exv10w1



 






Exhibit 10.1




NOTE PREPAYMENT AGREEMENT




     This Note Prepayment Agreement (this “Agreement”) is entered into as of the 27th day of
December, 2005 by and between Sterling Construction Company, Inc. (the “Company”) on the one hand
and each of the holders of certain subordinated promissory notes issued by the Company dated
November 13, 2004 and/or December 22, 2004 (each a “Note” and collectively the “Notes”) whose names
appear on the signature page of this Agreement under the heading “Noteholders” (the “Noteholders”)
on the other hand.



Background




     Each of the Notes provides that the principal amount thereof may be prepaid by the Company at any
time or from time to time without the consent of the Noteholder and without premium or penalty.
The parties are entering into this Agreement in order to provide for a prepayment of certain of the
Notes partly in cash and partly in shares of the Company’s common stock, $0.01 par value per share
(the “Common Stock.”)



     Accordingly, for and in consideration of the foregoing recitals, the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:




	1.	 	Prepayment. The Company shall have the option exercisable on or before March 30,
2006 to prepay the outstanding principal balance of the Notes held by the Noteholders (the
“Prepayment”) with a total of $2,587,136.00 in cash and the $2,447,697.00 balance in shares of
Common Stock (the “Shares.”) In the event the Prepayment occurs, accrued interest to the date
thereof shall be paid in cash.






	 	(a)	 	Each Noteholder’s Note shall be prepaid in cash and in Shares in the same
proportion that the total of the Noteholder’s Note or Notes bears to the total of all of
the Noteholders’ Notes. The portion of each Note that is payable in cash and in Shares is
set forth on Exhibit A under the headings “Cash Portion” and “Share Portion”,
respectively.
	 
	 	(b)	 	If the Company elects to make the Prepayment, the number of Shares to be issued
to each Noteholder shall be the Noteholder’s Share Portion divided by the per share
offering price that is set forth on the cover of the final prospectus for the Company’s
currently proposed public offering of common stock; provided however, that if no such
public offering is closed prior to February 28, 2006, the closing price or last bid price,
as the case may be, of the Common Stock on February 28, 2006 shall be used in lieu of such
offering price (the price used in accordance with the foregoing being hereinafter referred
to as the “Price Per Share.”) Any fractional share resulting from the calculation of the
number of shares issuable to each Noteholder as provided herein will not be issued;
instead an amount equal to such fraction multiplied by the Price Per Share will be paid in
cash in lieu of such fractional share.
	 
	 	(c)	 	If the Company elects to make the Prepayment, it shall do so by giving two (2)
days prior written notice to each of the Noteholders. Each Noteholder agrees to deliver,
and the Prepayment shall be made against receipt by the Company of, the original of all
Notes held by him on the date that the Prepayment is made.
	 
	 	(d)	 	All amounts on Exhibit A assume that the December 30, 2005 quarterly
principal payment has been made on each of the Notes.






	2.	 	Consent to Unequal Payments.






	 	(a)	 	Section 7(d) of each of the Notes provides as follows:
	 
	 	 	 	“Upon any payment (including by redemption) which is not a payment in full of all of the
principal amount and accrued interest of all outstanding Subordinated Notes, the aggregate
amount of the payments shall be allocated to all the Subordinated Notes then




 









 






	 	 	 	outstanding in proportion to the amounts of principal and interest due thereunder, so that
the amount of principal and interest paid under this Note shall bear the same ratio to the
aggregate principal and accrued interest paid under all of the Subordinated Notes as the
then outstanding principal and accrued interest then owed under this Note bears to the
aggregate principal and accrued interest then owed under all Subordinated Notes then
outstanding.”






	 	(b)	 	Each Noteholder understands, acknowledges and consents to the fact that a
prepayment in full of the four Notes held by persons who are not parties to this Agreement
may be made wholly in cash.






	3.	 	Representations. Each Noteholder by the execution of this Agreement represents and
warrants to the Company —






	 	(a)	 	That subject to the provisions of Section 4, below, he is acquiring
Shares for his own account for investment and not with a view towards the resale, transfer
or distribution thereof, nor with any present intention of distributing the same;
	 
	 	(b)	 	That he understands that the issuance of the Shares to him has not been
registered under the Securities Act of 1933, as amended (the “Securities Act”) or any
state securities law, but are being issued in a transaction exempt from the registration
requirements of the Securities Act and such laws, and that the exemption depends, among
other things, upon the bona fide nature of the Noteholder’s investment intent as expressed
herein;
	 
	 	(c)	 	That he understands that the Shares must be held indefinitely unless their
disposition is subsequently registered under the Securities Act and any applicable state
securities laws, or is exempt from registration;
	 
	 	(d)	 	That he has not assigned, pledged, transferred, deposited under any agreement,
or hypothecated his original Note or Notes or any interest therein, and has not signed any
power of attorney or other authorization respecting the same that is now outstanding and
in force, and has not otherwise disposed of the same; and
	 
	 	(e)	 	That upon his receipt of the Prepayment, the Company shall have repaid to him
in full all debts then owed by the Company to him other than any amounts owed to him for
salary and expense reimbursements accrued but not paid in the ordinary course of the
Company’s business.
	 
	 	(f)	 	That he understands that notwithstanding the provisions of Section 4,
below, the Shares will be subject to the terms and conditions of any lockup agreement
entered into by him with D.A. Davidson & Co. and Morgan Joseph & Co. Inc.






	4.	 	Resale Registration of the Shares.






	 	(a)	 	If the Prepayment is made, upon the written request of a majority of the
Noteholders made after the expiration of any lockup period applicable to the Shares, the
Company shall use commercially reasonable efforts to promptly file a registration
statement covering the resale of the Shares, to cause that registration statement to
become effective, and to keep it effective for at least thirty (30) days after it
initially becomes effective.
	 
	 	(b)	 	Notwithstanding the foregoing, the Company may delay the filing of such
registration statement for up to one hundred twenty (120) days if in the judgement of the
Company’s independent directors (as defined by the rules and regulations of the exchange
or trading market on which the Common Stock is listed) such a filing would not be in the
best interest of the Company.






	5.	 	Miscellaneous.




 









 












	 	(a)	 	This Agreement together with Exhibit A sets forth the full and complete
understanding of the parties with respect to the matters herein; 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 personal representatives and assigns;
and shall be assignable by a Noteholder only in connection with the assignment of his
Note.
	 
	 	(b)	 	This Agreement and any amendment hereof may be executed in any number of
counterparts, each of which may be executed by fewer than all of the parties hereto
(provided that each party executes at least one counterpart) each of which counterparts
shall be enforceable against the party or parties actually executing such counterpart, and
all of which together shall constitute but one and the same instrument. This Agreement
may be delivered by telecopier or other electronic transmission with the same force and
effect as if the same were a fully executed and delivered original manual counterpart.










 









 












	 	(c)	 	The waiver of any term or condition hereof shall be in writing and signed by the
party or parties to be bound thereby. Failure by a party to insist upon strict compliance
with any term, covenant or condition, or to exercise any right, contained herein shall not
be deemed a waiver of such term, covenant, condition or right; and no waiver or
relinquishment of any term, covenant, condition or right at any one or more times shall be
deemed a waiver or relinquishment thereof at any other time or times.
	 
	 	(d)	 	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.
	 
	 	(e)	 	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.






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





     In Witness Whereof, the parties have executed this Agreement as of the date first above
written.



	 	 	 	 	 
	 	Sterling Construction Company, Inc.

 	 
	 	By:  	/s/ John D. Abernathy
 	 
	 	 	John D. Abernathy 	 
	 	 	Chairman of the Audit Committee 	 
	 



Noteholders




	 	 	 
	/s/ Patrick T. Manning
	 	/s/ Joseph P. Harper, Sr.
	 
	 	 
	Patrick T. Manning
	 	Joseph P. Harper, Sr.
	 	 	 
	/s/ Maarten D. Hemsley
	 	/s/ Anthony F. Colombo
	 
	 	 
	Maarten D. Hemsley
	 	Anthony F. Colombo
	 	 	 
	/s/ Joseph P. Harper, Jr.
	 	/s/ Brian R. Manning
	 
	 	 
	Joseph P. Harper, Jr.
	 	Brian R. Manning
	 	 	 
	/s/ Jeffrey Manning
	 	/s/ Kevin J. Manning
	 
	 	 
	Jeffrey Manning
	 	Kevin J. Manning
	 	 	 
	/s/ Terry D. Williamson

 

	 	 
	Terry D. Williamson	 	 






 









 






EXHIBIT A

To

Note Prepayment Agreement




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Pro-	 
	 	 	November 13	 	 	December 22	 	 	Cash	 	 	Share	 	 	portionate	 
	Noteholder	 	Note	 	 	Note	 	 	Portion	 	 	Portion	 	 	Share	 
	Anthony F. Colombo
	 	$	123,189	 	 	$	114,182	 	 	$	121,972.48	 	 	$	115,398.52	 	 	 	4.71	%
	Joseph P. Harper, Jr.
	 	$	90,523	 	 	$	27,168	 	 	$	60,475.22	 	 	$	57,215.78	 	 	 	2.34	%
	Joseph P. Harper, Sr.
	 	$	1,850,600	 	 	$	786,822	 	 	$	1,355,232.52	 	 	$	1,282,189.48	 	 	 	52.38	%
	Brian R. Manning
	 	$	358,183	 	 	$	107,499	 	 	$	239,289.50	 	 	$	226,392.50	 	 	 	9.25	%
	Jeffrey Manning
	 	$	521,041	 	 	$	156,376	 	 	$	348,088.98	 	 	$	329,328.02	 	 	 	13.45	%
	Kevin Manning
	 	$	155,012	 	 	$	46,522	 	 	$	103,557.73	 	 	$	97,976.27	 	 	 	4.00	%
	Patrick T. Manning
	 	$	245,048	 	 	$	73,544	 	 	$	163,707.68	 	 	$	154,884.32	 	 	 	6.33	%
	Terry D. Williamson
	 	$	152,231	 	 	$	45,688	 	 	$	101,700.17	 	 	$	96,218.83	 	 	 	3.93	%
	Maarten D. Hemsley
	 	 	0	 	 	$	181,205	 	 	$	93,111.72	 	 	$	88,093.28	 	 	 	3.60	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Totals:
	 	$	3,495,827	 	 	$	1,539,006	 	 	$	2,587,136.00	 	 	$	2,447,697.00	 	 	 	100.00	%