SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of
the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
/ / Preliminary Information Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14c-5(d)(2))
/X/ Definitive Information Statement
TETRA TECH, INC.
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(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and
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amount on which the filing fee is calculated and state how
it was determined):
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
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[LOGO]
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670 NORTH ROSEMEAD BOULEVARD
PASADENA, CA 91107
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To the Stockholders of
Tetra Tech, Inc.
The Board of Directors of Tetra Tech, Inc. (the "Company") is seeking the
approval of its stockholders by written consent in lieu of a meeting of its 2001
Stock Plan, as amended. The 2001 Stock Plan (the "Plan") was adopted by the
Board, subject to stockholder approval, on December 29, 2001. At the Annual
Meeting of the Stockholders of the Company held on February 22, 2001, the
stockholders failed to approve the Plan. Based upon stockholder input, the Board
adopted the following amendments to the Plan on May 22, 2001: (i) a reduction in
the aggregate number of shares of the Company's common stock, $.01 par value
("Common Stock"), that may be issued pursuant to the Plan from 5,000,000 to
2,000,000; and (ii) a reduction in the maximum number of shares that may be
issued to a single participant (pursuant to the exercise of a stock option or
the grant of restricted stock) from 1,000,000 to 400,000. The Plan, as amended,
is hereinafter referred to as the "Amended Plan." No meeting of stockholders is
being held in connection with this consent solicitation. Please consider, sign
and return the enclosed form of written consent.
Stockholders of record on May 25, 2001 are entitled to submit consents. The
Consent Solicitation Statement on the following pages describes the matter being
presented to the stockholders.
The Board of Directors unanimously recommends that stockholders vote FOR the
approval of the Amended Plan.
We request that you please sign, date and return your consent in the
enclosed envelope on or before August 4, 2001. If you submit a properly executed
consent within sixty (60) days of the delivery of the first dated consent
delivered to the Company, your stock will be voted in favor of the Amended Plan.
Any other action by you will have the practical effect of voting against the
Amended Plan.
By Order of the Board of Directors
/s/ RICHARD A. LEMMON
---------------------------------
Richard A. Lemmon
EXECUTIVE VICE PRESIDENT AND SECRETARY
Pasadena, California
Dated: May 31, 2001
TETRA TECH, INC.
670 NORTH ROSEMEAD BOULEVARD
PASADENA, CA 91107
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CONSENT SOLICITATION STATEMENT
------------------------
INFORMATION REGARDING CONSENTS
This Consent Solicitation Statement and the accompanying form of consent are
furnished in connection with the solicitation of stockholder consents by the
Board of Directors of Tetra Tech, Inc. (the "Company"), in lieu of a meeting of
stockholders, in connection with the approval of the Company's 2001 Stock Plan,
as amended (the "Consent Solicitation"). The 2001 Stock Plan (the "Plan") was
adopted by the Board, subject to stockholder approval, on December 29, 2001. At
the Annual Meeting of the Stockholders of the Company held on February 22, 2001,
the stockholders failed to approve the Plan. Based upon stockholder input, the
Board adopted the following amendments to the Plan on May 22, 2001: (i) a
reduction in the aggregate number of shares of Common Stock that may be issued
pursuant to the Plan from 5,000,000 to 2,000,000; and (ii) a reduction in the
maximum number of shares that may be issued to a single participant (pursuant to
the exercise of a stock option or the grant of restricted stock) from 1,000,000
to 400,000. The Plan, as amended, is hereinafter referred to as the "Amended
Plan." Only stockholders of record on the books of the Company at the close of
business on May 25, 2001 (the "Record Date") will be entitled to submit a
consent. It is anticipated that these consent solicitation materials will be
mailed to stockholders on or about June 4, 2001.
The Company is incorporated in Delaware and is therefore subject to the
Delaware General Corporation Law (the "DGCL"). Section 228 of the DGCL permits
the stockholders of the Company to take action without a meeting if consents in
writing, setting forth the action so taken, are signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. The DGCL also provides that the
minimum necessary votes must be received by the Company within 60 days following
the Company's receipt of the first such written consent. Accordingly, if, within
60 days following the Company's receipt of the first such written consent
approving the Amended Plan, the Company receives executed consents approving the
Amended Plan from the holders of a majority of the issued and outstanding shares
of Common Stock, and those consents have not been revoked, the stockholders will
be deemed to have approved the Amended Plan.
All written consents received by the Company, regardless of when dated, will
expire unless valid, written, unrevoked consents constituting the necessary vote
for approval of the Amended Plan are received by the Company within 60 days of
the date of the Company's receipt of the first such consent.
As required by the DGCL, if the Amended Plan is approved by the
stockholders, the Company will promptly notify those stockholders from whom
consents have not been received.
A consent executed by a stockholder may be revoked at any time provided that
a written, dated revocation is executed and delivered to the Company prior to
the time at which the Company has received written consents sufficient to
approve the Amended Plan. A revocation may be in any written form validly signed
by the stockholder as long as it clearly states that the consent previously
given is no longer effective. The revocation should be addressed to Richard A.
Lemmon, Executive Vice President and Secretary, Tetra Tech, Inc., 670 North
Rosemead Boulevard, Pasadena, California 91107.
2
Only holders of record of the Company's common stock, par value $.01 per
share (the "Common Stock") at the close of business on the Record Date, will be
entitled to submit a consent on the accompanying form. On that date, the Company
had outstanding 41,030,461 shares of Common Stock. Each share of Common Stock is
entitled to one vote in the Consent Solicitation.
With respect to the 2001 Stock Plan, any action other than the delivery of a
properly executed consent within such 60-day period will have the practical
effect of voting against the Amended Plan.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. ENCLOSED WITH THIS CONSENT SOLICITATION STATEMENT IS A FORM OF WRITTEN
CONSENT WHICH SHOULD BE USED TO INDICATE APPROVAL OF THE AMENDED PLAN.
The Company will bear the entire cost of solicitation of consents, including
preparation, assembly, printing and mailing of this Consent Solicitation
Statement, the consent form and any additional information furnished to
stockholders. Copies of solicitation materials will be furnished to banks,
brokerage houses, fiduciaries and custodians holding in their names shares of
Common Stock beneficially owned by others to forward to such beneficial owners.
The Company may reimburse persons representing beneficial owners. Original
solicitation of consents by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other employees of the Company.
No additional compensation will be paid to directors, officers or other regular
employees for such services.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information regarding the ownership of the
Company's Common Stock as of May 1, 2001 by (i) all those persons known by the
Company to own beneficially more than 5% of the Company's Common Stock,
(ii) each director and each executive officer of the Company named in the
"Summary Compensation Table" included in the "Executive Compensation" section of
this Consent Solicitation Statement and (iii) all directors and executive
officers as a group. Unless otherwise noted in the following table, the address
of each beneficial owner is 670 N. Rosemead Boulevard, Pasadena, California
91107. Except as otherwise noted, the Company knows of no agreements among its
stockholders which relate to voting or investment power over its Common Stock.
3
NUMBER OF SHARES PERCENTAGE OF SHARES
NAME OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED BENEFICIALLY OWNED(1)
--------------------------- ------------------ ---------------------
T. Rowe Price Associates, Inc.(2)......................... 2,245,664 5.5%
100 East Pratt Street
Baltimore, Maryland 21202
AIM Management Group Inc.(3).............................. 2,152,070 5.3%
11 Greenway Plaza, Suite 100
Houston, Texas 77046
The Northwestern Mutual Life Insurance Company(4)......... 2,123,241 5.2%
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Li-San Hwang(5)........................................... 1,706,076 4.2%
Daniel A. Whalen(6)....................................... 530,591 1.3%
J. Christopher Lewis(7)................................... 57,182 *
Patrick C. Haden(8)....................................... 9,536 *
James J. Shelton(9)....................................... 11,784 *
James M. Jaska(10)........................................ 62,540 *
Richard A. Lemmon(11)..................................... 25,184 *
Charles R. Faust(12)...................................... 59,238
William R. Brownlie(13)................................... 173,829 *
Glenn S. Burkhardt(14).................................... 34,288 *
Total beneficial shares of all directors and executive
officers as a group (12 persons)(15).................... 2,931,750 7.2%
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* Amount represents less than 1% of the Company's Common Stock.
(1) Applicable percentages of ownership are based on 40,622,515 shares of Common
Stock outstanding on May 1, 2001, adjusted as required by the rules
promulgated by the Securities and Exchange Commission (SEC). This table is
based upon information supplied by officers, directors and principal
stockholders and Schedules 13D and 13G (if any) filed with the SEC. Unless
otherwise indicated, and subject to community property laws where
applicable, we believe that each of the stockholders named in this table has
sole voting and investment power with respect to the shares indicated as
beneficially owned. Any security that any person named above has the right
to acquire within 60 days is deemed to be outstanding for purposes of
calculating the percentage ownership of such person, but is not deemed to be
outstanding for purposes of calculating the ownership percentage of any
other person.
(2) All information regarding share ownership is taken from and furnished in
reliance upon the Schedule 13G/A, dated as of February 14, 2001, filed by T.
Rowe Price Associates, Inc.
(3) All information regarding share ownership is taken from and furnished in
reliance upon the Schedule 13G, dated as of February 9, 2001, filed by AIM
Management Group Inc. on behalf of itself and its wholly-owned subsidiaries,
AIM Advisors, Inc. and AIM Capital Management, Inc.
(4) All information regarding share ownership is taken from and furnished in
reliance upon the Schedule 13G/A, dated as of February 6, 2001, filed by The
Northwestern Mutual Life Insurance Company.
4
(5) Includes 63,952 shares issuable with respect to stock options exercisable
within 60 days after May 1, 2001.
(6) Includes 19,531 shares issuable with respect to stock options exercisable
within 60 days after May 1, 2001. Also includes 462,674 shares of Common
Stock held by Daniel A. Whalen and Katharine C. Whalen, as Trustees for the
Whalen Family Trust U/A/D 4/30/92, and 48,712 shares of Common Stock held by
Daniel A. Whalen and Katharine C. Whalen, as Trustees for the Whalen Family
Foundation.
(7) Includes 28,608 shares issuable with respect to stock options exercisable
within 60 days after May 1, 2001.
(8) Includes 9,536 shares issuable with respect to stock options exercisable
within 60 days after May 1, 2001.
(9) Includes 4,768 shares issuable with respect to stock options exercisable
within 60 days after May 1, 2001. Also includes 7,016 shares of Common Stock
held by JJS Holdings Limited Partnership, of which Mr. Shelton and his wife
are the General Partners.
(10) Includes 61,583 shares issuable with respect to stock options exercisable
within 60 days after May 1, 2001.
(11) Includes 22,939 shares issuable with respect to stock options exercisable
within 60 days after May 1, 2001.
(12) Includes 31,621 shares issuable with respect to stock options exercisable
within 60 days after May 1, 2001.
(13) Includes 46,083 shares issuable with respect to stock options exercisable
within 60 days after May 1, 2001. Also includes 4,083 shares of Common Stock
owned by Dr. Brownlie's wife and an aggregate of 2,100 shares of Common
Stock owned by his minor children.
(14) Includes 1,437 shares issuable with respect to stock options exercisable
within 60 days after May 1, 2001.
(15) Includes an aggregate of 371,284 shares issuable with respect to stock
options exercisable within 60 days after May 1, 2001.
PROPOSAL TO APPROVE OF THE COMPANY'S
2001 STOCK PLAN, AS AMENDED
The 2001 Stock Plan (the "Plan") was adopted by the Board, subject to
stockholder approval, on December 29, 2001. At the Annual Meeting of the
Stockholders of the Company held on February 22, 2001, the stockholders failed
to approve the Plan. Based upon stockholder input, the Board adopted the
following amendments to the Plan on May 22, 2001: (i) a reduction in the
aggregate number of shares of Common Stock that may be issued pursuant to the
Plan from 5,000,000 to 2,000,000; and (ii) a reduction in the maximum number of
shares that may be issued to a single participant (pursuant to the exercise of a
stock option or the grant of restricted stock) from 1,000,000 to 400,000. The
Plan, as amended, is hereinafter referred to as the "Amended Plan." The Amended
Plan provides for the granting of incentive stock options, nonqualified stock
options and rights to purchase restricted stock (as described below). The
Amended Plan is attached to this Consent Solicitation Statement as Annex A and
incorporated by reference into this Consent Solicitation Statement.
The Company cannot determine at this time either the number of options or
shares of restricted stock that it will allocate to its directors and executive
officers participating in the Amended Plan, or the number of options of shares
of restricted stock that these persons will actually receive in the future
5
because the amount and value of such awards that will be granted to any
participant are within the Company's discretion, subject to the limitations
described above.
SUMMARY DESCRIPTION OF THE AMENDED PLAN
GENERAL
The Amended Plan provides for the granting of incentive stock options,
nonqualified stock options and rights to purchase restricted stock to employees,
directors and other persons providing services to the Company. Under the Amended
Plan, shares of Common Stock may be issued either upon exercise of options or
purchases of restricted stock. If the Amended Plan is approved by the
stockholders, the Company will cease granting stock options under its 1992
Incentive Stock Plan. Under the Amended Plan, 2,000,000 shares may be issued
either as restricted stock or upon the exercise of options.
The purpose of the Amended Plan is to promote the interests of the Company
and its stockholders by enabling the Company to offer grants of stock to better
attract, retain and reward its employees, directors and other persons providing
services to it and, accordingly, to strengthen the mutuality of interests
between those persons and the Company's stockholders by providing those persons
with a proprietary interest in pursuing the Company's long-term growth and
financial success.
ELIGIBILITY AND PARTICIPATION
Persons eligible for options under the Amended Plan are employees, directors
and other persons providing services to the Company. However, incentive stock
options may only be granted to employees. The maximum number of shares that may
be issued to a single participant (upon the exercise of options and/or grants of
restricted stock) is 400,000. Currently, the Company has over 6,900 employees.
The Company has not determined all of the individuals who will receive
options or restricted stock, or the options or restricted stock that will be
granted to any individual or group of individuals.
ADMINISTRATION
The Amended Plan will be administered by a committee (the "Committee")
appointed by the Board. To the extent possible and advisable, the Committee will
be composed of individuals who satisfy Rule 16b-3 under the Securities Exchange
Act of 1934, as amended, and Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"). The Committee is authorized to interpret the
Amended Plan and to adopt rules and procedures relating to its administration.
Subject to specified limitations, the Committee is authorized to make such
modifications to the Amended Plan and to the grants thereunder as are necessary
to effectuate the intent of the Amended Plan as a result of any changes in the
tax, accounting or securities laws treatments of participants, the Company and
the Amended Plan. Further, the Committee may modify an existing option or a
restricted stock grant; however, no modification may be made that would impair
the rights of the participant without the participant's consent.
6
OPTIONS
Each option will be granted on such terms and in such form as the Committee
may approve, which shall not be inconsistent with the provisions of the Amended
Plan. The Committee determines whether the options will be incentive stock
options or nonqualified stock options. Under the Amended 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 a participant who 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. The Committee also determines the
termination date of the options, which will not be later than ten years after
the date of grant (or five years in the case of an incentive stock option
granted to a ten percent stockholder).
The closing price for the Common Stock, as reported on the Nasdaq Stock
Market on May 29, 2001, was $29.85 per share.
EXERCISE
Each option will become exercisable (i) as to one-fourth ( 1/4) of the full
number of shares subject thereto one year after the date of grant and (ii) as to
the balance in thirty-six (36) equal cumulative monthly installments following
such first anniversary date, or in such other installments and at such other
intervals as the Board or the Committee may otherwise determine. 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. 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.
Options may be exercised by payment of the full purchase price in cash or by
any other form of consideration that the Committee has approved, such as the
surrender of outstanding shares of Common Stock owned by the participant or by
withholding shares that would otherwise be issued upon the exercise of the
option. The Committee may also authorize the exercise of options by the delivery
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 option.
All rights to exercise options terminate three months following the
participant's severance for any reason other than death or disability, or upon
expiration of the option, whichever occurs first. During such three-month
period, the participant may only exercise options to the extent they were
exercisable on the date of the participant's severance. If a participant dies
without having fully exercised his or her options during the period of his or
her employment or within three months of his or her severance, the options may
be exercised within a period of one year following his or her death, if the
expiration of the option period has not first occurred to the extent the
participant could have exercised them on the date of his or her death. If the
participant was disabled at the time of severance, the options may be exercised
within a period of one year following his or her severance, if the expiration
date has not first occurred, to the extent the participant could have exercised
them on the date of his or her severance.
SUBSTITUTE OPTIONS
The Company may grant options to employees of acquired companies who hold
stock options of the acquired company upon such terms and conditions as the
Committee may determine but may not be contrary to applicable law.
TRANSFER RESTRICTIONS
Options may be transferred only by will or the laws of descent and
distribution.
7
RESTRICTED STOCK
Pursuant to the Amended 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.
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.
A participant will not have a vested right to the shares subject to the
grant of restricted stock until satisfaction of the vesting requirements
specified in the grant. The participant may not assign or alienate his or her
interest in the shares of restricted stock prior to vesting.
MODIFICATIONS
The Committee may modify an existing option, including the right to
accelerate the right to exercise it, extend or renew it, or cancel it and issue
a new option. Similar modifications may be made to grants of restricted stock.
However, no modification may be made in a manner adverse to the participant
holding that option or restricted stock without that participant's consent.
ADJUSTMENTS
The maximum number of shares that may be issued under the Amended 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. The Committee may also make such adjustments in the event of a
spin-off or other distribution of Company assets to stockholders, other than
normal cash dividends.
MERGERS; REORGANIZATIONS
In the event of a merger, share exchange, reorganization or consolidation of
the Company in which the Company is not the surviving corporation or survives as
a subsidiary of another corporation, each outstanding option will be assumed or
an equivalent option substituted by the successor corporation. In the event the
successor corporation refuses to assume or substitute for the option, the
participant will fully vest in and have the right to exercise the option as to
all of the shares of Common Stock purchasable under the option, including shares
that would not otherwise be vested or exercisable. Notwithstanding the
foregoing, the Board or Committee may, in any specific case, provide for the
treatment of an option in a manner different than that described above.
AMENDMENT AND TERMINATION
The Board of Directors may at any time amend or terminate the Amended Plan.
However, no modification may be made that would impair the rights of the
participant holding an option without the participant's consent. Further,
without the approval of the majority of the Company's stockholders, the Board
may not amend the provisions of the Amended Plan regarding (i) the class of
individuals entitled to receive incentive stock options; or (ii) the maximum
number of shares of Common Stock that may be issued under the Amended Plan
(except in the case of adjustments for stock splits, stock dividends or similar
events).
The Amended 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 Amended Plan
will not preclude any employee from participating in any other plan, program or
arrangement of the Company or its subsidiaries.
8
THE ABOVE DESCRIPTION SUMMARIZES THE MAIN PROVISIONS OF THE AMENDED 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 AMENDED PLAN.
STOCKHOLDERS ARE URGED TO READ THE AMENDED PLAN IN ITS ENTIRETY.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain federal income tax
consequences to a participant and the Company with respect to shares of Common
Stock issued under the Amended Plan. In addition, there may be state and local
tax consequences to a participant which may vary between each state and
locality.
INCENTIVE STOCK OPTIONS
No taxable income will be recognized by a participant upon the grant or
exercise of any incentive stock option under the Amended Plan. However, the
amount by which the fair market value of stock purchased upon exercise of an
incentive stock option exceeds the option price of such stock constitutes an
item of tax preference which could then be subject to the alternative minimum
tax in the year that the option is exercised. The Company 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 participant upon exercise,
provided that the participant is an employee of the Company from the date of
grant until three months before the date of exercise. In the event of the
participant's death or disability prior to exercise of an incentive stock
option, special rules apply in determining whether gain or loss upon sale of the
stock acquired upon exercise of such option will be taxable as long-term capital
gain or loss or ordinary income.
If the subsequent sale of stock is made prior to the expiration of such
two-year or one-year periods, the participant 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 participant, the amount of ordinary income recognized by the
participant 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 participant 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
in accordance with the tax rates then in effect under the Code. Long-term
capital gains are currently taxed at a maximum federal rate of 28%.
NONQUALIFIED STOCK OPTIONS
Generally, at the time of the grant of any nonqualified stock option under
the Amended Plan, no taxable income will be recognized by the participant and
the Company will not be entitled to a deduction. Upon the exercise of such
option, the participant 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 participant exceeds
the option price.
Income recognized by the participant upon exercise of a nonqualified stock
option will be taxed as ordinary income in accordance with the tax codes then in
effect under the Code. Ordinary income is
9
currently taxed at a maximum federal rate of 39.6%. If the participant is an
employee, such income will constitute "wages" with respect to which the Company
is required to deduct and withhold federal and state income and payroll taxes.
Any such deductions will be made from the wages, salary, bonus or other income
to which the participant would otherwise be entitled and, at the Company's
election, the participant may be required to pay to the Company (for withholding
on the participant's behalf) any amount not so deducted but required to be so
withheld.
Upon the subsequent disposition of shares acquired upon the exercise of an
option other than an incentive stock option, the participant will recognize
capital gain or loss in an amount equal to the difference between the 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.
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, 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 may be
determined to be, in whole or in part, a "parachute payment" for federal income
tax purposes. If the present value of all of the participant's parachute
payments exceeds three times the participant's average compensation for the past
five years, the participant 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 participant or an amount which the participant 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 Amended Plan or the vesting of
shares of stock will be taxed a ordinary income. If the purchaser is an
employee, such amount will constitute "wages" with respect to which the Company
is required to deduct and withhold federal and state income and payroll taxes.
Any such deductions will be made from the wages, salary, bonus or other income
to which the purchaser would otherwise be entitled and, at the Company's
election, the purchaser may be required to pay the Company (for withholding on
such purchaser's behalf) any amount not so deducted but required to be so
withheld.
10
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 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. A purchaser of
restricted stock may not assign or alienate his or her interest in the
restricted stock prior to vesting. However, if a purchaser of restricted stock
does dispose of such unvested shares of stock, the purchaser will recognize
compensation in the amount equal to the difference between the proceeds received
from the disposition and the purchaser's tax basis in the shares.
COMPENSATION DEDUCTION LIMITATION
In certain circumstances, a publicly held corporation such as the Company is
denied an income tax deduction for compensation paid to certain "covered
employees" (as defined below) in excess of $1.0 million per year. However, upon
exercise, nonqualified stock options granted under the Amended Plan with an
option price equal to or greater than the fair market value of the Common Stock
at the time of grant generally will not be subject to the $1.0 million deduction
limitation so long as the Committee is at all times composed of "outside
directors" as defined in applicable Treasury Regulations. If so, the
nonqualified stock options should then meet the exemption for "performance-
based" compensation. A "covered employee" is a participant who, on the last day
of the taxable year of the Company, is the chief executive officer or one of the
four other most highly compensated executive officers of the Company for proxy
disclosure purposes. Sales of restricted stock are also subject to this
$1.0 million deduction limitation.
THE FOREGOING SUMMARY OF THE EFFECTS OF FEDERAL INCOME TAXATION UPON
PARTICIPANTS, HOLDERS OF RESTRICTED STOCK AND THE COMPANY WITH RESPECT TO SHARES
ISSUED UNDER THE AMENDED PLAN DOES NOT PURPORT TO BE COMPLETE AND REFERENCE IS
MADE TO THE APPLICABLE PROVISIONS OF THE CODE.
REASONS FOR APPROVAL OF 2001 STOCK PLAN
The Board of Directors believes that the selected use of stock options and
restricted stock is an effective means of attracting, motivating and retaining
employees and that the availability of the number of shares covered by the
Amended Plan is important to the Company's business prospects and operations.
VOTE REQUIRED
The approval of the Amended Plan requires the consent of a majority of the
shares of Common Stock. Any action other than the delivery of a properly
executed consent within the sixty-day period will have the practical effect of
voting against the Amended Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
FOR ALL OF THE FOREGOING REASONS, THE BOARD BELIEVES THAT THE AMENDED PLAN
IS IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
11
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid or accrued by the
Company to the Chief Executive Officer and to each of the four additional most
highly compensated executive officers for each of the fiscal years in the
three-year period ended October 1, 2000:
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
-----------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------------------------- ------------------------ --------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING LTIP
SALARY BONUS COMPENSATION STOCK OPTIONS/ PAYOUTS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)(1) AWARD(S)($) SARS(#) ($) COMPENSATION($)
--------------------------- -------- -------- -------- ------------ ----------- ---------- -------- ---------------
Li-San Hwang .............. 2000 220,000 40,000 913(2) 0 30,000 0 4,305(3)
Chairman, Chief Executive 1999 195,000 0 1,801 0 15,000 0 8,350
Officer and President 1998 185,000 85,000 601 0 15,625 0 10,266
James M. Jaska ............ 2000 170,000 50,000 5,400(4) 0 25,000 0 4,939(5)
Executive Vice President, 1999 150,000 0 5,400 0 10,000 0 8,696
Chief Financial Officer 1998 120,000 60,000 4,950 0 3,125 0 7,060
and Treasurer
Richard A. Lemmon ......... 2000 135,000 50,000 5,400(6) 0 10,000 0 3,972(7)
Executive Vice President 1999 118,000 30,000 5,400 0 7,500 0 6,898
and Secretary 1998 100,000 35,000 4,950 0 3,125 0 5,871
Charles R. Faust .......... 2000 130,000 30,000 7,650(8) 0 3,000 0 7,788(9)
Vice President 1999 125,000 10,260 7,650 0 3,000 0 7,480
1998 120,000 25,000 7,650 0 6,250 0 7,155
William R. Brownlie ....... 2000 120,000 20,000 5,400(10) 0 3,000 0 3,587(11)
Senior Vice President 1999 117,000 30,000 16,458 0 3,750 0 7,000
1998 115,000 35,000 5,400 0 3,906 0 6,890
--------------------------
(1) No named executive officer received other annual compensation in excess of
the lesser of $50,000 or 10% of such officer's compensation in fiscal 2000.
(2) Comprised of $913 in benefits and premiums paid by the Company to Dr. Hwang
pursuant to the Executive Medical Reimbursement Plan.
(3) Comprised of $4,305 of Company contributions to its Retirement Plan.
(4) Comprised of $5,400 in automobile allowances.
(5) Comprised of $4,939 of Company contributions to its Retirement Plan.
(6) Comprised of $5,400 in automobile allowances.
(7) Comprised of $3,972 of Company contributions to its Retirement Plan.
(8) Comprised of $5,400 in automobile allowances and $2,250 in life insurance
premiums paid on behalf of Dr. Faust.
(9) Comprised of $7,788 of Company contributions to its Retirement Plan.
(10) Comprised of $5,400 in automobile allowances.
(11) Comprised of $3,587 of Company contributions to its Retirement Plan.
12
DIRECTOR COMPENSATION
Each nonemployee director of the Company received $10,000 cash compensation
for service on the Board of Directors and $2,500 cash compensation for service
on each committee thereof during the fiscal year ended October 1, 2000. This
compensation was in lieu of options as set forth below.
Under the Company's 1992 Stock Option Plan for Nonemployee Directors (the
"Nonemployee Directors Plan"), an option to purchase 4,768 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 date of the next annual
meeting of stockholders, 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 October 1, 2000, each
nonemployee director elected at the 2000 Annual Meeting of Stockholders was
entitled to receive an option to purchase 4,768 shares of Common Stock at an
exercise price of $18.875 per share, but declined such grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between the Company's Board of Directors
and the compensation committee of any other company.
STOCK OPTIONS
The following table sets forth information concerning options granted to
each of the named executive officers during fiscal 2000:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
INDIVIDUAL GRANTS ANNUAL RATES OF
------------------------------------------------------- STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS/SARS OPTION TERM
UNDERLYING GRANTED TO EXERCISE OR ---------------------
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION 5% 10%
NAME GRANTED(#)(1) FISCAL YEAR ($/SH) DATE ($)(2) ($)(2)
---- ------------- ------------ ----------- ---------- --------- ---------
Li-San Hwang........................ 30,000 4.23 10.91 11/14/09 205,837 521,632
James M. Jaska...................... 25,000 3.52 10.91 11/14/09 171,531 434,693
Richard A. Lemmon................... 10,000 1.41 10.91 11/14/09 68,612 173,877
Charles R. Faust.................... 3,000 0.42 10.91 11/14/09 20,584 52,163
William R. Brownlie................. 3,000 0.42 10.91 11/14/09 20,584 52,163
------------------------
(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.
13
The following table sets forth information concerning the aggregate number
of options exercised during fiscal 2000 by each of the named executive officers:
OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END FY-END
SHARES VALUE ---------------- -------------------
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) ($)(1) UNEXERCISABLE(#) UNEXERCISABLE($)(2)
---- ----------- -------- ---------------- -------------------
Li-San Hwang............................ 0 0 46,354/51,005 886,612/833,282
James M. Jaska.......................... 0 0 82,192/39,923 1,742,385/673,219
Richard A. Lemmon....................... 5,000 105,645 22,364/20,607 435,089/336,426
Charles R. Faust........................ 0 0 31,661/10,649 670,948/167,557
William R. Brownlie..................... 1,093 24,422 54,365/8,744 1,230,696/135,798
------------------------
(1) Value realized upon exercise is determined by subtracting the exercise price
from the closing price for the Common Stock on the date of exercise as
reported by the Nasdaq Stock Market and multiplying the remainder by the
number of shares of Common Stock exercised.
(2) Year end value is determined by subtracting the exercise price from the fair
market value of $28.56 per share (the closing price for the Company's Common
Stock as reported by the Nasdaq Stock Market as of September 29, 2000) and
multiplying the remainder by the number of underlying shares of Common
Stock.
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 22 operating units. If the
operating profit for any operating unit 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.
2001 STOCK PLAN
The 2001 Stock Plan (the "Plan") was adopted by the Board, subject to
stockholder approval, on December 29, 2001. At the Annual Meeting of the
Stockholders of the Company held on February 22, 2001, the stockholders failed
to approve the Plan. Based upon stockholder input, the Board adopted the
following amendments to the Plan on May 22, 2001: (i) a reduction in the
aggregate number of shares of Common Stock that may be issued pursuant to the
Plan from 5,000,000 to 2,000,000; and (ii) a reduction in the maximum number of
shares that may be issued to a single participant (pursuant to the exercise of a
stock option or the grant of restricted stock) from 1,000,000 to 400,000. The
Plan, as amended, is hereinafter referred to as the "Amended Plan." To date, no
grants of options or restricted stock have been made under this Amended Plan.
14
1992 INCENTIVE STOCK PLAN
The Company's 1992 Incentive Stock Plan (the "1992 Plan") was adopted by the
Company's Board of Directors on December 1, 1992 and was subsequently approved
by the Company's stockholders. The 1992 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. The maximum number of shares of Common Stock
authorized for issuance under the 1992 Plan is 7,106,387. As of May 1, 2001,
372,482 shares of Common Stock were available for grant. If the Amended Plan is
approved by the stockholders, the Company will cease granting stock options
under the 1992 Plan.
EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan (the "Purchase Plan") was adopted
by the Company's Board of Directors on November 15, 1995 and was subsequently
approved by the Company's stockholders. The Purchase Plan provides for the
granting of Purchase Rights to purchase Common Stock to regular full-time and
regular part-time employees and officers of the Company or any of its
subsidiaries, including directors who are also employees or officers of the
Company or any of its subsidiaries. Under the Purchase Plan, 1,098,632 shares
may be issued upon the exercise of Purchase Rights.
Each Purchase Right lasts for a period of 52 weeks (a "Purchase Right
Period"). Prior to the beginning of each Purchase Right Period, employees may
elect to contribute fixed amounts to the Purchase Plan during that Purchase
Right Period to purchase Common Stock. The maximum amount that an employee can
contribute during a Purchase Right Period is $4,000, and the minimum
contribution per payroll period is $25.
Under the Purchase Plan, the exercise price of a Purchase Right will be the
lesser of 100% of the fair market value of such shares (based upon its closing
price on the Nasdaq Stock Market) on the first day of the Purchase Right Period
or 85% of the fair market value on the last day of such Period. Employees'
contributions to the Purchase Plan are automatically used to purchase Common
Stock on the last day of the Purchase Right Period unless an employee elects to
withdraw from the Purchase Plan or is terminated prior to that date. If the
Company is sold, all Purchase Rights will become exercisable immediately
preceding the sale. Employees who elect to suspend their contributions can elect
either to withdraw their contributions or leave those amounts in the Purchase
Plan to be used to purchase Common Stock at the end of the Purchase Right
Period.
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
15
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.
OTHER RETIREMENT PLANS. SCM Consultants, Inc., McNamee, Porter &
Seeley, Inc., the Sentrex Group of Companies, MFG, Inc., Cosentini
Associates, Inc., PDR Engineers, Inc., Evergreen Utility Contractors, Inc.,
FHC, Inc., Rizzo Associates, Inc., Utilities & C.C., Inc., eXpert Wireless
Solutions, Inc., and Rocky Mountain Consultants, Inc., subsidiaries of the
Company, participate in separate retirement plans covering their respective
employees.
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
October 1, 2000, premiums totaling $500 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.
16
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 2000, 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 2000, 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.
17
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 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 2001, cash bonuses related to performance in fiscal 2000 paid to three of
the five named executive officers ranged from $20,000 to $50,000, and ranged
from 17% to 37% of such officers' base salaries.
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 Committee awarded stock options in fiscal 2000 to
all named executive officers.
INTERNAL REVENUE CODE SECTION 162(M)
Under Section 162(m) 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 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
18
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
September 29, 1995, and that all dividends have been reinvested. The Company-
constructed Peer Group Index includes the following companies: Fluor
Corporation, IT Group, Inc., Jacobs Engineering Group Inc., LCC
International, Inc., Mastec, Inc., Quanta Services, Inc., URS Corporation and
Wireless Facilities, Inc. The Company 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
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
TETRA TECH NASDAQ STOCK MARKET PEER INDEX
9/29/95 $100.0 $100.0 $100.0
12/29/95 $97.8 $101.2 $115.6
3/29/96 $95.7 $106.0 $119.9
6/28/96 $107.5 $114.6 $119.3
9/30/96 $127.7 $118.7 $114.8
12/31/96 $106.2 $124.5 $122.5
3/31/97 $78.6 $117.8 $103.8
6/30/97 $129.7 $139.4 $119.1
9/30/97 $131.7 $162.9 $118.7
12/31/97 $134.4 $152.5 $82.2
3/31/98 $163.0 $178.5 $109.5
6/30/98 $163.0 $183.4 $107.4
9/30/98 $189.0 $165.5 $87.1
12/31/98 $227.3 $215.1 $101.9
3/31/99 $176.9 $241.2 $82.5
6/30/99 $173.3 $263.9 $114.0
9/30/99 $175.2 $270.4 $102.5
12/31/99 $161.0 $399.7 $105.2
3/31/00 $249.4 $448.6 $148.8
6/30/00 $240.2 $390.0 $120.4
9/29/00 $299.9 $358.9 $100.8
SEPT. 29, 1995 SEPT. 30, 1996 SEPT. 30, 1997 SEPT. 30, 1998 SEPT. 30, 1999 SEPT. 29, 2000
Tetra Tech 100.0 127.7 131.7 189.0 176.2 299.9
Nasdaq Stock Market 100.0 118.7 162.9 165.5 270.4 358.9
Peer Index 100.0 114.8 118.7 87.1 102.5 100.8
The information contained above under the captions "Report of the
Compensation Committee of the Board of Directors" and "Company Performance" will
not be considered "soliciting material" or to be "filed" with the Securities and
Exchange Commission, nor will that information be incorporated by reference into
any future filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates it by reference into a filing.
By Order of the Board of Directors
/s/ RICHARD A. LEMMON
---------------------------------
Richard A. Lemmon
EXECUTIVE VICE PRESIDENT AND SECRETARY
Pasadena, California
Dated: May 31, 2001
19
ANNEX A
Tetra Tech, Inc.
2001 Stock Plan
1. PURPOSE. The purpose of the Tetra Tech, Inc. 2001 Stock Plan ("Plan")
is to promote the interests of Tetra Tech, Inc. ("Company") and its stockholders
by enabling it to offer grants of stock to better attract, retain, and reward
its employees, directors and other persons providing services to it and,
accordingly, to strengthen the mutuality of interests between those persons and
the Company's stockholders by providing those persons with a proprietary
interest in pursuing the Company's long-term growth and financial success.
2. DEFINITIONS. For purposes of this Plan, the following terms shall have
the meanings set forth below.
(a) "Board" means the Board of Directors of Tetra Tech, Inc.
(b) "Code" means the Internal Revenue Code of 1986. Reference to any
specific section of the Code shall be deemed to be a reference to any
successor provision.
(c) "Committee" means the administrative Committee of this Plan that is
provided in Section 3 of this Plan.
(d) "Common Stock" means the common stock of the Company or any security
issued in substitution, exchange, or in lieu thereof.
(e) "Company" means Tetra Tech, Inc., a Delaware corporation, or any
successor corporation. Except where the context indicates otherwise, the
term "Company" shall include its Parent and Subsidiaries.
(f) "Disabled" means permanent and total disability, as defined in Code
Section 22(e)(3).
(g) "Exchange Act" means the Securities Exchange Act of 1934.
(h) "Fair Market Value" of Common Stock for any day shall be determined
in accordance with the following rules.
(i) If the Common Stock is admitted to trading or listed on a
national securities exchange, the last reported sale price on that day
regular way, or if no such reported sale takes place on that day, the
average of the last reported bid and ask prices on that day regular way,
in either case on the principal national securities exchange on which the
Common Stock is admitted to trading or listed.
(ii) If not listed or admitted to trading on any national securities
exchange, the last sale price regular way on that day reported on the
Nasdaq National Market ("Nasdaq National Market") of the Nasdaq Stock
Market ("NSM") or, if no such reported sale takes place on that day, the
average of the closing bid and ask prices regular way on that day.
(iii) If not traded or listed on a national securities exchange or
included in the Nasdaq National Market, the last reported sale price on
that day regular way, or if no such reported sale takes place on that
day, the average of the closing bid and ask prices regular way on that
day reported by the NSM, or any comparable system on that day.
(iv) If the Common Stock is not included in (i), (ii) or
(iii) above, the last reported sale price on that day regular way, or if
no such reported sale takes place on that day, the closing bid and ask
prices regular way on that day as furnished by any member of the National
Association of Securities Dealers, Inc. ("NASD") selected from time to
time by the Company for that purpose.
If the national securities exchange, Nasdaq National Market, NSM, or NASD as
applicable, are closed on such date, the "Fair Market Value" shall be determined
as of the last preceding day on which
A-1
the Common Stock was traded or for which bid and ask prices are available. In
the case of an Incentive Stock Option, "Fair Market Value" shall be determined
without reference to any restriction other than one that, by its terms, will
never lapse.
(i) "Incentive Stock Option" means an option to purchase Common Stock
that is an incentive stock option within the meaning of Code Section 422.
(j) "Insider" means a person who is subject to Section 16 of the
Exchange Act.
(k) "Non-Qualified Stock Option" means any option to purchase Common
Stock that is not an Incentive Stock Option.
(l) "Option" means an Incentive Stock Option or a Non-Qualified Stock
Option.
(m) "Parent" shall mean any corporation (other than Tetra Tech, Inc.) in
an unbroken chain of corporations ending with Tetra Tech, Inc. if each of
the corporations (other than Tetra Tech, Inc.) owns stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain, as determined in
accordance with the rules of Code Section 424(e).
(n) "Participant" means a person who was been granted an Option or
Restricted Stock under the Plan.
(o) "Plan" means this Tetra Tech, Inc. 2001 Stock Plan, as it may be
amended from time to time.
(p) "Restricted Stock" means shares of Common Stock issued under
Section 9 of this Plan below that are subject to restrictions upon
assignment or alienation prior to vesting.
(q) "Severance" means, with respect to a Participant, the termination of
the Participant's provision of services to the Company as an employee,
director, or independent contractor, whether by reason of death, disability,
or any other reason. For purposes of determining the exercisability of an
Incentive Stock Option, a Participant who is on a leave of absence that
exceeds ninety (90) days will be considered to have incurred a Severance on
the ninety-first (91st) day of the leave of absence, unless the
Participant's rights to reemployment are guaranteed by statute or contract.
However, a Participant will not be considered to have incurred a Severance
because of a transfer of employment between the Company and a Subsidiary or
Parent (or vice versa).
(r) "Subsidiary" means any corporation or entity in which Tetra
Tech, Inc., directly or indirectly, controls fifty percent (50%) or more of
the total voting power of all classes of its stock having voting power, as
determined in accordance with the rules of Code Section 424(f).
(s) "Ten Percent Shareholder" means any person who owns (after taking
into account the constructive ownership rules of Code Section 424(d)) more
than ten percent (10%) of the stock of the Tetra Tech, Inc. or of any of its
Parents or Subsidiaries.
3. ADMINISTRATION.
(a) This Plan shall be administered by a Committee appointed by the
Board. The Board may remove members from, or add members to, the Committee
at any time. To the extent possible and advisable, the Committee shall be
composed of individuals that satisfy Rule 16b-3 under the Exchange Act and
Code Section 162(m). Notwithstanding anything herein to the contrary, any
action which may be taken by the Committee may also be taken by the Board.
(b) The Committee may conduct its meetings in person or by telephone. A
majority of the members of the Committee shall constitute a quorum, and any
action shall constitute the action of the Committee if it is authorized by:
(i) A majority of the members present at any meeting conducted in
accordance with the Company's bylaws; or
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(ii) The unanimous consent of all of the members in writing without a
meeting.
(c) The Committee is authorized to interpret this Plan and to adopt
rules and procedures relating to the administration of this Plan. All
actions of the Committee in connection with the interpretation and
administration of this Plan shall be binding upon all parties.
(d) Subject to the limitations of Sections 10 and 14 of this Plan, the
Committee is expressly authorized to make such modifications to this Plan
and to the grants of Restricted Stock hereunder as are necessary to
effectuate the intent of this Plan as a result of any changes in the tax,
accounting, or securities laws treatment of Participants, the Company and
the Plan.
(e) The Committee may delegate its responsibilities to others under such
conditions and limitations as it may prescribe, except that the Committee
may not delegate its authority with regard to the granting of Options or
Restricted Stock to Insiders if that would cause such grants to fail to
satisfy Rule 16b-3 under the Exchange Act or Code Section 162(m).
4. DURATION OF PLAN.
(a) This Plan shall be effective as of December 29, 2000, provided it is
approved by the majority of the Company's stockholders, in accordance with
the provisions of Code Section 422, within twelve (12) months before or
after the date of its adoption by the Board.
(b) In the event that this Plan is not so approved, this Plan shall
terminate and any Options granted under this Plan shall be void.
(c) This Plan shall terminate on December 29, 2010, except with respect
to Options then outstanding.
5. NUMBER OF SHARES.
(a) The aggregate number of shares of Common Stock which may be issued
pursuant to this Plan shall be Two Million (2,000,000). The maximum number
of shares that may be issued to a single Participant pursuant to the grant
of Options and/or Restricted Stock is Four Hundred Thousand (400,000).
(b) Upon the expiration or termination of an outstanding Option which
shall not have been exercised in full, the shares of Common Stock remaining
unissued under the Option shall again become available for use under the
Plan.
(c) Upon the forfeiture of shares of Restricted Stock, the forfeited
shares of Common Stock shall again become available for use under the Plan.
6. ELIGIBILITY.
(a) Persons eligible for Options under this Plan shall consist of
employees, directors, and other persons providing services to the Company.
However, Incentive Stock Options may only be granted to employees.
(b) Notwithstanding anything in this Plan to the contrary, in the event
that the Company acquires another entity, the Committee may authorize the
issuance of Options ("Substitute Options") to individuals or entities in
substitution of stock options previously granted to those individuals or
entities in connection with their performance of services for such acquired
entity upon such terms and conditions as the Committee shall determine but
which shall not be contrary to applicable law, taking into account the
limitations of Code Section 424(a) in the case of a Substitute Option that
is intended to be an Incentive Stock Option.
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7. FORM OF OPTIONS.
(a) Options shall be granted under this Plan on such terms and in such
form as the Committee may approve, which shall not be inconsistent with the
provisions of this Plan.
(b) The exercise price per share of Common Stock purchasable under an
Option shall be set forth in the Option, which in all cases shall be at
least equal to the Fair Market Value of the Common Stock on the date of the
grant.
(c) The exercise price of an Incentive Stock Option granted to a Ten
Percent Shareholder shall be no less than one hundred ten percent (110%) of
the Fair Market Value of the Common Stock on the date of the grant.
8. EXERCISE OF OPTIONS.
(a) Subject to all other provisions of this Plan, each Option shall
become exercisable (i) as to one-fourth ( 1/4) of the full number of shares
subject thereto one year after the date of grant and (ii) as to the balance
in thirty-six (36) equal cumulative monthly installments following such
first anniversary date, or in such other installments and at such other
intervals as the Board or the Committee may in any specific case otherwise
determine in granting such Option. Any Option shall be exercisable following
the date of the Participant's Severance only to the extent (if at all) such
Option was exercisable on the date of Severance.
(b) The aggregate Fair Market Value (determined as of the date of grant)
of the number of shares of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by a Participant during any
calendar year shall not exceed one hundred thousand dollars ($100,000) or
such other limit as may be required by Section 422 of the Code. To the
extent this limit is exceeded, the surplus shares shall be treated as
acquired upon the exercise of a Non-Qualified Stock Option. For this
purpose, the shares will be taken into account in the order in which the
underlying Options were granted.
(c) Options shall only be exercisable for whole numbers of shares and
for a minimum of 100 shares.
(d) Options are exercised by payment of the full amount of the purchase
price to the Company.
(i) The payment shall be in the form of cash or such other forms of
consideration as the Committee shall deem acceptable, such as the
surrender of outstanding shares of Common Stock owned by the Participant
(that have been held a sufficient period of time (if any) to avoid
adverse accounting treatment) or by withholding shares that would
otherwise be issued upon the exercise of the Option.
(ii) If the payment is made by means of the surrender of Restricted
Stock, a number of shares issued upon the exercise of the Option equal to
the number of shares of Restricted Stock surrendered shall be subject to
the same restrictions as the Restricted Stock that was surrendered.
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(iii) After giving due considerations to the consequences under
Rule 16b-3 under the Exchange Act and under the Code, the Committee may
also authorize the exercise of Options by the delivery to the Company or
its designated agent of an irrevocable written notice of exercise form
together with irrevocable instructions to a broker-dealer to sell or
margin a sufficient portion of the shares of Common Stock and to deliver
the sale or margin loan proceeds directly to the Company to pay the
exercise price of the Option.
9. RESTRICTED STOCK.
(a) The Committee may issue grants of Restricted Stock upon such terms
and conditions as it may deem appropriate, which need not be the same for
each such grant.
(b) Restricted Stock may not be sold to Participants for less than Fair
Market Value without taking into consideration any consequences under Code
Section 162(m).
(c) A Participant shall not have a vested right to the shares subject to
the grant of Restricted Stock until satisfaction of the vesting requirements
specified in the grant. The Participant may not assign or alienate the
Participant's interest in the shares of Restricted Stock prior to vesting.
(d) The following rules apply with respect to events that occur prior to
the date on which the Participant obtains a vested right to the Restricted
Stock.
(i) Stock dividends, shares resulting from stock splits, ETC. that
are issued with respect to the shares covered by a grant of Restricted
Stock shall be treated as additional shares received under the grant of
Restricted Stock.
(ii) Cash dividends constitute taxable compensation to the
Participant that is deductible by the Company.
10. MODIFICATION OF OPTIONS.
(a) The Committee may modify an existing Option, including the right to:
(i) Accelerate the right to exercise it;
(ii) Extend or renew it; or
(iii) Cancel it and issue a new Option.
However, no modification may be made to an Option that would impair the
rights of the Participant holding the Option without the Participant's consent.
Further, no such modification may be made within taking into consideration any
consequences under Code Section 162(m). Modifications similar to those described
above can be made to grants of Restricted Stock.
(b) Whether a modification of an existing Incentive Stock Option will be
treated as the issuance of a new Incentive Stock Option will be determined
in accordance with the rules of Code Section 424(h).
(c) Whether a modification of an existing grant of Restricted Stock or
of an Option granted to an Insider will be treated as a new grant will be
determined in accordance with Rule 16b-3 under the Exchange Act.
11. TERMINATION OF OPTIONS.
(a) Except to the extent the terms of an Option require its prior
termination, each Option shall terminate on the earliest of the following
dates.
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(i) The date which is ten (10) years from the date on which the
Option is granted or five (5) years in the case of an Incentive Stock
Option granted to a Ten Percent Shareholder.
(ii) The date which is one (1) year from the date of the Severance of
the Participant to whom the Option was granted, if the Participant was
Disabled at the time of Severance.
(iii) The date which is one (1) year from the date of the Severance
of the Participant to whom the Option was granted, if the Participant's
death occurs:
(A) While the Participant is employed by the Company; or
(B) Within three (3) months following the Participant's
Severance.
(iv) In the case of any Severance other than one described in
Subparagraphs (ii) or (iii) above, the date that is three (3) months from
the date of the Participant's Severance.
12. NON-TRANSFERABILITY OF GRANTS.
(a) No Option under this Plan shall be assignable or transferable except
by will or the laws of descent and distribution.
(b) Grants of Restricted Stock shall be subject to such restrictions on
transferability as may be imposed in such grants.
13. ADJUSTMENTS.
(a) In the event of any change in the capitalization of the Company
affecting its Common Stock (E.G., a stock split, reverse stock split, stock
dividend, recapitalization, combination, or reclassification), the Committee
shall authorize such adjustments as it may deem appropriate with respect to:
(i) The maximum number of shares of Common Stock that may be issued
under this Plan;
(ii) The number of shares of Common Stock covered by each outstanding
Option;
(iii) The exercise price per share in respect of each outstanding
Option; and
(iv) The maximum number of shares that may be issued to a single
individual.
(b) The Committee may also make such adjustments in the event of a
spin-off or other distribution of Company assets to stockholders, other than
normal cash dividends.
14. MERGERS; REORGANIZATIONS. Notwithstanding any other provision of this
Plan, in the event of a merger, share exchange, reorganization or consolidation
of the Company in which the Company is not the surviving corporation or survives
as a subsidiary of another corporation (a "Merger"), each outstanding Option
shall be assumed or an equivalent option substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation (the
"Successor Corporation"). In the event that the Successor Corporation refuses to
assume or substitute for the Option, the Participant shall fully vest in and
have the right to exercise the Option as to all of the shares of Common Stock
purchasable under the Option, including shares that would not otherwise be
vested or exercisable. If an Option becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a Merger, the Company shall notify
the Participant in writing or electronically that the Option shall be fully
vested and exercisable for a period of fifteen (15) days from the date of such
notice, and the Option shall terminate upon the expiration of such period. For
purposes of this Section 14, the Option shall be considered assumed if,
following the Merger, the option confers the right to purchase or receive, for
each share of Common Stock subject to the Option immediately prior to the
Merger, the consideration (whether stock, cash or other securities or property)
received in the Merger by holders of Common
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Stock for each share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding shares); provided, however, that
if such consideration received in the Merger is not solely common stock of the
Successor Corporation or its Parent, the Company may, with the consent of the
Successor Corporation, provide for the consideration to be received upon the
exercise of the Option, for each share of Common Stock subject to the Option, to
be solely common stock of the Successor Corporation or its Parent equal in fair
market value to the per share consideration received by holders of Common Stock
in the Merger.
The Board or the Committee may, in any specific case, specifically provide,
in an option agreement or otherwise, for the treatment of an Option in a manner
different than that set forth above upon the occurrence of any Merger, but in
the absence thereof the above provisions of this Section 14 shall govern the
Option.
15. AMENDMENT AND TERMINATION.
(a) The Board may at any time amend or terminate this Plan. However, no
modification may be made to the Plan that would impair the rights of the
Participant holding an Option without the Participant's consent.
(b) Without the approval of the majority of the stockholders of the
Company, the Board may not amend the provisions of this Plan regarding:
(i) The class of individuals entitled to receive Incentive Stock
Options; or
(ii) The maximum number of shares of Common Stock that may be issued
under the Plan, except as provided in Section 13 of this Plan.
16. NOTICE OF DISQUALIFYING DISPOSITION. A Participant must notify the
Company if the Participant disposes of stock acquired pursuant to the exercise
of an Incentive Stock Option issued under the Plan prior to the expiration of
the holding periods required to qualify for long-term capital gains treatment on
the disposition.
17. TAX WITHHOLDING.
(a) The Company shall have the right to take such actions as may be
necessary to satisfy its tax withholding obligations relating to the
operation of this Plan.
(b) If Common Stock that was surrendered by the Participant is used to
satisfy the Company's tax withholding obligations, the stock shall be valued
based on its Fair Market Value when the tax withholding is required to be
made. The maximum number of shares that may be withheld is the minimum
number of shares necessary to satisfy the applicable tax withholding rules.
18. NO ADDITIONAL RIGHTS.
(a) Neither the adoption of this Plan nor the granting (or exercise) of
any Option or Restricted Stock shall:
(i) Affect or restrict in any way the power of the Company to
undertake any corporate action otherwise permitted under applicable law;
or
(ii) Confer upon any Participant the right to continue performing
services for the Company, nor shall it interfere in any way with the
right of the Company to terminate the services of any Participant at any
time, with or without cause.
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(b) No Participant shall have any rights as a shareholder with respect
to any shares covered by an Option granted to the Participant or subject to
a grant of Restricted Stock until the date a certificate for such shares has
been issued to the Participant.
19. SECURITIES LAW RESTRICTIONS.
(a) No shares of Common Stock shall be issued under this Plan unless the
Committee shall be satisfied that the issuance will be in compliance with
applicable federal and state securities laws.
(b) The Committee may require certain investment (or other)
representations and undertakings by the Participant (or other person
exercising an Option or purchasing Restricted Stock by reason of the death
of the Participant) in order to comply with applicable law.
(c) Certificates for shares of Common Stock delivered under this Plan
may be subject to such restrictions as the Committee may deem advisable. The
Committee may cause a legend to be placed on the certificates to refer to
these restrictions.
20. INDEMNIFICATION. To the maximum extent permitted by law, the Company
shall indemnify each member of the Board, as well as any other employee of the
Company with duties under this Plan, against expenses (including any amount paid
in settlement) reasonably incurred by the individual in connection with any
claims against him or her by reason of the performance of the individual's
duties under this Plan, unless the losses are due to the individual's gross
negligence or lack of good faith.
21. GOVERNING LAW. This Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
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TETRA TECH, INC.
CONSENT FORM
CONSENT SOLICITED BY THE BOARD OF DIRECTORS
The undersigned, a stockholder of Tetra Tech, Inc. (the "Company") as of the
close of business on May 25, 2001, hereby takes the following action with
respect to all stock of the Company held by the undersigned in connection with
the solicitation by the Company's Board of Directors of written consents to the
approval to the Company's 2001 Stock Plan, as amended, as described in the
Company's Consent Solicitation Statement, dated May 31, 2001.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE)
(CONTINUED FROM OTHER SIDE)
The Board of Directors recommends that Stockholders CONSENT to the proposal
to approve the Company's 2001 Stock Plan, as amended.
Proposal to approve the Company's 2001 Stock Plan, as amended, as described
in the Company's Consent Solicitation Statement dated May 31, 2001
/ / CONSENT / / WITHHELD CONSENT / / ABSTAIN
Date: __________________________
________________________________
(Signature)
________________________________
(Signature)
Please mark, sign, date and
return this form promptly in the
enclosed envelope, in order to
be effective, this consent must
be delivered to the Company
within sixty (60) days of the
delivery to the Company of the
first dated consent from
stockholders. The Company
requests that you return this
form no later than August 4,
2001. Executors, trustees and
others signing in a represented
capacity should include their
names and the capacity in which
they sign.
IMPORTANT: In signing this form, please sign your name or names in the same way
as shown above. When signing as fiduciary, please give your full title. If
shares are required in the names of two or more persons, each should sign.