The Board of Directors (the “Board”) of Tetra Tech, Inc. (the “Company”) has adopted stock ownership guidelines for executive officers and directors, which has been amended and restated as of November 7, 2016 (the “Effective Date”). The Board may further update these guidelines from time to time. The Board believes that share ownership aligns the interests of its executive officers and directors with the interests of shareholders, promotes sound corporate governance, and demonstrates a commitment to the Company.
All executive officers are required to own shares of Company stock having a total value equal to the lesser of a specified multiple of base salary or a minimum number of shares, as set forth in the following table:
|Position||Multiple of Base Salary||Minimum Shares|
|Chief Executive Officer||6||170,000|
|Executive Vice President||3||40,000|
|Senior Vice President||2||20,000|
Until an executive officer’s stock ownership requirement is met, the executive officer must retain at least 75% of Gain Shares resulting from the exercise of a stock option or vesting of a restricted stock award. With respect to stock options, “Gain Shares” means the total number of shares of the Company stock that are being exercised less the number of shares, if any, used in the case of a cashless exercise to pay for the exercise price. With respect to a restricted stock award, “Gain Shares” means the total number of shares of Company stock subject to any such equity award that vest. Gain Shares shall in no event include shares of Company stock subject to any form of equity award that are used to satisfy tax withholding obligations for federal and state income and employment taxes on any gain attributable such an award.
Executive officers on the Effective Date will have five years from the Effective Date e to attain the required level of stock ownership applicable to their positions. Executive officers appointed after the Effective Date will have five years from the date of appointment to attain the required level of stock ownership. Executive officers who are subsequently promoted to either the CEO or an Executive Vice President position will have five years from the date of promotion to acquire any additional shares needed to attain the required level of stock ownership.
Each directors are required to own shares of Company stock having a total value equal to the lesser of at least three times the director’s annual base cash retainer or 6,100 shares.
Until a director’s stock ownership requirement is met, the director must retain at least 75% of Gain Shares resulting from the exercise of a stock option. “Gain Shares” shall have the same meaning as described above except that Gain Shares shall exclude shares of Company stock that would have been used to satisfy minimum tax withholding obligations had the director been employed by the Company as a common law employee.
Directors on the Effective Date will have five years from the Effective Date to attain the required level of stock ownership. Directors elected after the Effective Date will have five years from the date of election to the Board to attain the required level of stock ownership.
The following types of equity instruments count in determining stock ownership for purposes of these guidelines:
Stock ownership does not include unvested stock options.
The failure to comply with the stock ownership guidelines will result in the executive officer or director being required to use one-third of any net annual cash bonus or retainer, as applicable, to purchase Company stock. In addition, in the event of non-compliance, the Compensation Committee may exercise its discretion to declare an executive officer or director ineligible to receive equity grants under the Company’s plans. Progress toward meeting the guidelines will be presented to the Board of Directors at least annually in such manner as requested by the Board of the Directors.
There may be rare instances where the stock ownership guidelines would place a severe financial hardship on an executive officer or director. The Compensation Committee may, in its discretion, modify the stock ownership requirements in special circumstances.
These guidelines shall be administered and interpreted by the Compensation Committee.
These stock ownership guidelines shall be effective as of November 7, 2010 and may be updated from time to time. Only equity awards granted after the Effective Date shall be subject to the restriction on Gain Shares described above for executive officers and directors.