Exhibit 10.17


 





 


EXECUTIVE COMPENSATION POLICY


 


 


	
  Approved as amended

  	
  November 10, 2008

  	
  Board of Directors

  
	
  Document Owner:

  	
   

  	
  Board of Directors

  



 


Tetra Tech Confidential


 


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TABLE OF CONTENTS


 


Section


 


	
  1.0

  	
  PURPOSE

  
	
  2.0

  	
  PHILOSOPHY

  
	
  3.0

  	
  SCOPE

  
	
  4.0

  	
  ROLES AND RESPONSIBILITIES

  
	
  5.0

  	
  EXECUTIVE COMPENSATION COMPONENTS AND PLAN

  
	
  6.0

  	
  PROCESS FLOW/SCHEDULE

  
	
  7.0

  	
  APPENDIX I – EXAMPLES OF ANNUAL INCENTIVE BONUS

  
	
  8.0

  	
  APPENDIX II – RESTRICTED STOCK PLAN SUMMARY AND EXAMPLES

  
	
  9.0

  	
  APPENDIX III – TIMING OF EXECUTIVE EQUITY AWARDS

  
	
  10.0

  	
  APPENDIX IV – DETERMINATION OF NET INCOME

  



 


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1.0                               PURPOSE


 


The purpose of this document is to define the executive compensation
policy for Tetra Tech, Inc.


 


2.0                               PHILOSOPHY


 


Tetra Tech’s executive compensation program is designed to


 


·                  Align the interests of executive
officers with those of the stockholders;


 


·                  Attract, motivate, reward and retain
top level executives upon whom, in large part, the success of the Company
depends;


 


·                  Be competitive with compensation
programs for companies of similar size and complexity with whom the Company
competes for executive talent, including direct competitors;


 


·                  Provide compensation based upon the
short-term and long-term performance of both the individual executive and the
Company; and


 


·                  Strengthen the relationship between
pay and performance by emphasizing variable, at-risk compensation that is
dependent upon the successful achievement of specified corporate and individual
goals.


 


We believe a significant portion of executive officer pay should be at
risk, and based upon performance. 
Therefore, base salaries are targeted for approximately the median of
the peer group.  Conversely, compensation
at risk, specifically bonuses and equity grants, are targeted to provide
compensation that is above the median of our peers when above average business
results are attained.


 


3.0                               SCOPE


 


This policy applies to all executive officers of Tetra Tech, Inc.


 


4.0                               ROLES
AND RESPONSIBILITIES


 


Board of Directors


 


·                  Approves this Executive Compensation
Policy;


 


·                  Delegates authority as specified in
this policy to the Compensation Committee; and


 


·                  Approves positions to be covered by
this policy as recommended by the Chairman/CEO.


 


Compensation Committee


 


·                  Under delegated authority from the
Board of Directors, develops, administers and monitors executive compensation
in the long-term interests of the Company and its stockholders;


 


·                  Evaluates the performance and
establishes the compensation of the Chairman/CEO;


 


·                  Establishes the compensation of all
other executive officers of the Company based, in part, on the Chairman/CEO’s
recommendations;


 


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·                  Determines that performance goals
have been attained before payment; and


 


·                  Reserves the right to approve
exceptions to this policy as recommended by the Chairman/CEO (subject to the
terms of the Executive Compensation Plan described in Section 5.2).


 


Audit Committee


 


·                  Jointly with the Compensation
Committee determines the individual performance factor for the CFO position.


 


Chairman/CEO


 


·                  Reviews the performance of all other
officers of the Company and makes specific recommendations to the Compensation
Committee in regard to their compensation; and


 


·                  Develops performance targets for all
other executive officers and recommends those targets to the Compensation
Committee.


 


Human Resources


 


·                  Acquires information regarding peer
group and other competitor pay practices, and provides analysis of this
information to the Chairman/CEO and the Compensation Committee; and


 


·                  Provides compensation practice trend
data to the Chairman/CEO, and the Compensation Committee.


 


Finance and Accounting


 


·                  Provides Corporate performance data
for use in determining the degree to which certain performance objectives have
been met; and


 


·                  Assures payments have been properly
accrued and reported.


 


5.0                               EXECUTIVE
COMPENSATION COMPONENTS AND PLAN


 


The primary components of compensation for executive officers are base
salary, annual performance bonuses and long-term incentive compensation.


 


5.1                               Base
Salary


 


Base salaries for executive officers are reviewed on an annual basis to
ensure internal equity and external competitiveness.  Salaries are reviewed to determine whether
the base compensation is within a reasonable range of executive pay levels at
other companies that potentially compete with the Company for business and
executive talent.  Total compensation is
considered during this analysis. 
Consideration is given to individual performance, experience and time in
the position, initiative, contribution to overall corporate performance, and
salaries paid to other executives in the Company.  The review and determination occur as shown
in Section 6.0.


 


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5.2                               Annual
Performance Bonuses


 


Executive officer bonuses shall be subject to the terms of the Company’s
Executive Compensation Plan as adopted by the Board on November 10, 2008
(the “Plan”).  Specifically, no bonus may
exceed the applicable percentage of the Company’s Net Income set forth in Section 5
of the Plan.  Unless otherwise specified
by the Compensation Committee within 90 days after the beginning of a Plan Year
under the Plan, the term “Net Income” shall be as defined in Appendix IV of
this Policy.  Notwithstanding any term or
provision set forth in this Policy, in the event of any inconsistency between
this Policy and the Plan, or the exercise of any discretion on the part of the
Compensation Committee pursuant to this Policy, the terms of the Plan shall
control and supersede the inconsistent term or provision of this Policy or the
exercise of discretion hereunder.


 


This component is intended to promote the interests of the Company by
providing both an incentive and a financial reward for key employees who
contribute most to the operating results and growth of the Company.  Each year the Company identifies a target
amount of incentive compensation for each executive officer.  This target is expressed as a percentage of
base salary.


 


Bonuses are paid based upon meeting pre-determined performance
criteria.  These criteria fall into two
categories:  (1) overall corporate
performance, designated the Corporate Performance Factor (CPF), based on an
assessment of how Company did on an overall basis in achieving its key
objectives and (2) individual contribution, designated the Individual
Factor (IF), based on individual performance. 
The CPF, determined by the Compensation Committee, will have a range of
0 to 1.4 with a target of 1.0 based on the achievement of key objectives.  The CPF for group presidents will be determined
by the Chairman/CEO based on the contribution of the specific group to the
Company.  The IF will have a range of 0
to 1.2 with a target of 1.0 for expected contribution level.  The IF will be recommended by the
Chairman/CEO and approved by the Compensation Committee, with the exception of
the Chairman/CEO and CFO positions.  The
IF for the Chairman/CEO will be determined by the Compensation Committee.  The IF for the CFO will be recommended by the
Chairman/CEO and determined jointly by the Audit Committee and Compensation
Committee, giving strong consideration to the Audit Committee’s assessment of
the strength of the Company’s internal financial controls and the accuracy and
appropriateness of its financial reporting.


 


Target bonus amounts as a percentage of base salary are as follows:


 


TARGET BONUS AMOUNTS


 


	
  POSITION

  	
   

  	
  PERCENTAGE (%)

  	
   

  
	
  Chairman/CEO/President

  	
   

  	
  100

  	
   

  
	
  Chief
  Financial Officer

  	
   

  	
  60

  	
   

  
	
  Group
  Presidents

  	
   

  	
  60

  	
   

  
	
  Other
  Executive Officers

  	
   

  	
  40

  	
   

  



 


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Each Officer is eligible to receive an annual bonus in the range of 0%
to 168% of target, i.e., CPF (1.4) x IF (1.2) = 1.68 (168%) x target


 


MINIMUM/MAXIMUM OF BASE


 


	
  POSITION

  	
   

  	
  TARGET PERCENTAGE 

  (%)

  	
   

  	
  MINIMUM (%)

  	
   

  	
  MAXIMUM (%)

  	
   

  
	
  Chairman/CEO/President

  	
   

  	
  100

  	
   

  	
  0

  	
   

  	
  168

  	
   

  
	
  Chief
  Financial Officer

  	
   

  	
  60

  	
   

  	
  0

  	
   

  	
  100

  	
   

  
	
  Group
  Presidents

  	
   

  	
  60

  	
   

  	
  0

  	
   

  	
  100

  	
   

  
	
  Other
  Executive Officers

  	
   

  	
  40

  	
   

  	
  0

  	
   

  	
  67.2

  	
   

  



 


The Compensation Committee reserves the right to “zero” the CPF if
results are significantly below expected targets or a manageable event
negatively and severely impacts stockholder value.  The minimum performance threshold is .6;
achievement of less than 60% in either the CPF or IF will result in the
elimination of the bonus paid. 
Notwithstanding the above, the Compensation Committee, in consultation
with the Chairman/CEO, reserves the discretion to adjust specific performance
bonus amounts when deemed to be in the interests of the stockholders.  Bonus payments are made by December 15
of each year, based upon performance in the recently concluded fiscal year.


 


5.3                               Long-Term
Incentive Compensation


 


Long-term incentive awards are designed to:


 


·                  Reward financial performance and
encourage recipients to achieve long term sustained growth of stockholder
value.  The long-term incentive
compensation program encourages executives to maintain a long-term financial perspective
by linking a substantial portion of their compensation to stockholder returns
and the Company’s long-term financial success;


 


·                  Aid in the retention of key
executives;


 


·                  Balance the effect of market dynamics
on equity compensation;


 


·                  Take into consideration the effect of
FASB 123 impact on Company performance; and


 


·                  Foster executive officer stock
ownership.


 


Long-term incentives are generally provided in the form of equity
compensation, such as stock options and/or other equity related awards.  However, the Compensation Committee reserves
the right to utilize deferred cash incentives if beneficial to the interests of
the Company and its stockholders. 
Long-term incentive awards may have certain restrictions, such as
mandatory vesting periods, which encourage participating executives to continue
in the Company’s employ and thereby act as a retention incentive.


 


All grants of equity compensation shall be in accordance with the
provisions and limitations of the equity incentive plan periodically adopted by
the Board of Directors and approved by the stockholders.  The schedule for distribution of long
term-incentives is shown in Section 6.


 


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In addition to the above, the following guidelines will apply to the
long-term incentive plan:


 


·                  A maximum of 2% of outstanding shares
of stock and/or options will be distributed in any one year period.  The Compensation Committee retains the
discretion to increase this amount due to special circumstances, such as an
acquisition;


 


·                  A reserve of at least 10% of the
shares available for distribution each year will be held outside the normal
distribution for special needs (i.e., hiring, retention) that occur during the
year; and


 


·                  All restricted stock grants shall be
approved by the Compensation Committee. 
Restricted stock will typically not be granted to executives who are not
Section 16B Officers.  Restricted
stock grants will generally vest over a minimum of a three year period.  Vesting will primarily be
performance-based.  The mix of awards
will generally be approximately 2/3 stock options and 1/3 restricted
stock.  Each share of restricted stock
will be considered equivalent to 2.5 stock options.


 


Example:  The normal grant is
15,000 stock options.  On a converted
basis, using the ratio of 2/3 options and 1/3 restricted stock, the award would
be approximately 10,000 options and 2,000 shares of restricted stock.


 


·                  No more than 0.9% of the outstanding
shares of stock and/or options can be distributed to executive officers in one
year;


 


·                  The plan shall target 5-15% of the
non-officer population for inclusion in the long-term incentive program;


 


·                  Minimum stock option grants to
non-officers will typically be 500 shares and maximum grants to non-officers
will typically be 10,000 shares; and


 


·                  Executive officers will be eligible
to receive restricted stock grants during the first restricted stock approval
cycle following their date of hire, or date of appointment as an executive
officer.


 


5.4                               Other
Section 16B Officer Provisions


 


Certain additional consideration will be provided to Section 16B
officers as approved by the Compensation Committee.  These provisions recognize and reward the
officers for the additional responsibilities, liabilities and contributions
that accompany officer status. 
Specifically, the Chairman/CEO is provided with a country club
membership that is made available primarily for use in entertaining clients and
other business associates.  Section 16B
officers receive a $900 per month automobile allowance, as well as limited
reimbursement for club memberships, estate/financial planning and annual
physical examinations.  Also, Section 16B
officers are eligible to defer compensation via participation in the Deferred
Compensation Program.


 


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6.0                               PROCESS FLOW/SCHEDULE


 





 


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7.0          APPENDIX
I – EXAMPLES OF ANNUAL INCENTIVE BONUSES


 


Subject to the limitations of the Executive Compensation Plan:


 


Example
1


 


Narrative:               The Company significantly
exceeds each of its keys objectives and the CEO significantly exceeds all
individual contribution expectations, maximizing the bonus payment.


 


	
  Position:

  	
  CEO

  	
  Base Salary:  $100,000

  	
  CPF:  1.4

  	
  IF:  1.2

  



 


Bonus to be paid:  $100,000 X
1.00 X 1.4 X 1.2 = $168,000


 


Example
2


 


Narrative:               The Company achieves all
and exceeds some of its key objectives, and the CFO meets all individual
contribution expectations.


 


	
  Position: 

  	
  CFO

  	
  Base Salary:  $100,000

  	
  CPF:  1.2

  	
  IF:  1.0

  



 


Bonus to be paid:  $100,000 X 0.6
X 1.2 X 1.0 = $72,000


 


Example
3


 


Narrative:               The Company meets its key
objectives, and the General Counsel meets individual contribution expectations.


 


	
  Position:

  	
  General Counsel

  	
  Base Salary:  $100,000

  	
  CPF:  1.0

  	
  IF:  1.0

  



 


Bonus to be paid: $100,000 X 0.40 X 1.0 X 1.0 = $40,000


 


Example
4


 


Narrative:               The Company meets 80% of
its key objectives, and the Corporate Controller significantly exceeds
individual contribution expectations.


 


	
  Position:

  	
  Corporate Controller

  	
  Base Salary:  $100,000

  	
  CPF:  0.8

  	
  IF:  1.2

  



 


Bonus to be paid:  $100,000 X
0.40 X 0.8 X 1.2 = $38,400


 


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8.0          APPENDIX
II – RESTRICTED STOCK PLAN SUMMARY AND EXAMPLES


 


Overview


 


Tetra Tech’s baseline equity compensation plan provides for a mix of
stock options and restricted stock grants to be awarded to Section 16B
officers.  Restricted stock will
typically not be granted to individuals who are not Section 16B officers.


 


Restricted stock awards will be eligible for vesting in equal
installments annually over a three-year period. 
Vesting will be performance-based, based on GAAP EPS growth, as follows:


 


	
  Annual
  Award Vesting %

  	
   

  	
  EPS Growth

  
	
  0%

  	
   

  	
  EPS < 5% year-over-year growth

  
	
  60%

  	
   

  	
  EPS 5-9% year-over-year growth

  
	
  100%

  	
   

  	
  EPS 10-14% year-over-year growth

  
	
  120%

  	
   

  	
  EPS > 14% year-over-year growth

  



 


Evaluation of performance for vesting purposes and the award of
restricted stock will occur annually as part of the normal compensation cycle
as shown in Section 6.0.


 


For the purpose of this Plan, “GAAP EPS” is the fully diluted earnings
per share from continuing operations, as defined by Statement of Financial Accounting
Standards (SFAS) 128, and related interpretations, adjusted as follows:


 


·      The impact of goodwill
impairment under SFAS 142 will be excluded;


 


·      The impact of impairment on
long-lived assets under SFAS 144 will be excluded;


 


·      The impact of accounting
changes requiring current and prior period adjustments due to materiality under
relevant SEC Staff Accounting Bulletins and related accounting pronouncements
will be excluded;


 


·      The impact of any changes in
newly issued or existing accounting principles and related interpretations will
be excluded;


 


·      The financial statement
impact from the settlement of tax audits more or less than amounts previously
recorded will be excluded;


 


·      Gains and losses from the
sales of subsidiaries and significant lines of businesses will be excluded; and


 


·      The impact of shares issued
and costs incurred in connection with acquisitions, mergers or debt
restructurings will be excluded.


 


For each fiscal year, the Company’s CFO shall certify the amount of “GAAP
EPS”, adjusted as set forth above.


 


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Executive officer restricted stock grants shall be subject to the terms
of the Company’s 2005 Equity Incentive Plan, as amended by the Board on November 10,
2008 (the “2005 Plan”).  Notwithstanding
any term or provision set forth in this Policy, in the event of any
inconsistency between this Policy and the 2005 Plan, or the exercise of any
discretion on the part of the Compensation Committee pursuant to this Policy,
the terms of the 2005 Plan shall control and supersede the inconsistent term or
provision of this Policy or the exercise of discretion hereunder.


 


Plan
Summary


 


In the November/December Compensation Committee meeting the
Committee will authorize a specific number of shares of restricted stock to be
used for the three year Restricted Stock (RS) Plan that starts in the current
fiscal year.  For example, in December,
2006 the “2007, 2008 and 2009 Restricted Stock Plan” was authorized and
funded.  The Compensation Committee will
also approve the number of shares to be allocated to 16B officers.


 


As stated, the restricted stock will vest in 1/3 increments over three
years based on GAAP EPS achieved during the Performance Period.  For a specific three year RS plan, the prior
year GAAP EPS is the measurement control point (see examples).  Once established for a three year RS Plan,
the EPS control point cannot be modified.


 


At the end of each fiscal year, EPS will be determined and compared to
EPS for the immediately preceding fiscal year so that the year-over-year growth
rate may be calculated.  For each Section 16B
officer, the EPS growth rate will be used to determine the vesting percentage
of each installment.  Each installment of
stock eligible for vesting in a given year will be scored based upon EPS growth
since the year in which that installment was granted.


 


In the event the duties of a restricted stock holder are reduced, such
shares may continue to vest at the discretion of the Compensation Committee.


 


Assuming a new RS Plan is authorized each year, by the third year,
three individual plans, each with its own period and control point will be
running concurrently (see below).


 


	
  DATE

  	
   

  	
  PLAN AUTHORIZED

  	
   

  	
  CONTROL POINT

  	
   

  	
  PLAN PERIOD

  	
   

  
	
  12/06

  	
   

  	
  2007 RS Plan

  	
   

  	
  FY 06 GAAP EPS

  	
   

  	
  07,08,09

  	
   

  
	
  12/07

  	
   

  	
  2008 RS Plan

  	
   

  	
  FY 07 GAAP EPS

  	
   

  	
  08,09,10

  	
   

  
	
  12/08

  	
   

  	
  2009 RS Plan

  	
   

  	
  FY 08 GAAP EPS

  	
   

  	
  09,10,11

  	
   

  



 


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Example
1


 


A Section 16B officer is allocated 3,000 shares of restricted
stock at the end of fiscal year 2006 to vest in equal amounts at the end of
fiscal years 2007, 2008 and 2009, designated the “07 RS Plan.”  For fiscal year 2007, the EPS growth rate is
determined to be an 8% improvement over fiscal year 2006.  Accordingly, 600 of the 1,000 (i.e., .6 x
1,000) eligible shares will vest in 2007.


 


Example
2


 


Using Example 1, 1,000 shares of restricted stock is vested in the 2007
Plan at the end of FY-08.  EPS growth in
FY-08 is determined to be a 0% improvement over FY-07 for a two year average of
4% (i.e. 8% in year 1, 0 in year 2).  In
this example, the 16B officer would be awarded 0 shares of the 1,000 shares
that vested at the end of year two of the “07 RS Plan.”


 


Example
3


 


A 16B officer is awarded 3,000 shares in the 07 RS Plan, 4,000 shares
in the 08 RS Plan, and 5,000 shares in the 09 RS Plan.  Each plan as stated has its specific EPS
control point.  At the end of FY-09,
award components from each plan would be evaluated as follows:


 


	
  # SHARES

  AVAILABLE

  	
   

  	
  PLAN

  	
   

  	
  EPS CONTROL POINT

  	
   

  	
  ‘09 EPS

  	
   

  	
  % AVERAGE

  GROWTH

  	
   

  	
  SHARES

  AWARDED

  	
   

  
	
  1,000

  	
   

  	
  YR 3 ‘07

  	
   

  	
  80¢

  	
   

  	
  1.00

  	
   

  	
  8.3

  	
   

  	
  600

  	
   

  
	
  1,333

  	
   

  	
  YR 2 ‘08

  	
   

  	
  88¢

  	
   

  	
  1.00

  	
   

  	
  6.8

  	
   

  	
  800

  	
   

  
	
  1,667

  	
   

  	
  YR 1 ‘09

  	
   

  	
  75¢

  	
   

  	
  1.00

  	
   

  	
  33.0

  	
   

  	
  2,000

  	
   

  
	
  4,000

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  3,400

  	
   

  



 


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9.0          APPENDIX III – TIMING OF
EXECUTIVE EQUITY AWARDS


 


The effective date of the grant for all stock options and restricted
stock awards is the date of approval by the Compensation Committee.


 


Equity compensation recommendations for executive officers in
accordance with this policy, including both stock options and restricted stock,
will be presented to the Compensation Committee at the November/December meeting.  The Compensation Committee will also consider
salary increase and annual performance bonus recommendations at the November/December meeting.


 


Actual approval of stock option and restricted stock awards to
executive officers will be made by the Compensation Committee at its November/December meeting,
consistent with the annual stock option grants to all stock option recipients.


 


The Compensation Committee approves grants for new hires as recommended
by the Chairman/CEO.  The effective date
of the grant is the date of approval by the Compensation Committee.


 


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10.0        APPENDIX IV –
DETERMINATION OF NET INCOME


 


For the purpose of this Policy, “net income” is defined as the Company’s
net income as set forth in its audited financial statements, adjusted as
follows:


 


·      The impact of goodwill
impairment under SFAS 142 will be excluded;


 


·      The impact of impairment on
long-lived assets under SFAS 144 will be excluded;


 


·      The impact of accounting
changes requiring current and prior adjustments due to materiality under
relevant SEC Staff Accounting Bulletins and related accounting pronouncements
will be excluded;


 


·      The impact of any changes in
newly issued or existing accounting principles and related interpretations will
be excluded;


 


·      The financial statement
impact from the settlement of tax audits more or less than amounts previously
recorded will be excluded;


 


·      Gains and losses from the
sales of subsidiaries and significant lines of businesses will be excluded;


 


·      The costs incurred in
connection with acquisitions, mergers or debt restructurings will be excluded;
and


 


·      The impact of bonuses
accrued for individuals subject to the Executive Compensation Plan will be
excluded.


 


For each fiscal year, the Company’s CFO shall certify the amount of “net
income”, adjusted as set forth above.


 


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