QuickLinks
 -- Click here to rapidly navigate through this document

 
 

Exhibit 10.16    
    




  


 
 

EXECUTIVE COMPENSATION POLICY    
    



	    	 	 
	Approved as amended November 12, 2007	 	Board of Directors
	

Document Owner:	
 	

Board of Directors










  



 
 

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




2









   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 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 of the Chairman and the CEO, and establishes the compensation of the Chairman and the CEO;



	•
	Establishes
the compensation of all executive officers of the Company based, in part, on the 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 and the CEO. 



3







 





Audit Committee  



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




Chief Executive Officer  



	•
	Reviews
the performance of all other officers of the Company, and, in consultation with the Chairman, makes specific recommendations to the Compensation Committee in regard
to their compensation; and



	•
	Develops
performance targets for all other executive officers and, in consultation with the Chairman, recommends those performance 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 CEO, the Chairman, and the Compensation
Committee; and



	•
	Provides
compensation practice trend data to the CEO, the Chairman, 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. 


5.2   Annual Performance Bonuses  


        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 assessment of how the overall Company did 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 shall have a range of 0 to 1.4 with a target of 1.0 


4







 



based
on achievement of key objectives. The CPF for group executives will be determined by the CEO/COO based on the contribution of the specific group to the Company. The IF shall 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 CEO/COO and approved by the Compensation Committee with the exception of the Chairman, CEO/COO, and CFO
positions. The IF for the Chairman will be determined by the Compensation Committee. The IF for the CEO/COO will be recommended by the Chairman and determined by the Compensation Committee. The IF for
the CFO will be recommended by the CEO/COO 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	 	100
	Chief Executive Officer/COO	 	  75
	President	 	  55
	Chief Financial Officer	 	  55
	Operations Senior Vice President*	 	  45
	Other Executive Officers	 	  40






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


MINIMUM/MAXIMUM OF BASE  



	Position
 
	 	Target percentage (%)
	 	Minimum (%)
	 	Maximum (%)

	Chairman	 	100	 	0	 	 168
	Chief Executive Officer/COO	 	  75	 	0	 	 126
	President	 	  55	 	0	 	92.4
	Chief Financial Officer	 	  55	 	0	 	92.4
	Operations Senior VP*	 	  45	 	0	 	75.6
	Other Executive Officers	 	  40	 	0	 	67.2







	*
	Bonus
targets for Operation Senior Vice Presidents increase to 45% in FY07 and 50% in FY08. 



        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 and the CEO, reserve 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 



5







 


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 programs. 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. 



        Any
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. 


        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, etc.)
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 2/3 options and 1/3 restricted stock mix; the award would be
approximately 2,000 shares of restricted stock and 10,000 stock options. 



	•
	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 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 are attributable to officer status. Specifically, the 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. 


6







 

6.0   PROCESS FLOW/SCHEDULE  


         

  


7








 

7.0   APPENDIX I—EXAMPLES OF ANNUAL INCENTIVE BONUSES  


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 0.75 X 1.4 X 1.2 = $126,000 


Example 2  


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



	Position:	 	CEO	 	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 0.40 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 


8.0   APPENDIX II—RESTRICTED STOCK PLAN SUMMARY AND EXAMPLES  


Overview  


        Tetra Tech's baseline 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. 


8







 



        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 loses 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. 




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" will be authorized and funded. The Compensation
Committee will also approve the number of shares to be allocated to 16B officers. 


        As
stated, the restricted shares awarded to individuals will be eligible to 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. 



        Assuming
a new plan every 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






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 8% improvement over fiscal year 2006. Accordingly, 600 of the 1,000 (i.e.,
..6 × 1,000) eligible shares will vest in 2007. 


9







 



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
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






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 the 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 CEO. The effective date of the grant is the date of approval by the Compensation Committee. 


10











QuickLinks



Exhibit 10.16


EXECUTIVE COMPENSATION POLICY



TABLE OF CONTENTS