifications and designs, inventions, discoveries, processes,
drawings, documents, records, software, or any information of a third party that
is held by the Company or its affiliates under an obligation of confidentiality.

 
7.
Non-Compete Obligations.  For purposes of this Section 7 only, the term "the
Company" shall include the Company's affiliates.  Mr. Manning's obligations with
respect to competing with the Company and soliciting its employees shall be as
follows (the "Non-Compete Obligations"):

 
7.1.
Mr. Manning shall not render services or advice, whether for compensation or
without compensation and whether as an employee, officer, director, principal or
otherwise, to any person or organization with respect to any product or service
that is competitive with a product or service of the Company in which he was
actively engaged during his employment by the Company or of which he has
detailed knowledge; or with any planned business in which he had an active part
in the planning or of which he has detailed knowledge.

 
7.2.
Mr. Manning shall not either directly or indirectly as agent or otherwise in any
manner solicit, influence or encourage any customer of the Company to take away
or to divert or direct its business to himself or to any person or entity by or
with which he is employed, associated, affiliated or otherwise related (other
than the Company.)

 
7.3.
Mr. Manning shall not recruit or otherwise solicit or induce any employee of the
Company to terminate his or her employment with or otherwise cease his or her
relationship with the Company.

 
7.4.
The Non-Compete Obligations apply to the state of Texas and any other state in
which the Company and its affiliates taken as a whole receives more than 10% of
its annual revenues.

 
7.5.
Mr. Manning's obligations under this Section 7 shall continue (a) so long as he
is an employee of the Company; and (b) after his employment terminates (whether
by reason of the expiration of this Agreement or pursuant to Section 8
(Termination by the Company) or Section 9 (Termination by Mr. Manning)) below,
or otherwise) for a period of twelve months; or for the period, if any, during
which he is entitled to be paid his Base Payroll Salary, whichever period is
longer.

 
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Patrick T. Manning Employment Agreement — continued
 
8.
Termination bythe Company.  Prior to the expiration of this Agreement, the
Company may terminate Mr. Manning's employment only pursuant to the following
terms and on the following conditions:

 
8.1.
Without Cause.  The Company may terminate Mr. Manning's employment Without Cause
(as defined below) by giving him ninety days' prior written notice thereof, in
which event —

 
8.1.1.
The Company shall continue to pay him his Base Payroll Salary then in effect
through December 31, 2010 or for twelve full calendar months, whichever period
is longer (the "Severance Period;")

 
8.1.2.
During the Severance Period, the Company shall continue to cover Mr. Manning
under the medical and dental plans sponsored by the Company for its employees
with the same coverage he had immediately prior to the termination of his
employment, provided that Mr. Manning remits to the Company on a timely basis an
amount equal to the applicable monthly COBRA premium (less the COBRA
administrative surcharge) for such continued coverage; and the Company shall
reimburse Mr. Manning for any medical premium expenses incurred by him hereunder
within thirty days after the date of his payment thereof. To the extent that any
medical or dental expense or in-kind benefits provided for under this Section
8.1.2 are taxable to Mr. Manning in a given year, any such expense shall be
reimbursed to Mr. Manning by the Company within thirty days of such expense
being incurred by him, and any expenses reimbursed or in-kind benefits provided
hereunder shall not affect the expenses eligible for reimbursement or in-kind
benefits provided in any other year.

 
8.1.3.
The Company shall pay Mr. Manning in the manner and at the time set forth in
Exhibit A, a portion of any Base Deferred Salary and of any Incentive Bonus that
he would have earned had he remained an employee of the Company through the end
of the calendar year in which his employment terminated, such portion to be
based on the number of days during such year that he was an employee of the
Company; and

 
8.1.4.
The Company shall permit him to purchase any insurance maintained by the Company
for its own benefit on his life at its then cash surrender value.

 
The foregoing severance benefits are the only benefits and payments to which Mr.
Manning is entitled that arise out of the termination of his employment under
this Section 8.1.
 
8.2.
Definition of Without Cause.  Mr. Manning's employment shall be deemed to have
been terminated by the Company Without Cause unless termination is for one of
the reasons set forth in Section 8.5, below, by reason of his death or pursuant
to Section 9.1, below.

 
8.3.
Termination for Permanent Disability.  The Company may terminate Mr. Manning's
employment if he shall become permanently disabled.  Mr. Manning shall be
considered to have become permanently disabled if during any consecutive
twelve-month period, because of ill health, or physical or mental disability, he
shall have been continuously unable to perform his duties under this Agreement,
in whole or in substantial part, for one hundred eighty consecutive days.  The
phrase "substantial part" means the inability of Mr. Manning to perform and
devote at least eight hours per work day to the performance of his duties and
responsibilities.

 
8.4.
Upon the Death of Mr. Manning.  In the event of Mr. Manning's death during the
term of this Agreement, his employment shall thereupon terminate and the Company
shall pay his estate —

 
8.4.1.
His Base Payroll Salary then in effect through the date of his death to the
extent not already paid; and

 
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Patrick T. Manning Employment Agreement — continued
 
8.4.2.
In the manner and at the time provided in Exhibit A, a portion of any Base
Deferred Salary and any Incentive Bonus that he would have earned had he
remained an employee through the end of the calendar year in which his death
occurred, such portion to be based on the number of days during such year that
he was an employee.

 
8.5.
Termination for Cause.  The Company may terminate Mr. Manning's employment for
Cause (as defined below) by giving him written notice of termination.  In the
event of the termination of Mr. Manning's employment for Cause, the Company
shall pay him any accrued but unpaid Base Payroll Salary through the date of
termination and any other legally-required payments through that date.  For the
avoidance of doubt, no Base Deferred Salary and no Incentive Bonus shall be
payable to him for the year in which his employment is terminated for Cause. 

 
 
8.5.1.
Definition of Cause.  For purposes of Section 8.5, "Cause" for termination of
Mr. Manning's employment shall mean any one or more of the following:

 
(a)
Mr. Manning’s gross neglect of his duties, gross negligence in the performance
of his duties, or his refusal to perform his duties.

 
 
(b)
Mr. Manning’s unsatisfactory performance of his duties that is not cured within
thirty working days after written notice is given to him specifically
identifying each reason why Mr. Manning’s performance is unsatisfactory and what
he can do to cure such unsatisfactory performance.

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

 
 
(d)
Mr. Manning’s conviction of any criminal activity not described in Subsection
(c), above, or participation in an activity involving moral turpitude that is or
could reasonably be expected to be injurious to the business or reputation of
the Company.

 
(e)
Mr. Manning’s immoderate use of alcohol and/or the use of non-prescribed
narcotics that adversely and materially affects the performance of his duties.

 
9.
Termination by Mr. Manning.

 
9.1.
Voluntary Resignation.  Mr. Manning may resign his employment with the Company
on ninety days' prior written notice to the Company (the "90-Day Notice
Period.")  Upon receipt of a notice of resignation, the Company —

 
 
9.1.1.
May accelerate the effective date of Mr. Manning's resignation to any date
within the 90-Day Notice Period; and/or

 
 
9.1.2.
May deem his notice of resignation a resignation by him of (i) any one or more
of the offices then held by him in the Company; and (ii) any one or more of the
directorships and offices then held by him in the Company's affiliates, in each
case to be effective on any date or dates within the 90-Day Notice Period.

 
9.2.
In the event Mr. Manning's resignation becomes effective before the end of a
calendar year, a portion of any Base Deferred Salary that he would have earned
had he remained an employee through the end of such calendar year shall be paid
to him in the manner and at the time set forth in Exhibit A, such portion to be
based on the number of days during such year that he was an employee, but no
Incentive Bonus shall be payable to him for such year.

 
9.3.
In the event that Mr. Manning's resignation becomes effective at or after the
end of the calendar year in which he gave notice of his resignation, he shall be
entitled to Base Deferred Salary and Incentive Bonus for the year in which he
gave notice of his resignation to the same extent as if he had not given notice
of his resignation.

 
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Patrick T. Manning Employment Agreement — continued
 
9.4.
No Incentive Bonus shall be payable to Mr. Manning with respect to the calendar
year following the calendar year in which he gives notice of his resignation.

 
9.5.
Constructive Termination.  Mr. Manning may terminate his employment if (a) the
Company commits a Breach (as defined below) of this Agreement; (b) Mr. Manning
gives the Company detailed written notice of the Breach within thirty days after
the occurrence thereof; and (c) the Company shall fail to cure the Breach within
thirty days after the receipt of such notice or, if the nature of the Breach is
such that it cannot practicably be cured in thirty days, if the Company shall
fail to diligently and in good faith commence a cure of the Breach within such
thirty-day period.

 
9.6.
In the event of the termination by Mr. Manning of his employment by reason of a
Breach by the Company, the termination shall be deemed for purposes of this
Agreement to be a termination by the Company Without Cause, and the Company
shall be required to perform all of its obligations described in Section 8.1,
above.

 
9.7.
For purposes of Section 9.5, above, "Breach" shall mean a material breach by the
Company of any one or more of the material terms or conditions of this
Agreement.

 
10.
Notices.  All notices required or permitted under this Agreement shall be in
writing and shall be deemed given by a party when hand delivered to the other
party against a receipt therefor or when deposited with a delivery service that
provides next-business-day delivery and proof of delivery, in either case
addressed to the other party as follows:

 
If to the Company at:
With a copy to:
Sterling Construction Company, Inc.
Roger M. Barzun
20810 Fernbush Lane
60 Hubbard Street
Houston, Texas 77073
Concord, Massachusetts 01742
Attention:  Board of Directors
 
If to Mr. Manning, at his most recent home address as shown in the Company's
employment records.
 

 
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
 
11.
Severability.  If any provision or part of a provision of this Agreement is
finally declared to be invalid by any tribunal of competent jurisdiction, such
part shall be deemed automatically adjusted, if possible, to conform to the
requirements for validity, but, if such adjustment is not possible, it shall be
deemed deleted from this Agreement as though it had never been included
herein.  In either case, the balance of any such provision and of this Agreement
shall remain in full force and effect.  Notwithstanding the foregoing, however,
no provision shall be deleted if it is clearly apparent under the circumstances
that either or both of the parties would not have entered into this Agreement
without such provision.

 
12.
Survival.  Notwithstanding the expiration or earlier termination of this
Agreement or of Mr. Manning's employment for any reason, the terms and
conditions of Section 6 (Confidential Information) and Section 7 (Non-Compete
Obligations) above, and any other obligation of a party that by its terms is to
be performed or is to have continued effect after such termination shall survive
such expiration or termination.

 
13.
Proration.  Any amount payable to Mr. Manning hereunder for a period shorter
than the period for which it is provided herein shall be pro-rated on a daily
basis using a 365-day year.

 
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Patrick T. Manning Employment Agreement — continued
 
14.
Miscellaneous.

 
14.1.
Entire Agreement.  This Agreement together with Exhibit A contains the entire
understanding of the parties on the subject matter hereof; shall not be amended,
except by written agreement of the parties signed by each of them; shall be
binding upon, and inure to the benefit of, the parties and their successors,
personal representatives and permitted assigns; and shall not be assignable by
either party without the prior written consent of the other party, except that
the Company may assign this Agreement to any entity acquiring all of the stock,
business or assets of the Company, provided that the acquiror assumes all of the
Company 's obligations hereunder.

 
14.2.
Construction.

 
 
14.2.1.
Each party has read and understood this Agreement and each party has had an
opportunity to review this agreement with its or his counsel. Accordingly, each
provision of this Agreement shall be interpreted and enforced without the aid of
any canon, custom or rule of law requiring or suggesting construction against
the party drafting or causing the drafting of such provision.

 
 
14.2.2.
The words "herein," "hereof," "hereunder," "hereby," "herewith" and words of
similar import when used in this Agreement shall be construed to refer to this
Agreement as a whole.

 
 
14.2.3.
An "affiliate" of the Company is any entity controlling, controlled by, or under
common control with the Company.

 
14.3.
Prior Agreements.  No representation, affirmation of fact, course of prior
dealings, promise or condition in connection herewith or usage of the trade not
expressly incorporated herein shall be binding on the parties.

 
14.4.
Waiver.  The failure to insist upon strict compliance with any term, covenant or
condition contained herein shall not be deemed a waiver of such term, nor shall
any waiver or relinquishment of any right at any one or more times be deemed a
waiver or relinquishment of such right at any other time or times.  No term or
condition hereof shall be waived unless in writing by the party to be bound by
such waiver;

 
14.5.
Captions.  The captions of the paragraphs herein are for convenience only and
shall not be used to construe or interpret this Agreement.

 
14.6.
Counterparts & Execution.  This Agreement may be executed in multiple
counterparts, each of which may be considered an original, but all of which
together shall constitute but one and the same instrument.  This Agreement when
signed by a party may be delivered by telecopier or other facsimile transmission
with the same force and effect as if the same were an executed and delivered
original manually-signed counterpart.

 
15.
Governing Law.  This Agreement shall be governed by, and construed in accordance
with, the domestic laws of the State of Texas without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of
Texas or of any other jurisdiction) that would cause the application hereto of
the laws of any jurisdiction other than the State of Texas.

 
16.
Compliance with Section 409A of the Code.

 
16.1.
To the extent that any payment to Mr. Manning under this Agreement is deemed to
be deferred compensation subject to the requirements of Section 409A of the
Internal Revenue Code of 1986 (the "Code") this Agreement shall be operated in
compliance with the applicable requirements of Section 409A of the Code
("Section 409A") and its corresponding regulations and related guidance with
respect to the payment in question.  Notwithstanding anything in this Agreement
to the contrary, any payment under this Agreement that is subject to the
requirements of Section 409A may only be made in a manner and upon an event
permitted by Section 409A.  To the extent that any provision of this Agreement
would cause a conflict with the requirements of Section 409A, or would cause the
administration of this Agreement to fail to satisfy the requirements of Section
409A, such provision shall be deemed null and void to the extent permitted by
applicable law, and the Company may modify this Agreement in such a manner as to
comply with such requirements without Mr. Manning's consent.

 
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Patrick T. Manning Employment Agreement — continued
 
16.2.
If Mr. Manning is a key employee (as defined in Section 416(i) of the Code
(without regard to paragraph 5 thereof)) except to the extent permitted under
Section 409A, no benefit or payment that is subject to Section 409A (after
taking into account all applicable exceptions to Section 409A, including but not
limited to the exceptions for short-term deferrals and for separation pay only
upon an involuntary separation from service) shall be made under this Agreement
on account of Mr. Manning's separation from service (as defined in Section 409A)
with the Company until the later of —

 
 
16.2.1.
The date prescribed for payment in this Agreement; and

 
 
16.2.2.
The first day of the seventh calendar month that begins after the date of Mr.
Manning's separation from service (or, if earlier, the date of his death.)

 
16.3.
All payments that were delayed by reason of the application of the date
prescribed by Section 16.2.2, above (the "Section 16.2.2 Date") shall be
aggregated and paid to Mr. Manning on the Section 16.2.2 Date in a lump sum
together with interest computed from the date each such payment would have first
been paid to him absent the application of the Section 16.2.2 Date until paid
using the Non-LIBOR rate of interest the Company would have paid had it borrowed
the amount of the payment under its revolving line of credit.  After the Section
16.2.2 Date, the Company shall pay any other amounts provided for herein to the
extent and in the manner provided in this Agreement.

 
In Witness Whereof, the parties hereto have executed this Agreement as of the
day and year first above written.
 
Sterling Construction Company, Inc.
                   
By:
       
Robert W. Frickel
 
Patrick T. Manning
 
Chairman of the Compensation Committee
   

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Patrick T. Manning Employment Agreement — continued
Exhibit A
 
For purposes of this Exhibit A, "SCC" means the Company.

Title
Mr. Manning shall be elected annually Chief Executive Officer of the Company.
Duties and Responsibilities
Mr. Manning shall carry out the customary duties and responsibilities of a chief
executive officer of a publicly-traded company.
Reporting Relationship
In carrying out those duties and responsibilities, Mr. Manning shall report to
SCC's Board of Directors.
Base Payroll Salary

Mr. Manning's annualized Base Payroll Salary shall be $365,000, which shall be
paid to him commencing as of July 19, 2007 in bi-weekly installments at the same
time and in the same manner as other senior managers of the Company are paid
their Base Payroll Salaries.
Base Deferred Salary

Mr. Manning's annualized Base Deferred Salary shall be $162,500 and shall be
paid to him if in a given calendar year SCC achieves seventy-five percent of the
EBITDA budgeted for such year provided that the budget was approved by the Board
of Directors of SCC.
 
However, if 75% of budgeted EBITDA is achieved in 2007 —
 
For the period January 1 through and including July 18, 2007, Mr. Manning shall
be paid an amount equal to 54.25% of his "bonus" under the Prior Agreement; and
 
For the period from and including the Effective Date through and including
December 31, 2007, Mr. Manning shall be paid an amount equal to 45.75% of his
Base Deferred Salary set forth above. 
Incentive Bonus

Each calendar year including calendar year 2007, Mr. Manning shall be eligible
to earn an Incentive Bonus of up to $162,500.
 
Of that amount —
 
·      Sixty percent shall be paid to Mr. Manning if SCC achieves the
fully-diluted earnings per share budgeted for such year provided that the budget
was approved by the Board of Directors of SCC ("Budgeted EPS"); and
 
·      Forty percent will be based upon the extent to which, if at all, Mr.
Manning has achieved the personal goals and objectives established for him for
such year , provided however, that for calendar year 2007, the forty percent
portion of the Incentive bonus shall be awarded, if at all, in the sole
discretion of the Compensation Committee.
 
The foregoing is in lieu of any "Additional Bonus" that might otherwise be
payable under the Prior Agreement.
In determining whether Budgeted EPS has been achieved in a given year, any
shares of common stock of SCC issued during such year otherwise than out of a
reserve therefor that had been established at or before the approval of the
budget shall be ignored.
 
Mr. Manning's personal goals and objectives for a given year shall be
established in consultation with, shall be subject to final approval by, and the
extent of their achievement shall be determined by SCC's Board of Directors and
SCC's Compensation Committee.

 
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Patrick T. Manning Employment Agreement — continued
 
EBITDA

For purposes of this Agreement, EBITDA means the net income of SCC on a
consolidated basis determined in accordance with generally accepted accounting
principles for a given calendar year —
Plus           Interest expense for the period;
Plus           Depreciation and amortization expense for the period;
Plus           Federal and state income tax expense incurred for the period;
Plus           Extraordinary Items (to the extent negative) if any, for the
period;
Minus   Extraordinary Items (to the extent positive) if any;
Minus       Interest income for the period;
Minus      Any fees paid to non-employee directors; and
 
in calculating EBITDA for a given year, appropriate and equitable adjustment
shall be made for any material changes in the Company’s business that occur
during such year, such as an acquisition of a business or the sale of a part of
the business.
Vacation
Mr. Manning shall be eligible to take so many days vacation per year as he
believes is appropriate in light of the needs of the business.

 
 
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