<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as Permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
THE KEITH COMPANIES, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
--------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
--------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
THE KEITH COMPANIES, INC.
2955 Red Hill Avenue
Costa Mesa, California 92626
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on May 15, 2000
----------------
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of The Keith
Companies, Inc. will be held at 2955 Red Hill Avenue, Costa Mesa, California,
on May 15, 2000 at 9:00 a.m., local time, for the following purposes:
(1) To elect members of the board of directors to serve until the next
annual meeting of shareholders;
(2) To ratify the appointment of KPMG LLP as our independent auditors for
fiscal 2000; and
(3) To transact such other business as may properly come before the meeting
or any adjournments and postponements thereof.
The board of directors has fixed the close of business on March 31, 2000 as
the record date for the determination of shareholders entitled to notice of and
to vote at the meeting. Only holders of our common stock at the close of
business on the record date are entitled to vote at the meeting. A list of
shareholders entitled to vote at the annual meeting will be available for
inspection at our executive offices. Shareholders attending the meeting whose
shares are held in the name of a broker or other nominee should bring with them
a proxy or letter from that firm confirming their ownership of shares.
Accompanying this Notice are a Proxy and Proxy Statement. IF YOU WILL NOT BE
ABLE TO ATTEND THE MEETING TO VOTE IN PERSON PLEASE SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. The Proxy
may be revoked at any time prior to its exercise at the meeting.
By Order of the Board of Directors,
/s/ Gary C. Campanaro
Gary C. Campanaro, Secretary
Costa Mesa, California
April 12, 2000
YOUR VOTE IS IMPORTANT
You are cordially invited to attend the annual meeting. However, even if you
do plan to attend, please promptly complete, sign, date and mail the enclosed
Proxy in the envelope provided. Returning a signed Proxy will not prevent you
from voting in person at the annual meeting, if you so desire, but will help us
to secure a quorum and reduce the expense of additional proxy solicitation.
<PAGE>
THE KEITH COMPANIES, INC.
2955 Red Hill Avenue
Costa Mesa, California 92626
----------------
ANNUAL MEETING OF SHAREHOLDERS
May 15, 2000
----------------
PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished to the shareholders of The Keith
Companies, Inc., or TKCI, a California corporation, in connection with the
solicitation of proxies by and on behalf of our board of directors. The proxies
solicited hereby are to be voted at our annual meeting of shareholders to be
held at 9:00 a.m., local time, on May 15, 2000, at our offices at 2955 Red Hill
Avenue, Costa Mesa, California 92626, and at any and all adjournments and
postponements thereof. This Proxy Statement and the accompanying form of proxy
are being mailed to all shareholders on or about April 12, 2000.
A form of proxy is enclosed for your use. The shares represented by each
properly executed unrevoked proxy will be voted as directed by the shareholder
with respect to the matters described therein. If no direction is made, the
shares represented by each properly executed proxy will be voted FOR
management's nominees for the board of directors and FOR the ratification of
the appointed independent auditors.
Any proxy given may be revoked at any time prior to the exercise thereof by
filing with our Secretary an instrument revoking such proxy or by the filing of
a duly executed proxy bearing a later date. Any shareholder present at the
meeting who has given a proxy may withdraw it and vote his shares in person if
such shareholder so desires.
It is contemplated that the solicitation of proxies will be made primarily
by mail. We will make arrangements with brokerage houses and other custodians,
nominees and fiduciaries to send proxies and proxy material to the beneficial
owners of the shares and will reimburse them for their expenses in so doing.
Should it appear desirable to do so in order to ensure adequate representation
of shares at the meeting, our officers, agents and employees may communicate
with shareholders, banks, brokerage houses and others by telephone or in person
to request that proxies be furnished. All expenses incurred in connection with
this solicitation will be borne by us. We have no present plans to hire special
employees or paid solicitors to assist in obtaining proxies, but we reserve the
option of doing so if it should appear that a quorum otherwise might not be
obtained.
Only holders of record of our common stock at the close of business on March
31, 2000 are entitled to notice of and vote at the annual meeting. As of March
31, 2000, we had issued and outstanding 5,076,598 shares of common stock. Each
share of our common stock issued and outstanding on the record date of
March 31, 2000 is entitled to one vote at the annual meeting.
The holders of a majority of our shares of stock issued and outstanding and
entitled to vote at the annual meeting, present in person or represented by
proxy, shall constitute a quorum. Except with respect to the election of
directors or as otherwise provided by statute, all matters coming before the
annual meeting shall be decided by the vote of the holders of a majority of the
stock present in person or represented by proxy at the annual meeting and
entitled to vote thereat. Votes cast at the annual meeting will be tabulated by
the persons appointed by us to act as inspectors of election for the annual
meeting.
The inspectors of election will treat shares of voting stock represented by
a properly signed and returned proxy as present at the annual meeting for
purposes of determining a quorum, without regard to whether the proxy is marked
as casting a vote or abstaining. Likewise, the inspectors of election will
treat shares of voting
<PAGE>
stock represented by "broker non-votes" (i.e., shares of voting stock held in
record name by brokers and nominees concerning which (i) instructions have not
been received from the beneficial owners or persons entitled to vote; (ii) the
broker or nominee does not have discretionary voting power under applicable
rules or the instrument under which it serves in such capacity; or (iii) the
record holder has indicated on the proxy card or has executed a proxy and
otherwise notified us that it does not have authority to vote such shares on
that matter) as present for purposes of determining a quorum. Abstentions or
broker non-votes will have no effect in the election of directors. Except as
otherwise provided by statute, all other matters to come before the annual
meeting require the approval of a majority of the shares of voting stock
present and entitled to vote thereat. Therefore, abstentions concerning a
particular proposal will have the same effect as votes against such proposal.
At the annual meeting, each shareholder will have cumulative voting rights
with respect to the election of directors, provided that such shareholder has
given notice at the annual meeting prior to the voting for directors of the
shareholder's intention to cumulate votes. If any one shareholder has given
such notice, all shareholders may cumulate their votes. If cumulative voting
rights are exercised, in voting for directors each share will have that number
of votes which equals the number of directors which may be elected (five). Such
votes may be cast for one nominee or allocated among two or more nominees. In
the event that the board of directors deems it appropriate, proxies may be
cumulated and distributed unequally among the five nominees identified herein
in order to ensure the election of the maximum number of such nominees. The
five nominees receiving the highest number of votes at the annual meeting will
be elected.
DIRECTORS AND EXECUTIVE OFFICERS
Nominees
Directors are elected at each annual meeting of shareholders and hold office
until the next annual meeting of shareholders or until their respective
successors are elected and qualified. The board of directors is of the opinion
that the election to the board of directors of the persons identified below,
all of whom are currently serving as directors and have consented to continue
to serve if elected, would be in our best interests. The names of such nominees
are as follows: Aram H. Keith, Gary C. Campanaro, Walter W. Cruttenden, III,
George Deukmejian and Christine Diemer Iger.
Management proxies will be voted FOR the election of the above-named
nominees unless the shareholders indicate that the proxy shall not be voted for
all or any one of the nominees. If for any reason a nominee should, prior to
the annual meeting, become unavailable for election as a director, an event not
now anticipated, the proxies will be voted for such substitute nominee if any,
as may be recommended by management. In no event, however, shall the proxies be
voted for a greater number of persons than the number of nominees named.
Directors and Executive Officers
Set forth below is certain information with respect to our executive
officers and nominees of our board of directors.
<TABLE>
<CAPTION>
Name Age Position with the company
---- --- -------------------------
<S> <C> <C>
Aram H. Keith.............. 55 Chief Executive Officer and Chairman of the Board
Eric C. Nielsen............ 40 President
Jerry M. Brickman.......... 53 Chief Operating Officer
Gary C. Campanaro.......... 39 Chief Financial Officer, Secretary and Director
Walter W. Cruttenden, III.. 49 Director(2)
George Deukmejian.......... 71 Director(1)
Christine Diemer Iger...... 47 Director(1)(2)
</TABLE>
- --------
(1) Member of the audit committee.
(2) Member of the compensation committee.
2
<PAGE>
All directors hold office until the next annual meeting of shareholders or
the election and qualification of their successors. Officers are elected
annually by the board of directors and serve at its discretion.
Aram H. Keith co-founded TKCI in March 1983 and has served as our Chief
Executive Officer and Chairman of the Board since that time. Mr. Keith also
served as our President from 1983 to 1999. In addition, Mr. Keith is the
President, Chief Executive Officer and Chairman of the Board of Directors of
John M. Tettemer & Associates, a wholly-owned subsidiary of TKCI. Mr. Keith has
been a California licensed civil engineer since 1972. He also holds civil
engineering licenses in the states of Arizona, Colorado, Nevada and Texas. Mr.
Keith received a B.S. in Civil Engineering from California State University at
Fresno.
Eric C. Nielsen has served as our President since July 1999. Prior to that
time, Mr. Nielsen served as the President of our Costa Mesa division since
November 1994. Mr. Nielsen joined us in November 1985 as Senior Designer and
became a Vice President, Engineering and Mapping in July 1990. Mr. Nielsen
received a B.S. in Civil Engineering from California Polytechnic State
University and is a registered engineer in the states of California, Colorado
and Hawaii.
Jerry M. Brickman joined us in March 1988 and has served as our Chief
Operating Officer since October 1993. Prior to that, Mr. Brickman served as our
Senior Vice President and Contracts Administrator. Before joining us, Mr.
Brickman served for 22 years in the United States Air Force, retiring at the
rank of Major in February 1988. He received a B.S. in Business Administration
from the University of Arizona and an M.S. in Logistics Management from the Air
Force Institute of Technology.
Gary C. Campanaro has served as our Chief Financial Officer since January
1998, as a director since July 1998 and as our Secretary since April 12, 1999.
In addition, Mr. Campanaro is the Chief Financial Officer of John M. Tettemer &
Associates. Mr. Campanaro joined CB Commercial Real Estate Group, Inc. (now CB
Richard Ellis), a commercial real estate brokerage firm, in November 1992 as a
Vice President of the Financial Consulting Group and became Senior Vice
President, Managing Officer of the Financial Consulting Group in February 1995
and also began serving on CB Commercial Real Estate Group Inc.'s operation
management board. Mr. Campanaro served in those positions until he joined TKCI.
From July 1988 to November 1992, he held various accounting, finance and real
estate positions with CKE Restaurants, Inc., an owner and operator of a
restaurant chain. Mr. Campanaro began his professional career with KPMG LLP and
is licensed by the State of California as a Certified Public Accountant, and as
a real estate broker. He is a member of the American Institute of Certified
Public Accountants. Mr. Campanaro received a B.S. in Accounting from the
University of Utah.
Walter W. Cruttenden, III joined our board of directors in July 1997. Mr.
Cruttenden is the Chief Executive Officer of Cruttenden Partners LLP, an
investment company. Mr. Cruttenden served as Chairman of the Board of Directors
and Chief Executive Officer of E*OFFERING Corp. from September 1998 until
January 2000. In 1986, he founded Cruttenden Roth Inc. and served as the
Chairman of the Board and Chief Executive Officer until November 1997 and
Chairman of the Board until September 1998. E*OFFERING Corp. and Cruttenden
Roth Inc. are both investment banking institutions.
George Deukmejian joined our board of directors in July 1999. Mr. Deukmejian
was the Governor of the State of California, serving in such office from
January 1983 until January 1991. Following his departure from the Governor's
office, he joined the law firm of Sidley & Austin in its Los Angeles office
where he practiced as a partner until July 1999 and where he currently
practices as Senior Counsel. Prior to his election as Governor, Mr. Deukmejian
served from 1979 to 1982 as the Attorney General of the State of California and
from 1963 to 1978, served in the California State Legislature. Mr. Deukmejian
currently serves on the boards of directors of Burlington Northern Santa Fe
Corp. and Foundation Health Systems, Inc. He also serves as a Deputy Trustee of
the Golden Eagle Insurance Trust in Liquidation and on the Senior Advisory
Council of the Industrial Bank of Japan's Los Angeles office. Mr. Deukmejian
received a B.A. in Sociology from Siena College and a J.D. from St. Johns
University Law School.
3
<PAGE>
Christine Diemer Iger joined our board of directors in July 1999. Ms. Diemer
Iger is the current Chief Executive Officer of the Building Industry
Association of Southern California, Orange County chapter which she joined in
July 1989. Prior to joining that organization, she was an appellate lawyer for
the Attorney General of the State of California from 1981 to 1983, and served
as the Director of the California Department of Housing and Community
Development from 1983 to 1989. Ms. Diemer Iger is a former board member of the
Federal National Mortgage Association (Fannie Mae) and the California Housing
Finance Agency (CHFA). Ms. Diemer Iger received a B.A. in English from
California State University at San Diego and a J.D. from Western State
University, College of Law.
Meetings of Board and Committees
Our board of directors held three meetings during the fiscal year ended
December 31, 1999 and has held one meeting since the end of such fiscal year.
Among the incumbent nominees for membership on the board of directors, no
director attended fewer than 75% of the aggregate of the meetings of our board
and the committees upon which he or she served, except for Mr. Cruttenden, who
was unable to attend one meeting.
Our board of directors has standing audit and compensation committees, but
does not have a nominating committee. In practice, our entire board performs
the function of a nominating committee.
The audit committee of the board of directors held four meetings during the
fiscal year ended December 31, 1999 and has held one meeting since the end of
such fiscal year. The committee's responsibility is to review and act or report
to our board of directors with respect to various audit and accounting matters,
including the recommendation of independent auditors, the determination of the
scope of audit procedures, the nature of the services to be performed by and
the fees to be paid to our independent auditors, the establishment of our
accounting practices, and the monitoring of all financial aspects of our
operations. The audit committee is composed of George Deukmejian and Christine
Diemer Iger, who are independent directors.
The compensation committee of the board of directors held no meetings during
the fiscal year ended December 31, 1999 and has held one meeting since the end
of such fiscal year. The compensation committee is responsible for making
recommendations to the board concerning such executive compensation
arrangements and plans as it deems appropriate. The compensation committee is
composed of Walter W. Cruttenden, III and Christine Diemer Iger, who are
independent directors.
Director Compensation
Our non-employee directors receive $1,500 per day for any day during which
the member has personally attended any shareholders, board and/or committee
meeting and are reimbursed for out-of-pocket expenses incurred in connection
with attendance at shareholders, board and committee meetings.
We may also periodically award options or warrants to our directors under
our existing stock option plan and otherwise. Our Amended and Restated 1994
Stock Incentive Plan authorizes us to grant options to purchase shares of our
common stock, $.001 par value per share, to selected officers, directors
(including nonemployee directors) key employees (including officers and
directors who are employees) and other providers of service to us and our
subsidiaries, with the aggregate number of shares to be delivered upon exercise
not to exceed 1,111,111.
This plan terminates in July 2004. Options granted under the plan will have
a term not to exceed ten (10) years and an exercise price in an amount
determined by the board of directors or the committee administering the plan.
As of March 31, 2000, options to purchase an aggregate of 196,870 shares of our
common stock had been issued under the plan to our directors and executive
officers, at exercise prices ranging from $2.70 to $9.00 per share.
4
<PAGE>
In fiscal 1999, we issued options to purchase the following numbers of
shares to our directors, some of whom are also executive officers: (i) Aram H.
Keith--46,000 shares vesting over five years; (ii) Gary C. Campanaro--12,500
shares vesting over five years; (iii) George Deukmejian--7,407 shares which
vested immediately; and (iv) Christine Diemer Iger--7,407 shares which vested
immediately. All of the above options have a term of ten years.
Indemnification of Directors and Officers
Our articles of incorporation and indemnification agreements entered into
between us and certain of our directors and officers require us to indemnify
such officers and directors to the fullest extent permitted by applicable law
against liabilities incurred in connection with their duties as our officers
and directors. Such indemnification rights may extend to liabilities under the
Securities Act. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and controlling
persons, we have been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act,
and is, therefore, unenforceable.
Recommendation of the Board of Directors
The board of directors recommends that the shareholders vote for the
election of each of the nominees listed above.
RATIFICATION OF INDEPENDENT AUDITORS
The board of directors, on the recommendation of the audit committee, has
appointed the firm of KPMG LLP, our independent public auditors during the year
ended December 31, 1999, to serve in the same capacity for the year ending
December 31, 2000, and is asking the shareholders to ratify this appointment. A
representative of KPMG LLP is expected to be present at the annual meeting,
will have the opportunity to make a statement if he or she desires to do so,
and will be available to respond to appropriate questions.
Recommendation of the Board of Directors
The board of directors recommends that the shareholders vote for the
ratification of the selection of KPMG LLP to serve as our independent auditors
for the year ending December 31, 2000.
OTHER MATTERS
The board of directors knows of no matter to come before the annual meeting
other than as specified herein. If other business should, however, be properly
brought before such meeting the persons voting the proxies will vote them in
accordance with their best judgment.
5
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning compensation paid or
accrued by us to our "named executive officers," which are our Chief Executive
Officer and to each of our other three most highly compensated executive
officers who earned more than $100,000 in salary and bonus for all services
rendered in all capacities during year ended December 31, 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
--------------------------- ------------
Securities
Underlying
Name and Principal Fiscal All Other Stock
Position Year Salary Bonus Compensation Options
------------------ ------ -------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Aram H. Keith .......... 1999 $375,423(/1/) -- $66,573(/2/) 46,000
Chief Executive Officer
and 1998 373,419(/3/) 6,832(/4/) --
Chairman of the Board
Eric C. Nielsen......... 1999 158,290(/5/) -- 15,561(/6/) 10,000
President
Jerry M. Brickman....... 1999 147,309 -- 26,090(/7/) 8,000
Chief Operating Officer 1998 130,403 5,186(/8/) 9,259
Gary C. Campanaro ...... 1999 146,116(/9/) -- 9,186(/10/) 12,500
Chief Financial Officer
and Secretary 1998 115,016(/11/) -- 5,171(/12/) 31,482
</TABLE>
- --------
(1) Consists of $373,923 in salary and $1,500 in matching contributions made
by us under our 401(k) plan.
(2) Consists of $53,957 payout of accrued vacation and sick time, $5,443 in
reimbursement of various automobile expenses, $6,987 in membership dues
paid by us on behalf of Mr. Keith and $186 in premiums on a life insurance
policy of which Mr. Keith is the beneficiary.
(3) Consists of $371,562 in salary and $1,857 in matching contributions made
by us under our 401(k) plan.
(4) Consists of a $1,500 auto allowance, $5,146 in membership dues paid by us
on behalf of Mr. Keith and $186 in premiums on a life insurance policy of
which Mr. Keith is the beneficiary.
(5) Consists of $156,790 in salary and $1,500 in matching contributions made
by us under our 401(k) plan.
(6) Consists of a $12,000 auto allowance, $3,375 in membership dues paid by us
on behalf of Mr. Nielsen and $186 in premiums on a life insurance policy
of which Mr. Nielsen is the beneficiary.
(7) Consists of $19,904 payout of accrued vacation and sick time, $6,000 auto
allowance and $186 in premiums paid on a life insurance policy of which
Mr. Brickman is the beneficiary.
(8) Consists of a $5,000 auto allowance and $186 in premiums paid on a life
insurance policy of which Mr. Brickman is the beneficiary.
(9) Consists of $144,616 in salary and $1,500 in matching contributions made
by us under our 401(k) plan.
(10) Consists of a $6,000 auto allowance, $3,000 in club membership dues and
fees and $186 in premiums on a life insurance policy of which Mr.
Campanaro is the beneficiary.
(11) Consists of $114,423 in salary and $593 in matching contributions made by
us under our 401(k) plan.
(12) Consists of $5,000 auto allowance and $171 in premiums paid on a life
insurance policy of which Mr. Campanaro is the beneficiary.
6
<PAGE>
Options Granted in Last Fiscal Year
The following table sets forth certain information concerning stock options
granted to the named executive officers during the fiscal year ended December
31, 1999. This information includes hypothetical potential gains from stock
options granted in fiscal 1999. These hypothetical gains are based entirely on
assumed annual growth rates of 5% and 10% in the value of our common stock
price over the 10 year life of the stock options granted in 1999. These assumed
rates of growth were selected by the Securities and Exchange Commission for
illustration purposes only, and are not intended to predict future stock
prices, which will depend upon market conditions and our future performance and
prospects.
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed Annual
Rates of Stock
% of Total Price
Number of Options Appreciation
Securities Granted to for Option
Underlying Employees Exercise Term(3)
Options Fiscal Price Expiration -----------------
Name Granted(1) Year(2) ($/Share) Date 5% 10%
---- ---------- ---------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Aram H. Keith...... 46,000 15.2% $9.00 2009 $260,400 $659,800
Eric C. Nielsen.... 10,000 3.3% 9.00 2009 56,600 143,400
Jerry M. Brickman.. 8,000 2.6% 9.00 2009 45,300 114,800
Gary C. Campanaro.. 12,500 4.1% 9.00 2009 70,800 179,300
</TABLE>
- --------
(1) Options vest 20% annually over five years.
(2) Based on options to purchase 302,600 shares granted to employees during the
fiscal year ended December 31, 1999, excluding non-employee directors.
(3) Calculated using the potential realizable value of each grant.
Aggregated Option Exercises and Fiscal Year-End Option Values
The following table sets forth certain information regarding stock options
exercised by the named executive officers during the fiscal year ended December
31, 1999, as well as the number of exercisable and unexercisable in-the-money
stock options and their values at fiscal year-end. An option is in-the-money if
the fair market value for the underlying securities exceeds the exercise price
of the option.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Shares Unexercised Options at In-the-Money Options
Acquired December 31, 1999 at December 31, 1999(1)
on Value ------------------------- -------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
-------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Aram H. Keith........... -- -- -- 46,000 $ -- $ --
Eric C. Nielsen......... -- -- 29,261 23,332 47,150 14,887
Jerry M. Brickman....... -- -- 19,631 19,850 29,691 7,420
Gary C. Campanaro....... -- -- 6,297 37,685 9,279 37,111
</TABLE>
- --------
(1) Represents the Nasdaq last sale price of underlying securities at fiscal
year end, minus the exercise price of the options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We do not, nor are any of our directors, nominees, executive officers or
beneficial owners of more than five percent of our outstanding common stock, or
any immediate family member of the foregoing, or during fiscal 1999 at any
time, were, or are proposed to be, parties to, or have a direct or indirect
material interest in, any relationships or transactions, or series of related
transactions, described in Item 404 of Regulation S-K promulgated by the
Securities and Exchange Commission.
7
<PAGE>
In November 1998, we entered into indemnification agreements with all of our
directors and executive officers providing for indemnification rights in some
circumstances. See "Directors and Executive Officers--Indemnification of
Directors and Officers."
On December 31, 1997, we borrowed $910,177 and $127,815 from Aram H. Keith
and Floyd S. Reid, respectively, under promissory notes. On June 3, 1998, we
borrowed an additional $300,000 from Mr. Keith. Prior to our initial public
offering, we borrowed funds from Mr. Keith from time to time as cash flow was
needed. In February 1998, as a condition to our credit agreement with Imperial
Bank, subordination agreements were executed by Messrs. Keith and Reid
subordinating our payment obligations to them under the notes to our
obligations to Imperial Bank under our credit agreement. The notes to Messrs.
Keith and Reid were subsequently amended and restated to include language which
referenced these agreements and the two separate notes to Mr. Keith were
consolidated into a single note in the principal amount of $1,210,177. Each of
these notes provided for an interest rate of 10% per annum and was due and
payable in full on July 1, 2000. In July 1999, we repaid all amounts due under
these notes.
In October 1997, we borrowed an aggregate of $213,782 from the Erica Keith
Educational Trust and the Susan E. Reid Housing Trust under two separate
promissory notes in the amounts of $129,205 and $84,577, respectively. The
obligees on these notes were trusts established for the benefit of the children
of Messrs. Reid and Keith. In February 1998, as a condition to our credit
agreement with Imperial Bank, subordination agreements were executed on behalf
of these trusts subordinating our payment obligations to the trusts under the
notes to our obligations to Imperial Bank under our credit agreement. Amended
and restated notes were executed in February 1999 to include accrued and unpaid
interest in the principal amounts, to extend the maturation dates and to
include language on the face of the notes to reference the subordination to our
obligations to Imperial Bank. The amended and restated notes to the Erica Keith
Educational Trust and the Susan E. Reid Housing Trust were in the amounts of
$132,000 and $86,000, respectively. These notes replaced the October 1997
notes. Each of these notes provided for an interest rate of 10% per annum and
was due and payable in full on October 30, 2000. In July 1999, we repaid all
amounts due under these notes.
In April 1997, we borrowed $700,000 from Mr. Cruttenden under a Secured
Promissory Note Line of Credit. In February 1999, the note to Mr. Cruttenden
was amended and restated to provide for its subordination to our obligations to
Imperial Bank. This note, as amended, provided for an interest rate of 10% per
annum and became fully due and payable on July 1, 2000. In conjunction with the
note, we entered into a Security Agreement with Mr. Cruttenden, Keith
Engineering and Mr. Keith, granting to Mr. Cruttenden a security interest in
all of our assets to secure the repayment of the amounts due under the note.
Mr. Keith personally guaranteed our obligations under the note. The note was
repaid in full by us in July 1999.
In January 1988, Messrs. Keith and Reid entered into a Partnership Agreement
for the purpose of owning and administering investments made by them. This
agreement was amended in July 1992 to require Mr. Reid, after consultation with
Mr. Keith, to vote in concert with Mr. Keith. Effective December 31, 1999, this
agreement was amended further to terminate the provision requiring Messrs.
Keith and Reid to vote in concert.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 1999, the members of our
compensation committee were Walter W. Cruttenden, III and Christine Diemer
Iger, both of whom are nonemployee directors. No member of our compensation
committee has a relationship that would constitute an interlocking relationship
with executive officers and directors of another entity.
Board Compensation Committee Report on Executive Compensation
The compensation committee of our board of directors hereby submits its
report concerning the compensation of our executive officers, including the
Chief Executive Officer. The compensation committee is responsible for the
establishment and administration of our compensation policies with respect to
our executive officers and other employees and for the administration of our
stock incentive plan.
8
<PAGE>
Our executive compensation program is designed to align executive
compensation with our business strategy and performance. The goals of the
executive compensation program are: (i) to attract and retain key executives
critical to our success; (ii) to provide levels of compensation which are
competitive within and outside the industry in which the company competes with
for executive talent; and (iii) to motivate executives to enhance long-term
shareholder value by providing appropriate incentives, including ownership
through stock options.
The annual compensation has been considered for the executive officers,
including Aram H. Keith, our Chief Executive Officer and Chairman of the Board,
including base salaries, coupled with stock options and other incentives and
compensation. Base salaries are the fixed component of the executive officers'
compensation package. Salaries are set and adjusted based upon competitive
standards and individual performance.
Salary levels and the award of stock options are based upon our performance
during the prior year as set forth in our audited financial statements, and the
contribution of each individual executive officer to our performance. Among the
factors which the committee has established to assess our overall performance
are: our performance against budget and targets for revenue, expenses and the
successful implementation of both short and long-term corporate strategies for
enhancing shareholder value (e.g. strategic acquisitions, accounting systems,
facilities expansion, productivity improvements, etc.) and service development
along with technical advances.
A portion of the compensation of our executive officers is based upon the
award of stock options which rely on increases in the value of our common
stock. The issuance of options is intended to encourage such employees to
establish a meaningful, long-term ownership interest in us consistent with the
interests of our shareholders. Under our stock option plan, options are granted
from time to time to certain of our officers, directors and key employees and
our subsidiaries at the fair market value of our common stock at the time of
grant. Because the compensation element of options is dependent on increases
over time in the market value of such shares, stock options represent
compensation that is tied to our long-term performance.
The committee has reviewed the fiscal 1999 compensation of each of the
executive officers and is of the opinion that such compensation is reasonable
in view of that which is paid within and outside the industry in which the
company competes with for executive talent. The committee also reviewed the
stock options awarded in fiscal 1999 and is of the opinion that the option
awards are reasonable in view of the officers' individual performance and
positions with us.
COMPENSATION COMMITTEE:
Walter W. Cruttenden, III
Christine Diemer Iger
9
<PAGE>
Performance Graph
Set forth below is a line graph comparing the cumulative total shareholder
return on our common stock, based on its market price, with the cumulative
total return of companies on the Nasdaq Industrial Index, the Wilshire 5000
Index and a weighted average peer group index, assuming reinvestment of
dividends, for the period beginning July 12, 1999 through our year ended
December 31, 1999. We constructed our own peer group index which includes the
following companies listed in alphabetical order: Michael Baker Corporation; EA
Engineering Science & Technology, Inc.; Harding Lawson Associates Group, Inc.;
Kaiser Group International, Inc.; Stone & Webster, Incorporated; Tetra Tech,
Inc.; URS Corporation; and Roy F. Weston, Inc. Our common stock was initially
offered to the public on July 12, 1999. This graph assumes that the value of
the investment in our common stock and each of the comparison groups was $100
on July 12, 1999.
COMPARISON OF CUMULATIVE TOTAL RETURNS
[PERFORMANCE GRAPH APPEARS HERE]
July 12, December 31,
1999 1999
-------- ------------
The Keith Companies.............. $100.00 $ 48.61
Nasdaq Industrial Index.......... $100.00 $134.59
Wilshire 5000 Index.............. $100.00 $107.89
Peer Group Index................. $100.00 $ 78.21
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of
our common stock as of December 31, 1999 by:
. each person who is known by us to beneficially own more than 5% of our
common stock;
. each of our directors and executive officers; and
. all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission. In computing the number
of shares beneficially owned by a person and the percentage ownership of that
person, shares of common stock underlying options or warrants held by that
person that are currently exercisable or exercisable within 60 days of April
11, 2000 are deemed outstanding. These shares, however, are not deemed
outstanding for the purposes of computing the percentage ownership of any other
person. Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, each shareholder named in the table has
sole voting and investment power with respect to the share set forth opposite
such shareholder's name. Unless otherwise indicated, the address for each of
the following shareholders is c/o The Keith Companies, Inc., 2955 Red Hill
Avenue, Costa Mesa, California 92626.
<TABLE>
<CAPTION>
Name of Beneficial Owner or Identity of Amount and Nature of Percent of
Group Beneficial Ownership Common Stock
- --------------------------------------- -------------------- ------------
<S> <C> <C>
Aram H. Keith(/1/).......................... 1,647,720 32.5%
Floyd S. Reid............................... 509,444 10.0%
Walter W. Cruttenden, III................... 461,935 9.1%
Gary C. Campanaro(/2/)...................... 32,871 *
Jerry M. Brickman(/3/)...................... 32,342 *
Eric C. Nielsen(/4/)........................ 30,261 *
George Deukmejian(/5/)...................... 8,907 *
Christine Diemer Iger(/6/).................. 7,407 *
All directors and executive officers as a
group (7 persons).......................... 2,221,443 43.8%
</TABLE>
- --------
* Less than 1%.
(1) Includes 9,200 shares underlying options.
(2) Includes 14,353 shares underlying options.
(3) Includes 21,231 shares underlying options.
(4) Includes 29,261 shares underlying options.
(5) Consists of 1,500 shares of common stock held by a defined benefit pension
plan of which Mr. Deukmejian is the trustee and sole participant and 7,407
shares underlying options.
(6) Consists solely of shares underlying options.
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, and the
regulations thereunder, require our directors, executive officers and persons
who own more than 10% of a registered class of our equity securities to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership of our common stock and other equity securities
and to furnish us with copies of all Section 16(a) forms that they file.
During the most recent fiscal year ended December 31, 1999, each of our
directors and executive officers inadvertently failed to file on a timely basis
an Initial Statement of Beneficial Ownership of Securities on
11
<PAGE>
Form 3 following our initial public offering. Each of these Form 3s were filed
within one week of the filing deadline. In addition, Walter W. Cruttenden, III
and George Deukmejian, each an outside director, failed to file on a timely
basis a Statement of Changes of Beneficial Ownership of Form 4. All of the
delinquent forms referred to above were subsequently filed.
To our knowledge, based solely on a review of the copies of such reports
furnished to us and written representations that no other reports were
required, during the fiscal year ended December 31, 1999, all other Section
16(a) filing requirements applicable to our officers, directors and greater
than 10% beneficial owners were complied with.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders are advised that any shareholder proposal intended for
consideration at the next annual meeting must be received by us at the address
set forth on the first page of this Proxy Statement no later than December 14,
2000 to be included in the proxy material for the 2001 annual meeting. It is
recommended that shareholders submitting proposals direct them to our secretary
and utilize certified mail, return-receipt requested in order to ensure timely
delivery.
ANNUAL REPORT
A copy of our Annual Report on Form 10-K for the fiscal year ended December
31, 1999, as filed with the Securities and Exchange Commission, is available
without charge by writing to: Corporate Secretary, The Keith Companies, Inc.,
2955 Red Hill Avenue, Costa Mesa, California 92626.
THE SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN PROMPTLY THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
/s/ Gary C. Campanaro
Gary C. Campanaro, Secretary
Costa Mesa, California
April 12, 2000
12
<PAGE>
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
THE KEITH COMPANIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints Aram H. Keith and Gary C. Campanaro, and each of
them, with full power of substitution, to vote all shares of Common Stock of
any class of The Keith Companies, Inc. (the "Company") held of record by the
undersigned as of March 31, 2000, at the Annual Meeting of Shareholders of the
Company to be held at 2955 Red Hill Avenue, Costa Mesa, California, on May 15,
2000 at 9:00 a.m. local time, and at all adjournments thereof (the "Annual
Meeting"), upon the following matters, which are described in the Company's
Proxy Statement for the Annual Meeting.
(Continued and to be Signed on Reverse Side)
<PAGE>
A [X] Please mark your votes as in this example.
FOR all nominees listed at WITHHOLD AUTHORITY to
right (except as marked to vote for all nominees listed at
the contrary below) right
[_] [_]
1. ELECTION OF
DIRECTORS NOMINEES:
(INSTRUCTIONS: To withhold authority to Aram H. Keith
vote for any individual Gary C. Campanaro
nominee, write the Walter W. Cruttenden, III
nominee's name on the George Deukmejian
lines immediately below) Christine Diemer Iger
--------------------------------------------------------------------------
---------------- -------------- --------------
---------------- -------------- --------------
2. To ratify the appointment of KPMG LLP as the Company's
independent auditors for fiscal 2000.
FOR [_] AGAINST [_] ABSTAIN [_]
3. In accordance with the discretion of the proxy holder, to act
upon all matters incident to the conduct of the meeting and
upon other matters that properly come before the meeting.
FOR [_] AGAINST [_] ABSTAIN [_]
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF ANY NOMINEE NAMED ABOVE DECLINES
OR IS UNABLE TO SERVE AS A DIRECTOR, THE PERSONS NAMED AS PROXIES SHALL HAVE
FULL DISCRETION TO VOTE FOR ANY OTHER PERSON WHO MAY BE NOMINATED.
PLEASE DATE, SIGN, MAIL AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE.
SIGNATURE(S) x____________________ x____________________ DATE ____________
NOTE: Please sign exactly as your name appears herein. If the stock is
registered in the name of two or more persons, each should sign.
Executors, administrators, trustees, guardians, attorneys and
corporate officers should add their titles.
