Exhibit 10.19


 





 


EXECUTIVE COMPENSATION POLICY


 


 


	
  Approved
  as amended

  	
   

  	
  November 7,
  2010

  
	
  Document
  Owner:

  	
   

  	
  Board
  of Directors

  



 


Page 1 of 14


 


Tetra Tech Confidential


 

















 


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

  



 


Page 2 of 14


 


Tetra Tech Confidential


 

















 


1.0                               PURPOSE


 


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


 


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.


 


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;


 


Page 3 of 14


 


Tetra Tech Confidential


 

















 


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


 


·                  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 


 


Page 4 of 14


 


Tetra Tech Confidential


 

















 


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.


 


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 for each covered position.  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

  	
   

  	
  120

  	
   

  
	
  Chief Financial Officer

  	
   

  	
  75

  	
   

  
	
  Group Presidents

  	
   

  	
  75

  	
   

  
	
  Other Executive Officers

  	
   

  	
  50

  	
   

  



 


Page 5 of 14


 


Tetra Tech Confidential


 

















 


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

  	
   

  	
  120

  	
   

  	
  0

  	
   

  	
  202

  	
   

  
	
  Chief Financial Officer

  	
   

  	
  75

  	
   

  	
  0

  	
   

  	
  126

  	
   

  
	
  Group Presidents

  	
   

  	
  75

  	
   

  	
  0

  	
   

  	
  126

  	
   

  
	
  Other Executive Officers

  	
   

  	
  50

  	
   

  	
  0

  	
   

  	
  84.0

  	
   

  



 


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 equity award expense 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.


 


Page 6 of 14


 


Tetra Tech Confidential


 

















 


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.


 


Page 7 of 14


 


Tetra Tech Confidential


 














 


6.0                               PROCESS
FLOW/SCHEDULE


 





 


Page 8 of 14


 


Tetra Tech Confidential


 

















 


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 1.20 X 1.4 X 1.2
= $201,600


 


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 0.75 X 1.2 X 1.0
= $90,000


 


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 0.50 X 1.0 X 1.0
= $50,000


 


Example
4


 


Narrative:                                            The
Company meets most 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 0.50 X 0.8 X 1.2
= $48,000


 


Page 9 of 14


 


Tetra Tech Confidential


 

















 


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
  15-20% year-over-year growth

  
	
  140%

  	
   

  	
  EPS
  > 20% 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 will be excluded;


 


·                  The impact of impairment on
long-lived assets 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.


 


Page 10 of 14


 


Tetra Tech Confidential


 

















 


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


 


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 the average
annual 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

  



 


Page 11 of 14


 


Tetra Tech Confidential


 

















 


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


 


This
example provides vesting results under a series of scenarios involving vesting
award amounts and hypothetical EPS growth.


 


	
   

  	
   

  	
  Restrictive Stock

  	
   

  	
  Earnings Per

  	
   

  	
  Average

  Annual

  	
   

  	
  Vesting Schedule

  Through 11/09

  	
   

  	
  Vesting Schedule Effective

  12/09

  	
   

  
	
  Date

  	
   

  	
  Awarded

  	
   

  	
  Share (EPS)

  	
   

  	
  Growth %

  	
   

  	
  Year-over-Year

  	
   

  	
  %

  	
   

  	
  Year-over-Year

  	
   

  	
  %

  	
   

  
	
  12/06

  	
   

  	
  1200

  	
   

  	
  .65

  	
   

  	
  0%

  	
   

  	
  EPS<
  5%

  	
   

  	
  0%

  	
   

  	
  EPS
  < 5%

  	
   

  	
  0%

  	
   

  
	
  12/07

  	
   

  	
  1500

  	
   

  	
  .79

  	
   

  	
  21.5%

  	
   

  	
  EPS
  5% - 9%

  	
   

  	
  60%

  	
   

  	
  EPS
  5% - 9%

  	
   

  	
  60%

  	
   

  
	
  12/08

  	
   

  	
  1800

  	
   

  	
  1.02

  	
   

  	
  29.1%

  	
   

  	
  EPS
  10% - 14%

  	
   

  	
  100%

  	
   

  	
  EPS
  10% - 14%

  	
   

  	
  100%

  	
   

  
	
  12/09

  	
   

  	
  2100

  	
   

  	
  1.21

  	
   

  	
  18.6%

  	
   

  	
  EPS > 14%

  	
   

  	
  120%

  	
   

  	
  EPS 15% - 20%

  	
   

  	
  120%

  	
   

  
	
  12/10

  	
   

  	
  2400

  	
   

  	
  .85

  	
   

  	
  <29.8>%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  EPS
  > 20%

  	
   

  	
  140%

  	
   

  
	
  12/11

  	
   

  	
  2700

  	
   

  	
  1.45

  	
   

  	
  71.0%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


Sample
Vesting


 


Eligible
for Vesting (1/3 of Annual RS Award)


 


	
  12/07

  	
   

  	
  12/08

  	
   

  	
  12/09

  	
   

  	
  12/10

  	
   

  	
  12/11

  
	
  400 Shares

  (from ‘06 award)

  	
   

  	
  900 Shares

  (400 of ‘06 award,

  500 of ‘07 award)

  	
   

  	
  1,500 Shares

  (400 from ‘06 award, 500 from ‘07 award, 600 from
  ‘08 award)

  	
   

  	
  1,800 Shares

  (500 from ‘07 award, 600 from ‘08 award, 700 from
  ‘09 award)

  	
   

  	
  2,100 Shares

  (600 from ‘08 award, 700 from ‘09 award, 800 from
  ‘10 award)

  



 


Actual
Vesting


 


	
  400 x 1.2 = 480

  	
   

  	
  400 x 1.2 = 480

  	
   

  	
  400 x 1.2 = 480

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  500 x 1.2 = 600

  	
   

  	
  500 x 1.2 = 600

  	
   

  	
  500
  x 0 = 0

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  600 x 1.2 = 720

  	
   

  	
  600
  x 0 = 0

  	
   

  	
  600 x .1.0 = 600

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  700 x 0 = 0

  	
   

  	
  700 x .6 = 420

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  800 x 1.4 = 1120

  
	
  480 Shares

  	
   

  	
  1,080 Shares

  	
   

  	
  1,800 Shares

  	
   

  	
  0 Shares

  	
   

  	
  2,140 Shares

  



 


Page 12 of 14


 


Tetra Tech Confidential


 

















 


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.


 


Page 13 of 14


 


Tetra Tech Confidential


 

















 


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 will be
excluded;


 


·                  The impact of impairment on long-lived assets
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, net of tax, 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.


 


Page 14 of 14


 


Tetra Tech Confidential