QuickLinks-- Click here to
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 22, 2001
------------------------
To the Stockholders of
TETRA TECH, INC.:
The Annual Meeting19, 2002
TO OUR STOCKHOLDERS:
We will hold our 2002 annual meeting of the Stockholders (the "Meeting")stockholders of Tetra Tech, Inc., a Delaware corporation, (the "Company"), will be held on Thursday,Tuesday, February 22,
200119, 2002 at 10:00 a.m., Pacific Standard Time,Los Angeles time, at The Doubletree Hotel, located at 199 N. Los Robles Avenue, Pasadena, California 91101, for the following purposes
as91101. As further described in the accompanying Proxy Statement:
1. To electproxy statement, at this meeting we will:
- (1)
- Elect five directors to
the Boardour board ofDirectors of the Companydirectors to serve for a term of one year and until their successors are duly elected andqualified. 2. To consider and act upon a proposal to amend the Company's Certificate of Incorporation to increase the number of authorized shares of common stock, $.01 par value per share, from 50,000,000 to 85,000,000. 3. To considerqualified; - (2)
- Consider and act upon a proposal to approve
and adopttheCompany's 2001proposed Tetra Tech, Inc. 2002 StockPlan. 4. To transactOption Plan; and - (3)
- Transact such other business as may properly come before the
Meetingmeeting or any meetings held upon adjournmentthereof. The BoardofDirectorsthe meeting.
Our board of directors has fixed the close of business on December 15, 200011, 2001 as the record date for the determination of stockholders entitled to vote at the Meetingmeeting or any meetings held upon adjournment or adjournments thereof, and onlyof the meeting. Only record holders of the Company'sour common stock at the close of business on that day will be entitled to vote. A copy of the Company's 2000 Annual Reportour 2001 annual report to stockholders is enclosed with this Noticenotice, but is not to be considered part of the proxy soliciting material.
Each stockholder is cordially invited
We invite you to be presentattend and to vote in personperson.If you cannot attend, to assure that you are represented at the Meeting. TO ASSURE REPRESENTATION AT THE MEETING, HOWEVER, STOCKHOLDERS ARE
URGED TO SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE
POSTAGE PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. Any stockholder attendingmeeting, please sign and return the Meetingenclosed proxy card as promptly as possible in the enclosed postage prepaid envelope. If you attend the meeting, you may vote in person, even if he or sheyou previously returned a signed proxy.
By Orderorder of the Boardboard of Directors
/s/ directors
Richard A. Lemmon
Richard A. Lemmon
EXECUTIVE VICE PRESIDENT AND SECRETARY
Executive Vice President, Administration and Secretary
Pasadena, California
January 18, 2002
670 North Rosemead Boulevard
Pasadena, California January 15, 2001
[TETRA TECH, INC. LOGO]
------------------------
670 NORTH ROSEMEAD BOULEVARD
PASADENA, CALIFORNIA 91107
------------------------
PROXY STATEMENT
------------------
GENERAL INFORMATION
This Proxy Statement is being sent
We are sending you this proxy statement on or about January 15, 200118, 2002 in connection with the solicitation of proxies by the Boardour board of Directors of Tetra
Tech, Inc., a Delaware corporation (the "Company").directors. The proxies are for use at the 2001 Annual Meetingour 2002 annual meeting of Stockholders of the Company (the "Meeting"),stockholders, which we will be heldhold at 10:00 a.m., Pacific Standard Time,Los Angeles time, on Thursday,Tuesday, February 22,
2001,19, 2002, at The Doubletree Hotel, located at 199 N. Los Robles Avenue, Pasadena, California 91101, and91101. The proxies will remain valid for use at any meetings held upon adjournment thereof.of that meeting. The record date for the Meetingmeeting is the close of business on December 15, 2000 (the "Record
Date"), and all11, 2001. All holders of record of the Company'sour common stock $.01 par value
per share (the "Common Stock"), on the Record Daterecord date are entitled to notice of the Meetingmeeting and to vote at the Meetingmeeting and any meetings held upon adjournment thereof.of that meeting. Our principal executive offices are located at 670 N. Rosemead Boulevard, Pasadena, California, 91107, and our telephone number is (626) 351-4664.
A proxy form is enclosed. Whether or not you plan to attend the Meetingmeeting in person, please date, sign and return the enclosed proxy as promptly as possible, in the postage prepaid envelope provided, to insureensure that your shares will be voted at the Meeting. Any stockholder who returns ameeting. You may revoke your proxy in such form has the
power to revoke it at any time prior to its effective use by filing with our secretary an instrument revoking it or a duly executed proxy bearing a later date with the
Secretary of the Company or by attending the Meetingmeeting and voting in person.
Unless contrary instructions are given, any suchyou instruct otherwise, your proxy, if not revoked, will be voted at the Meeting: (a) meeting:
- •
- for
the Board of Directors'our board's slate of nominees;(b) for the proposal to amend the Certificate of Incorporation to increase the number of authorized shares of Common Stock from 50,000,000 to 85,000,000; (c) for the proposal - •
- to approve
and adopttheCompany's 2001proposed Tetra Tech, Inc. 2002 Stock Option Plan; and(d) - •
- as recommended by
the Board of Directorsour board with regard to all other matters, in its discretion.The
Our only voting securities of the Company are the outstanding shares of Common
Stock.our common stock. At the Record Date, the Companyrecord date, we had 39,935,78952,381,602 shares of Common Stock
outstanding.common stock outstanding and approximately 2,213 stockholders of record. If the stockholders of record present in person or represented by their proxies at the meeting hold at least a majority of our outstanding shares of common stock, a quorum will exist for the transaction of business at the meeting. Stockholders of record who abstain from voting, including brokers holding their customers' shares who cause abstentions to be recorded, are counted as present for quorum purposes.
For each share of Common Stock heldcommon stock you hold on the Record Date, a
stockholder isrecord date, you are entitled to one vote on all matters that we will consider at this meeting. You are not entitled to be considered at the
Meeting. The Company's Certificate of Incorporation, as amended, does not
provide for cumulative voting. In the election of directors, the five candidates
who receive the highest number of affirmative votes will be elected. Votes
against a candidate and votes withheld have no legal effect. In matters other
than the election of directors, abstentions are counted as votes against in
tabulations of the votes cast on proposals presented to stockholders.cumulate your votes.
Brokers holding shares of record for their customers generally are not entitled to vote on some matters unless their customers give them specific voting instructions. If the broker does not receive specific instructions, the broker will note this on the proxy form or otherwise advise the Companyus that it lacks voting authority. The votes that the brokers would have cast if their customers had given them specific instructions are commonly called "broker non-votes."
The voting requirements for the proposals we will consider at the meeting are:
- •
- Election of directors. The five candidates who receive the highest number of affirmative votes will be elected. Votes against a candidate and votes withheld from voting for a candidate will have no effect on the election.
- •
- Approval of the proposed Tetra Tech, Inc. 2002 Stock Option Plan. A majority of the votes cast on this proposal by the holders of shares of our common stock present, or represented, and entitled to vote at the annual meeting must approve this proposed plan and the total votes cast on this proposal must represent over fifty percent of all shares entitled to vote on this proposal. Abstentions count as votes cast and have the effect of a vote against the proposal. Broker non-votes are not counted as votes cast and will have no effect on the outcome.
We will pay for the cost of preparing, assembling, printing and mailing this Proxy Statementproxy statement and the accompanying form of proxy andto our stockholders, as well as the cost of soliciting proxies relating to the Meeting, will be borne by the Company. The Companymeeting. We may request banks and brokers to solicit their customers who beneficially own Common Stockour common stock listed of record in names of nominees, andnominees. We will reimburse suchthese banks and brokers for their reasonable out-of-pocket expenses of suchregarding these solicitations. TheOur officers, directors and employees may supplement the original solicitation by mail of proxies, by mail may be supplemented by telephone, telegramfacsimile, e-mail and personal solicitation bysolicitations. We will pay no additional compensation to our officers, directors and regular employees of the
Company, but no additional compensation will be paid to such individuals.
1
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company presently has
At the meeting, you will elect five directors all of whom are elected annually.
At the Meeting, the term of office of all directors currently holding office
will expire and five directors will be elected to serve for a term of office consisting of the ensuingcoming year andor until their respective successors are elected and qualified. Accordingly, the Board of DirectorsOur board intends to nominate the five
incumbent directors named belowLi-San Hwang, Daniel A. Whalen, J. Christopher Lewis, Patrick C. Haden and James J. Shelton for election as directors. All are current members of our board. Each nominee has consented to being named in this Proxy Statementproxy statement as a nominee for election as a director and has agreed to serve as a director if elected.
The persons named as proxies in the accompanying form of proxy have advised the Companyus that they intend at the Meeting to vote the shares covered by the proxies for the election of the nominees named below.above. If any one or more of such nominees are unable to serve, or for good cause will not serve, the persons named as proxies in the accompanying form of proxy may vote for the election of such substitute nominees as the Board of Directorsthat our board may propose. The accompanying form of proxy contains a discretionary grant of authority with respect to this matter. The persons named as proxies in the accompanying form of proxy may not vote for a greater number of persons than the number of nominees named herein.above.
No arrangement or understanding exists between any nominee and any other person or persons pursuant to which any nominee was or is to be selected as a director or nominee. None of the nominees have any family relationship among themselves or with any of our executive officerofficers.
Information concerning members of the Company.
NOMINEES
The nomineesour board of the Board of Directors are listed below, together with their
ages, certain biographical information and all positions and offices with the
Company held by them.
directors
| Name | Age | Position | ||
|---|---|---|---|---|
| Li-San | 66 | Chairman of the Board | ||
Daniel A. | 54 | Director | ||
J. Christopher | 45 | Director | ||
Patrick C. | 48 | Director | ||
James J. | 85 | Director |
Dr. Hwang joined the Company'sour predecessor in 1967 and has held his present positions since theour acquisition by the Company of the Water Management Group of Tetra Tech, Inc., a subsidiary of Honeywell Inc., in March 1988 (the
"Acquisition").1988. Dr. Hwang was named the Director of Engineering at the Company in 1972 and a Vice President in 1974. Prior to the Acquisition,acquisition, Dr. Hwang was Senior Vice President of Operations. He has served as an advisor to numerous government and professional society committees and has published extensively in the field of hydrodynamics. Dr. Hwang is a graduate of the National Taiwan University, Michigan State University and the California Institute of Technology, holding B.S., M.S. and Ph.D. degrees, respectively, in Civil Engineering, specializing in water resources.
Mr. Whalen has been a member of the Boardour board of Directors of the Companydirectors since July 1997. Mr. Whalen is currently serving as an advisor to the President of the
Company.our Chairman. He is a former President of Whalen & Company, Inc. (WAC) and a former executive officer of the Company.officer. Mr. Whalen joined theus and our board upon our merger with Whalen & Company, and the Board
upon the merger of the Company and WACInc. in June 1997. Prior to founding WACWhalen & Company, Inc., in 1987, Mr. Whalen co-founded and served as an executive officer of First Cellular Group, Inc., The Microwave Group, Inc., Network Building & Consulting, Inc. and Cellular Development Company. 2
Mr. Lewis has been a member our board of the Board of Directors of the Companydirectors since February 1988. Since 1982, Mr. Lewis has been a general partner of Riordan, Lewis & Haden, a Los Angeles-based partnership which invests
3
equity in high-growth middle market companies. Mr. Lewis also serves as a director of Emergent Information Technologies, Inc., a provider of proposal management, systems engineering and information technology services; California Beach Restaurants, Inc., an owner and operator of restaurants; and several privately-held companies.
Mr. Haden has been a member of the Boardour board of Directors of the Companydirectors since December 1992. Mr. Haden is a general partner of Riordan, Lewis & Haden, which he joined in 1987. Mr. Haden also serves as a director of IndyMac Bancorp,Bancorp., Inc., the holding company for IndyMac Bank. IndyMac Bank is a technology-based mortgage banker. In addition, Mr. Haden serves as a director of several privately-held companies.
Mr. Shelton has been a member of the Boardour board of Directors of the Companydirectors since March 1995. Mr. Shelton is a self-employed investor and venture capitalist. He is the former (retired) President of the Baker Drilling Equipment Co., and formerly served as the Director of Corporate Relations and a director of Baker Hughes Incorporated (formerly Baker International Corp.).
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Company's Board
Information regarding our board of Directorsdirectors and its committees
Our board of directors met fourfive times during the fiscal year ended
October 1, 2000.2001. Each of the Company'sour directors attended 75% or more of the total number of meetings of the Board of Directorsboard and meetings of the committees of the Board of Directorsboard on which he served (during the period within which he was a director or member of such committee) during the fiscal year ended October 1, 2000.
The Company has an Audit Committee which, during the2001.
In fiscal year ended
October 1, 2000, was comprised2001, our audit committee consisted of Messrs. Lewis, Haden and Haden. The functionShelton. Mr. Lewis was the chairman of the Audit Committee is to consult and meetaudit committee. Each of the members of our audit committee was independent in accordance with the Company'sstandards of the Nasdaq Stock Market. Our board of directors has adopted a written charter for our audit committee. Our audit committee monitors the integrity of the financial reporting process and systems of internal controls, monitors the independence and performance of our independent auditors and its Chief
Financial Officerinternal auditing department and other financeprovides an avenue of communication among the independent auditors, management, the internal auditing department and accounting personnel, review potential
conflictour board of interest situations, where appropriate, and report and make
recommendations to the full Board of Directors regarding such matters. The Audit
Committeedirectors. Our audit committee met twicefive times during the fiscal year ended October 1, 2000.
The Company has a Compensation Committee which, during the2001.
In fiscal year ended
October 1, 2000,2001, our compensation committee consisted of Messrs. Lewis and Haden. The Compensation
CommitteeOur compensation committee reviews the compensationperformance of the Company's Chief Executive Officer and
reviews the recommendations of the Chief Executive Officer relating to
compensation of certain of the Company's otherour chief executive officers. The
Compensation Committee also establishes policies relating to the compensation of
Company executive officersofficer and other keyexecutives and makes specific recommendations and decisions regarding their compensation. The committee's goal is to ensure that our compensation system for our executives, as well as our philosophy for compensation for all employees, andis aligned with the long-term interest of our stockholders. The compensation committee also administers the Company'sour stock option plans. The Compensation Committeecompensation committee held one meeting during fiscal year 2000.2001. Neither Mr. Haden nor Mr. Lewis wasserved at any time during the fiscal year ended October 1, 20002001 or at any other time as one of our officers or as an officer or employee of the
Company.
The Company does not haveemployee.
In December 2001, our board created a standingnew nominating committee, or anyconsisting of Messrs. Lewis and Haden. As the committee performing the functions thereof.
Nowas recently formed, it did not meet during fiscal 2001.
None of our executive officer of the Companyofficers serves as a member of the Boardboard of Directorsdirectors, audit committee, compensation committee or Compensation Committeenominating committee of any other entity which has one or more executive officers serving as a member of the Company's Boardour board of Directorsdirectors, audit committee, compensation committee or Compensation Committee.
3
DIRECTOR COMPENSATION
Eachnominating committee.
Director compensation
None of our non-employee director of the Companydirectors received $10,000any cash compensation for service on the Boardour board of Directors and $2,500 cash compensation for service
on eachdirectors or any committee thereof during the fiscal year ended October 1, 2000. This
compensation was in lieu of options as set forth below.2001.
4
Under the Company'sour 1992 Stock Option Plan for NonemployeeNon-employee Directors, (the
"Nonemployee Directors Plan"), an option to purchase 4,768 shares of Common
Stockour common stock is granted to each nonemployee director of the Companyour non-employee directors automatically each year, immediately following theour annual meeting of stockholders of the Company.
Suchstockholders. This option vests and becomes exercisable in full on the date of the next annual meeting of our stockholders, provided that the optionee is reelected as a director
of the Company.director. The exercise price of stock options granted under the
Nonemployee Directors Planthis plan is equal to the fair market value of the Common Stockour common stock on the date of grant. During the fiscal year ended October 1, 2000,2001, at our 2001 annual meeting of stockholders, Messrs. Lewis and Haden each nonemployee director elected at the 2000 Annual Meeting of Stockholders was
entitled to receivereceived an option to purchase 4,7687,500 shares of Common Stock atour common stock and Mr. Shelton received an option to purchase 5,000 shares of our common stock. The exercise price of $18.875each option was $15.25 per share, but declined such grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONshare.
Compensation committee interlocks and insider participation
No interlocking relationship exists between the Company's Boardour board of Directorsdirectors and the compensation committee of any other company.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate
Limitation of Incorporationliability and indemnification matters
Our certificate of incorporation limits the liability of our directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a company will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability (i) for any breach of their duty of loyalty to the company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit.
The Company's Bylaws
Our bylaws provide that the Company shallwe will indemnify itsour officers and directors and may indemnify itsour employees and other agents to the fullest extent permitted by law. The Company's BylawsOur bylaws also permit itus to secure insurance on behalf of any officer, director, employeeof our officers, directors, employees or other agentagents for any liability arising out of his or her actions in such capacity, regardless of whether Bylawsour bylaws would permit indemnification.
The Company maintains
We maintain director and officer liability insurance.
At present, there is no pending litigation or proceeding involving any director, officer, employeeof our directors, officers, employees or agent of the Company, whereagents in which indemnification will be required or permitted. The Company isWe are not aware of any threatened litigation or proceeding which may result in a claim for such indemnification.
4
5
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS CERTAIN BENEFICIAL OWNERS
AND EXECUTIVE OFFICERSMANAGEMENT
The following table sets forth information regarding the ownership of the
Company's Common Stockour common stock as of December 15, 2000 by (i) 11, 2001 by:
- •
- all those persons known by
the Companyus to own beneficially more than 5% ofthe Company's Common Stock, (ii)our common stock; - •
- each
director and named executive officerof our directors; - •
- each of the
Companyexecutive officers named in the "Summary Compensation Table" included in the "Executive Compensation" section of this proxy statement; and(iii) - •
- all of our directors and executive officers as a group.
Unless otherwise set forth in the following table, the address of each beneficial owner is 670 N. Rosemead Boulevard, Pasadena, California 91107. Except as otherwise noted, the
Company knowswe know of no agreements among itsour stockholders which relate to voting or investment power over its Common Stock.
| Name of Beneficial Owner(1) | Number of Shares Beneficially Owned | Percentage of Shares Beneficially Owned(1) | |||
|---|---|---|---|---|---|
| AIM Management Group Inc.(2) 11 Greenway Plaza, Suite 100 Houston, Texas 77046 | 5,284,250 | 10.1 | % | ||
T. Rowe Price Associates, Inc.(3) 100 East Pratt Street Baltimore, Maryland 21202 | 2,807,080 | 5.4 | % | ||
The Northwestern Mutual Life Insurance Company(4) 720 East Wisconsin Avenue Milwaukee, Wisconsin 53202 | 2,654,050 | 5.1 | % | ||
Li-San Hwang(5) | 1,821,542 | 3.5 | % | ||
Daniel A. Whalen(6) c/o Brown Investment Advisory & Trust Company 9 South Street Baltimore, Maryland 21202 | 663,647 | 1.3 | % | ||
J. Christopher Lewis(7) | 61,478 | * | |||
Patrick C. Haden(8) | 11,920 | * | |||
James J. Shelton(9) | 14,730 | * | |||
James M. Jaska(10) | 85,399 | * | |||
Michael J. Nigro(11) | 49,381 | * | |||
Glenn S. Burkhardt(12) | 17,521 | * | |||
Richard A. Lemmon(13) | 30,796 | * | |||
All directors and executive officers as a group (12 persons)(14) | 2,847,125 | 5.4 | % |
- *
- Amount represents less than 1% of the Company's Common
Stock.stock.
6
- (1)
- Applicable percentages of ownership are based on
39,935,78952,381,602 shares ofCommon Stockour common stock outstanding on December15, 2000,11, 2001, adjusted as required by the rules promulgated by the Securities and ExchangeCommission (SEC).Commission. This table is based upon information supplied by our officers, directors and principal stockholders and Schedules 13D and 13G (if any) filed with theSEC.Securities and Exchange Commission. Unless otherwise indicated, and subject to community property laws where applicable, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Any security that any person named above has the right to acquire within 60 days is deemed to be outstanding for purposes of calculating the percentage ownership of such person, but is not deemed to be outstanding for purposes of calculating the ownership percentage of any other person. - (2)
- All information regarding share ownership is taken from and furnished in reliance upon the Schedule
13G,13G/A, dated as of May 10, 2001, filed by AIM Management Group Inc. on behalf of itself and its wholly-owned subsidiaries, AIM Advisors, Inc. and AIM Capital Management, Inc. - (3)
- All information regarding share ownership is taken from and furnished in reliance upon the Schedule 13G/A, dated as of February
8, 2000,14, 2001, filed by T. Rowe Price Associates, Inc.(3) - (4)
- All information regarding share ownership is taken from and furnished in reliance upon the Schedule 13G/A, dated as of February 6, 2001, filed by The Northwestern Mutual Life Insurance Company.
- (5)
- Includes
63,952108,262 shares issuable with respect to stock options exercisable within 60 days after December15, 1999.11, 2001. Also includes133,3331,713,280 sharesof Common Stockheld by Li-San Hwang and Anne H. Hwang, as Trustees for theMesa Charitable Trust, of which Dr.Li-San Hwangis the Trustee. (4)and Anne H. Hwang Community Property Trust. - (6)
- Includes
14,64824,414 shares issuable with respect to stock options exercisable within 60 days after December15, 2000.11, 2001. Also includes535,742578,343 sharesof Common Stockheld by Daniel A. Whalen and Katharine C. Whalen, as Trustees for the Whalen Family Trust U/A/D 4/30/92. (5)92, and 60,890 shares held by Brown Investment Advisory & Trust Company, as Trustee for the Whalen Family Foundation. - (7)
- Includes
28,60835,760 shares issuable with respect to stock options exercisable within 60 days after December15, 2000. 5(6) Excludes an aggregate of 3,353 shares of Common Stock owned by Mr. Haden's wife as to which Mr. Haden disclaims beneficial ownership.11, 2001. - (8)
- Includes
9,53611,920 shares issuable with respect to stock options exercisable within 60 days after December15, 2000. (7)11, 2001. - (9)
- Includes
4,7685,960 shares issuable with respect to stock options exercisable within 60 days after December15, 2000.11, 2001. Also includes7,0168,770 sharesof Common Stockheld byJJS Holdings Limited Partnership, of which Mr.James J. Shelton, Sarah Belle Shelton andhis wife areJames J. Shelton, Jr., Trustees of theGeneral Partners. (8)James J. Shelton and Sarah Belle Shelton Family Trust dated August 19, 1987. - (10)
- Includes
66,70084,208 shares issuable with respect to stock options exercisable within 60 days after December15, 2000. (9)11, 2001. - (11)
- Includes
28,49749,381 shares issuable with respect to stock options exercisable within 60 days after December15, 2000. (10)11, 2001. - (12)
- Includes
31,6218,048 shares issuable with respect to stock options exercisable within 60 days after December15, 2000.11, 2001. Also includesan aggregate of 3,6009,473 sharesof Common Stock ownedheld byDr. Faust's minor children. (11)Glenn S. Burkhardt, as Trustee for the Glenn S. Burkhardt Trust. - (13)
- Includes
46,08328,871 shares issuable with respect to stock options exercisable within 60 days after December15, 2000. Also includes 4,083 shares of Common Stock owned by Dr. Brownlie's wife and an aggregate of 2,100 shares of Common Stock owned by his minor children. (12)11, 2001. - (14)
- Includes
1,437416,297 shares issuable with respect to stock options exercisable within 60 days after December15, 2000. (13) Includes 345,947 shares issuable with respect to stock options exercisable within 60 days after December 15, 2000. 6EXECUTIVE OFFICERS' COMPENSATION AND OTHER INFORMATION EXECUTIVE OFFICERS The following table sets forth certain information11, 2001.
7
Information concerning each person
who is anour executive officer of the Company:
officers
| Name | Age | Position | ||
|---|---|---|---|---|
| Li-San | 66 | Chairman of the Board | ||
James M. | 50 | President, Chief Financial Officer and Treasurer | ||
Richard A. | 42 | Executive Vice President, Administration and Secretary | ||
Michael J. Nigro | 41 | Executive Vice President, | ||
Glenn S. Burkhardt | 49 | Executive Vice President, | ||
Michael C. Bush | 44 | Executive Vice President, Communications | ||
James T. Haney | 56 | Executive Vice President, Corporate Development | ||
Charles R. | 56 | Vice President |
Our executive officers of the Company are elected by and serve at the discretion of the Boardour board of Directors.directors. Set forth below is a brief description of the business experience of all executive officers other than Li-San Hwang. For information concerning the business experience of Dr. Hwang, who is also a director, of the Company, see "Proposal No. 1--Election1—Election of Directors--Nominees.Directors—Nominees."
Mr. Jaska joined the Companyus in 1994 as our Vice President, Chief Financial Officer and Treasurer and was named Executive Vice President in December 2000.November 2001. From 1991 to 1994, Mr. Jaska held several operations and management positions at Alliant Techsystems, Inc., in addition to leading the environmental business venture and having operational responsibility for large government defense plants. From 1988 to 1990, he served as the Director of Finance and Business Management at Honeywell Inc.'s Precision Weapons Operations. From 1981 to 1987, he was responsible for environmental affairs at Honeywell Inc. From 1977 to 1981, he managed regulatory affairs dealing with the production of specialty chemicals at Ecolab, Inc. Mr. Jaska also served as an advisor to numerous governmental and professional committees. Mr. Jaska holds B.S. and M.S. degrees from Western Illinois University and completed an executive management program through Harvard University.
Mr. Lemmon Executive Vice President and Secretary, joined the Companyour predecessor in 1981. Until1981, serving in a technical capacity. In 1985, he servedjoined our predecessor's corporate staff in several technical capacities. He transferred to
Corporate Human Resources, and was promoted to Corporate Managera management position. In 1988, at the time of Human
Resources in 1987. Following the Company's divestitureour divestment from Honeywell Inc., Mr. Lemmon structured and managed many of the Company's Risk Management, Human Resource
and Office Leasing programs.corporate functions. In 1990, he was promoted to Director of Administration and in 1994 assumed responsibility for contracts administration
and was elected as the Company'sCorporate Secretary. In November 1995, Mr. Lemmon was elected a Vice President and was named Executive Vice President in December 2000. Mr. Lemmon holds a B.A. degree in Business Administration.
Mr. Nigro joined us in 1995 through our acquisition of Tetra Tech EM Inc., formerly known as PRC Environmental Management, Inc., and was named Executive Vice President in February 2001. He joined PRC Environmental Management, Inc. in 1982 and served the Environmental Protection Agency in the capacity of Project Engineer, Program Liaison and Program Manager for numerous programs and initiatives. In 1987, Mr. Nigro was named Vice President of Tetra Tech EM Inc., and was responsible for business development, budget management and forecasting, quality control review of technical reports and assisting in corrective actions for projects and programs. He was named President of Tetra Tech EM Inc. in 1996. Mr. Nigro holds a B.S. degree in Civil Engineering from Marquette University.
8
Mr. Burkhardt joined the Companyus in 1998 through the Company'sour acquisition of McNamee, Porter & Seeley, Inc. and was named Executive Vice President
Infrastructure in December 2000. Mr. Burkhardt joined McNamee, Porter & Seeley, Inc. in 1973 and has served as project manager, operations director, business development director, financial officer and, most recently, President. Mr. Burkhardt has managed the conceptual planning, design and construction administration of water, 7
Dr. Brownlie
Mr. Bush joined theus in 1997 through our acquisition of Whalen & Company, in 1981, has been aInc. where he served as Vice President since
1988and Chief Operating Officer, and was named a SeniorPresident in 2000. He was named Executive Vice President in December 1993. Dr. Brownlie has
managed2001. Prior to his positions at Whalen & Company, Inc., Mr. Bush held management positions at Kaiser Permanente and Hewlett Packard. Mr. Bush holds a B.S. degree in Industrial Engineering from Stanford University and an M.S. degree in Management from the Graduate School of Business at Stanford University.
Mr. Haney joined us in May 2001 through our acquisition of Maxim Technologies, Inc. and was named Executive Vice President in December 2001. Mr. Haney joined Maxim Engineers, Inc., the predecessor of Maxim Technologies, Inc., in 1992 as President and Chief Executive Officer. During his tenure at Maxim Engineers, Inc., Mr. Haney was directly involved in the acquisition of the U.S. subsidiary of Huntingdon International Holdings, PLC, Huntingdon Engineering and Environmental, Inc. and the formation of Maxim Technologies, Inc. Prior to his positions at Maxim Technologies, Inc., among other companies, Mr. Haney held several large government environmental support programs. Dr. Brownlie is
a registered Civil Engineer with a technical backgroundengineering and management positions at Lockwood Greene Engineers, Inc. and served as Captain and Project Officer in hydrology,
hydraulics, water quality analysis and numerical modeling. Dr. Brownliethe Biomedical Sciences Corps for the U.S. Air Force Weapons Laboratory. Mr. Haney holds B.S. and M.S. degrees in CivilChemical Engineering from the State University of New York
at Buffalo, and earned a Ph.D. in Civil Engineering from the California
Institute of Technology.
Mr. Gherini joined the Company in 1976. Mr. Gherini has served as Program
Manager on a variety of contracts involving chemistry, water quality control and
water quality modeling, and served as Division Vice President prior to being
named to his present position in 1988. He is the author of numerous technical
publications and is the developer of several models for pollutant fate and
transport. He has served on two National Academy of Science panels. Mr. Gherini
is a registered engineer with B.S. and M.S. degrees in Civil Engineering from
Stanford University, and a M.S. degree in Aquatic Chemistry from HarvardClemson University.
Dr. Faust, Vice President of the Company since 1988 and President of our subsidiary GeoTrans, Inc. ("GEO"), a subsidiary of the Company, co-founded GEOGeoTrans, Inc. in 1979. In addition to his management responsibilities, he is engaged in the quantitative assessment and investigation of highly technical groundwater problems. He has published 23 articles and has co-authored a book on groundwater modeling. Dr. Faust holds B.S. and Ph.D. degrees in Geology from Pennsylvania State University.
Mr. Say joined Edward H. Richardson & Associates (a firm that was acquired
by the Company's predecessor in 1981 and became a division
Section 16(a) beneficial ownership reporting compliance
Section 16(a) of the CompanySecurities Exchange Act requires "insiders," including our executive officers, directors and beneficial owners of more than 10% of our common stock, to file reports of ownership and changes in 1991)ownership of our common stock with the Securities and Exchange Commission and Nasdaq Stock Market, and to furnish us with copies of all Section 16(a) forms they file. We became subject to Section 16(a) in 1958 and was named to his present positionconjunction with the registration of our common stock under the Securities Exchange Act in 1988. He has authored
several publications1991. Based solely on site development, engineering and storm drainage.
Mr. Say holds a B.S. in Civil Engineeringour review of the copies of such forms received by us, or written representations from Robert College in Istanbul,
Turkey and a M.S. in Civil Engineering from the University of Delaware.
8
9
The following table sets forth the cash compensation paid or accrued by the
Company to the Chief Executive Officer and to each of the four additional most
highly compensated executive officersus for each of the fiscal years in the three-year period ended October 1, 2000:
SUMMARY COMPENSATION TABLE
- •
- Our chief executive officer; and
- •
- Our four most highly compensated executive officers other than our chief executive officer at September 30, 2001.
Compensation is presented only for years in which each person was an executive officer.
| | | | | | Long-Term Compensation | | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Annual Compensation | Awards | Payouts | | |||||||||||||
| Name and Principal Position | Year | Salary ($) | Bonus ($) | Other Annual Compensation ($)(1) | Restricted Stock Award(s) ($) | Securities Underlying Options (#) | Payouts LTIP ($) | All Other Compensation ($) | |||||||||
| Li-San Hwang Chairman, Chief Executive Officer and President | 2001 2000 1999 | 250,000 220,000 195,000 | 100,000 40,000 0 | 1,683 913 1,801 | (2) | 0 0 0 | 35,000 30,000 15,000 | 0 0 0 | 11,615 4,305 8,350 | (3) | |||||||
James M. Jaska(4) Executive Vice President, Chief Financial Officer and Treasurer | 2001 2000 1999 | 190,000 170,000 150,000 | 90,000 50,000 0 | 5,400 5,400 5,400 | (5) | 0 0 0 | 30,000 25,000 10,000 | 0 0 0 | 13,954 4,939 8,696 | (6) | |||||||
Michael J. Nigro Executive Vice President, Resource Management | 2001 | 144,000 | 100,000 | 2,700 | (7) | 0 | 18,000 | 0 | 11,772 | (8) | |||||||
Glenn S. Burkhardt Executive Vice President, Infrastructure | 2001 | 170,000 | 60,000 | 4,050 | (9) | 18,000 | 10,822 | (10) | |||||||||
Richard A. Lemmon Executive Vice President, Administration and Secretary | 2001 2000 1999 | 160,000 135,000 118,000 | 70,000 50,000 30,000 | 5,400 5,400 5,400 | (11) | 0 0 0 | 18,000 20,000 7,500 | 0 0 0 | 11,369 3,972 6,898 | (12) | |||||||
- (1)
- No named executive officer received other annual compensation in excess of the lesser of $50,000 or 10% of such officer's compensation in fiscal
2000.2001. - (2)
- Comprised of
$913$1,683 in benefits and premiums paidby the Company to Dr. Hwang pursuant tounder the Executive Medical Reimbursement Plan. - (3)
- Comprised of
$4,305$11,615 ofCompanyretirement plan contributionsto its Retirement Plan. - (4)
- Mr. Jaska was named President in November 2001.
- (5)
- Comprised of $5,400 in automobile allowances.
(5) - (6)
- Comprised of
$4,939$13,954 ofCompany contributions to its Retirement Plan. (6)retirement plan contributions. - (7)
- Comprised of $2,700 in automobile allowances.
- (8)
- Comprised of $11,772 of retirement plan contributions.
- (9)
- Comprised of $4,050 in automobile allowances.
- (10)
- Comprised of $10,822 of retirement plan contributions.
- (11)
- Comprised of $5,400 in automobile allowances.
(7) - (12)
- Comprised of
$3,972$11,369 ofCompany contributions to its Retirement Plan. (8) Comprised of $5,400 in automobile allowances and $2,250 in life insurance premiums paid on behalf of Dr. Faust. (9) Comprised of $7,788 of Company contributions to its Retirement Plan. (10) Comprised of $5,400 in automobile allowances. (11) Comprised of $3,587 of Company contributions to its Retirement Plan. 9retirement plan contributions.
10
The following table sets forth information concerning options granted to each of the named executive officers during fiscal 2000:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Option Grants In Last Fiscal Year
| | | | | | Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Individual Grants | |||||||||||
| | Number of Securities Underlying Options Granted(#)(1) | % of Total Options Granted to Employees in Fiscal Year | | | ||||||||
| | Exercise or Base Price ($/Sh) | | ||||||||||
| Name | Expiration Date | 5% ($)(2) | 10% ($)(2) | |||||||||
| Li-San Hwang | 37,500 | 3.14 | 21.80 | 01/16/11 | 514,121 | 1,302,884 | ||||||
James M. Jaska | 31,250 | 2.61 | 21.80 | 01/16/11 | 428,434 | 1,085,737 | ||||||
Michael J. Nigro | 25,000 | 2.09 | 21.80 | 01/16/11 | 342,748 | 868,590 | ||||||
Glenn S. Burkhardt | 25,000 | 2.09 | 21.80 | 01/16/11 | 342,748 | 868,590 | ||||||
Richard A. Lemmon | 25,000 | 2.09 | 21.80 | 01/16/11 | 342,748 | 868,590 | ||||||
- (1)
- All options are incentive stock options
and weregranted underthe Company'sour 1992 Incentive Stock Plan. Such options vest over four year periods at an annual rate of 25% beginning on the first anniversary of the date of grant. - (2)
- Potential realizable value is determined by multiplying the exercise or base price per share by the stated annual appreciation rate compounded annually for the term of the option (10 years), subtracting the exercise or base price per share from the product, and multiplying the remainder by the number of options granted. Actual gains, if any, on stock option exercises and
Common Stockcommon stock holdings are dependent on the future performance ofthe Common Stockour common stock and overall stock market conditions. There can be no assurance that the amounts reflected in this table will be achieved.10
11
The following table sets forth information concerning the aggregate number of options exercised during fiscal 2000 by, and year-end option values for, each of the named executive officers:
OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
Option Exercises In Last Fiscal Year And
Fiscal Year End Option Values
| | | | Number of Unexercised Options at FY-End | Value of Unexercised In-the-Money Options at FY-End | ||||
|---|---|---|---|---|---|---|---|---|
| Name | Shares Acquired on Exercise(#) | Value Realized($)(1) | Exercisable/ Unexercisable(#) | Exercisable/ Unexercisable($)(2) | ||||
| Li-San Hwang | 0 | 0 | 79,940/79,884 | 758,281/329,443 | ||||
James M. Jaska | 57,500 | 1,124,109 | 64,479/61,915 | 651,878/244,654 | ||||
Michael J. Nigro | 24,413 | 356,981 | 38,911/35,313 | 379,496/60,122 | ||||
Glenn S. Burkhardt | 1,210 | 10,618 | 586/28,048 | 1,219/19,229 | ||||
Richard A. Lemmon | 22,500 | 338,417 | 16,174/40,040 | 124,168/111,850 |
- (1)
- Value realized upon exercise is determined by subtracting the exercise price from the closing price for our common stock on the date of exercise as reported by the Nasdaq National Market and multiplying the remainder by the number of shares of common stock exercised.
- (2)
- Year end value is determined by subtracting the exercise price from the fair market value of
$28.56$17.68 per share (the closing price forthe Company's Common Stockour common stock as reported by the NasdaqStockNational Market as of September29, 2000)28, 2001) and multiplying the remainder by the number of underlying shares ofCommon Stock. BONUS PROGRAMS The Boardcommon stock.
Bonus programs
Our board of Directorsdirectors awards, at its discretion, annual bonuses to itsour executive officers based upon recommendations made by the Compensation Committeeour compensation committee (as to Dr. Hwang) and Dr. Hwang (as to the other executive officers) concerning individual performance and the Company'sour achievement of certain operating results. The Company maintainsWe maintain a separate bonus program for other key employees. Under that program, the Company is divided into 22 operating units. If the operating profit for any our operating unitunits, determined on an annual basis following the conclusion of the fiscal year, exceeds the targeted percentage for that year, then a bonus equal to 25% of the amount in excess of the target is allocated to that profit centeroperating unit and the groupunit manager divides it among groupunit members in his or her discretion based upon individual performance.
2001 STOCK PLAN
2002 Stock Option Plan
On December 29, 2000, the Board18, 2001, our board of Directorsdirectors adopted the Company's 2001Tetra Tech, Inc. 2002 Stock Option Plan, as described in Proposal No. 3.2. To date, no grants of options or
restrictedcovering 145,000 shares of common stock have been made under this Plan.
plan.
1992 INCENTIVE STOCK PLANIncentive Stock Plan
The Company's 1992 Incentive Stock Plan (the "Plan") was adopted by the
Company's Boardour board of Directorsdirectors on December 1, 1992 and was subsequently approved by the Company'sour stockholders. The Planplan provides for the granting of incentive stock options, nonqualified stock options and rights to purchase restricted stock to our key employees and officers, of the Company or any of its subsidiaries, including directors who are also our key employees or officers of the Company and
its subsidiaries.officers. The maximum number of shares of Common Stockcommon stock authorized for issuance under the Planplan is 5,761,718.
EMPLOYEE STOCK PURCHASE PLAN7,202,147. As of December 11, 2001, 4,320,474 shares were subject to outstanding options granted under the plan and 136,038 shares were available for future option grants. The Company'splan terminates in December 2002.
12
Employee Stock Purchase Plan
The Employee Stock Purchase Plan (the "Purchase Plan") was adopted by the Company's Boardour board of Directorsdirectors on November 15, 1995 and was subsequently approved by the Company'sour stockholders. The Purchase Planplan provides for the granting of Purchase Rightspurchase rights to purchase Common Stockour common stock to our regular
11
of the Company or any of
its subsidiaries, including directors who are also employees or officersofficers. Under this plan, 1,373,290 shares of the
Company or any of its subsidiaries. Under the Purchase Plan, 1,098,632 sharesour common stock may be issued upon the exercise of Purchase Rights.purchase rights.
Each Purchase Rightpurchase right lasts for a period of 52 weeks (a "Purchase Right
Period").weeks. Prior to the beginning of each Purchase Right Period,purchase right period, our employees may elect to contribute fixed amounts to the Purchase Planplan during that Purchase
Right Periodpurchase right period to purchase Common Stock.our common stock. The maximum amount that an employee can contribute during a Purchase Rightpurchase right period is $4,000, and the minimum contribution per payroll period is $25.
Under the Purchase Plan,plan, the exercise price of a Purchase Rightpurchase right will be the lesser of 100% of the fair market value of such shares (based upon itsthe closing price on the Nasdaq StockNational Market) on the first day of the Purchase Right Periodpurchase right period or 85% of the fair market value on the last day of such Period.period. Employees' contributions to the Purchase Planplan are automatically used to purchase Common
Stockour common stock on the last day of the Purchase Right Periodpurchase right period unless an employee elects to withdraw from the Purchase Planplan or is terminated prior to that date. If the
Company iswe are sold, all Purchase Rightspurchase rights will become exercisable immediately preceding the sale. Employees who elect to suspend their contributions can elect either to withdraw their contributions or leave those amounts in the Purchase
Planplan to be used to purchase Common Stockour common stock at the end of the Purchase Right
Period.
RETIREMENT PLANS
THE COMPANY RETIREMENT PLAN. The Company maintainspurchase right period.
Retirement plans
Our Retirement Plan. We maintain a combined discretionary profit-sharing contribution and 401(k) retirement plan (the "Retirement Plan")
covering all of our employees and employees of the Company and itsour subsidiaries and related participating employers. The Retirement PlanOur retirement plan is qualified under Section 401(a) of the Internal Revenue Code, of 1986, as amended (the "Code"), and the 401(k) portion of the Retirement Planour retirement plan is intended to qualify under Section 401(k) of the Code.
Under the terms of the Retirement Plan,our retirement plan, each eligible employee may elect to defer up to 15% of base compensation or the maximum 401(k) contribution allowed under Federal law and to have such deferred amount contributed to the Retirement
Planretirement plan on his or her behalf. The Company makesWe make a matching contribution to each employee who elects to participate in the 401(k) portion of the Retirement Plan.our retirement plan. In addition, the Boardour board of Directorsdirectors may elect to have the Companyus make a profit sharing contribution that will be allocated among the eligible participants in
the ratio that each participant's grossbased on a percentage of base compensation bears toearned during the total
gross base compensationplan year and the participants' employment on the last day of all eligible employees. Companythe plan year. Our matching and profit sharing contributions fully vest upon the earlier of the employee's retirement, death, disability or fifth year of service. Benefits under the Retirement Planour retirement plan are generally distributed in the form of a lump sum following a participant's retirement, death, disability or termination of employment. Benefits may be distributed prior to termination of employment under certain circumstances including hardship. The Company paysWe pay all costs associated with the administration of the retirement plan.
Other Retirement Plan.
OTHER RETIREMENT PLANS.Plans. Certain of our subsidiaries, SCM Consultants, Inc., McNamee, Porter & Seeley, Inc., the Sentrex Group of Companies, MFG, Inc., Collins/Piña Consulting Engineers, Inc., Cosentini Associates, Inc., PDR Engineers, Inc., Evergreen Utility Contractors, Inc., FHC, Inc., Rizzo Assoicates, Inc., Utilities & C.C., Inc., eXpert Wireless Solutions, Inc., andFHC, Inc., Rizzo Associates, Inc., Rocky Mountain Consultants, Inc., subsidiaries of the
Company,Williams, Hatfield & Stoner, Inc., Vertex Engineering Services, Inc., Commonwealth Technology, Inc., Western Utility Contractors, Inc. and Sciences International, Inc., participate in separate retirement plans covering their respective employees. EXECUTIVE MEDICAL REIMBURSEMENT PLAN
TheIn addition, certain former employees of Shepherd Miller, Inc. participate in a separate retirement plan.
Executive Medical Reimbursement Plan
Our Executive Medical Reimbursement Plan, (the "Medical Plan"), which was established by the Company'sour predecessor in 1975 for the benefit of the
Company'sour executive officers, reimburses participants, their spouses and covered children for medical expenses not covered by the Company'sour regular group medical plan. In effect, this Medical Planour medical plan provides participants with 100% medical coverage for all allowable medical expenses. During the fiscal year ending
October 1, 2000, premiums totaling $500 were paid by the Company in connection
with the Medical Plan. At the present time, Messrs.Dr. Hwang and Gherinione former officer are the only executive officersindividuals covered by the Medical Planmedical plan and the Company doeswe do not intend to offer the Medical Planmedical plan to any additional executive officers in the future.
12
REPORT OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
The Audit Committee of the Board of Directors is composed of two directors
who are independent directors. The purpose of the Audit Committee is to review
the Company's financial reporting process on behalf of the Board of Directors.
The Audit Committee operates under a written charter which is included as Annex
A to this proxy statement. Management has the primary responsibility for the
financial statements and the reporting process. The Company's independent
auditors are responsible for expressing an opinion on the conformity of the
Company's audited financial statements to accounting principles generally
accepted in the United States of America.
The Audit Committee has reviewed and discussed with management and the
independent auditors the audited financial statements. The Audit Committee has
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61, COMMUNICATION WITH AUDIT COMMITTEES. In
addition, the Audit Committee has received from the independent auditors the
written disclosures required by Independence Standards Board No. 1, INDEPENDENCE
DISCUSSIONS WITH AUDIT COMMITTEES and discussed with them their independence
from the Company and its management.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board has approved,
that the audited financial statements be included in the Company's Annual Report
on SEC Form 10-K for the year ended October 1, 2000, for filing with the
Securities and Exchange Commission.
AUDIT COMMITTEE
J. Christopher Lewis
Patrick C. Haden
13
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
REGARDING COMPENSATION
The Compensation Committee (the "Committee")compensation committee of the Boardour board of Directors
oversees the general compensation policies of the Company, oversees the
compensation plans, establishes the specific compensation of Dr. Hwang, the
Company's Chief Executive Officer, reviews the Chief Executive Officer's
recommendations as to the specific compensation levels for the other executive
officers and oversees the Company's stock incentive plans. The Compensation
Committeedirectors is currently composed of two independent, non-employee directors who have no interlocking relationships as defined by the Securities and Exchange Commission. COMPENSATION POLICY AND PROGRAMS. The Committee'scommittee regularly meets at least once each year and holds additional meetings as required. The compensation committee met once during fiscal 2001.
Compensation committee responsibilities
The compensation committee has the following responsibilities:
- •
- Overseeing our general compensation policies;
- •
- Overseeing our compensation plans;
- •
- Establishing the compensation of our chief executive officer;
- •
- Reviewing our chief executive officer's recommendations as to the specific compensation levels for the other executive officers; and
- •
- Overseeing our stock incentive plans.
Compensation policy and programs
The compensation committee's responsibility is to provide a strong and direct link among stockholder values, Companyour financial performance and executiveour executives' compensation through itstheir oversight of the design and implementation of a sound compensation program that will attract and retain highly qualified personnel. Compensation programs are intended to complement the
Company'sour short- and long-term business objectives and to focus executive efforts on the fulfillment of these objectives.
Each year the Committee has conductedcommittee conducts a full review of the Company'sour executive compensation program. It has been the Committee'stheir practice to establish target levels of compensation for our senior officers consistent with that of companies comparable in size and complexity to the Company,us, as well as companies which are direct business competitors of the Company.ours. After their review of data relating to all aspects of compensation paid by such groups of companies, actual compensation of the Company'sour executive officers is subject to increase or decrease by the Committeecommittee from targeted levels according to the Company'sour overall performance and the individual's efforts and contributions. A significant portion of executive compensation is directly related to the
Company'sour financial performance and is therefore at risk. Total compensation for the Company'sour senior management is composed of base salary, near-term incentive compensation in the form of bonuses and long-term incentive compensation in the form of stock options. The Committeecommittee retains the discretion to adjust the formula for certain items of compensation so long as total compensation reflects overall corporate performance and individual achievement.
BASE SALARY.
Base salary
In establishing base salary levels for senior officer positions, the Committeecommittee and Dr. Hwang consider levels of compensation at similarly situated companies and at direct competitors, levels of responsibility and internal issues of consistency and fairness. In determining the base salary of a particular executive, the Committeecommittee and Dr. Hwang consider individual performance, including the accomplishment of short- andshort-and long-term objectives, and various subjective criteria including initiative, contribution to overall corporate performance and leadership ability.
In fiscal 2000,2001, the annual base salary of Dr. Hwang was determined by the Committeecommittee based on comparableupon:
- •
- Comparable chief executive salaries of a peer group of companies and of direct
competitors referred to above, the Company'scompetitors;
14
- •
- Our overall performance and profitability in fiscal
2000,2001; - •
- Dr. Hwang's efforts and contributions to
the Companyus; and - •
- Dr. Hwang's ownership interest in
the Company. BONUSES. The Company'sus.
Bonuses
Our executive officers are eligible for annual bonuses based upon recommendations made by Dr. Hwang (as to the other executive officers) and the Compensation Committeecompensation committee (as to Dr. Hwang) based upon their individual performance and the Company'sour achievement of certain operating results.
Amounts of individual awards are based principally upon the results of the
Company'sour financial performance during the prior fiscal year. The amount of awards for senior officers are within guidelines established by the Committeecommittee and Dr. Hwang as a result of their review of total compensation for senior management of peer companies and competitors. The actual amount awarded, within these guidelines, will beis determined principally by the Committee'scommittee's and Dr. Hwang's assessment of the individual's contribution to the Company'sour overall financial performance. Consideration is also given to factors such as the individual's successful completion of a special project, any significant increase or decrease in the level of 14
Committee'scommittee's and Dr. Hwang's evaluation of the individual's overall efforts and ability to discharge the responsibilities of his or her position. In fiscal 2001,2002, cash bonuses related to performance in fiscal 20002001 paid to three of the five named executive officers ranged from $20,000$60,000 to $50,000,$100,000, and ranged from 17%35% to 37%69% of such officers' base salaries.
STOCK OPTIONS.
Stock Options
In fiscal 1992, the Committeeour board adopted the Company's 1992 Incentive Stock Plan (the "1992 Plan"). The purposePlan. Due to the limited number of stock options available for grant under the 1992 plan and the termination of the 1992 plan in December 2002, our board adopted the 2002 Stock Option Plan in December 2001, subject to stockholder approval. The primary purpose of both the 1992 plan and the 2002 plan is to provide incentives and reward the contributions of key employees and officers for the achievement of our long-term Company performance, as measured by earnings per share and the market value of the Common Stock.our common stock. The Committeecommittee and Dr. Hwang set guidelines for the number and terms of stock option or restricted stock
awards based on factors similar to those considered in connection with respect to the other components of the Company'sour compensation program, including a comparison with the practices of our peer group companies and direct competitors. InIf our performance is unsatisfactory, the event of
unsatisfactory corporate performance, the Committeecommittee may decide not to award stock options or restricted stock in any given fiscal year, although exceptions to this policy may be made for individuals who have assumed substantially greater responsibilities and other similar factors. The awardsgrants under the 1992 Planplan and the 2002 plan are designed to align the interests of the executives with those of theour stockholders. Generally, stock options under the 1992 plan become exercisable in cumulative installments over a period of four years, butwhile stock options under the 2002 plan become exercisable as to 25% of the shares covered thereby on the first anniversary of the grant date and as to the balance in 36 cumulative monthly installments following such first anniversary date. In both cases, the individual forfeits any installment which has not vested during the period of his or her employment.
Under the 1992 Plan,plan, the Committeecommittee awarded stock options covering an aggregate of 143,750 shares in fiscal 20002001 to allthe five named executive officers.
INTERNAL REVENUE CODE SECTION 162(M).officers for their contributions to our performance in fiscal 2000. Under the 2002 plan, the committee awarded stock options covering an aggregate of 119,000 shares in fiscal 2002 to the five named executive officers for their contributions to our performance in fiscal 2001.
15
Internal Revenue Code Section 162(m)
Under Section 162 of the Internal Revenue Code, of 1986, as amended, the amount of compensation paid to certain executives that is deductible with respect to the Company'sour corporate taxes is limited to $1,000,000 annually. It is the current policy of the Committeecompensation committee to maximize, to the extent reasonably possible, the Company'sour ability to obtain a corporate tax deduction for compensation paid to our executive officers of the
Company to the extent consistent with theour best interests and those of our stockholders.
COMPENSATION COMMITTEE
J. Christopher Lewis
Patrick C. Haden
16
The audit committee of our board of directors is composed of three directors who are independent directors. The purpose of our audit committee is to monitor the integrity of the Companyfinancial reporting process and its
stockholders.
COMPENSATIONsystems of internal controls, monitor the independence and performance of our independent auditors and internal auditing department and provide an avenue of communication among the independent auditors, management, the internal auditing department and our board of directors. Our audit committee operates under a written charter approved by our board of directors. Our independent auditors are responsible for expressing an opinion of the conformity of our audited financial statements to accounting principles generally accepted in the United States of America.
Our audit committee has reviewed and discussed with management and the independent auditors the audited financial statements. Our audit committee has discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61,Communication with Audit Committees. In addition, our audit committee has received from the independent auditors the written disclosures required by Independence Standards Board No. 1,Independence Discussion with Audit Committees and discussed with them their independence from us and our management.
In reliance on the reviews and discussions referred to above, our audit committee recommended to our board of directors, and our board has approved, that our audited financial statements be included in our annual report on the Form 10-K, for the year ended September 30, 2001, for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE
J. Christopher Lewis (Chair)
Patrick C. Haden
15
James J. Shelton
17
The following graph shows a comparison of our cumulative total returns for the
Company,with those of the Nasdaq Stock Market (U.S. Companies) Index and a
Company-constructedour self-constructed Peer Group Index (as defined below). The graph assumes that the value of an investment in Common Stockour common stock and in each such index was $100 on September 29, 1995,27, 1996, and that all dividends have been reinvested. The
Company-constructedOur self-constructed Peer Group Index includes the following companies: Fluor Corporation, IT Group, Inc., Jacobs Engineering Group Inc., LCC International, Inc., Mastec, Inc., Quanta Services, Inc., URS Corporation and Wireless Facilities, Inc. The Company believesWe believe that the companies included in the Peer Group Index are among theour primary competitors of the Company.competitors.
The comparison in the graph below is based on historical data and is not intended to forecast the possible future performance of the Company's Common
Stock.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
TETRA TECH, NASDAQ STOCK MARKET (U.S. COMPANIES),
AND TETRA TECH'S SELF-CONSTRUCTED PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
and
18
PROPOSAL NO. 2
APPROVAL OF THE BOARD OF DIRECTORS
FOR ALL OF THE FOREGOING REASONS, THE BOARD BELIEVES THAT THE AMENDMENT IS
IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS A VOTE "FOR" APPROVAL THEREOF. PROXIES WILL BE VOTED FOR THIS
PROPOSAL UNLESS OTHERWISE SPECIFICALLY INDICATED.2002 STOCK OPTION PLAN
On December 18,
PROPOSAL NO. 3
2001, STOCK PLAN PROPOSAL
The 2001 Stock Plan (the "Plan"), which wasour board of directors adopted, by the Board of
Directors, subject to stockholder approval, on December 29, 2000, provides for
the granting2002 Stock Option Plan. Under the 2002 plan, up to 4,000,000 shares of incentiveour common stock may be issued upon the exercise of stock options nonqualifiedgranted under the 2002 plan. At this meeting, our stockholders will be asked to approve the 2002 plan.
The 2002 plan is intended to replace our existing stock option plan, the 1992 Incentive Stock Plan, which terminates in December 2002. Of the 7,202,147 shares authorized to be issued under the 1992 plan, as of December 11, 2001, 4,320,474 shares were subject to outstanding options granted under the 1992 plan and rights136,038 shares remained eligible for future option grants.
The 2002 plan will play an important role in our efforts to purchase restricted stock (as described below).attract and retain employees, and to align the interests of our employees with those of our stockholders through increased ownership of our company by those employees. The Plan2002 plan is attached to this Proxy Statementproxy statement as Annex BA and incorporated by reference into this Proxy
Statement.
SUMMARY DESCRIPTION OF THE PLAN
GENERAL.proxy statement.
Summary description of the 2002 plan
Purpose of the 2002 plan
The Plan provides for the granting of incentive2002 plan allows us to grant to participants stock options nonqualified stock options and rights to purchase restricted stockshares of our common stock. The purpose of the 2002 plan is to enable us to offer participants an opportunity to acquire an equity interest in us. We believe that this will improve our ability to attract, retain and reward employees
directors and other persons providing services to the Company. Under the Plan,
shares of Common Stock may be issued pursuant to the Plan, either upon exercise
of options or purchases of restricted stock. If the Plan is approved by the
stockholders, the Companyus. It will cease granting stock options under its 1992
Incentive Stock Plan. Under the Plan, 5,000,000 shares may be issued either as
restricted stock or upon the exercise of options.
The purpose of the Plan is to promote the interests of the Company and its
stockholders by enabling it to offer grants of stock to better attract, retain
and reward its employees, directors and other persons providing services to it
and, accordingly, toalso strengthen the mutuality of interests between those personsplan participants and the Company'sour stockholders by providing those personsparticipants with a proprietary interest in pursuing the Company'sour long-term growth and financial success.
ADMINISTRATION. The Plan
Eligibility and participation
Generally, all employees, directors (excluding non-employee directors) and other persons providing bona fide services to us or any of our subsidiaries are eligible to receive grants of options under the 2002 plan. Subject to the adjustments described below, we may not issue more than 200,000 shares of common stock pursuant to options granted to any single participant under the 2002 plan during any calendar year. Currently, we have over 7,000 employees. Except as set forth below, we have not determined the options that we will be administered bygrant to any particular individual or group of individuals.
Administration of the 2002 plan
Our board, or a committee (the
"Committee") appointed by our board consisting of two or more members of our board, may administer the Board. To2002 plan. The committee has the extent possible and advisable, the
Committee will be composed of individuals who satisfy Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, and Section 162(m) of the Internal
Revenue Code of 1986 (the "Code"). The Committee is authorizedauthority to interpret the Plan2002 plan and to adopt rules and procedures relating to its administration.the administration of the 2002 plan.
Shares subject to the 2002 plan
Subject to specified limitations,adjustments to reflect certain corporate events that are described below, we may grant options with respect to up to 4,000,000 shares of our common stock under the Committee is2002 plan. We may not increase this maximum number of shares without the approval of our stockholders. If an option granted under the 2002 plan expires or terminates without having been exercised in full, the shares of common stock remaining unissued under that option will again become available for issuance under the 2002 plan. The shares of common stock to be issued upon the exercise of options granted under the 2002 plan will be issued directly from our authorized to make such modifications
tobut unissued shares of common stock.
19
Options
Options granted under the Plan and to the grants thereunder as are necessary to effectuate the
intent of the Plan as a result of any changes in the tax, accounting or
securities laws treatments of participants, the Company and the Plan. Further,
the Committee may modify an existing option or a restricted stock grant;
however, no modification2002 plan may be made that would impair the rights of the
participant without the participant's consent.
OPTIONS. Each option will be granted on such terms and in such form as the
Committee may approve, which shall not be inconsistent with the provisions of
the Plan. The Committee determines whether the options will beeither incentive stock options, or ISOs, or nonqualified stock options. Underoptions, or NQSOs. We will determine the Plan,terms and conditions of each option and include them in a written agreement between the participant and us. Each option agreement will set forth:
- •
- the per share exercise price of
anythe option,may notwhich will generally beless thanthefair market valueclosing price ofsuch sharesa share of our common stock as reported on the Nasdaq National Market on the date of grant; - •
- the
grantvesting provisions of the option,and, solely with respect to any incentive stock option granted to a participant who is a ten percent stockholder ofwhich will typically provide that theCompany, will not be less than 110% of the fair market value on the date of the grant of the incentive stock option. EXERCISE. Eachoption will become exercisable(i)as toone-fourth ( 1/4)1/4 of thefullnumber of shares subject thereto one year after the date of grant, and(ii)as to the balance inthirty-six (36)36 equal cumulative monthly installments following such first anniversary date; - •
- the termination date of the option, which will not be later than ten years after the date of grant; and
- •
- the effect on the option of the termination of the participant's employment.
Each option agreement will also contain other terms and conditions that we may establish. The closing price for our common stock as reported on the Nasdaq National Market on December 27, 2001 was $20.55 per share. Options are not transferable during the individual's lifetime.
To the extent an option is intended to qualify as an ISO, the option is required to have terms and conditions consistent with the requirements for that treatment under the Internal Revenue Code. ISOs are subject to the following special restrictions:
- •
- ISOs may only be granted to our, or our subsidiaries', employees;
- •
- the exercise price for an ISO must be at least equal to 100%, or 110% in
such other installments andthe case of stockholders holding more than 10% of the total combined voting power of all classes of our stock, of the fair market value of our common stock, determined on the date of grant; - •
- the aggregate fair market value of the shares of common stock issuable upon exercise of all ISOs granted to a participant, determined at
such other intervals astheBoard or the Committee may otherwise determine. No persons may receive incentive stock optionstime each ISO is granted, thatarebecome exercisable for the first time duringanya calendar yearwith respectcannot exceed $100,000; and - •
- ISOs must terminate no later than the first to
Common Stock having a fair market value ofoccur of:- (1)
- ten years, or five years for stockholders holding more than
$100,000. In calculating10% of the$100,000 limit, Common Stock is valued at its fair market value ontotal combined voting power of all classes of our stock, from the date ofgrant. If an option expires or terminates before it is exercised in full,grant; and - (2)
- three months following the
unissued stock reserved for the option becomes available for the granting of new options or the issuance of restricted stock. Options may be exercised by paymenttermination of thefull purchase price in cashparticipant's employment, unless the termination is the result of the participant's death orby any other form of consideration that the Committee has approved, such as the surrender of outstanding shares of Common 19Stock owned bydisability or if the participantor by withholding shares that would otherwise be issued upondies during theexercisethree month period following the termination, in which case other rules apply.
Modification of options
We have the option. The Committee may also authorizeauthority to modify any outstanding option as we consider appropriate, including the exercise of options by the delivery of an irrevocable written notice of exercise
form together with irrevocable instructionsauthority to a broker-dealer to sell or margin
a sufficient portion of the shares of Common Stock and to deliver the sale or
margin loan proceeds directly to the Company to paymodify the exercise price of the
option.
All rights to exercise options terminate three months following the
participant's severance for any reason other than death or disability, or upon
expiration of the option, whichever occurs first. During such three month
period, the participant may only exercise options to the extent they were
exercisable on the date of the participant's severance. If a participant dies
without having fully exercised his or her options during the period of his or
her employment or within three months of his or her severance, the options may
be exercised within a period of one year following his or her death, if the
expiration of the option period has not first occurred to the extent the
participant could have exercised them on the date of his or her death. If the
participant was disabled at the time of severance, the options may be exercised
within a period of one year following his or her severance, if the expiration
date has not first occurred, to the extent the participant could have exercised
them on the date of his or her severance.
SUBSTITUTE OPTIONS. The Company may grant options to employees of acquired
companies who hold stock options of the acquired company upon such terms and
conditions as the Committee may determine but may not be contrary to applicable
law.
TRANSFER RESTRICTIONS. Options may be transferred only by will or the laws
of descent and distribution.
RESTRICTED STOCK. Pursuant to the Plan, the Committee will from time to
time determine, in its discretion, those persons who will be offeredaccelerate the right to purchase sharesexercise any option, and extend or renew any option. However, we may not modify any option in a manner adverse to the participant holding that option without that participant's consent. Furthermore, we may not reduce the exercise price of restrictedany outstanding option, including any repricing effected by issuing replacement stock and the number of sharesoptions for outstanding stock options that may be
purchased by each such person.
The purchase price per share of all restricted stock will be determined by
the Committee, in its sole discretion, so long as the purchase price is not lesshave exercise prices higher than the fairprevailing market value of Common Stock on the date the right to purchase
such restricted stock is granted.
A participant will not have a vested right to the shares subject to the
grant of restricted stock until satisfactionprice of the vesting requirements
specified inunderlying stock, without first obtaining the grant. The participant may not assign or alienate his or her
interest in the sharesapproval of restricted stock prior to vesting.
ADJUSTMENTS. The maximum numberour stockholders.
20
Adjustments
In connection with certain types of shares that may be issued under the
Plan, and all outstanding options and outstanding securities subject to the
Company's repurchase right, will be adjusted forcorporate events like stock splits, stock dividends, recapitalizations, consolidations or reclassifications, we may make appropriate and similar capital changes. The Committee may also make suchequitable adjustments to:
- •
- the aggregate number of shares for which we can grant options under the 2002 plan;
- •
- the number and kind of shares covered by outstanding options; and
- •
- the per share exercise price of outstanding options.
Change in the
event of a spin-off or other distribution of Company assets to stockholders,
other than normal cash dividends.
MERGERS; REORGANIZATIONS.control
In the event of aconnection with any merger share exchange,
reorganization or consolidation of the Company in which the Company iswe are not the surviving corporation, or survives as a subsidiaryresult of another corporation, eachwhich our common stock ceases to be publicly traded, we may, but are not required to, terminate all outstanding option will be assumedoptions upon the consummation of that merger or an equivalent option substituted byconsolidation. However, as a condition to the successor corporation. Intermination, we must eliminate all restrictions on the eventexercisability of the successor corporation refuses to assume
or substitute for the option,options and give the participant will fully vest in and haveat least 20 days prior to the righttermination to exercise those options without regard to any of these restrictions.
Tax matters
We are authorized to withhold from the option as to allcompensation of the shares of Common Stock purchasableparticipants amounts necessary to satisfy the tax withholding obligations arising from the 2002 plan.
Compliance with securities laws
We are not obligated to issue any common stock under the option, including2002 plan if we determine that the issuance would violate applicable state or federal securities laws. We intend to file a registration statement on Form S-8 to register the shares that would not otherwise be vestedissuable under the 2002 plan promptly following the approval of the 2002 plan by our stockholders.
Termination or exercisable. Notwithstandingamendment of the foregoing,2002 plan
Our board of directors may terminate the Board or Committee may, in any
specific case, provide for the treatment of an option in a manner different than
that described above.
AMENDMENT AND TERMINATION. The Board of Directors may2002 plan at any time amend ortime. Unless earlier terminated by our board, the 2002 plan will terminate on December 17, 2011, the Plan. However, no modification may be made that would impairtenth anniversary of the effective date of the 2002 plan. We cannot grant options under the 2002 plan after its termination date. Termination of the 2002 plan will not affect the rights of any participant with respect to any option outstanding as of the time of the termination. Our board may also amend the 2002 plan at any time. However, no amendment may adversely affect the rights of any participant holding an option without the participant's consent.with respect to any outstanding award. Further, without the approval of the majority of the Company'sour stockholders, the
Boardour board may not amend the provisions of the Plan regarding (i)2002 plan for the purpose of:
- •
- modifying the class of individuals
20entitled to receive incentive stockoptions;or (ii) - •
- increasing the maximum number of shares of
Common Stockcommon stock that may be issued under thePlan (except in2002 plan, except as to thecaseadjustments described above; and - •
- materially increasing the benefits which accrue to participants under the 2002 plan.
The above description summarizes the main provisions of adjustments for stock splits, stock dividends or similar events).
The Planthe 2002 plan and the options to be granted thereunder. This description does not preventpurport to be complete and is qualified in its entirety by the Company from establishing any other plan,
program or arrangement of any kind relating to employee compensation or benefits
or providing for the issuance of shares of Common Stock, and the grant of
options or opportunities to purchase restricted stock under the Plan will not
preclude any employee from participating in any other plan, program or
arrangementprovisions of the Company or2002 plan. Stockholders are urged to read the 2002 plan in its subsidiaries.
THE ABOVE DESCRIPTION SUMMARIZES THE MAIN PROVISIONS OF THE PLAN AND THE
STOCK INCENTIVES GRANTED THEREUNDER. THIS DESCRIPTION DOES NOT PURPORT TO BE
COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE PROVISIONS OF THE PLAN.
STOCKHOLDERS ARE URGED TO READ THE PLAN IN ITS ENTIRETY.
FEDERAL INCOME TAX CONSEQUENCESentirety.
21
Federal income tax consequences of the 2002 plan
The following is a general discussion of certainthe principal federal income tax consequences to a participantof participation in the 2002 plan is based on the statutes and the Company with respect to sharesregulations existing as of Common
Stock issued under the Plan.December 15, 2001. In addition, thereparticipation in the 2002 plan may behave state and local tax consequences. We encourage participants to consult their own tax advisors with respect to the tax consequences to aof their participation in the 2002 plan.
Incentive stock options
A participant which may vary between each state and locality.
INCENTIVE STOCK OPTIONS. Nowill not recognize taxable income will be recognized by a
participant upon the grant or exercise of any incentive stock option under the
Plan. However the amount by which the fair market value of stock purchased upon exercise of an incentive stock option exceeds the option price of such stock
constitutes an item of tax preference which could then be subject to the
alternative minimum tax in the year that the option is exercised. The Company
willISO, and we are not be entitled to anyan income tax deduction as the result of the grant or exercise of any incentive stock option.
Gainan ISO. However, the Internal Revenue Service has issued proposed regulations that, if finalized, would require us to withhold employment taxes (e.g., FICA and FUTA) at the time of exercise of an ISO. If the proposed regulations are finalized, this new rule is anticipated to apply to ISOs that are exercised on or after January 1, 2003. Any gain or loss resulting from the subsequent sale of shares of common stock acquired upon exercise of an incentive stock optionISO will be long-term capital gain or loss if suchthe sale is made after the later of:
- •
- two years from the date of
thegrant of theoption and afterISO; or - •
- one year from the
transferdate ofsuch stock to the participant uponexerciseprovided that the participant is an employeeof theCompany fromISO.
If a participant sells common stock acquired upon the date of
grant until three months before the date of exercise. In the event of the
participant's death or disability prior to exercise of an incentive stock
option, special rules apply in determining whether gain or loss upon sale of the
stock acquired upon exercise of such option will be taxable as long-term capital
gain or loss or ordinary income.
If the subsequent sale of stock is madeISO prior to the expiration of such
two-year or one-yearboth of these periods, the sale will be a "disqualifying disposition" under the federal tax laws. The participant will generally recognize ordinary income in the year of salethe disqualifying disposition in an amount equal to the difference between the exercise price of the ISO and the fair market value of the shares of our common stock on the date of exercise provided that if
such sale is a transaction in which a loss (if sustained) would have been
recognized byof the participant,ISO. However, the amount of ordinary income recognized by the participant generally will not exceed the excess (if any) ofdifference between the amount realized on the sale overand the optionexercise price. The CompanyWe will then be entitled to an income tax deduction of like amount.equal to the amount taxable as ordinary income to the participant. Any excessadditional gain recognized by the participant upon such sale would thenthe disqualifying disposition will be taxable as long-term capital gain either long-term or short-term
depending upon whetherif the shares of common stock hadhave been held for more than one year prior to
sale.
Ifbefore the saledisqualifying disposition or short-term capital gain if the shares of common stock receivedhave been held for less than one year before the disqualifying disposition.
The amount by which the fair market value, determined on the date of exercise, of the shares of common stock purchased upon exercise of an option qualifies for
long-term capital gain treatment,ISO exceeds the capital gain wouldexercise price is also an item of tax preference that may be taxedsubject to individualsalternative minimum tax in accordancethe year that the ISO is exercised.
Nonqualified stock options
As with an ISO, a participant will not recognize taxable income on the grant of an NQSO, and we are not entitled to an income tax rates then in effect underdeduction as the Code. Long-term
capital gains are currently taxed at a maximum federal rate of 28%.
NONQUALIFIED STOCK OPTIONS. Generally, at the timeresult of the grant of any
nonqualified stock option under the Plan, no taxable income will be recognized
by the participant and the Company will not be entitled to a deduction. Uponan NQSO. Unlike an ISO, however, upon the exercise of such option,an NQSO, the participant generally will recognize taxableordinary income, and the Companywe will then be entitled to aan income tax deduction, in the amount by which the then fair market value of the shares of Common Stock issued to such
participantcommon stock purchased upon exercise, determined as of the date of exercise, exceeds the optionexercise price. 21
Income recognized by the participant upon exercise of a nonqualified stock
option will be taxed as ordinary income in accordance with the tax codes then in
effect under the Code. OrdinaryThis income is currently taxed at a maximum federal
ratepart of 39.6%. If the participant is an employee, such income will constituteparticipant's "wages" with respect tofor which the Company iswe are required to deduct and withhold federal and state income and payrollas well as employment taxes. Any such deductions will be made
from the wages, salary, bonus or other income to which the participant would
otherwise be entitled and, at the Company's election, the participant may be
required to pay to the Company (for withholding on the participant's behalf) any
amount not so deducted but required to be so withheld.
Upon the subsequent dispositionsale of shares of common stock acquired upon the exercise of an option other than an incentive stock option,NQSO, the participant will recognize capital gain or loss in an amount equal to the difference between the proceeds received upon dispositionsale and the fair market value of suchthe shares aton the timedate of exercise. If suchthe participant has held the shares have been held for more than one year at the time of such disposition,the sale, the capital gain or loss will be long-term.
ACCELERATION OF STOCK OPTIONS UPON A TRANSFER OF CONTROL. If,long-term, otherwise the capital gain will be short-term.
22
Acceleration of stock options upon a transfer of control
Upon a reorganization, merger, sale or other transaction resulting in a change inof control, of the Company, the exercisability of stock options held by certain of our employees (generally officers, stockholders and highly compensated employees of
the Company) isemployees) may be accelerated (or payments aremay be made to cancel unexercisable options of such employees), such. The acceleration of exercisability or this type of payment may be determined to be, in whole or in part, a "parachute payment" for federal income tax purposes. If the present value of all of thea participant's parachute payments equals or exceeds three timetimes the participant's average compensation for the past five years, the participant also will be subject toowe a 20% excise tax on the amount of suchthe parachute payment which is in excess of the greater of suchof:
- •
- the average compensation of the participant for the past five years; or
- •
- an amount which the participant establishes as reasonable compensation.
In addition, the Companywe will not be allowed a deduction for suchto deduct any excess parachute payment.
RESTRICTED STOCK. A purchaserpayments.
Capital gains and ordinary income tax
Long-term capital gains are currently taxed at a maximum federal rate of restricted stock will be required to
include in his or her gross income, in the taxable year of such purchaser in
which the shares of restricted stock vest, the amount by which the then fair
market value of such restricted stock (determined at the date of vesting)
exceeds the purchase price paid for such restricted stock.20%. However, a purchaser
may elect pursuant to Section 83(b) of the Code to include in his or her gross
income for the taxable year in which the restricted stock is issued, the excess
of the fair market value of all such restricted stock at the time of such
issuance (determined without reference to the Company's repurchase rights) over
the amount paid for such restricted stock. In this event, the purchaser will not
recognize taxable income when the restricted stock vests. If shareslong-term capital gains with respect to whichstock with a Section 83(b) election has been made are later repurchased byholding period of more than five years may qualify to be taxed at a maximum federal rate of 18% if the Company, the purchaser will not be entitled to a deduction.
As a result of issuing restricted stock subject to a repurchase right, the
Company will be entitled to a deduction for its taxable year within which ends
the taxable year of the purchaser of such stock in which such purchaser is
required to include an amount in gross income, either as a result of the vesting
of the shares or of making a Section 83(b) election. The amount of such
deduction will be equalwas acquired pursuant to the amount, if any, whichexercise of an option that was granted to the purchaserparticipant no earlier than January 1, 2001. Short-term capital gains and ordinary income are taxed at marginal federal rates of such stockup to 39.6% (although current law provides that this rate is required to include in his or her gross income.
Any amount included in a purchaser's gross income as a result of the
issuance of shares of restricted stock under the Plan or the vesting of shares
of stock will be taxed a ordinary income. If the purchaser is an employee, such
amount will constitute "wages" with respect to which the Company is required to
deduct and withhold federal and state income and payroll taxes. Any such
deductions will be made from the wages, salary, bonus or other income to which
the purchaser would otherwise be entitled and, at the Company's election, the
purchaser may be required to pay the Company (for withholding on such
purchaser's behalf) any amount not so deducted but required to be so withheld.
Except as described above, upon the disposition of shares of vested
restricted stock, the purchaser will recognize capital gain or loss in an amount
equalreduced to the difference between the proceeds received from the
22
disposition38.6% for years 2002 and the purchaser's tax basis in the shares. If such shares have
been held at the time of their disposition2003, to 37.6% for more than oneyears 2004 and 2005 and to 35% for year from the
earlier of the date of a 2006 and thereafter).
Section 83(b) election or the date the Company's
repurchase right terminates as to the shares, the capital gain or loss will be
long-term. A purchaser of restricted stock may not assign or alienate his or her
interest in the restricted stock prior to vesting. However, if a purchaser of
restricted stock does dispose of such unvested shares of stock, the purchaser
will recognize compensation in the amount equal to the difference between the
proceeds received from the disposition and the purchaser's tax basis in the
shares.
COMPENSATION DEDUCTION LIMITATION. In certain circumstances, a publicly
held corporation such as the Company is denied an income tax deduction for162(m) limitation
We generally cannot deduct compensation paid to certain "covered employees" (as defined below)key executives in excess of $1.0 million$1,000,000 per year.year unless certain conditions are satisfied. In general, only our CEO and our four other highest paid executive officers are subject to this limitation. The income that an executive would recognize by reason of the exercise of an NQSO is subject to this deduction limitation. However, uponthis limitation does not apply if:
- •
- the 2002 plan is approved by our stockholders;
- •
- the exercise
nonqualified stockprice of options grantedunder the Plan with an option priceis at least equal toor greater thanthe fair market value of theCommon Stock atcommon stock upon thetimedate ofgrant generally willthe grant; and - •
- the options are granted by a committee composed exclusively of members of our board of directors who are not
beour employees or employees of one of our subsidiaries.
Section 16 of the Exchange Act
Special rules apply in the case of individuals subject to the $1.0 million deduction limitation so long as the Committee is at
all times composed of "outside directors" as defined in applicable Treasury
Regulations. If so, the nonqualified stock options should then meet the
exemption for "performance-based" compensation. A "covered employee" is a
participant who, on the last day of the taxable year of the Company, is the
chief executive officer or one of the four other most highly compensated
executive officers of the Company for proxy disclosure purposes. Sales of
restricted stock are also subject to this $1.0 million deduction limitation.
THE FOREGOING SUMMARY OF THE EFFECTS OF FEDERAL INCOME TAXATION UPON
PARTICIPANTS, HOLDERS OF RESTRICTED STOCK AND THE COMPANY WITH RESPECT TO SHARES
ISSUED UNDER THE PLAN DOES NOT PURPORT TO BE COMPLETE AND REFERENCE IS MADE TO
THE APPLICABLE PROVISIONS OF THE CODE.
REASONS FOR APPROVAL OF PLAN PROPOSAL
The Board of Directors believes that the selected use of stock options and
restricted stock is an effective means of attracting, motivating and retaining
employees and that the availability of the number of shares covered by the Plan
is important to the Company's business prospects and operations.
VOTE REQUIRED
The approval of the Plan requires the affirmative vote of a majority of the
votes cast at the Meeting. Neither an absention nor a broker non-vote is an
affirmative vote and, therefore, both will have the same effect as a vote
against the Plan. See "General Information."
RECOMMENDATION OF THE BOARD OF DIRECTORS
FOR ALL OF THE FOREGOING REASONS, THE BOARD BELIEVES THAT THE PLAN IS IN
THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS A VOTE "FOR" APPROVAL THEREOF. PROXIES WILL BE VOTED FOR THIS
PROPOSAL UNLESS OTHERWISE SPECIFICALLY INDICATED.
23
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a)16(b) of the Securities Exchange Act of 1934 ("1934. In particular, under current law, unless a participant that is subject to Section 16")16(b) of the Exchange Act timely makes an election under Section 83(b) of the Internal Revenue Code within 30 days following the exercise of an option, shares of common stock received pursuant to the exercise of a stock option may be treated as restricted as to transferability and subject to a substantial risk of forfeiture for a period of up to six months after the date of receipt. Accordingly, the amount of ordinary income recognized, and the amount of our tax deduction, may be determined as of the end of such period.
23
Applicability of ERISA
The 2002 plan is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974 and it is not a tax-qualified retirement plan under Section 401(a) of the Internal Revenue Code.
The foregoing summary of the effects of federal income taxation upon us and participants with respect to shares issued under the 2002 plan does not purport to be complete. Each participant is urged to consult with his or her personal tax advisor regarding the federal, state and local tax consequences of participating in the 2002 plan.
Options granted under the 2002 plan
We cannot determine at this time either the number of options that we will allocate to our directors and executive officers participating in the 2002 plan and to other participants in the future or the number of options that these persons will actually receive in the future because the amount and value of awards that we will grant to any participant are within our discretion, subject to the limitations described above. The table below sets forth information concerning all options granted under the 2002 plan, subject to stockholder approval, as of December 18, 2001. Our non-employee directors are not eligible to receive grants under the 2002 plan.
| Individual or Group | Number of Options Received | Exercise Price($) | ||
|---|---|---|---|---|
| Li-San Hwang Chairman of the Board and Chief Executive Officer | 35,000 | 20.00 | ||
James M. Jaska President, Chief Financial Officer and Treasurer | 30,000 | 20.00 | ||
Richard A. Lemmon Executive Vice President, Administration and Secretary | 18,000 | 20.00 | ||
Michael J. Nigro Executive Vice President, Resource Management | 18,000 | 20.00 | ||
Glenn S. Burkhardt Executive Vice President, Infrastructure | 18,000 | 20.00 | ||
Michael C. Bush Executive Vice President, Communications | 18,000 | 20.00 | ||
Charles R. Faust Vice President | 8,000 | 20.00 |
Vote required
The approval of the 2002 plan requires the Company's executive officers, directors and beneficial ownersconsent of more than
10%a majority of the Company's Common Stock (collectively, "Insiders") to file reportsshares of ownership and changesour common stock. Any action other than the delivery of a properly executed proxy will have the practical effect of voting against the 2002 plan.
Recommendation of our board of directors
Our Board believes that the 2002 plan is in ownership of Common Stock of the Company with the
Securities and Exchange Commissionour best interests and the Nasdaq Stock Market,best interests of our stockholders and to furnish
the Company with copiesunanimously recommends a vote "for" approval of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Form 5s were
requiredthis proposal. Your proxies will be voted for those persons, the Company believes that its Insiders complied with
all applicable Section 16 filing requirements for fiscal 2000.
this proposal unless you specifically indicate otherwise.
24
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, certified public accountants, acted as the Company'sour independent auditors and audited theour consolidated financial statements of the
Company for the fiscal year ended October 1, 2000. The Company hasSeptember 30, 2001. We have been advised that Deloitte & Touche LLP is independent with respect to the Companyus within the meaning of the Securities Act of 1993,1933, as amended, and the applicable published rules and regulations thereunder. The audit committee of the board has selected Deloitte & Touche LLP as independent accountants to audit our consolidated financial statements for fiscal 2002. A representativemember of that firm is expected to be present at the Meetingmeeting, will have an opportunity to make a statement if he or she desires to do so, and the representative is expected towill be available to respond to appropriate questions. The Board of Directors has recommended thatIf Deloitte & Touche LLP be appointedshould decline to act or otherwise become incapable of acting, or if Deloitte & Touche LLP's engagement is discontinued for any reason, the audit committee will appoint another accounting firm to serve as the Company's auditorsour independent public accountants for fiscal 2002.
Audit fees
Deloitte & Touche LLP's fees for the fiscal 2001 audit and the quarterly reviews, including review of Forms 10-Q, were $546,000, of which an aggregate amount of $262,000 was billed through September 30, 2001.
Financial information systems and implementation fees
Deloitte & Touche LLP did not render any services related to financial information systems design and implementation for the fiscal year ended September 30, 2001.
All other fees
Aggregate fees billed for all other services rendered by Deloitte & Touche LLP for the fiscal year ended September 30, 2001 were $58,000. The audit committee of our board of directors considers these services compatible with maintaining Deloitte & Touche LLP's independence.
STOCKHOLDER PROPOSALS FOR 20022003 ANNUAL MEETING
Any stockholder who wishes
If you wish to present a proposal for action at the 2002
Annual Meetingour 2003 annual meeting of Stockholdersstockholders and who wisheswish to have it set forth in the corresponding proxy statement and identified in the corresponding form of proxy prepared bythat management will prepare, you must notify the Companyus no later than September 1, 20012002 in suchthe form as required under the rules and regulations promulgated by the Securities and Exchange Commission. Otherwise, your proposal will not be included in management's proxy materials.
If you wish to present a proposal for action at our 2003 annual meeting of stockholders, even though it will not be included in management's proxy materials, our bylaws require that you must notify us no earlier than 90 days, and no later than 60 days, before the date of the 2003 annual meeting. However, if we do not notify you, or otherwise publicly disclose, the date of the 2003 annual meeting at least 70 days before the date of the meeting, you may notify us of the proposal you wish to present within ten days after the day on which we mail notice of, or otherwise publicly disclose, the date of our 2003 annual meeting. Your notice must be in the form required by our bylaws.
Our board of Directorsdirectors does not know of any other matters to be presented at the Meeting,2002 annual meeting of stockholders but, if other matters do properly come before the Meeting,meeting, it is intended that the persons named as proxies in the proxy will vote on them in accordance with their best judgment.
A copy of the Company's 2000 Annual Report for the fiscal year ended
October 1, 2000our 2001 annual report is being mailed to each stockholder of record together with this Proxy Statement.proxy statement. The Company has filed with2001 annual report includes our audited financial statements for the Securities and Exchange Commission its Annual
Reportfiscal year
25
ended September 30, 2001. Our annual report on Form 10-K for the fiscal year ended October 1, 2000. This Report
containsincludes these financial statements, as well as more detailed information concerning the Companyabout us and itsour operations, supplementary financial information and certain schedules whichschedules. The annual report and Form 10-K are not included
in the 2000 Annual Report. A COPYpart of our proxy soliciting material. COPIES OF THISTHE ANNUAL REPORT WILLON FORM 10-K, WITHOUT EXHIBITS, CAN BE FURNISHED TO
STOCKHOLDERSOBTAINED WITHOUT CHARGE UPON REQUEST TO:BY CONTACTING US AT: Investor Relations, Tetra Tech, Inc., 670 North Rosemead Boulevard, Pasadena, California 91107; telephone number (626) 351-4664; or via e-mail at ir@tetratech.com. The Annual Report and
Form 10-K are not part351-4664.
By order of the Company's soliciting material.
By Orderboard of the Board of Directors
/s/ directors
Richard A. Lemmon
Richard A. Lemmon
Executive Vice President, Administration and Secretary
Pasadena, California
January 15, 2001
24
26
ANNEX A
TETRA TECH, INC.
BOARD OF DIRECTORS
INDEPENDENT AUDIT COMMITTEE CHARTER
SCOPE OF RESPONSIBILITY
The Independent Audit Committee (the "Audit Committee") of the Board of
Directors (the "Board") for
Tetra Tech, Inc. (the "Company") is responsible for
effective oversight of the Company's financial reporting process and adequacy of
internal controls, relationships with external and internal auditors and
financial compliance issues.
The Company's independent auditor is accountable to the Audit Committee and
the Board, as representatives of the Company's stockholders. The Audit Committee
and the Board have the ultimate authority to select (or nominate for stockholder
approval), evaluate and, where appropriate, replace the independent auditor.
DESCRIPTION OF FUNCTIONS AND ACTIVITIES
2002 Stock Option Plan
1. Shall be an effective independent committee with oversight
responsibility for and an understanding of the Company's financial
statements. Members of the Audit Committee shall have no relationship to
the Company that may interfere with a Committee member's exercising
their independence from management and the corporation. At least one
member of the Committee shall have accounting or related financial
management expertise.
2. Evaluate the audit activities of the Company's independent public
accountants and internal auditors.
3. Receive periodic reports from the independent auditor regarding the
auditor's independence consistent with Independent Standards Board
Standard 1, discuss such reports with the auditor, and if so determined
by the Audit Committee, recommend that the Board take appropriate action
to oversee the independence of the independent auditor.
4. Review and approve the Company's operating policies and practices,
including information security practices.
5. Provide oversight of the financial reporting process and adequacy of
internal controls.
6. Maintain direct relationship with external and internal auditors.
7. Examine the external and internal auditors' findings relevant to:
- significant accounting policies
- significant audit adjustments
- any significant disagreements with management
- auditors' awareness of management consultation with other accountants
8. Encourage and strongly support enhanced dialogue about the Company's
financial statements among corporate management and outside auditors
relevant to:
- quality of earnings
- accounting practices adopted
- estimates and judgments made by management
- unrecorded audit adjustments
- clarity of financial disclosures
9. Conduct a review meeting following the completion of the Company's
fiscal year with at least one additional meeting conducted within the
fiscal year.
10. Continually review approaches to improving the Audit Committee
effectiveness.
A-1
ANNEX B
TETRA TECH, INC.
2001 STOCK PLAN
1. PURPOSE.
The purpose of the Tetra Tech, Inc. 20012002 Stock Option Plan ("Plan") is to promote the interests of Tetra Tech, Inc. ("Company") and its stockholders by enabling itthe Company to offer grants of stockParticipants an opportunity to acquire an equity interest in the Company so as to better attract, retain, and reward its employees, directors (excluding non-employee directors) and other persons providing services to itthe Company and, accordingly, to strengthen the mutuality of interests between those personsParticipants and the Company's stockholders by providing those personsParticipants with a proprietary interest in pursuing the Company's long-term growth and financial success.
2. DEFINITIONS.Definitions.
For purposes of this Plan, the following terms shall have the meanings set forth below.
- (a)
"Board" - "Board" means the Board of Directors of Tetra Tech, Inc.
- (b)
"Code" - "Code" means the Internal Revenue Code of
1986.1986, and the applicable regulations thereunder. Reference to any specific section of the Code shall be deemed to be a reference to any successor provision. - (c)
"Committee" - "Committee" means the
administrative Committee ofcommittee appointed by the Board, if any, to administer this Planthatas permitted bySection 5below or, if no such committee isprovided in Section 3 of this Plan.appointed, the Board. - (d)
"Common - "Common Stock" means the common stock of the Company or any security issued in substitution, exchange, or in lieu thereof.
- (e)
"Company" - "Company" means Tetra Tech, Inc., a Delaware corporation, or any successor corporation. Except where the context indicates otherwise, the term "Company" shall include its
Parent andSubsidiaries. - (f)
"Disabled" - "Disabled" means permanent and total disability, as defined in Code Section 22(e)(3).
- (g)
"Exchange - "Exchange Act" means the Securities Exchange Act of 1934.
- (h)
"Fair - "Fair Market Value" of Common Stock for any day shall be determined in accordance with the following
rules.rules:- (i)
- If the Common Stock is admitted to trading or listed on a national securities exchange, the last reported sale price on that day regular way, or if no such reported sale takes place on that day, the average of the last reported bid and ask prices on that day regular way, in either case on the principal national securities exchange on which the Common Stock is admitted to trading or listed.
- (ii)
- If not listed or admitted to trading on any national securities exchange, the last sale price regular way on that day reported on the Nasdaq National Market ("Nasdaq National Market") of the Nasdaq Stock Market ("NSM") or, if no such reported sale takes place on that day, the average of the closing bid and ask prices regular way on that day.
- (iii)
- If not traded or listed on a national securities exchange or included in the Nasdaq National Market, the last reported sale price on that day regular way, or if no such reported sale takes place on that day, the average of the closing bid and ask prices regular way on that day reported by the NSM, or any comparable system on that day.
27
- (iv)
- If the Common Stock is not included in (i), (ii) or (iii) above, the last reported sale price on that day regular way, or if no such reported sale takes place on that day, the closing bid and ask prices regular way on that day as furnished by any member of the National Association of Securities Dealers, Inc. ("NASD") selected from time to time by the Company for that purpose.
B-1
If the national securities exchange, Nasdaq National Market, NSM or NASD, as applicable, are closed on such date, the "Fair Market Value" shall be determined as of the last preceding day on which the Common Stock was traded or for which bid and ask prices are available. In the case of an Incentive Stock Option, "Fair Market Value" shall be determined without reference to any restriction other than one that, by its terms, will never lapse.
- (i)
"Incentive - "Incentive Stock Option" means an option to purchase Common Stock that is an incentive stock option within the meaning of Code Section 422.
- (j)
"Insider" - "Insider" means a person who is subject to Section 16 of the Exchange Act.
- (k)
"Non-Qualified - "Non-Qualified Stock Option" means any option to purchase Common Stock that is not an Incentive Stock Option.
- (l)
"Option" - "Option" means an Incentive Stock Option or a Non-Qualified Stock Option.
- (m)
"Parent" shall mean any corporation (other than Tetra Tech, Inc.) in an unbroken chain of corporations ending with Tetra Tech, Inc. if each of the corporations (other than Tetra Tech, Inc.) owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain, as determined in accordance with the rules of Code Section 424(e). (n) "Participant" - "Participant" means a person who was been granted an Option
or Restricted Stockunder the Plan.(o) "Plan" - (n)
- "Plan" means this Tetra Tech, Inc.
20012002 Stock Option Plan, as it may be amended from time to time.(p) "Restricted Stock" means shares of Common Stock issued under Section 9 of this Plan below that are subject to restrictions upon assignment or alienation prior to vesting. (q) "Severance" - (o)
- "Severance" means, with respect to a Participant, the termination of the Participant's provision of services to the Company as an employee
director,or independent contractor, whether by reason of death, disability, or any other reason. For purposes of determining the exercisability of an Incentive Stock Option, a Participant who is on a leave of absence that exceeds ninety (90) days will be considered to have incurred a Severance on the ninety-first (91st) day of the leave of absence, unless the Participant's rights to reemployment are guaranteed by statute or contract. However, a Participant will not be considered to have incurred a Severance because of a transfer of employment between the Company and a Subsidiaryor Parent(or vice versa).(r) "Subsidiary" - (p)
- "Subsidiary" means any corporation or entity in which Tetra Tech, Inc., directly or indirectly, controls fifty percent (50%) or more of the total voting power of all classes of its stock having voting power, as determined in accordance with the rules of Code Section 424(f).
(s) "Ten - (q)
- "Ten Percent Shareholder" means any person who owns (after taking into account the constructive ownership rules of Code Section 424(d)) more than ten percent (10%) of the stock of the Tetra Tech, Inc. or of any of its
ParentsSubsidiaries.
3. Eligibility.
All employees (including employee directors) and other persons providing bona fide services to the Company or Subsidiaries.
3. ADMINISTRATION.
any Subsidiary are eligible to receive Options under this Plan. However, Incentive Stock Options may only be granted to employees of the Company or of a Subsidiary.
4. Substitute Options.
In the event the Company acquires another entity, the Committee may authorize the issuance of Options ("Substitute Options") to employees and other persons in substitution of stock options previously granted to them in connection with their performance of services for such acquired entity
28
upon such terms and conditions as the Committee shall determine but which shall not be contrary to applicable law, taking into account the limitations of Code Section 424(a) in the case of any Substitute Option that is intended to be an Incentive Stock Option.
- (a)
- This Plan shall be administered by a Committee consisting of two or more members of the Board appointed by the Board. The Board may remove members from, or add members to, the Committee at any time. To the extent possible and advisable, the Committee shall be composed of individuals
thatwho satisfy Rule 16b-3 under the Exchange Act and Code Section 162(m). Notwithstanding anything herein to the contrary, any action which may be taken by the Committee may also be taken by the Board.B-2 - (b)
- The Committee may conduct its meetings in person or by telephone. A majority of the members of the Committee shall constitute a quorum, and any action shall constitute the action of the Committee if it is authorized by:
- (i)
- A majority of the members present at any meeting conducted in accordance with the Company's bylaws; or
- (ii)
- The unanimous consent of all of the members in writing without a meeting.
5. Administration.
- (c)
- The Committee is authorized to interpret this Plan and to adopt rules and procedures relating to the administration of this Plan. All actions of the Committee in connection with the interpretation and administration of this Plan shall be binding upon all parties.
- (d)
- Subject to the limitations
of Sections 10 and 14 of this Plan,set forth below, the Committee is expressly authorized to make such modifications to this Plan andtothegrants of Restricted StockOptions granted hereunder as are necessary to effectuate the intent of this Plan as a result of any changes in the tax, accounting, or securities laws treatment of Participants, the Company and the Plan. - (e)
- The Committee may delegate its responsibilities to others under such conditions and limitations as it may prescribe, except that the Committee may not delegate its authority with regard to the granting of Options
or Restricted Stockto Insiders if that would cause such grants to fail to satisfy Rule 16b-3 under the Exchange Act or Code Section 162(m).4. DURATION OF PLAN. (a)
6. Effective Date.
This Plan shall be effective as ofon December 29, 2000,18, 2001, provided it is approved by the holders of a majority of the Common Stock, at the Company's stockholders, in accordance with2002 Annual Meeting. If the provisions of Code Section 422, within twelve (12) months before or
after the date of its adoption by the Board.
(b) In the event that this Plan is not so approved by the stockholders at that meeting, the Plan and all Options issued under the Plan will terminate. The approval by the stockholders must relate to:
- (a)
- The class of individuals who are entitled to receive Incentive Stock Options; and
- (b)
- The maximum number of shares of Common Stock that may be issued under the Plan, except as adjusted pursuant toSection 13of this
Plan shall terminate and any Options granted under this Plan shallPlan.
If either of those items is changed, the approval of the stockholders must again be void.
(c)obtained.
7. Termination of Plan.
This Plan shall terminate on December 29, 2010,17, 2011, except with respect to Options then outstanding. 5. NUMBER OF SHARES.
(a)However, the Board may elect to terminate the Plan on a prior date. The aggregatetermination of this Plan shall not adversely affect the rights of any Participant with respect to any Option outstanding as of the time of such termination.
29
- (a)
- The maximum number of shares of Common Stock which may be issued pursuant to this Plan shall be
FiveFour Million(5,000,000)(4,000,000).The maximum number of shares that may be issued to a single Participant is One Million (1,000,000). (b)Upon the expiration or termination of an outstanding Option which shall not have been exercised in full, the shares of Common Stock remaining unissued under the Option shall again become available for use under the Plan.(c) Upon the forfeiture - (b)
- The maximum number of
shares of Restricted Stock, the forfeitedshares of Common Stock that may be issuable pursuant to Options granted during any calendar year to any Participant is two hundred thousand (200,000) shares. For purposes of determining the maximum number of shares that may be issued to a single Participant, shares subject to a terminated Option shallagain become availablebe considered outstanding. - (c)
- In the event a Participant pays part or all of the exercise price of an Option by surrendering shares of Common Stock that the Participant previously acquired, only the number of shares issuable to the Participant in excess of those surrendered shall be taken into account for
usepurposes of determining the maximum number of shares that may be issued under thePlan. 6. ELIGIBILITY. (a) Persons eligible for Options under thisPlan,shall consist of employees, directors,both as to that Participant andother persons providing services to the Company. However, Incentive Stock Options may only be granted to employees. (b) Notwithstanding anything in this Plan to the contrary,in theevent that the Company acquires another entity, the Committee may authorize the issuanceaggregate (to all Participants).
8. Shares Subject to this Plan.
- (a)
- Options shall be granted under this Plan on such terms and in such form as the Committee may approve, which shall not be inconsistent with the provisions of this
Plan.Plan, but which need not be the same for each such grant. Options may be either Nonqualified Stock Options or Incentive Stock Options. - (b)
- The
exercise priceterms and conditions of each Option shall include, in addition to such other terms and conditions as may be established by the Committee, (i) the per shareof Common Stock purchasable under an Option shall be set forth in the Option, which in all cases shall be at least equal to the Fair Market Value of the Common Stock on the date of the grant. (c) Theexercise price ofan Incentive Stocksuch Optiongranted to a Ten Percent Shareholder shall be no less than one hundred ten percent (110%)in accordance withsubparagraph (c)below, (ii) the termination date of such Option, and (iii) the effect on such Option of theFair Market Value of the Common Stock on the date of the grant. 8. EXERCISE OF OPTIONS. (a)Participant's Severance. Subject to all other provisions of this Plan, each Option shall become exercisable (i) as to one-fourth (1/4)1/4) of the full number of shares subject thereto one year after the date of grant and (ii) as to the balance in thirty-six (36) equal cumulative monthly installments following such first anniversary date, or in such other installments and at such other intervals as the Board or the Committee may in any specific case otherwise determine in granting such Option. Any Option shall be exercisable following the date of the Participant's Severance only to the extent (if at all) such Option was exercisable on the date of Severance.(b) - (c)
- The
aggregateexercise price per share of Common Stock purchasable under an Option shall be set forth in the Option, which in all cases shall be at least equal to the Fair Market Value(determined asof the Common Stock on the date ofgrant) ofthenumber of shares of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by a Participant during any calendar year shall not exceed one hundred thousand dollars ($100,000) or such other limit as may be required by Section 422 of the Code. To the extent this limit is exceeded, the surplus shares shall be treated as acquired upon the exercise of a Non-Qualified Stock Option. For this purpose, the shares will be taken into account in the order in which the underlying Options were granted. (c) Options shall only be exercisable for whole numbers of shares and for a minimum of 100 shares. (d) Options are exercised by payment of the full amount of the purchase price to the Company. (i)grant. Thepayment shall be in the form of cash or such other forms of consideration as the Committee shall deem acceptable, such as the surrender of outstanding shares of Common Stock owned by the Participant (that have been held a sufficient period of time (if any) to avoid adverse accounting treatment) or by withholding shares that would otherwise be issued upon the exercise of the Option. (ii) If the payment is made by means of the surrender of Restricted Stock, a number of shares issued upon the exercise of the Option equal to the number of shares of Restricted Stock surrendered shall be subject to the same restrictions as the Restricted Stock that was surrendered. (iii) After giving due considerations to the consequences under Rule 16b-3 under the Exchange Act and under the Code, the Committee may also authorize the exercise of Options by the delivery to the Company or its designated agent of an irrevocable written notice of exercise form together with irrevocable instructions to a broker-dealer to sell or margin a sufficient portion of the shares of Common Stock and to deliver the sale or margin loan proceeds directly to the Company to pay theexercise price of an Incentive Stock Option granted to a Ten Percent Shareholder shall be no less than one hundred ten percent (110%) of theOption. B-49. RESTRICTED STOCK. (a) The Committee may issue grantsFair Market Value ofRestrictedthe Common Stockuponon the date of the grant. - (d)
- Any Option which is intended, as evidenced by its designation, as an Incentive Stock Option shall be made subject to such terms and conditions as
itmaydeem appropriate, which need notbe required for such Option to qualify as an Incentive Stock Option. Incentive Stock Options granted under this Plan shall also include a requirement that thesame for eachParticipant receiving suchgrant. (b) RestrictedIncentive Stockmay notOption must notify the Company if he or she disposes of Common Stock acquired pursuant to the exercise thereof prior to the expiration of the holding periods prescribed in Section 422(a)(1) of the Code.
9. Form of Options ("Substitute Options") to individuals or entities in
substitution of stock options previously granted to those individuals or
entities in connection with their performance of services for such acquired
entity upon such terms and conditions as the Committee shall determine but
which shall not be contrary to applicable law, taking
B-3
into account the limitations of Code Section 424(a) in the case of a
Substitute Option that is intended to be an Incentive Stock Option.
7. FORM OF OPTIONS.
Options.
30
- (e)
- If an Option is intended to be
soldexempt from the million dollar ($1,000,000) compensation deduction limitation of Code Section 162(m), in addition toParticipants for less than Fair Market Value without taking into consideration any consequencesthe exercise price requirement ofsubparagraph (c), the grant must be made by a committee composed exclusively of two (2) or more "outside directors" as that term is defined under Code Section 162(m).(c) A Participant shall not have a vested right to the shares subject to the grant - (a)
- The Committee may modify
anany existing Optionincludingas it deems appropriate. Such authority shall include, without limitation, the rightto: (i) Accelerateto accelerate the right to exerciseit; (ii) Extendany Option, extend or renewit; or (iii) Cancel itany Option, andissue a newmodify any restrictions with respect to any Option. However, in no event will the exercise price of any outstanding Option be reduced or repriced (as determined under applicable accounting standards), including any repricing effected by issuing replacement stock options for outstanding stock options that have an exercise price greater than the Fair Market Value of the Common Stock, without first obtaining stockholder approval. - (b)
- No modification may be made to
anany Option that wouldimpairadversely affect the rights of the Participant holding the Option without the Participant's consent. Further, no such modification may be made within taking into consideration any consequences under Code Section 162(m).Modifications similar - (c)
- In the event the Committee amends the terms of an Option so that it no longer qualifies as an Incentive Stock Option, the limitations imposed upon the Option under the Code and the Plan by virtue of it (formerly) qualifying as an Incentive Stock Option shall no longer apply, to
those described above can be made to grants of Restricted Stock. (b)the extent specified in the amendment. - (d)
- Whether a modification of an existing Incentive Stock Option will be treated as the issuance of a new Incentive Stock Option will be determined in accordance with the rules of Code Section 424(h).
(c)Whether a modification of an existinggrant of Restricted Stock or of anOption granted to an Insider will be treated as a new grant for purposes of Section 16 of the Exchange Act will be determined in accordance with Rule 16b-3 under the Exchange Act.
10. Modification of Restricted Stock until satisfaction of the vesting requirements
specified in the grant. The Participant may not assign or alienate the
Participant's interest in the shares of Restricted Stock prior to vesting.
(d) The following rules apply with respect to events that occur prior to
the date on which the Participant obtains a vested right to the Restricted
Stock.
(i) Stock dividends, shares resulting from stock splits, ETC. that
are issued with respect to the shares covered by a grant of Restricted
Stock shall be treated as additional shares received under the grant of
Restricted Stock.
(ii) Cash dividends constitute taxable compensation to the
Participant that is deductible by the Company.
10. MODIFICATION OF OPTIONS.
Options.
11. TERMINATION OF OPTIONS.
(a)Termination of Options.
Except to the extent the terms of an Option require its prior termination, each Option shall terminate on the earliest of the following dates:
(i)
- (a)
- The date which is ten (10) years from the date on which the Option is granted or five (5) years in the case of an Incentive Stock Option granted to a Ten Percent Shareholder.
(ii) - (b)
- The date which is one (1) year from the date of the Severance of the Participant to whom the Option was granted, if the Participant was Disabled at the time of Severance.
(iii) - (c)
- The date which is one (1) year from the date of the Severance of the Participant to whom the Option was granted, if the Participant's death occurs:
(A)- (i)
- While the Participant is employed by the Company; or
B-5(B) - (ii)
- Within three (3) months following the Participant's Severance.
(iv)
- (d)
- In the case of any Severance other than one described in
Subparagraphs (ii)subparagraphs (b) or(iii)(c) above, the date that is three (3) months from the date of the Participant's Severance.
31
12. NON-TRANSFERABILITY OF GRANTS.
(a)Non-transferability of Options.
No Option under this Plan shall be assignable or transferable except by will or the laws of descent and distribution.
(b) Grants of Restricted Stock shall be subject to such restrictions on
transferability as may be imposed in such grants.
- (a)
- In the event of any change in the capitalization of the Company affecting its Common Stock
(E.G.(e.g., a stock split, reverse stock split, stock dividend, recapitalization, combination, or reclassification), the Committee shall authorize such adjustments as it may deem appropriate with respect to:- (i)
- The maximum number of shares of Common Stock that may be issued under this Plan;
- (ii)
- The number of shares of Common Stock covered by each outstanding Option;
- (iii)
- The exercise price per share in respect of each outstanding Option; and
- (iv)
- The maximum number of shares that may be issued to a single individual.
13. ADJUSTMENTS.
Adjustments
- (b)
- The Committee may also make such adjustments in the event of a spin-off or other distribution of Company assets to stockholders, other than normal cash dividends.
14. MERGERS; REORGANIZATIONS. NotwithstandingChange in Control.
In connection with any other provision of this
Plan, in the event of a merger share exchange, reorganization or consolidation of the Company with or into another entity in which the Company is not the surviving corporation or survives as a subsidiaryresult of another corporation (a "Merger"), each outstanding
Option shall be assumed or an equivalent option substituted bywhich the successor
corporation or a Parent or Subsidiary of the successor corporation (the
"Successor Corporation"). In the event that the Successor Corporation refuses to
assume or substitute for the Option, the Participant shall fully vest in and
have the right to exercise the Option as to all of the shares of Common Stock purchasable under the Option, including shares that would not otherwise be
vestedceases or exercisable. If an Option becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a Merger, the Company shall notify
the Participant in writing or electronically that the Option shall be fully
vested and exercisable for a period of fifteen (15) days from the date of such
notice, and the Option shall terminate upon the expiration of such period. For
purposes of this Section 14, the Option shall be considered assumed if,
following the Merger, the option confers the right to purchase or receive, for
each share of Common Stock subject to the Option immediately prior to the
Merger, the consideration (whether stock, cash or other securities or property)
received in the Merger by holders of Common Stock for each share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares); provided, however, that if such consideration received
in the Merger is not solely common stock of the Successor Corporation or its
Parent, the Company may, with the consent of the Successor Corporation, provide
for the considerationwill cease to be received upon the exercise of the Option, for each
share of Common Stock subject to the Option, to be solely common stock of the
Successor Corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the Merger.
The Board orpublicly traded, the Committee may, in any specific case, specifically provide,
in an option agreement or otherwise, forbut shall not be required to, authorize the treatmenttermination of an Option in a manner
different than that set forth aboveall outstanding Options upon the B-6
occurrenceconsummation of such merger or consolidation. However, as a condition to such termination, all restrictions on the exercisability of such Options (i.e., vesting provisions) shall be eliminated and the holders thereof shall be given at least twenty (20) days prior to such termination to exercise their Options without regard to any Merger, but in the absence thereof the above provisions of
this Section 14 shall govern the Option.
such restrictions.
- (a)
- The Board may at any time amend or terminate this Plan. However, no modification may be made to the Plan that would impair the rights of the Participant holding an Option without the Participant's consent.
- (b)
- Without the approval of the holders of a majority of the
stockholders of the Company,Common Stock, the Board may not amend the provisions of this Planregarding:for the purpose of:- (i)
The - Modifying the class of individuals entitled to receive
Incentive StockOptions;or - (ii)
The - Increasing the maximum number of shares of Common Stock that may be issued under the Plan, except as provided inSection 13of this Plan; or
- (iii)
- Materially increasing the benefits which accrue to Participants under this Plan.
- (i)
15. AMENDMENT AND TERMINATION.
Amendment and Termination.
- (a)
- The Company shall have the right to take such actions as may be necessary to satisfy its tax withholding obligations relating to the operation of this Plan.
- (b)
- If Common Stock that was surrendered by the Participant is used to satisfy the Company's tax withholding obligations, the stock shall be valued based on its Fair Market Value when the tax withholding is required to be made. The maximum number of shares
16. NOTICE OF DISQUALIFYING DISPOSITION. A Participant must notify the
Company if the Participant disposes of stock acquired pursuant to the exercise
of an Incentive Stock Option issued under the Plan prior to the expiration of
the holding periods required to qualify for long-term capital gains treatment on
the disposition.
17. TAX WITHHOLDING.
Withholding.
32
that may be withheld is the minimum number of shares necessary to satisfy the applicable tax withholding rules.
18. NO ADDITIONAL RIGHTS.
- (a)
- Neither the adoption of this Plan nor the granting (or exercise) of any Option
or Restricted Stockshall:- (i)
- Affect or restrict in any way the power of the Company to undertake any corporate action otherwise permitted under applicable law;
or - (ii)
- Confer upon any Participant the right to continue performing services for the
Company, nor shall it interfereCompany; or - (iii)
- Interfere in any way with the right of the Company to terminate the services of any Participant at any time, with or without
cause.cause, subject to such other contractual obligations as may exist.
17. Additional Rights.
- (b)
- No Participant shall have any rights as a
shareholderstockholder with respect to any shares covered by an Option granted to the Participantor subject to a grant of Restricted Stockuntil the date a certificate for such shares has been issued to theParticipant. 19. SECURITIES LAW RESTRICTIONS.Participant following the exercise of the Option.
- (a)
- No shares of Common Stock shall be issued under this Plan unless the Committee shall be satisfied that the issuance will be in compliance with applicable federal and state securities
laws.laws, as well as the requirements of any stock exchange or quotation system upon which the Common Stock is listed or quoted. - (b)
- The Committee may require certain investment (or other) representations and undertakings by the Participant (or other person exercising an Option
or purchasing Restricted Stockby reason of the death of the Participant) in order to comply with applicable law. - (c)
- Certificates for shares of Common Stock delivered under this Plan may be subject to such restrictions as the Committee may deem advisable. The Committee may cause a legend to be placed on the certificates to refer to these restrictions.
B-720. INDEMNIFICATION.
18. Securities Law Restrictions.
- (a)
- To the maximum extent permitted by law, the Company shall indemnify each member of the Board, as well as any other employee of the Company with duties under this Plan, against expenses (including any amount paid in settlement) reasonably incurred by the individual in connection with any claims against him or her by reason of the performance of the individual's duties under this Plan, unless the losses are due to the individual's gross negligence or lack of good faith.
21. GOVERNING LAW. - (b)
- The Company will have the right to select counsel and to control the prosecution or defense of the suit.
- (c)
- In the event that more than one person who is entitled to indemnification is subject to the same claim, all such persons shall be represented by a single counsel, unless such counsel advises the Company in writing that he or she cannot represent all such persons under applicable rules of professional responsibility.
- (d)
- The Company will not be required to indemnify any person for any amount incurred through any settlement unless the Company consents in writing to the settlement.
19. Indemnification.
20. Governing Law.
This Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Delaware.
B-8
33
COMMON STOCK
PROXY
TETRA TECH, INC.
BOARD OF DIRECTORS
The undersigned hereby appoints Li-San Hwang and Richard A. Lemmon, or either of them, the true and lawful attorneys and proxies of the undersigned, with full power of substitution, to vote all shares of the Common Stock, $.01 par value ("Common Stock"), of TETRA TECH, INC. (the "Company") which the undersigned is entitled to vote, at the Annual Meeting of the Stockholders of the Company to be held at The Doubletree Hotel, 199 N. Los Robles Avenue, Pasadena, California 91101 on Thursday,Tuesday, February 22, 200119, 2002 at 10:00 a.m., Pacific Standard Time, and at any and all adjournments thereof, on the proposals set forth below and any other matters properly brought before the Meeting.
1. ELECTION OF DIRECTORS FOR all nominees WITHHOLD AUTHORITY
/ / listed below / / to
(except
| 1. | ELECTION OF DIRECTORS | / / | FOR all nominees listed below | / / | WITHHOLD AUTHORITY to | |||||
| (except as marked to the contrary below) | vote for all nominees |
(INSTRUCTION: To withhold authority to vote for allany individual nominee, mark the contrary below) nominees
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK THE
BOX NEXT TO THE NOMINEE'S NAME BELOW.box next to the nominee's name below.)
/ /LI-SAN HWANG/Li-San Hwang / /J. CHRISTOPHER LEWISChristopher Lewis / /PATRICK/Patrick C. HADENHaden
/ /JAMES/James J. SHELTONShelton / /DANIEL/Daniel A. WHALEN
2. AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 50,000,000 TO 85,000,000.
Whalen
/ / FOR / / AGAINST / / ABSTAIN
3.
2. Approval and adoption of the Company's 20012002 Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
4.
3. Such other matters as may properly come before the Meeting.
THE DIRECTORS RECOMMEND A VOTE
The Directors recommend a vote FOR ALL NOMINEES LISTED IN PROPOSALall Nominees listed in Proposal 1 and FOR PROPOSAL 2 AND FOR PROPOSAL 3.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
(CONTINUED FROM OTHER SIDE)Proposal 2.
(Continued and to be signed on the other side)
(Continued from other side)
Unless a contrary direction is indicated, this Proxy will be voted FOR all nominees listed in Proposal 1 FOR Proposal 2 and FOR Proposal 3;2; if specific instructions are indicated, this Proxy will be voted in accordance therewith.
All proxies to vote at said Meeting or any adjournment thereof heretofore given by the undersigned are hereby revoked. Receipt of Notice of Annual Meeting and Proxy Statement dated January 15, 200118, 2002 is acknowledged.
Please mark, sign, date and return this Proxy in the accompanying prepaid envelope. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF TETRA
TECH, INC.
This Proxy is solicited on behalf of the Board of Directors of Tetra Tech, Inc.
Dated: _________________, 2001
______________________________
, 2002
(Signature)
______________________________
(Signature)
Please sign exactly as your name appears hereon. When shares are held by joint tenants, both should sign. When signing as attorney, as executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.