Document:

Exhibit
10.32

 

FIFTH AMENDMENT

TO AMENDED AND RESTATED

LOAN AND SECURITY AGREEMENT

THIS FIFTH AMENDMENT to Amended and Restated
Loan and Security Agreement (this “Amendment”)
is entered into as of November 20, 2007, by and between Silicon Valley
Bank (“Bank”) and Transoma Medical, Inc., a Delaware corporation (“Borrower”)
whose address is 4211 Lexington Avenue North, Suite 2244, St. Paul, Minnesota
55126.

RECITALS

A.                                    Bank and Borrower have entered into that certain Amended and Restated
Loan and Security Agreement with an Effective Date of June 21, 2005 (as the
same has been and may from time to time be further amended, modified,
supplemented or restated in writing, the “Loan Agreement”).

B.                                    Bank has extended credit to Borrower for the
purposes permitted in the Loan Agreement.

C.                                    Borrower has requested that Bank amend the Loan
Agreement to (i) revise the Tangible
Net Worth covenant and (ii) make certain other revisions to the Loan Agreement
as more fully set forth herein.

D.                                    Bank has agreed to so amend certain provisions of
the Loan Agreement, but only to the extent, in accordance with the terms, subject to the
conditions and in reliance upon
the representations and warranties set forth below.

AGREEMENT

NOW, THEREFORE,
in consideration of the
foregoing recitals and other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, and intending to be legally bound,
the parties hereto agree as follows:

1.                                      Definitions.   Capitalized terms used
but not defined in this Amendment shall
have the meanings given to them in the Loan Agreement.

2.                                      Amendments to Loan
Agreement.

2.1                                 Section 6.7(i) (Tangible Net
Worth). Section 6.7(i) of
the Loan Agreement reads as follows:

(i)                                     Tangible Net Worth. A Tangible Net Worth plus
Subordinated Debt and any class of Borrower’s
stock treated as a liability on Borrower’s balance sheet of at least the
following amounts for the following periods:

 

1

 

	
  April 1, 2007
  through June 30, 2007

  	
   

  	
  $

  	
  15,000,000

  	
   

  
	
  July 1, 2007 and
  thereafter

  	
   

  	
  $

  	
  12,000,000

  	
   

  

 

 

Said
Section 6.7(i) is hereby amended to read as follows:

 

(i)                                     Tangible Net Worth. A Tangible Net Worth plus
Subordinated Debt and any class of Borrower’s
stock treated as a liability on Borrower’s balance sheet of at least the
following amounts for the following periods:

 

	
  October 31, 2007
  through February 29, 2008

  	
   

  	
  $

  	
  7,675,000

  	
   

  
	
  March 1, 2008
  and thereafter

  	
   

  	
  $

  	
  6,175,000

  	
   

  

2.2              Section 13.1 (Tangible Net Worth
Definition).   For purposes of clarity, the parties hereby acknowledge and agree that “intangible
items” as used in the definition of “Tangible Net Worth” contained in Section
13.1 of the Loan Agreement includes deferred
costs related to Borrower’s proposed public offering and restricted cash.

2.3                                 Exhibit D (Compliance Certificate).   Exhibit D to the Loan Agreement is hereby replaced by Exhibit A hereto.

3.                                      Fee.   In consideration for Bank entering into this
Amendment, Borrower shall concurrently pay Bank a fee in the amount of $5,000,
which fee is deemed fully earned on the date hereof, and shall be
non-refundable and in addition to all interest and other fees payable to Bank
under the Loan Documents. Bank is authorized to charge said fee to Borrower’s
loan account.

4.                                      Limitation of Amendments.

4.1                               The amendments set forth in Section 2, above, are effective for the
purposes set forth herein and shall be limited precisely as written and shall
not be deemed to (a) be a consent to any
amendment, waiver or modification of any other term or condition of any
Loan Document, or (b) otherwise prejudice any right or remedy which Bank may
now have or may have in the future under or in connection with any Loan
Document.

4.2                               This Amendment shall be construed in connection
with and as part of the Loan Documents and
all terms, conditions, representations, warranties, covenants and agreements
set forth in the Loan Documents, except as herein amended, are hereby ratified
and confirmed and shall remain in full force and effect.

 

2

 

                                                5.                                      Representations and Warranties.   To induce Bank to enter
into this Amendment, Borrower hereby represents and warrants to Bank as
follows:

 

                                                                                                5.1                               Immediately after giving effect to this
Amendment (a) the representations and warranties contained in the Loan Documents
are true, accurate and complete in all material respects as of the date hereof
(except to the extent such representations and warranties relate to an earlier
date, in which case they are true and correct as of such date), and (b) no
Event of Default has occurred and is continuing;

 

                                                                                                5.2                               Borrower has the power and authority to
execute and deliver this Amendment and to perform its obligations under the
Loan Agreement, as amended by this Amendment;

 

                                                                                                5.3                               The Second Amended and Restated
Certificate of Incorporation of Borrower filed with the Delaware Secretary of
State on February 26, 2007, remains true, accurate and complete and has not
been amended, supplemented or restated and is and continues to be in full force
and effect;

 

                                                                                                5.4                               The execution and delivery by Borrower of
this Amendment and the performance by Borrower of its obligations under the
Loan Agreement, as amended by this Amendment, have been duly authorized;

 

                                                                                                5.5                               The execution and delivery by Borrower of
this Amendment and the performance by Borrower of its obligations under the
Loan Agreement, as amended by this Amendment, do not and will not contravene
(a) any law or regulation binding on or affecting Borrower, (b) any contractual
restriction with a Person binding on Borrower for which Borrower has not
obtained from such Person an effective consent or waiver with respect thereto,
(c) any order, judgment or decree of any court or other governmental or public
body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational
documents of Borrower;

 

                                                                                                5.6                               The execution and delivery by Borrower of
this Amendment and the performance by Borrower of its obligations under the
Loan Agreement, as amended by this Amendment, do not require any order,
consent, approval, license, authorization or validation of, or filing,
recording or registration with, or exemption by any governmental or public body
or authority, or subdivision thereof, binding on either Borrower, except as
already has been obtained or made; and

 

                                                                                                5.7                               This Amendment has been duly executed and
delivered by Borrower and is the binding obligation of Borrower, enforceable
against Borrower in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, liquidation,
moratorium or other similar laws of general application and equitable
principles relating to or affecting creditors’ rights.

 

                                                6.                                      Counterparts; Fees and Costs.   This Amendment may be
executed in any number of counterparts and all of such counterparts taken
together shall be deemed to constitute one and the same instrument. Without
limitation on the terms of the Loan

 

3

 

Agreement, Borrower agrees to reimburse Bank for
all costs and fees (including attorneys’ fees) incurred in connection with this
Amendment and any documents contemplated
hereby.

7.                  Effectiveness.   This Amendment shall be
deemed effective upon (a) the due execution and delivery of this Amendment by each party
hereto, and (b) Bank’s receipt of the Acknowledgment of Amendment and
Reaffirmation of Guaranty substantially
in the form attached hereto as Schedule 1, duly executed and delivered by each
Guarantor, unless such Acknowledgment is waived in writing by Bank.

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as
of the date first written above.

 

 

	
  BANK

  	
   

  	
  BORROWER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Silicon Valley Bank

  	
   

  	
  Transoma Medical, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Jay McNeil

  	
   

  	
  By:

  	
  /s/ Charles T. Coggin

  	
   

  
	
  Name:

  	
  Jay McNeil

  	
   

  	
  Name:

  	
  Charles T. Coggin

  	
   

  
	
  Title:

  	
  SRM

  	
   

  	
  Title:

  	
  VP & CFO

  	
   

  

 

4

EXHIBIT A

TO

FIFTH AMENDMENT TO

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

EXHIBIT D

COMPLIANCE CERTIFICATE

 

	
  TO:

  	
  SILICON VALLEY BANK

  
	
   

  	
  3003 Tasman Drive

  
	
   

  	
  Santa Clara, CA 95054

  
	
   

  	
   

  
	
  FROM:

  	
  TRANSOMA MEDICAL, INC.

  

 

                                                The undersigned Responsible Officer of
TRANSOMA MEDICAL, INC. (“Borrower”) certifies that under the terms and
conditions of the Amended and Restated Loan and Security Agreement between
Borrower and Bank (the “Agreement”), (i) Borrower is in complete compliance for
the period ending
                   
with all required covenants except as noted below and (ii) all representations
and warranties in the Agreement are true and correct in all material respects
on this date. In addition, the undersigned certifies that Borrower, and each
Subsidiary, has timely filed all required tax returns and paid, or made
adequate provision to pay, all material taxes, except those being contested in
good faith with adequate reserves under GAAP. Attached are the required
documents supporting the certification. The Officer certifies that these are
prepared in accordance with Generally Accepted Accounting Principles (GAAP)
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Responsible Officer acknowledges that no
borrowings may be requested at any time or date of determination that Borrower
is not in compliance with any of the terms of the Agreement, and that
compliance is determined not just at the date this certificate is delivered.

 

Please indicate compliance status
by circling Yes/No under “Complies” column.

 

	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial statements + CC

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes

  	
  No

  
	
  Annual (Audited)

  	
   

  	
  FYE within 120 days

  	
   

  	
  Yes

  	
  No

  
	
  A/R & A/P Agings & Inventory Reports

  	
   

  	
  Monthly within 20 days

  	
   

  	
  Yes

  	
  No

  
	
  Board of Director Projections

  	
   

  	
  Prior to FYE (June 30)

  	
   

  	
  Yes

  	
  No

  
	
  Borrowing Base Certificate

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes

  	
  No

  

 

	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Maintain on a monthly basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Tangible
  Net Worth

  	
   

  	
  *

  	
   

  	
  $

  	
   

  	
   

  	
   

  	
  Yes

  	
  No

  
	
  Minimum
  Liquidity Coverage

  	
   

  	
  **

  	
   

  	
   

  	
   

  	
  :1.00

  	
   

  	
  Yes

  	
  No

  

 

*A Tangible Net Worth plus Subordinated Debt and any class of Borrower’s
stock treated as a liability on Borrower’s balance sheet of at least $7,675,000
from October 31, 2007 through February 29, 2008, and $6,175,000 from March 1,
2008 and thereafter.

 

5

 

** A ratio of unrestricted cash (and equivalents) plus accounts
receivables divided by outstanding Obligations of not less than 1.25 to 1.00.

 

Borrower only has deposit accounts located at the following
institutions:                                                       .

 

	
  Comments
  Regarding Exceptions: See Attached.

  	
   

  	
  BANK USE ONLY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Received by:

  	
   

  
	
  Sincerely,

  	
   

  	
   

  	
  AUTHORIZED
  SIGNER

  
	
   

  	
   

  	
   

  	
   

  
	
  TRANSOMA MEDICAL, INC.

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Verified:

  	
   

  
	
  SIGNATURE

  	
   

  	
   

  	
  AUTHORIZED
  SIGNER

  
	
   

  	
   

  	
   

  	
   

  
	
  TITLE

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
  DATE

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Compliance Status:

  	
  Yes    No

  
							

 

6

 

Schedule 1

 

ACKNOWLEDGMENT OF AMENDMENT

AND REAFFIRMATION OF GUARANTY

 

                                                Section 1.                                          Guarantor hereby acknowledges and
confirms that it has reviewed and approved the terms and conditions of the
Fifth Amendment to Loan and Security Agreement dated as of substantially even
date herewith (the “Amendment”).

 

                                                Section 2.                                          Guarantor hereby consents to the
Amendment and agrees that the Guaranty relating to the Obligations of Borrower
under the Loan Agreement shall continue in full force and effect, shall be
valid and enforceable and shall not be impaired or otherwise affected by the
execution of the Amendment or any other document or instrument delivered in
connection herewith.

 

                                                Section 3.                                          Guarantor represents and warrants that,
after giving effect to the Amendment, all representations and warranties
contained in the Guaranty are true, accurate and complete as if made the date
hereof.

 

 

Dated as of November 20, 2007

 

	
   

  	
  GUARANTOR

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DATA SCIENCES UK, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brian P. Brockway

  	
   

  
	
   

  	
  Name:

  	
  Brian P. Brockway

  	
   

  
	
   

  	
  Title:

  	
  President and CEO

  	
   

  

 

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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

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