<PAGE>
================================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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 Section 240.14a-11(c) or Section 240.14a-12
TETRA TECH, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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:
-------------------------------------------------------------------------
(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.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF TETRA TECH, INC.]
TETRA TECH, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 7, 1997
To The Stockholders Of TETRA TECH, INC.:
The Annual Meeting of the Stockholders (the "Meeting") of Tetra Tech, Inc.,
a Delaware corporation (the "Company"), will be held on Friday, February 7,
1997 at 10:00 a.m., Pacific Standard Time, at The Pasadena Hilton located at
150 S. Los Robles Avenue, Pasadena, California 91101, for the following
purposes as described in the accompanying Proxy Statement:
1. To elect four directors to the Board of Directors of the Company to
serve for a term of one year and until their successors are duly elected
and qualified.
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 15,000,000 to 20,000,000.
3. To consider and act upon a proposal to amend the Company's 1992
Incentive Stock Plan to increase the number of shares that may be issued
pursuant to such Plan from 2,156,250 to 2,950,000.
4. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on December 9, 1996
as the record date for the determination of stockholders entitled to vote at
the Meeting or any adjournment or adjournments thereof, and only record
holders of the Company's common stock at the close of business on that day
will be entitled to vote. A copy of the Company's 1996 Annual Report is
enclosed with this Notice but is not to be considered part of the proxy
soliciting material.
Each stockholder is cordially invited to be present and to vote in person 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
attending the Meeting may vote in person even if he or she previously returned
a proxy.
By Order of the Board of Directors
/s/ Richard A. Lemmon
Richard A. Lemmon
Vice President and Secretary
Pasadena, California
January 8, 1997
<PAGE>
[LOGO TETRA TECH, INC.]
TETRA TECH, INC.
670 North Rosemead Boulevard
Pasadena, California 91107
---------------------
PROXY STATEMENT
---------------------
GENERAL INFORMATION
This Proxy Statement is being sent on or about January 8, 1997 in connection
with the solicitation of proxies by the Board of Directors of Tetra Tech,
Inc., a Delaware corporation (the "Company"). The proxies are for use at the
1997 Annual Meeting of Stockholders of the Company (the "Meeting"), which will
be held at 10:00 a.m., Pacific Standard Time, on Friday, February 7, 1997, at
The Pasadena Hilton located at 150 S. Los Robles Avenue, Pasadena, California
91101, and at any meetings held upon adjournment thereof. The record date for
the Meeting is the close of business on December 9, 1996 (the "Record Date"),
and all holders of record of the Company's common stock, $.01 par value per
share (the "Common Stock"), on the Record Date are entitled to notice of the
Meeting and to vote at the Meeting and any meetings held upon adjournment
thereof.
A proxy form is enclosed. Whether or not you plan to attend the Meeting in
person, please date, sign and return the enclosed proxy as promptly as
possible, in the postage prepaid envelope provided, to insure that your shares
will be voted at the Meeting. Any stockholder who returns a proxy in such form
has the power to revoke it at any time prior to its effective use by filing an
instrument revoking it or a duly executed proxy bearing a later date with the
Secretary of the Company or by attending the Meeting and voting in person.
Unless contrary instructions are given, any such proxy, if not revoked, will
be voted at the Meeting: (a) for the Board of Directors' slate of nominees;
(b) for approval of the proposed amendment to the Company's Certificate of
Incorporation, as amended; (c) for approval of the proposed amendment to the
Company's 1992 Incentive Stock Plan (the "1992 Plan"); and (d) as recommended
by the Board of Directors with regard to all other matters, in its discretion.
The voting securities of the Company are the outstanding shares of Common
Stock. At the Record Date, the Company had 14,141,658 shares of Common Stock
outstanding. For each share of Common Stock held on the Record Date, a
stockholder is entitled to one vote on all matters 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 four
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, whereas broker non-votes are not counted for purposes of
determining whether a proposal has been approved; provided, however, that
since the amendment of the Certificate of Incorporation requires the approval
of a majority of the outstanding shares, for purposes of determining whether
Proposal No. 2 has been approved, abstentions and broker non-votes will be
counted and will have the same legal effect as votes against the approval of
Proposal No. 2.
The cost of preparing, assembling, printing and mailing this Proxy Statement
and the accompanying form of proxy, and the cost of soliciting proxies
relating to the Meeting, will be borne by the Company. The Company may request
banks and brokers to solicit their customers who beneficially own Common Stock
listed of record in names of nominees, and will reimburse such banks and
brokers for their reasonable out-of-pocket expenses of such solicitations. The
original solicitation of proxies by mail may be supplemented by telephone,
telegram and personal solicitation by officers, directors and regular
employees of the Company, but no additional compensation will be paid to such
individuals.
1
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company presently has four directors, all of whom are elected annually.
At the Meeting, the term of office of all directors currently holding office
will expire and four directors will be elected to serve for a term of office
consisting of the ensuing year and until their respective successors are
elected and qualified. Accordingly, the Board of Directors intends to nominate
the four incumbent directors named below for election as directors. Each
nominee has consented to being named in this Proxy Statement as a nominee for
election as 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 Company that they intend at the Meeting to vote the shares covered by the
proxies for the election of the nominees named below. 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 Directors 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.
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 executive officer of the Company.
NOMINEES
The nominees 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.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Li-San Hwang....................... 61 Chairman of the Board of Directors,
President and Chief Executive Officer
J. Christopher Lewis............... 40 Director
Patrick C. Haden................... 43 Director
James J. Shelton................... 80 Director
</TABLE>
Dr. Hwang joined the Company's predecessor in 1967 and has held his present
positions since the acquisition by the Company of the Water Management Group
of Tetra Tech, Inc., a subsidiary of Honeywell, Inc., in March 1988 (the
"Acquisition"). He was named Director of Engineering at the Company in 1972
and a Vice President in 1974. Prior to the Acquisition, Dr. Hwang was Senior
Vice President of Operations and was responsible for the development and
expansion of the current business base. 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. He also serves as a
director of Data Processing Resources Corporation.
Mr. Lewis has been a member of the Board of Directors of the Company since
February 1988. Since 1982, Mr. Lewis has been a general partner of Riordan,
Lewis & Haden, a Los Angeles-based partnership which invests in management
buy-out and venture capital transactions. Mr. Lewis also serves as a director
of Data Processing Resources Corporation, California Beach Restaurants, Inc.
and several privately-held companies.
Mr. Haden has been a member of the Board of Directors of the Company since
December 1, 1992. Mr. Haden is a general partner of Riordan, Lewis & Haden,
which he joined in 1987. Mr. Haden also serves as a director of PIA
Merchandising Services, Inc. and several privately-held companies.
2
<PAGE>
Mr. Shelton has been a member of the Board of Directors of the Company 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 of Directors met four times during the fiscal year ended
September 29, 1996. Each of the Company's directors attended 75% or more of
the total number of meetings of the Board of Directors and meetings of the
committees of the Board of Directors on which he served (during the period
within which he was a director or member of such committee) during the fiscal
year ended September 29, 1996.
The Company has an Audit Committee which, during the fiscal year ended
September 29, 1996, was comprised of Messrs. Lewis and Haden. The function of
the Audit Committee is to consult and meet with the Company's auditors and its
Chief Financial Officer and other finance and accounting personnel, review
potential conflict of interest situations, where appropriate, and report and
make recommendations to the full Board of Directors regarding such matters.
The Audit Committee met once during the fiscal year ended September 29, 1996.
The Company has a Compensation Committee which, during the fiscal year ended
September 29, 1996, consisted of Messrs. Lewis and Haden. The Compensation
Committee reviews the compensation 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 other senior executive officers. The
Compensation Committee also establishes policies relating to the compensation
of Company executive officers and other key employees and administers the
Company's stock option plans. The Compensation Committee held one meeting
during fiscal year 1996. Neither Mr. Haden nor Mr. Lewis was at any time
during the fiscal year ended September 29, 1996 or at any other time an
officer or employee of the Company.
The Company does not have a standing nominating committee or any committee
performing the functions thereof.
No executive officer of the Company serves as a member of the Board of
Directors or Compensation Committee of any other entity which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
DIRECTOR COMPENSATION
No director of the Company received any cash compensation for service on the
Board of Directors or any committee thereof during the fiscal year ended
September 29, 1996.
Under the Company's 1992 Stock Option Plan for Nonemployee Directors (the
"Nonemployee Directors Plan"), an option to purchase 2,441 shares of Common
Stock is granted to each nonemployee director of the Company automatically
each year, immediately following the annual meeting of stockholders of the
Company. Such option vests and becomes exercisable in full on the first
anniversary of its grant date, provided that the optionee is reelected as a
director of the Company. The exercise price of stock options granted under the
Nonemployee Directors Plan is equal to the fair market value of the Common
Stock on the date of grant. During the fiscal year ended September 29, 1996,
each director elected at the 1996 Annual Meeting of Stockholders received an
option to purchase 2,441 shares of Common Stock at an exercise price of $16.70
per share.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between the Company's Board of Directors
and the compensation committee of any other company.
3
<PAGE>
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation limits the liability of 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 provide that the Company shall indemnify its officers
and directors and may indemnify its employees and other agents to the fullest
extent permitted by law. The Company's Bylaws also permit it to secure
insurance on behalf of any officer, director, employee or other agent for any
liability arising out of his or her actions in such capacity, regardless of
whether Bylaws would permit indemnification.
The Company maintains director and officer liability insurance.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of the Company, where indemnification
will be required or permitted. The Company is not aware of any threatened
litigation or proceeding which may result in a claim for such indemnification.
4
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding the ownership of the
Company's Common Stock as of December 2, 1996 by (i) all those persons known
by the Company to own beneficially more than 5% of the Company's Common Stock,
(ii) each director, nominee for director and certain executive officers of the
Company and (iii) all officers and directors as a group. Except as otherwise
noted, the Company knows of no agreements among its stockholders which relate
to voting or investment power over its Common Stock.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SHARES SHARES
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER(1) OWNED OWNED(1)
--------------------------- ------------ -------------
<S> <C> <C>
Li-San Hwang(2)
Tetra Tech, Inc.
670 N. Rosemead Blvd.
Pasadena, California 91107...................... 1,121,757 7.9%
Pilgrim Baxter & Associates, Ltd.(3)
1255 Drummers Lane
Wayne, Pennsylvania 19087....................... 1,389,482 9.8
The Northwestern Mutual Life Insurance
Company(4)
720 E. Wisconsin Avenue
Milwaukee, Wisconsin 53202...................... 867,413 6.1
J. Christopher Lewis(5).......................... 45,870 *
Patrick C. Haden(6).............................. 7,690 *
James J. Shelton(7).............................. 4,785 *
Thomas D. Brisbin(8)............................. 2,500 *
Kim K. Hoag(9)................................... 9,374 *
Charles R. Faust(10)............................. 46,222 *
James M. Jaska(11)............................... 20,167 *
All directors and officers as a group (12
persons)(12).................................... 1,558,616 10.9%
</TABLE>
- --------
* Amount represents less than 1% of the Company's Common Stock.
(1) Unless otherwise indicated, the persons named in the table have sole
voting and sole investment power with respect to all shares of Common
Stock shown as beneficially owned by them, subject to community property
rules where applicable and the information contained in this table and
these notes.
(2) Excludes an aggregate of 14,015 shares of Common Stock owned by Dr.
Hwang's adult children as to which Dr. Hwang disclaims beneficial
ownership. Includes 5,468 shares issuable with respect to stock options
exercisable within 60 days after December 2, 1996.
(3) All information regarding share ownership is taken from and furnished in
reliance upon the Schedule 13G, as amended as of February 14, 1996, filed
by Pilgrim Baxter & Associates, Ltd.
(4) All information regarding share ownership is taken from and furnished in
reliance upon the Schedule 13G, dated February 6, 1996, filed by The
Northwestern Mutual Life Insurance Company.
(5) Includes 4,882 shares issuable with respect to stock options exercisable
within 60 days after December 2, 1996.
(6) Excludes an aggregate of 1,718 shares of Common Stock owned by Mr.
Haden's wife as to which Mr. Haden disclaims beneficial ownership.
Includes 4,882 shares issuable with respect to stock options exercisable
within 60 days after December 2, 1996.
(7) Includes 2,344 shares held by James J. Shelton, Sarah Belle Shelton and
James J. Shelton, Jr., Trustees of the James J. Shelton and Sarah Belle
Shelton Family Trust dated August 19, 1987, and 2,441 shares issuable
with respect to stock options exercisable within 60 days after December
2, 1996.
(8) Includes 2,500 shares issuable with respect to stock options exercisable
within 60 days after December 2, 1996.
(9) Includes 9,374 shares issuable with respect to stock options exercisable
within 60 days after December 2, 1996.
(10) Includes 6,047 shares issuable with respect to stock options exercisable
within 60 days after December 2, 1996. Additionally, Dr. Faust's minor
children own an aggregate of 1,406 shares of Common Stock as to which Dr.
Faust disclaims beneficial ownership.
(11) Includes 20,156 shares issuable with respect to stock options exercisable
within 60 days after December 2, 1996.
(12) Includes 95,725 shares issuable with respect to stock options exercisable
within 60 days after December 2, 1996.
5
<PAGE>
EXECUTIVE OFFICERS, COMPENSATION
AND OTHER INFORMATION
EXECUTIVE OFFICERS
The following table sets forth certain information concerning each person
who is an executive officer of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Li-San Hwang............ 61 Chairman of the Board of Directors, President
and Chief Executive Officer
Thomas D. Brisbin....... 44 Executive Vice President, Chief Operating
Officer
William R. Brownlie..... 43 Senior Vice President
Kim K. Hoag............. 46 Senior Vice President, Marketing
Steven A. Gherini....... 51 Vice President, Research and Development
Arkan Say............... 61 Vice President
Charles R. Faust........ 51 Vice President
James M. Jaska.......... 45 Vice President, Chief Financial Officer and
Treasurer
Richard A. Lemmon....... 37 Vice President and Secretary
</TABLE>
Executive officers of the Company are elected by and serve at the discretion
of the Board of 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--Election of Directors--
Nominees."
Dr. Brisbin was named Executive Vice President and Chief Operating Officer
of the Company in 1996. He joined Planning Research Corporation ("PRC"), a
wholly-owned subsidiary of The Black & Decker Corporation, in 1978 and was co-
founder and President of PRC Environmental Management, Inc. ("PRC EMI").
During his 17 year tenure at PRC, he was involved in all aspects of marketing,
operations and finance. Before joining PRC, he was a research associate at
Argonne National Laboratory and an adjunct professor at the Illinois Institute
of Technology. Dr. Brisbin holds a B.S. degree from Northern Illinois
University and a Ph.D. in Environmental Engineering from Illinois Institute of
Technology. He also completed Harvard Business School's Advanced Management
Program in 1988.
Dr. Brownlie joined the Company in 1981, has been a Vice President since
1988 and was named a Senior Vice President in December 1993. He has managed
several large government environmental support programs and serves as head of
two of the Company's largest profit centers. Dr. Brownlie is a registered
Civil Engineer with a technical background in hydrology, hydraulics, water
quality analysis and numerical modeling. Dr. Brownlie holds B.S. and M.S.
degrees in Civil Engineering at the State University of New York at Buffalo,
and earned a Ph.D. in Civil Engineering from the California Institute of
Technology.
Mr. Hoag joined the Company in 1995 as Senior Vice President of Marketing.
Prior to joining the Company, he served as Vice President, Department of
Energy (DOE) Programs at Jacobs Engineering Group Inc. for six years. He also
held sales and operations management positions at Ralph M. Parsons Company and
Westinghouse Electric Company. For 10 years, he held various environmental and
safety management positions for the DOE. Mr. Hoag holds B.S. and M.S. degrees
from Central Missouri State University.
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 Harvard University.
6
<PAGE>
Mr. Say joined Edward H. Richardson & Associates (a firm that was acquired
by the Company's predecessor in 1981 and became a division of the Company in
1991) in 1958 and was named to his present position in 1988. He has authored
several publications on site development, engineering and storm drainage. Mr.
Say holds a B.S. in Civil Engineering from Robert College in Istanbul, Turkey
and an M.S. in Civil Engineering from the University of Delaware.
Dr. Faust, Vice President of the Company since 1988 and Executive Vice
President of GeoTrans, Inc. ("GeoTrans"), a subsidiary of the Company, co-
founded GeoTrans 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. Jaska joined the Company in 1994 as Vice President, Chief Financial
Officer and Treasurer. Prior to joining the Company, he served as the Director
of Finance and Business Management at Honeywell Inc.'s Precision Weapons
Operations. At Alliant Techsystems, Inc., Mr. Jaska held several operations
and management positions, in addition to leading the environmental business
venture and having operational responsibility for large government defense
plants. 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, Director of Administration and Corporate Secretary, joined the
Company in 1981. Until 1985, he served in several technical capacities. He
transferred to Corporate Human Resources, and was promoted to Corporate
Manager of Human Resources in 1987. Following the Company's divestiture from
Honeywell, Inc., Mr. Lemmon structured and managed the Company's Risk
Management, Human Resource and Office Leasing programs. In 1990, he was
promoted to Director of Administration and in 1994 assumed responsibility for
contracts administration and was elected as the Company's Secretary. In
November 1995, Mr. Lemmon was elected a Vice President. Mr. Lemmon holds a
B.A. degree in Business Administration.
7
<PAGE>
EXECUTIVE COMPENSATION
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 officers for each of the fiscal years in the
three-year period ended September 29, 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------------------------
SECURITIES
RESTRICTED UNDERLYING
OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
SALARY BONUS COMPENSATION AWARD(S) SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) (#) ($) ($)
- --------------------------- ---- ------- ------ ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Li-San Hwang 1996 185,016 80,000 1,975(2) 0 6,250 0 10,746(3)
Chairman, Chief Executive 1995 185,016 80,000 4,203 0 7,813 0 11,665
Officer and President 1994 184,341 65,000 11,180 0 0 0 12,100
Thomas D. Brisbin 1996 148,593 50,000 0 0 53,750 0 9,337(4)
Executive Vice President, 1995 2,914 32,000 0 0 0 0 66
Chief Operating Officer 1994(5) -- -- -- -- -- -- --
Kim K. Hoag 1996 115,314 20,000 5,400(6) 0 3,125 0 7,018(7)
Senior Vice President, 1995 44,232 40,000 2,250 0 34,375 0 50,323
Marketing 1994(8) -- -- -- -- -- -- --
Charles R. Faust 1996 115,000 27,000 5,400(9) 0 1,875 0 8,758(10)
Vice President 1995 112,000 37,684 5,400 0 4,688 0 8,291
1994 106,500 40,900 5,400 0 6,836 0 7,988
James M. Jaska 1996 104,344 27,000 5,400(11) 0 2,500 0 6,378(12)
Vice President, 1995 100,006 30,000 5,478 0 0 0 6,250
Chief Financial Officer 1994 1,923 40,000 0 0 39,063 0 35,000
and Treasurer
</TABLE>
- --------
(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
1996.
(2) Comprised of $1,087 in automobile lease payments and $888 in automobile
insurance premiums paid on behalf of or reimbursed to Dr. Hwang.
(3) Includes the Company's contribution to its Retirement Plan of $9,250 and
benefits paid by the Company to Dr. Hwang pursuant to the Company's
Executive Medical Reimbursement Plan in the amount of $1,496.
(4) Includes the Company's contribution to its Retirement Plan of $9,337.
(5) Dr. Brisbin was not employed by the Company during the 1994 fiscal year.
(6) Comprised of a $5,400 automobile allowance.
(7) Comprised of the Company's contribution to its Retirement Plan in the
amount of $7,018.
(8) Mr. Hoag was not employed by the Company during the 1994 fiscal year.
(9) Comprised of a $5,400 automobile allowance.
(10) Includes GeoTrans' contribution to GeoTrans' Retirement Plan of $8,470
and life insurance premiums of $288 paid on behalf of Dr. Faust.
(11) Comprised of a $5,400 automobile allowance.
(12) Includes the Company's contribution to its Retirement Plan in the amount
of $6,378.
8
<PAGE>
The following table sets forth information concerning options granted to
each of the named executive officers during fiscal 1996:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
---------------------------------------------- STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS/SARS EXERCISE OPTION TERM
UNDERLYING GRANTED TO OR BASE -----------------
OPTIONS/SARS EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE ($)(2) ($)(2)
- ---- ------------- ------------ -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Li-San Hwang............ 6,250 1.54 19.00 12/08/05 74,681 175,257
Thomas D. Brisbin....... 10,000 2.47 17.60 1/16/06 110,685 259,749
Thomas D. Brisbin....... 43,750 10.80 17.60 5/14/06 484,249 1,136,401
Kim K. Hoag............. 3,125 0.77 19.00 12/08/05 37,341 87,628
Charles R. Faust........ 1,875 0.46 19.00 12/08/05 22,404 52,577
James M. Jaska.......... 2,500 0.62 19.00 12/08/05 29,872 70,103
</TABLE>
- --------
(1) All options are incentive stock options and were granted under the
Company's 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 Stock holdings are dependent on the future
performance of the Common Stock and overall stock market conditions. There
can be no assurance that the amounts reflected in this table will be
achieved.
The following table sets forth information concerning the aggregate number
of options exercised during fiscal 1996 by each of the named executive
officers:
OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END AT FY-END
SHARES ---------------- -------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE(#) UNEXERCISABLE($)(1)
- ---- ----------- ----------- ---------------- -------------------
<S> <C> <C> <C> <C>
Li-San Hwang...... 0 0 1,953/12,110 25,135/105,106
Thomas D. Brisbin. 0 0 2,500/51,250 15,375/315,188
Kim K. Hoag....... 0 0 8,593/28,907 88,594/280,656
Charles R. Faust.. 7,996 85,070 1,172/10,335 15,084/131,874
James M. Jaska.... 0 0 19,531/22,032 226,364/238,251
</TABLE>
- --------
(1) Value is determined by subtracting the exercise price from the fair market
value of $23.75 per share (the closing price for the Company's Common
Stock as reported by the Nasdaq Stock Market as of September 27, 1996) and
multiplying the remainder by the number of underlying shares of Common
Stock.
9
<PAGE>
BONUS PROGRAMS
The Board of Directors awards, at its discretion, annual bonuses to its
executive officers based upon recommendations made by the Compensation
Committee (as to Dr. Hwang) and Dr. Hwang (as to the other executive officers)
concerning individual performance and the Company's achievement of certain
operating results. The Company maintains a separate bonus program for other
key employees. Under that program, the Company is divided into 18 profit
centers. If the operating profit for any profit center 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 center and the group manager divides it
among group members in his or her discretion based upon individual
performance.
1992 INCENTIVE STOCK PLAN
The Company's 1992 Incentive Stock Plan was adopted by the Company's Board
of Directors on December 1, 1992 and was subsequently approved by the
Company's stockholders. For a discussion of the 1992 Incentive Stock Plan, as
proposed to be amended, see "The 1992 Incentive Stock Plan Proposal."
RETIREMENT PLANS
The Company Retirement Plan. The Company maintains a combined discretionary
profit-sharing contribution and 401(k) retirement plan (the "Retirement Plan")
covering all employees of the Company and its subsidiaries and related
participating employers. The 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 Plan is intended to qualify under Section 401(k) of
the Code.
Under the terms of the 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 Plan on his or her behalf. The Company makes a matching
contribution to each employee who elects to participate in the 401(k) portion
of the Retirement Plan. In addition, the Board of Directors may elect to have
the Company make a profit sharing contribution that will be allocated among
the eligible participants in the ratio that each participant's gross base
compensation bears to the total gross base compensation of all eligible
employees. Company 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 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 pays
all costs associated with the administration of the Retirement Plan.
Effective January 1, 1997, GeoTrans, Inc., Simons, Li & Associates, Inc.,
Hydro-Search, Inc., PRC Environmental Management, Inc. and KCM, Inc. will
become participating employers in the Retirement Plan. Prior to this time, the
subsidiaries participated in separate retirement plans covering their
respective employees. Those plans will be frozen or merged into the Retirement
Plan.
EXECUTIVE MEDICAL REIMBURSEMENT PLAN
The Executive Medical Reimbursement Plan (the "Medical Plan"), which was
established by the Company's predecessor in 1975 for the benefit of the
Company's executive officers, reimburses participants, their spouses and
covered children for medical expenses not covered by the Company's regular
group medical plan. In effect, this Medical Plan provides participants with
100% medical coverage for all allowable medical expenses. During the fiscal
year ending September 29, 1996, premiums totaling $420 were paid by the
Company in connection with the Medical Plan. At the present time, Messrs.
Hwang and Gherini are the only executive officers covered by the Medical Plan
and the Company does not intend to offer the Medical Plan to any additional
executive officers in the future.
10
<PAGE>
CERTAIN TRANSACTIONS
Patrick C. Haden, a director and stockholder of the Company, is of counsel
to the law firm of Riordan & McKinzie, Los Angeles, California. Riordan &
McKinzie acts as general counsel to the Company. Certain principals and
employees of Riordan & McKinzie beneficially own shares of the Company's
Common Stock.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee (the "Committee") of the 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
Committee is 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's responsibility is to
provide a strong and direct link among stockholder values, Company performance
and executive compensation through its 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's short- and long-term business objectives and to focus executive
efforts on the fulfillment of these objectives.
Each year the Committee has conducted a full review of the Company's
executive compensation program. It has been the Committee's practice to
establish target levels of compensation for senior officers consistent with
that of companies comparable in size and complexity to the Company, as well as
companies which are direct business competitors of the Company. After review
of data relating to all aspects of compensation paid by such groups of
companies, actual compensation of the Company's executive officers is subject
to increase or decrease by the Committee from targeted levels according to the
Company's overall performance and the individual's efforts and contributions.
A significant portion of executive compensation is directly related to the
Company's financial performance and is therefore at risk. Total compensation
for the Company's 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 Committee 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. In establishing base salary levels for senior officer
positions, the Committee 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 Committee and Dr. Hwang
consider individual performance, including the accomplishment of short- and
long-term objectives, and various subjective criteria including initiative,
contribution to overall corporate performance and leadership ability.
In fiscal 1996, the annual base salary of Dr. Hwang was determined by the
Committee based on comparable chief executive salaries of a peer group of
companies and of direct competitors referred to above, the Company's overall
performance and profitability in fiscal 1996, Dr. Hwang's efforts and
contributions to the Company and Dr. Hwang's ownership interest in the
Company.
Bonuses. The Company's executive officers are eligible for annual bonuses
based upon recommendations made by Dr. Hwang (as to the other executive
officers) and the Compensation Committee (as to Dr. Hwang) based upon their
individual performance and the Company's achievement of certain operating
results.
Amounts of individual awards are based principally upon the results of the
Company's financial performance during the prior fiscal year. The amount of
awards for senior officers are within guidelines
11
<PAGE>
established by the Committee 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 be determined
principally by the Committee's and Dr. Hwang's assessment of the individual's
contribution to the Company's 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 the
participant's executive responsibility and the Committee'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 1997, bonuses related to
performance in fiscal 1996 paid to the five named executive officers ranged
from $20,000 to $80,000, and ranged from 17% to 43% of such officers' base
salaries.
Dr. Hwang's bonus with respect to the 1996 fiscal year was $80,000. In
determining the amount of the 1996 award, the Committee gave particular
consideration to the following factors: (1) the Company's favorable return on
average equity during the 1996 fiscal year in a difficult economic climate;
(2) the positive earnings growth of the Company during the fiscal year; and
(3) the efforts and significant contributions made by Dr. Hwang in discharging
his responsibilities as Chief Executive Officer. The Committee also determined
that the discretionary bonus should constitute a larger percentage of Dr.
Hwang's total annual compensation.
Stock Options. In fiscal 1992, the Committee adopted the Company's 1992
Incentive Stock Plan (the "1992 Plan"). The purpose of the 1992 Plan is to
provide incentives and reward the contributions of key employees and officers
for the achievement of long-term Company performance, as measured by earnings
per share and the market value of the Common Stock. The Committee and Dr.
Hwang set guidelines for the number and terms of stock option or restricted
stock awards based on factors similar to those considered with respect to the
other components of the Company's compensation program, including comparison
with the practices of peer group companies and direct competitors. In the
event of unsatisfactory corporate performance, the Committee 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 awards
under the 1992 Plan are designed to align the interests of executives with
those of the stockholders. Generally, stock options become exercisable in
cumulative installments over a period of four years, but the individual
forfeits any installment which has not vested during the period of his or her
employment.
Under the 1992 Plan, the Compensation Committee awarded stock options in
fiscal 1996 to all named executive officers.
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's corporate taxes is
limited to $1,000,000 annually. It is the current policy of the Compensation
Committee to maximize, to the extent reasonably possible, the Company's
ability to obtain a corporate tax deduction for compensation paid to executive
officers of the Company to the extent consistent with the best interests of
the Company and its stockholders.
COMPENSATION COMMITTEE
J. Christopher Lewis
Patrick C. Haden
12
<PAGE>
COMPANY PERFORMANCE
The following graph shows a comparison of cumulative total returns for the
Company, the Nasdaq Stock Market (U.S. Companies) Index and a Company-
constructed Peer Group Index (as defined below). The graph assumes that the
value of an investment in Common Stock and in each such index was $100 on
December 17, 1991 (the date the Company's Common Stock was registered under
Section 12 of the Securities Exchange Act of 1934), and that all dividends have
been reinvested. The Company-constructed Peer Group Index includes the
following companies: Dames & Moore, Inc., E A Engineering Science & Technology,
Inc., EMCON, Ecology & Environment, Inc., Harding Associates, Inc., ICF Kaiser
International, Inc., International Technology Corp., TRC Companies, Inc., URS
Consultants, Inc. and Roy F. Weston, Inc. The Company believes that the
companies included in the Peer Group Index are among the primary competitors of
the Company.
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
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
Measurement Period TETRA NASDAQ STOCK TETRA TECH'S SELF-
(Fiscal Year Covered) TECH MARKET (U.S.) CONSTRUCTED PEER GROUP
- --------------------- ---------- ------------- ----------------------
<S> <C> <C> <C>
Measurement Pt- 12/17/91 $100.00 $100.00 $100.00
FQE 03/27/92 $133.33 $112.34 $ 99.57
FQE 06/29/92 $131.11 $103.50 $ 79.05
FQE 09/25/92 $151.11 $107.58 $ 73.84
FQE 12/29/92 $161.11 $125.00 $ 80.16
FQE 03/29/93 $194.44 $126.96 $ 81.74
FQE 06/29/93 $180.56 $130.78 $ 74.65
FQE 10/01/93 $212.50 $142.32 $ 72.33
FQE 12/29/93 $253.47 $143.52 $ 70.37
FQE 03/29/94 $272.57 $141.26 $ 70.78
FQE 06/29/94 $250.00 $132.16 $ 57.56
FQE 09/30/94 $332.03 $143.54 $ 59.74
FQE 12/29/94 $303.82 $141.50 $ 54.43
FQE 03/29/95 $334.20 $155.08 $ 51.10
FQE 06/29/95 $393.34 $175.63 $ 53.55
FQE 09/29/95 $504.56 $198.25 $ 61.10
FQE 12/29/95 $493.71 $200.68 $ 51.54
FQE 03/29/96 $402.86 $210.05 $ 46.57
FQE 06/28/96 $542.53 $227.17 $ 49.50
FQE 09/27/96 $644.26 $235.98 $ 47.43
</TABLE>
13
<PAGE>
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION
At the meeting, the stockholders will be asked to approve an amendment to
the Company's Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 15,000,000 shares to 20,000,000 shares.
The proposed increase in the number of authorized number of shares of Common
Stock would be accomplished by amending the first paragraph of Article IV of
the Certificate of Incorporation of the Company to read as follows:
"The total number of shares of stock that the Corporation shall have
authority to issue is twenty-two million (22,000,000), consisting of twenty
million (20,000,000) shares of common stock, par value $0.01, and two
million (2,000,000) shares of preferred stock, par value $0.01. The
designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof are as follows:"
The Company has no present intention of issuing any shares of Common Stock
except in connection with the Company's stock plans noted above. Nevertheless,
the Board of Directors believes that it is in the best interests of the
Company and its stockholders to increase the authorized number of shares of
Common Stock to 20,000,000, so that additional shares would be available for
issuance in the future for such corporate purposes as the Board deems
advisable from time to time without further action by the stockholders (unless
stockholder action is required by applicable law or by the rules of the Nasdaq
Stock Market). Such corporate purposes include financings, acquisitions, stock
dividends and incentive and employee benefit plans. Under the current rules of
the Nasdaq Stock Market, on which the Common Stock is currently listed and
principally traded, stockholder approval may be required when, for example,
the present or potential issuance of shares results or could result in an
increase of at least 20% in the number of outstanding shares of Common Stock.
In addition to the corporate purposes indicated above, an increase in the
authorized number of shares of Common Stock can be used to make more difficult
the change of control of the Company. Under certain circumstances, the Board
of Directors could create impediments to, or frustrate persons seeking to
effect, a takeover or transfer of control of the Company, by causing such
shares to be issued to a holder who might side with the Board in opposing a
takeover bid that the Board determines is not in the best interests of the
Company and its stockholders. Furthermore, the existence of such shares might
have the effect of discouraging any attempt by a person or entity, through the
acquisition of a substantial number of shares of Common Stock, to acquire
control of the Company since the issuance of such shares could dilute the
common ownership of such person or entity.
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of a majority of the outstanding shares of Common Stock
that are present or represented and entitled to vote at the Meeting is
required for approval of the amendment.
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.
14
<PAGE>
PROPOSAL NO. 3
1992 INCENTIVE STOCK PLAN PROPOSAL
The 1992 Incentive Stock Plan, which was adopted on December 1, 1992,
provides for the granting of incentive stock options, nonqualified stock
options and rights to purchase restricted stock (as described below). On
December 18, 1996, the Board of Directors adopted and approved an amendment to
the 1992 Incentive Stock Plan (the 1992 Incentive Stock Plan, as amended, is
referred to herein as the "Plan") to increase the number of shares that may be
issued pursuant to the Plan, either upon exercise of options or purchases of
restricted stock, from 2,156,250 to 2,950,000. The Plan, as proposed to be
amended, is attached to this Proxy Statement as Annex A and incorporated by
reference into this Proxy Statement.
SUMMARY DESCRIPTION OF THE PLAN
The Plan provides for the granting of incentive stock options, nonqualified
stock options and rights to purchase restricted stock to key employees and
officers of the Company or any of its subsidiaries, including directors who
are also key employees or officers of the Company and its subsidiaries. Under
the Plan, shares of Common Stock may be issued pursuant to the Plan, either
upon exercise of options or purchases of restricted stock. For purposes of the
Plan, the term "subsidiary" means any corporation, 50% or more of the voting
stock of which is owned by the Company or by a subsidiary (as so defined) of
the Company. Under the Plan, all authorized shares may be issued either as
restricted stock or upon the exercise of options.
The purpose of the Plan is to further the growth, development and financial
success of the Company and its subsidiaries by providing additional incentives
to certain officers and key employees by assisting such persons to acquire
shares of Common Stock and to benefit directly from the Company's growth,
development and financial success.
The Plan is administered by a committee (the "Committee") consisting of not
less than two members of the Board of Directors who are not officers or
employees of the Company or its subsidiaries. The members of the Committee are
appointed by, and serve at the pleasure of, the full Board of Directors. The
Committee determines, among other things, (a) the participants who will
receive options, the number of shares to be covered by options, the exercise
price of options, the dates on which options are granted, and the other terms
and conditions of options (which may vary from option to option), (b) the
persons who will receive rights to purchase restricted stock and the
respective number of shares sold pursuant thereto, and the purchase price and
other terms and conditions of the restricted stock purchase agreements entered
into with such persons, and (c) whether options will be incentive stock
options or nonqualified stock options.
The Committee also has the authority to construe and interpret the Plan, to
establish and amend rules and regulations for its administration and to
determine the rights and obligations of participants under the Plan.
Furthermore, the Board of Directors may from time to time, to the extent
permitted by law, terminate the Plan with respect to options and restricted
stock not then granted or issued, respectively, or revise or amend the Plan.
The maximum number of shares of Common Stock authorized for issuance under
the Plan is 2,950,000.
Options. Each option is evidenced by an agreement between the Company and
each of the respective optionees (the "Option Agreements"), which must conform
to the Plan but may contain such further provisions as the Committee may
determine. The Committee determines whether the options will be incentive
stock options or nonqualified stock options. Under the Plan, the exercise
price of any option may not be less than the fair market value of such shares
on the date of the grant of the option and, solely with respect to any
incentive stock option granted to an optionee that is a ten percent
stockholder of the Company, will not be less than 110% of the fair market
value on the date of the grant of the incentive stock option.
When granting each option, the Committee sets the dates on which it is
exercisable and the number of shares that may be purchased on each date,
provided that each option must become fully exercisable no later than five
15
<PAGE>
years from the date of grant and the number of shares of Common Stock subject
to the option must become exercisable at the rate of at least 20% per year
until the option is fully exercisable. No persons may receive incentive stock
options that are exercisable for the first time during any calendar year with
respect to Common Stock having a fair market value of more than $100,000. In
calculating the $100,000 limit, Common Stock is valued at its fair market
value on the date of grant. The Committee also sets the termination date for
each option when it grants the option, but incentive stock options and
nonqualified stock options may not be granted for a duration of more than 10
years and more than 10 years and one day, respectively. If an option expires
or terminates before it is exercised in full, the unissued stock reserved for
the option becomes available for the granting of new options or the issuance
of restricted stock.
The Committee is authorized to grant options containing the agreement of the
optionee to resell to the Company at the exercise price therefor any Common
Stock issued pursuant to the exercise of such option. The Committee will
determine, in its discretion, those persons who will receive options
containing such repurchase right and the basis upon which the Company may
exercise its repurchase right. Such repurchase right of the Company will
terminate at such times, and in such installment amounts, as may be specified
by the Committee in any particular instance.
Options may be exercised by payment of the full purchase price in cash, by
check, by tender of the optionee's promissory note or by any other form of
lawful consideration that the Committee has approved. The Committee may allow
certain employees to exercise an incentive stock option or a nonqualified
stock option by the tender of shares of the Company previously held. The
Committee, if it chooses to allow the exercise of options by tender of shares,
intends to only allow such exercise by the tender of shares which have been
previously held by the employee for six months. Shortfalls must be made up in
cash.
All rights to exercise options terminate 90 days from the date the optionee
ceases to be an employee of the Company or of a subsidiary of the Company for
any reason other than death or disability, or upon expiration of the option,
whichever occurs first. During such 90 day period, the optionee may only
exercise the options to the extent that they were exercisable on the date the
optionee's employment terminated. If an optionee dies without having fully
exercised his or her options during the period of his or her employment or
within 90 days of the termination of employment, the options may be exercised
within a period of 180 days following his or her death, if the expiration of
the option period has not first occurred to the extent that the optionee could
have exercised them on the date of his or her death.
If an optionee terminates employment with the Company or its subsidiaries
while disabled without having fully exercised his or her options, the options
may be exercised within a period of one year following his or her termination,
if the expiration date has not first occurred, to the extent that the optionee
could have exercised them on the date of his or her termination.
The Company may grant options to employees of acquired companies or their
subsidiaries who hold stock options of the acquired company or one of its
subsidiaries. The exercise price of these substitute options may be less than
the fair market value of the Company's Common Stock on the date of grant in
order to preserve the economic benefit to the optionee of the substitute
option. The new options will retain the exercise and termination dates of the
options held in the acquired company (subject to the ten-year and one day
limit and the ten-year limit on the maximum terms of nonqualified stock
options and incentive stock options, respectively, issued under the Plan).
Options and restricted stock as to which the Company has a repurchase right
may be transferred only by will or the laws of descent and distribution or a
qualified domestic relations order and, during an optionee's lifetime, are
exercisable only by the optionee or a transferee pursuant to a qualified
domestic relations order.
Restricted Stock. Pursuant to the Plan, the Committee will from time to time
determine, in its discretion, those persons who will be offered the right to
purchase shares of restricted stock and the number of shares that may be
purchased by each such person.
16
<PAGE>
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
less than the fair market value of Common Stock on the date the right to
purchase such restricted stock is granted. Such purchase price must be paid in
cash, by check, by tender of the person's promissory note or such other lawful
consideration as the Committee may approve.
All restricted stock will be issued pursuant to a form of Restricted Stock
Purchase Agreement, which will generally provide for a repurchase right of the
Company, such that if the purchaser of such restricted stock ceases to be an
employee of the Company or any of its subsidiaries for any reason whatsoever,
the Company will have the option and right to repurchase the restricted stock
from such purchaser at a repurchase price equal to the purchase price paid by
such purchaser. The Restricted Stock Purchase Agreement will also specify
when, and in what installment amounts, if any, that such new repurchase right
will terminate. Unless otherwise stated, the Company's right to repurchase
will terminate as to 25% of the aggregate number of shares of restricted stock
originally issued to the participant on each anniversary date of the
participant's commencement of employment by the Company or any of its
subsidiaries, commencing upon the first anniversary date, such that such
repurchase right will terminate completely on the fourth anniversary date of
such commencement of employment.
If the purchaser of restricted stock dies before the Company's repurchase
right is terminated in full, such death will constitute a termination for
which the Company may exercise its repurchase right.
The maximum number 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 for stock splits, stock dividends and
similar capital changes. Upon the dissolution or liquidation of the Company,
or any reorganization, merger or consolidation in which the Company does not
survive, the Plan, each outstanding option and, at the Company's option, the
Company's repurchase right with respect to outstanding restricted stock, will
terminate, except that the surviving corporation may, in its sole and absolute
discretion, grant any optionee a new option to purchase shares of the
surviving corporation on terms and conditions that will substantially preserve
the optionee's right and benefits under the Plan. If an optionee does not
receive a new option from the surviving corporation, the optionee will have
the right, upon 30 days notice, to exercise, in whole or in part, any
unexpired option without regard to the installment provisions of the Plan
until five days before the effective date of the dissolution or liquidation of
the Company or, upon a reorganization, merger or consolidation in which the
Company is not the surviving corporation, exercise in whole or in part, any
unexpired option or options issued to the optionee that is then capable of
being exercised.
Amendment of the 1992 Incentive Stock Plan; Nonexclusivity. The Board of
Directors or Committee may not change or amend the Plan without receiving the
affirmative vote of the holders of a majority of the Company's voting stock
that is represented and entitled to vote at a duly held stockholders' meeting
of the Company or by the written consent of the holders of a majority of the
voting stock of the Company entitled to vote in a manner that does any of the
following: increases the maximum number of shares subject to the Plan (except
in the case of adjustments for stock splits, stock dividends, reorganization
or similar events); decreases the option price requirements (except for the
issuance of substitute options); changes the class of employees entitled to
receive options; changes the limit on the value of Common Stock that any one
optionee may have options to purchase, unless the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), are changed to allow a
different limit; or materially increases the benefits accruing to participants
under the Plan.
The Plan does not prevent 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 arrangement of the Company or 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.
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FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. No taxable income will be recognized by an optionee
upon the grant or exercise of any incentive stock option under the Plan. The
Company will not be entitled to any income tax deduction as the result of the
grant or exercise of any incentive stock option.
Gain or loss resulting from the subsequent sale of stock acquired upon
exercise of an incentive stock option will be long-term capital gain or loss
if such sale is made after two years from the date of the grant of the option
and after one year from the transfer of such stock to the optionee upon
exercise, provided that the optionee is an employee of the Company from the
date of grant until three months before the date of exercise. In the event of
the optionee'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.
If the subsequent sale of stock is made prior to the expiration of such two-
year or one-year periods, the optionee will recognize ordinary income in the
year of sale in an amount equal to the difference between the exercise price
and the fair market value of the stock on the date of exercise, provided that
if such sale is a transaction in which a loss (if sustained) would have been
recognized by the optionee, the amount of ordinary income recognized by the
optionee will not exceed the excess (if any) of the amount realized on the
sale over the option price. The Company will then be entitled to an income tax
deduction of like amount. Any excess gain recognized by the optionee upon such
sale would then be taxable as capital gain, either long-term or short-term
depending upon whether the stock had been held for more than one year prior to
sale.
If the sale of stock received upon exercise of an option qualifies for long-
term capital gain treatment, the capital gain would be taxed to individuals at
the current maximum rate of 28%. 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.
Nonqualified Stock Options. Generally, at the time of the grant of any
option under the Plan, no taxable income will be recognized by the optionee
and the Company will not be entitled to a deduction. Upon the exercise of such
option, the optionee generally will recognize taxable income, and the Company
will then be entitled to a deduction, in the amount by which the then fair
market value of the shares of Common Stock issued to such optionee exceeds the
option price. However, if, upon the occurrence of certain events (such as
termination of employment), the stock issued to an optionee is subject to
repurchase by the Company at the exercise price of the underlying option, then
the optionee will not recognize income (and the Company will not be entitled
to a deduction) at the time the underlying option is exercised unless the
optionee makes an election to recognize income at that time. If such election
is not made, the optionee will recognize income and the Company will be
entitled to a deduction at the time when the Company's repurchase right
expires. See "Restricted Stock" below. Additionally, if a sale of the stock
received upon exercise of such option would subject the optionee to suit under
Section 16(b) of the Exchange Act the optionee will not recognize income (and
the Company will not be entitled to a deduction) at the time such option is
exercised unless the optionee makes an election to recognize income at that
time. If such election is not made, the optionee will recognize income and the
Company will be entitled to a deduction at the time when Section 16(b) would
no longer apply to such stock sale.
Income recognized by the optionee upon exercise of a nonqualified stock
option will be taxed as ordinary income up to the current maximum rate of
39.6%. Such income constitutes "wages" with respect to which the Company is
required to deduct and withhold federal and state income tax. Such deductions
will be made from the wages, salary, bonus or other income to which the
optionee would otherwise be entitled and, at the Company's election, the
optionee may be required to pay to the Company (for withholding on the
optionee's behalf) any amount not so deducted but required to be so withheld.
Upon the subsequent disposition of shares acquired upon the exercise of an
option other than an incentive stock option, the optionee will recognize
capital gain or loss in an amount equal to the difference between the
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proceeds received upon disposition and the fair market value of such shares at
the time of exercise. If such shares have been held for more than one year at
the time of such disposition, the capital gain or loss will be long-term.
Exercising Options with Shares of Common Stock. To the extent an optionee
pays all or part of the option price by tendering shares of Common Stock owned
by the optionee, the tax consequences described above generally would apply.
However, the number of shares received (upon exercise) equal to the number of
shares surrendered in payment of the aggregate option price will have the same
basis and tax holding period as the shares surrendered. The additional shares
received upon such exercise will have a tax basis equal to the amount of
ordinary income recognized and any cash paid on such exercise and a holding
period which commences on the date of exercise.
If an optionee exercises an option by tendering shares previously acquired
on the exercise of an incentive stock option, a disqualifying disposition will
occur if the applicable holding period requirements have not been satisfied
with respect to the surrendered stock. The consequences of such a
disqualifying disposition is that the optionee may recognize ordinary income
at the time.
Acceleration of Stock Options Upon a Transfer of Control. If, upon a
reorganization, merger, sale or other transaction resulting in a change in
control of the Company or of a substantial portion of its assets, the
exercisability of stock options held by certain employees (generally officers,
stockholders and highly compensated employees of the Company) is accelerated
(or payments are made to cancel unexercisable options of such employees), such
acceleration or payment will be determined to be a "parachute payment" for
federal income tax purposes. If the present value of all of the optionee's
parachute payments exceeds three times the optionee's average compensation for
the past five years, the optionee will be subject to a 20% excise tax on the
amount of such parachute payment which is in excess of the greater of such
average compensation of the optionee or an amount which the optionee
establishes as reasonable compensation. In addition, the Company will not be
allowed a deduction for such excess parachute payment.
Restricted Stock. A purchaser 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. 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 shares with respect to which a Section 83(b) election has been made are
later repurchased by 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 equal to the amount, if any, which the purchaser of
such stock 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 as ordinary income. Such amount constitutes "wages"
with respect to which the Company is required to deduct and withhold federal
and state income tax. 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 equal to the difference between the proceeds received from the
disposition and the purchaser's tax basis in the shares. If such shares have
been held at the time of their
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disposition for more than one year from the earlier of the date of a 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. Upon disposition of
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.
Limitation on Compensation Deduction. Upon exercise, options granted to a
"covered employee" with an option price equal to or greater than the fair
market value of the Common Stock at the time of grant should not be subject to
the $1.0 million deduction cap for compensation paid to certain executives of
publicly held corporations such as the Company. The Plan should satisfy the
rules governing exemption from the deduction cap for "performance based"
compensation since (1) stockholders should have received adequate disclosure
of the terms of the Plan in this Proxy Statement and (2) the Plan has been
approved by a compensation committee consisting solely of two or more "Outside
Directors" of the Company.
Upon exercise, options granted to a covered employee with an option price
less than the fair market value of the Common Stock at the time of grant would
be subject to the $1.0 million deduction cap for the Company. A "covered
employee" is an optionee 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 for proxy disclosure purposes. An "Outside
Director" is a Director who is not (1) a current employee of the Company or
related entity, (2) a former employee who is receiving compensation for prior
services, (3) a former officer or (4) receiving compensation from the Company
for personal services other than regular directors' compensation.
The foregoing summary of the effects of federal income taxation upon
optionees, 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 1992 INCENTIVE STOCK PLAN PROPOSAL
As of December 18, 1996, the Plan had 912,455 shares available for issuance
thereunder. The Board of Directors recommends increasing such number of shares
at this time in order to have additional shares available for the Company's
employees. 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 AND RECOMMENDATION OF BOARD OF DIRECTORS
Each holder of shares of Common Stock outstanding on the Record Date is
entitled to one vote per share on the proposal to approve the amendment to the
Plan to increase the number of shares that may be issued pursuant to the Plan.
Approval of such action requires the affirmative vote of a majority of the
votes cast at the Annual Meeting.
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.
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COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 ("Section 16") requires
the Company's executive officers, directors and beneficial owners of more than
10% of the Company's Common Stock (collectively, "Insiders") to file reports
of ownership and changes in ownership of Common Stock of the Company with the
Securities and Exchange Commission and the Nasdaq Stock Market, and to furnish
the Company with copies 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
required for those persons, the Company believes that its Insiders complied
with all applicable Section 16 filing requirements for fiscal 1996, with the
exception of Mr. Brisbin, who filed a late Form 3 in December 1996 to report
his becoming an executive officer of the Company in October 1996.
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP, certified public accountants, acted as Company's
independent auditors and audited the consolidated financial statements of the
Company for the fiscal year ended September 29, 1996. The Company has been
advised that Deloitte & Touche LLP is independent with respect to the Company
within the meaning of the Securities Act of 1993, as amended, and the
applicable published rules and regulations thereunder. A representative of
that firm is expected to be present at the Meeting and the representative is
expected to be available to respond to appropriate questions. The Board of
Directors has recommended that Deloitte & Touche LLP be appointed as the
Company's auditors for fiscal 1997.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any stockholder who wishes to present a proposal for action at the 1998
Annual Meeting of Stockholders and who wishes to have it set forth in the
corresponding proxy statement and identified in the corresponding form of
proxy prepared by management must notify the Company no later than September
1, 1997 in such form as required under the rules and regulations promulgated
by the Securities and Exchange Commission.
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OTHER MATTERS
The Board of Directors does not know of any other matters to be presented at
the Meeting, but, if other matters do properly come before the 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 1996 Annual Report for the fiscal year ended
September 29, 1996 is being mailed to each stockholder of record together with
this Proxy Statement.
The Company has filed with the Securities and Exchange Commission its Annual
Report on Form 10-K for the fiscal year ended September 29, 1996. This Report
contains detailed information concerning the Company and its operations,
supplementary financial information and certain schedules which are not
included in the 1996 Annual Report. A COPY OF THIS REPORT WILL BE FURNISHED TO
STOCKHOLDERS WITHOUT CHARGE UPON REQUEST IN WRITING TO: Richard A. Lemmon,
Secretary, Tetra Tech, Inc., 670 North Rosemead Boulevard, Pasadena,
California 91107; telephone number (818) 351-4664. The Annual Report and Form
10-K are not part of the Company's soliciting material.
By Order of the Board of Directors
/s/ Richard A. Lemmon
Richard A. Lemmon
Vice President and Secretary
Pasadena, California
January 8, 1997
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ANNEX A
TETRA TECH, INC.
1992 INCENTIVE STOCK PLAN
Section 1. Description of Plan. This is the 1992 Incentive Stock Plan, dated
December 1, 1992 (the "Plan"), of Tetra Tech, Inc., a Delaware corporation
(the "Company"). Under the Plan, officers and key employees of the Company, to
be selected as set forth below, may be granted options ("Options") to purchase
shares of the Common Stock of the Company ("Common Stock") or the opportunity
to purchase shares of Common Stock which are subject to a repurchase right of
the Company ("Restricted Stock"). For purposes of this Plan, the term
"subsidiary" means any corporation, fifty percent (50%) or more of the voting
stock of which is owned by the Company or by a subsidiary (as so defined) of
the Company. It is intended that the Options under the Plan will either
qualify for treatment as incentive stock options under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and be designated
Incentive Stock Options, or not qualify for such treatment and be designated
Nonqualified Stock Options.
Section 2. Purpose of this Plan. The purpose of the Plan and of granting
Options and issuing Restricted Stock to specified employees is to further the
growth, development and financial success of the Company and its subsidiaries
by providing additional incentives to officers and certain key employees, by
assisting such persons to acquire shares of Common Stock and to benefit
directly from the Company's growth, development and financial success.
Incentive Stock Options may only be granted to employees.
Section 3. Eligibility. Key employees and officers of the Company or any of
its subsidiaries, including directors who are also key employees or officers
of the Company or any of its subsidiaries, shall be eligible to receive grants
of Incentive Stock Options, Nonqualified Stock Options and the opportunity to
purchase Restricted Stock. Directors of the Company who are not key employees
or officers of the Company but are consultants to the Company shall not be
eligible to participate in this Plan. A person who holds an Option or
Restricted Stock is herein referred to as a "Participant." More than one
Option may be granted to any one Participant and any Participant may hold both
Options and Restricted Stock. Grants of Options may be made on more than one
occasion to any Participant. The maximum number of shares of Common Stock in
respect of which Options may be granted under Section 5 hereof to a single
Participant is 2,950,000. The foregoing notwithstanding, the Board of
Directors of the Company (the "Board") may at any time or from time to time
designate one or more Directors as ineligible for selection as a Participant
under the Plan.
For Incentive Stock Options, the aggregate fair market value (determined at
the time the Option is granted) of the Common Stock with respect to which
incentive stock options are exercisable for the first time by any Participant
during any calendar year (under all Incentive Stock Option plans of the
Company or any subsidiary which are qualified under Section 422 of the Code)
shall not exceed $100,000.
Section 4. Administration. The Plan shall be administered by the
Compensation Committee (the "Committee") established by the Board. The
Committee shall be constituted so as to permit the Plan to comply with the
provisions of Rule 16b-3 under the Securities Exchange Act of 1934 (the
"Exchange Act") and with Code Section 162(m) and the Treasury Regulations
promulgated thereunder. The Committee shall meet at such times and places as
it determines and may meet through a telephone conference call. A majority of
its members shall constitute a quorum, and the decision of a majority of those
present at any meeting at which a quorum is present shall constitute the
decision of the Committee. A memorandum signed by all of its members shall
constitute the decision of the Committee without necessity, in such event, for
holding an actual meeting.
The Committee is authorized and empowered to administer the Plan and subject
to the Plan, (a) to select the Participants who shall receive Options, to
specify the number of shares of Common Stock with respect to which Options are
granted to each Participant, to specify the Option Price and the terms of
Options, and in general to grant Options; (b) to select the Participants who
shall receive the opportunity to purchase Restricted
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Stock, to specify the number of shares of Restricted Stock which each such
Participant shall be entitled to purchase, to specify the purchase price and
the terms of the Restricted Stock; (c) to determine, subject to the limits
contained herein, whether Options will be Incentive Stock Options or
Nonqualified Stock Options; (d) to determine the dates upon which Options
shall be granted and Restricted Stock shall be purchased and to provide for
the terms and conditions of the Options and Restricted Stock, which need not
be identical as to the various Options granted and Restricted Stock issued;
(e) to determine whether the grant of Options shall call for the issuance of
Restricted Stock upon the exercise of such grant; (f) to accelerate the time
during which an Option may be exercised notwithstanding the terms of the
option agreement (as defined in Section 8) stating the time during which it
may be exercised; (g) to accelerate the vesting provisions contained in the
restricted stock agreement (as defined in Section 12); (h) to interpret the
Plan; (i) to prescribe, amend and rescind rules relating to the Plan; and (j)
to determine the rights and obligations of Participants under the Plan. The
interpretation and construction by the Committee of any provision of the Plan
or of any Option granted or Restricted Stock issued thereunder shall be final.
No member of the Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any Option or Restricted Stock.
Section 5. Shares Subject to the Plan. The aggregate number of shares of
Common Stock which may be issued pursuant to the Plan (either upon the
exercise of Options or the purchase of Restricted Stock) shall not exceed
2,950,000 shares, provided that such aggregate number may be adjusted from
time to time as set forth in the first sentence of Section 16 hereof. Upon the
expiration or termination for any reason of an outstanding Option which shall
not have been exercised in full, or the exercise by the Company of its
repurchase right with respect to any Restricted Stock (as described in Section
9 hereof), then any shares of Common Stock then remaining unissued which shall
have been reserved for issuance upon such exercise of an Option or any shares
of Common Stock so repurchased, shall again become available for the granting
of additional Options or the issuance of Restricted Stock under the Plan. No
shares deliverable to the Company in full or partial payment of an option
exercise price payable pursuant to Section 7 shall become available for the
grant of other options or the issuance of Restricted Stock under the Plan.
Notwithstanding the foregoing, the shares subject to a terminated Option shall
continue to be considered to be outstanding for purposes of determining the
maximum number of shares that may be issued to a single Participant.
Similarly, the repricing of an Option will be considered the grant of a new
Option for this purpose.
Section 6. Option Price. The purchase price per share (the "Option Price")
of the shares of Common Stock underlying each Option shall be not less than
the fair market value of such shares on the date of granting of the Option,
except as provided in Section 17 hereof; provided, however, that if the
Optionee is a ten percent (10%) stockholder of the Company (as defined in
Section 422(b)(6)) of the Code at the time such Option is granted, the Option
Price shall be not less than one hundred ten percent (110%) of said fair
market value. Such fair market value shall be determined by the Committee on
the basis of the reported closing sales price on such date or, in the absence
of a reported closing sales price on such date, on the basis of the average of
reported closing bid and asked prices on such date. In the absence of either a
reported closing sales price or reported bid and asked prices, the Committee
shall determine such market value on the basis of the best available evidence.
Section 7. Exercise of Options. Subject to all other provisions of the Plan,
each Option shall be exercisable for the full number of shares of Common Stock
subject thereto, or any part thereof, in such installments and at such
intervals as the Committee may determine in granting such Option, provided
that (a) each Option shall become fully exercisable no later than five (5)
years from the date the Option is granted, and (b) the number of shares of
Common Stock subject to each Option shall become exercisable at the rate of at
least twenty percent (20%) per year each year until the Option is fully
exercisable. Options granted to a Participant shall be exercisable without
regard to whether such Participant holds any other options under the Plan.
Each Option shall terminate and expire, and shall no longer be subject to
exercise, as the Committee may determine in granting such Option, but in no
event later than ten (10) calendar years from the date of grant thereof. The
Option shall be exercised by the Participant by giving written notice to the
Company specifying the number of full shares to be purchased and accompanied
by payment of the full purchase price therefor in cash, by check or in such
other form of lawful consideration (including promissory notes with interest
of ten percent
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(10%) or such other rate as may be approved by the Internal Revenue Service to
avoid the application of imputed interest) as the Committee may approve from
time to time, including without limitation and in the sole discretion of the
Committee the assignment and transfer by the Participant to the Company of
outstanding shares of the Company's Common Stock theretofore held by the
Participant in a manner intended to comply with the provisions of Rule 16b-3
under the Exchange Act (to the extent it applies to the Participant). After
giving due consideration to the consequences under Section 16 of 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 the exercise price of the Options.
Section 8. Option Agreement. Each Option granted under the Plan shall be
evidenced by a written stock option agreement executed by the Company and
accepted by the Participant, which (a) shall contain each of the provisions
and agreements herein specifically required to be contained therein; (b) shall
indicate whether such Option is to be an Incentive Stock Option or a
Nonqualified Stock Option, and if an Incentive Stock Option, such agreement
shall contain terms and conditions permitting such Option to qualify for
treatment as an incentive stock option under Section 422A of the Code; (c) in
the case of Participants who are reporting persons under Section 16 of the
Exchange Act and the regulations promulgated thereunder, may contain the
agreement of the Participant not to dispose of the Option or any Common Stock
received upon exercise of the Option for at least six months from the date of
the Option grant; (d) may contain the agreement of the Participant to remain
in the employ of, and to render services to, the Company and any of to
subsidiaries for a period of one year from the date of the Option, but such
agreement shall not impose upon the Company or any of its subsidiaries any
obligation to retain the Participant in their employ for any period
whatsoever; (e) may contain the agreement of the Participant to resell any
Common Stock issued pursuant to the exercise of Options granted under the Plan
to the Company for the Option Price of such Options; and (f) may contain such
other terms and conditions as the Committee may deem desirable and which are
not inconsistent with the Plan. The respective stock option agreements
evidencing Option grants under the Plan need not be identical.
Section 9. Restricted Stock. Under the Plan, the Committee shall determine,
in its discretion, the Participants who shall be offered the opportunity to
purchase shares of Restricted Stock and the respective number of shares which
may be so purchased by each such Participant. The Company shall forthwith
thereafter notify each person so designated of the number of shares which such
Participant may purchase and shall provide such other information as it deems
appropriate, and such Participant may, within thirty (30) days of such
notification (or within such longer period as the Committee may in its
discretion permit), notify the Company that such Participant elects to so
purchase such Restricted Stock. In the event that the person so designated
does not elect to purchase such Restricted Stock, the Company shall not be
obligated to make any other award or payment to such person, and the Committee
may (but shall not be required to) permit another person to purchase the
Restricted Stock so refused. Such Restricted Stock shall be subject to a
repurchase right of the Company, such that if the purchaser of such Restricted
Stock ceases to be an employee of the Company or its subsidiaries for any
reason whatsoever, the Company shall have the right to repurchase and redeem
the Restricted Stock from the Participant at a purchase price equal to the
price at which such shares were originally purchased by the Participant;
provided, however, that such repurchase right of the Company shall terminate
at such times, and in such installment amounts, as may be specified by the
Committee in any particular instance, including the specification, at the
Committee's discretion, that such an issuance may be made with no repurchase
right or any other restriction whatsoever. Unless otherwise stated, the
Company's right to repurchase shall terminate as to twenty-five percent (25%)
of the aggregate number of shares of Restricted Stock originally issued to the
Participant on each anniversary date of the Participant's commencement of
employment by the Company or any subsidiary, commencing upon the first such
anniversary date, such that such repurchase right shall terminate completely
on the fourth anniversary of such commencement of employment. With respect to
shares as to which the Company's repurchase right has not terminated, the
repurchase right, if exercised, must be exercised within ninety (90) days of
the date of termination of the Participant's employment. In the event of the
exercise of such repurchase right, all shares remaining subject to such right
must be purchased by the Company at a purchase price equal to the price at
which such shares were originally purchased by the Participant.
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Section 10. Purchase Price of Restricted Stock. The purchase price per share
("Purchase Price") of shares of Restricted Stock issued hereunder shall be
determined by the Committee in its discretion so long as the Purchase Price is
not less than the fair market value of the Company's Common Stock on the date
the right to purchase such Restricted Stock is granted. Such fair market value
shall be determined by the Committee on the basis of the reported closing
sales price on such date or, in the absence of a reported closing sales price
on such date, on the basis of the average of reported closing bid and asked
prices on such date. In the absence of either a reported closing sales price
or reported bid and asked prices, the Committee shall determine such market
value on the basis of the best available evidence.
Section 11. Manner of Purchase of Restricted Stock. Upon the purchase of
shares of Restricted Stock, the Participant shall deliver to the Company a
check or cash in the amount of the Purchase Price of the Restricted Stock, or
such other lawful consideration (including promissory notes with interest of
ten percent (10%) or such other rate as may be approved by the Internal
Revenue Service to avoid the application of imputed interest) as the Committee
may approve.
Section 12. Restricted Stock Purchase Agreement. All shares of Restricted
Stock sold by the Company pursuant to the Plan shall be issued and sold
pursuant to a restricted stock purchase agreement executed by the Company and
accepted by the Participant, which (a) shall contain each of the provisions
and agreements herein specifically required to be contained therein, (b) may
contain the agreement of the Participant not to dispose of the Restricted
Stock for at least six months from the date of grant thereof and (c) may
contain such other terms and conditions as the Committee deems desirable and
which are not inconsistent with the Plan.
Section 13. Issuance of Common Stock. The Company's obligation to issue
shares of Common Stock upon the exercise of an Option or the purchase of
Restricted Stock is expressly conditioned upon the completion by the Company
of any registration or other qualification of such shares under any state
and/or federal law or rulings or regulations of any government regulatory
body, or the making of such investment representations or other
representations and undertakings by the Participant (or such Participant's
legal representative, heir or legatee, as the case may be) in order to comply
with the requirements of any exemption from any such registration or other
qualification of such shares which the Company in its sole discretion shall
deem necessary or advisable. Such required representations and undertakings
may include representations and agreements that such Participant (or such
Participant's legal representative, heir or legatee): (a) is purchasing such
shares for investment and not with any present intention of selling or
otherwise disposing thereof; and (b) agrees to have placed upon the face and
reverse of any certificates evidencing such shares a legend setting forth (i)
any representations and undertakings which such Participant has given to the
Company or a reference thereto, and (ii) that, prior to effecting any sale or
other disposition of any such shares, the Participant must furnish to the
Company an opinion of counsel, satisfactory to the Company and its counsel, to
the effect that such sale or disposition will not violate the applicable
requirements of state and federal laws and regulatory agencies.
Section 14. Nontransferability. No Option or Restricted Stock as to which
the Company's repurchase right has not at that time terminated shall be
assignable or transferable except by will or by the laws of descent and
distribution or, except with respect to Incentive Stock Options pursuant to a
qualified domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder. During the
lifetime of a Participant, any Option granted to him or her shall be
exercisable only by such Participant or his or her former spouse, if
transferred in accordance with the foregoing sentence. After the death of a
Participant, the Option granted to him or her may be exercised, prior to its
termination as provided by Section 19(b) hereof, only by such Participant's
legal representative or legatee or a person who acquired the right to exercise
the Option by reason of the death of the Participant or otherwise in
accordance with this Section 14.
Section 15. Death of Participant. The death of a Participant shall
constitute a termination of employment such that the Company shall have the
repurchase right, described in Section 9 hereof, with respect to the shares of
Restricted Stock of such Participant as to which such repurchase right has not
at that time terminated.
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<PAGE>
Section 16. Recapitalization, Reorganization, Merger or Consolidation. If
the outstanding shares of Common Stock of the Company are increased, decreased
or exchanged for different securities through reorganization, merger,
consolidation, recapitalization, reclassification, stock split, stock dividend
or like capital adjustment, a proportionate adjustment shall be made (a) in
the aggregate number of shares of Common Stock which may be issued pursuant to
the exercise of Options or the purchase of Restricted Stock under the Plan, as
provided in Section 5 hereof, (b) in the number, prices and kind of shares
subject to any outstanding Option granted under the Plan, and (c) in the
number and kind of securities subject to the Company's repurchase right under
outstanding restricted stock purchase agreements and in the repurchase price
thereof.
Upon the dissolution, liquidation or sale of all or substantially all of the
business, properties and assets of the Company, or upon any reorganization,
merger or consolidation in which the Company does not survive, or upon any
reorganization, merger or consolidation in which the Company does survive and
the Company's stockholders have the opportunity to receive cash, securities of
another corporation or other property in exchange for their capital stock of
the Company, the Plan, each outstanding Option and, at the Committee's
discretion, the Company's repurchase right with respect to outstanding
Restricted Stock, shall terminate; provided that in such event: (a) each
Participant to whom no option has been tendered by the surviving corporation
in accordance with all of the terms of provision (b) immediately below or who
does not accept any such substitute option which is so tendered shall have the
right until ten (10) days before the effective date of such dissolution or
liquidation of the Company or upon such reorganization, merger or
consolidation, to exercise in whole or in part, any unexpired Option or
Options issued to him or her, without regard to the installment provisions of
Section 7 hereof, or any option agreement; or (b) in its sole and absolute
discretion, the surviving corporation in any reorganization, merger or
consolidation may, but shall not be so obligated, tender to any Participant
holding an Option, an option or options to purchase shares of the surviving
corporation, and such new option or options shall contain such terms and
provisions as shall be required substantially to preserve the rights and
benefits of any Option then outstanding under this Plan and, if accepted by
such Participant, such new option shall replace the Option under the Plan.
To the extent that the foregoing adjustments relate to stock or securities
of the Company, such adjustments shall be made by the Committee, whose
determination in that respect shall be final, binding and conclusive. Except
as hereinbefore expressly provided in this Section 16, the Participant shall
have no rights by reason of any subdivision or consolidation of shares of
stock of any class or the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class, and the number or
price of shares of Common Stock subject to any Option shall not be affected
by, and no adjustment shall be made by reason of any dissolution, liquidation,
reorganization, merger or consolidation, or any issue by the Company of shares
of stock of any class, or rights to purchase or subscribe for stock of any
class, or securities convertible into shares of stock of any class.
The grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications or
changes in its capital or business structures or to merge, consolidate,
dissolve or liquidate or to sell or transfer all or any part of its business
or assets.
Section 17. Substitute Options. If the Company at any time should succeed to
the business of another corporation through a merger or consolidation, or
through the acquisition of stock or assets of such corporation, Options may be
granted under the Plan to those employees of such corporation who, in
connection with such succession, become employees of the Company or its
subsidiaries, in substitution for options to purchase stock of such
corporation held by them at the time of the succession. The Committee, in its
sole and absolute discretion, shall determine the extent to which such
substitute Options shall be granted (if at all), the persons to receive such
substitute Options (who need not all be optionees of such corporation), the
number and type of Options to be received by each such person, the Option
Price of such Options (which may be determined without regard to Section 6
hereof) and the terms and conditions of such substitute Options; provided,
however, that the Option Price of each such substituted Option shall be an
amount such that, in the sole and absolute judgment of the Committee (and if
the Options to be granted are Incentive Stock Options, in compliance with
Section 424(a)
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<PAGE>
of the Code), the economic benefit provided by such Option is not greater than
the economic benefit represented by the option in the acquired corporation as
of the date of the Company's acquisition of such corporation. Any Option
substituted for another option in accordance with this Section 17 will expire
upon the expiration date of such other option (or ten (10) years from the date
such Option is granted if earlier), and, notwithstanding the provisions of
Section 7 hereof, will be exercisable during the period in which the other
option would have been exercisable. Any provision of this Section 17 to the
contrary notwithstanding, no option shall be granted, nor any action taken,
permitted or omitted, which would have the effect of causing this Plan, or any
Options granted hereunder, as to which Rule 16b-3 under the Exchange Act may
apply, not to comply with such Rule.
Section 18. Rights as a Stockholder. A Participant holding an Option, or a
transferee of an Option, shall have no rights as a stockholder with respect to
any shares covered by his or her Option until the date of the issuance of a
stock certificate to him or her for such shares. A Participant shall have no
rights as a stockholder with respect to any shares of Restricted Stock until
the date of the issuance of a stock certificate to him or her for such shares.
No adjustment shall be made for dividends (ordinary or extraordinary, whether
in cash, securities or other property) or distributions or other rights for
which the record date is prior to the date such stock certificate is issued,
except as expressly provided in Section 16 hereof. A Participant shall,
however, be entitled to receive copies of the Company's annual reports to
stockholders, including audited year-end financial statements, during the
period an Option is outstanding.
Section 19. Termination of Options. Each Option granted under the Plan shall
set forth a termination date thereof, which date shall be not later than ten
(10) years from the date such Option is granted unless the Participant is a
ten-percent stockholder of the Company (as described in Section 422(b)(6) of
the Code) at the time such Option is granted, in which case the Option shall
terminate no later than five years from the date of the grant thereof. In any
event, all Options shall terminate and expire upon the first to occur of the
following events:
(a) the expiration of ninety (90) days from the date of such
Participant's termination of employment or other relationship with the
Company (other than by reason of death), except that if the Participant is
then disabled (within the meaning of Section 22(e)(3) of the Code, the
expiration of one (1) year from the date of the Participant's termination
of employment or other relationship; provided, however, that the Committee
may in its discretion extend these periods for Nonqualified Stock Options
for up to five (5) years, provided that such extension shall not extend the
period during which the Option may be exercised beyond the original term of
the Option;
(b) the expiration of one hundred eighty (180) days from the date of the
death of such Participant if his or her death occurs while he or she is, or
not later than ninety (90) days after he or she has ceased to be, employed
by or engaged in another relationship with the Company or any of its
subsidiaries; provided, however, that the Committee may in its discretion
extend these periods for Nonqualified Stock Options for up to five (5)
years, provided that such extension shall not extend the period during
which the Option may be exercised beyond the original term of the Option;
(c) the termination of the Option pursuant to Section 16 of the Plan.
The termination of employment of a Participant by death or otherwise shall
not accelerate or otherwise affect the number of shares with respect to which
an Option may be exercised; provided, however, that the Option may only be
exercised with respect to that number of shares which could have been
purchased under the Option had the Option been exercised by the Participant on
the date of such termination.
Section 20. Withholding of Taxes. The Company may deduct and withhold from
the wages, salary, bonus and other income paid by the Company to the
Participant the requisite tax upon the amount of taxable income, if any,
recognized by the Participant in connection with the purchase of Restricted
Stock or the exercise in whole or in part of any Option or the sale of Common
Stock issued to the Participant upon exercise of the Option, all as may be
required from time to time under any federal or state tax laws and
regulations. This withholding of
A-6
<PAGE>
tax shall be made from the Company's concurrent or next payment of wages,
salary, bonus or other income to the Participant or by payment to the Company
by the Participant of the required withholding tax, as the Committee may
determine; provided, however, that, in the sole discretion of the Committee,
the Participant may pay such tax by reducing the number of shares of Common
Stock issued upon exercise of an Option or by surrendering shares of Common
Stock owned by the Participant (for which purpose such shares of Common Stock
shall be valued at fair market value as determined in good faith by the
Committee, which determination shall be final, conclusive and binding).
Section 21. Effectiveness and Termination of Plan. The Plan shall be
effective as of December 1, 1992, and applies to all Options and Restricted
Stock granted by the Company on that date and thereafter; provided, however,
that no Option shall be exercisable unless and until the Plan has been
approved by the stockholders of the Company; and provided, further, that no
Option may be granted hereunder on or after that date, which is ten (10) years
from the effective date of the Plan. The Plan shall terminate when all shares
of Common Stock which may be issued hereunder pursuant to the exercise of
Options or the purchase of Restricted Stock have been so issued; provided,
however, that the Board may in its absolute discretion terminate the Plan at
any time. No such termination, other than as provided for in Section 16
hereof, shall in any way affect any Option or Restricted Stock then
outstanding.
Section 22. Amendment of Plan. The Board may make such amendments to the
Plan and, with the consent of each Participant adversely affected, the
Committee may make such changes in the terms and conditions of granted Options
as it shall deem advisable, including, but not limited to, accelerating the
time at which an Option may be exercised, but may not, without the affirmative
vote of the holders of a majority of the voting stock of the Company which is
present, or represented, and entitled to vote at a duly held stockholders'
meeting of the Company or the written consent of the holders of a majority of
the voting stock of the Company entitled to vote, (a) increase the maximum
number of shares subject to the Plan, except pursuant to Section 16 of the
Plan; or (b) change the designation of the class of participants eligible to
receive Options.
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<PAGE>
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. which the undersigned is
entitled to vote, at the Annual Meeting of the Stockholders of TETRA TECH, INC.
to be held at The Pasadena Hilton, 150 S. Los Robles Avenue, Pasadena,
California 91101 on Friday, February 7, 1997 at 10:00 a.m., Los Angeles Time,
and at any and all adjournments thereof, on the proposals set forth below and
any other matters properly brought before the Meeting.
<TABLE>
<S> <C>
1. ELECTION OF DIRECTORS [_] FOR all nominees listed below [_] WITHHOLD AUTHORITY
(except as marked to the contrary below) (to vote for all nominees)
(Instruction: to withhold authority to vote for any individual nominee, mark
the box next to the nominee's name below.)
[_] Li-San Hwang [_] J. Christopher Lewis [_] Patrick C. Haden [_] James J. Shelton
</TABLE>
2. PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF
INCORPORATION:
[_] FOR [_] AGAINST [_] ABSTAIN
3. PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S 1992 INCENTIVE STOCK
PLAN:
[_] FOR [_] AGAINST [_] ABSTAIN
4. Such other matters as may properly come before the Meeting.
THE DIRECTORS RECOMMEND A VOTE FOR ALL NOMINEES LISTED IN PROPOSAL 1, FOR
APPROVAL OF THE AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION AND FOR
APPROVAL OF THE AMENDMENT TO THE COMPANY'S 1992 INCENTIVE STOCK PLAN.
Unless a contrary direction is indicated, this Proxy will be voted FOR all
nominees listed in Proposal 1, FOR approval of the Amendment to the Company's
Certificate of Incorporation and FOR approval of the Amendment to the Company's
1992 Incentive Stock Plan; 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 7, 1997 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.
Dated: ________________ , 1997
------------------------------
(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.
TRANSFER AGENT = US STOCK TRANSFER
CC / UR
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